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, 2005
                         Commission file number: 1-12850

                                   XDOGS, Inc.
                        Formerly known as XDOGS.COM, INC.
               --------------------------------------------------
              (Exact name of small business issuer in its charter)

                          7000 Flour Exchange Building
                             310 Fourth Avenue South
                          MINNEAPOLIS, MINNESOTA 55415
                     --------------------------------------
                    (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):  (612) 359-9020

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  $ - 0 -

The aggregate market value of the Company's common stock held by non-affiliates
of the Company on June 15, 2005 was approximately $3,370,771 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 equity securities outstanding: Common Stock, $0.001
par value per share (the "Common Stock"). On June 15, 2005, there were
168,538,543 shares outstanding. As of June 30, 1998, the date of our
reorganization in Bankruptcy, our common shares were subject to a 54 for 1
reverse split. As of August 23, 2000, our common shares were further subject to

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a 5 for 1 reverse split. All references to our shares in this Form 10-KSB
include the effect of these reverse splits 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 shares are Class A Convertible Preferred Stock have been
issued. See "Item 5 Market for the Company's Common Equity and Related
Stockholder Matters."


                                   XDOGS, INC.

           FORM 10-KSB ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 2005

                                TABLE OF CONTENTS

                                     PART 1

                                                                            Page

ITEM 1.     DESCRIPTION OF BUSINESS..........................................  4
ITEM 2.     DESCRIPTION OF PROPERTY..........................................  6
ITEM 3.     LEGAL PRECEEDINGS................................................  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..........  6
ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION......... 10
ITEM 7.    FINANCIALSTATEMENTS............................................... 14
ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND
             FINANCIAL DISCLOSURE............................................ 14
ITEM 8A. CONTROLS AND PROCEDURES............................................. 14

                                    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.............................................. 16
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT AND RELATED STOCKHOLDER MATTERS...................... 17
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................... 18
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.................................... 18
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................. 19

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References in this document to "us," "we," "the Registrant" or "the Company"
refer to XDOGS, Inc., and its predecessors.

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.

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<PAGE>


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

Limited Operation

We currently have no operations, no revenues and have generated a loss in each
year of our operations. Previously, we were the exclusive North America
distributors of high-end European outdoor apparel and equipment for the outdoor
enthusiast. We sought to build and market our exclusive distribution rights and
these products initially through the internet and then later through a
traditional wholesale to retail business model. We were not successful.

Due to general economic conditions and the ensuing downturn in e-commerce and
internet-based businesses generally, we abandoned our prior business plan to
exploit our exclusive distribution rights via the internet, re-focused our
strategy and adopt a traditional wholesale to retail sales distribution model
which we have been implementing since August, 2000. However, this has provided
no substantial operations or revenues to date and we do not anticipate that it
will. Due to the lack of revenues, we no longer maintain any exclusive
distribution arrangements.

In our current form, we expect to continue to generate significant losses and
without additional funding through private placements of our common stock, which
cannot be guaranteed, it is highly unlikely that we can continue to operate.

As a result, we have been focusing on a plan of operation entailing a strategic
merger, acquisition or acquisitions to enhance shareholder value. On May 23,
2005, and on we entered into an Asset Purchase Agreement with Mid-Continent
Investments, Inc. ("MCI"). We acquired a net revenue interest in certain oil and
gas leases, and equipment, in Montgomery County, Kansas, in exchange for our
Common Stock.

On June 1, our Board of Directors approved an Amendment to our Articles of
Incorporation to change our name from XDOGS, Inc., to Avalon Oil and Gas, Inc.,
to reflect our acquisition. We expect the name change to be effective on or
about July 18, 2005.

History

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 and our name was changed to Snow
Runner (USA), Inc. 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.

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Acquisition Strategy

On August 7, 2003, we signed a non-binding letter of intent to acquire the
business and operations of Katherine Baumann, LLC ("KB"), a Beverly Hills based,
California Limited Liability Company and designer of specialty women's handbags.
We had a ninety-day option to acquire 25 percent of KB's fully-diluted capital
stock for $250,000, payable in cash. In November 2003, the option expired and
the parties agreed not to proceed with the acquisition.

On November 17, 2003, we signed a non-binding letter of intent to acquire the
business and operations of StravinSOFT, Inc. ("StravinSOFT"), a Dallas, Texas
based provider of Business and Custom Solutions, Best in Class Data
Transmission, and File Maker Application Software. In February 2004, the letter
of intent expired and we decided not to proceed with the acquisition.

