UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.   20549





FORM
10-Q





xQUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the
quarterly period ended March 31, 2009





 ̈
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT


For the
transition period from _____ to _____





OSAGE
EXPLORTION AND DEVELOPMENT, INC.


(Exact
name of small business issuer as specified in its charger)





Delaware
              0-52718
              26-0421736(State or other jurisdiction
                of incorporation or
                organization)
              (Commission File No.)
              (I.R.S. Employer
                Identification No.)





2445 5th Avenue
                Suite 310
                San Diego, CA  92101
                (Address of principal executive
                offices)
              
              (619) 677-3956
                (Issuer’s telephone number)





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 month (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.


Yes   x                             No ̈


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company in
Rule 12b-2 of the Exchange Act.





Large
Accelerated Filer    ̈     Accelerated
Filer    ̈


Non-Accelerated
Filer   ̈     Smaller
Reporting Company  x





Indicate
by check mark whether the registrant is a shell company (as defined in section
12b-2 of the Exchange Act)


Yes    ̈                             Nox





The
number of outstanding shares of the registrant’s Common Stock, $0.0001 par
value, as of May 12, 2009 was 46,359,775.














OSAGE
EXPLORATION AND DEVELOPMENT, INC. AND SUBSIDIARY





TABLE
OF CONTENTS





PagePART I – FINANCIAL INFORMATIONItem 1.
                                            Financial Statements (unaudited)Consolidated Balance Sheets; March 31, 2009 and December 31, 2008
                                            1Consolidated Statement of Operations; Three Months ended March 31, 2009 andMarch 31, 2008
                                            2Consolidated Statement of Cash Flows; Three Months ended March 31, 2009 andMarch 31, 2008
                                            3Notes to Consolidated Financial Statements
                                            4Item 2.
                                            Management’s Discussion and Analysis of Financial Condition and Results of Operations
                                            10Item 3.
                                            Quantitative and Qualitative Disclosures about Market Risk
                                            17Item 4.
                                            Controls and Procedures
                                            17PART II – OTHER INFORMATIONItem 1.
                                            Legal Proceedings
                                            18Item 1.A.      Risk Factors
                                            18Item 2.
                                            Unregistered Sales of Equity Securities and Use of Proceeds
                                            18Item 3
                                            Default upon Senior Securities
                                            18Item 4
                                            Submission of Matters to a Vote of Security Holders
                                            18Item 5
                                            Other Information
                                            18Item 6
                                            Exhibits
                                            18Signatures
                                            19




ii


PART
I. FINANCIAL INFORMATION





Item 1.
Financial Statements





OSAGE
EXPLORATION AND DEVELOPMENT, INC.
 CONSOLIDATED
BALANCE SHEETS
 As of
March 31, 2009 and December 31, 2008




2009
                                                
                                                
                                                2008(unaudited)ASSETSCurrent
      Assets:Cash
      and cash equivalents
                                                
                                                $
                                                1,032,580
                                                
                                                
                                                $
                                                988,508Colombian
      Trust Accounts (Note 4)
                                                
                                                
                                                359,800
                                                
                                                
                                                
                                                537,665Accounts
      Receivable
                                                
                                                
                                                52,033
                                                
                                                
                                                
                                                64,658Bank
      CD pledged for Letter of Credit (Note 6)
                                                
                                                
                                                24,166
                                                
                                                
                                                
                                                145,632Other
      Current Assets
                                                
                                                
                                                579,301
                                                
                                                
                                                
                                                110,986Prepaid
      Expenses
                                                
                                                
                                                47,384
                                                
                                                
                                                
                                                65,380Total
      Current Assets
                                                
                                                
                                                2,095,264
                                                
                                                
                                                
                                                1,912,829Property
      and Equipment, at cost (Note 2):Oil
      and gas properties and equipment
                                                
                                                
                                                1,976,744
                                                
                                                
                                                
                                                4,920,550Capitalized
      asset retirement costs
                                                
                                                
                                                46,146
                                                
                                                
                                                
                                                13,675Other
      property & equipment
                                                
                                                
                                                68,192
                                                
                                                
                                                
                                                46,2222,091,082
                                                
                                                
                                                
                                                4,980,447Less:
      accumulated depletion, depreciationand
      amortization
                                                
                                                
                                                (269,801
                                                )
                                                
                                                
                                                (183,166
                                                )1,821,281
                                                
                                                
                                                
                                                4,797,281Bank
      CD pledged for Bond
                                                
                                                
                                                30,000
                                                
                                                
                                                
                                                30,000Total
      Assets
                                                
                                                $
                                                3,946,545
                                                
                                                
                                                $
                                                6,740,110LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      Liabilities:Accounts
      payable
                                                
                                                $
                                                952,079
                                                
                                                
                                                $
                                                2,128,915Accrued
      Expenses
                                                
                                                
                                                14,697
                                                
                                                
                                                
                                                87,941Current
      Maturity of Promissory Note (Note 8)
                                                
                                                
                                                3,913
                                                
                                                
                                                
                                                3,572Total
      Current Liabilities
                                                
                                                
                                                970,689
                                                
                                                
                                                
                                                2,220,428Promissory
      Note, net of Current Maturity (Note 8)
                                                
                                                
                                                2,489
                                                
                                                
                                                
                                                3,283Liability
      for Asset Retirement Obligations (Note 12)
                                                
                                                
                                                51,941
                                                
                                                
                                                
                                                18,203Commitments
      and Contingencies (Note 9)Stockholders'
      Equity:Common
      stock, $0.0001 par value, 190,000,000 sharesauthorized;
      46,359,775 and 40,959,775 shares issued and outstanding as of
      March 31, 2009 and December 31, 2008, respectively.
                                                
                                                
                                                4,636
                                                
                                                
                                                
                                                4,095Additional-Paid-in-Capital
                                                
                                                
                                                11,786,073
                                                
                                                
                                                
                                                11,336,613Deferred
      Compensation
                                                
                                                
                                                —
                                                
                                                
                                                
                                                (7,493
                                                )Stock
      Purchase Notes Receivable
                                                
                                                
                                                (142,500
                                                )
                                                
                                                
                                                (142,500
                                                )Accumulated
      Deficit
                                                
                                                
                                                (7,883,049
                                                )
                                                
                                                
                                                (6,155,716
                                                )Accumulated
      Other Comprehensive Loss -Currency
      Translation (Loss)/Gain
                                                
                                                
                                                (843,734
                                                )
                                                
                                                
                                                (536,803
                                                )2,921,426
                                                
                                                
                                                
                                                4,498,196Total
      Liabilities and Stockholders' Equity
                                                
                                                $
                                                3,946,545
                                                
                                                
                                                $
                                                6,740,110





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


1


OSAGE
EXPLORATION AND DEVELOPMENT, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 For the
Three Months March 31, 2009 and March 31, 2008 (unaudited)




2009
                                            
                                            
                                            2008Operating
      RevenuesOil
      Revenues
                                            
                                            $
                                            262,813
                                            
                                            
                                            $
                                            34,565Pipeline
      Revenues
                                            
                                            
                                            481,257
                                            
                                            
                                            
