**U.S. Securities and Exchange Commission**

**Washington, D. C. 20549**

**Form 10-KSB**

**(MarkOne)**

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

**For the fiscal year ended February 28, 2007**

**o****  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

**For the transition period from                to               .**

**Commission file number 0-8532**

**OAKRIDGE ENERGY, INC.**

(Name of small businessissuer in its charter)

| **Utah**                                          | ** ** | **87-0287176**       |
|---------------------------------------------------|------------|----------------------|
| (State or other  jurisdiction of incorporation or |       | (I.R.S. Employer     |
| organization)                                     |       | Identification  No.) |
|                                              |       |                 |
| **4613  Jacksboro Highway**                       | ** ** | ** **           |
| **Wichita  Falls, Texas**                         | ** ** | **76302**            |
| (Address of  principal executive offices)         |       | (Zip Code)           |

Issuer’s telephone number: **(940) 322-4772**

Securities registered underSection 12(b) of the Exchange Act:

**None**

Securities registered underSection 12(g) of the Exchange Act:

**CommonStock, $.04 par value**

(Title of class)

Check whether the issuer isnot required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct. **o**

Check whether the issuer (1)filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. **YES ****x****  NO ****o**

Check if there is nodisclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB. **x**

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). **YES ****o****  NO ****x**

State issuer’s revenues forits most recent fiscal year. $1,357,089

Statethe aggregate market value of the voting and non-voting common equity held bynonaffiliates computed by reference to the price at which the common equity wassold, or the average bid and asked prices of such common equity, as of aspecified date within the past 60 days.

$9,839,829 as of April20, 2007

State the number of sharesoutstanding of each of the issuer’s classes of common equity, as of the latestpracticable date.

4,262,917 as of May 16, 2007

**DOCUMENTSINCORPORATED BY REFERENCE**

None

TransitionalSmall Business Disclosure Format (check one): **YES ****o****  NO****x**

 

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**TABLE OF CONTENTS**

 
| PART I                                      |                                                                                                                |
|---------------------------------------------|---------------------------------------------------------------------------------------------------------------------|
|                                        |                                                                                                                |
| ITEM 1.                                     | DESCRIPTION OF  BUSINESS                                                                                            |
|                                        |                                                                                                                |
| Oil and Gas Operations                      |                                                                                                                |
|                                        |                                                                                                                |
| Gravel Operations                           |                                                                                                                |
|                                        |                                                                                                                |
| Carbon Junction Coal  Mine                  |                                                                                                                |
|                                        |                                                                                                                |
| Real Estate Held for  Sale                  |                                                                                                                |
|                                        |                                                                                                                |
| Competition and Markets                     |                                                                                                                |
|                                        |                                                                                                                |
| Regulation                                  |                                                                                                                |
|                                        |                                                                                                                |
| Environmental  and Health Controls          |                                                                                                                |
|                                        |                                                                                                                |
| Operating  Hazards and Uninsured Risks      |                                                                                                                |
|                                        |                                                                                                                |
| Employees                                   |                                                                                                                |
|                                        |                                                                                                                |
| ITEM 2.                                     | DESCRIPTION OF  PROPERTY                                                                                            |
|                                        |                                                                                                                |
| Oil and Gas Properties                      |                                                                                                                |
|                                        |                                                                                                                |
| Reserves                                    |                                                                                                                |
|                                        |                                                                                                                |
| Production                                  |                                                                                                                |
|                                        |                                                                                                                |
| Lifting  Costs and Average Sales Prices     |                                                                                                                |
|                                        |                                                                                                                |
| Sales  Contracts and Major Customers        |                                                                                                                |
|                                        |                                                                                                                |
| Developed  Acreage and Productive Wells     |                                                                                                                |
|                                        |                                                                                                                |
| Undeveloped Acreage                         |                                                                                                                |
|                                        |                                                                                                                |
| Drilling Activity                           |                                                                                                                |
|                                        |                                                                                                                |
| Coal and Gravel  Properties                 |                                                                                                                |
|                                        |                                                                                                                |
| Real Estate                                 |                                                                                                                |
|                                        |                                                                                                                |
| Office Building                             |                                                                                                                |
|                                        |                                                                                                                |
| ITEM 3.                                     | LEGAL PROCEEDINGS                                                                                                   |
|                                        |                                                                                                                |
| ITEM 4.                                     | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                |
|                                        |                                                                                                                |
| PART II                                     |                                                                                                                |
|                                        |                                                                                                                |
| ITEM 5.                                     | MARKET FOR  COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER  PURCHASES OF EQUITY SECURITIES |
|                                        |                                                                                                                |
| ITEM 6.                                     | MANAGEMENT’S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                     |
|                                        |                                                                                                                |
| Results of Operations                       |                                                                                                                |
|                                        |                                                                                                                |
| Financial  Condition and Liquidity          |                                                                                                                |
|                                        |                                                                                                                |
| Critical  Accounting Policies and Estimates |                                                                                                                |
|                                        |                                                                                                                |
| Forward-Looking  Statements                 |                                                                                                                |
|                                        |                                                                                                                |
| ITEM 7.                                     | FINANCIAL  STATEMENTS                                                                                               |
|                                        |                                                                                                                |
| ITEM 8.                                     | CHANGES IN  AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                               |
|                                             |                                                                                                                     |  |  |

 

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| ITEM 8A.                                                 | CONTROLS AND  PROCEDURES                                                                                                                |
|----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|
|                                                     |                                                                                                                                    |
| ITEM 8B.                                                 | OTHER INFORMATION                                                                                                                       |
|                                                     |                                                                                                                                    |
| PART III                                                 |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| ITEM 9.                                                  | DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT |
|                                                     |                                                                                                                                    |
| Directors and  Executive Officers                        |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| Section  16(a) Beneficial Ownership Reporting Compliance |
|                                                     |                                                                                                                                    |
| Audit Committee                                          |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| Audit Committee  Financial Expert                        |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| Nomination Procedures                                    |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| Code of Ethics                                           |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| ITEM 10.                                                 | EXECUTIVE  COMPENSATION                                                                                                                 |
|                                                     |                                                                                                                                    |
| ITEM 11.                                                 | SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER  MATTERS                                        |
|                                                     |                                                                                                                                    |
| ITEM 12.                                                 | CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE                                                               |
|                                                     |                                                                                                                                    |
| ITEM 13.                                                 | EXHIBITS                                                                                                                                |
|                                                     |                                                                                                                                    |
| ITEM 14.                                                 | PRINCIPAL  ACCOUNTANT FEES AND SERVICES                                                                                                 |
|                                                     |                                                                                                                                    |
| Audit Fees                                               |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| Audit-Related Fees                                       |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| Tax Fees                                                 |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| All Other Fees                                           |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| Pre-Approval  Policies and Procedures                    |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| SIGNATURES                                               |                                                                                                                                    |
|                                                     |                                                                                                                                    |
| EXHIBITS                                                 |                                                                                                                                    |
|                                                          |                                                                                                                                         |  |

 

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**PART I**

**ITEM1.****                                                DESCRIPTIONOF BUSINESS.**

Oakridge Energy,Inc. (the “Company”) is engaged in the exploration for and development,production and sale of oil and gas primarily in Texas.  The Company also holds certain real estate inColorado for sale, which lands cover gas, coal and other mineral deposits. See “Oiland Gas Operations” and “Real Estate Held for Sale” below and “Item 6. –Management’s Discussion and Analysis or Plan of Operation.”

The Company is aUtah corporation incorporated in 1969. The Company’s executive offices are located at 4613 Jacksboro Highway,Wichita Falls, Texas 76302.  The Company’stelephone number is (940) 322-4772.

The Company hasrestricted its oil and gas exploration activities in recent fiscal years as ithas conserved its limited resources for utilization on a secondary recoverywater-flood project on its principal oil and gas producing property in MadisonCounty, Texas, its proposed real estate development project adjacent toDurango, Colorado, and reclamation of its Carbon Junction Coal Mine in Durango,Colorado.  In fiscal 2007, the Companycontinued its participation in the water-flood project started in the lastquarter of fiscal 2003 as well as its other oil and gas operations. See “Oiland Gas Operations” and “Real Estate Held for Sale” below and “Item 6. –Management’s Discussion and Analysis or Plan of Operation.”

During mid 2004,Sandra Pautsky, the Company’s Chief Executive Officer and principalshareholder, received treatment for cancer that was diagnosed in late 2003.  Ms. Pautsky has responded well to treatmentand has resumed normal activities, although additional treatment will benecessary in the future. Ms. Pautsky has been the principal force pushing theCompany’s proposed real estate development project. Concerns regarding herhealth, the project size, the significant financial requirement by the Company,the number of years to complete, coupled with the risk involved to the Companyin committing so much of its limited financial resources to one project causedthe Company to decide after the end of fiscal 2004 to attempt to sell theCompany’s 1852 acres of land located in La Plata County, Colorado.

On April 4, 2006,the Company signed a contract to sell its Durango property (the “DurangoProperty”) for a price of $40,000,000, which contained an election by the buyerto terminate its contract in accordance with provisions in the agreement.  On June 12, 2006, the Company was notified ofthe buyer’s election to terminate its contract.

On October 18,2006, the Company entered into a contract with another buyer for a price of$35,000,000, with no provision to terminate the contract with the exception ofproof of title.  On November 29, 2006,the Company announced the failure of the buyer to make good delivery of installmentearnest money deposits following the death of the buyer’s principal thatresulted in the buyer’s contract default. See “Real Estate - Decision to Sell Property” below and “Item 6. –Management’s Discussion and Analysis or Plan of Operation.”

**Oil andGas Operations**

The Company’s oiland gas operations are primarily conducted in Madison and other North Texascounties and to a lesser extent, Freestone, Red River, Panola, Gregg and SmithCounties of East Texas.  The Company isthe operator of only its North Texas Leases. All other oil and gas interests owned are participation interestswhereby the Company owns an interest in a property that is operated andmaintained by another interest owner under an operating agreement. The Companyreceives payment for its oil and gas sales from the purchaser or the operatorand is billed by the operator for its ownership percentage of joint expensesrelative to getting the oil and/or gas from the wells to a sales point.

The Company didnot participate in the drilling of any exploratory or development wells in thefiscal year ended February 28, 2007; however, when the Company is offered aparticipation, Ms. Pautsky and Danny Croker, the Company’s Vice President,select the exploration and development prospects in which the Companyparticipates.

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The Company’s principalproducing oil and gas property for the past eight fiscal years has been its 25%working interest in the BSR (Sub-Clarksville) Field in Madison County, Texas(the “Madison County, Texas property”). In fiscal 2006 and 2007 the Madison County, Texas property wasresponsible for approximately 60% of the Company’s total oil and gasrevenues.  The property consists of 25producing wells with proven developed reserves.

The property is fullydeveloped for its primary oil and gas reserves. As production declined, a decision was made to install a secondaryrecovery project on the property. The Company’s independent petroleum engineershave estimated that 509,641 barrels of proven undeveloped secondary oilreserves are recoverable to the Company’s interest in the property bywater-flooding the reservoir. In fiscal 2003, Texas Railroad Commissionapprovals of the project were obtained, the property was unitized and theproject commenced effective as of December 1, 2002.

As a part of thewater-flood process, there are currently three water injection wells and onewater supply well.  During fiscal 2007,approximately 810,000 barrels of water were injected into the three wellsresulting in approximately 2,060,000 barrels of water being injected into theformation thus far.  The operator hasinformed the Company that until approximately 3,000,000 barrels of water havebeen injected into the formation, no significant increase in oil productionvolumes are expected from the property. It is the intent of the operator to make changes in the next sixty toninety days, which will include converting two additional wells to injectionwells at a location in the field which will add infield flooding to the currentdown-dip flooding in the southern part of the field.  When the field was set up for injection,infrastructure was installed that would permit injection at any well.  Wells that are located nearby to currentinjection wells have begun to respond to injection, although there can be noassurance that the waterflood will be successful.  The project may ultimately require convertinga total of 9 producing wells to water injection wells and converting anotherproducing well to a water supply well.

The Company’s remaininginvestment cost for the project is estimated to be approximately $375,000,which includes its share of the cost for a proposed water plant anddistribution system and conversion costs mentioned above. See “Item 6. –Management’s Discussion and Analysis or Plan of Operation - Results ofOperations.”

**GravelOperations**

**Surfaceownership, gravel mining contract and surface lease**:  The Company’s gravel property is located onapproximately 63.5 acres of the 1,852 acres of land owned by the Company in feein La Plata County, Colorado.  Pursuantto a contract and surface lease effective January 1, 1994, Four CornersMaterials ( “FCM”) mined sand, gravel and rock products from the gravel permitarea for a term of eight years. After the expiration of the contract, gravelmining continued pursuant to an oral agreement between the parties.

**Permitand permitted acres**: The original permit area covered 33.6acres, but, with the Company’s consent, FCM added an adjacent 11.9 acres (9.9acres in one transaction, 2.0 in another) of the Company’s land to the permitarea providing FCM additional gravel reserves to mine.

In mid-2002, FCMfiled a permit amendment to the Colorado Division of Reclamation, Mining, andSafety (the “CDRMS”) for a gravel permit to cover 97.31 acres pursuant to an agreementbetween the Company and FCM regarding complete reclamation by it of the Company’scoal mine at the Company’s expense and to allow for additional acres to beincluded in FCM’s gravel mining operation. The 97.31 acres included 33.06 original acres included in the gravelpermit, 9.9 acres additional gravel acres included under FCM’s previous gravelpermit and 54.35 acres permitted under the Company’s coal permit.

In September 2003as a result of a request by FCM that the CDRMS cease processing its financialwarranty for the permit, the permit area was reduced to the original 33.06acres which had previously been mined and CDRMS stated a mining permit wouldnot be issued until the division received and approved  performance and financial warranties. Followingthis action by FCM, the Company required the cessation of FCM’s gravel miningoperation on the property.  Thereafter,FCM filed a permit application to change the permit area to include theoriginal 33.06 acres and an additional 31.45 acres, being 64.51 acres andissued a financial warranty for those acres.

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In May 2005 thepermit area was reduced from 64.51 acres to 63.5 acres as 1.01 acres financialguarantee was included under the Company’s Carbon Junction coal minereclamation plan.

**Reclamationand financial warranty**: In fiscal 2006, FCM reclaimed itsmining operation, as allowed under its permit on the property, at which timethe CDRMS released a portion of FCM’s financial warranty with regard toreclamation, retaining approximately $104,000 in financial warranties awaitingCDRMS confirmation that environmental responses, vegetation and re-growth hasstabilized.

**PostMining Activities & Inspections**: Following the cessationof mining, sales of gravel were made from stockpiles accumulated prior tomining termination.  Thereafter throughfiscal 2005, revenues related to the gravel operation were received for roadusage fees, use of surface land for operations, and stock pile sales.  The Company would consider leasing theproperty again for gravel operations but has no intention of conducting gravelmining operations itself on the property.

Monthly inspectionof the mine-site and its records are conducted by the CDRMS who reports to FCMregarding compliance requirements under the permit as a result of theinspection.  Inspections and resultingcompliance operations will continue until the complete release of thereclamation liability and warranty.

**CarbonJunction Coal Mine**

**Surfaceownership and coal leases: **Leasescovering coal deposits beneath Company lands were acquired in October 1990 andhave primary terms of twenty-five years, and unless renewed, expire in the year2015. The Company’s leases cover a 25% interest in the coal; as the Companyowns a 75% interest in the coal, the surface estate of approximately 1,640acres, and has the executive rights (i.e., the exclusive right to sign coalleases) on the leased 25% interest.****Noannual delay rentals or advance minimum royalties are required.  In 1991, the Company purchased the surfaceestate, a 75% interest in the coal and the executive rights to the remaining25% interest in the coal of approximately 190 additional acres in La PlataCounty adjacent to the above-referenced tract. The Company has not leased the remaining 25% interest in the coal.  By virtue of its fee and lease ownership andthe executive rights it holds, the Company controls 100% of the above describedtracts.

**CoalMining Permit dated July 31, 2003 Expiring July 31, 2008**:  Coal deposits held under the Company’s landshave been minimally permitted and disturbed by mining operations.  Of the 1,830 acres owned and leased, 192acres have been permitted for mining, and approximately 38 acres have beendisturbed. Competitive conditions in the coal marketplace, primarilytransportation issues, have resulted in the inability of the Company to producethese deposits competitively; therefore the Company records no economic valuefor the reserves. If required for reclamation activities, the Company willacquire a new permit upon the expiration of the current permit.

**Reclamationliability and financial warranties:**  The Company’s original and current bond****amount for the reclamation of the coal mine is$816,526.  Of the 192 acres covered bythe mine permit, approximately 38 acres have been disturbed by operations.   The Company has reclaimed 26 of those acresresulting in 12 acres remaining disturbed.