On June 1, 2004, we signed a non-binding letter of intent to acquire the
business and operations of Legion Media Partners, ("LMP"), a Los Angeles,
California, based financier and distributor of theatrical motion pictures and
television programming on a world-wide basis. Under the terms of the LOI, we
planned to issue shares of its common stock to the shareholders of LMP in
exchange for either (a) all of the issued and outstanding capital stock of LMP,
or (b) all of the assets necessary for, used in or useful to LMP's operations.
We contemplated a one-for-one share exchange with the shareholders of LMP
receiving seventy-three percent (73%) of the new entity. The LOI subsequently
expired and we decided not to proceed with the proposed acquisition.

On May 23, 2005, we acquired an eighty percent (80%) Net Revenue Interest in
certain oil and gas leasehold interests located in Montgomery County, Kansas
from MCI, an unrelated entity. In connection with the acquisition, we also
acquired certain oil field equipment along with the oil and gas net revenue
interests in exchange for an aggregate of 85,000,000 authorized, but previously
unissued, shares of the Company's common stock.

The acquired oil and gas properties include a three hundred twenty (320) acre
leasehold and oil field equipment.

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 immediate additional
financing, or generate revenues from the acquired oil and gas leasehold
interest, none of which can be guaranteed. Unless additional funding is located,
it is highly unlikely that we can continue to operate.

Ultimately, our success is dependent upon our ability to generate revenues from
our acquired oil and gas leasehold interest, 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 leasehold. There is no assurance that even with adequate financing or
combined operations, we will generate revenues and be profitable.

PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS

We currently do not have any patents, trademarks or proprietary rights.

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.

                                       5

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EMPLOYEES

As of March 31, 2005 we had one full time employee consisting of our President.

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 7000 Flour Exchange Building, 310 Fourth
Avenue South, Minneapolis, Minnesota 55415. This office space is leased from an
unaffiliated third party on a month to month basis, for a monthly rental of
$500.00.

ITEM 3. LEGAL PROCEEDINGS

Mr. Henry Furst filed a complaint against the Company in the U.S. District
Court, for the District of Minnesota, alleging that the Company breached its
contractual obligations to him and seeking $144,300 in damages. The parties
subsequently negotiated a settlement whereby the Company agreed to pay Mr. Furst
$94,000 in installments and executed a confession of judgment in favor of Mr.
Furst for that amount. The Company failed to pay Mr. Furst in accordance with
the settlement agreement. During the year ended March 31, 2002, the Company paid
Mr. Furst a total of $22,363 in interest and principal. As of March 31, 2004,
the balance due on the litigation settlement totaled $85,926. In February 2005,
Mr. Furst agreed to accept $16,000 and 500,000 shares of the Company's stock to
settle the judgment. The 500,000 shares issued in the settlement were valued at
traded market price of the stock on the settlement date, or $.01 per share. The
settlement resulted in the Company recognizing a gain on the extinguishment of
the judgment totaling $64,926.

We also have various matters pending alleging nonpayment for services and
aggregating not more than $25,000.

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

No matters were submitted to a vote of the Company's shareholders during the
fiscal year ended March 31, 2005.


                                     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 "XDGI".

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.

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                                High               Low

Fiscal Year Ended
March 31, 2005

First Quarter                  $ 0.04             $ 0.01
Second Quarter                   0.03               0.01
Third Quarter                    0.02               0.01
Fourth Quarter                   0.06               0.01

Fiscal Year Ended
March 31, 2004

First Quarter                  $ 0.08             $ 0.01
Second Quarter                   0.01               0.01
Third Quarter                    0.03               0.01
Fourth Quarter                   0.03               0.01


(b) Approximate Number of Holders of Common Stock

As of June 15, 2004, 168,558,543 shares of our Common Stock were outstanding and
the number of holders of record of our Common Stock at that date was
approximately 350. However, we estimate that it has a significantly greater
number of shareholders because a substantial number of our shares are held in
nominee names by our market makers.

(c) Dividends

No dividends on the Common Stock were paid by us during the fiscal year ended
2005 or the fiscal year ended 2004, 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.

(d) 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 for under such plan.

(e) 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.

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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 equal is 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, which may be a majority of the outstanding voting
securities of the Company.