                                            —Total
      Operating Revenues
                                            
                                            
                                            744,070
                                            
                                            
                                            
                                            34,565Operating
      Costs and ExpensesOperating
      Expenses
                                            
                                            
                                            203,348
                                            
                                            
                                            
                                            18,423Asset
      Impairment
                                            
                                            
                                            1,612,894
                                            
                                            
                                            
                                            —Depreciation,
      Depletion and Accretion
                                            
                                            
                                            86,634
                                            
                                            
                                            
                                            2,733Stock
      Based Compensation Expense
                                            
                                            
                                            37,493
                                            
                                            
                                            
                                            681,930General
      and Administrative Expenses
                                            
                                            
                                            546,227
                                            
                                            
                                            
                                            398,832Total
      Operating Costs and Expenses
                                            
                                            
                                            2,486,596
                                            
                                            
                                            
                                            1,101,918Operating
      (Loss)
                                            
                                            
                                            (1,742,526
                                            )
                                            
                                            
                                            (1,067,353
                                            )Other
      Income (Expenses):Interest
      Income
                                            
                                            
                                            16,526
                                            
                                            
                                            
                                            27,689Interest
      Expense
                                            
                                            
                                            (1,333
                                            )
                                            
                                            
                                            (250,568
                                            )(Loss)
      before Income Taxes
                                            
                                            
                                            (1,727,333
                                            )
                                            
                                            
                                            (1,290,232
                                            )Provision
      for Income Taxes
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —Net
      (Loss)
                                            
                                            
                                            (1,727,333
                                            )
                                            
                                            
                                            (1,290,232
                                            )Other
      Comprehensive (Loss)/Income, net of tax:Foreign
      Currency Translation Adjustment
                                            
                                            
                                            (306,931
                                            )
                                            
                                            
                                            124,971Other
      Comprehensive Income
                                            
                                            
                                            (306,931
                                            )
                                            
                                            
                                            124,971Comprehensive
      (Loss)
                                            
                                            $
                                            (2,034,264
                                            )
                                            
                                            $
                                            (1,165,261
                                            )Basic
      and Diluted Loss per Share
                                            
                                            $
                                            (0.04
                                            )
                                            
                                            $
                                            (0.04
                                            )Weighted
      average number of common shareand
      common share equivalents used tocompute
      basic and dilluted Loss per Share
                                            
                                            
                                            43,274,775
                                            
                                            
                                            
                                            35,959,775





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


2


OSAGE
EXPLORATION AND DEVELOPMENT, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For the
Three Months Ended March 31, 2009 and March 31, 2008
(unaudited)




2009
                                  
                                  
                                  2008Cash
      flows from Operating Activities:Net
      (Loss)
                                  
                                  $
                                  (1,727,333
                                  )
                                  
                                  $
                                  (1,290,232
                                  )Adjustments
      to reconcile net (loss) to net cashprovided/(used)
      by operating activites:Asset
      Impairment
                                  
                                  
                                  1,612,894Beneficial
      Conversion of Convertible Debenture
                                  
                                  
                                  
                                  
                                  
                                  
                                  216,790Stock
      Based Compensation
                                  
                                  
                                  7,493
                                  
                                  
                                  
                                  681,930Shares
      issued for services
                                  
                                  
                                  30,000Accretion
      of Asset Retirment Obligation
                                  
                                  
                                  33,738
                                  
                                  
                                  
                                  414Amortization
      of Deferred Financing Costs
                                  
                                  
                                  
                                  
                                  
                                  
                                  11,172Provision
      for depletion, depreciationamortization
      and valuation allowance
                                  
                                  
                                  86,634
                                  
                                  
                                  
                                  2,733Changes
      in operating assets and liabitlies:(Increase)
      in accounts receivable
                                  
                                  
                                  12,625
                                  
                                  
                                  
                                  (1,375
                                  )(Increase)
      in other current assets
                                  
                                  
                                  (360,992
                                  )(Increase)
      in prepaid expenses
                                  
                                  
                                  17,996
                                  
                                  
                                  
                                  16,791Increase/(decrease)
      in accounts payable and accrued expenses
                                  
                                  
                                  1,615,988
                                  
                                  
                                  
                                  67,175Net
      cash provided/(used) by operating activities
                                  
                                  
                                  1,329,043
                                  
                                  
                                  
                                  (294,602
                                  )Cash
      flows from Investing Activities:Increase
      in Asset Retirement Obligation
                                  
                                  
                                  (32,471
                                  )
                                  
                                  
                                  —Investment
      in Bank CD pledged for Letter of Credit
                                  
                                  
                                  (50,934
                                  )
                                  
                                  
                                  —Maturity
      of Bank CD pledged for Letter of Credit
                                  
                                  
                                  145,632
                                  
                                  
                                  
                                  —Reimbursement
      by LEC for expenditures on Phases 1 and 2 of Rosablanca
                                  
                                  
                                  881,523Investments
      in Oil & Gas Properties
                                  
                                  
                                  (1,530,986
                                  )
                                  
                                  
                                  (109,487
                                  )Deposit
      made on Oil & Gas Property
                                  
                                  
                                  —
                                  
                                  
                                  
                                  (100,000
                                  )Return
      of deposit made on Oil & Gas Property
                                  
                                  
                                  —
                                  
                                  
                                  
                                  140,000Purchase
      of Non Oil & Gas property
                                  
                                  
                                  —
                                  
                                  
                                  
                                  (15,685
                                  )Interest
      earned on Bank CD pledged for Letter of Credit
                                  
                                  
                                  (732
                                  )
                                  
                                  
                                  (1,837
                                  )Payments
      (from) Colombian Trust Account
                                  
                                  
                                  (389,619
                                  )
                                  
                                  
                                  —Net
      cash (used) by investing activities
                                  
                                  
                                  (977,587
                                  )
                                  
                                  
                                  (87,009
                                  )Cash
      flows from Financing Activities:Proceeds
      from payment on Stock Purchase Notes Receivable
                                  
                                  
                                  —
                                  
                                  
                                  
                                  14,100Payments
      on Promissory Notes
                                  
                                  
                                  (453
                                  )
                                  
                                  
                                  (864
                                  )Net
      cash provided/(used) by financing activities
                                  
                                  
                                  (453
                                  )
                                  
                                  
                                  13,236Effect
      of exchange rate on cash and cash equivalents
                                  
                                  
                                  (306,931
                                  )
                                  
                                  
                                  124,971Net
      increase (decrease) in cash and cash equivalents
                                  
                                  
                                  44,072
                                  
                                  
                                  
                                  (243,404
                                  )Cash
      and Cash equivalents beginning of period
                                  
                                  
                                  988,508
                                  
                                  
                                  
                                  689,545Cash
      and Cash equivalents at end of period
                                  
                                  $
                                  1,032,580
                                  
                                  
                                  $
                                  446,141SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      Payment for Interest
                                  
                                  
                                  67
                                  
                                  
                                  
                                  33,364Cash
      Payment for Income Taxes
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Non-Cash
      Transactions:Issuance
      of Shares to Lewis Energy Corporation
                                  
                                  
                                  420,000Forgiveness
      of accounts payable to Lewis Energy Corporation
                                  
                                  
                                  1,985,043Issuance
      of Shares for Services
                                  
                                  
                                  30,000





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


3





OSAGE
EXPLORATION AND DEVELOPMENT, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


March 31,
2009 (unaudited)





1. BASIS
OF PRESENTATION





Osage
Exploration and Development, Inc. (“Osage” or the “Company”) prepared the
accompanying unaudited consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America (“USA”)
for interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and
Item 310(b) of regulation S-K. These financial statements should be read
together with the financial statements and notes in the Company’s 2008 Form 10-K
filed with the SEC.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles (“GAAP”) in the USA were condensed or omitted.
The accompanying financial statements reflect all adjustments and disclosures,
which, in the Company’s opinion, are necessary for fair presentation. All such
adjustments are of a normal recurring nature. The results of operations for the
interim periods are not necessarily indicative of the results of the entire
year.





