U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                    For the fiscal year ended March 31, 2007
                         Commission file number: 1-12850

                             Avalon Oil & Gas, Inc.
                             ----------------------
              (Exact name of small business issuer in its charter)

                        7808 Creekridge Circle, Suite 105
                          MINNEAPOLIS, MINNESOTA 55439
                          ----------------------------
                    (Address of principal executive offices)

     Incorporated under the laws of                   84-1168832
          the State of Nevada                I.R.S. Identification Number

(Small Business Issuer's telephone number including area code): (952) 746-9655

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

Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $0.001
PAR VALUE PER SHARE (Title of Class)

Indicate by check mark whether the Company (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]

The issuer's revenues for its most recent fiscal year were $ 49,671

The aggregate market value of the Company's common stock held by non-affiliates
of the Company on July 11, 2007 was approximately $15,493,296 computed by
reference to the average of the closing bid and ask prices as quoted on that
date.

Check whether the Company has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Securities Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [X] No [ ]

The Company has one class of common stock outstanding, $0.001 par value per
share (the "Common Stock"). On June 29, 2007, there were 19,366,620 shares
outstanding. As of May 15, 2007, our common shares were subject to a 1 for 20
reverse split. All references to our shares in this Form 10-KSB include the
effect of this reverse split of our common stock. The Company is also authorized
to issue 1,000,000 shares of Preferred Stock, par value $0.10 per share, of
which 100 Class A Convertible Preferred Shares have been issued. See "Item 5
Market for the Company's Common Equity and Related Stockholder Matters."

<PAGE>

                             Avalon Oil & Gas, Inc.

           FORM 10-KSB ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 2007

                                TABLE OF CONTENTS

                                     PART 1

                                                                            Page

ITEM 1.  DESCRIPTION OF BUSINESS.............................................. 3
ITEM 2.  DESCRIPTION OF PROPERTY.............................................. 6
ITEM 3.  LEGAL PROCEEDINGS.................................................... 6
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................. 6

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............. 7
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION............11
ITEM 7.  FINANCIAL STATEMENTS.................................................13
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND
           FINANCIAL DISCLOSURE...............................................13
ITEM 8A. CONTROLS AND PROCEDURES..............................................13

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT..................14
ITEM 10. EXECUTIVE COMPENSATION...............................................14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT AND RELATED STOCKHOLDER MATTERS.........................16
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................17
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................18
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES...............................18


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References in this document to "us," "we," "the Registrant" or "the Company"
refer to Avalon Oil & Gas, Inc., and its predecessor XDOGS, Inc..

This report contains "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are based on
certain assumptions and describe future plans, strategies and expectations of
the Company. They are generally identifiable by use of the words "believe",
"expect", "intend", "anticipate", "estimate", "project" or similar expressions.
These statements are not guarantees of future performance, events or results and
involve potential risks and uncertainties. Accordingly, actual performance,
events or results may differ materially from such forward-looking statements. We
undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.

Factors that could cause actual results to differ materially from current
expectations include, but are not limited to, changes in general economic
conditions, changes in interest rates, legislative and regulatory changes, the
unavailability of equity and debt financing, unanticipated costs associated with
our potential acquisitions, expanding a new line of business, ability to meet
competition, loss of existing key personnel, ability to hire and retain future
personnel, our failure to manage our growth effectively and the other risks
identified in this filing or other reports of the Company filed with the U.S.
Securities and Exchange Commission. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning us and our
business, including additional factors that could materially affect our
financial results, is included in our other filings with the U.S. Securities and
Exchange Commission.








                                        2
<PAGE>


                                     PART I


ITEM 1.  DESCRIPTION OF BUSINESS

Business Development

We were originally incorporated in Colorado in April 1991 under the name Snow
Runner (USA), Inc. We were the general partner of Snow Runner (USA) Ltd., a
Colorado limited partnership to sell proprietary snow skates under the name
"Sled Dogs" which was dissolved in August 1992. In late 1993, we relocated our
operations to Minnesota and in January 1994 changed our name to Snow Runner,
Inc. In November 1994 we changed our name to the Sled Dogs Company. On November
5, 1997, we filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
In September 1998, we emerged from protection of Chapter 11 of the U.S.
Bankruptcy Code. In May, 1999, we changed our state of domicile to Nevada and
our name to XDOGS.COM, Inc. In August 2000, following our bankruptcy, we made a
decision to re-focus to a traditional wholesale to retail distributor, and
obtained the exclusive North American rights to distribute high-end European
outdoor apparel and equipment. We first intended to exploit these rights over
the Internet under the name XDOGS.COM, Inc. However, due to the general economic
conditions and the ensuing general downturn in e-commerce and internet-based
businesses, we decided that to best preserve our core assets we would need to
adopt a more traditional strategy. Thus, we abandoned this approach and to
better reflect our new focus, we changed our name to XDOGS, Inc. On July 22,
2005, the Board of Directors and a majority of the Company's shareholders
approved an amendment to our Articles of Incorporation to change the Company's
name to Avalon Oil & Gas, Inc., and to increase the authorized number of shares
of our common stock from 200,000,000 shares to 1,000,000,000 shares, par value
of $0.001, and engage in the acquisition of producing oil and gas properties.

Acquisition Strategy

Our strategy is to acquire oil and gas producing properties that have proven
reserves and established in-field drilling locations with a combination of cash,
debt, and equity. We believe that acquisition of such properties minimizes our
risk, allows us to generate immediate cash flow, and provides in-field drilling
locations to expand production within the proven oil and gas fields. We will
aggressively develop these low cost/low risk properties in order to enhance
shareholder value. In addition, Avalon's technology group acquires oil
production enhancing technologies. Through our strategic partnership with UTEK
Corporation, (UTK: ASE) a transfer technology company, we are building an asset
portfolio of innovative technologies in the oil and gas industry to maximize
enhancement opportunities at its various oil and gas properties.

In furtherance of the foregoing strategy, we have engaged in the following
transactions during the last three years:

                                        3
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On May 23, 2005, we signed a Letter of Intent to acquire an eighty percent (80%)
Net Revenue Interest in certain oil and gas leasehold interests located
primarily in the Montgomery County, Kansas and certain oil field equipment (the
"Assets") from Mid-Continent Investments, Inc. ("MCI"). On July 22, 2005, we
closed the transaction and delivered 85,000,000 shares of the Company's common
stock to MCI in anticipation of receipt of an assignment the Company delivered
85,000,000 shares of its common stock to MCI, in anticipation of receipt of an
assignment transferring ownership of the Assets. As of January 25, 2006, the
Company had not received an assignment of the Assets, and sent a letter to our
transfer agent cancelling the 85,000,000 shares that were issued and delivered
to MCI, for failure of consideration. On December 21, 2006, the District Court
for the Fourth Judicial District, State of Minnesota, issued a judgment
cancelling the 85,000,000 shares issued to MCI. On May 4, 2007, the judgment
issued by the District Court for the Fourth Judicial District, State of
Minnesota was filed with the County Clerk in Tulsa County, Oklahoma.

On August 29, 2005 we acquired a one hundred percent (100%) working interest,
seventy-eight percent (78%) net revenue interest, in 2,400 acres located in
Canadian County, Oklahoma ("The Oklahoma Properties"), from Sooner Trend Leasing
LLC, payable by delivering 48,000,000 authorized, but previously un-issued,
shares of the Company's common stock. On February 13, 2005, the Company returned
The Oklahoma Properties to Sooner Trend Leasing LLC, and sent a letter to our
transfer agent canceling the 48,000,000 shares of stock issued to Sooner Trend
Leasing LLC. On October 20, 2006, the District Court for the Fourth Judicial
District, State of Minnesota, issued a judgment cancelling the 48,000,000 shares
issued to Sooner Trend Leasing, LLC. On May 4, 2007, the judgment issued by the
District Court for the Fourth Judicial District, State of Minnesota was filed
with the County Clerk in Tulsa County, Oklahoma.

On May 17, 2006, we signed a strategic alliance agreement with UTEK Corporation,
a technology transfer company to develop a portfolio of new technologies for the
oil and gas industry.

On June 15, 2006, we acquired a fifty percent (50%) working interest in the J.C.
Kelly wellbore, a 121.9 acre lease in Wood County, Texas, in addition to the
E.A. Chance #1 and #2 wellbores, a 40 acre lease in Camp County, Texas and all
of the surface equipment for the properties, from KROG Partners LLC. The J. C.
Kelly well produces from the Paluzy Interval and the Chance # 1 and #2 wells
produce from the Sub-Clarksville zone, within an active waterflood area.

On July 17, 2006, we acquired Ultrasonic Mitigation Technologies, Inc., ("UMTI")
a wholly owned subsidiary of UTEK Corporation (AMEX: UTK). UMTI holds the
exclusive worldwide license for the mitigation of paraffin wax deposition from
crude oil using ultrasonic waves. Varying ultrasonic transducers are positioned
in production tubing walls as a means to inhibit the wax from attaching to the
pipes. The use of this technology helps prevent precipitates from forming on
pipes, and also breaks wax bonds thereby increasing flow rates and production
efficiency. This technology was developed at the University of Wyoming by Dr.
Brian Towler.

On August 11, 2006, we acquired a fifty percent (50%) working interest in the
Dixon Heirs #1, Deltic Farms & Timber #1 and the Gunn #1 wells and associated
units and leases, in Miller County, Arkansas. These are mature wells with stable
production, and were originally drilled in the early 1980's.

On November 9, 2006, we acquired Intelli-Well Technologies, Inc., ("IWT") a
wholly owned subsidiary of UTEK Corporation (AMEX: UTK). IWT holds a license for
borehole casing technology developed by researchers at Lawrence Livermore
National Laboratory. The technology uses a densely spaced network of sensors
which are installed along and outside of the oil well casings before they are
grouted into place. The sensors monitor critical parameters in the subsurface
oil reservoir. Data from multiple sensors provides real-time information
regarding the status of the reservoir and the primary and secondary oil recovery
process. Sensors located deep within the reservoir are much more sensitive than
sensors located on the surface. The type of sensors that can be installed
include seismic sensors, electrical resistance tomography electrodes,
electromagnetic induction tomography coils and thermocouples.

                                        4
<PAGE>

On November 15, 2006, we acquired a ten percent (10%) working interest in 13
wellbores, which include six (6) producing oil wells, three (3) salt water
disposal wells, three (3) shut-in or marginally producing wells, and one (1)
well that has been plugged and abandoned since the effective date, located in
Upshur County, Texas. These wells produce from the Woodbine interval. Avalon is
currently working on optimization/workover opportunities with the goal of
enhancing operations and production from the shut-in wellbores.

On January 3, 2007, we executed a letter of intent, allowing us a right to
purchase a twenty-five percent (25%) working interest in a six well production
property located in Grant Parish, Louisiana. The letter of intent provided the
opportunity for Avalon and its partners to conduct a sixty day test of the
productive capability of the property, as well as customary due diligence, prior
to the acquisition. The property consists of five shut-in wells with production
potential in the prolific Wilcox production interval and one salt water disposal
well. These wells were drilled in the early 1980's by an independent producer.
Avalon believes that there is significant oil production potential in many of
these wells, and that a minimal workover program is required to return the
property to production. The salt water disposal well is capable of disposal of
significant volumes of produced water, resulting in highly economic production
of over 10% oil cut in this property. We exercised our option to acquire a
twenty-five percent (25%) working interest in the property on April 20, 2007.

On March 29, 2007, we acquired Leak Location Technologies, Inc., ("LLT") a
wholly owned subsidiary of UTEK Corporation (AMEX: UTK). LLT owns an exclusive
license to a system for determining the presence and location of leaks in
underground pipes. The technology was developed by researchers at Rensselaer
Polytechnic Institute. The system uses a series of acoustic sensors to monitor
changes in pipeline acoustic emissions, and has been proven in field application
with a large multinational petroleum company. The lead scientist in charge of
that project is currently under contract to Avalon to manage the technology
design refresh and prototype development for commercialization.

On May 22, 2007, we acquired a fifteen percent (15%) working interest in the
Janssen #1A prospect in Karnes County, Texas. The Janssen Prospect will be
re-completed in the existing vertical wellbore by a sidetrack drilling procedure
at a depth of approximately 10,500 feet, and test the Wilcox sand. Total
potential reserves are estimated to be 75,000 to 100,000 barrels of condensate
and 3 to 4 BCF (billion cubic feet) of gas.

We plan to raise additional capital during the coming fiscal year, but currently
have not identified additional funding sources. Our ability to continue
operations is highly dependent upon our ability to obtain additional financing,
or generate revenues from our acquired oil and gas leasehold interests, none of
which can be guaranteed.