In March 2006, theCompany put out a Final Reclamation Bid Package for its Carbon Junction coalmine.  On April 24, 2006, the Companyentered into a fixed-price contract in the amount of $567,000 with C&JGravel of Durango, Colorado to accomplish the work in the Final Reclamation BidPackage.  As of February 28, 2006, theCompany’s reclamation reserve was raised to $567,000 to reflect the amountcontracted by the Company for the reclamation. Reclamation activitiespermissible under the terms of the permit were completed in fiscal 2006.

On August 25,2006, the Company filed a Phase 1 Bond Release Application with the CDRMSrequesting the release of $489,916 of the current bond required to cover therelease from the permit of approximately 26 reclaimed acres of the 38 acresdisturbed.  On August 28, 2006, theCompany was informed by the CDRMS that a previously filed Technical RevisionNo. 13, which updated the reclamation cost estimate for the mine, would resultin a reduction of its $816,526 reclamation liability for the site in the amountof $114,473 to $702,053. Under the terms of a Phase 1 bond release, up to 60%of the remaining bond is acceptable to be released. In fiscal 2008, the Companyexpects the release of approximately $421,231 in addition to the $114, 473resulting in a remaining financial warranty of approximately $281,000 for theremaining approximately 12 disturbed acres.

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Phase II and Phase IIIbond releases are eligible for complete and final bond release after sedimentcontrol structures are reclaimed.  Ifthese structures were necessary for the impending development of the site,Phase II and Phase III bond releases may be approved by the CDRMS at the timethat it is determined.  However, the fullrelease of the Company’s reclamation performance bond is subject to the CDRMS’sconfirmation that environmental responses, ground cover, vegetative habitat andre-growth have stabilized and may require a couple of years.

**CurrentMining Activities and Inspections:** Activities on the minesite have ceased with the exception of monthly site and records monitoringrequired under the terms of the permit and are conducted by the CDRMS.Inspections are conducted each month and the CDRMS reports to the Companyregarding issues of its general mine compliance under the terms of its permit.If needed, the Company then conducts operations to respond to requirements bythe CDRMS as a result of these inspections. Inspections and operations will continue until the complete release ofthe reclamation liability and warranty. See “Item 6. – Management’s Discussionand Analysis or Plan of Operation.”

**RealEstate Held for Sale**

Location:  The Company’s Durango Property is comprisedof approximately 1,852 acres of land located in La Plata County, Colorado.  The major highways intersecting the City ofDurango and La Plata County are US Highway 550 running north and south and USHighway 160 running east and west.  TheCompany’s land is aligned with US Highway 160 and is located on a mesa adjacentto and above the City of Durango.  TheDurango Property is not currently within the city limits; however, certainportions of the Durango Property have common boundaries to the city.

Background andPlan Approval Process:  In September2000, the Company filed an annexation application and the conceptual plan withthe City of Durango, Colorado for 1,100 acres of its property.  The Company became aware that, prior to anyaction by the city regarding annexation, a plan had to be developed andapproved by the city for the area in which the Company’s property is located(the “Area Plan”).  The Area Planevaluates land uses within a specific area to determine whether the uses willbe compatible with each other. Properties adjacent and nearby that may be impacted by the landownerrequesting annexation are studied. Impacts to resources of minerals, coal, oil and gas, as well aswildlife, archeological, geologic and environmental hazards, traffic, publicfacilities and infrastructure are reviewed. Public hearings on the Area Plan provide a forum for neighborhooddiscussion and comment. Public meetings were held in fiscal years 2001, 2002and 2003. The ideas, issues and concerns of the property owners, the Durangocommunity, and city staff were used to prepare the Area Plan.  The Area Plan provides guidance for decisionsin developing lands within the Area Plan consistent with the community’s largervision for Durango.

Significant issuesthat arose during the approval process were public access across and throughthe mesa, the city’s desire for greater density, and the Company’s desire forits land to be developed at a lower density.

The sole currentaccess onto the Company’s property is located on the western end and servesincoming and outgoing traffic that in the past has included gravel trucks.  The city required that the Company’s propertybe served by two or more access roads. The city’s 1997 US Highway 160/550 Area Plan included a bypass fromHighway 160/550 across the Company’s property connecting U.S. Highway 550 toHorse Gulch/Goeglein Road to the east. The Company advised the city that it could not support a bypass throughthe Company’s property.  The issueultimately was resolved by the Company’s agreement to accept the minor arterialroadway concept and the city’s agreement to shift the location of the roadwayto the perimeter of its property so that the roadway would not cross theplanned golf course.  Additional accessmay be required in accordance with the Area Plan during the annexation process.However, no paved secondary access road serving the mesa is required until atraffic study determines the average daily traffic volume to and from the areawill exceed 5,000 vehicle trips per day.

With respect tothe density of housing units, as issues arose during the Area Plan process, theCompany proposed to build fewer residential units than the city desired.  The Durango Property has been identified bythe community as a very desirable location for growth.  The approved Area Plan supports theconstruction of anywhere from approximately 1,500 to 3,000 residential units.

Plan concept:  Conceptual Plans are subject to change.  The guidelines within the Area Plan reflectthe principles found in traditional neighborhood developments.  The Company’s mixed-use development concept,

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tentatively called “Oakridgeat Durango,” is a neighborhood design where residential villages would bewithin convenient walking or biking distance to nearby neighborhood squaresoffering life’s daily essentials.  Eachsquare would include a small neighborhood business district intended as atransitional area of light business uses between residential areas and otherfeatures where shopping, services or office spaces would be provided to thenearby neighborhoods.  The center of eachsquare would include a small community park and plaza for resting, playing oreating. Houses of worship and day care would be conveniently sited.  Residential densities would shift from high-densityin the center of the village to medium or less density as the golf course orrims of the mesa are approached.  TheArea Plan adopted by the City of Durango incorporates areas of open space andpreserves hillsides, gulches and other natural features of the terrain, whileallowing residential, commercial and resort development opportunities aroundthe proposed golf course and other recreational properties.  A substantial business park is envisioned toattract corporate home offices and local businesses to the area.

The mountainousacres of the Durango Property that extend northeast would remain outside theannexed area of the Durango city limits for possible development into 35-acrelots in the future.

Approval of AreaPlan:  The Area Plan, contemplating thatapproximately 1,202 acres of the Company’s property would be annexed, wasadopted by the City of Durango’s Planning Commission in December 2003 and bythe City Council in January 2004.  TheCompany’s management believes that the approval of a final Area Planconstitutes a major step forward for the Company.

Annexation:  The next step in the process will be for theCity of Durango, when requested by the Company or any new owner (see “Decisionto Sell the Durango Property,” below), to approve the Company’s annexationapplication.  Once the Area Plan has beenadopted, then an annexation impact report is required to address the physicalanalysis of the annexation issue.  Theapplicant will submit to the City of Durango an annexation application, a masterplan for infrastructure, and a plan for its initial phase of development.  The city planners will review, hold publichearings, and then prepare a recommendation to the City Council to approve,approve with conditions or deny the annexation application and plan fordevelopment.   At this stage, the Companyis unable to estimate the timetable for all of the foregoing to occur.

Decision to Sellthe Durango Property:  After obtainingapproval of the Area Plan, the Company concluded, during the first quarter offiscal 2005, that it would be prudent for it to attempt to sell the DurangoProperty.  The Company’s decision wasbased on several principal factors, one being the recent developments withrespect to the health of Sandra Pautsky, its Chief Executive Officer andprincipal shareholder, who has been the moving force pushing the development ofthe Company’s property since the death of her father, Noel Pautsky, in 1998. Infiscal 2004, Ms. Pautsky was diagnosed with a life-threatening form of cancer.In mid-2004 Ms. Pautsky received specialized treatment for her disease. Sheresponded well and has resumed normal activities. Additional treatment will benecessary in the future.  Concernsregarding her health, the size of the proposed development, the significantfinancial requirement by the Company, the number of years to complete, coupledwith the risk involved to the Company in committing so much of its limitedfinancial resources to one project caused the Company to decide after the endof fiscal 2004 to attempt to sell its land in fiscal 2005. The Company’sofficers, other than Ms. Pautsky, have not been actively involved with respectto the Durango Property; however, in the event that the Company should not sellthe Durango Property, the Company anticipates that Chi Chi Ray, Ms. Pautsky’sdaughter, a long-term employee of the Company, would assume primaryresponsibility for the Company’s Durango development activities.  Ms. Ray has been actively involvedhistorically and to date with the Company’s actions in Colorado.

Efforts related tothe Sale of the Durango Property:   Inlate fiscal 2005, the Company engaged in serious negotiations with twopotential buyers.  As negotiationsprogressed in fiscal 2006, the Board of Directors determined it would be prudentto obtain outside assistance in marketing the Durango Property and/or theCompany and its assets.

On May 16, 2005,representatives of Morgan Keegan & Co., Inc. (“Morgan Keegan”) met withcertain members of the Board of Directors and discussed marketing the Companyand its assets.  The Board of Directorsdetermined that the Company should solicit buyers for a sale of the Companyand/or its assets on terms and at prices that would maximize shareholder value.

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On June 3, 2005,the Board of Directors approved the retention of Morgan Keegan to analyze thestrategic alternatives for the Company and the Durango Property.  As part of its process, Morgan Keegan agreedto identify different categories of potential buyers depending on theirinterest in the Company, as a whole, its energy assets, or the Company’s realestate assets.  In addition, MorganKeegan agreed to aggressively market the Company and its assets to a largenumber of potential buyers in order to ensure a competitive process.

During June andJuly 2005, with guidance from Morgan Keegan, the Company prepared aninformation memorandum that described the Company, the Durango Property and theacquisition opportunity.  Thereafter,Morgan Keegan began to solicit interest from potential buyers identified by bothMorgan Keegan and the Board of Directors. Morgan Keegan indicated that it had, on a preliminary basis, identified38 potential buyers for the Company and/or its assets. Out of the 38 potentialbuyers identified, 23 parties signed a confidentiality agreement and receivedthe information memorandum.

During the summerand early fall of 2005, Morgan Keegan and Company representatives hosted ninesite visits and received eight offers for either the Company or itsassets.  All offers from potential buyerswere rejected because the offers were less than our asking price.

On November 7,2005, the Company received an offer from the operator of the Madison County,Texas oil property under three different scenarios:  oil and gas assets only, the Durango Propertyonly, or the Durango Property and oil and gas assets.  All options offered were rejected because theoffers were less than the Company’s asking price.

On November 30,2005, the Board of Directors reviewed the status of Morgan Keegan’s efforts tosell the Company and/or its assets and decided to release Morgan Keegan fromits contract.  The Company continueddiscussions with offerors identified by Morgan Keegan after releasing MorganKeegan.

On December 13,2005, the Company engaged a local Durango real estate brokerage company on anon-exclusive basis to market the Durango Property at a specified minimumprice. The marketing performed by the brokerage company resulted in two sitevisits but no offers.

On January 12,2006, the Company engaged another local Durango real estate brokerage companyon a non-exclusive basis to market the Durango Property at a specified minimumprice.  The second brokerage companycontacted approximately four potential buyers, which resulted in two sitevisits. One of the potential buyers performed significant due diligence on theDurango Property.  However, other offerswere received by the Company prior to the completions of such due diligence andno offer was made. On March 21, 2006, one of the potential buyers submitted anoffer on the Durango Property.

On January 13,2006, the Company contracted with another local Durango brokerage company on anon-exclusive basis to market the Durango Property at a specified minimum pricewho identified six potential buyers, which resulted in two site visits and oneoffer on March 17, 2006.  This brokeragecompany was responsible for identifying Denali Partners, LLC (“Denali”) as apotential buyer for the Durango Property in November 2004.  The Company was contacted by therepresentative for Denali and conducted serious negotiations with the groupprior to the determination of the Board of Directors in mid-2005 to analyzestrategic alternatives for the Company and the Durango Property through theengagement of Morgan Keegan. Morgan Keegan continued the Company’s negotiationswith Denali during their marketing efforts to sell the Company and/or itsassets and received an offer from Denali for less than its final offer.

In February 2006,the Company renewed negotiations with Denali. On March 6, 2006, the Company received an offer from Denali of $35million, which was later increased to approximately $40 million.  Between March 6, 2006 and April 4, 2006, theCompany, our legal advisors and financial advisors engaged in conference callsand exchanged correspondence with Denali to negotiate the terms of the Contractto Buy and Sell Real Estate and ancillary documents (the “Contract”).

Mutual Acceptanceof Contract to Buy and Sell Real Estate: On April 4, 2006, the Company accepted Denali’s offer, subject tocertain terms and conditions, and our Board of Directors (i) determined thatthe transactions contemplated by the Contract to Buy and Sell Real Estate wereadvisable and in the best interest of the shareholders and (ii) unanimouslyapproved the Contract to Buy and Sell Real Estate.  At the request of Denali, Ms.

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Pautsky agreed to votethe shares of common stock that she owns or has the right to vote in favor ofthe asset sale.  On April 4, 2006,the Contract to Buy and Sell Real Estate was executed by all parties thereto.Simultaneously with Ms. Pautsky’s execution of the contract, a press release tothe Company’s shareholders describing the sale was published.

Extension ofContract Term:  On May 4, 2006, theCompany and the Buyer executed an Agreement to Amend/Extend Contract to allow14 additional days for completion of the Alta survey of the DurangoProperty.  This action lengthened theContract’s extension period from June 5, 2006 to June 19, 2006.

Inspection Periodand Earnest Money: The Buyer’s obligations under the Contract were subject toand conditioned upon the Buyer’s investigation and study of the DurangoProperty and satisfaction with all aspects deemed relevant by the Buyer in itssole and absolute discretion.  TheContract inspection period would be the period that is 60 days from theexecution of the Contract, or any extension date thereof.  Prior to June 19, 2006, the Buyer could forany reason in its sole discretion terminate the Contract.

On June 12, 2006,the Company received notice that the buyer had elected to terminate thecontract.   In that event, the initialearnest money deposit of $2 million was fully refundable and all earnest moneyand interest earned thereon were returned to the buyer.

In an effort toeliminate the election to terminate provision in future contracts, the Companymade the determination that it would provide to all potential buyers a packagethat included title and survey documentation, due diligence documents providedto Denali under the terminated contract, marketing information and planningapproval documentation.

Between June 12,2006 and July 18, 2006, with assistance from Crane, Leake, & Ehlers, aprofessional corporation located in Durango, Colorado, the Company compiled afour-volume package on the Durango Property, which is issued to potentialbuyers with the request that a buyer complete their due diligence on theproperty prior to making an offer to the Company.

Between June 19,2006 and August 30, 2006, the Company, through Crane, Leake, & Ehlers, issued20 packages to interested parties, which included some parties that made offerson the Durango Property prior to our entering into contract with Denali.  Thereafter, an additional 5 packages havebeen issued, with some being returned and reissued.

On July 19, 2006,the Company issued a package to a local realty company for receipt of theirclient, First City Realty Development Corp.

On September 6,2006, the Company received a contract for the purchase of the Durango Propertyfrom one of the groups who had received a package.  We did not accept the contract as the termswere not satisfactory.

On September 21,2006, the Company received a contract for the purchase of the Durango Propertyfrom one of the groups who had received a package.  We did not accept the contract as the termswere not satisfactory.

On October 6,2006, the Company received a Contract to Buy and Sell Real Estate from FirstCity Realty Development Corp. for $35,000,000. Certain terms required further negotiation.

On October 18,2006, the Company sent First City Realty Development Corp. a counterproposal tothe Contract to Buy and Sell Real Estate, which was executed by the Company andFirst City Realty Development Corp. on October 18, 2006.

On November 29,2006,  the Company announced that FirstCity Realty Development Corp. had defaulted on the above-referenced contract asa result of First City Realty’s failure to make the first two earnest moneydeposits following the death of Larry Day, the owner and President of FirstCity Realty Development Corp.

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The Company isexploring all its remedies with respect to First City Realty Development Corp.’sdefault, but the Company has been disappointed to date with activities pursuantto the default.

On April 18, 2007,the Company received a Letter of Intent to acquire the Company’s DurangoProperty, not intended to be a binding agreement subject to final terms ofbeing negotiated and established in a mutually executed contract.  Preliminary terms were not acceptable to theCompany.  Discussions are ongoing.  

**Competitionand Markets**

CompetitiveConditions:  Two other Durango areadevelopments are of significant size and could compete with Oakridge atDurango. Three Springs is a large project that is being developed a few mileseast of Oakridge at Durango on the eastern edge of the city that includes a 60acre medical center and campus, new hospital, medical office buildings, and 66affordable employee housing units. It’s Village 1 has been approved for 1,872units to be completed in three phases with 300,000 square feet of commercialspace to be included on the property. Approximately 80,000 square feet of thecommercial space is expected to be completed in the fall.  Approximately 30 residential units ranging insize from 1,300 square feet to 2,300 square feet priced between $340,000 and$510,000 are currently being offered for reservation, through a reservationagreement.  Edgemont Ranch is anotherdevelopment located nearby Durango. Edgemont Ranch is situated to the northeast of the City and whencomplete is expected to include approximately 1,000 homes on 1,400 acres.  Because of the size and the proximity ofthese projects to the Durango Property, they may compete with Oakridge atDurango.