The
Company incurred significant losses and had negative cash flow from operations
in the last three years and the three months ended March 31, 2009 and has an
accumulated deficit of $7,883,049 at March 31, 2009 and $6,155,716 (audited) at
December 31, 2008.  Substantial portions of the losses are
attributable primarily to asset impairment charges, stock based compensation
expense, professional fees and interest expense.  The Company's
operating plans require additional funds that may take the form of debt or
equity financings. There can be no assurance that any additional funds will be
available. The Company's ability to continue as a going concern is in
substantial doubt and is dependent upon achieving a profitable level of
operations and obtaining additional financing.





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





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





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





IMPACT OF
RECENT ACCOUNTING PRONOUNCEMENTS





Recent
Pronouncements





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


4





In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities an amendment of FASB Statement No. 133." SFAS 161 changes
the disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under SFAS 133 and its related interpretations,
and (c) how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. Based on current
conditions, the Company does not expect the adoption of SFAS 161 to have a
significant impact on its results of operations or financial
position.





In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). SFAS 162 did not have an impact on the Company's
financial statements.





In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60." The scope of
SFAS 163 is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial
guarantee contracts issued by enterprises excluded from the scope of Statement
60 or to some insurance contracts that seem similar to financial guarantee
insurance contracts issued by insurance enterprises (such as mortgage guaranty
insurance or credit insurance on trade receivables), SFAS 163 also does not
apply to financial guarantee insurance contracts that are derivative instruments
included within the scope of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 163 will not have an impact on the
Company's financial statements.





Income
Tax





The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, on January 1, 2008.  As a result of the
implementation of FIN 48, the Company made a comprehensive review of its
portfolio of tax positions in accordance with recognition standards established
by FIN 48.  As a result of the implementation of Interpretation 48,
the Company recognized no material adjustments to liabilities or stockholders
equity.





When tax
returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained.  The benefit of a tax
position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not
that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any.  Tax positions taken are
not offset or aggregated with other positions.  Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest
amount of tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheets along with any associated interest and penalties
that would be payable to the taxing authorities upon examination.





Interest
associated with unrecognized tax benefits are classified as interest expense and
penalties are classified in selling, general and administrative expenses in the
statements of income.




We did
not have a provision for income taxes for 2009 and 2008.  Due to a
history of operating losses, the Company records a full valuation allowance
against its net deferred tax assets and therefore has recorded no tax provision
related to its US operations for the current period.


5


2. OIL
AND GAS PROPERTIES





Oil and
gas properties consisted of the following as of March 31, 2009 and December 31,
2008:





2009
                  
                  
                  2008(audited)Properties
      subject to amortization
                  
                  $
                  1,970,376
                  
                  
                  $
                  2,239,193Properties
      not subject to amortization
                  
                  
                  6,368
                  
                  
                  
                  2,681,357Capitalized
      asset retirement costs
                  
                  
                  46,146
                  
                  
                  
                  13,675Accumulated
      depreciation and depletion
                  
                  
                  (49,302
                  )
                  
                  
                  (143,290
                  )Oil
      & Gas Properties, Net
                  
                  $
                  1,973,588
                  
                  
                  $
                  4,790,935





3.
GEOGRAPHICAL INFORMATION





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





Colombia
                  
                  
                  United States
                  
                  
                  ConsolidatedMarch
      31, 2009Total
      Revenues
                  
                  $
                  726,255
                  
                  
                  $
                  17,815
                  
                  
                  $
                  744,070%
      of Total
                  
                  
                  97.6
                  %
                  
                  
                  2.4
                  %
                  
                  
                  100.0
                  %Long
      Lived Assets
                  
                  $
                  1,646,965
                  
                  
                  $
                  174,316
                  
                  
                  $
                  1,821,281%
      of Total
                  
                  
                  90.4
                  %
                  
                  
                  9.6
                  %
                  
                  
                  100.0
                  %March
      31, 2008Total
      Revenues
                  
                  $
                  -
                  
                  
                  $
                  34,565
                  
                  
                  $
                  34,565%
      of Total
                  
                  
                  0.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Long
      Lived Assets
                  
                  
                  142,563
                  
                  
                  
                  165,995
                  
                  
                  
                  308,558%
      of Total
                  
                  
                  46.2
                  %
                  
                  
                  53.8
                  %
                  
                  
                  100.0
                  %





4.
COLOMBIAN TRUST ACCOUNTS




In June
2007, we entered into an agreement (the “Agreement”) with Gold Oil, Plc (“Gold”)
and Empesa Petrolera de Servicios y Asesorias, S.A. (“Empesa), whereby we
farmed-in to the approximately 165 square mile Rosablanca concession in Colombia
awarded by the Agencia Nacional de Hidrocarburos (“ANH”) to Gold in June
2007.  In August 2007, we (i) paid $1,200,000 to Gold representing
funds Gold previously issued to a trust established by the ANH to use for
drilling the first well for the Rosablanaca concession and (ii) issued a letter
of credit of $144,000 for the benefit of Gold’s bank in Colombia representing
the guarantee required by the ANH.  We were obligated to commence
drilling on the first well by December 26, 2008, which we have
done.  As of March 31, 2009, we had a balance of $427,756 in this
trust account.




Under the
terms of the concession agreement with the ANH, we are required to perform six
phases, with each phase lasting 12 months.  We already performed the
first phase which was to drill the first well.  Each phase will
require us to fund a new trust account and issue a letter of credit as well as
perform certain tasks.  Phase 2 required an establishment of a new
trust account for $790,000, of which our share was initially $395,000 but was
then reduced to $197,500 upon the signing of the Lewis Energy Colombia, Inc.,
(“LEC”) transaction as further described in Footnote 10.  Phase 2 also
required the issuance of a letter of credit in the amount of $110,000, of which
our share was initially $55,000, but was later reduced to $27,500 upon signing
of the LEC transaction and obligated us to perform certain seismic
work.  As of March 31, 2009, we had a balance of $192,119 in the trust
account to be used for Phase 2.  Phases 3,4,5 and 6 each require the
funding of a trust account in the amount of $1,200,000, of which our share will
be $300,000 and an issuance of a letter of credit in the amount of $144,0000, of
which our share will be $36,000 and the drilling of an additional well in each
phase.  The concession with the ANH shall remain in effect as long as
we meet our timely obligations to drill each well that we present to the
ANH.