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

(f) Sales of Unregistered Shares

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:

During the year ended March 31, 2005, 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.

During the fiscal year ended March 31, 2005, we issued to our Directors
3,000,000 shares of our Common Stock at approximately $0.01 per share totaling
$30,000 for services rendered for during the fiscal year ending March 31, 2004.
The shares were valued at the quoted market price of the stock on the date of
issuance.

During the fiscal year ended 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. The shares were valued at the quoted market price
of the stock on the date of issuance.

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.

During the fiscal year ended March 31, 2005 we issued to Mr. Kent Rodriguez, the
Company's 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. The quoted market price on the date of issuance
of these shares was $0.01.

During the fiscal year ended March 31, 2005 we issued to Mr. 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

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During the year ended March 31, 2005, the Company 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.

Fiscal 2004

During the fiscal year ended March 31, 2004, we issued a total of 11,383,000
shares of our Common Stock for total compensation of $148,700 for cash,
repayment of debt and services as follows:

During the year ended March 31, 2004, we issued 4,200,000 shares of our Common
Stock to 10 accredited investors, at an average of approximately $0.0154 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 $64,500.

During the fiscal year ended March 31, 2004, we issued to consultants 6,510,000
shares of our Common Stock at approximately $0.029 per share totaling $65,200
for consulting services rendered. The shares were valued at the quoted market
price of the stock on the date of issuance.

During the fiscal year ended March 31, 2004, we issued to Mr. Kent Rodriguez,
the Company's president, 100,000 shares of our Common Stock for services
rendered at $0.03 per share, totaling $3,000.00. The shares were valued at the
quoted market price of the stock on the date of issuance.

Fiscal 2003

During the fiscal year ended March 31, 2003, we issued a total of 20,842,500
shares of our Common Stock for total compensation of $1,088,356 for cash,
repayment of debt and services as follows:

During the year ended March 31, 2003, we issued 8,162,500 shares of our Common
Stock to 20 accredited investors, for an average of approximately $0.026 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 $209,075.

During the fiscal year ended March 31, 2003, we issued to our officers, 350,000
shares of our Common Stock at approximately $0.029 per share totaling $10,000
for consulting services rendered. The shares were valued at the quoted market
price of the stock on the date of issuance.

During the fiscal year ended March 31, 2003, we issued to our directors,
1,000,000 shares of our Common Stock at $0.02 per share totaling $20,000 for
services. The shares were valued at the quoted market price of the stock on the
date of issuance.

During the fiscal year ended March 31, 2003, we issued 1,200,000 shares of our
Common Stock at approximately $0.01 per share to retire $11,248 in outstanding
liabilities.

During the fiscal year ended 2003, we issued 1,430,000 shares of our Common
Stock to outside service providers for services at approximately $0.04 per share
totaling $58,000.

During the fiscal year ended March 31, 2003, we issued to Mr. Kent Rodriguez,
the Company's president, 7,000,000 shares of our Common Stock for salaries
earned during the years ended March 31, 2003, 2002 and 2001, at approximately
$0.026 per share, totaling $180,000 ($60,000 for the year ended 2003). The
shares were valued at the quoted market price of the stock on the date of
issuance.

During the fiscal year ended March 31, 2003, we issued to Mr. Kent Rodriguez,
the Company's president, 700,000 shares of our Common Stock and 100 shares of
our $0.10 par value Series A Preferred Stock as payment for a total of $500,000
of principal and $29,000 accrued interest towards Notes previously issued by us

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to Mr. Rodriguez. The Notes totaled $645,120 and the principal balance of
$145,120 remains as a Note payable at 12% interest per annum. The Series A
Preferred Stock carries a dividend of 8% per annum and may be converted to 40%
of the then issued and outstanding Common Stock of the Company at the time of
conversion.

During the fiscal year ended March of 2003, we issued to Mr. Kent Rodriguez, the
Company's president, 1,000,000 shares of our Common Stock as payment for $32,986
in accumulated dividend payments regarding the Series A Preferred Stock and
$38,047 in accrued interest related to Mr. Rodriguez's Promissory Notes.