Competition:  A large number of companies and individualsare engaged in the exploration for oil and gas, and most of the companies soengaged possess substantially greater technical and financial resources thanthe Company.  Competition for desirableleases and suitable prospects for oil and gas drilling operations is intense,and in the past the Company has experienced significant competition inobtaining the services of drilling contractors and in purchasing tubular goodsand other materials necessary to drill and complete wells.  In fiscal 2006 and 2007, the Company did notexperience any difficulty in obtaining services and materials because of itslack of exploration and development activities.

The gravel andcoal industries are also highly competitive. A principal competitive factor in both industries is product price.  In addition, with respect to coal, (i) itsquality and (ii) with regard to major sales agreements, the financial andorganizational ability of the selling company to meet long-term coal deliveryrequirements of utility companies and (iii) transport the product competitivelyare important.  With regard to thequality of coal, the important criteria include BTU (heating value), sulfur andash content.

Markets:  The Company’s ability to produce and marketoil and gas profitably depends upon a number of factors which are beyond thecontrol of the Company, the effect of which cannot be accurately predicted oranticipated.  These factors include theavailability of adequate pipeline and other transportation facilities, themarketing of competitive fuels and other factors affecting the availability ofa ready market, such as fluctuating supply and demand. Additional factorsaffecting the marketing of oil and gas include imports and actions by foreignproducing nations.

Oil and gas priceshave been on a generally upward trend since the first quarter of fiscal 2003and such prices had a materially positive effect on the Company’s revenues infiscal 2007 and on the amount and present value of the Company’s estimatedproven oil and gas reserves at year end. In fiscal 2007, the Company’s average oil price received increased $4.74per barrel (approximately 8%) from that received in fiscal 2006.  The Company’s average gas price received forfiscal 2007 finished the year lower than in fiscal 2006 (a decrease of $1.81per MCF, or approximately 24%); however, the effect of changes in gas prices onthe Company’s revenues and proven reserves is not as great as changes in oilprices due to the Company’s significant weighting in favor of oil production.

While certain ofthe Company’s gas properties experience seasonal variations in demand, theCompany was not experiencing any significant curtailment, or an inability tosell all of its deliverable gas, on an overall basis at February 28, 2007. See “Item6. – Management’s Discussion and Analysis or Plan of Operation - Results ofOperations.”

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**Regulation**

Oil and Gas:  The production of oil and gas is subject toextensive federal and state laws, rules, orders and regulations governing awide variety of matters, including the drilling and spacing of wells, allowablerates of production, prevention of waste and pollution and protection of theenvironment.  In addition to the directcosts borne in complying with such regulations, operations and revenues may beimpacted to the extent that certain regulations limit oil and gas production tobelow economic levels.  The regulationsare generally designed to ensure that oil and gas operations are carried out ina safe and efficient manner and to ensure that similarly situated operators areprovided with reasonable opportunities to produce their respective fair sharesof available oil and gas reserves.  Sincethese regulations generally apply to all oil and gas producers, the Companybelieves that these regulations do not put the Company at a materialdisadvantage to other oil and gas producers.

Certain sales,transportation and re-sales of natural gas by the Company are subject to bothfederal and state laws and regulations, including, but not limited to, theNatural Gas Act (the “NGA”), the Natural Gas Policy Act of 1978 (the “NGPA”)and regulations promulgated by the Federal Energy Regulatory Commission (“FERC”)under the NGA, the NGPA and other statutes. The provisions of the NGA and the NGPA, as well as the regulationsthere-under, are complex and can affect all who produce, resell, transport,purchase or consume natural gas.

Although FERCtransportation regulations do not directly apply to the Company because it isnot engaged in rendering jurisdictional transportation services, theseregulations do affect the operations of the Company by virtue of the need todeliver its gas production to markets served by interstate or intrastatepipelines.

Coal andGravel:  The Company’s coal operations inthe past have been subject to extensive regulation under the Surface MiningControl and Reclamation Act of 1977 and the Colorado law of a similar natureand the Clean Air Act of 1990.  Theeffects of such regulations have been (i) to increase significantly the leadtime to commence actual surface coal mining operations, (ii) to make it morecostly for the coal to be marketed and (iii) to limit the customers for thecoal to certain types of power plants. The Company’s gravel operations are subject to comparable regulation,but compliance standards are less rigid.

**Environmentaland Health Controls**

The Company’soperations are subject to numerous federal, state and local laws andregulations relating to environmental and health protection.  These laws and regulations require the acquisitionof a permit before drilling commences, restrict the type, quantities andconcentration of various substances that can be released into the environmentin connection with drilling and production activities, limit or prohibitdrilling activities on certain lands lying within wilderness, wetlands andother protected areas and impose substantial liabilities for pollutionresulting from oil and gas operations. These laws and regulations may also restrict air or other dischargesresulting from the operation of pipeline systems and other facilities in whichthe Company may own an interest. Although the Company believes that compliance with environmental lawsand regulations will not have a material adverse effect on operations orearnings, risks of substantial costs and liabilities are inherent in oil andgas operations, and there can be no assurance that significant costs andliabilities will not be incurred. Moreover, it is possible that otherdevelopments, such as stricter environmental laws and regulations or claims fordamages to property or persons resulting from the Company’s operations, couldresult in substantial costs and liabilities.

**OperatingHazards and Uninsured Risks**

The Company’s oiland gas operations are subject to all of the risks normally incident to the oiland gas exploration and production business, including blowouts, cratering,explosions, pollution and other environmental damage, any of which could resultin substantial losses to the Company due to injury or loss of life, damage to ordestruction of wells, production facilities and other property, clean-upresponsibilities, regulatory investigations and penalties and suspensions ofoperations.  As is common in the oil andgas industry, the Company is not fully insured against certain of these riskseither because insurance is not available or because the Company has electednot to insure due to high premium costs. The Company maintains comparable insurance coverage for its coal andgravel operations.

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**Employees**

As of May 16, 2007, the Company had four full-time employeesand one part-time employee.  Three of theemployees were located at the Company’s executive offices and two were fieldemployees located in North Texas.  TheCompany considers its relations with its employees to be satisfactory.

**ITEM2.****                                                DESCRIPTIONOF PROPERTY.**

**Oil andGas Properties.**

**Reserves**

** **Reference is made to “SupplementalOil and Gas Data (Unaudited)” included as supplemental information to theFinancial Statements for additional information concerning:  (i) certain cost and revenue informationpertaining to the Company’s oil and gas producing activities; (ii) estimates ofthe Company’s oil and gas reserves and changes in such reserves; and (iii) astandardized measure of the discounted future net cash flows from the Company’soil and gas reserves and the changes in such standardized measure.  The engineering report with respect to theCompany’s proved oil and gas reserves as of February 28, 2007 was prepared byStephens Engineering, independent petroleum engineers, Wichita Falls, Texas (“StephensEngineering”). At such date, all of the Company’s oil and gas reserves werelocated in the United States and in the States of Texas, Mississippi, Coloradoand Oklahoma.

No reserve reportspertaining to the Company’s proved net oil or gas reserves were filed with anyFederal governmental authority or agency during the fiscal year ended February28, 2007, and no major discovery is believed to have caused a significantchange in the Company’s estimates of proved reserves since that date.

The followingtable reflects Stephens Engineering’s estimate of those quantities of oil andgas as of February 28, 2007 which can be produced from the Company’s proveddeveloped reserves during the fiscal year ending February 28, 2008, using equipmentinstalled and under economic and operating conditions existing at February 28,2007:
| Oil (Bbls.) |   | 16,896 |   |
|-------------|--------|--------|--------|
| Gas (MCF)   |   | 24,457 |   |

The Company is not obligated to provide a fixed anddeterminable quantity of oil and gas in the future under any of its existingcontracts or arrangements.

**Production**

The followingtable shows for each of the three fiscal years ended February 28, 2007 thetotal production attributable to the Company’s oil and gas interests:
| Fiscal Year Ended  February 28 | ** ** | **Oil  (Bbls.)** | ** ** | **Gas  (MCF)** | ** ** |
|-----------------------------------------------|------------|------------------|------------|----------------|------------|
| 2007                                          |       | 18,707           |       | 20,749         |       |
| 2006                                          |       | 21,587           |       | 38,732         |       |
| 2005                                          |       | 23,852           |       | 41,289         |       |

 

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**Lifting Costs and Average SalesPrices**

The Company’s production(lifting) costs and average sales prices received during each of the threefiscal years ended February 28, 2007 were as shown in the following table:
|                              | ** ** | **Fiscal Year  Ended February 28,** | ** ** |
|------------------------------|------------|----------------------------------------------------|------------|
| ** **                   | ** ** | **2007**                                           | ** ** | **2006** | ** ** | **2005** | ** ** |
| Lifting Costs                |       |                                               |       |   |   |   |   |
|                         |       |                                               |       |   |   |   |   |
| Per Equivalent  Unit (Bbls.) |       | $                                                  | 39.69      |   | $ | 24.30 |   | $ | 20.36 |   |
|                         |       |                                               |       |   |   |   |   |
| Average Sales  Prices        |       |                                               |       |   |   |   |   |
|                         |       |                                               |       |   |   |   |   |
| Oil (per Bbl.)               |       | 62.42                                              |       | 57.68 |   | 42.54 |   |
| Gas (per MCF)                |       | 5.82                                               |       | 7.63 |   | 5.95 |   |
|                              |            |                                                    |            |  |  |  |  |  |  |  |

 

**Sales Contracts and MajorCustomers**

The Company does not own any refining facilities andsells its oil under short-term contracts at f.o.b. field prices posted by theprincipal purchasers of oil in the areas in which the Company’s producingproperties are located.  During thefiscal year ended February 28, 2007, approximately 70% of the Company’s oilsales were made to Teppco Crude Oil, L.P. (“Teppco”) and approximately 24% weremade to Sunoco, Inc.  During fiscal 2007,approximately 57% of the Company’s gas sales were made under short-termcontracts to Orion Pipeline, L.L.C. (“Orion”) and approximately 19% were madeto Chevron U.S.A., Inc.

Substantially allof the Company’s oil sales to Teppco and its gas sales to Orion were from theCompany’s Madison County, Texas property.

In the opinion ofmanagement, the termination of any of the Company’s sales contracts would notadversely affect the Company’s ability to sell its oil and gas production atcomparable prices.

**DevelopedAcreage and Productive Wells**

As of February 28,2007, the Company owned working and overriding royalty interests in 8,999 gross(2,530 net) acres of developed oil and gas leases and 67 gross (21.09 net)productive oil and gas wells.

The followingtable summarizes the Company’s developed acreage and productive wells as ofFebruary 28, 2007:
| ** **    | ** ** | **Developed Acreage(1)** | ** ** | ** ** | ** ** | **Productive Wells(1)(3)** | ** ** |
|---------------|------------|-------------------------------|------------|------------|------------|---------------------------------|------------|
| ** **    | ** ** | **Gross(2)**                  | ** ** | **Net(2)** | ** ** | ** **                      | ** ** | **Gross(2)** | ** ** | **Net(2)** | ** ** |
| ** **    | ** ** | **Oil**                       | ** ** | **Gas**    | ** ** | **Oil**                         | ** ** | **Gas** | ** ** | ** ** | ** ** | **Oil** | ** ** | **Gas** | ** ** | **Oil** | ** ** | **Gas** | ** ** |
| Texas:        |       |                          |       |       |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Madison Co    |       | 4,515                         |       | —     |       | 1,129                           |       | — |   |   |   | 25 |   | — |   | 6.25 |   | — |   |
| All Other Cos |       | 2,248                         |       | 1,914      |       | 1,219                           |       | 177 |   |   |   | 26 |   | 13 |   | 12.47 |   | 2.31 |   |
| Mississippi   |       | 40                            |       | —     |       | —                          |       | — |   |   |   | 1 |   | — |   | 0.01 |   | — |   |
| Colorado      |       | —                        |       | 242        |       | —                          |       | 4 |   |   |   | — |   | 1 |   | — |   | 0.02 |   |
| Oklahoma      |       | 40                            |       | —     |       | 1                               |       | — |   |   |   | 1 |   | — |   | 0.03 |   | — |   |
|          |       |                          |       |       |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total         |       | 6,843                         |       | 2,156      |       | 2,349                           |       | 181 |   |   |   | 53 |   | 14 |   | 18.76 |   | 2.33 |   |

 

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(1)           Reversionary interestswhich may increase or decrease the interest shown have been disregarded forpurposes of this table.

(2)           “Gross,” as it appliesto acreage or wells, refers to the number of wells or acres in which aninterest is owned by the Company.  “Net,”as it applies to acreage or wells, refers to the sum of the fractionalownership interests owned by the Company in gross wells or gross acres.

(3)           Includes 14 gross (3.19net) shut-in wells; excludes 8 gross (3.30 net) water injection wells.

**UndevelopedAcreage**

The followingtable shows the gross and net acres of undeveloped oil and gas leases held bythe Company at February 28, 2007:
| State    | ** ** | **Gross Acres** | ** ** | **Net Acres** | ** ** |
|----------|------------|----------------------|------------|--------------------|------------|
| Texas    |       | 1,670                |       | 551                |       |
| Arkansas |       | 2,428                |       | 1,214              |       |
|     |       |                 |       |               |       |
| Total    |       | 4,098                |       | 1,765              |       |

 

All of the Company’sundeveloped leases in the State of Arkansas cover lands located in MillerCounty.  In the absence of drillingactivity which establishes commercial reserves sufficient to justify retentionor renewal of leases, the Company’s leases on approximately 2.63% of its netacres will expire in fiscal 2008, 10.91% will expire in fiscal 2009 and 0.18%will expire in fiscal 2010.  Theremaining approximate 86.28% of the Company’s undeveloped acreage, whichincludes all of such acreage in the State of Arkansas and a portion of suchacreage in Gregg and Montague Counties, Texas, is currently held in force byproduction.  The Company has no ownershipinterest in the Miller County, Arkansas productive acreage.

**DrillingActivity**

TheCompany did not participate in drilling any development wells during the threefiscal years ended February 28, 2007, and, as of February 28, 2007, theCompany was not in the process of drilling or completing any wells.

**Coal andGravel Properties.**

Coal Leases:  Leases covering coal deposits beneath Companylands were acquired in October 1990 and have primary terms of twenty fiveyears, and unless renewed, expire in the year 2015. The Company’s leases covera 25% interest in the coal; as the Company owns a 75% interest in the coal, thesurface estate of approximately 1,640 acres, and has the executive rights(i.e., the exclusive right to sign coal leases) on the leased 25% interest.****No annual delay rentals or advance minimumroyalties are required.   In 1991, theCompany purchased the surface estate, a 75% interest in the coal and theexecutive rights to the remaining 25% interest in the coal of approximately 190additional acres in La Plata County adjacent to the above-referencedtract.  The Company has not leased theremaining 25% interest in the coal.  Byvirtue of its fee and lease ownership and the executive rights it holds, theCompany controls 100% of the above described tracts.  

Coal Mining Permitdated July 31, 2003, Expiring July 31, 2008:   Coal deposits held under the Company’s landshave been minimally permitted and disturbed by mining operations.  Of the 1,830 acres owned and leased, 192acres have been permitted for mining, and approximately 38 acres have beendisturbed. Competitive conditions in the coal marketplace, primarilytransportation issues, have resulted in the inability of the Company to producethese deposits competitively; therefore the Company records no economic valuefor these reserves. The mine permit requires financial warranty for thedisturbed acres under the permit, therefore the Company made the decision toreclaim its permitted area, as allowed under permit conditions, in order toobtain the substantial release of its financial warranty for reclamation. See “Item1 - Description of Business - Carbon Junction Coal Mine”

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The Company alsoowns 55% of the gravel, oil, gas and other mineral rights with respect to theapproximate 1,640 acre tract in La Plata County, Colorado and has the executiverights on the remaining 45%.  The permitto mine gravel held by FCM, operator of the gravel mine, contains 63.5acres.  FCM is no longer mining sand, graveland rock products from the permit area and has reclaimed, as allowed undertheir permit, the lands disturbed by their activities.  See “Item 1. - Description of Business -Gravel Operations” and “Item 6. – Management’s Discussion and Analysis or Planof Operation - Results of Operations.”

**RealEstate.**

The DurangoProperty, in La Plata County, Colorado held for sale by the Company contains1,852 acres covering coal, gas and other minerals including gravel as describedabove in “Coal and Gravel Properties”. Approximately 1,202 acres of such land is the subject of a planned mixeduse development by the Company.  See “Item1. - Description of Business - Real Estate Held for Sale.”