6


5.
DEPOSITS





In
January 2007, we placed a deposit totaling $82,000 on approximately 85% of the
working interest of a natural gas property consisting of 640 acres with proved
undeveloped reserves located in Hansford County, Texas, owned by Pearl Resources
Corp.  The agreement was amended in March 2007 stipulating that unless
the Company acquires a contiguous lease by June 1, 2007 for $48,000, a second
contiguous lease by August 1, 2007 for $80,000 and place $445,180 in escrow for
drilling and completing the first well with actual commencement of drilling
prior to September 15, 2007, the seller has the right to refund 90% of all
payments received and void the agreement.  In September 2007, the
seller provided us with an extension until June 30, 2008 to fulfill all of our
obligations under the agreement.  We have not received an extension
from the seller and believe the seller will void the agreement.  We do
not believe we will receive any of the $82,000 we have invested and accordingly,
as of December 31, 2008, we wrote down the value of the deposit to
zero.





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





In
February 2008, we entered into an letter of intent and issued a $100,000 deposit
to acquire a minority position in certain producing oil and gas assets in
Colombia.  On April 8, 2008, we entered into a membership
interest purchase agreement (the “Purchase Agreement”) with Sunstone Corporation
(“Sunstone”) pursuant to which the Company acquired from Sunstone 100% of the
membership interests in Cimarrona Limited Liability company, an Oklahoma limited
liability company (“Cimarrona LLC”).  Cimarrona LLC is the owner of a
9.4% interest in certain oil and gas assets in the Guaduas field, located in the
Dindal and Rio Seco Blocks that covers 30,665 acres in the Middle Magdalena
Valley in Colombia.  The Purchase Agreement is effective as of April
1, 2008.  The purchase price consisted of 2,750,000 shares of the
Company’s common stock and a warrant to purchase 1,125,000 shares of the
Company’s common stock exercisable at $1.25 per share and expiring April 8,
2013.  The $100,000 deposit was returned to the Company in conjunction
with closing of the transaction.





6. BANK
CD PLEDGED FOR LETTER OF CREDIT





In August
2007, we placed $144,000 in a certificate of deposit (“CD”) with a bank as
collateral for the $144,000 letter of credit required by the ANH as more fully
described in footnote 4 above.  In June 2008, we received an extension
from the ANH until December 26, 2008 to drill our first
well.  Accordingly, in December 2008, the CD was extended until March
25, 2009.  We were obligated to drill the first well in the Rosablanca
concession by December 26, 2008 in order to not lose our interest in the
concession and this CD.  As we completed our obligation on the first
well by December 26, 2008, the letter of credit expired on March 25, 2009 and we
redeemed the CD at that time.  Accordingly, the balance of this CD at
March 31, 2009 was zero.





In March
2009, we placed the equivalent of $55,000 in a CD, and LEC then reimbursed us
$27,500 for this CD, with a bank in Colombia as collateral for the $110,000
letter of credit required by the ANH for Phase 2 as more fully described in
footnote 4 above.  The balance of this CD at March 31, 2009 was
$24,166.


7


7.
UNSECURED CONVERTIBLE PROMISSORY NOTE





In July
2007, we issued a $1,100,000 unsecured convertible promissory note (“Unsecured
Convertible Promissory Note”) to one institutional investor for gross proceeds
of $1,100,000.  The Unsecured Convertible Promissory Note matured
September 30, 2008, had an 8% interest rate, payable in cash quarterly, and was
convertible, in whole or in part, into units, with each unit (“Unit”) priced at
$1.00 and consisting of one share of common stock and one warrant, exercisable
at $1.25 per share maturing three years from issuance.  We had the
option to prepay the Unsecured Convertible Promissory Note at any time prior to
maturity with no penalty.   We had the option, but only at
maturity, to repay the Unsecured Convertible Promissory Note in
Units.  At September 30, 2008, we elected to repay in full the
Unsecured Convertible Promissory note by issuing 1,100,000 Units.  As
such, the balance of the Unsecured Convertible Promissory Note at March 31, 2009
and December 31, 2008 (audited) was zero.  Pursuant to EITF 98-5,
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios" and EITF 00-27, “Application of Issue
No. 98-5 in Certain Convertible Instruments,” we recorded $1,067,274 upon the
issuance of the Unsecured Convertible Promissory Note attributable to the
beneficial conversion feature as additional paid in capital.  The
discount was amortized using the effective interest rate method over the term of
the indebtedness.





8.
PROMISSORY NOTE





On April
27, 2007, we purchased a truck to be used by our pumper in our Oklahoma property
by issuing a promissory note (the “Promissory Note”) to a bank secured by the
truck.  The Promissory Note matures October 27, 2010, has a variable
interest rate of Prime plus 1.0%, and has monthly principal and interest
payments totaling $366.  As of March 31, 2009, the interest rate on
the Promissory Note was 4.25%.





The
following table summarizes the balance of the note at March 31,
2009:





Promissory
      Note Outstanding at March 31, 2009
                  
                  $
                  6,402Less
      Current Portion
                  
                  
                  3,913$
                  2,489





9.
COMMITMENTS AND CONTINGENCIES





Under the
terms of the Rosablanca concession agreement with the ANH, we are required to
perform six phases, with each phase lasting 12 months.  We performed
the first phase which was to drill the first well.  Each phase will
require us to fund a new trust account and issue a letter of credit as well as
perform certain tasks.  Phases 3,4,5 and 6 each require the funding of
a trust account in the amount of $1,200,000, of which our share will be
$300,000, an issuance of a letter of credit in the amount of $144,0000, of which
our share will be $36,000 and the drilling of an additional well in each
phase.  The concession with the ANH shall remain in effect for up to
24 years as long as we meet our timely obligations to drill each well that we
present to the ANH.





ENVIRONMENT





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





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





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





The
Company is not aware of any environmental claims existing as of March 31, 2009,
that would have a material impact on its consolidated financial position or
results of operations. There can be no assurance, however, that current
regulatory requirements will not change, or past non-compliance with
environmental laws will not be discovered on the Company's
property.


8





LAND
RENTALS AND OPERATING LEASES





In
February 2008, the Company entered into a 36 month lease for its corporate
offices in San Diego.  The lease is initially for $3,682 per month for
the first year, increasing to $3,800 and $3,923 in the second and third year
respectively.  The lease is guaranteed by Mr. Kim Bradford, our
President and Chief Executive Officer.  No compensation was given to
Mr. Bradford for his guarantee. In addition, the Company is responsible for all
operating expenses and utilities.  Outside of the San Diego lease, the
Company’s Oklahoma office and all equipment leased are under month-to-month
operating leases.





Future
minimum rental payments required as of March 31, 2009 under operating leases are
as follows by year:





Year
                  
                  Amount2009
                  
                  $
                  34,2012010
                  
                  
                  46,9502011
                  
                  
                  3,922Totals
                  
                  $
                  85,073





Rental
expense charged to operations totaled $13,633 and $10,865 in 2009 and 2008,
respectively.