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

RESULTS OF OPERATIONS AND PLAN OF OPERATION

No Real Operations

As of March 31, 2005, we had no operations other than paying past debts and
seeking merger or acquisition candidates, which activities generated no
revenues. Due to general economic conditions and the ensuing downturn in
e-commerce and internet-based businesses generally, we abandoned our prior
business plan to exploit our exclusive distribution rights via the internet and
re-focused our strategy and adopted a traditional wholesale to retail sales
distribution model seller of specialty action sports hard goods and related
apparel which we have been implementing since August, 2000. We expect to
continue to generate significant losses and without additional funding through
private placements of our Common Stock, which cannot be guaranteed, it is highly
unlikely that we can continue to operate.

On May 23, 2005, the Company acquired an eighty percent (80%) Net Revenue
Interest in certain oil and gas leasehold interests located in Montgomery
County, Kansas from MCI, an unrelated entity. In connection with the
acquisition, the Company also acquired certain oil field equipment along with
the oil and gas net revenue interests in exchange for an aggregate of 85,000,000
authorized, but previously unissued, shares of the Company's common stock.

The acquired oil and gas properties include a three hundred twenty (320) acre
leasehold and oil field equipment.

Acquisition Strategy

On August 7, 2003, we signed a non-binding letter of intent to acquire the
business and operations of Katherine Baumann, LLC ("KB"), a Beverly Hills based,
California Limited Liability Company and designer of specialty women's handbags.
We had a ninety-day option to acquire 25 percent of KB's fully-diluted capital
stock for $250,000, payable in cash. In November 2003, the option expired and
the parties agreed not to proceed with the acquisition.

On November 17, 2003, we signed a non-binding letter of intent to acquire the
business and operations of StravinSOFT, Inc. ("StravinSOFT"), a Dallas, Texas
based provider of Business and Custom Solutions, Best in Class Data
Transmission, and File Maker Application Software. In February 2004, the letter
of intent expired and we decided not to proceed with the acquisition.

On June 1, 2004, we signed a non-binding letter of intent to acquire the
business and operations of Legion Media Partners, ("LMP"), a Los Angeles,
California, based financier and distributor of theatrical motion pictures and
television programming on a world-wide basis. Under the terms of the LOI, we
planned to issue shares of its common stock to the shareholders of LMP in
exchange for either (a) all of the issued and outstanding capital stock of LMP,
or (b) all of the assets necessary for, used in or useful to LMP's operations.

                                       10

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We contemplated a one-for-one share exchange with the shareholders of LMP
receiving seventy-three percent (73%) of the new entity. The LOI subsequently
expired and we decided not to proceed with the proposed acquisition.

Subsequent Events

Asset Purchase Agreement

Effective May 23, 2005, the Company acquired an eighty percent (80%) Net Revenue
Interest in certain oil and gas leasehold interests located in Montgomery
County, Kansas from MCI, an unrelated entity. In connection with the
acquisition, the Company also acquired certain oil field equipment along with
the oil and gas net revenue interests in exchange for an aggregate of 85,000,000
shares of authorized, but previously unissued, shares of the Company's common
stock.

The acquired oil and gas properties include a three hundred twenty (320) acre
leasehold and oil field equipment.

With the issuance of 85,000,000 shares of Common Stock to MCI in connection with
the acquisition, MCI became the holder of approximately 51.66% of the issued and
outstanding securities of the Company. The change of control of the Company was
effected solely by the issuance of newly issued shares of the Company to MCI
upon the acquisition without any other consideration.

Directors and Officers

On February 17, 2005, the following individuals were elected to serve on the
Company's Board of Directors until the next shareholder meeting:

         1. Bruce Schreiner
         2. James Iman
         3. Gerald McIlhargey
         4. Ronald Abercrombie

Also, on February 17, 2005, the Company named Ronald Abercrombie the Interim
Chief Operating Officer, to assist the Company with the proposed transaction as
contemplated in the Letter of Intent between the Company and MCI, and Craig C.
Avery and Douglas Barton resigned as directors of the Company.

In addition, Messrs Schreiner, Iman, and McIlhargey were each granted options to
purchase 2,500,000 shares of the Company's common stock at an exercise price of
$.01 per share. Mr. Abercrombie was granted options to purchase 10,000,000
shares of the Company's common stock at an exercise price of $.01 per share.

During April 2005, each of the above four directors resigned their position and
all of the above options to purchase 17,500,000 shares of the Company's common
stock were cancelled.

During May 2005, the Company named Thomas M. Day and Charles Gregoire de
Rothschild to serve on The Company's Board of Directors until the next
shareholder meeting, and issued each director 250,000 shares of the Company's
Common Stock for their services.

Name Change

On June 17, 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.