Ultimately, our success is dependent upon our ability to generate revenues from
our acquired oil and gas leasehold interests, and to achieve profitability,
which is dependent upon a number of factors, including general economic
conditions and the sustained profitability resulting from the operation of the
acquired oil and gas leaseholds. There is no assurance that even with adequate
financing or combined operations, we will generate revenues and be profitable.

PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS

On May 17, 2006, The Company signed a strategic alliance agreement with UTEK
Corporation, a technology transfer company to develop a portfolio of new
technologies for the oil and gas industry.

On July 17, 2006, we acquired Ultrasonic Mitigation Technologies, Inc. ("UMTI").
UMTI holds the exclusive worldwide license for the mitigation of paraffin wax
deposition from crude oil using ultrasonic waves. This technology was developed
at the University of Wyoming by Dr. Brian Towler.

On November 9, 2006, we acquired Intelli-Well Technologies, Inc., ("IWT"). IWT
holds a license for borehole casing technology developed by researchers at
Lawrence Livermore National Laboratory.

                                       5
<PAGE>

On March 29, 2007, we acquired Leak Location Technologies, Inc., ("LLT"). LLT
owns an exclusive license to a system for determining the presence and location
of leaks in underground pipes.

On May 17, 2007, The Company renewed its strategic alliance agreement with UTEK
Corporation, a technology transfer company to develop a portfolio of new
technologies for the oil and gas industry.

ENVIRONMENTAL MATTERS

During the last three fiscal years, compliance with environmental laws and
regulations did not have a specific impact on the Company's operations. The
Company does not anticipate that it will incur any material capital expenditures
for environmental control facilities for environmental facilities during the
next fiscal year.

EMPLOYEES

As of March 31, 2007 we had two full time employees consisting of our President
and Vice President. The Board has retained William Anderson, Glen Harrod, Mark
Oliver, William Graham, Thomas Bugbee, Gary Browning, Menno Wiebe and Bruce
Merrifield, as Advisors. We do not have any part time employees at this time.

RESEARCH AND DEVELOPMENT

During the last three fiscal years, we did not incur research and development
expenses.

ITEM 2.  PROPERTIES

Our corporate office is located at 7808 Creekridge Circle, Suite 105,
Minneapolis, MN 55439. This office space is leased from an unaffiliated third
party on three year lease, which ends on December 1, 2009, for a monthly rental
of $3,100.00.

ITEM 3.  LEGAL PROCEEDINGS

Avalon Oil & Gas is not a party to any pending legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On December 20, 2005, the Board of Directors and a majority of our shareholders
elected Kent Rodriguez, Douglas Barton and Thad Kaplan to serve on our Board of
Directors until the next shareholder meeting.

The Board of Directors has approved and implemented as of May 15, 2007, a
reverse stock split and established a ratio of 1-for 20. This move followed a
vote by written consent of the stockholders dated April 23, 2007 and an action
by written consent of the Board of Directors on April 25, 2007. Our common stock
began trading on a reverse-split basis, on May 15, 2007. As a result of the
reverse stock split, every 20 shares of our common stock will be combined into
one share of our common stock. The reverse stock split affects all shares of
common stock, stock options and warrants outstanding as of immediately prior to
the effective time of the reverse stock split. Fractional shares equal or
greater to one-half share are rounded up, and fractional shares less then
one-half are rounded down. In addition, we our trading symbol changed to AOGN.BB
from AOGS.BB.

                                       6
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  Principal Market or Markets

Effective with the close of business on June 19, 1997, our Common Stock was
delisted from the NASDAQ Small Cap Market. In June of 1997, our Common Stock
began trading on the NASD Over-the-Counter Bulletin Board ("OTCBB"). Market
makers and other dealers provided bid and ask quotations of our Common Stock. We
trade under the symbol "AOGN".

The table below represents the range of high and low bid quotations of our
Common Stock as reported during the reporting period herein. The following bid
price market quotations represent prices between dealers and do not include
retail markup, markdown, or commissions; hence, they may not represent actual
transactions. For the purposes of the Fiscal Year Ended March 31, 2007, the
prices have been modified to reflect the one-for-twenty (1:20) reverse stock
split effectuated May 15, 2007


                                 High            Low
                                 ----            ---
Fiscal Year Ended
March 31, 2007

First Quarter                   $ 3.00          $ 0.20
Second Quarter                    4.00            2.60
Third Quarter                     2.60            1.20
Fourth Quarter                    1.20             .40

Fiscal Year Ended
March 31, 2006

First Quarter                   $ 0.06          $ 0.01
Second Quarter                    0.05            0.01
Third Quarter                     0.06            0.02
Fourth Quarter                    0.05            0.02

(b)  Approximate Number of Holders of Common Stock

As of July 10, 2007, 19,366,620 shares of our Common Stock were outstanding and
the number of holders of record of our Common Stock at that date was
approximately 838. However, we estimate that there are a significantly greater
number of shareholders because a substantial number of our shares are held in
nominee names by brokerage firms.

(c)  Dividends

No dividends on the Common Stock were paid by us during the fiscal year ended
2007, or the fiscal year ended 2006, nor do we anticipate paying dividends on
Common Stock in the foreseeable future. Holders of Common Stock are entitled to
receive such dividends as may be declared by our Board of Directors.

(c)  Securities Authorized for Issuance Under Equity Compensation Plans.

We have not established an Equity Compensation Plan and have not authorized the
issuance of any securities under such plan.

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(d)  Preferred Stock.

Our Articles of Incorporation authorize us to issue up to 1,000,000 shares of
$0.10 par value preferred stock, with such classes, series and preferences as
our Board of Directors may determine from time to time. In June 2002, our Board
of Directors authorized the issuance of 100 shares of Series A Convertible
Preferred Stock (the "Series A Preferred Stock"). Our Board further agreed to
issue all of the Series A Preferred Stock to our Chairman and President, Kent
Rodriguez, in satisfaction of $500,000 in loans made by Mr. Rodriguez.

The Series A Preferred Stock accrues dividends at the rate of 8% per annum on
the original purchase price for the shares. If declared by the Board of
Directors, these dividends are payable quarterly, beginning in September 2002.
We are prohibited from paying any dividends on our Common Stock until all
accrued dividends are paid on our Series A Preferred Stock.

If we liquidate or dissolve, and after payment of our debts, the holders of the
Series A Preferred Stock are entitled to a preference payment before we make any
distributions to our Common Stockholders. The preference amount is equal to the
original purchase price for the Series A Preferred shares plus accrued, but
unpaid dividends.

The Series A Preferred Stock is convertible at anytime into 40% of the then
outstanding shares of Common Stock and securities convertible into Common Stock
on a fully diluted basis. However, conversion is limited to the number of shares
of Common Stock available for issuance under our articles of incorporation.

Regardless of whether or not the Series A Preferred Stock has been converted to
our Common Stock, the Series A Preferred Stockholder is entitled to vote, at all
times, on an as-if converted basis. The Preferred Stockholder, Mr. Rodriguez,
has the right to vote the Series A Preferred Stock together with his other
holdings in the Company, owns in excess of forty (40%) percent of the
outstanding voting securities of the Company.

Other than the Series A Preferred Stock, no preferred stock has been issued. See
Item *11, Security Ownership of Certain Beneficial Owners and Management".

(e)  Sales of Unregistered Shares

Fiscal 2007 (number of shares and price adjusted pursuant to one-for-twenty
(1:20) reverse stock split effectuated on May 15, 2007).

During the fiscal year ended March 31, 2007, we issued a total of 5,146,333
shares of our Common Stock for total consideration of $1,773,099 for cash,
repayment of debt stock subscription receivable, and services as follows:

On April 18, 2006, we authorized the issuance of 135,000 shares of common stock
for consulting services.

On May 1, 2006, we granted to our directors warrants to purchase 100,000 shares
of common stock at a price of $0.50 per share for director services. These
warrants expire on May 1, 2011.

In May 2006, the Company issued 109,000 shares of common stock and warrants to
purchase 50,000 shares of common stock at a price of $2.00 per share. These
warrants expire on May 2014. The purchase price for the shares and the warrants
was $100,000.

On May 15, 2006, we entered into a strategic alliance agreement with UTEK
Corporation for consulting services. We issued 34,682 shares of common stock in
connection with this agreement. The value of the stock issued, $0.70 per share,
was recorded at fair value based on other cash sales of restricted stock. Of the
$24,277 in services, $3,034 was included in "stock-based compensation" with the
balance not shown as issued until services are rendered.

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<PAGE>

On May 18, 2006, the Company issued 375,000 shares of stock for consulting
services valued at $262,500.

On May 24, 2006, we issued 500,000 shares of common stock to a corporation for
consulting services and assumption of $34,500 of accrued payroll taxes.

On June 1, 2006, we executed a six-month consulting agreement with a consultant
and issued 15,000 shares of common stock as compensation.

On June 8, 2006, we granted warrants to purchase 12,500 shares of common stock
at a price of $0.50 per share for website design and maintenance services. These
warrants expire on June 8, 2011.

On June 1, 2006, the Company executed a six-month consulting agreement with a
Consultant and issued 15,000 shares of common stock as compensation. The stock
was valued at $10,500 of which $8,750 was recognized as compensation expense
during the year ending March 31, 2007.

On July 7, 2006, we issued UTEK Corporation 812,500 shares of common stock for
the purchase of Ultrasonic Mitigation Technologies, Inc., (UMTI).

On August 18, 2006, we issued a consultant 25,000 shares of common stock as
additional consideration for the acquisition of a fifty percent (50%) working
interest in a leasehold in Miller County, Arkansas.

On August 29, 2006, we authorized the issuance of 50,000 shares of common stock
for consulting services.

On September 12, 2006, we authorized the issuance of 60,000 shares of common
stock for investor relation services.

On November 9, 2006, we issued UTEK Corporation 1,000,000 shares for the
purchase of Intelli-Well Technologies, Inc., ("IWT").

On January 11, 2007 we authorized the issuance of 750,000 shares of common stock
for consulting services.

On January 11, 2007, we authorized the issuance of 150,000 shares of common
stock for consulting services.

On March 29, 2007, we issued UTEK Corporation 1,835,526 shares of common stock
for the purchase of Leak Location Technologies, Inc., ("LLT").

During the twelve months ended March 31, 2007, we issued 206,262 shares of
common stock to 8 accredited investors, at an average of approximately $1.00 per
share, pursuant to the exemptions afforded by Section 4(2) of the Securities Act
of 1933, as amended, for which we received total cash proceeds of $196,404.

The Company entered into a Regulation S Stock Purchase agreement on May 15,
2006.

During the year ended March 31, 2007, 1,730,644 shares of common stock with cash
proceeds of $1,199,123 were sold pursuant to the Regulation S Stock Purchase
agreement.

Fiscal 2006


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We issued a total of 21,100,000 Shares of our Common Stock to five (5)
accredited investors at approximately $0.011 per share, pursuant to the
exemptions afforded by Section 4(2) of the Securities Act of 1933, as amended,
for which we received total cash proceeds of $229,000.

We issued to each of our then Directors an aggregate of 900,000 shares of our
Common Stock at approximately $0.01 per share totaling $9,000 for services
totaling $13,500 rendered for during the fiscal year.

We issued to 13, 726,667 shares of our Common Stock at approximately $0.016 per
share totaling $203,287 for consulting services rendered.

We issued 19,000,000 shares of our Common Stock at approximately $0.016 per
shares totaling $302,956 in exchange for debt and accrued interest.

We issued 700,000 shares of our Common Stock at approximately $0.01 per share
totaling $12,600 as additional consideration for a $50,000.00 promissory note.

We issued 15,000,000 shares of our Common Stock at approximately $0.018 per
share totaling $90,108 for satisfaction of accounts payable liabilities.

We issued 32,000,000 shares in exchange for a stock subscription receivable in
the amount of $832,000.

Fiscal 2005 -

During the fiscal year ended March 31, 2005, we issued a total of 36,900,000
shares of our Common Stock for total compensation of $54,000 for cash, repayment
of debt and services as follows:

We issued 7,000,000 shares of our Common Stock to 3 accredited investors, at an
average of approximately $0.008 per share, pursuant to the exemptions afforded
by Section 4(2) of the Securities Act of 1933, as amended, for which we received
total cash proceeds of $54,000.

We issued to our former Directors 3,000,000 shares of our Common Stock at
approximately $0.01 per share totaling $30,000 for services rendered during the
fiscal year ending March 31, 2005.

We issued to consultants 8,700,000 shares of our Common Stock at approximately
$0.01 per share totaling $87,000 for consulting services rendered during the
fiscal year ending March 31, 2005.