LEGAL
PROCEEDINGS





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





10.
EQUITY TRANSACTIONS





Cimarrona
Acquisition


On
April 8, 2008, pursuant to the Purchase Agreement with Sunstone Corporation
whereby the Company acquired from Sunstone 100% of the membership interests in
Cimarrona, the Company issued to Sunstone 2,750,000 shares of the Company’s
common stock and a warrant to purchase 1,125,000 shares of the Company’s common
stock exercisable at $1.25 per share and expiring April 8, 2013.  In
addition, the Company issued 50,000 shares of common stock to Energy Capital
Solutions, LP for their role as financial advisor and $22,500 to Larry Ray, an
individual, as a finder’s fee.





Lewis Energy Colombia,
Inc.


In March
2009, we entered into an agreement (the “LEC Agreement”) with Lewis Energy
Colombia, Inc. (“LEC”), whereby LEC has agreed to provide $3,500,000, to drill
the first well and become operator of Rosablanca in return for a 50% assignment
of our 50% operating interest in the Rosablanca.  In addition, LEC is
entitled to recoup two times its investment in the first well before Osage
receives any cash flow from the first well.  The transaction was
recorded in accordance with paragraph 47(c) SFAS 19, “Financial Accounting and
Reporting by Oil and Gas Producing Companies.”  Furthermore, as part
of the LEC Agreement, we issued 5,250,000 shares of our common stock to an
affiliate of LEC.  As a result of the LEC transaction, revenues and
investments on all future wells in Rosablanca will be allocated 40% to Gold, 25%
to LEC, 25% to us and 10% to Empesa.    If any party doesn’t
contribute its share of the costs, its revenue interest will automatically be
transferred to the party that provides the capital.  On March 23,
2009, we announced we completed testing on the first well without finding
producible hydrocarbons in any of the zones evaluated.  As a result of
the transaction, we recognized no gain or loss on the assignment of our
interest.





11. MAJOR
CUSTOMERS





In 2009,
three customers accounted for all of our sales.  Pacific, Hocol and
Sunoco, each accounted for approximately 65%, 33% and 2%, respectively, of total
revenues.  In 2008, Sunoco accounted for 100% of our total
revenues.


9


12. ASSET
RETIREMENT OBLIGATIONS





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





There are
no legally restricted assets for the settlement of asset retirement
obligations.  A reconciliation of the Company's asset retirement
obligations for the periods presented is as follows:





March 31, 2009
                      
                      
                      March 31, 2008Colombia
                      
                      
                      United States
                      
                      
                      Combined
                      
                      
                      Colombia
                      
                      
                      United States
                      
                      
                      CombinedBeginning
      Balance
                      
                      $
                      —
                      
                      
                      $
                      18,203
                      
                      
                      $
                      18,203
                      
                      
                      $
                      —
                      
                      
                      $
                      16,547
                      
                      
                      $
                      16,547Incurred
      during the period
                      
                      
                      
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Additions
      for new wells
                      
                      
                      32,471
                      
                      
                      
                      —
                      
                      
                      
                      32,471
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Accretion
      expense
                      
                      
                      812
                      
                      
                      
                      455
                      
                      
                      
                      1,267
                      
                      
                      
                      —
                      
                      
                      
                      414
                      
                      
                      
                      414Ending
      Balance
                      
                      $
                      33,283
                      
                      
                      $
                      18,658
                      
                      
                      $
                      51,941
                      
                      
                      $
                      —
                      
                      
                      $
                      16,961
                      
                      
                      $
                      16,961




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




This
report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 that include, among others, statements of: expectations, anticipations,
beliefs, estimations, projections, and other similar matters that are not
historical facts, including such matters as: future capital requirements,
development and exploration expenditures (including the amount and nature
thereof), drilling of wells, reserve estimates (including estimates of future
net revenues associated with such reserves and the present value of such future
net revenues), future production of oil and gas, repayment of debt, business
strategies, and expansion and growth of business operations. These statements
are based on certain assumptions and analyses made by our management in light of
past experience and perception of: historical trends, current conditions,
expected future developments, and other factors that our management believes are
appropriate under the circumstances. We caution the reader that these
forward-looking statements are subject to risks and uncertainties, including
those associated with the financial environment, the regulatory environment, and
trend projections, that could cause actual events or results to differ
materially from those expressed or implied by the statements. Such risks and
uncertainties include those risks and uncertainties identified
below.





Significant
factors that could prevent us from achieving our stated goals include: declines
in the market prices for oil and gas, adverse changes in the regulatory
environment affecting us, the inherent risks involved in the evaluation of
properties targeted for acquisition, our dependence on key personnel, the
availability of capital resources at terms acceptable to us, the uncertainty of
estimates of proved reserves and future net cash flows, the risk and related
cost of replacing produced reserves, the high risk in exploratory drilling and
competition. You should consider the cautionary statements contained or referred
to in this report in connection with any subsequent written or oral
forward-looking statements that may be issued. We undertake no obligation to
release publicly any revisions to any forward-looking statement to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.


10


In June
2007, we entered into the Agreement with Gold and Empesa, whereby we farmed-in
to the approximately 165 square mile Rosablanca concession in Colombia awarded
by the ANH to Gold in June, 2007.  Our decision to pursue the
Rosablanca project was based on the seismic data generated by the ANH that
revealed multiple target opportunities.  Under the Agreement, we are
considered the operators of the concession and are obligated to pay all costs
associated with drilling and testing of the first well on the Rosablanca
project.  Revenues generated from the first well were to be allocated
50% to us, 40% to Gold and 10% to Empesa.  In March 2009, we entered
into an agreement (the “LEC Agreement”) with Lewis Energy Colombia, Inc.
(“LEC”), whereby LEC agreed to provide $3,500,000 to drill the first well and
become operator of Rosablanca in return for a 50% assignment of our 50%
operating interest in the Rosablanca.  In addition, LEC is entitled to
recoup two times its investment in the first well before Osage receives any cash
flow from the first well.  The transaction was recorded in accordance
with paragraph 47(c) SFAS 19, “Financial Accounting and Reporting by Oil and Gas
Producing Companies.”  Furthermore, as part of the LEC Agreement, we
issued 5,250,000 shares of our common stock to an affiliate of
LEC.  As a result of the LEC transaction, revenues and investments on
all future wells in Rosablanca will be allocated 40% to Gold, 25% to LEC, 25% to
us and 10% to Empesa.    If any party doesn’t contribute its
share of the costs, its revenue interest will automatically be transferred to
the party that provides the capital.  On March 23, 2009, we announced
we completed testing on the first well without finding producible hydrocarbons
in any of the zones evaluated.  As a result of the transaction, we
recognized no gain or loss on the assignment of our interest.