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We have been funding our obligations through the issuance of our Common Stock
for services rendered or for cash in private placements. The Company may seek
additional funds in the private or public equity or debt markets in order to
execute its 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
on acceptable terms in which case the Company's ability to execute its business
strategy will be impaired.

Operations for Fiscal 2005

As of March 31, 2005, we had current and total assets of $51, and outstanding
liabilities of $457,163. We did not generate any revenues as of the year ended
March 31, 2005. During this period, our selling, general, and administrative
expenses were $128,992, our interest expense was $30,653 and our stock-based
consulting and compensation expense relating to stock issued for services was
$117,000. We had a net loss for the year ending March 31, 2005, of $212,445 or
$0.01 per share.

Liquidity and Capital Resources

Our cash and cash equivalents were $51 at the year ended March 31, 2005,
compared to $22 at year ended March 31, 2004. As a result of having little cash
during our fiscal year 2005, we meet our liquidity needs through the issuance of
our common shares for cash or for services rendered. For fiscal 2005, we issued
7,000,000 shares of our Common Stock in private placements raising $54,000 in
cash, 8,700,000 shares for services rendered, 4,400,000 shares for accrued
compensation, 2,800,000 shares for accrued preferred stock dividends, and
10,500,000 shares to settle outstanding promissory notes and related accrued
interest totaling $75,000 and $16,142.

For the twelve months ended March 31, 2005 we used $0 in investing activities.

During the twelve months ended March 31, 2005, we did not purchase any
equipment.

Our financing activities for the period ended March 31, 2005 provided cash of
$38,000 as compared to $114,340 for the period ended March 31, 2004. We plan to
raise additional capital during the coming fiscal year, but currently have not
identified additional funding.

Unless additional funding is identified, it is highly unlikely that we can
continue to operate.

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 interest, 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
leasehold.

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

Ultimately, our success is dependent upon our ability to generate revenues from
our acquired oil and gas leasehold interest.

Risk Factors

An investment in our securities is very 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.

                                       12

<PAGE>


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

During the past several years, we have attempted, without success, to generate
revenues and profits by the resale of branded clothing and accessories. For the
year ended March 31, 2005, we incurred a net loss of $252,445. On March 31,
2005, we had a working capital deficiency of $457,112. We cannot assure that we
will ever be profitable.

We have no business operations.

We have discontinued the marketing of branded clothes and accessories due to our
lack of working capital.

On May 23, 2005, the Company acquired an eighty percent (80%) Net Revenue
Interest in certain oil and gas leasehold interests located primarily in
Montgomery County, Kansas from MCI, an unrelated entity. In connection with the
acquisition, the Company also acquired certain oil field equipment along with
the oil and gas net revenue interests in exchange for an aggregate of 85,000,000
shares of authorized, but previously unissued, shares of the Company's common
stock.

The acquired oil and gas properties include a three hundred twenty (360) acre
leasehold and oil field equipment.

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 located primarily in Montgomery County,
Kansas, we acquired from MCI. 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 your 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. We have an employment agreement with him. 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. We 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 46.64 % of our outstanding
stock and are able to affect the election of the members of our Board of
Directors and make corporate decisions. In particular, Mr. Rodriguez controls
approximately 46.19% 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".

                                       13

<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 of Nevada law. These provisions may deter or discourage takeover
attempts and other changes in control of us not approved by our Board of
Directors. If potential acquirers are deterred, you may lose an opportunity to
profit from a possible acquisition.

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

None

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.

                                                     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                         45           Chief Executive Officer,
                                                    President, Secretary,
                                                    Director

Thomas M. Day                          52           Director

Charles Gregoire de Rothschild         61           Director


                                       14

<PAGE>


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.

THOMAS M. DAY

Mr. Day has served as a Director of the Company since May, 2005. Since 1970 to
the present, he has worked in various capacities in the oil and gas service
industry; and has worked a field superintendent for the past ten (10) years for
MCI. He has a B.A. degree from Oklahoma State University, Stillwater, Oklahoma.
Mr. Day has an Airline Transport Pilot Certificate and is a long time member of
the Pro Rodeo Cowboy Association. He is a resident of Independence, Kansas. Mr.
Day shall devote such time as is necessary to carry out his responsibilities as
a Director of the Company.