We issued to Kent Rodriguez, our President, 4,400,000 shares of our Common Stock
for salaries earned from April 1, 2003 through January 31, 2005, at
approximately $0.025 per share, totaling $110,000.

We issued to Kent Rodriguez, our President, 2,800,000 shares of our Common Stock
as payment for $73,333 in accumulated dividend payments regarding our Series A
Preferred Stock, at approximately $.025 per share.

We issued to Henry Furst, 500,000 shares of our Common Stock as partial payment
for an outstanding judgment. The 500,000 shares issued in the settlement were
valued at the quoted market price of the stock on the settlement date, or $0.01
per share. The settlement resulted in the Company recognizing a gain on the
payment of the judgment totaling $64,926.

We issued 10,500,000 shares of its common stock to settle outstanding promissory
notes and related accrued interest totaling $75,000 and $16,142, respectively.

                                       10
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

RESULTS OF OPERATIONS AND PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with out
financial statements and notes related thereto. The discussion of results,
causes and trends should not be construed to infer conclusions that such
results, causes or trends necessarily will continue in the future.

Operations

As of March 31, 2007, we were acquiring oil and gas producing properties with a
combination of cash, debt, and equity. In addition, we have, through our
strategic alliance with UTEK, Inc., acquired three innovative oil and gas
technologies.

As of March 31, 2007, we had current and total assets of $2,993,201, and
outstanding liabilities of $231,603. We had oil and gas sales of $49,671, for
the year ended March 31, 2007. During this period, lease operating expense was
54,318, our selling, general, and administrative expenses $743,137, our interest
expense was $123,333 and our stock-based consulting and compensation expense
relating to stock issued for services was $2,054,541.

Liquidity and Capital Resources

Our cash and cash equivalenets were $900,537 at the year ended March 31, 2007,
compared to $43,818 at year ended March 31, 2006. We met our liquidity needs
through the issuance of our common shares for cash or for services rendered. For
fiscal 2007, we issued 1,936,906 shares of our Common Stock in private
placements raising $1,514,527 in cash, 3,479,513 shares for consulting services
rendered, 20,000 shares for assumption of accounts payable liabilities, and
4,073,026 shares for property acquisitions.

For the twelve months ended March 31, 2007 we used $138,302 in investing
activities.

During the twelve months ended March 31, 2007, we purchased $37,282 in
equipment.

Our financing activities for the period ended March 31, 2007 provided cash of
$1,539,867 as compared to $252,323 for the period ended March 31, 2006. We plan
to raise additional capital during the coming fiscal year.

Our ability to continue operations is highly dependent upon our ability to
obtain immediate additional financing, or generate revenues from our acquired
oil and gas leasehold interests, and to achieve profitability, which is
dependent upon a number of factors, including general economic conditions and
the sustained profitability resulting from the operation of the acquired oil and
gas leaseholds.

There is no assurance that, even with adequate financing or combined operations,
we will generate sufficient revenues to be profitable.

Our success is largely dependent upon our ability to generate revenues from our
acquired oil and gas leasehold interests and from the income from the oil and
gas enhancement technology we have acquired from UTEK, Inc.

Acquisition Strategy

On May 17, 2007, we renewed our strategic alliance agreement with UTEK
Corporation, a technology transfer company to develop a portfolio of new
technologies for the oil and gas industry.

                                       11
<PAGE>

On May 22, 2007, we acquired a fifteen percent (15%) working interest in the
Janssen #1A prospect in Karnes County, Texas. The Janssen Prospect will be
re-completed in the existing vertical wellbore by a sidetrack drilling procedure
at a depth of approximately 10,500 feet, and test the Wilcox sand. Total
potential reserves are estimated to be 75,000 to 100,000 barrels of condensate
and 3 to 4 BCF (billion cubic feet) of gas.

We have been funding our obligations through the issuance of our Common Stock
for services rendered or for cash in private placements. We may seek additional
funds in the private and public equity or debt markets in order to execute our
plan of operation and business strategy. There can be no assurance that we will
be able to attract capital or obtain such financing when needed or acceptable
terms, in which event our ability to execute out business strategy will be
impaired.

Risk Factors

Any investment in our securities is highly speculative. You should not purchase
our shares if you cannot afford to lose your entire investment. You should
consider the following risks before acquiring any of our shares.

We have never been, and may never be, profitable.

During the past several years, we have attempted, without success, to generate
revenues and profits. For the year ended March 31, 2007, we incurred a net loss
of $3,438,151. On March 31, 2007, we had net working capital of $794,681. We
cannot assure that we will ever be profitable.

We need additional capital.

We need additional financing to continue operations. The amount required depends
upon our business operations, and the capital needs of our acquisition of the
certain oil and gas leasehold interests. We may be unable to secure this
additional required financing on a timely basis, under terms acceptable to us,
or at all. To obtain additional financing, we will likely sell additional equity
securities, which will further dilute shareholders' ownership in us. Ultimately,
if we do not raise the required capital, we may need to cease operations.

We are dependent on our key personnel.

We are highly dependent upon the services of Kent A. Rodriguez, our President
and Chief Executive Officer. However, if he terminated his services with us, our
business would suffer.

There is only a limited trading market for our securities.

Our Common Stock traded on the OTC Bulletin Board. The prices quoted may not
reflect the price at which you can resell your shares. Because of the low price
of our stock, we are subject to particular rules of the U.S. Securities and
Exchange Commission that make it difficult for stock brokers to solicit
customers to purchase our stock. This reduces the number of potential buyers of
our stock and may reduce the value of your shares. We cannot assure that a
trading market for our stock will continue or that you will ever be able to
resell your shares at a profit, or at all.

No dividends are anticipated to be paid.

We presently pay no dividends. We have never paid any cash dividends and do not
expect to do so in the future. If you need current income, you should not
purchase our stock.

Our management controls us.

Our current officers and directors own approximately 45% of our outstanding
stock and are able to affect the election of the members of our Board of
Directors and make corporate decisions. Mr. Rodriguez, by his ownership of Class
A Preferred Stock, has the right to vote 40% of our voting securities.
Accordingly, even if we issue additional shares to third parties, Mr. Rodriguez
will continue to control at least 40% of our voting securities. This voting
concentration may also have the effect of delaying or preventing a change in our
management or control or otherwise discourage potential acquirers from
attempting to gain control of us. If potential acquirers are deterred, you may
lose an opportunity to profit from a possible acquisition. See "Security
Ownership of Certain Beneficial Owners and Management" and "Market for the
Company's Common Stock and Related Stockholder Matters".

                                       12
<PAGE>

A significant number of shares will become eligible for public sale, potentially
depressing our stock price.

During the last fiscal year, we issued an aggregate of approximately 36,900,000
shares of our Common Stock in private transactions not registered with the U.S.
Securities and Exchange Commission. Under the SEC's Rule 144, these shares
generally first become eligible for public resale after one year. Shareholders
generally may resell only a limited number of their privately acquired shares
after one year. Generally, after two years, stockholders who are not affiliated
with us may resell any number of their privately acquired shares pursuant to
Rule 144(k). The resale of the shares we have privately issued, or the potential
for their future public resale, may depress our stock price. Our governing
documents and Nevada law may discourage the potential acquisitions of our
business.

Our Board of Directors may issue additional shares of capital stock and
establish their rights, preferences and classes, in most cases without
stockholder approval. In addition, we may become subject to anti-takeover
provisions found in Section 89.378-78.379 of the Nevada Business Corporation Act
which may deter changes in control of our management which have not been
approved by our Board of Directors.

ITEM 7.  FINANCIAL STATEMENTS.

Our audited Financial Statements are attached as a Schedule.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

On November 15, 2005, we appointed Murrell, Hall McIntosh and Co., PLLP as out
independent accountant and we dismissed Cordovano and Honeck, LLP.

Information required by Part II (Item 8) of this Form 10-KSB is incorporated by
reference from Avalon Oil & Gas' Form 8-K Dated November 15, 2005.

ITEM 8A. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, Kent Rodriguez, our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the design and operation of our disclosure controls and procedures pursuant to
Rule 13a-15b under the Securities Exchange Act of 1934. Based on his review of
our disclosure controls and procedures, Mr. Rodriguez has concluded that our
disclosure controls and procedures are effective in timely alerting him to
material information relating to us that is required to be included in our
periodic SEC filings. Further, there were no significant changes in the internal
controls or in other factors that could significantly affect these controls
after the evaluation date and the date of this report.

                                       13
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Our Directors and Executive Officers are shown below:

Name                     Age                        Position
----                     ---                        --------
Kent Rodriguez           46         Chief Executive Officer, President,
                                    Chief Financial Officer, Secretary, Director

Jill Allison             38         Vice President

Douglas Barton           65         Director

Thad Kaplan              39         Director


Each Director is serving a term of office, which will continue until the next
annual meeting of shareholders and until the election and qualification of his
respective successor.

KENT A. RODRIGUEZ

Mr. Rodriguez joined the Company as Chief Executive Officer, President, and
Chief Executive Officer in January, 1997. Since 1995, he has been the Managing
Partner of Weyer Capital Partners, a Minneapolis-based venture capital
corporation. From 1985 to 1995, he was employed by the First National Bank of
Elmore, Elmore, Minnesota, in various capacities. He has a B.A. degree from
Carleton College.

JILL ALLISON

Ms. Allison brings over 20 years of diversified management experience in
business development and technology commercialization. Prior to joining Avalon,
she managed a technology strategy consulting practice with focus in the market
convergence of physical and IT security industries. Her venture development
background includes market leadership positions with Monsanto, Iridian
Technologies, Pinkertons and Cylink Corporation. She holds a B.A. in Economics
from Gustavus Adolphus College; a Master's in International Management (MIM) in
Marketing from the American Graduate School of International Management
(Thunderbird), Glendale, AZ; and an MBA in Strategic and Entrepreneurial
Management from the Wharton School of the University of Pennsylvania, where she
focused on strategic alliances and management of technology.

DOUGLAS BARTON

Mr. Barton has served as a Director of the Company since November, 1998. From
1987 to the present, he has been the President and sole owner of Venture
Communications, Inc., a private promotion, development, and marketing consulting
firm. He has a B.S. degree in Economics/History from the University of
Minnesota.

THAD KAPLAN

Mr. Kaplan has served as a Director of the Company since December, 2005 Mr.
Kaplan is currently Executive Vice President of Mergers, Acquisitions and Land
Management for Universal Property Development and Acquisition Corporation
(OTCBB: UPDA), he has been with the company since 2005. Prior to that Mr. Kaplan
consulted for many energy company on the retail level. From 1997 to 2002, Mr.
Kaplan was the owner of BS Holdings, Inc., a food and beverage industry holding
company. Prior to owning BS Holdings, Inc., Mr. Kaplan was the purchaser and
manager for an independent supermarket chain in Middletown, New York. Mr.
Kaplan's responsibilities included purchasing decisions, management of
employees, marketing and profit and loss responsibility. Mr. Kaplan holds an
Associates degree from Sullivan County Community College, New York with studies
in Food Service, Restaurant Management and the Culinary Arts.

                                       14
<PAGE>

The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders and until their successors have been
elected and qualified. There are no family relationships among the Company's
officers and directors, nor are there any arrangements or understanding between
any of the directors or officers of the Company or any other person pursuant to
which any officer or director was or is to be selected as an officer or
director. The Directors took action sixteen (16) times by written consent during
the fiscal year ended March 31, 2007.

In 1999, the Board of Directors established a Compensation Committee. It is
currently comprised of Messrs. Barton and Kaplan. The Compensation Committee
held one meeting in fiscal 2007.

In May 2000, the Board of Directors established an Audit Committee. It is
currently comprised of Messrs. Barton and Mr. Kaplan. The Audit Committee held
one meeting in fiscal 2007.

We have adopted a Code of Ethics which is designed to ensure that our directors
and officers meet the highest standards of ethical conduct. The Code of Ethics
requires that our directors and officers comply with all laws and other legal
requirements, conduct business in an honest and ethical manner and otherwise act
with integrity and in our best interest.

Involvement in Legal Proceedings

We are not aware that any of our officers and directors were, or have been
involved in any material legal proceedings which would have any effect upon the
Company.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act") requires our
officers and directors and persons owning more than ten percent of our Common
Stock to file initial reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Additionally, Item 405 of Regulation
S-B under the 34 Act requires us to identify in our Form 10-KSB and proxy
statement those individuals for whom one of the above referenced reports was not
filed on a timely basis during the most recent fiscal year or prior fiscal
years. Given these requirements, we have the following report to make under this
section. None of our officers or directors, and all persons owning more than ten
percent of its shares have filed the subject reports, if required, on a timely
basis during the past fiscal year.