In August
2007, we (i) paid $1,200,000 to Gold representing the funds Gold previously
issued to a trust account established by the ANH to use for drilling the first
well for the Rosablanaca concession and (ii) issued a letter of credit in the
amount of $144,000 for the benefit of Gold’s bank in Colombia representing the
guarantee required by the ANH.  We were obligated to commence drilling
on the first well by December 26, 2008, which we have done.  As of
December 31, 2008, we had a balance of $537,665 in the trust
account.  Under the terms of the concession agreement with the ANH, we
have the right to explore for up to six phases, with each phase lasting 12
months.  We already performed the first phase which was to drill the
first well.  Each phase will require us to fund a new trust account,
and issue a letter of credit as well as perform certain tasks.  Phase
2 required an establishment of a trust account for $790,000, of which our share
was $197,500, and an issuance of a letter of credit in the amount of $110,000,
of which our share was $27,500 and obligated us to perform certain seismic
work.  In the first quarter of 2009, we funded both the trust account
and the letter of credit.  Phases 3, 4, 5 and 6, assuming that we are
still in exploration, each require the funding of a trust account in the amount
of $1,200,000, of which our share will be $300,000, an issuance of a letter of
credit in the amount of $144,000, of which our share will be $36,000 and the
drilling of an additional well in each phase.  The exploitation phase
of the concession with the ANH shall remain in effect for up to 24 years as long
as we meet our timely obligations to drill each well that we present to the ANH.
The royalty rate under this ANH contract is 8% for up to 5,000 barrels per day,
increasing on a sliding scale to 25% if production exceeds 600,000 barrels per
day.  On March 23, 2009, we announced that we have completed testing
on the first well without finding producible hydrocarbons in any of the zones
evaluated.




In
February 2008, we entered into a letter of intent and issued a $100,000 deposit
to acquire a minority position in certain producing oil and gas assets in
Colombia.  On April 8, 2008, we entered into (the Purchase
Agreement with Sunstone pursuant to which we acquired from Sunstone 100% of the
membership interests in Cimarrona LLC, the owner of a 9.4% interest in certain
oil and gas assets in the Guaduas field, located in the Dindal and Rio Seco
Blocks that consist of twenty-one wells, of which seven are currently producing,
that covers 30,665 acres in the Middle Magdalena Valley in Colombia as well as a
pipeline with a current capacity in excess of 30,000 barrels of oil per
day.  The Purchase Agreement was effective as of April 1,
2008.





The
purchase price consisted of 2,750,000 shares of the Company’s common stock and a
warrant to purchase 1,125,000 shares of the Company’s common stock exercisable
at $1.25 per share and expiring April 8, 2013.  The $100,000 deposit
was returned to the Company in conjunction with closing of the
transaction.  In addition, we issued 50,000 shares of common stock to
Energy Capital Solutions, LP for their role as financial advisor and $22,500 to
Larry Ray, an individual, as a finder’s fee.


The
Cimarrona property, but not the pipeline, is subject to an Ecopetrol Association
Contract (the “Association Contract”) whereby we pay Ecopetrol S.A.
(“Ecopetrol”) royalties of 20% of the oil produced.  The royalty
amount is paid in oil.  In addition to the royalty, according to the
Association Contract, Ecopetrol may, for no consideration, become a 50% partner,
once an audit of revenues and expenses indicate that the partners in the
Association Contract have a received a 200% reimbursement of all historical
costs to develop and operate the Guaduas field.  We believe that
Ecopetrol could become a 50% partner in 2009 which would effectively reduce the
cash flows generated by the property by 50%.  In addition, in 2022,
the Association Contract with Ecopetrol terminates, at which time we will have
no economic interest remaining in this property.  The property and the
pipeline are both operated by Pacific Rubiales Energy Corp. (“Pacific
Rubiales”), which owns 90.6% of the Guaduas field.  Pipeline revenues
generated from Cimarrona primarily relate to transportation costs charged to
third party oil producers, including Pacific Rubiales.


11





We
anticipate we will need to raise at least $1,000,000 to provide for requirements
for the next twelve months including costs to complete phase 2 and fund the
trust account and letter of credit for phase 3 of Rosablanca.  If we
are unable to raise the entire sum and cannot fulfill our obligations under the
Rosablanca concession, we may lose the concession and our ability to participate
in other Colombian projects.  At present, the revenues generated from
Cimarrona and Oklahoma properties are only sufficient to cover field operating
expenses and a small portion of our overhead.





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





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


12


Results
of Operations





Three
Months ended March 31, 2009 compared to Three Months ended March 31,
2008





2009
                
                
                2008
                
                
                ChangeAmount
                
                
                Percentage
                
                
                Amount
                
                
                Percentage
                
                
                Amount
                
                
                PercentageOil
      Sales
                
                $
                262,813
                
                
                
                35.3
                %
                
                $
                34,565
                
                
                
                100.0
                %
                
                $
                228,248
                
                
                
                660.3
                %Pipeline
      Sales
                
                
                481,257
                
                
                
                64.7
                %
                
                
                —
                
                
                
                0.0
                %
                
                
                481,257
                
                
                
                N/ATotal
      Revenues
                
                
                744,070
                
                
                
                100.0
                %
                
                
                34,565
                
                
                
                100.0
                %
                
                
                709,505
                
                
                
                2052.7
                %Operating
      ExpensesOperating
      Expenses
                
                
                203,348
                
                
                
                27.3
                %
                
                
                18,423
                
                
                
                53.3
                %
                
                
                184,925
                
                
                
                1003.8
                %Asset
      Impairment
                
                
                1,612,894
                
                
                
                216.8
                %
                
                
                —
                
                
                
                0.0
                %
                
                
                1,612,894
                
                
                
                N/AStock
      Based Compensation Expense
                
                
                37,493
                
                
                
                5.0
                %
                
                
                681,930
                
                
                
                1972.9
                %
                
                
                (644,437
                )
                
                
                -94.5
                %Depreciation
      , Depletion and Accretion
                
                
                86,634
                
                
                
                11.6
                %
                
                
                2,733
                
                
                
                7.9
                %
                
                
                83,901
                
                
                
                3069.9
                %General
      & Administrative Expenses
                
                
                546,227
                
                
                
                73.4
                %
                
                
                398,832
                
                
                
                1153.9
                %
                
                
                147,395
                
                
                
                37.0
                %Total
      Operating Costs and Expenses
                
                
                2,486,596
                
                
                
                334.2
                %
                
                
                1,101,918
                
                
                
                3188.0
                %
                
                
                1,384,678
                
                
                
                125.7
                %Operating
      Loss
                
                
                (1,742,526
                )
                
                
                -234.2
                %
                
                
                (1,067,353
                )
                
                
                -3088.0
                %
                
                
                (675,173
                )
                
                
                63.3
                %Other
      Income/(Expenses)
                
                
                15,193
                
                
                
                2.0
                %
                
                
                (222,969
                )
                
                
                -645.1
                %
                
                
                238,162
                
                
                
                -106.8
                %Net
      Loss
                
                
                (1,727,333
                )
                
                
                -232.1
                %
                
                
                (1,290,322
                )
                
                
                -3733.0
                %
                
                
                (437,011
                )
                
                
                33.9
                %Comprehensive
      Loss
                
                $
                (2,034,264
                )
                
                
                -273.4
                %
                
                $
                (1,165,261
                )
                
                
                -3371.2
                %
                
                $
                (869,003
                )
                
                
                74.6
                %





Oil
Sales





Revenues
from oil sales were $262,813, an increase of $228,248, or 660.3%, in 2009
compared to $34,565 in 2008.  Approximately 93% of the oil revenues in
2009 were derived from the Cimarrona property which we acquired on April 1,
2008.  In 2009, we sold 7,647 barrels (“BBLs”) at an average gross
price of $35.43 compared to 489 BBBls at an average gross price of $93.83 in
2008.