CHARLES GREGOIRE De ROTHSCHILD

Mr. Rothschild has served as a Director of the Company since May, 2005. For the
past 35 years, he has been involved in Finance, Investments and Merchant
Banking. Mr. Rothschild as served as a Director of several Companies including
AB International Investors, Summit Investments, and Aaron Rothschild de Realty.
He is a resident of New York, NY. Mr. Rothschild shall devote such time as is
necessary to carry out his responsibilities as a Director of the Company.

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., (formerly known as Douglas Communications, Inc.) a private
promotion, development, and marketing consulting firm. He has a B.S. degree in
Economics/History from the University of Minnesota. Mr. Barton resigned as a
Director of the Company, in February, 2005.

CRAIG C. AVERY

Mr. Avery has served as Secretary and a Director of the Company since August,
1997. For the past 15 years, he has been the owner of Craig C. Avery Company, a
Minneapolis-based real estate development and investment company, which has
developed apartments, senior housing, office buildings, and industrial and
residential land subdivisions. He has a B.A. and MBA degree in Finance from the
University of Minnesota. Mr. Avery resigned as Secretary and Director of the
Company, in February, 2005.

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 four (4) times by written consent during the
fiscal year ended March 31, 2005.

In 1999, the Board of Directors established a Compensation Committee comprised
of Messrs. Avery and Barton. The Compensation Committee held one meeting in
fiscal 2005.

                                       15

<PAGE>


In May 2000, the Board of Directors established an Audit Committee. It is
currently comprised of Messrs. Day and Rothschild. The Audit Committee held one
meeting in fiscal 2005.

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.

EXECUTIVE COMPENSATION

The following table sets forth the compensation received for the three fiscal
years ended March 31, 2004, 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.

Name and
Principal Position                            Year           Salary (1)
                                              ----           ----------

Kent A. Rodriguez,
Chief Executive Officer and President         2005      $ 60,000 (1) (2) (4)
                                              2004      $ 60,000 (1) (2) (4)
                                              2003      $ 60,000 (1) (2) (3) (4)


(1) No salary was paid in any year but was accrued on a monthly basis. No
bonuses were paid for the years ending March 31, 2004 and March 31, 2003. A
stock bonus was paid in the years ending March 31, 2003, as explained below.

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

(3) On September 30, 2003, Mr. Rodriguez was issued 100,000 shares as a bonus
valued at $1,000.

                                       16

<PAGE>


(4) 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.

Mr. Rodriguez did not receive any other annual compensation, or other
compensation during the Company's fiscal years ended March 31, 2005, 2004 or
2003.

OPTION GRANTS IN LAST FISCAL YEAR

The Company did not grant any options to purchase any equity securities of the
Company during fiscal 2005.

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, 2006, 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. Since November 1999, Mr. Rodriguez has agreed to
allow the Company to accrue such amount. 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 30, 2004 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 15, 2005, we had a total of 168,538,543
common shares issued and outstanding.

Names and Addresses                        Beneficial                 Percent
of Beneficial Owner                        Ownership                  of Class

Kent Rodriguez                             129,749,743 (1)             46.19%
7000 Flour Exchange Building
310 Fourth Avenue South
Minneapolis, MN 55415

Thomas M. Day                                  250,000                  0.15%
7000 Flour Exchange Building
310 Fourth Avenue South
Minneapolis, MN 55415

Charles Gregrorie de Rothschild                500,000                  0.30%
7000 Flour Exchange Building
310 Fourth Avenue South
Minneapolis, MN 55415

Officers and Directors                     139,499,743 (1)             46.64%
as a Group (3 persons)

Mid-Continent Investments                   85,000,000                 50.43%
7906 East 55th Street
Tulsa, OK  74145

                                       17

<PAGE>


(1) Includes 1,200,200 shares of Common Stock owned by Weyer Capital
Corporation, an affiliate of Mr. Rodriguez, and 112,359,543 shares of Common
Stock issuable upon conversion of 100 shares of Series A Preferred Stock.

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, which were issued in prior years. The $145,120 note carries a 10
percent interest rate and matured in June 2004. The $84,840 note also carries a
10 percent interest rate and matured in July 2004. Both notes are in default.

The Company paid the officer $6,598 for interest expense during the year ended
March 31, 2005. Accrued interest payable and interest expense on the notes
totaled $17,247 and $22,996, respectively, as of and for the year ended March
31, 2005.

During the year ended March 31, 2004, the officer loaned the Company an
additional $84,840 in exchange for a promissory note. The $84,840 note carries a
10 percent interest rate and mature in July 2004.