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF BOARD OF DIRECTORS

Members of the Board of Directors receive no cash compensation for their service
on the Board of Directors, the Compensation Committee or the Audit Committee but
are reimbursed for any out-of-pocket expenses incurred by them in connection
with our business. The Company has issued both Mr. Barton and Mr. Kaplan
warrant(s) to purchase 100,000 shares of The Company's Common Stock at $0.01 per
share and warrants to purchase 50,000 shares of the Company's Common Stock at
$.50 per share. These warrants have been exercised pursuant to a cashless
exercise, and both Mr. Barton and Mr. Kaplan were issued 107,547 shares on May
17, 2007.

EXECUTIVE COMPENSATION

The following table sets forth the compensation received for the three fiscal
years ended March 31, 2007, by the Company's Chief Executive Officer (the "Named
Executive Officer"). No executive officer of the Company received in excess of
$100,000 during that period. Compensation does not include minor
business-related and other expenses paid by us for our officers. Such amounts in
the aggregate do not exceed $10,000.

                                       15
<PAGE>

     Name and
Principal Position                           Year           Salary

Kent A. Rodriguez,
Chief Executive Officer and President        2007         $ 84,000 (3)
                                             2006         $ 84,000 (3)
                                             2005         $ 60,000 (1) (2)

(1) Effective on November 23, 1999, Mr. Rodriguez became subject to an
employment agreement pursuant to which he accrues $5,000 per month in wages.

(2) During the fiscal year ended March 31, 2005, we issued to Mr. Kent
Rodriguez, the Company's president, 4,400,000 shares of our Common Stock for
salaries earned from April 1, 2003 through January 31, 2005, at approximately
$0.025 per share, totaling $110,000. The quoted market price on the date of
issuance of these shares was $0.01.

(3) Effective on May 31, 2005, Mr. Rodriguez became subject to an employment
agreement pursuant to which he is paid $7,000 per month in wages.

Mr. Rodriguez did not receive any other annual compensation, or other
compensation during the Company's fiscal years ended March 31, 2007, 2006 or
2005.

OPTION GRANTS IN LAST FISCAL YEAR

The Company did not grant any options to purchase any equity securities of the
Company during fiscal ending March 31, 2006.

EMPLOYMENT AGREEMENTS

We have an employment agreement with Kent Rodriguez, our Chief Executive Officer
and President dated May 31, 2005. The employment agreement extends through May
31, 2008, unless terminated earlier. If we terminate Mr. Rodriguez without
cause, we are required to pay him. Under the employment agreement, Mr. Rodriguez
earns a base salary of $84,000. He is also entitled to health benefits.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding ownership of our
Common Stock as of June 29, 2007 by (i) each person known by us to be the
beneficial owner of more than five percent of our outstanding Common Stock; (ii)
each director of our Company; and (iii) all executive officers and directors of
our Company as a group. As of June 29, 2007, we had a total of 19,366,620 common
shares issued and outstanding.




                                       16
<PAGE>

Names and Addresses                         Beneficial           Percent
of Beneficial Owner                         Ownership            of Class

Kent Rodriguez                             13,778,590 (1)         42.68%
7808 Creekridge Circle, Suite 105
Minneapolis, MN 55439

Douglas Barton                                107,205              0.56%
7808 Creekridge Circle, Suite 105
Minneapolis, MN 55439

Thad Kaplan                                   107,205              0.56%
7808 Creekridge Circle, Suite 105
Minneapolis, MN 55439

Trinity Bui                                 1,309,000 (2)          6.76%
300 East 55th Street, Apt 14D
New York NY  10022

UTEK Corporation                            3,682,708             19.00%
 202 South Wheeler Street
Plant City, FL  33563


Officers and Directors                     13,992.640 (1)         43.80%
as a Group (3 persons)


(1) Includes 10,100 shares of Common Stock owned Weyer Capital Corporation, an
affiliate of Mr. Rodriguez, and 12,911,080 shares of Common Stock issuable upon
conversion of 100 shares of Series A Preferred Stock.

(2) Includes warrants to purchase 450,000 shares of Common Stock, includes
shares and warrants held by Trinity Bui, personally, and Trinity Financing
Investments Corp., of which Ms. Bui is President, and sole Stockholder.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party - Notes Payable

As of March 31, 2005, the Company owed an officer two promissory notes totaling
$229,960. The $145,120 note carried a 10 percent interest rate and matured in
June 2004. The $84,840 note also carried a 10 percent interest rate and matured
in July 2004. Accrued interest payable on the notes totaled 22,996 at June 29,
2005. On June 29, 2005, the officer transferred the rights to the debts and the
debts were subsequently cancelled in exchange for 16,000,000 shares of the
Company's common stock on June 29, 2005.

On May 8, 2006, a shareholder loaned the Company $100,000 for working capital in
exchange for a promissory note. The note carries a 10% interest rate and matured
on November 8, 2006. The Company entered into an agreement with the noteholder
to extend the due date until May 8, 2008. The note holder has the right to
convert the note and accrued interest at the rate of $.20 (adjusted for reverse
stock split) per share. The value of this conversion feature was treated as a
loan discount for the full $100,000 of the loan and is being amortized to
interest expense over the life of the loan. Amortization of $100,000 was
included in interest expense for the year ended March 31, 2007.

Related Party - Preferred Stock

The 100 shares of Series A Preferred Stock, issued to an officer/director as
payment for $500,000 in promissory notes, are convertible into the number of
shares of common stock sufficient to represent 40 percent (40%) of the fully
diluted shares outstanding after their issuance. The Series A Preferred Stock
pays an eight percent (8%) dividend. The dividends are cumulative and payable
quarterly. The Series A Preferred Stock carries liquidating preference, over all
other classes of stock, equal to the amount paid for the stock plus any unpaid
dividends. The Series A Preferred Stock provides for voting rights on an "as
converted to common stock" basis.

                                       17
<PAGE>

During the year ended March 31, 2007, the Company incurred $40,000 in preferred
stock dividends.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.
23.1            Consent Murrell, Hall, & McIntosh CPA                   *

31.1            Certification

32.1            Certification

(b) Reports on Form 8-K. During the fiscal year ended March 31, 2007, and
through July 13, 2007, we filed the following on Form 8-K:

(a) Form 8-K

     1.   Filed April 6, 2006, Completion of Acquisition of Assets, the Company
          acquired a fifty percent (50%) working interest, in a 266.73-acre oil
          and gas lease in Starr County, Texas, from Canyon Creek Oil and Gas,
          Inc.

     2.   Filed December 15, 2006, the Company entered into an agreement and
          plan of acquisition to acquire one hundred (100%) percent of
          Ultrasonic Mitigation Technologies, Inc.

     3.   Filed January 16, 2007, the Company announced that it has, jointly
          with its partner KROG Partners, LLC, acquired an oil and gas property
          in Upshur County, Texas consisting of thirteen (13) wellbores.

     4.   Filed January 19, 2007, the Company announced that it has employed two
          expert advisors to advise Avalon with respect to its expansion program
          in Latin America.

     5.   Filed February 2, 2007, the Company announced that it, along with
          three partners, executed a letter of intent to acquire a one hundred
          (100%) percent working interest in six well production properties
          located in Grant Parish, Louisiana, subject to testing of the wells
          and related due diligence

     6.   Filed February 13, 2007, the Company reported on the results of the
          initial stages of testing on the wells in Grant Parish, Louisiana.

     7.   Filed May 4, 2007, the Company announced that it had entered into an
          agreement and plan of acquisition to acquire one hundred (100%)
          percent of Leak Location Technologies, Inc as of March 30, 2007.

     8.   Filed June 27, 2007, the Company announced in press releases issued on
          May 31, 2007, and June 19, 2007, the purchase of and sidetrack
          drilling at oil wells in the Janssen Prospect, Karnes County, Texas
          (the "Janssen Well"). In addition, in press releases dated June 5,
          2007 and June 21, 2007, the Company announced the commencement and
          completion of the workover on the Gunn #1 well, Miller County,
          Arkansas (the "Gunn Well").

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees.

We were billed by our independent auditors, Murrell Hall & McIntosh $45,104 in
fees for the fiscal year ended March 31, 2007 and $11,362 in fees for the fiscal
year ended March 31, 2006.

                                       18
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Company has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: July 16, 2007


/s/ Kent Rodriguez
----------------------------
Kent Rodriguez,
President and Chief Executive Officer

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


Signature and Title                                                 Date



/s/ Kent Rodriguez                                              July 13, 2007
----------------------------
Kent Rodriguez, President, Chief Executive Officer
Secretary and Director (Principal Executive Officer and
Principal Financial Officer)



/s/ Douglas Barton                                              July 13, 2007
----------------------------
Douglas Barton, Director




/s/ Thad Kaplan                                                 July 13, 2007
----------------------------
Thad Kaplan, Director


                                       19
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             Avalon Oil & Gas, Inc.
                          EXHIBIT INDEX TO FORM 10-KSB


                    For the fiscal year ended March 31, 2007
                         Commission File Number 1-12850

Exhibit
Number    Description                                                    Page

3.1       Restated Articles of Incorporation (Incorporated by
          reference to Exhibit 3.1 to Registration Statement on Form
          SB-2, Registration No. 33-74240C).                               *

3.2       Restated Bylaws (Incorporated by reference to Exhibit 3.2 to
          Registration Statement on Form SB-2, Registration No.
          33-74240C).                                                      *

3.3       Articles of Incorporation for the State of Nevada.
          (Incorporated by reference to Exhibit 2.2 to Form 10-KSB
          filed February 2000)                                             *

3.4       Articles of Merger for the Colorado Corporation and the
          Nevada Corporation (Incorporated by reference to Exhibit 3.4
          to Form 10-KSB filed February 2000)                              *

3.5       Bylaws of the Nevada Corporation (Incorporated by reference
          to Exhibit 3.5 to Form 10-KSB filed February 2000)               *

4.1       Specimen of Common Stock (Incorporated by reference to
          Exhibit to Registration Statement on Form SB-2, Registration
          No. 33-74240C).                                                  *

10.1      Incentive Compensation and Employment Agreement for Kent A.
          Rodriguez (Incorporated by Reference to Exhibit 10.12 of our
          Form 10-KSB filed July 20, 2001)                                 *

31.1      Certification

32.1      Certification

  *    Incorporated by reference to a previously filed exhibit or report

<PAGE>


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Avalon Oil & Gas, Inc.

We have audited the accompanying consolidated balance sheet of Avalon Oil & Gas,
Inc. as of March 31, 2007, and the related consolidated statements of
operations, changes in stockholders' deficit, and cash flows for the years ended
March 31, 2007 and 2006. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Avalon Oil & Gas,
Inc. as of March 31, 2007, and the consolidated results of its operations,
changes in stockholders' deficit and cash flows for the years ended March 31,
2007 and 2006, in conformity with accounting principles generally accepted in
the United States of America.


/s/  Murrell, Hall, McIntosh & Co., PLLP


July 13, 2007
Oklahoma City, Oklahoma



<PAGE>
<TABLE>
<CAPTION>


                         AVALON OIL AND GAS, INC.
                        CONSOLIDATED BALANCE SHEET
                              March 31, 2007

                                  Assets

<S>                                                                     <C>
Current assets:
    Cash and cash equivalents                                           $    900,537
    Marketable securities                                                     31,047
    Accounts receivable                                                       11,643
    Deposits                                                                   3,138
    Notes receivable                                                          65,000
    Prepaid expenses                                                          28,995
                                                                        ------------

       Total current assets                                                1,040,360
                                                                        ------------

Property and equipment
    Equipment, net of depreciation of $1,502                                  37,156
    Producing oil and gas properties, net of depletion of $23,335 and
       impairment of $93,999                                                 546,471
                                                                        ------------

       Total property and equipment                                          583,627

Intellectual property rights, net of amortization of $51,514 and
    impairment of $371,925                                                 1,369,214
                                                                        ------------

                                                                        $  2,993,201
                                                                        ============


                   Liabilities and Shareholders' Deficit
Current liabilities:
     Accounts payable                                                         43,749
     Due to related party                                                     13,367
     Notes payable  - related party                                          100,000
     Accrued liabilities                                                      44,646
                                                                        ------------

        Total current liabilities                                            201,762
                                                                        ------------

Accrued ARO liability                                                         29,841
Commitments and contingencies                                                   --

Shareholders' equity:
     Preferred stock, Series A, $0.10 par value, 1,000,000 shares
       authorized, 100 shares issued and outstanding                         500,000
     Common stock, $0.001 par value, 50,000,000 shares authorized,
       17,037,706 shares issued and outstanding,                              17,038
     Additional paid-in capital                                           21,529,910
     Stock subscription receivable                                           (34,500)
     Other comprehensive income                                               (4,459)
     Accumulated (deficit)                                               (19,246,391)
                                                                        ------------
        Total shareholders' equity                                         2,761,598
                                                                        ------------
                                                                        $  2,993,201
                                                                        ============


            See accompanying notes to consolidated financial statements.