**OfficeBuilding.**

The Company owns aone-story office building situated at 4613 Jacksboro Highway in Wichita Falls,Texas in which its executive offices are located.  The building is located on .519 acres of landand contains 5,117 square feet of space. The building was built in 1974 and isin overall good condition.

**ITEM3.****                                                LEGALPROCEEDINGS.**

The Company is nota party to any pending litigation.  Tothe best knowledge of the Company, there are no legal proceedings to which anydirector, officer or affiliate of the Company, any owner of record or beneficiallyof more than five percent (5%) of any class of voting securities of theCompany, or any associate of any such director, officer or security holder is aparty adverse to the Company or has a material interest adverse to the Company.

**ITEM4.****                                                SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS.**

No matter wassubmitted during the fourth quarter of the fiscal year ended February 28, 2007to a vote of the Company’s security holders, through the solicitation ofproxies or otherwise.

**PART II**

**ITEM 5.****                                                MARKETFOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUERPURCHASES OF EQUITY SESCURITIES.**

The Company’scommon stock, $.04 par value, is traded in the over-the-counter market.  The following table shows the range of bidquotations for the common stock during the two fiscal years ended February 28,2006 and February 28, 2007 by quarters. Such quotations were furnished to the Company by the National QuotationBureau, LLC and were supplied by The National Association of Securities Dealers(“NASD”) through the NASD OTC Bulletin Board, the NASD’s automated system forreporting NON-NASDAQ quotes and the National Quotation Bureau’s PinkSheets.  The quotations represent pricesbetween dealers and do not include retail markups, markdowns or commissions anddo not necessarily represent actual transactions.
| Period                                | ** ** | **High** | ** ** | **Low** | ** ** |
|---------------------------------------|------------|----------|------------|---------|------------|
|                                  |       |     |       |    |       |
| Fiscal Year  Ended February 28, 2006: |       |     |       |    |       |
| Quarter Ended May 31, 2005            |       | $        | 6.00       |    | $          | 3.25 |   |
| Quarter Ended August 31, 2005         |       | 5.00     |       | 3.25    |       |
| Quarter Ended November 30, 2005       |       | 5.00     |       | 2.35    |       |
| Quarter Ended February 28, 2006       |       | 5.75     |       | 3.25    |       |
|                                  |       |     |       |    |       |
| Fiscal Year  Ended February 28, 2007: |       |     |       |    |       |
| Quarter Ended May 31, 2006            |       | $        | 9.00       |    | $          | 4.00 |   |
| Quarter Ended August 31, 2006         |       | 7.50     |       | 4.00    |       |
| Quarter Ended November 30, 2006       |       | 8.40     |       | 4.50    |       |
| Quarter Ended  February 28, 2007      |       | 8.00     |       | 5.00    |       |

 

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As of May 16,2007, the approximate number of holders of record of the common stock of theCompany was 432.

The Company didnot pay any dividends during the two fiscal years ended February 28, 2006 andFebruary 28, 2007.  There are currentlyno restrictions upon the Company’s ability to pay dividends. Our Board ofDirectors has not approved a dividend in connection with the proposed sale ofthe Company’s Colorado lands.  Althoughour Board of Directors will consider approving a dividend to distribute aportion of the net proceeds received from the sale of the Durango Property, ifthe sale is accomplished, we cannot assure you that such dividend will beapproved or declared.

The followingtable shows all purchases of the Company’s shares of common stock made by theCompany during the fourth quarter of the Company’s fiscal year endedFebruary 28, 2007:

Purchases ofEquity Securities
| **Period**                                  | ** ** | **Total Number of Shares  Purchased** | ** ** | **Average Price Paid Per Share** | ** ** |
|---------------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
| December 1, 2006  Through December 31, 2006 |       | 4,000                                                |       | $7.00                                                |       |

 

The purchase of shares were made in privatetransactions directly with the stockholders involved. The Company has nopublicly announced plans or programs to purchase its shares of common stock.

**ITEM 6.****                                                MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLAN OF OPERATION.**

The followingdiscussion and analysis should be read in conjunction with the FinancialStatements and Notes thereto included in Item 7.

**Resultsof Operations**

The Company had a netloss of $174,680 ($.04 per share) in the fiscal year ended February 28, 2007compared to a net income of $323,731 ($.08 per share) in the fiscal year endedFebruary 28, 2006. The Company experienced losses from operations in both the2007 and 2006 fiscal periods, however, the loss from operations in fiscal 2006was offset by an approximate $690,100 gain on the sale of investment securitieswith no such sale occurring in fiscal 2007. Also, revenues for fiscal 2007 decreased approximately $204,000 (13.07%)while oil and gas operations expense increased approximately $203,900 (25.2%)adding to the loss in fiscal 2007.

Oil and gasrevenues decreased approximately $174,000 (11.36%) in the fiscal year endedFebruary 28, 2007.  Although averageoil prices received during the year continued to rise, it did not offset thedecrease in the Company’s oil volumes sold and the decline in the average pricereceived for gas.  Fees in the amount of$36,600 received by the Company both in fiscal 2007 and 2006 for serving asoperator of most of the Company’s North Texas area properties are included inoil and gas revenues.

Thefollowing table compares the Company’s oil and gas revenues and average pricesreceived by the Company and its sales volumes of oil and gas during fiscal 2007with those of fiscal 2006:

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| ** **                | ** ** | **Fiscal 2007** | ** ** | **Fiscal 2006** | ** ** | **Percentage  Difference** | ** ** |
|---------------------------|------------|----------------------|------------|----------------------|------------|----------------------------|------------|
| Oil:                      |       |                 |       |                 |       |                       |       |
|                      |       |                 |       |                 |       |                       |       |
| Revenues                  |       | $                    | 1,145,535  |                 | $          | 1,261,657                  |       | - | 9.2 | % |
| Volume (Bbls.)            |       | 18,322               |       | 21,874               |       | +                          | 16.2       | % |
| Average Price  (per Bbl.) |       | $                    | 62.52      |                 | $          | 57.68                      |       | + | 8.4 | % |
|                      |       |                 |       |                 |       |                       |       |   |
| Gas:                      |       |                 |       |                 |       |                       |       |   |
|                      |       |                 |       |                 |       |                       |       |   |
| Revenues                  |       | $                    | 171,070    |                 | $          | 225,490                    |       | - | 24.1 | % |
| Volume (MCF)              |       | 29,396               |       | 29,545               |       | -                          | .5         | % |
| Average Price (per MCF)   |       | $                    | 5.82       |                 | $          | 7.63                       |       | - | 23.7 | % |

 

Non-material amounts ofnatural gas liquids revenues and sales volumes for both years are excluded fromthe foregoing table.

The Company’srevenues in fiscal 2007 from the Madison County, Texas property decreased$101,204 (11.07%) as the higher average oil prices received for production fromthe property could not offset the effect of lower oil and gas sales volumes.  The Madison County, Texas property has beenfully developed for its primary oil and gas reserves for some time.  The property was unitized in fiscal 2003 anda secondary recovery (waterflood) project on the property was commenced in thelast quarter of that year.  Threeinjection and one water supply wells are active currently and during fiscal2007 approximately 810,000 barrels of water were injected into the three wellsresulting in approximately 2,060,000 barrels of makeup water injected thusfar.  The Company has been advised by theoperator that it does not expect any significant increase in oil productionvolumes from the property until the void in the producing formation from prioroil and gas production, which is equivalent to roughly 3,000,000 barrels ofoil, has been filled.  Some wells nearbyto the injection wells have begun to respond to the waterflood.  Although the Company has continued strongexpectations with respect to the waterflood project, it should again beemphasized that there can be no assurance that the secondary recovery projectwill be successful.

The Company’sgravel revenues for fiscal 2007 decreased $30,000 (100%). The Company receivedrevenues from surface use due to FCM operations in fiscal 2006. No surface userevenues were received in fiscal 2007.

Expenses for the Company’s oil and gas operationsincreased $203,900 (25.2%) in the fiscal year ended February 28, 2007 asworkover and well servicing costs, tubing replacements, pumps, repairs,supplies, chemicals and electricity expenses increased.  Madison County lease operations increased$161,300 and North Texas lease operations increased $39,100.  The Company did not participate in thedrilling of any wells in fiscal 2007 or 2006, therefore no exploration or dryhole costs were incurred in these periods.

The expenses ofthe Company’s coal and gravel operations decreased by approximately $327,900(69.4%) in fiscal 2007, primarily as the result of the Company incurring theexpense of reclaiming its Carbon Junction Coal Mine in fiscal 2006, with onlyminimal charges toward reclamation in fiscal 2007. FCM has reclaimed its gravelmining operations on the property, which consisted of 63.5 acres.

Real estatedevelopment expense increased approximately $192,500 (24,844%) in fiscal 2007primarily due to surveying costs, legal expenses related to sale efforts,increased ad valorem taxes and payroll. General and administrative expensesdecreased approximately $26,600 (4.7%) in fiscal 2007 resulting from lowerlegal fees which were partially offset by higher payroll and employee benefitcosts.

Other incomedecreased approximately $559,100 (68.8%) in fiscal 2007 compared to fiscal2006. Other income consists of two primary components - other net income andgain on sales and redemptions of investment securities. The Company experienceda gain on the sale of investment securities of approximately $690,100 in fiscal2006 with no such gain in fiscal 2007. Other net income consists primarily of interest and dividend income andthe gain or loss on any sale of oil and gas properties or other assets andpartnership income or loss. Increased interest rates resulted in increasedinterest income in the amount of approximately $57,100. As to the remainingother net income components, the gain on sale of assets increased approximately$90,600 and  the Company’s loss relatingto its interest in the limited partnership, which operates a small gas pipelinein the East Texas area, was approximately $3,000 more in fiscal 2007 than infiscal 2006.

The Company’sprovision for income tax became a benefit in fiscal 2007 when it had been anexpense in fiscal 2006 resulting in a decrease in income tax expense of approximately$306,500 in fiscal 2007

17

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compared to fiscal2006.  This provision includes U.S.Federal corporate and state income taxes.

The Company’sweighted average shares outstanding decreased approximately .38% in the fiscalyear ended February 28, 2007 due to the purchase of 8,500 shares of the Company’sstock made by the Company from other shareholders during the year.

FinancialCondition and Liquidity

During fiscal2007, the Company did not participate in any exploratory or developmentdrilling and generally tried to restrict its expenditures on operational andinvesting activities.  However; asfollows, the operating, investing and financing activities were all net usersof cash, resulting in a decrease in the Company’s cash and cash equivalents atyear end of approximately $956,500.

The Company’soperating activities used approximately $775,800 in cash in fiscal 2007essentially as a result of the payment of its third party contract to reclaimits Carbon Junction coal mine in the amount of $567,000.  Increased ad valorem taxes and expensesrelated to the Company’s efforts to sell the Durango Property that includepayroll and legal expenses, engineering cost for performing an Alta survey toconfirm the number of acres and boundary of lands being sold by the Companyincreased fiscal year operating expenses in the amount of approximately$254,000, although a portion of the Company’s accounts in the amount ofapproximately $175,000 were owed at fiscal year end.   The Company’s investing activities usedapproximately $126,900 in funds, primarily for the purchase of investmentsecurities.  The Company’s financingactivities (entirely purchases of the Company’s common stock) usedapproximately $53,900 in funds in fiscal 2007. At February 28, 2007, the Company still had no indebtedness and cash andcash equivalents aggregated approximately $2,410,800.

The Company’sdecision to attempt to sell its Colorado real estate, which sale is expected infiscal 2008, should eliminate the need for any substantial drawdown of theCompany’s cash reserves or the need to obtain additional debt or equityfinancing. The Company expects to fund its contemplated oil and gas pluggingand abandonment operations during fiscal 2008 and any purchases of the Company’sstock that it makes from its cash and cash equivalents and any cash flow fromits oil and gas properties.  Thecontinued absence of revenues from gravel operations will reduce availablefunds, although more than sufficient funds should be available to the Companyfor operations.

The Company’saverage oil product prices received increased during fiscal 2007 as average gasproduct prices decreased.  The Companydoes not anticipate that its average oil and gas prices received in fiscal 2008will exceed, or perhaps even be equivalent to, those received during fiscal2007.  The Company’s fiscal 2008operations should benefit from the contemplated release of a portion of theCompany’s $817,000 coal mine reclamation bond to the State of Colorado expectedin fiscal 2008.

Critical Accounting Policies and Estimates

Theforegoing discussion and analysis of the Company’s results of operations andfinancial condition and liquidity is based upon the financial statements, whichhave been prepared in accordance with accounting principles generally acceptedin the United States of America.  Thepreparation of these financial statements requires the Company to makeestimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses.  TheCompany’s significant accounting policies are described in Note B of the notesto financial statements.  In response toSecurities and Exchange Commission (the “Commission”) Release No. 33-8040, “CautionaryAdvice Regarding Disclosure About Critical Accounting Policies,” the Companyhas identified certain of these policies as being of particular importance tothe portrayal of the Company’s results of operations and financial position andwhich require the application of significant judgment by management.  The Company analyzes its estimates, includingthose related to oil and gas revenues, oil and gas properties, income taxes,contingencies and litigation, and bases its estimates on historical experienceand various other assumptions that the Company believes to be reasonable underthe circumstances.  Actual results maydiffer from these estimates under different assumptions or conditions.  The Company believes the following criticalaccounting policies affect its more significant judgments and estimates used inthe preparation of the Company’s financial statements:

**SuccessfulEfforts Method of Accounting**:**** The Company accountsfor its natural gas and crude oil exploration and development activitiesutilizing the successful efforts method of accounting.  Under this method,

18

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costs of productiveexploratory wells, development dry holes and productive wells, costs to acquiremineral interests and three-dimensional (3-D) seismic costs arecapitalized.  Exploration costs,including personnel costs, certain geological and geophysical expensesincluding two-dimensional (2-D) seismic costs and delay rentals for oil and gasleases, are charged to expense as incurred. Exploratory drilling costs are initially capitalized, but charged toexpense if and when the well is determined not to have found reserves incommercial quantities.  The sale of apartial interest in a proved property is accounted for as a cost recovery andno gain or loss is recognized.

The application ofthe successful efforts method of accounting requires managerial judgment todetermine the proper classification of wells designated as developmental orexploratory which will ultimately determine the proper accounting treatment ofthe costs incurred.  The results from adrilling operation can take considerable time to analyze and the determinationthat commercial reserves have been discovered requires both judgment andindustry experience.  Wells may becompleted that are assumed to be productive but actually deliver oil and gas inquantities insufficient to be economic, which may result in the abandonment ofthe wells at a later date.  Wells may bedrilled that target geologic structures that are both developmental andexploratory in nature and an allocation of costs is required to properlyaccount for the results.  The evaluationof oil and gas leasehold acquisition costs requires managerial judgment to estimatethe fair value of these costs with reference to drilling activity in a givenarea.  Drilling activities in an area byother companies may also effectively condemn leasehold positions.

The successfulefforts method of accounting can have a significant impact on the operationalresults reported when the Company is entering a new exploratory area in hopesof funding an oil and gas field that will be the focus of future developmentdrilling activity.  The initialexploratory wells may be unsuccessful and will be expensed.

**ReserveEstimates**:** **The Company’s estimates of oil andgas reserves, by necessity, are projections based on geologic and engineeringdata, and there are uncertainties inherent in the interpretation of such dataas well as the projection of future rates of production and the timing ofdevelopment expenditures.  Reserveengineering is a subjective process of estimating underground accumulations ofoil and gas that are difficult to measure. The accuracy of any reserve estimate is a function of the quality ofavailable data, engineering and geological interpretation and judgment.  Estimates of economically recoverable oil andgas reserves and future net cash flows necessarily depend upon a number ofvariable factors and assumptions, such as historical production from the areacompared with production from other producing areas, the assumed effects ofregulations by governmental agencies and assumptions governing future oil andgas prices, future operating costs, severance taxes, development costs andworkover gas costs, all of which may in fact vary considerably from actualresults.  The future drilling costsassociated with reserves assigned to proved undeveloped locations mayultimately increase to an extent that these reserves may be later determined tobe uneconomic.  For these reasons,estimates of the economically recoverable quantities of oil and gasattributable to any particular group of properties, classifications of suchreserves based on risk of recovery and estimates of the future net cash flowsexpected there from may vary substantially. Any significant variance in the assumptions could materially affect theestimated quantity and value of the reserves, which could affect the carryingvalue of the Company’s oil and gas properties and/or the rate of depletion ofthe oil and gas properties.  Actualproduction, revenues and expenditures with respect to the Company’s reserveswill likely vary from estimates and such variances may be material.