Pipeline
Sales





Pipeline
sales from our Cimarrona property accounted for 64.7% and 0% of total revenues
in 2009 and 2008, respectively.  In 2009, we recognized pipeline sales
of $481,257 from the transportation of approximately 2.71 million barrels (of
which our share was approximately 255,000 barrels).  No pipeline sales
were recognized in 2008 as Cimarrona was acquired on April 1, 2008.





Total
Revenues





Total
revenues were $744,070, an increase of $709,505, or 2,052.7%, in 2009 compared
to $34,565 in 2008.  Approximately 98% of our 2009 revenues were
derived from our Cimarrona property which we acquired on April 1,
2008.  Oil and gas sales comprised 35.3% of total revenues in 2009
compared to 100% in 2008, due to the inclusion of the Cimarrona pipeline sales
in 2009.





Operating
Expenses





Our
operating expenses were $203,348 in 2009 with $149,835 attributable to our
Cimarrona property, compared to operating expenses of $18,423 in 2008, which
were entirely attributable to our Osage property.  Operating expenses
as a percentage of total revenues decreased to 27.3% in 2009 from 53.3% in
2008.


13


Asset
Impairment





We
recorded an asset impairment charge of $1,612,894 in 2009 relating to our first
well at Rosablanca as we found no producible hydrocarbons.  No
impairment charge was recorded in 2008.





Stock
Based Compensation Expense





Stock
based compensation expense was $37,493 and $681,930 in 2009 and
2008.  2009 Stock based compensation expense was comprised of $30,000
of the value of shares issued to two consultants and $7,493 for the amortization
of the value of shares issued in November 2007 to two employees which vested on
January 2009.  2008 Stock based compensation expense relates
amortization in 2008 of the value of shares issued in November
2007.  All shares were valued based on the stock price at the date of
issuance.





General
and Administrative Expenses





General
and administrative expenses were $536,227 in 2009, a $137,395 increase, or 34.4%
increase, compared to $398,832 in 2008.  The increase is primarily
attributable to increased expenses in Colombia relating to the Rosablanca and
the Cimarrona property, as well as increased compensation
expense.  General and administrative expenses as a percentage of total
revenues decreased to 72.1% in 2009 from 1,153.9% in 2008, primarily due to the
increase in revenues exceeding the increase in general and administrative
expenses.





Depreciation,
depletion and accretion





Depreciation,
depletion and accretion were $86,634 in 2009 compared to $2,733 in 2007,
primarily due to depreciation and depletion relating to the Cimarrona property
which we acquired in April 1, 2008 and the amortization of asset retirement
obligation relating to the Rosablanca property.





Loss
from Operations





Loss from
operations was $1,742,526 and $1,067,353 in 2009 and 2008,
respectively.





Interest
Expense, Net





Net
interest income was $15,193 in 2009 compared to a net interest expense of
$222,969 in 2008.  Interest expense in 2008 consisted primarily of the
amortization of the beneficial conversion feature of the $1,100,000 Unsecured
Convertible Promissory Note, which converted into shares of common stock in
September 2008.





Net
Loss





Net loss
was $1,727,333 and $1,290,232 in 2009 and 2008, respectively.





Foreign
Currency Translation





Foreign
currency translation loss was $306,931 in 2009 compared to a foreign currently
translation gain of $124,971 in 2008.  The Colombian Peso to Dollar
Exchange Rate averaged 2,418 and 1,910 in 2009 and 2008, respectively and was
2,551 and 1,831 at March 31, 2009 and March 31, 2008, respectively.





Comprehensive
Loss





Comprehensive
loss was $2,034,264 and $1,165,261 in 2009 and 2008, respectively.





Liquidity
and Capital Resources





We had
working capital of $1,124,575 at March 31, 2009, compared to a working capital
deficit of $307,599 at December 31, 2008.  Working capital at March
31, 2009 consisted primarily of $1,032,580 of cash, $579,301 of other current
assets consisting primarily of the net amount due from Pacific Rubiales under
our joint operating agreement and $359,800 in trust accounts in Colombia, offset
by $952,079 of accounts payable.


14


At both
March 31, 2009 and December 31, 2008, we had no debt on our balance
sheet.  Since January 1, 2007, we have raised in excess of $6,000,000
in gross proceeds through various debt and equity financings, as well as
partnership agreements.  We have used the majority of the net proceeds
for costs related to our Rosablanca project in Colombia, as well as for working
capital purposes.





Net cash
provided by operating activities totaled $1,329,043 in 2009 compared to net cash
used by operating activities of $294,602 in 2008.  The major
components of the net cash used by operating activities in 2009 were the
$1,727,333 net loss, offset by $1,612,894 asset impairment charge relating to
our first well in Rosablanca and $1,615,988 increase in accounts payable and
accrued expenses.  The major components of the net cash used in
operating activities in 2008 were the net loss of $1,290,232, offset by $681,930
stock based compensation and $216,790 amortization of beneficial conversion
feature.





Net cash
used by investing activities totaled $977,587 in 2009 compared to net cash used
by investing activities of $87,009 in 2008.  Net cash used in
investing activities in 2009 consisted primarily of $1,530,986 investments in
oil and gas properties and $389,619 payments made out of our Colombian trust
accounts, offset by $881,523 received from LEC for the assignment of 50% of our
Rosablanca concession.  Net cash used in investing activities in 2008,
consisted primarily of $$109,487 investments in oil properties and $100,000
deposit made on an oil property, offset by the return of $140,000 of a deposit
made on an oil property.





Net cash
used by financing activities totaled $453, while net cash provided by financing
activities totaled $13,236 in 2008 and consisted primarily of the $14,100
proceeds from payment on the stock purchase notes receivable.





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





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





We
operate our Osage Property through independent contractors that operate
producing wells for several small oil companies.  Pacific Rubiales,
which owns 90.6% of the Guaduas field, is the operator, while LEC, which owns
25% of the Rosablanca concession, is the operator of Rosablanca.





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





Effect
of Changes in Prices


Changes
in prices during the past few years have been a significant factor in the oil
and gas industry. The price received for the oil produced by us fluctuated
significantly during the last year. Changes in the price that we receive for our
oil and gas is set by market forces beyond our control as well as governmental
intervention.  Average price received by us for a barrel of oil
equivalent (“BOE”) were $35.43 and $93.83 in 2009 and 2008,
respectively.  The volatility and uncertainty in oil and gas prices
have made it more difficult for a company like us to increase our oil and gas
asset base and become a significant participant in the oil and gas
industry.  We currently sell all of our oil and gas production to
Hocol in Colombia and Sunoco in the United States.  However, in the
event these customers discontinued oil and gas purchases, we believe we can
replace these customers with other customers who would purchase the oil at terms
standard in the industry.