                                         F-1
<PAGE>

                            AVALON OIL AND GAS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   For The Years Ended March 31, 2007 and 2006




                                                        2007            2006
                                                   ------------    ------------


Oil and Gas Sales                                  $     49,671    $       --

Operating expenses:
    Lease operating expense                              54,318            --
    Selling, general and administrative expenses        743,137         173,479
    Stock-based compensation                          2,054,541         280,451
    Depreciation, depletion and amortization             76,299              52
                                                   ------------    ------------
       Total operating expenses                       2,928,295         453,982
                                                   ------------    ------------
       (Loss from operations)                        (2,878,624)       (453,982)

Other Income (Expenses)
    Interest income                                      27,659            --
    Property impairments                               (465,924)           --
    Interest expense:
       Related party                                   (123,333)         (6,049)
       Other                                               --           (38,925)
                                                   ------------    ------------

(Loss) from Continuing Operations before
    Income Taxes                                     (3,440,222)       (498,956)

Provision (benefit) for income taxes                       --              --
                                                   ------------    ------------

Net loss                                             (3,440,222)       (498,956)

Preferred Stock Dividend                                (40,000)        (40,000)
                                                   ------------    ------------

Loss attributable to common stock
    after preferred stock dividends                $ (3,480,222)   $   (538,956)
                                                   ============    ============

Basic and diluted loss per common share            $      (0.32)   $      (0.09)
                                                   ============    ============

Basic and diluted weighted average
    common shares outstanding                        10,917,440       5,777,179
                                                   ============    ============

The componets of other comprehensive income:
    Net loss                                       $ (3,440,222)       (498,956)
    Unrealized losses on held-for-sale
       marketable securites                              (4,459)           --
                                                   ------------    ------------

Comprehensive income (loss)                        $ (3,444,681)   $   (498,956)
                                                   ============    ============


          See accompanying notes to consolidated financial statements.

                                       F-2
<PAGE>

                                                     AVALON OIL AND GAS, INC.
                                           STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT



                                                        Preferred Stock, Series A           Common Stock                Stock
                                                       ---------------------------   ----------------------------    Subscription
                                                          Shares       Par Value        Shares        Par Value       Receivable
                                                       ------------   ------------   ------------    ------------    ------------
                             Balance, March 31, 2005            100   $         10      3,981,928    $      3,982    $       --

Common stock issued in exchange for
    director services                                          --             --           45,000              45            --
Common stock issued in exchange for
    consulting services                                        --             --          686,333             686            --
Common stock issued in exchange for debt and
    accrued interest (Note 2)                                  --             --          950,000             950            --
Common stock issued for cash                                   --             --        1,055,000           1,055            --
Common stock issued for loan discount                          --             --           35,000              35            --
Common stock issued for subscription                           --             --        1,600,000           1,600        (832,000)
Common stock issued for syndication fees                       --             --           25,000              25            --
Common stock issued for assumption of
    accounts payable                                           --             --          750,000             750            --
Warrants issued in exchange for
    director services                                          --             --             --              --              --
Beneficial conversion feature of preferred stock            499,990           --             --              --          (499,990)
Beneficial conversion feature of loan                          --             --             --              --              --
Dividends on preferred stock                                   --             --             --              --              --
Net loss                                                       --             --             --              --              --
                                                       ------------   ------------   ------------    ------------    ------------
                             Balance, March 31, 2006            100   $    500,000      9,128,261    $      9,128    $   (832,000)
                                                       ============   ============   ============    ============    ============

Common stock issued in exchange for
    consulting services                                        --             --        3,479,513           3,480            --
Common stock issued in exchange for
    assumption of liabilities                                  --             --           20,000              20         (34,500)
Common stock issued for cash                                   --             --        1,936,906           1,937            --
Common stock issued for property acquisitions                  --             --        4,073,026           4,073            --
Cancellation of stock subscription                             --             --       (1,600,000)         (1,600)        832,000
Warrants issued in exchange for
    director services                                          --             --             --              --              --
Warrants issued in exchange for
    services                                                   --             --             --              --              --
Syndication fees                                               --             --             --              --              --
Beneficial conversion feature of loan                          --             --             --              --              --
Unrealized loss on investments held for sale                   --             --             --              --              --
Dividends on preferred stock                                   --             --             --              --              --
Net Loss                                                       --             --             --              --              --
                                                       ------------   ------------   ------------    ------------    ------------
                             Balance, March 31, 2007            100   $    500,000     17,037,706    $     17,038    $    (34,500)
                                                       ============   ============   ============    ============    ============


     Table continues below.

                                                        Additional        Other
                                                         Paid-in      Comprehensive      Retained
                                                         Capital          Income         Deficit          Total
                                                       ------------    ------------    ------------    ------------
                             Balance, March 31, 2005   $ 14,766,109    $       --      $(15,227,213)   $   (457,112)

Common stock issued in exchange for
    director services                                        13,455            --              --            13,500
Common stock issued in exchange for
    consulting services                                     202,601            --              --           203,287
Common stock issued in exchange for debt and
    accrued interest (Note 2)                               307,606            --              --           308,556
Common stock issued for cash                                227,945            --              --           229,000
Common stock issued for loan discount                         6,965            --              --             7,000
Common stock issued for subscription                        830,400            --              --              --
Common stock issued for syndication fees                        (25)           --              --
Common stock issued for assumption of
    accounts payable                                         89,358            --              --            90,108
Warrants issued in exchange for
    director services                                        63,664            --              --            63,664
Beneficial conversion feature of preferred stock               --              --              --
Beneficial conversion feature of loan                        25,984            --              --            25,984
Dividends on preferred stock                                   --              --           (40,000)        (40,000)
Net loss                                                       --              --          (498,956)       (498,956)
                                                       ------------    ------------    ------------    ------------
                             Balance, March 31, 2006   $ 16,034,072    $       --      $(15,766,169)   $    (54,969)
                                                       ============    ============    ============    ============

Common stock issued in exchange for
    consulting services                                   2,013,726            --              --         2,017,206
Common stock issued in exchange for
    assumption of liabilities                                34,480            --              --              --
Common stock issued for cash                              1,512,589            --              --         1,514,526
Common stock issued for property acquisitions             2,677,130            --              --         2,681,203
Cancellation of stock subscription                         (830,400)           --              --              --
Warrants issued in exchange for
    director services                                        33,187            --              --            33,187
Warrants issued in exchange for
    services                                                  4,148            --              --             4,148
Syndication fees                                            (74,660)           --              --           (74,660)
Beneficial conversion feature of loan                       125,638            --              --           125,638
Unrealized loss on investments held for sale                   --            (4,459)           --            (4,459)
Dividends on preferred stock                                   --              --           (40,000)        (40,000)
Net Loss                                                       --              --        (3,440,222)     (3,440,222)
                                                       ------------    ------------    ------------    ------------
                             Balance, March 31, 2007   $ 21,529,910    $     (4,459)   $(19,246,391)   $  2,761,598
                                                       ============    ============    ============    ============


                                    See accompanying notes to consolidated financial statements.

                                                               F-3
<PAGE>

                                AVALON OIL AND GAS, INC.
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                       For The Years Ended March 31, 2007 and 2006

                                                                  2007           2006
                                                              -----------    -----------

Cash flows from operating activities
    Net (loss)                                                $(3,440,222)   $  (498,956)
    Adjustments to reconcile net (loss) to net cash used in
      operating activities:
         Depreciation                                               1,450             52
         Depletion                                                 23,335           --
         Amortization                                              51,514           --
         Impairment of property                                   465,924           --
         Amortization of loan discount  to interest expense       100,000         38,584
         Stock-based compensation                               2,054,541        280,451
    (Increase) decrease in operating assets:
      Marketable securities                                       (31,047)          --
      Accounts receivable                                         (11,643)          --
      Prepaid expenses                                             11,643           --
      Deposits                                                     (3,138)          --
    Increase (decrease) in operating liabilities:
      Accounts payable and other accrued expenses                 (38,349)       (27,321)
                                                              -----------    -----------
         Net cash provided (used) in operating activities     $  (815,992)   $  (207,190)
                                                              -----------    -----------

Cash flows from investing activities:
     Proceeds from UMTI stock purchase                            269,650           --
     Proceeds from Intelli-well stock purchase                    202,500           --
     Proceeds from Leak Location stock purchase                    99,999           --
     Note receivable                                              (65,000)          --
     Purchase of fixed assets                                     (37,282)        (1,376)
     Additions to oil and gas properties                         (332,564)          --
                                                              -----------    -----------
       Net cash (used) in investing activities                    137,303         (1,376)
                                                              -----------    -----------

Cash flows from financing activities:
     Proceeds from sale of common stock                         1,514,527        229,000
     Preferred stock dividends                                       --          (26,667)
     Syndication fees paid                                        (74,660)          --
     Payments on note payable                                        --           (8,000)
     Proceeds from issuance of note payable                       100,000         58,000
                                                              -----------    -----------
       Net cash provided by financing activities                1,539,867        252,333
                                                              -----------    -----------

Effect of unrealized losses on marketable
     securities held for resale                                    (4,459)          --

 Net increase (decrease) in cash
    and cash equivalents                                          856,719         43,767

Cash and cash equivalents,                                         43,818             51
                                                              -----------    -----------
    Beginning of period

Cash and cash equivalents,
    End of period                                             $   900,537    $    43,818
                                                              ===========    ===========


          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>

                                  AVALON OIL AND GAS, INC.
                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                         For The Years Ended March 31, 2007 and 2006




Supplemental cash flow information:
    Cash paid during the period for:
      Interest                                                         $      --     $      --
                                                                       ===========   ===========
      Income taxes                                                     $      --     $      --
                                                                       ===========   ===========

    Non-cash investing and financing transactions:
      Common stock issued as payment for debt and
         accrued interest                                              $      --     $   276,949
                                                                       ===========   ===========
      Common stock issued in exchange for consulting services          $ 2,017,206   $   228,367
                                                                       ===========   ===========
      Common stock issued in exchange for directors' fees              $      --     $    13,500
                                                                       ===========   ===========
      Common stock issued for fees in stock sale                       $      --     $       500
                                                                       ===========   ===========
      Common stock issued for loan consideration                       $      --     $     7,000
                                                                       ===========   ===========
      Preferential conversion feature of loan                          $      --     $    25,984
                                                                       ===========   ===========
      Warrants issued in exchange for services                         $     4,180   $      --
                                                                       ===========   ===========
      Warrants issued in exchange for directors' fees                  $   161,153   $      --
                                                                       ===========   ===========
      Common stock issued for accrued liabilites                       $    34,500   $      --
                                                                       ===========   ===========
      Common stock issued for aquistion of oil and
         gas properties                                                $   301,400   $      --
                                                                       ===========   ===========
      Common stock issued for technologies acquired                    $ 2,379,803   $      --
                                                                       ===========   ===========


                See accompanying notes to consolidated financial statements.

                                             F-5
</TABLE>
<PAGE>

                             AVALON OIL & GAS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Company is currently in the process of raising funds to acquire oil and gas
properties and related oilfield technologies which the Company plans to develop
into commercial applications.

On July 7, 2006, the Company purchased all the outstanding shares of Ultrasonic
Mitigation Technologies, Inc. (UMTI) from UTEK Corporation for 16,250,000 shares
of the Company's Common Stock valued at $695,500. The shares were valued at the
average sales price received in private placements for sales of restricted
common stock for cash. UMTI became a wholly owned subsidiary of the Company as
of the date of acquisition. UMTI holds technology license of a patented process
for paraffin wax mitigation from crude oil using ultrasonic waves from the
University of Wyoming.

On November 8, 2006, the Company purchased all the outstanding shares of
Intelli-Well Technologies, Inc. (IWTI)from UTEK Corporation for 20,000,000
shares of the Company's common stock valued at $594,000. The shares were valued
at the average sales price received in private placements for sales of
restricted common stock for cash. ITWI became a wholly owned subsidiary of the
Company as of the date of acquisition. IWTI holds a non-exclusive license in the
United States for a borehole casing technology developed by the Regents of the
University of California (the "Regents") through its researchers at Lawrence
Livermore National Laboratory.