**Impairmentof Oil and Gas Properties**:** **The Company reviews its oil andgas properties for impairment at least annually and whenever events andcircumstances indicate a decline in the recoverability of their carryingvalue.  The Company estimates theexpected future cash flows of its oil and gas properties and compares suchfuture cash flows to the carrying amount of the properties to determine if thecarrying amount is recoverable.  If thecarrying amount exceeds the estimated undiscounted future cash flows, theCompany will adjust the carrying amount of the oil and gas properties to theirfair value.  The factors used todetermine fair value include, but are not limited to, estimates of provedreserves, future commodity pricing, future production estimates, anticipatedcapital expenditures and a discount rate commensurate with the risk associatedwith realizing the expected cash flows projected.

Given thecomplexities associated with oil and gas reserve estimates and the history ofprice volatility in the oil and gas markets, events may arise that wouldrequire the Company to record an impairment of the recorded book valuesassociated with oil and gas properties. The Company has not recognized impairments this year or in the prioryears, however, there can be no assurance that impairments will not berecognized in the future.

19

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**AssetRetirement Obligations:** The Company’s recorded asset retirement obligations represent theestimated present value of the amounts expected to be incurred to plug,abandon, and remediate the producing properties at the end of their productivelives, in accordance with state laws, as well as the estimated costs associatedwith the reclamation of the property surrounding and including the Company’sprevious coal mining operations. The Company determines the asset retirementobligations by calculating the present value of estimated cash flows related tothe liability. The asset retirement obligations are recorded as a liability atthe estimated present value as of the asset’s inception, with an offsettingincrease to producing properties. Periodic accretion of the discount related tothe estimated liability is recorded as an expense in the statement ofoperations.

The estimatedliability is determined using significant assumptions, including currentestimates of plugging and abandonment costs, annual inflation of these costs,the productive lives of wells, and a risk-adjusted interest rate. Changes inany of these assumptions can result in significant revisions to the estimatedasset retirement obligations. Revisions to the asset retirement obligations arerecorded with an offsetting change to producing properties, resulting inprospective changes to depletion and depreciation expense and accretion of thediscount.  Because of the subjectivity ofassumptions and the relatively long lives of most of the wells, the costs toultimately retire the Company’s wells may vary significantly from priorestimates.

Forward-LookingStatements

Certaininformation included in this Annual Report on Form 10-KSB and other materialsfiled by the Company with the Commission contain forward-looking statementsrelating to the Company’s operations and the oil and gas industry.  Such forward-looking statements are based onmanagement’s current projections and estimates and are identified by words suchas “expects,” “intends,” “plans,” “believes,” “estimates,” “anticipates” andsimilar words.  These statements are notguarantees of future performance and involve certain risks, uncertainties andassumptions that are difficult to predict. Therefore, actual results may differ materially from what is expressedin such forward-looking statements.

Among the factorsthat could cause actual results to differ materially are crude oil and naturalgas price fluctuations, failure to achieve expected production and the timingof receipt of revenues from existing and future exploration and developmentprojects (including, particularly, the secondary recovery project on theMadison County, Texas property), higher than estimated oil and gas and coalreclamation costs and delays with respect to, or failure to obtain,governmental permits and approvals necessary to proceed with real estatedevelopment.  In addition, theseforward-looking statements may be affected by general domestic andinternational economic and political conditions.

20

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**ITEM 7.****                                                     FINANCIAL STATEMENTS.**

**Index toFinancial Statements**
| Report of Independent  Registered Public Accounting Firm                                |   |
|-----------------------------------------------------------------------------------------|--------|
|                                                                                    |   |
| Balance Sheets as of  February 28, 2007 and 2006                                        |   |
|                                                                                    |   |
| Statements  of Operations for the years ended February 28, 2007 and 2006                |   |
|                                                                                    |   |
| Statements  of Stockholders’ Equity for the years ended February 28, 2007 and 2006 |   |
|                                                                                    |   |
| Statements  of Cash Flows for the years ended February 28, 2007 and 2006                |   |
|                                                                                    |   |
| Notes  to Financial Statements                                                          |   |
|                                                                                    |   |
| Supplemental Oil and Gas Data (Unaudited)                                               |   |

 

21

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#### **REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

To the Board of Directorsand Stockholders of

Oakridge Energy, Inc.

We have auditedthe accompanying balance sheets of Oakridge Energy, Inc., a Utah corporation,as of February 28, 2007 and2006, and the related statements of operations, stockholders’ equity, and cashflows for the years then ended.  Thesefinancial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these financial statements based on our audits.

We conducted ouraudits in accordance with the standards of the Public Company AccountingOversight Board (United States).  Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement.  The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting.  Anaudit includes consideration of internal control over financial reporting as abasis for designing audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

In our opinion,the financial statements referred to above present fairly, in all materialrespects, the financial position of Oakridge Energy, Inc. as of February 28, 2007 and 2006, and theresults of its operations and its cash flows for the years then ended inconformity with accounting principles generally accepted in the United Statesof America.
| /s/ Whitley Penn LLP |   |
|----------------------|--------|
|                 |   |
|                 |   |
| Fort Worth, Texas    |   |
| May 25, 2007         |   |

 

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**OAKRIDGEENERGY, INC.**

**BALANCESHEETS**
| ** **                                                                                             | ** ** | **February 28,** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                             | ** ** | **2007**              | ** ** | **2006** | ** ** |
| **Assets**                                                                                             |       |                  |       |   |   |
| Current assets:                                                                                        |       |                  |       |   |   |
| Cash and cash  equivalents                                                                             |       | $                     | 2,410,827  |   | $ | 3,367,361 |   |
| Trade accounts  receivable                                                                             |       | 275,953               |       | 204,137 |   |
| Investment  securities available for sale                                                              |       | 101,138               |       | — |   |
| Prepaid expenses  and other                                                                            |       | 19,187                |       | 18,632 |   |
| Total current assets                                                                                   |       | 2,807,105             |       | 3,590,130 |   |
|                                                                                                   |       |                  |       |   |   |
| Oil and gas properties,  at cost, using the successful efforts method of accounting:                   |       |                  |       |   |   |
| Proved developed  properties                                                                           |       | 7,007,229             |       | 6,980,937 |   |
| Less accumulated  depletion and depreciation                                                           |       | 6,275,612             |       | 6,242,138 |   |
| Proved developed  properties, net                                                                      |       | 731,617               |       | 738,799 |   |
| Unproved  properties                                                                                   |       | 243,132               |       | 221,736 |   |
| Net oil and gas  properties                                                                            |       | 974,749               |       | 960,535 |   |
|                                                                                                   |       |                  |       |   |   |
| Coal and gravel  properties, at cost:                                                                  |       |                  |       |   |   |
| Undeveloped  properties                                                                                |       | 5,850,424             |       | 5,850,424 |   |
| Mining and  service equipment                                                                          |       | 2,333,783             |       | 2,461,783 |   |
| Total coal and  gravel properties                                                                      |       | 8,184,207             |       | 8,312,207 |   |
| Less accumulated  depletion and depreciation                                                           |       | 7,923,719             |       | 8,051,719 |   |
| Net coal and gravel  properties                                                                        |       | 260,488               |       | 260,488 |   |
|                                                                                                   |       |                  |       |   |   |
| Other property and  equipment, net of accumulated depreciation of $430,819 and $421,868,  respectively |       | 159,503               |       | 117,094 |   |
|                                                                                                   |       |                  |       |   |   |
| Real estate held for  sale                                                                             |       | 3,074,857             |       | 3,077,648 |   |
|                                                                                                   |       |                  |       |   |   |
| Deferred income taxes                                                                                  |       | 139,582               |       | 18,786 |   |
|                                                                                                   |       |                  |       |   |   |
| Other non-current  assets                                                                              |       | 852,079               |       | 857,597 |   |
|                                                                                                   |       |                  |       |   |   |
| Total assets                                                                                           |       | $                     | 8,268,363  |   | $ | 8,882,278 |   |

 

See accompanying notes tofinancial statements.

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** **
| ** **                                                                                       | ** ** | **February 28,** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                       | ** ** | **2007**              | ** ** | **2006** | ** ** |
| **Liabilities and Stockholders’  Equity**                                                   |       |                  |       |   |   |
| Current liabilities:                                                                             |       |                  |       |   |   |
| Accounts payable                                                                                 |       | $                     | 278,190    |   | $ | 100,337 |   |
| Accrued expenses                                                                                 |       | 49,684                |       | 52,611 |   |
| Current portion  of asset retirement obligations                                                 |       | 80,155                |       | 642,308 |   |
| Total current liabilities                                                                        |       | 408,029               |       | 795,256 |   |
|                                                                                             |       |                  |       |   |   |
| Asset retirement  obligations                                                                    |       | 425,023               |       | 415,403 |   |
| Total liabilities                                                                                |       | 833,052               |       | 1,210,659 |   |
|                                                                                             |       |                  |       |   |   |
| Commitments and  contingencies                                                                   |       | —                |       | — |   |
|                                                                                             |       |                  |       |   |   |
| Stockholders’ equity:                                                                       |       |                  |       |   |   |
| Common stock,  par value $.04 per share, 20,000,000 shares authorized, 10,157,803 shares  issued |       | 406,312               |       | 406,312 |   |
| Additional  paid-in capital                                                                      |       | 805,092               |       | 805,092 |   |
| Retained  earnings                                                                               |       | 16,582,854            |       | 16,757,534 |   |
| Accumulated  other comprehensive loss                                                            |       | (7,753                | )          | — |   |
| Stockholders’ equity  before treasury stock                                                 |       | 17,786,505            |       | 17,968,938 |   |
| Less treasury stock, at  cost; 5,894,886 shares and 5,886,386 shares, respectively               |       | 10,351,194            |       | 10,297,319 |   |
| Total stockholders’  equity                                                                 |       | 7,435,311             |       | 7,671,619 |   |
|                                                                                             |       |                  |       |   |   |
| Total liabilities and  stockholders’ equity                                                 |       | $                     | 8,268,363  |   | $ | 8,882,278 |   |

 

See accompanying notes to financial statements.

 

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**OAKRIDGEENERGY, INC.**

**STATEMENTSOF OPERATIONS**
| ** **                                              | ** ** | **Year Ended February 28,** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                              | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| Revenues:                                               |       |                                       |       |   |   |
| Oil and gas                                             |       | $                                          | 1,357,089  |   | $ | 1,531,058 |   |
| Gravel                                                  |       | —                                     |       | 30,000 |   |
| Total revenues                                          |       | 1,357,089                                  |       | 1,561,058 |   |
|                                                    |       |                                       |       |   |   |
| Operating expenses:                                     |       |                                       |       |   |   |
| Oil and gas:                                            |       |                                       |       |   |   |
| Depletion and  depreciation                             |       | 33,474                                     |       | 37,653 |   |
| Lease operating                                         |       | 979,597                                    |       | 771,499 |   |
| Total oil and  gas                                      |       | 1,013,071                                  |       | 809,152 |   |
|                                                    |       |                                       |       |   |   |
| Coal and gravel                                         |       | 144,333                                    |       | 472,244 |   |
| Real estate  development                                |       | 193,318                                    |       | 775 |   |
| General and  administrative                             |       | 541,267                                    |       | 567,913 |   |
| Total operating  expenses                               |       | 1,891,989                                  |       | 1,850,084 |   |
|                                                    |       |                                       |       |   |   |
| Loss from operations                                    |       | (534,900                                   | )          | (289,026 | ) |
|                                                    |       |                                       |       |   |   |
| Other income (expense):                                 |       |                                       |       |   |   |
| Gain on sales and  redemptions of investment securities |       | —                                     |       | 690,103 |   |
| Other income                                            |       | 253,215                                    |       | 122,179 |   |
| Total other income                                      |       | 253,215                                    |       | 812,282 |   |
|                                                    |       |                                       |       |   |   |
| Income (loss) before  income taxes                      |       | (281,685                                   | )          | 523,256 |   |
|                                                    |       |                                       |       |   |   |
| Income tax expense  (benefit)                           |       | (107,005                                   | )          | 199,525 |   |
|                                                    |       |                                       |       |   |   |
| Net income (loss)                                       |       | $                                          | (174,680   | ) | $ | 323,731 |   |
|                                                    |       |                                       |       |   |   |
| **Basic and diluted loss per  common share:**           |       |                                       |       |   |   |
|                                                    |       |                                       |       |   |   |
| Net income (loss)                                       |       | $                                          | (0.04      | ) | $ | 0.08 |   |
|                                                    |       |                                       |       |   |   |
| Weighted average shares  outstanding                    |       | 4,266,395                                  |       | 4,282,713 |   |

 

See accompanying notes tofinancial statements.

 

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**OAKRIDGEENERGY, INC.**

**STATEMENTSOF STOCKHOLDERS’ EQUITY**

**Years EndedFebruary 28, 2007 and 2006**
| ** **                                                               | ** ** | **Common  Stock** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Treasury  Stock** | ** ** | **Total** | ** ** | **Comprehensive  Income (Loss)** | ** **  |
|--------------------------------------------------------------------------|------------|-------------------|------------|----------------------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|---------------------|------------|-----------|------------|---------------------------------------|-------------|
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Balance at March 1, 2005                                                 |       | $                 | 406,312    |                             | $          | 805,092                |       | $                                                         | 16,433,803 |                | $          | 291,053   |       | $                                     | (10,234,551 | ) | $ | 7,701,709 |   |   |   |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Purchases of treasury  stock                                             |       | —            |       | —                           |       | —                 |       | —                                                    |       | (62,768             | )          | (62,768   | )          |                                  |        |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Net income                                                               |       | —            |       | —                           |       | 323,731                |       | —                                                    |       | —              |       | 323,731   |       | $                                     | 323,731     |   |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Change in unrealized  gain on investment securities, net of income taxes |       | —            |       | —                           |       | —                 |       | (291,053                                                  | )          | —              |       | (291,053  | )          | (291,053                              | )           |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Comprehensive income for  year                                           |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       | $                                     | 32,678      |   |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Balance at February 28,  2006                                            |       | 406,312           |       | 805,092                          |       | 16,757,534             |       | —                                                    |       | (10,297,319         | )          | 7,671,619 |       |                                  |        |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Purchases of treasury  stock                                             |       | —            |       | —                           |       | —                 |       | —                                                    |       | (53,875             | )          | (53,875   | )          |                                  |        |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Net loss                                                                 |       | —            |       | —                           |       | (174,680               | )          | —                                                    |       | —              |       | (174,680  | )          | $                                     | (174,680    | ) |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Change in unrealized  gain on investment securities, net of income taxes |       | —            |       | —                           |       | —                 |       | (7,753                                                    | )          | —              |       | (7,753    | )          | (7,753                                | )           |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Comprehensive loss for  year                                             |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       | $                                     | (182,433    | ) |
|                                                                     |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                                  |        |
| Balance at February 28,  2007                                            |       | $                 | 406,312    |                             | $          | 805,092                |       | $                                                         | 16,582,854 |                | $          | (7,753    | )          | $                                     | (10,351,194 | ) | $ | 7,435,311 |   |   |   |

 

See accompanying notes tofinancial statements.