We have
no material exposure to interest rate changes.  We are subject to
changes in the price of oil and exchange rates of the Colombian Peso, which are
out of our control.  In our Osage property, we sold oil at prices
ranging from $32.35 to $41.09 per barrel in 2009 compared to a range of $88.25
to $103.5 per barrel in 2008.  In our Cimarrona property in Colombia,
we sold oil at prices ranging from $28.06 to $42.88 per barrel in
2009.  The Colombian Peso to Dollar Exchange Rate averaged
approximately 2,418 and 1,910 in 2009 and 2008, respectively.  The
Colombian Peso to Dollar Exchange Rate was 2,551 and 1,831 at March 31, 2009 and
March 31, 2008, respectively.


15


Oil
and Gas Properties


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





The costs
of drilling and equipping development wells are capitalized, whether the wells
are successful or unsuccessful.  The costs of drilling and equipping
exploratory wells are capitalized until they are determined to be either
successful or unsuccessful.  If the wells are successful, the costs of
the wells remain capitalized.  If, however, the wells are
unsuccessful, the capitalized costs of drilling the wells, net of any salvage
value, are charged to operations in the period the wells are determined to be
unsuccessful.  In 2009, we recorded an impairment charge of $1,612,894
relating to our first well in the Rosablanca concession as we found no
producible hydrocarbons.





The
provision for depreciation and depletion of oil and gas properties is computed
on the unit-of-production method. Under this method, we compute the provision by
multiplying the total unamortized costs of oil and gas properties including
future development, site restoration, and dismantlement abandonment costs, but
excluding costs of unproved properties by an overall rate determined by dividing
the physical units of oil and gas produced during the period by the total
estimated units of proved oil and gas reserves. This calculation is done on a
country-by-country basis.  As of March 31, 2009, our oil production
operations were conducted in Colombia and in the United States of
America.  The cost of unevaluated properties not being amortized, to
the extent there is such a cost, is assessed quarterly to determine whether the
value has been impaired below the capitalized cost. The cost of any impaired
property is transferred to the balance of oil and gas properties being depleted.
The costs associated with unevaluated properties relate to projects which were
undergoing exploration or development activities or in which we intend to
commence such activities in the future. We will begin to amortize these costs
when proved reserves are established or impairment is determined.





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





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





Revenue
Recognition


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


16


Off-Balance
Sheet Arrangements


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





·
            an
      obligation under a guarantee
contract,


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


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


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





Item
      3.
            Quantitative
      and Qualitative Disclosures about Market
Risk





Our
company is a Smaller Reporting Company.  A Smaller Reporting Company
is not required to provide the disclosure information required by this
item.





Item
      4.
            Controls
      and Procedures





The
Company’s management, including the Company’s principal executive officer and
principal financial officer, evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”).  Based upon their evaluation, the principal executive
officer and principal financial offer concluded that, as of the end of the
period covered by this report, the Company’s disclosure controls and procedures
were not effective for the purpose of ensuring that the information required to
be disclosed in the reports that the Company files or submits under the Exchange
Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s
management, including its principal executive and principal financial offers, as
appropriate to allow timely decisions regarding required
disclosure.





Management
conducted an assessment of the effectiveness of the Company’s internal control
over financial reporting as of March 31, 2009, utilizing a top-down, risk based
approach described in SEC Release No. 34-55929 as suitable for smaller public
companies.  Based on this assessment, management determined that the
Company’s internal control over financial reporting as of March 31, 2009 is not
effective.  Based on this assessment, management has determined that,
as of March 31, 2009, there were material weaknesses in our internal control
over financial reporting. The material weaknesses identified during management's
assessment was the lack of independent oversight by an audit committee of
independent members of the Board of Directors. As defined by the Public Company
Accounting Oversight Board Auditing Standard No. 5, a material weakness is a
deficiency or a combination of deficiencies, such that there is a reasonable
possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected.  Given the difficulty of
finding qualified individuals who are willing to serve as independent directors,
there has been no change in the audit committee.





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





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


17


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





Except as
indicated herein, there were no changes in the Company’s internal control over
financial reporting during the three months ended  March 31, 2009 that
have materially affected, or are reasonable likely to materially affect, the
Company’s internal control over financial reporting.





PART
II – OTHER INFORMATION





Item
      1.
            Legal
      Proceedings





We are
not a party to, or the subject of, any material pending legal proceedings other
than ordinary, routine litigation incidental to our business.





Item
      1A.
            Risk
      Factors





Our
company is a Smaller Reporting Company.  A Smaller Reporting Company
is not required to provide the risk factor disclosure required by this
item.





Item
      2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds





(a) The following securities were
issued during the fiscal quarter and not previously reported in a Quarterly
Report on Form 10-Q of Current Report on Form 8-K





In
January 2009, we issued a total of 150,000 shares of our Common Stock to two
consultants.  The shares were valued at $30,000, or $0.20 per share,
representing the closing stock price of the Common Stock at the date of
grant.  The shares were issued pursuant to Section 4(2) of the
Securities Act of 1933 and Regulation D promulgated thereunder and a restrictive
legend was placed thereon.





(b)  None





(c)  None





Item
      3
            Default
      upon Senior Securities





None





Item
      4
            Submission
      of Matters to a Vote of Security
Holders





None





Item
      5
            Other
      Information





(a)  None





(b)  None





Item
      6
            Exhibits





See
Exhibit Index attached hereto.


18


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf of the undersigned thereunto
duly authorized.





OSAGE
      EXPLORATION AND DEVELOPMENT, INC.
                (Registrant)Date: 
      May 13, 2009
              By:
              /s/ Kim BradfordKim
      BradfordPresident
      and Chief Executive Officer




Date: 
      May 13, 2009
              By:
              /s/ Kim BradfordKim
      Bradford
                Principal
      Financial Officer


19


EXHIBIT
INDEX





The
following is a list of Exhibits required by Item 601 of Regulation
S-K.  Except for these exhibits indicated by an asterisk which are
filed herewith, the remaining exhibits below are incorporated by reference to
the exhibit previously filed by us as indicated.





Exhibit No.
              
              Description3.1
              
              Articles
      of Incorporation of Osage Exploration and Development, Inc.
      (1)3.2
              
              Bylaws
      of Osage Exploration and Development, Inc. (1)31.1
      (*)
              
              Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002, signed by Kim Bradford, President and
      Chief Executive Officer (Principal Executive Officer)31.2
      (*)
              
              Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002, signed by Kim Bradford, Chief Financial
      Officer (Principal Financial Officer).32.1
      (*)
              
              Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002, signed by Kim Bradford, President and
      Chief Executive Officer (Principal Executive Officer and Principal
      Financial Officer).





(1)
            Incorporated
      herein by reference to Exhibit 3.1 to the Osage Exploration and
      Development, Inc. Form 10-SB Amendment No. 1 filed August 27,
      2007


(2)
            Incorporated
      herein by reference to Exhibit 3.2 to the Osage Exploration and
      Development, Inc. Form 10-SB Amendment No. 1 filed August 27,
      2007


20