On March 28, 2007, the Company purchased all the outstanding shares of Leak
Location Technologies, Inc. (LLTI)from UTEK Corporation for 36,710,526 shares of
the Company's common stock valued at $1,090,303. The shares were valued at the
average sales price received in private placements for sales of restricted
common stock for cash. LLTI became a wholly owned subsidiary of the Company as
of the date of acquisition. LLTI holds a non-exclusive license in the United
States for a leak detection and location technology developed by the Rensselaer
Polytechnic Institute ("Rensselaer") through its researcher Michael Savic.

Basis of consolidation

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Ultrasonic Mitigation Technologies, Inc.;
Intelli-Well Technologies, Inc. and Leak Location Technologies, Inc. All
significant inter-company items have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires us to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.

Basis of Accounting

The Company's financial statements are prepared using the accrual method of
accounting. Revenues are recognized when earned and expenses when incurred.

                                       F-6
<PAGE>

Cash Equivalents

Cash and cash equivalents consist primarily of cash on deposit, certificates of
deposit, money market accounts, and investment grade commercial paper that are
readily convertible into cash and purchased with original maturities of three
months or less. The Company maintains its cash balances at several financial
institutions. Accounts at the institutions are insured by the Federal Deposit
Insurance Corporation up to $100,000. At March 31, 2007 $751,687 of the
Company's cash balances are in excess of this amount.

Investments

The Company classifies its debt and marketable securities into held-to-maturity,
trading, or available-for-sale categories. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Debt securities for which the Company does not have
the intent or ability to hold to maturity are classified as available for sale.
Held-to-maturity securities are recorded as either short-term or long-term on
the balance sheet based on contractual maturity date and are stated at amortized
cost. Marketable securities that are bought and held principally for the purpose
of selling them in the near term are classified as trading securities and are
reported at fair value, with unrealized gains and losses recognized in earnings.
Debt and marketable equity securities are classified as available-for-sale and
are carried at fair market value, with the unrealized gains and losses, net of
tax, included in the determination of comprehensive income and reported in
shareholder's equity.

The fair value of substantially all securities is determined by quoted market
prices. Gains or losses on securities sold are based on the specific
identification method. As of March 31, 2007, all investments are considered to
be available-for-sale for financial reporting purposes.

Fair Value of Financial Instruments

The Company's financial instruments are cash and cash equivalents, accounts
receivable, accounts payable, notes payable, and long-term debt. The recorded
values of cash and cash equivalents, accounts receivable, and accounts payable
approximate their fair values based on their short-term nature. The recorded
values of notes payable and long-term debt approximate their fair values, as
interest approximates market rates.

Accounts Receivable

Management periodically assesses the collectibility of the Company's accounts
receivable. Accounts determined to be uncollectible are charged to operations
when that determination is made. All of the Company's accounts receivable are
concentrated in the Oil industry.

Oil and Natural Gas Properties

The Company follows the full cost method of accounting for natural gas and oil
properties, prescribed by the Securities and Exchange Commission ("SEC".) Under
the full cost method, all acquisition, exploration, and development costs are
capitalized. The Company capitalizes all internal costs, including: salaries and
related fringe benefits of employees directly engaged in the acquisition,
exploration and development of natural gas and oil properties, as well as other
identifiable general and administrative costs associated with such activities.

                                       F-7
<PAGE>

All capitalized costs of natural gas and oil properties, including the estimated
future costs to develop reserves, are amortized on the units-of-production
method using estimates of proved reserves. Investments in unproved reserves and
major development projects are not amortized until proved reserves associated
with the projects can be determined or until impairment occurs. If the results
of an assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized. Abandonment of
natural gas and oil properties are accounted for as adjustments of capitalized
costs; that is, the cost of abandoned properties is charged to the full cost
pool and amortized.

Under the full cost method, the net book value of natural gas and oil
properties, less related deferred income taxes, may not exceed a calculated
"ceiling". The ceiling is the estimated after-tax future net revenue from proved
natural gas and oil properties, discounted at ten percent (10%) per annum, plus
the lower of cost or fair market value of unproved properties adjusted for the
present value of all future oil and gas hedges. In calculating future net
revenues, prices and costs in effect at the time of the calculation are held
constant indefinitely, except for changes that are fixed and determinable by
existing contracts. The net book value is compared to the ceiling on a quarterly
basis. The excess, if any, of the net book value above the ceiling is required
to be written off as an expense. During the year ended March 31, 2007, the
Company recognized an impairment expense of $93,999.

Other Property and Equipment

Other property and equipment is reviewed on an annual basis for impairments and
as of March 31, 2007, the Company had not identified any such impairment.
Repairs and maintenance are charged to operations when incurred and improvements
and renewals are capitalized.

Other property and equipment are stated at cost. Depreciation is calculated
using the straight-line method for financial reporting purposes and accelerated
methods for tax purposes.

The estimated useful lives are as follows:

            Office Equipment:  5-7 Years

Asset Retirement Obligations

In accordance with the provisions of SFAS No. 143, Accounting for Asset
Retirement Obligations, the Company records the fair value of its liability for
asset retirement obligations in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long live assets.
Over time, the liability is accreted to its present value at the end of each
reporting period, and the capitalized cost is depreciated over the useful life
of the related assets. Upon settlement of the liability, the Company will either
settle the obligation for its recorded amount or incur a gain or loss upon
settlement. The Company's asset retirement obligations relate to the plugging
and abandonment of its oil properties.


Intangible Assets

The cost of licensed technologies acquired is capitalized and will be amortized
over the shorter of the term of the licensing agreement or the remaining life of
the underlying patents.

The Company evaluates recoverability of identifiable intangible assets whenever
events or changes in circumstances indicate that intangible assets carrying
amount may not be recoverable. Such circumstances include, but are not limited
to: (1) a significant decrease in the market of an asset, (2) a significant
adverse change in the extent or manner in which as asset is used, or (3) an
accumulation of cost significantly in excess of the amount originally expected
for the acquisition of an asset. The Company measures the carrying amount of the
assets against the estimated undiscounted future cash flows associated with it.

                                      F-8
<PAGE>

Should the sum of the expected cash flows be less than the carrying amount of
assets being evaluated, an impairment loss would be recognized. The impairment
loss would be calculated as the amount by which the carrying amount of the
assets, exceed fair value. For the year ended March 31, 2007, the Company
recognized an impairment loss of $371,925, related to the Intelli-Well
Technologies, Inc..

Estimated amortization of intangible assets over the next five years is as
follows:

                   03/31/08                             $ 81,735
                   03/31/09                               81,735
                   03/31/10                               81,735
                   03/31/11                               81,735
                   03/31/12                               81,735
                                                        --------
                                                        $408,675
                                                        ========

Stock Based Compensation

In December 2004, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standards No. 123R (FAS-123R), Share Based Payment, which
is a revision of Statement of Financial Accounting Standards No. 123 (FAS-123),
Accounting for Stock-Based Compensation.

FAS-123R eliminates accounting for share-based compensation transaction using
the intrinsic value method prescribed in Accounting Principles Board Opinion
No.25 (APB-25, Accounting for Stock Issued to Employees), and requires instead
that such transactions be accounted for using a fair-value-based method. The
Company has elected to adopt the provisions of FAS-123R effective January 1,
2006, under the modified prospective transition method, in which compensation
cost was recognized beginning with the effective date (a) based on the
requirements of FAS-123R for all share-based payments granted after the
effective date and (b) based on the requirements of FAS 123-R for all awards
granted to employees prior to the effective date of FAS-123R that remain
unvested on the effective date.

As permitted under FAS-123, the Company elected to follow Accounting Principles
Board Opinion No.25, Accounting for Stock Issued to Employees, and related
interpretations in accounting for stock-based awards to employees through
December 31, 2005. Accordingly, compensation cost for stock options and
non-vested stock grants was measured as the excess, if any, of the market price
of the Company's common stock at the date of the grant over the exercise price.

With the adoption of FAS-123R, the Company elected to amortize stock-based
compensation for awards granted on or after the adoption of FAS-123R on January
1, 2006, on a straight-line basis over the requisite service (vesting) period
for the entire award. For awards granted prior to January 1, 2006, compensation
costs are amortized in a manner consistent with Financial Accounting Standards
Boards Interpretation No. 28 (FIN-28), Accounting for Stock Appreciation Rights
and Other Variable Stock Option of Award Plans. This is the same manner applied
in the pro-forma disclosures under FAS-123.

In accordance with the requirements of SEC Staff Accounting Bulletin ("SAB")D-90
"Grantor Balance Sheet Presentation of Unvested, Forfeitable Equity Instruments
Granted to Non Employees, unvested, forfeitable equity instruments granted to
non employees are treated as not issued for accounting purposes until the
issuing entity has received consideration for it and the condition is thus
satisfied. As of March 31, 2007 there were 6,835 shares issued to non employees
valued at $4,785 for which services had not been provided. These shares were not
shown as issued for financial reporting purposes.

                                      F-9
<PAGE>

Warrants

The value of warrants issued is recorded at their fair values as determined by
use of a Black Sholes Model at such time or over such periods as the warrants
vest.

Earnings per Common Share

Statement of Financial Accounting Standards ("SFAS") 128, Earnings Per Share,
requires presentation of "basic" and "diluted" earnings per share on the face of
the statements of operations for all entities with complex capital structures.
Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflect the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted during the period.
Dilutive securities having an antidilutive effect on diluted earnings per share
are excluded from the calculation.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax loss and credit carryforwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities. The components
of the deferred tax assets and liabilities are individually classified as
current and non-current based on their characteristics. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.

Revenue Recognition

In accordance with the requirements of SEC Staff Accounting Bulletin Topic 13A
"Revenue Recognition", revenues are recognized at such time as (1) persuasive
evidence of an arrangement exists, (2) delivery has occurred or services have
been rendered, (3) the seller's price to the buyer is fixed or determinable and
(4) collectibility is reasonably assured. Specifically, oil and gas sales are
recognized as income at such time as the oil and gas are delivered to a viable
third party purchaser at an agreed price. Interest income is recognized as it is
earned.

Recently Issued Accounting Standards

In December 2004, the FASB issued a revision of SFAS No. 123, "Share-Based
Payment". The statement establishes standards for the accounting for
transactions in which an entity exchanges its equity investments for goods and
services. It also addresses transactions in which an entity incurs liabilities
in exchange for goods or services that are based on the fair value of the
entity's equity instruments or that may be settled by the issuance of those
equity instruments. The statement does not change the accounting guidance for
share-based payments with parties other than employees. The statement is
effective for the quarter beginning January 1, 2006. The Company does not expect
this statement to have a material effect on its reporting.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary
Assets-amendment of APB Opinion No. 29". Statement 153 eliminates the exception
to fair value for exchanges of similar productive assets and replaces it with a
general exception for exchanged transactions that do not have a commercial
substance, defined as transactions that are not expected to result in
significant changes in the cash flows of the reporting entity. This statement is
effective for exchanges of non-monetary assets occurring after September 15,
2005. The Company does not expect this statement to have a material effect on
its reporting.

                                      F-10
<PAGE>

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3".
Statement 154 requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the
change. The statement is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. The Company does
not expect this statement to have a material effect on its reporting.

In February 2006, the FASB issued Statement No. 155, "Accounting for Certain
Hybrid Financial Instruments" ("SFAS No. 155"), which amends FASB Statements No.
133 and 140. This Statement permits fair value remeasurement for any hybrid
financial instrument containing an embedded derivative that would otherwise
require bifurcation, and broadens a Qualified Special Purpose Entity's ("QSPE")
permitted holdings to include passive derivative financial instruments that
pertain to other derivative financial instruments. This Statement is effective
for all financial instruments acquired, issued or subject to a remeasurement
event occurring after the beginning of an entity's first fiscal year beginning
after September 15, 2006. This Statement has no current applicability to the
Company's financial statements. Management plans to adopt this Statement on
April 1, 2007 and it is anticipated that the initial adoption of this Statement
will not have a material impact on the Company's financial position, results of
operations, or cash flows.

In June 2006, the FASB issued Interpretation 48, "Accounting for Uncertainty in
Income Taxes" ("FIN 48"), an interpretation of FASB Statement No. 109,
"Accounting for Income Taxes." FIN 48 clarifies the accounting and reporting for
income taxes where interpretation of the law is uncertain. FIN 48 prescribes a
comprehensive model for the financial statement recognition, measurement,
presentation and disclosure of income tax uncertainties with respect to
positions taken or expected to be taken in income tax returns. FIN 48 is
effective for fiscal years beginning after December 15, 2006. This Statement has
no current applicability to the Company's financial statements. Management plans
to adopt this Statement on April 1, 2007 and it is anticipated that the initial
adoption of FIN 48 will not have a material impact on the Company's financial
position, results of operations, or cash flows.