26

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**OAKRIDGEENERGY, INC.**

**STATEMENTSOF CASH FLOWS**
| ** **                                                                                           | ** ** | **Year Ended February 28,** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                           | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| **Operating Activities**                                                                             |       |                                       |       |   |   |
| Net income (loss)                                                                                    |       | $                                          | (174,680   | ) | $ | 323,731 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |       |                                       |       |   |   |
| Depletion and  depreciation                                                                          |       | 59,925                                     |       | 61,800 |   |
| Accretion of  discount on asset retirement obligations                                               |       | 19,239                                     |       | 18,410 |   |
| Gain on sales  and redemptions of investment securities                                              |       | —                                     |       | (690,103 | ) |
| Gain on sales of  oil and gas properties                                                             |       | —                                     |       | (3,583 | ) |
| Gain on sales of  coal and gravel property                                                           |       | (24,350                                    | )          | — |   |
| Gain on sales of  other property and equipment                                                       |       | (25,000                                    | )          | (1,572 | ) |
| Gain on sales of  real estate held for sale                                                          |       | (46,428                                    | )          | — |   |
| Loss on  investment in limited partnership                                                           |       | 5,518                                      |       | 2,479 |   |
| Deferred income  taxes                                                                               |       | (120,796                                   | )          | 179,252 |   |
| Changes in  operating assets and liabilities:                                                        |       |                                       |       |   |   |
| Trade accounts  receivable                                                                           |       | (71,816                                    | )          | (53,678 | ) |
| Prepaid expenses  and other                                                                          |       | (555                                       | )          | 1,860 |   |
| Accounts payable  and accrued expenses                                                               |       | 174,926                                    |       | 47,229 |   |
| Asset retirement  obligations                                                                        |       | (571,772                                   | )          | 407,845 |   |
| Net cash provided by  (used in) operating activities                                                 |       | (775,789                                   | )          | 293,670 |   |
|                                                                                                 |       |                                       |       |   |   |
| **Investing Activities**                                                                             |       |                                       |       |   |   |
| Additions to investment  securities                                                                  |       | (108,891                                   | )          | — |   |
| Additions to oil and  gas properties                                                                 |       | (47,688                                    | )          | (9,243 | ) |
| Additions to other  property and equipment                                                           |       | (68,860                                    | )          | — |   |
| Additions to real  estate held for sale                                                              |       | —                                     |       | (47,889 | ) |
| Proceeds from sales of  investment securities                                                        |       | —                                     |       | 892,534 |   |
| Proceeds from sales of  oil and gas properties                                                       |       | —                                     |       | 4,102 |   |
| Proceeds from sales of  coal and gravel property                                                     |       | 24,350                                     |       | — |   |
| Proceeds from sales of  other property and equipment                                                 |       | 25,000                                     |       | 2,407 |   |
| Proceeds from sales of  real estate held for sale                                                    |       | 49,219                                     |       | — |   |
| Net cash provided by  (used in) investing activities                                                 |       | (126,870                                   | )          | 841,911 |   |
|                                                                                                 |       |                                       |       |   |   |
| **Financing Activity**                                                                               |       |                                       |       |   |   |
| Purchases of treasury  stock                                                                         |       | (53,875                                    | )          | (62,768 | ) |
|                                                                                                 |       |                                       |       |   |   |
| Net increase (decrease)  in cash and cash equivalents                                                |       | (956,534                                   | )          | 1,072,813 |   |
| Cash and cash  equivalents at beginning of year                                                      |       | 3,367,361                                  |       | 2,294,548 |   |
|                                                                                                 |       |                                       |       |   |   |
| Cash and cash  equivalents at end of year                                                            |       | $                                          | 2,410,827  |   | $ | 3,367,361 |   |
|                                                                                                 |       |                                       |       |   |   |
| **Supplemental Disclosure of Cash  Flow Information**                                                |       |                                       |       |   |   |
| Income taxes paid                                                                                    |       | $                                          | —     |   | $ | 16,593 |   |
|                                                                                                 |       |                                       |       |   |   |
| **Supplemental Disclosure of  Non-Cash Information**                                                 |       |                                       |       |   |   |
| Change in unrealized  gain on investment securities, net of income taxes                             |       | $                                     | (7,753     | ) | $  | (291,053 | ) |

 

See accompanying notes tofinancial statements.

27

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**OAKRIDGE ENERGY, INC.**

**NOTES TO FINANCIAL STATEMENTS**

**February28, 2007 and 2006**

**A.    Natureof Business**

OakridgeEnergy, Inc. (the “Company”) is engaged in the exploration for and development,production, and sale of oil and gas primarily in Texas.  The Company has received lease and royaltyincome from gravel deposits in Colorado and holds certain real estate inColorado for sale.  The Company wasincorporated in Utah in 1969 and its executive offices are located in WichitaFalls, Texas.

**B.    Summaryof Significant Accounting Policies**

A summary of the Company’s significant accountingpolicies consistently applied in the preparation of the accompanying financialstatements follows.

### **Basisof Accounting**

The accounts are maintained and the financialstatements have been prepared using the accrual basis of accounting inaccordance with accounting principles generally accepted in the United Statesof America.

### **Use of Estimates**

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect certainreported amounts in the financial statements and accompanying notes.  Actual results could differ from theseestimates and assumptions.

### **Comprehensive Income**

The Companyreports comprehensive income in accordance with the provisions of Statement ofFinancial Accounting Standards (“SFAS”) No. 130, *Reporting Comprehensive Income.*  SFAS No. 130 established standards forreporting and presentation of comprehensive income and its components in a fullset of financial statements.  Comprehensiveincome (loss) consists of net income (loss) and net unrealized gains (losses)on securities and is presented in the statements of stockholders’ equity.  SFAS No. 130 requires only additionaldisclosures in the financial statements; it does not affect the Company’sfinancial position or results of operations.

### **Fair Value of Financial Instruments**

In accordance withthe reporting requirements of SFAS No. 107, *Disclosuresabout Fair Value of Financial Instruments*, the Company calculatesthe fair value of its assets and liabilities which qualify as financialinstruments under this statement and includes this additional information inthe notes to financial statements when the fair value is different than thecarrying value of those financial instruments. The estimated fair value of cash equivalents, accounts receivable, andaccounts payable approximates their carrying amounts due to the relativelyshort maturity of these instruments.

28

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### **Cashand Cash Equivalents**

TheCompany considers all cash and highly liquid investments with originalmaturities of three months or less to be cash equivalents.

**TradeAccounts Receivable**

The Company performsongoing credit evaluations of its customers’ financial condition and extendscredit to virtually all of its customers. Credit losses to date have not been significant and have been withinmanagement’s expectations.  In the eventof complete non-performance by the Company’s customers, the maximum exposure tothe Company is the outstanding accounts receivable balance at the date ofnon-performance.

### **Investment Securities**

The Companyreports investments in accordance with SFAS No. 115, *Accounting for Certain Investments in Debt and Equity Securities*.  The Company’s investments are classified atthe time of purchase into one of three categories as follows:

·                  Held to Maturity Securities - Debt securities that theCompany has the positive intent and ability to hold to maturity are reported atamortized cost, adjusted for the amortization or accretion of premiums anddiscounts.

·                  TradingSecurities - Debt and equity securities that are bought and held principallyfor the purpose of selling them in the near term are reported at fair value,with unrealized gains and losses included in earnings.

·                  Available forSale Securities - Debt and equity securities not classified as held to maturitysecurities or trading securities are reported at fair value, with unrealizedgains and losses excluded from earnings and reported as a separate component ofstockholders’ equity (net of tax effects).

The Company didnot have any securities classified as held to maturity or trading as of February 28, 2007 and 2006.

A decline in themarket value of any available for sale security below cost that is deemed to beother than temporary results in a reduction of the carrying amount to fairvalue.  The impairment is charged toearnings and a new cost basis for the security is established.  No impairment charges were recorded during 2007or 2006.

Dividend and interest income are recognized whenearned.  Gains and losses on securitiessold are computed under the specific identification method.

29

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### **Oil and Gas Properties**

The Company uses the successful efforts method ofaccounting for oil and gas producing activities.  Costs to acquire mineral interests in oil andgas properties, to drill exploratory wells that find proved reserves, and todrill and equip development wells are capitalized.  Geological and geophysical costs, costs todrill exploratory wells that do not find proved reserves, and non-producingleasehold abandonments are expensed as incurred.

Unproved oil and gas properties are periodicallyassessed for impairment of value and a loss is recognized at the time ofimpairment by providing an impairment allowance.  Capitalized costs of producing oil and gas propertiesare depleted and depreciated by the units-of-production method based on provedoil and gas reserves as estimated by an independent petroleum reservoirengineering firm.

Upon sale or retirement of a proved property, the costand related accumulated depletion and depreciation are eliminated from theproperty accounts, and any resulting gain or loss is recognized.

**Coal and Gravel Properties**

Costsattributable to the acquisition and development of coal and gravel propertiesare capitalized, while costs incurred to maintain the properties areexpensed.  Undeveloped coal and gravelproperties, which are individually significant, are periodically assessed forimpairment of value and a loss is recognized at the time of impairment byproviding an impairment allowance. Capitalized costs of producing propertiesare depleted on a property-by-property basis using the units-of-productionmethod.

Depreciation on mining and service equipment iscalculated using accelerated and straight-line methods over the estimateduseful lives of the assets. Upon sale or abandonment, the cost of the equipmentand related accumulated depreciation are removed from the accounts and anygains or losses thereon are recognized.

**Other Property and Equipment**

Depreciation on other property and equipment iscalculated using accelerated and straight-line methods over the estimateduseful lives of the assets. Upon sale or abandonment, the cost of the equipmentand related accumulated depreciation are removed from the accounts and anygains or losses thereon are recognized.

**RealEstate Held for Development or Sale**

Real estate held for development or sale is carried atcost, which does not exceed net realizable value. Real estate development andconstruction costs directly identifiable with such property arecapitalized.  The cost of the propertyremains as a non-current asset since the Company may proceed with thedevelopment if it is unable to complete a sales transaction.

30

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**Impairment of Long-Lived Assets**

The carrying value of property and equipment isperiodically evaluated under the provisions of SFAS No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets.*  SFAS No.144 requires long-lived assets and certain identifiable intangibles to bereviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable.  When it is determined that the estimatedfuture net cash flows of an asset will not be sufficient to recover its carryingamount, an impairment loss must be recorded to reduce the carrying amount toits estimated fair value.

Under SFAS No. 144, the Company evaluates impairmentof proved oil and gas properties on a field-by-field basis.  On this basis, certain fields may be impairedbecause they are not expected to recover their entire carrying value fromfuture net cash flows.  During 2007 and2006, the Company recorded no impairment losses related to its proved oil andgas properties.  If estimated future cashflows are not achieved with respect to certain fields, further write-downs maybe required.

### **Investment in Partnership**

The Company uses the equity method of accounting forits investment in partnership.  Theinvestment in partnership of approximately $36,000 and $41,000 at February 28, 2007 and 2006, respectively,are included in other non-current assets in the accompanying balancesheets.  The Company recognized lossespertaining to its interest in the partnership of approximately $5,000 and$3,000 during 2007 and 2006, respectively, which are included in other incomein the accompanying statements of operations.

### **Asset Retirement Obligations**

The Companyaccounts for asset retirement obligations under SFAS No. 143, *Accounting for Asset Retirement Obligations*.  SFAS No. 143 requires legal obligationsassociated with the retirement of long-lived assets to be recognized at theirfair value at the time that the obligations are incurred.  Oil and gas producing companies incur thisliability upon acquiring or drilling a well. Under SFAS No. 143, an asset retirement obligation is recorded as aliability at its estimated present value at the asset’s inception, with anoffsetting increase to producing properties on the accompanying balance sheetwhich is allocated to expense over the useful life of the asset.  Periodic accretion of the discount on assetretirement obligations is recorded as an expense in the accompanying statementof operations.

### **Revenue Recognition**

The Companyrecognizes revenue as oil and gas are produced based on contracted or estimatedsales prices.  Estimated revenue issubject to adjustments based on final settlement.  Such adjustments are reflected in revenuewhen received.

31

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### **Income Taxes**

Deferred incometaxes are determined using the liability method in accordance with SFAS No.109, *Accounting for Income Taxes*.  Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences betweenthe financial statement carrying amounts of existing assets and liabilities andtheir respective tax bases.

Deferred taxassets and liabilities are measured using enacted tax rates expected to applyto taxable income in the years in which those temporary differences areexpected to be recovered or settled.  Theeffect on deferred tax assets and liabilities of a change in tax rates isrecognized in income in the period that includes the enactment date. Inaddition, a valuation allowance is established to reduce any deferred tax assetfor which it is determined that it is more likely than not that some portion ofthe deferred tax asset will not be realized.

**Earningsor Loss Per Common Share**

Basic earnings(loss) per common share is calculated by dividing net income (loss) (availableto common stockholders) by the weighted average number of common sharesoutstanding for the period.  Dilutedearnings (loss) per common share reflects the potential dilution that couldoccur if accounts or other contracts to issue common stock were exercised orconverted into common stock or resulted in the issuance of common stock thatthen shared in the earnings of the Company. For the years and quarters presented herein, basic and diluted earnings(loss) per common share are the same as the Company has no common stockequivalents.

**Impact ofRecently Issued Accounting Standards**

In July 2006, theFinancial Accounting Standards Board issued Financial Interpretation No. 48(FIN 48), *Accounting for Uncertainty in Income Taxes*,an Interpretation of SFAS No. 109.  FIN48 prescribes guidance to address inconsistencies among entities with themeasurement and recognition in accounting for income tax positions forfinancial statement purposes. Specifically, FIN 48 addresses the timing of the recognition of incometax benefits.  FIN 48 also requires thefinancial statement recognition of an income tax benefit when the entitydetermines that it is more-likely-than-not that the taxposition will be ultimately sustained. FIN 48 is effective for fiscal years beginning after December 15, 2006.Management does not believe adoption of this standard will have a materialimpact on its financial position or results of operations.

**C.    Investment Securities**

The amortized cost and fairvalue of the Company’s investment securities available for sale, as of February28, 2007 was approximately $109,000 and $101,000, respectively.  The Company had no investment securitiesavailable for sale, as of February 28, 2006.

32

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# **D. AssetRetirement Obligations**

Pursuant to SFASNo. 143, *Accounting for Asset RetirementObligations*, the Company has recognized the fair value of its assetretirement obligations related to the plugging, abandonment, and remediation ofoil and gas producing properties as well as the reclamation of the propertysurrounding the Company’s previous coal mining operations. The present value ofthe estimated asset retirement costs has been capitalized as part of thecarrying amount of the related long-lived assets, which approximated $283,000.

The liability hasbeen accreted to its present value as of the end of each year. The Companyevaluated 82 wells, and has determined a range of abandonment dates between May2007 and August 2024.

Thefollowing represents a reconciliation of the asset retirement obligations forthe years ended February 28, 2007 and 2006:
|                                                    | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|
|                                               |       |     |       |     |       |
| Asset retirement  obligations at beginning of year |       | $        | 1,057,711  |     | $          | 631,456 |   |
| Revision to  estimate                              |       | —   |       | 418,600  |       |
| Liabilities  settled during the year               |       | (571,772 | )          | (10,755  | )          |
| Accretion of  discount                             |       | 19,239   |       | 18,410   |       |
| Asset retirement  obligations at end of year       |       | $        | 505,178    |     | $          | 1,057,711 |   |

 

# **E.****              Income Taxes**

The Company’s income tax expense (benefit)attributable to income (loss) from continuing operations consists of thefollowing:
| ** **                     | ** ** | **Current** | ** ** | **Deferred** | ** ** | **Total**            | ** ** |
|--------------------------------|------------|-------------|------------|--------------|------------|----------------------|------------|
| Year ended February 28,  2007: |       |        |       |         |       |                 |       |
| U.S. Federal                   |       | $           | —     |         | $          | (121,909   | )          | $ | (121,909   | ) |
| State and local                |       | 18,504      |       | (3,600       | )          | 14,904               |       |
| Income tax expense  (benefit)  |       | $           | 18,504     |         | $          | (125,509   | )          | $ | (107,005 | ) |
|                           |       |        |       |         |       |                 |       |
| Year ended February 28,  2006: |       |        |       |         |       |                 |       |
| U.S. Federal                   |       | $           | 1,745      |         | $          | 173,874              |       | $ | 175,619 |   |
| State and local                |       | 18,528      |       | 5,378        |       | 23,906               |       |
| Income tax expense (benefit)   |       | $           | 20,273     |         | $          | 179,252              |       | $ | 199,525 |   |

 

33

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Income tax expense(benefit) for the years presented differs from the “expected” federal incometax benefit for those years, computed by applying the statutory U.S. Federalcorporate tax rate of 34% to pre-tax income (loss), as a result of thefollowing:
|                                                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                             |       |     |       |     |       |
| Computed  “expected” tax expense (benefit)             |       | $        | (95,773    | )        | $          | 177,929 |   |
| State and local  income taxes, net of federal income tax benefit |       | 12,269   |       | 15,778   |       |
| Other, primarily  revision of prior year provision estimate      |       | (23,501  | )          | 5,818    |       |
| Income tax benefit                                               |       | $        | (107,005   | )        | $          | 199,525 |   |

 

The tax effects of temporary differences that give rise to significantportions of the deferred tax assets and deferred tax liabilities, at February28, 2007 and 2006 are presented below:
|                                                                                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Deferred tax  assets:                                                                                   |       |     |       |     |       |
| Net operating loss carryforward                                                                         |       | $        | 312,980    |     | $          | — |   |
| Alternative minimum tax credit carryforward                                                             |       | 101,709  |       | 102,149  |       |
| Asset retirement obligations                                                                            |       | 203,411  |       | 391,803  |       |
| Total deferred  tax assets                                                                              |       | 618,100  |       | 493,952  |       |
|                                                                                                    |       |     |       |     |       |
| Deferred tax  liabilities:                                                                              |       |     |       |     |       |
| Oil and gas properties and other property and  equipment, principally due to depletion and depreciation |       | (433,323 | )          | (429,971 | )          |
| Coal properties, principally due to differences in  depletion                                           |       | (45,195  | )          | (45,195  | )          |
| Total deferred  tax liabilities                                                                         |       | (478,518 | )          | 475,166  |       |
| Net deferred tax  asset (liability)                                                                     |       | $        | 139,582    |     | $          | 18,786 |   |
|                                                                                                    |       |     |       |     |       |
| Included in the  balance sheet as:                                                                      |       |     |       |     |       |
| Deferred income taxes, current                                                                          |       | $        | —     |     | $          | — |   |
| Deferred income taxes, non-current                                                                      |       | 139,582  |       | 18,786   |       |
| Net deferred tax asset  (liability)                                                                     |       | $        | 139,582    |     | $          | 18,786 |   |

 

34

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Based on the futurereversal of existing taxable temporary differences and future earningsexpectations, management of the Company believes it is more likely than notthat deferred tax assets will be realized or settled, and accordingly, novaluation allowance has been recorded.