In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 addresses how companies should measure fair value
when they are required to use a fair value measure for recognition or disclosure
purposes under GAAP. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value and expands disclosures about fair value measurements.
SFAS No. 157 is effective for fiscal years beginning after November 15, 2007,
with earlier adoption permitted. Management is assessing the impact of the
adoption of this Statement.

In September 2006, the FASB issued Statement No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans" ("SFAS No. 158"), an
amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires
(a) recognition of the funded status (measured as the difference between the
fair value of the plan assets and the benefit obligation) of a benefit plan as
an asset or liability in the employer's statement of financial position, (b)
measurement of the funded status as of the employer's fiscal year-end with
limited exceptions, and (c) recognition of changes in the funded status in the
year in which the changes occur through comprehensive income. The requirement to
recognize the funded status of a benefit plan and the disclosure requirements
are effective as of the end of the fiscal year ending after December 15, 2006.
The requirement to measure the plan assets and benefit obligations as of the
date of the employer's fiscal year-end statement of financial position is
effective for fiscal years ending after December 15, 2008. This Statement has no
current applicability to the Company's financial statements. Management plans to
adopt this Statement on March 31, 2007 and it is anticipated the adoption of
SFAS No. 158 will not have a material impact to the Company's financial
position, results of operations, or cash flows.

                                      F-11
<PAGE>

In September 2006, the Securities Exchange Commission issued Staff Accounting
Bulletin No. 108 ("SAB No. 108"). SAB No. 108 addresses how the effects of prior
year uncorrected misstatements should be considered when quantifying
misstatements in current year financial statements. SAB No. 108 requires
companies to quantify misstatements using a balance sheet and income statement
approach and to evaluate whether either approach results in quantifying an error
that is material in light of relevant quantitative and qualitative factors. When
the effect of initial adoption is material, companies will record the effect as
a cumulative effect adjustment to beginning of year retained earnings and
disclose the nature and amount of each individual error being corrected in the
cumulative adjustment. SAB No. 108 is effective beginning January 1, 2007 and it
is anticipated that the initial adoption of SAB No. 108 will not have a material
impact on the Company's financial position, results of operations, or cash
flows.

Reclassifications

Certain reclassifications have been made to the prior years' financial
statements to conform to the current year presentation. These reclassifications
had no effect on previously reported results of operations or retained earnings.

Note 2: Related Party Transactions

Promissory Notes

On May 8, 2006, a shareholder loaned the Company $100,000 for working capital in
exchange for a promissory note. The note carries a 10% interest rate and matured
on November 8, 2006. The Company entered into an agreement with the noteholder
to extend the due date until May 8, 2008. The note holder has the right to
convert the note and accrued interest at the rate of $0.20 (adjusted for reverse
stock split) per share. The value of this conversion feature was treated as a
loan discount for the full $100,000 of the loan and is being amortized to
interest expense over the life of the loan. Amortization of $100,000 was
included in interest expense for the year ended March 31, 2007.

Preferred Stock

The 100 shares of Series A Preferred Stock, issued to an officer/director as
payment for $500,000 in promissory notes, are convertible into the number of
shares of common stock sufficient to represent 40 percent (40%) of the fully
diluted shares outstanding after their issuance. The Series A Preferred Stock
pays an eight percent (8%) dividend. The dividends are cumulative and payable
quarterly. The Series A Preferred Stock carries liquidating preference, over all
other classes of stock, equal to the amount paid for the stock plus any unpaid
dividends. The Series A Preferred Stock provides for voting rights on an "as
converted to common stock" basis.

During the year ended March 31, 2007, the Company incurred $40,000 in preferred
stock dividends.

                                      F-12
<PAGE>

The holders of the Series A Preferred Stock have the right to convert into a
sufficient number of shares of common stock to equal 40% of the then
fully-diluted shares outstanding. Fully diluted shares outstanding is computed
as the sum of the number of shares of common stock outstanding plus the number
of shares of common stock issuable upon exerciser, conversion or exchange of
outstanding options, warrants, or convertible securities.


Stock-Based Compensation

During the year ended March 31, 2007, the Company issued its directors an option
to purchase 100,000 shares of common stock for directors' fees. The transactions
were recorded at the quoted market price of the stock on the date of issuance.
The services, valued at $33,187, are included in the accompanying financial
statements as "Stock-based compensation".

During the year ended March 31, 2007, 3,479,513 of the 3,486,349 shares issued
during the year ended March 31, 2006 for consulting services valued at
$2,017,206 were earned and included in the accompanying financial statements as
"Stock-based compensation".

During the year ended March 31, 2007 the Company issued 49,682 shares of common
stock valued at $34,777 for consulting services. Of these shares 6,835 valued at
$4,785 were treated as not being issued for financial reporting purposes as
required by SAB D-90 "Grantor Balance Sheet Presentation of Unvested,
Forfeitable Equity Instruments Granted to Non Employees".

Note 3: Note Receivable

On December 11, 2006 the Company accepted a note receivable from an individual
for $65,000, due on April 1, 2007 with an interest rate of 13%. The note is
secured by real property.

Note 4: Property Acquisitions

Effective on November 15, 2006, the Company acquired a fifty (50%) percent
working interest in an active Woodbine production property in Upshur County,
Texas, consisting of thirteen (13) wellbornes.

On February 8, 2007, the Company announced that it had entered into a letter of
intent to purchase an undivided twenty-five (25%) percent interest in six-well
production property in Grant Parish, Louisiana.

Note 5: Ultrasonic Mitigation Technology Acquisition

On July 7, 2006, the Company purchased all the outstanding shares of Ultrasonic
Mitigation Technologies, Inc. (UMTI) from UTEK Corporation for 812,500 shares of
the Company's Common Stock valued at $695,500. The shares were valued at the
average sales price received in private placements for sales of restricted
common stock for cash. UMTI became a wholly owned subsidiary of the Company as
of the date of acquisition. The purchase price was allocated to the assets of
UMTI as follows:

          Cash                  $300,000
          Technology licenses    395,500
                                --------
                                $695,500
                                ========

                                      F-13
<PAGE>

The Company also paid a $30,000 finders fee related to the acquisition of UMTI
that has been added to the cost of the technology license.

The technology license is for licensing of a patented process for paraffin wax
mitigation from crude oil using ultrasonic waves from the University of Wyoming.

UMTI had no operating activities prior to its being acquired by the Company,
therefore there is no pro-forma combined results.

In the agreement with UTEK, the Company agreed to an anti-dilution adjustment
during the twelve (12) months following the effective date of such agreement.
This anti-dilution adjustment calls for UTEK Corporation to receive additional
shares of stock proportionate to the amount of common shares issued by the
Company to any of its current list of management and directors within twelve
(12) months subsequent to the acquisition date, and excludes any common shares
issued the holders of Series A Preferred Stock.

The Company is amortizing the technology license over a 10 year estimated life,
amortization for the year ended March 31, 2007 was $31,939.

Note 6: Intelli-Well Technologies, Inc.

On November 8, 2006, the Company purchased all the outstanding shares of
Intelli-Well Technologies, Inc. (IWTI)from UTEK Corporation for 1,000,000 shares
of the Company's common stock valued at $594,000. The shares were valued at the
average sales price received in private placements for sales of restricted
common stock for cash. ITWI became a wholly owned subsidiary of the Company as
of the date of acquisition. The purchase price was allocated to the assets of
UMTI as follows:

          Cash                  $225,000
          Technology licenses    369,000
                                --------
                                $594,000
                                ========

The Company also paid a $22,500 finders fee related to the acquisition of IWTI
that has been added to the cost of the technology license.

IWTI holds a non-exclusive license in the United States for a borehole casing
technology developed by the Regents of the University of California (the
"Regents") through its researchers at Lawrence Livermore National Laboratory.

The technology uses a densely spaced network of sensors which are installed
along and outside of oil well casings before they are grouted into place. The
sensors monitor critical parameters in the subsurface oil reservoir. Data from
multiple sensors can provide real-time information regarding the status of the
reservoir and the primary and secondary oil recovery process. The types of
sensors that can be installed include seismic sensors, electrical resistance
tomography electrodes, electromagnetic induction tomography coils and
thermocouples.

IWTI had no operating activities prior to its being acquired by the Company,
therefore there is no pro-forma combined results.

In the agreement with UTEK, the Company agreed to an anti-dilution adjustment
during the twelve (12) months following the effective date of such agreement.
This anti-dilution adjustment calls for UTEK Corporation to receive additional
shares of stock proportionate to the amount of common shares issued by the
Company to any of its current list of management and directors within twelve
(12) months subsequent to the acquisition date, and excludes any common shares
issued the holders of Series A Preferred Stock.

                                      F-14
<PAGE>

The Company is amortizing the technology license over a 10 year estimated life,
amortization for the year ended March 31, 2007 was $19,575.

During the year ended March 31, 2007 the Company determined that due to an
extended time to bring the technology to market, an impairment in the value of
the Intelli-Well technology of $371,925 should be recorded.

Note 7: Leak Location Technologies, Inc.

On March 28, 2007, the Company purchased all the outstanding shares of Leak
Location Technologies, Inc. (LLTI)from UTEK Corporation for 1,835,526 shares of
the Company's common stock valued at $1,090,303. The shares were valued at the
average sales price received in private placements for sales of restricted
common stock for cash. LLTI became a wholly owned subsidiary of the Company as
of the date of acquisition. The purchase price was allocated to the assets of
UMTI as follows:

          Cash                  $  100,000
          Prepaid consuslting       15,000
          Technology licenses      975,303
                                ----------
                                $1,090,303
                                ==========

LLTI holds a non-exclusive license in the United States for a leak detection and
location technology developed by the Rensselaer Polytechnic Institute
("Rensselaer") through its researcher Michael Savic.

The technology uses a plurality of remote acoustic transmission sensor units
distributed along underground pipe with each unit containing equipment for
analyzing acoustic signals from the pipe. The equipment includes a mechanism for
identifying acoustic features of a leak from ambient signals.

LLTI had no operating activities prior to its being acquired by the Company,
therefore there is no pro-forma combined results.

In the agreement with UTEK, the Company agreed to an anti-dilution adjustment
during the twelve (12) months following the effective date of such agreement.
This anti-dilution adjustment calls for UTEK Corporation to receive additional
shares of stock proportionate to the amount of common shares issued by the
Company to any of its current list of management and directors within twelve
(12) months subsequent to the acquisition date, and excludes any common shares
issued the holders of Series A Preferred Stock.

Note 8: Income Taxes

At March 31, 2007, the Company had accumulated a net operating loss of
approximately $24,472,000 (including pre-reorganization), which may be used to
reduce future taxable income through 2026. A valuation allowance has been
recognized to completely reserve for the deferred tax assets related to the loss
carryforwards. The reserve has been established because of the uncertainty of
future taxable income, which is necessary in order to realize the benefits of
the net operating loss carryforwards. Any tax benefits realized in the future
from pre-confirmation operating loss carryforwards will be reported as a direct
addition to additional paid-in capital. The Company's ability to utilize these
carryforwards to offset future taxable income is subject to restrictions under
Section 382 of the Internal Revenue Code due to certain changes in the equity

                                      F-15
<PAGE>

ownership of the Company. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for tax purposes. Components
of the Company's deferred tax assets are:

                                             2007            2006
                                         ------------    ------------
Deferred tax assets from net operating
         loss carryforwards              $ 10,012,220    $  8,671,350
Less: Valuation allowance                $(10,012,220)   $ (8,671,350)
                                         ------------    ------------

Net Deferred tax asset                   $       --      $       --
                                         ============    ============


A reconciliation of the provision for (benefit from) income taxes with amounts
determined by applying the statutory U.S federal income tax rates to income
before income taxes is as follows:

                                                  Year Ended March 31,
                                               --------------------------
                                                   2007           2006
                                               -----------    -----------

     Tax (benefit) at Federal Statutory rate   $(1,169,675)   $  (168,600)

     Tax (benefit)- state                         (172,011)       (24,800)

     Valuation allowance                         1,341,686        193,400
                                               -----------    -----------

     Effective provision (benefit) for taxes   $      --      $      --
                                               ===========    ===========

Note 9: Shareholders' Equity

On May 15, 2007, the Board of Directors has approved and implemented a reverse
stock split and established a ratio of 1-for 20. This move followed a vote by
written consent of the stockholders dated April 23, 2007 and an action by
written consent of the Board of Directors on April 25, 2007. Our common stock
began trading on a reverse-split basis, on May 15, 2007. As a result of the
reverse stock split, every 20 shares of our common stock will be combined into
one share of our common stock. The reverse stock split affects all shares of
common stock, stock options and warrants outstanding as of immediately prior to
the effective time of the reverse stock split. Fractional shares equal or
greater to one-half share are rounded up, and fractional shares less then
one-half are rounded down. The effects of this reverse stock split have been
applied in the consolidated financial statements and notes to consolidated
financial statements.