At February 28, 2007, the Company has analternative minimum tax credit carryforward of approximately $102,000, whichhas no expiration date and is available to reduce the Company’s future taxableincome. Additionally at February 28, 2007, the Company has a net operating losscarryforward of approximately $844,000, which will expire in fiscal 2027 and isavailable to offset the Company’s future taxable income.

# **F.     Segment Information**

The following informationis presented in accordance with SFAS No. 131, *Disclosuresabout Segments of an Enterprise and Related Information.* The Companyis engaged in oil and gas, coal and gravel activities and real estatedevelopment. The Company has identified such segments based on managementresponsibility and the nature of the Company’s products, services and costs. Thereare no major distinctions in geographical areas served as all operations are inthe United States. The Company measures segment profit (loss) as income (loss)from operations. Business segment assets are those assets controlled by eachreportable segment. The following table sets forth certain information aboutthe financial information of each segment for the years ended February 28, 2007and 2006:
|                                                 | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| Business segment  revenue:                      |       |     |       |     |       |
| Oil and gas                                     |       | $        | 1,357,089  |     | $          | 1,531,058 |   |
| Gravel                                          |       |     |       | 30,000   |       |
| Total revenues                                  |       | $        | 1,357,089  |     | $          | 1,561,058 |   |
|                                            |       |     |       |     |       |
| Business segment  profit (loss):                |       |     |       |     |       |
| Oil and gas                                     |       | $        | 344,018    |     | $          | 721,906 |   |
| Coal and gravel                                 |       | (144,333 | )          | (442,244 | )          |
| Real estate development                         |       | (193,318 | )          | (775     | )          |
| General corporate                               |       | (541,267 | )          | (567,912 | )          |
| Loss from operations                            |       | (534,900 | )          | (289,026 | )          |
| Other income                                    |       | 253,215  |       | 812,282  |       |
| Income (loss)  before income taxes              |       | $        | (281,685   | )        | $          | 523,256 |   |
|                                            |       |     |       |     |       |
| Business segment  assets:                       |       |     |       |     |       |
| Depreciation, depletion and amortization:       |       |     |       |     |       |
| Oil and gas                                     |       | $        | 33,474     |     | $          | 37,654 |   |
| Coal and gravel                                 |       | —   |       | —   |       |
| Real estate development                         |       | —   |       | —   |       |
| General corporate                               |       | 26,451   |       | 24,146   |       |
| Total depreciation,  depletion and amortization |       | $        | 59,925     |     | $          | 61,800 |   |

 

35

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|                             | ** ** | **2007** | ** ** | **2006** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|
|                        |       |     |       |     |       |
| Capital  expenditures:      |       |     |       |     |       |
| Oil and gas                 |       | $        | 47,688     |     | $          | 9,243 |   |
| Real estate development     |       | —   |       | 47,889   |       |
| General corporate           |       | $        | 68,860     |     | —     |   |
| Total capital  expenditures |       | $        | 116,548    |     | $          | 57,132 |   |

 
|                         | ** ** | **2007**  | ** ** | **2006**  | ** ** |
|-------------------------|------------|-----------|------------|-----------|------------|
|                    |       |      |       |      |       |
| Assets:                 |       |      |       |      |       |
| Oil and gas             |       | $         | 3,937,802  |      | $          | 4,591,890 |   |
| Coal and gravel         |       | 260,488   |       | 260,488   |       |
| Real estate development |       | 3,074,857 |       | 3,077,648 |       |
| General corporate       |       | 995,216   |       | 952,252   |       |
| Total assets            |       | $         | 8,268,363  |      | $          | 8,882,278 |   |

 

**G.**    **Related Party Transactions**

In the normalcourse of business, the Company owns interests in various oil and gasproperties in which certain stockholders and related parties also owninterests.

# **H.    Commitments and Contingencies**

The Company is subject tocertain claims and litigation arising in the normal course of business. In theopinion of management, the outcome of such matters will not have a materiallyadverse effect on the results of operations or financial position of theCompany.

As of February 28, 2007 and 2006, theCompany has pledged interest-bearing cash deposits approximating $817,000 tosecure letters of credit in favor of the Colorado Bureau of Land Management forstate requirements regarding land reclamation based on future operations withrespect to coal and gravel properties. These pledged cash deposits are includedin other non-current assets in the accompanying balance sheets.

36

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### **I.              Risk Concentrations**

Financialinstruments that potentially subject the Company to concentration of creditrisk consist principally of cash, cash equivalents, and investments. Cashequivalents of approximately $2,464,000 and $3,171,000 at February 28, 2007 and2006, respectively, consisted of interest-bearing cash deposits. The Companymaintains deposits primarily in two financial institutions, which at times mayexceed amounts covered by insurance provided by the Securities InvestorProtection Corporation and the U.S. Federal Deposit Insurance Corporation,$500,000 for securities and $100,000 for cash balances. At February 28, 2007 and 2006 the Companyhad approximately $264,000 and $601,000 of uninsured deposits, respectively. TheCompany has not experienced any losses with respect to uninsured balances.

Oil sales to twocustomers, which accounted for more than 10% of the Company’s total oil sales,approximated $787,000 (68.7%) and $272,000 (23.7%) for the year ended February 28, 2007. Two customersaccounted for approximately $994,000 (72%) and $311,000 (23%) of the Company’stotal oil sales for the year ended February 28, 2006. Gas sales to threecustomers approximated $97,000 (56.9%), $29,000 (16.8%), and $23,000 (13.6%) ofthe Company’s total gas sales for the year ended February 28, 2007. Three customers accounted for approximately$154,000 (62%), $43,000 (17%), and $30,000 (12%) of the Company’s gas sales forthe year ended February 28, 2006. Lease operating payments primarily made to aprincipal operator on its oil and gas producing properties approximated$545,000 and $437,000 in 2007 and 2006, respectively.

**J.             Quarterly Operating Results (Unaudited)**

Quarterly results of operations for 2007 and 2006 wereas follows:
| **2007**                                  | ** ** | **First  Quarter** | ** ** | **Second  Quarter** | ** ** | **Third  Quarter** | ** ** | **Fourth  Quarter** | ** ** | **Full  Year** | ** ** |
|-------------------------------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|----------------|------------|
|                                      |       |               |       |                |       |               |       |                |       |           |       |
| Total revenues                            |       | $                  | 347,317    |                | $          | 399,174            |       | $                   | 307,934    |           | $          | 302,664 |   | $ | 1,357,089 |   |
|                                      |       |               |       |                |       |               |       |                |       |           |       |
| Income (loss) from  operations            |       | (125,795           | )          | (103,511            | )          | (122,848           | )          | (182,746            | )          | (534,900       | )          |
|                                      |       |               |       |                |       |               |       |                |       |           |       |
| Net income                                |       | $                  | (50,387    | )                   | $          | (8,337             | )          | $                   | (55,500    | )              | $          | (60,456 | ) | $ | (174,680 | ) |
|                                      |       |               |       |                |       |               |       |                |       |           |       |
| Basic and diluted income per common share |       | $                  | (0.01      | )                   | $          | (0.00              | )          | $                   | (0.01      | )              | $          | (0.02 | ) | $ | (0.04 | ) |

 
| **2006**                                         | ** ** | **First  Quarter** | ** ** | **Second  Quarter** | ** ** | **Third  Quarter** | ** ** | **Fourth  Quarter** | ** ** | **Full  Year** | ** ** |
|--------------------------------------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|----------------|------------|
|                                             |       |               |       |                |       |               |       |                |       |           |       |
| Total revenues                                   |       | $                  | 375,524    |                | $          | 389,806            |       | $                   | 432,058    |           | $          | 363,670 |   | $ | 1,561,058 |   |
|                                             |       |               |       |                |       |               |       |                |       |           |       |
| Income (loss) from  operations                   |       | 28,270             |       | (46,265             | )          | 93,604             |       | (364,635            | )          | (289,026       | )          |
|                                             |       |               |       |                |       |               |       |                |       |           |       |
| Net income (loss)                                |       | $                  | 31,463     |                | $          | 268,608            |       | $                   | 81,334     |           | $          | (57,674 | ) | $ | 323,731 |   |
|                                             |       |               |       |                |       |               |       |                |       |           |       |
| Basic and diluted income (loss) per common share |       | $                  | 0.01       |                | $          | 0.06               |       | $                   | 0.02       |           | $          | (0.01 | ) | $ | 0.08 |   |

 

37

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The following tables setforth supplementary disclosures for oil and gas producing activities inaccordance with SFAS No. 69, *Disclosuresabout Oil and Gas Producing Activities*.

**CostsIncurred**

A summary of costsincurred in oil and gas property acquisition, development, and explorationactivities (both capitalized and charged to expense) for the years endedFebruary 28, 2007 and 2006, as follows:
|                                     | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
| Acquisition of  proved properties   |       | $        | 26,292     |     | $          | 383 |   |
| Acquisition of  unproved properties |       | $        | 21,396     |     | $          | 11,063 |   |
| Exploration costs                   |       | $        | —     |     | $          | — |   |

 

### **Results of Operations for ProducingActivities**

The following table presents the results of operationsfor the Company’s oil and gas producing activities for the years ended February28, 2007 and 2006:
|                                                                                                   | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Revenues                                                                                          |       | $        | 1,357,089  |     | $          | 1,531,058 |   |
| Production costs                                                                                  |       | (979,597 | )          | (771,499 | )          |
| Depletion,  depreciation, and valuation provisions                                                |       | (33,474  | )          | (37,653  | )          |
| Exploration  costs                                                                                |       | —   |       | —   |       |
|                                                                                              |       | 344,018  |       | 721,906  |       |
| Income tax  expense                                                                               |       | (116,966 | )          | (245,448 | )          |
| Results of operations  for producing activities (excluding corporate overhead and interest costs) |       | $        | 227,052    |     | $          | 476,458 |   |

 

### **Reserve Quantity Information**

The followingtable presents the Company’s estimate of its proved oil and gas reserves all ofwhich are located in the United States. The Company emphasizes that reserveestimates are inherently imprecise and that estimates of reserves related tonew discoveries are more imprecise than those for producing oil and gasproperties. Accordingly, the estimates are expected to change as futureinformation becomes available. The estimates have been prepared with theassistance of an independent petroleum reservoir engineering firm. Oilreserves, which include condensate and natural gas liquids, are stated inbarrels and gas reserves are stated in thousands of cubic feet.

38

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|                                                 | ** ** | **Oil**     | ** ** | **Gas**    | ** ** |
|-------------------------------------------------|------------|-------------|------------|------------|------------|
| ** **                                      | ** ** | **(Bbls.)** | ** ** | **(MCF)**  | ** ** |
| **Proved  developed and undeveloped reserves:** | ** ** | ** **  | ** ** | ** ** | ** ** |
| Balance at March 1, 2005                        |       | 654,590     |       | 172,255    |       |
| Revisions of previous estimates                 |       | 23,144      |       | 46,523     |       |
| Production                                      |       | (21,586     | )          | (38,732    | )          |
| Balance at February 28, 2006                    |       | 656,148     |       | 180,046    |       |
| Revisions of previous estimates                 |       | 19,526      |       | 52,040     |       |
| Production                                      |       | (18,741     | )          | (21,092    | )          |
| Balance at  February 28, 2007                   |       | 656,933     |       | 210,994    |       |

 

| **Proved developed reserves:** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------|------------|------------|------------|
| February 28, 2005                        |       | 99,369     |       | 172,255    |       |
| February 28, 2006                        |       | 183,007    |       | 180,046    |       |
| February 28, 2007                        |       | 144,447    |       | 193,354    |       |

 

### **Standardized Measure of Discounted Future NetCash Flow and Changes Therein Relating to Proved Oil and Gas Reserves**

The followingtable, which presents a standardized measure of discounted future cash flowsand changes therein relating to proved oil and gas reserves, is presentedpursuant to SFAS No. 69. In computing this data, assumptions other than thoserequired by the Financial Accounting Standards Board could produce differentresults. Accordingly, the data should not be construed as being representativeof the fair market value of the Company’s proved oil and gas reserves.

Future cash inflows werecomputed by applying existing contract and year-end prices of oil and gasrelating to the Company’s proved reserves to the estimated year-end quantitiesof those reserves. Future price changes were considered only to the extentprovided by contractual arrangements in existence at year end. Futuredevelopment and production costs were computed by estimating the expendituresto be incurred in developing and producing the proved oil and gas reserves atthe end of the year, based on year-end costs. Future income tax expenses werecomputed by applying the year-end statutory tax rate, with consideration offuture tax rates already legislated, to the future pre-tax net cash flowsrelating to the Company’s proved oil and gas reserves. The standardized measureof discounted future cash flows at February 28, 2007 and 2006, which representsthe present value of estimated future cash flows using a discount rate of 10% ayear, follows:

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|                                                           | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|-----------------------------------------------------------|------------|------------|------------|------------|------------|
| Future cash  inflows                                      |       | $          | 36,682,533 |       | $          | 39,315,545 |   |
| Future  production and development costs                  |       | (9,500,025 | )          | (9,039,156 | )          |
| Future income  tax expenses                               |       | (4,013,740 | )          | (4,354,700 | )          |
| Future net cash  flows                                    |       | 23,168,768 |       | 25,921,689 |       |
| 10% annual  discount for estimated timing of cash flows   |       | (6,843,008 | )          | (7,424,309 | )          |
| Standardized measure of  discounted future net cash flows |       | $          | 16,325,760 |       | $          | 18,497,380 |   |

 
| Beginning of year                                                     |   | $          | 18,497,380 |       | $      | 14,320,370 |   |
|-----------------------------------------------------------------------|--------|------------|------------|------------|--------|------------|--------|
| Sales of oil and gas, net of production costs                         |   | (377,492   | )          | (759,559   | )      |
| Extensions, discoveries, and improved recoveries,  less related costs |   | 341,415    |       | 341,415    |   |
| Accretion of discount                                                 |   | 1,849,738  |       | 1,432,037  |   |
| Net change in sales and transfer prices, net of  production costs     |   | (2,276,861 | )          | 4,030,262  |   |
| Changes in estimated future development costs                         |   | —     |       | (68,283    | )      |
| Net change in income taxes                                            |   | 802,861    |       | (1,564,340 | )      |
| Changes in production rates (timing and other)                        |   | (3,180,042 | )          | (61,391    | )      |
| Revisions of previous quantities                                      |   | 668,761    |       | 826,869    |   |
| End of year                                                           |   | $          | 16,325,760 |       | $      | 18,497,380 |   |

 

40

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**ITEM8.**                                                **CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE.**

The Company didnot change its independent registered public accounting firm or have anydisagreements with them on accounting and financial disclosure issues in thefiscal year ended February 28, 2007.

**ITEM 8A.****                                       CONTROLSAND PROCEDURES.**

The term “disclosurecontrols and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of theSecurities Exchange Act of 1934 (the “Exchange Act”). This term refers to thecontrols and procedures of a company that are designed to ensure thatinformation required to be disclosed by a company in the reports that it filesor submits under the Exchange Act is recorded, processed, summarized andreported within the time periods specified by the Commission. Our management,including our Chief Executive Officer and Principal Financial Officer, hasevaluated the effectiveness of our disclosure controls and procedures as of theend of the period covered by this annual report. Based upon that evaluation,our Chief Executive Officer and Principal Financial Officer have concluded thatour disclosure controls and procedures were effective as of the end of theperiod covered by this annual report.

There were nochanges to our internal control over financial reporting during our last fiscalquarter that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

**ITEM 8B.****                                       OTHERINFORMATION.**

None.