During the year ended March 31, 2007, $126,667 was included in "Stock-based
compensation" with the balance not shown as issued until services are rendered,
for shares issued in exchange for consulting services in January 2006. There is
no remaining balance due.

During the year ended March 31, 2007, $323,333 was included in "Stock-based
compensation" for shares issued in exchange for consulting services rendered in
March 2006, with the balance not shown as issued until services are rendered.

On April 18, 2006, the Company authorized the issuance of 135,000 shares of
common stock for consulting services.

                                      F-16
<PAGE>

In May 2006, the Company issued 109,000 shares of common stock and warrants to
purchase 50,000 shares of common stock at a price of $2.00 per share. These
warrants expire in May 2014. The purchase price for the shares and the warrants
was $100,000.

On May 1, 2006, the Company granted to its directors warrants to purchase
100,000 shares of common stock at a price of $0.5 per share for director
services. These warrants expire on May 1, 2011.

On May 15, 2006, the Company entered into a strategic alliance agreement with
UTEK Corporation for consulting services. The Company issued 34,682 shares of
common stock in connection with this agreement. The value of the stock issued,
$0.035 per share was recorded at fair value based on other cash sales of
restricted stock. Of the $24,277 in services, $21,242 was included in
"Stock-based compensation" with the balance not shown as issued until services
are rendered.

On May 18, 2006, the Company issued 375,000 shares of stock for consulting
services valued at $262,500.

$34,500 is shown as a stock subscription receivable for consulting services and
the assumption of payroll taxes from May 24, 2006, and will remain until the
payroll taxes have been paid by the shareholder.

On June 1, 2006, the Company executed a six-month consulting agreement with a
Consultant and issued 15,000 shares of common stock as compensation. The stock
was valued at $10,500 of which $8,750 was recognized as compensation expense
during the year ending March 31, 2007.

On June 8, 2006 the Company granted warrants to purchase 12,500 shares at a
price of $0.5 per share for website design and maintenance services. These
warrants expire on September 8, 2011.

On August 18, 2006, the Company authorized the issuance of 25,000 shares of
common stock for consulting services. The stock was valued at $21,400 and was
charged to expense during the year ending March 31, 2007.

On August 29, 2006 the Company authorized the issuance of 50,000 shares of
common stock for consulting services. This transaction was valued at $42,800 and
was charged to expense for the year ending March 31, 2007.

On September 12, 2006 the Company authorized the issuance of 60,000 shares of
common stock for consulting services. The stock was valued at $68,480 and was
recognized as compensation expense during the year ending March 31, 2007.

During the year ended March 31, 2007, the Company issued 206,262 shares of its
common stock to 8 accredited investors, at an average price of approximately
$1.00 per share, pursuant to the exemptions afforded by Section (4)2 of the
Securites Act of 1933, as amended, for which the Company received total cash
proceeds of $196,404.

All stock transactions for services with third parties were valued as of the
earlier of the date at which a commitment for performance by the third party to
earn the stock was reached or the date at which the third party's performance
was complete.

On May 15, 2006, the Company entered into a Regulation S Stock Purchase
agreement.

During the year ended March 31, 2007, 1,730,644 shares of common stock with cash
proceeds of $1,199,123 were sold pursuant to the Regulation S Stock Purchase
agreement.

                                      F-17
<PAGE>

Information with respect to stock warrants outstanding is follows:

 Exercise   Outstanding               Expired or    Outstanding     Expiration
  Price    March 31, 2006   Granted   Exercised    March 31, 2007      Date
  -----    --------------   -------   ---------    --------------      ----
 Warrants:
  $0.20        125,000         -0-       -0-            125,000      12/8/2012
  $0.20        100,000         -0-       -0-            100,000      3/31/2011
  $0.60        150,000         -0-       -0-            150,000       3/6/2013
  $0.50          -0-         100,000     -0-            100,000       5/1/2011
  $0.50          -0-          12,500     -0-             12,500       6/8/2011
  $2.00          -0-          50,000     -0-             50,000       5/1/2001


Note 10:  Technology License Agreements

On July 12, 2006 UMTI entered into a technology license of a patented process
for paraffin wax mitigation from crude oil using ultrasonic waves from the
University of Wyoming. This license calls for an earned royalty of five percent
on net sales of licensed technologies and services; twenty-five percent of all
sublicense fees and revenues with an escalating minimum annual royalty which
will be credited toward the total royalties due.

On March 27, 2007 LLTI entered into non-exclusive license in the United States
for a leak detection and location technology developed by the Rensselaer
Polytechnic Institute ("Rensselaer") through its researcher Michael Savic. The
Agreement calls for a milestone license fee of $10,000 sixteen months following
the effective date of the agreement or the first production introduction which
ever is sooner. A royalty fee of four and one-half percent (4.5%) of gross sales
of licensed products required with annual minimum royalty payments.

Minimum obligations under license agreements for the next five years:

                3/31/08                         $    --
                3/31/09                            10,000
                3/31/10                            20,000
                3/31/11                            30,000
                3/31/12                            40,000
                                                ---------
                                                $ 100,000
                                                =========

Note 11: Earnings Per Share

SFAS 128 requires a reconciliation of the numerator and denominator of the basic
and diluted earnings per share (EPS) computations. The following securities were
not included in the calculation of diluted earnings per share because their
effect was anti-dilutive.

For the year ended March 31, 2007, 136,704 shares that were issued for services
not yet rendered have not been recorded in the financial statements. These
shares will be recognized when services are rendered.

For the years ended March 31, 2007 and 2006, dilutive shares do not include
outstanding warrants to purchase 225,000 shares of common stock at an exercise
price of $0.20; 150,000 shares of common stock at an exercise price of $0.60;
112,500 share of common stock at an exercise price of $0.50 and 50,000 shares of
common stock at an exercise price of $2.00 because the effects were
anti-dilutive. Diluted shares does not include shares issuable to the preferred
shareholders pursuant to their right to convert preferred stock into sufficient
common shares sufficient to equal 40% of the post conversion outstanding shares
as the effect would be anti-dilutive.

The following reconciles the components of the EPS computation:
<TABLE>
<CAPTION>
<S> <C> <C>

                                             Income          Shares       Per Share
                                            Numerator)    (Denominator)    Amount
                                           -----------     -----------    --------

For the year ended March 31, 2007:
   Net loss                                $(3,440,222)
   Preferred stock dividends                   (40,000)
                                           -----------
   Basic EPS loss available to
   common shareholders                     $(3,480,222)     10,917,440    $  (0.32)
   Effect of dilutive securities:
   None                                           --              --       --
                                           -----------     -----------    --------

   Diluted EPS loss available to
   common shareholders                     $(3,480,222)     10,917,440    $  (0.32)
                                           ===========     ===========    ========

For the year ended March 31, 2006:
   Net loss                                $  (498,956)
   Preferred stock dividends                   (40,000)
                                           -----------
   Basic EPS loss available to
   common shareholders                     $  (538,956)      5,777,179    $  (0.09)

   Effect of dilutive securities:
   None                                           --              --       --
                                           -----------     -----------    --------

   Diluted EPS loss available to
   common shareholders                     $  (538,956)      5,777,179    $  (0.09)
                                           ===========     ===========    ========

                                      F-18
<PAGE>

Note 11: SFAS 69 SUPPLEMENTAL DISCLOSURES (Unaudited)

Net Capitalized Costs

The Company's aggregate capitalized costs related to natural gas and oil
producing activities are summarized as follows:

Natural gas and oil properties and                        March 31, 2007   March 31, 2006
                                                          --------------   --------------
   Related lease equipment:
   Proved                                                   $ 663,806         $    --

Accumulated depreciation, depletion and impairment           (117,335)             --
                                                            ---------         ---------

   Net capitalized costs                                    $ 546,471         $    --
                                                            =========         =========

</TABLE>

Costs Incurred

Costs incurred in natural gas and oil property acquisition, exploration and
development activities that have been capitalized are summarized as follows:

                                                      Years Ended March 31,
                                                      2007             2006
                                                    --------         --------

Acquisition of properties                           $628,919         $   --
Development costs                                     34,892             --
                                                    --------         --------
                                                    $663,806         $   --
                                                    ========         ========


Results of Operations for Natural Gas and Oil Producing Activities

The Company's results of operations from natural gas and oil producing
activities are presented below for the fiscal years ended March 31, 2007 and
2006. The following table includes revenues and expenses associated directly
with the Company's natural gas and oil producing activities. It does not include
any interest costs and general and administrative costs and, therefore, is not
necessarily indicative of the contribution to consolidated net operating results
of the Company's natural gas and oil operations.
                                                      Years Ended March 31,
                                                      2007            2006
                                                   ---------       ---------

    Production revenues                            $  49,671       $    --
    Production costs                                 (54,318)           --
    Impairment of property                           (93,999)           --
    Depletion expense                                (23,335)           --
                                                   ---------       ---------
                                                    (121,981)           --
    Imputed income tax provision (1)                    --              --
                                                   ---------       ---------
    Results of operation for natural gas/oil
        producing activity                         $(121,981)      $    --
                                                   =========       =========

(1)  The imputed income tax provision is hypothetical (at the statutory rate)
     and determined without regard to the Company's deduction for general and
     administrative expenses, interest costs and other income tax credits and
     deductions, nor whether the hypothetical tax provision will be payable.

                                      F-19
<PAGE>

Natural Gas and Oil Reserve Quantities

The following schedule contains estimates of proved natural gas and oil reserves
attributable to the Company. Proved reserves are estimated quantities of natural
gas and oil that geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions. Proved developed reserves are those which are
expected to be recovered through existing wells with existing equipment and
operating methods. Reserves are stated in thousand cubic feet (mcf) of natural
gas and barrels (bbl) of oil. Geological and engineering estimates of proved
natural gas and oil reserves at one point in time are highly interpretive,
inherently imprecise and subject to ongoing revisions that may be substantial in
amount. Although every reasonable effort is made to ensure that the reserve
estimates are accurate, due to their nature reserve estimates are generally less
precise than other estimates presented in connection with financial statement
disclosures.

                                                         Oil - bbls
                                                         ----------
Proved reserves:
                                                          -------
     Balance, March 31, 2006                                 --
                                                          -------
          Purchase of reserves-in-place                    29,815
          Extensions and discoveries
          Production                                       (1,043)
                                                          -------
     Balance, March 31, 2007                               28,772
                                                          =======
Proved developed reserves:
     Balance, March 31, 2006                                 --
     Balance, March 31, 2007                               15,659

Standardized Measure of Discounted Future Net Cash Flows:

The following schedule presents the standardized measure of estimated discounted
future net cash flows from the Company's proved reserves for the fiscal years
ended March 31, 2007 and 2006. Estimated future cash flows are based on
independent reserve data. Because the standardized measure of future net cash
flows was prepared using the prevailing economic conditions existing at March
31, 2007 and 2006, it should be emphasized that such conditions continually
change. Accordingly, such information should not serve as a basis in making any
judgment on the potential value of the Company's recoverable reserves or in
estimating future results of operations.
                                                        Years Ended March 31,
                                                        2007              2006
                                                     -----------       ---------

Future production revenues (1)                       $ 1,805,253       $    --
Future production costs                                 (743,727)           --
Future development costs                                  (3,250)           --
                                                     -----------       ---------
Future cash flows before income taxes                  1,058,276            --
Future income tax                                       (141,664)           --
                                                     -----------       ---------
Future net cash flows                                    916,612            --
Effect of discounting future annual
    cash flows at 10%                                   (368,994)           --
                                                     -----------       ---------
Standardized measure of discounted
    net cash flows                                   $   547,618       $    --
                                                     ===========       =========

(1)  The weighted average oil wellhead price used in computing the Company's
     reserves were $65.94 per bbl at March 31, 2007.

                                      F-20
<PAGE>

The following schedule contains a comparison of the standardized measure of
discounted future net cash flows to the net carrying value of proved natural gas
and oil properties at January 31, 2007 and 2006:
                                                           Years Ended March 31,
                                                             2007         2006
                                                           --------    ---------
Standardized measure of discounted future
     net cash flows                                        $547,618    $    --
Proved natural gas & oil property net of
     Accumulated depreciation, depletion and
     amortization, including impairment of
     $93,999                                                547,618         --
                                                           --------    ---------
Standardized measure of discounted future
     net cash flows in excess of net carrying
     value of proved natural gas & oil properties          $   --      $    --
                                                           ========    =========















                                      F-21