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**PART III**

**ITEM 9.****                                                DIRECTORSAND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE; COMPLIANCEWITH SECTION 16(a) OF THE EXCHANGE ACT.**

Directors andExecutive Officers

The followingtable provides certain information pertaining to the Company’s directors andexecutive officers:
| **Name and Age**           | ** ** | **Business Experience  and Current Positions  With Company**                                                                                                                      | ** ** | **Year First  Became Director** |
|----------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|
| ** **                 | ** ** | ** **                                                                                                                                                                        | ** ** | ** **                      |
| Sandra Pautsky ― 65  |       | Chairperson of the Board of Directors of the Company  since July 1998, President since June 1998 and Secretary-Treasurer since May  1992                                          |       | 1986                            |
| Danny Croker ― 57    |       | Vice President and Assistant Secretary - Treasurer  of the Company since May 1992 and owner of Exlco, Inc., oil and gas  operations                                               |       | 1992                            |
| Randy Camp ― 54      |       | Partner in the firm of Moore, Camp, Phillips &  Co., L.L.P. (or its predecessor firms), Certified Public Accountants, Wichita  Falls, Texas for more than the past five years |       | 1992                            |
| Carol J. Cooper ― 60 |       | Certified Public Accountant, Principal Accounting  Officer of the Company since July 1998 and Principal Financial Officer of the  Company since October 2002                      |       | N/A                             |

 

Danny Croker isSandra Pautsky’s stepbrother. There are no other family relationships among anyof the directors or executive officers of the Company. Sandra Pautsky may beconsidered to be the controlling stockholder of the Company by virtue of herbeneficial ownership of approximately 59% of the Company’s outstanding commonstock and her positions with the Company. See “Item 11.-Security Ownership ofCertain Beneficial Owners and Management and Related Stockholder Matters.” Eachof the directors and executive officers holds office from the date of his orher election for a period of one year or until his or her successor has beenelected. None of the directors or executive officers is involved in any legalproceedings in which he or she is a party adverse or has a material interestadverse to the Company. None of the directors or executive officers has beeninvolved in any legal proceedings which are material to an evaluation of his orher ability or integrity.

Section 16(a)Beneficial Ownership Reporting Compliance

Section 16(a) ofthe Exchange Act requires the Company’s executive officers, directors andpersons who beneficially own more than 10% of the Company’s common stock tofile with the Commission initial reports of beneficial ownership and reports ofchanges in beneficial ownership of the Company’s common stock. The rulespromulgated by the Commission under Section 16(a) of the Exchange Act requirethose persons to furnish the Company with copies of all reports filed with theCommission pursuant to Section 16(a).

Based solely onthe Company’s review of copies of forms it received and on writtenrepresentations from the foregoing persons, the Company believes that duringthe fiscal year ended February 28, 2007 all filing requirements under Section16(a) of the Exchange Act were met on a timely basis by such persons.

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Audit Committee

The Company doesnot have a separately-designated standing audit committee. Instead, the entireBoard of Directors acts as the audit committee for the Company.

Audit CommitteeFinancial Expert

Although theCompany does not have a separately-designated audit committee, a member of theCompany’s Board of Directors, Randy Camp, meets the requirements to beconsidered an audit committee financial expert and is independent as defined inRule 4200(a)(15) of the National Association of Securities Dealers, Inc.listing standards.

NominationProcedures

The Company hasnot made any changes to the procedures by which security holders may recommendnominees to the Company’s Board of Directors since the Company last provideddisclosure to security holders in response to the requirements of Item7(d)(2)(ii)(G) of Schedule 14A of the Exchange Act.

Code of Ethics

Pursuant to therequirements of Item 406 of Regulation S-B, the Company’s “Code ofEthical Conduct for Senior Officers,” which is currently in effect, is filed asExhibit 14 to this report.

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**ITEM 10.****                                         EXECUTIVECOMPENSATION.**

The followingtable sets forth information regarding compensation for services in allcapacities to the Company for the three fiscal years ended February 28, 2007 ofthe Company’s Chief Executive Officer. No other executive officer of theCompany received total annual salary and bonus exceeding $100,000 in any ofsuch years.
| ** **                                 | ** ** | ** ** | ** ** | **Summary Compensation Table** | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|------------|------------|------------------------------------------|------------|------------|------------|
| **Name and  Principal Position** | ** ** | **Year**   | ** ** | **Salary**                               | ** ** | **Bonus**  | ** ** | **All Other  Compensation(1)** | ** ** | **Total** | ** ** |
|                                       |       |       |       |                                     |       |       |       |   |   |   |   |
| Sandra Pautsky                             |       | 2007       |       | $                                        | 101,667    |       | $          | 10,417 |   | $ | 174 |   | $ | 112,258 |   |
| President and                              |       | 2006       |       | 85,000                                   |       | 7,083      |       | 204 |   | $ | 92,287 |   |
| Principal Executive  Officer               |       | 2005       |       | 85,000                                   |       | 322,083    | (2)        | 204 |   | $ | 407,287 |   |
|                                            |            |            |            |                                          |            |            |            |  |  |  |  |  |  |  |  |

 

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(1)           All other compensation consisted ofCompany paid life insurance premiums.

(2)           In the first quarter of fiscal 2005,the Board of Directors of the Company approved (with Ms. Pautsky abstaining) andthe Company paid Ms. Pautsky, the Company’s President and ChiefExecutive Officer, a bonus of $315,000 in consideration ofher extraordinary services over a number of years with respect tothe Company’s proposed real estate development project atDurango, Colorado, which culminated with the Area Plan approval obtained inJanuary 2004.

The Company doesnot have employment agreements with any of its executive officers, has nomaterial bonus, profit-sharing or stock option plans or pension or retirementbenefits. The Company has a group health insurance plan which it makesavailable to all employees of the Company and their family members on anon-discriminatory basis. Pursuant to such plan, $25,000 in life insurancebenefits are provided for all employees of the Company, with the amount of suchbenefits provided decreasing as certain age levels are reached.

Executive officersof the Company who are also directors do not receive any fee or remunerationfor services as members of the Board of Directors. Randy Camp, the onlydirector who is not an employee of the Company, received an annual fee of$3,000 for serving as a director in the fiscal year ended February 28, 2007.

The following table setsforth information concerning compensation of our director who is not also anexecutive officer for fiscal 2007:

DirectorCompensation Table as of February 28, 2007
| **Name**   | ** ** | **Fees Earned or Paid in Cash** | ** ** | **Total** | ** ** |
|------------|------------|----------------------------------------------------------|------------|-----------|------------|
| Randy Camp |       | $                                                        | 3,000      |      | $          | 3,000 |   |
|            |            |                                                          |            |           |            |  |  |

 

**ITEM11.****                                         SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND**

**MANAGEMENTAND RELATED STOCKHOLDER MATTERS.**

The followingtable shows the beneficial ownership of the Company’s common stock as of April25, 2007 by: (i) each person known by the management of the Company to own morethan 5% of the Company’s outstanding common stock; (ii) each executive officerand director; and (iii) the executive officers and directors of the Company asa group.

44

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| **Name and Address**                                                    | ** ** | **Amount**       | ** ** | **Percent** | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------|------------|-------------|------------|
| **of**                                                                            | ** ** | **Beneficially** | ** ** | **of**      | ** ** |
| **Beneficial Owner**                                                         | ** ** | **Owned**        | ** ** | **Class**   | ** ** |
| Sandra  Pautsky  4613 Jacksboro Highway  Wichita Falls, Texas 76302               |       | 2,513,514        | (1)        | 58.96       | %          |
| Flem  Noel Pautsky, Jr. Trust  4613 Jacksboro Highway  Wichita Falls, Texas 76302 |       | 908,247          |       | 21.30       |       |
| Noel  Pautsky Trust  4613 Jacksboro Highway  Wichita Falls, Texas 76302           |       | 676,062          |       | 15.86       |       |
| Robert  S. Allen  125 Ashlyn Ridge  McDonough, Georgia 30252                      |       | 256,700          |       | 6.02        |       |
| Danny  Croker                                                                     |       | ―          |       | ―     |       |
| Randy  Camp                                                                       |       | 100              |       | *           |       |
| Carol  J. Cooper                                                                  |       | ―          |       | ―     |       |
| Executive officers and  directors as a group  (four persons)                      |       | 2,513,614        | (2)        | 58.96       |       |

 

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*                                        Representsless than 1% of outstanding common stock.

(1)                                 Includes:(i) 631,635 shares owned directly by Ms. Pautsky; (ii) 676,062 owned by theNoel Pautsky Trust of which Ms. Pautsky is the Trustee and one of fourbeneficiaries; (iii) 140,464 shares owned by the Noel Pautsky Marital Trust ,of which Ms. Pautsky is the Trustee; (iv) 908,247 shares owned by the Flem NoelPautsky, Jr. Trust, of which Ms. Pautsky is the Trustee and (v) 157,106 sharesowned by the Jimmy Pautsky Trust, of which Ms. Pautsky is the Trustee. Ms.Pautsky disclaims any beneficial ownership of the shares owned by the NoelPautsky Trust in excess of 175,000 shares. Ms. Pautsky also disclaims anybeneficial ownership of the shares owned by the Flem Noel Pautsky, Jr. Trust,the Noel Pautsky Marital Trust and the Jimmy Pautsky Trust.

(2)                                 Includesall shares beneficially owned by Sandra Pautsky, Danny Croker, Randy Camp andCarol J. Cooper.

The Company does not haveany securities authorized for issuance under equity compensation plans.

**ITEM 12.****                                         CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.**

Sandra Pautsky isan executive officer, director and beneficial owner of in excess of 5% of theCompany’s outstanding common stock. In addition, the Flem Noel Pautsky, Jr.Trust and the Noel Pautsky Trust are the beneficial owners of in excess of 5%of the Company’s outstanding common stock.

Ms. Pautsky is thetrustee of the Flem Noel Pautsky, Jr. Trust, the Noel Pautsky Trust, the NoelPautsky Marital Trust and the Jimmy Pautsky Trust. Ms. Pautsky and the FlemNoel Pautsky, Jr. Trust each own undivided working interests in certain of theoil and gas leases in the North Texas area in which the Company also owns anundivided working interest and of which the Company serves as the operator. Inaccordance with standard operating procedures, the Company submits jointinterest billings to such related parties and the other unaffiliated workinginterest owners in the properties which the Company operates on a monthly basisfor their respective pro-rata shares of the costs incurred on the propertiesand the Company’s fee for serving as operator for the preceding month. Inaddition, Exlco, Inc. (“Exlco”), 100% of whose outstanding stock is owned byDanny Croker, an executive officer and director, is allocated and bears aportion of the Company’s office rent and supplies. Ms.

45

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Pautsky, the Flem NoelPautsky, Jr. Trust, The Noel Pautsky Marital Trust, the Jimmy Pautsky Trust andShawn Price (Ms. Pautsky’s son) are allocated and bear a portion of the Company’saccounting expense.

At February 28,2005, Ms. Pautsky, the Flem Noel Pautsky, Jr. Trust, and Exlco had accountspayable to the Company, representing their then unpaid joint interest and otherbillings, aggregating $1,619. During the two fiscal years ended February 28,2007, the Company submitted monthly joint interest and other billings to suchthree parties, the Noel Pautsky Estate and the three new entities listed above(the Noel Pautsky Marital Trust, the Jimmy Pautsky Trust and Shawn Price)totaling $52,106, and such parties paid the Company an aggregate of $51,633with respect to such joint interest and other billings, leaving a balance of$2,092 owed to the Company at February 28, 2007.

**ITEM 13.****                                         EXHIBITS.**
| Exhibit No. | ** ** | **Document Description**                                                                                                                                                                                                                                                                                    |
|-------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(i)(a)     |       | Articles of Incorporation of the Company dated May  9, 1969 filed as Exhibit A(1) to the Company’s Form 10 and incorporated  herein by reference.                                                                                                                                                      |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 3(i)(b)     |       | Amendment to Articles of Incorporation of the  Company dated October 22, 1982 filed as Exhibit 3.(I)(B) Form 10-KSB for the  period ending February 28, 2005 and incorporated herein by reference.                                                                                                          |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 3(ii)       |       | By-Laws of the Company dated May 23, 1975 filed as  Exhibit A(4) to Form 10 and incorporated herein by reference.                                                                                                                                                                                           |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 10          |       | Contract to Buy and Sell Real Estate and  Counterproposal related thereto, dated as of October 18, 2006, by and among  First City Realty Development Corp. and Oakridge Energy, Inc. (Exhibit 2.1 to  Oakridge Energy, Inc.’s Form 8-K dated October 18, 2006, and incorporated  herein by reference). |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 14          |       | Code of Ethical Conduct of Senior Officers filed as  Exhibit 14 to the Company’s Form 10-KSB for the period ending February 28,  2005 and incorporated herein by reference.                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 31(i)       |       | Certifications of Chief Executive Officer Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                      |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 31(ii)      |       | Certifications of Principal Financial Officer  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                  |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 32          |       | Certifications of Chief Executive Officer and  Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act  of 2002 (filed herewith).                                                                                                                                                     |

 

**ITEM 14.****                                         PRINCIPALACCOUNTANT FEES AND SERVICES.**

The independentregistered public accounting firm of Whitley Penn LLP (“Whitley Penn”) auditedthe financial statements of the Company for the fiscal year ended February 28,2007. Whitley Penn has audited the Company’s financial statements for each ofthe eight fiscal years ended February 28, 2007.

Audit Fees

Fees paid toWhitley Penn for the fiscal year 2006 and 2007 audits of the Company’sfinancial statements and the reviews of quarterly reports on Form 10-QSB duringsuch years were $44,250 and $47,827 to date, respectively.

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Audit-Related Fees

The Company paid$15,809 in audit-related fees to Whitley Penn during the fiscal year endedFebruary 28, 2006, but did not incur any audit-related fees from Whitley Pennduring the fiscal year ended February 28 2007.

Tax Fees

Fees paid toWhitley Penn by the Company for preparation of the Company’s federal income taxreturn for the fiscal year ended February 28, 2006 and fiscal year endedFebruary 28, 2007 were $12,264 and $11,685 respectively.

All Other Fees

Fees paid toWhitley Penn by the Company for consulting services related to its DurangoProperty for the fiscal year ended February 28, 2006 and fiscal year endedFebruary 28, 2007 were $675 and $5200, respectively.

Pre-Approval Policies and Procedures

Asindicated under Item 9, the Company does not have a separately-designated auditcommittee and the Board of Directors of the Company acts in that capacity. Priorto the Company’s engagement of Whitley Penn to render the audit and non-auditservices set forth above, such engagement was approved by the Company’s Boardof Directors.

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**SIGNATURES**

In accordance withSection 13 or 15(d) of the Exchange Act, the registrant caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.

OAKRIDGE ENERGY, INC.
| By:    | /s/ Sandra Pautsky        |   |
|--------|---------------------------|--------|
|   | Sandra Pautsky, President |

 

DATE: May 29, 2007

Inaccordance with the Exchange Act, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities and on thedates indicated.
| By:                | /s/ Sandra Pautsky         |   |               | By:                        | /s/ Carol J. Cooper |   |
|--------------------|----------------------------|--------|--------------------|----------------------------|---------------------|--------|
|               | Sandra Pautsky, President, |   |               | Carol J. Cooper, Principal |
|               | Chief Executive            |   |               | Financial Officer and      |
|               | Officer and Director       |   |               | Accounting Officer         |
|               |                       |   |               |                       |
| DATE: May 29, 2007 |                       |   | DATE: May 29, 2007 |
|                    |                            |        |                    |                            |                     |        |  |

 

 
| By:                | /s/ Danny Croker       |   |               | By:                  | /s/ Randy Camp |   |
|--------------------|------------------------|--------|--------------------|----------------------|----------------|--------|
|               | Danny Croker, Director |   |               | Randy Camp, Director |
|               |                   |   |               |                 |
| DATE: May 29, 2007 |                   |   | DATE: May 29, 2007 |
|                    |                        |        |                    |                      |                |        |  |

 

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**EXHIBITS.**
| Exhibit No. | ** ** | **Document Description**                                                                                                                                                                                                                                                                                    |
|-------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(i)(a)     |       | Articles of Incorporation of the Company dated May  9, 1969 filed as Exhibit A(1) to the Company’s Form 10 and incorporated  herein by reference.                                                                                                                                                      |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 3(i)(b)     |       | Amendment to Articles of Incorporation of the  Company dated October 22, 1982 filed as Exhibit 3.(I)(B) Form 10-KSB for the  period ending February 28, 2005 and incorporated herein by reference.                                                                                                          |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 3(ii)       |       | By-Laws of the Company dated May 23, 1975 filed as  Exhibit A(4) to Form 10 and incorporated herein by reference.                                                                                                                                                                                           |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 10          |       | Contract to Buy and Sell Real Estate and  Counterproposal related thereto, dated as of October 18, 2006, by and among  First City Realty Development Corp. and Oakridge Energy, Inc. (Exhibit 2.1 to  Oakridge Energy, Inc.’s Form 8-K dated October 18, 2006, and incorporated  herein by reference). |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 14          |       | Code of Ethical Conduct of Senior Officers filed as  Exhibit 14 to the Company’s Form 10-KSB for the period ending February 28,  2005 and incorporated herein by reference.                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 31(i)       |       | Certifications of Chief Executive Officer Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                      |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 31(ii)      |       | Certifications of Principal Financial Officer  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                  |
|        |       |                                                                                                                                                                                                                                                                                                        |
| 32          |       | Certifications of Chief Executive Officer and  Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act  of 2002 (filed herewith).                                                                                                                                                     |

 

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