The Company paid the officer $20,186 matured interest expense during the year
ended March 31, 2004. Accrued interest payable and interest expense on the notes
totaled $849 and $21,035, respectively, as of and for the year ended March 31,
2004.

Related Party - Preferred Stock

During the years ended March 31, 2002, 2001 and 2000, the Company signed several
notes with an officer/director, for $128,120, $317,000 and $200,000 in proceeds.
These notes accrued interest at 12 percent per annum and are secured by all
available business assets. During the year ended March 31, 2003, the Company
issued 100 shares of its Series A Preferred Stock and 700,000 shares of its
Common Stock to the officer/director as payment for $500,000 of principal and
$29,000 of accrued interest on the notes

The 100 shares of Series A Preferred Stock, issued to the 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 of the fully diluted
shares outstanding after their issuance. The Series A Preferred Stock pays eight
percent dividends. The dividends are cumulative and payable quarterly. The
Series A Preferred Stock carries a 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.

Preferred dividends for the years ended March 31, 2005 and 2004 totaled $40,000
and $40,000, respectively. During February 2005, the Company issued 2,800,000
shares of its common stock to the officer/director as payment for $73,333 of
dividends earned for the period from April 2003 through January 2005, at
approximately $.025 per share. The quoted market price on the date of issuance
of these shares was $0.01. As of March 31, 2005, the Company owed the officer
$6,667 in accrued dividends.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

     31.1 Certification of Chief Executive Officer pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

     31.2 Certification of Chief Financial Officer pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

     32.1 Certification of Chief Executive Officer pursuant to Section 906 of
          the Sarbanes-Oxley Act of 2002.

     32.2 Certification of Chief Financial Officer pursuant to Section 906 of
          the Sarbanes-Oxley Act of 2002.

                                       13

<PAGE>


(b) Reports on Form 8-K. During the fiscal year ended March 31, 2004, and
through August 7, 2003, we filed the following on Form 8-K:

     1.   Filed May 6, 2003, Notice of action by majority stockholders to Amend
          Articles of Incorporation

     2.   Filed August 7, 2003, Notice of signing of Letter of Intent to acquire
          Kathrine Baumann, LLC.

     3.   Filed November 25, 2003 Notice of termination of Letter of Intent to
          acquire Kathrine Baumann, LLC.

     4.   Filed November 25, 2003 Notice of signing a Letter of Intent to
          acquire StravinSoft, Inc.

     5.   Filed June 4, 2004, Notice of signing a Letter of Intent to acquire
          Legion Media, Inc.

     6.   Filed February 17, 2005, Notice of signing a Letter of Intent to
          acquire a net revenue interest in certain oil and gas leases, and
          equipment, in Montgomery County, Kansas, in exchange for our Common
          Stock.

     7.   Filed May 23, 2005, Notice of signing as Asset Purchase Agreement with
          Mid-Continent Investments, Inc. ("MCI"). We acquired a net revenue
          interest in certain oil and gas leases, and equipment, in Montgomery
          County, Kansas, in exchange for our Common Stock.

     8.   Filed June 15, 2005, Filed Preliminary Information Statement to Amend
          the Company's Articles of Incorporation approved by a majority of the
          Company's stockholders.

     9.   Filed June 27, 2005, Filed Definitive Information Statement to Amend
          the Company's Articles of Incorporation approved by a majority of the
          Company's stockholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees.

We were billed by our independent auditors, Cordovano and Honeck LLP, $8,500.00
in fees for the fiscal year ended March 31, 2005, and $14,625.00 for the fiscal
year ended March 31, 2004.

                                   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 6, 2005


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

                                       19

<PAGE>


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 6, 2005
----------------------------------
     Kent Rodriguez, President, Chief Executive Officer
     Secretary and Director (Principal Executive Officer and
     Principal Financial Officer)



/s/  Thomas M. Day                                                July 6, 2005
----------------------------------
     Thomas M. Day, Director



/s/  Charles Gregoire de Rothschild                               July 6, 2005
------------------------
     Charles Gregoire de Rothschild, Director

                                       20

<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   XDOGS, INC.
                          EXHIBIT INDEX TO FORM 10-KSB


                    For the fiscal year ended March 31, 2005
                         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 9.1 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)                                                   *

23.1                Consent of Cordovano and Honeck CPA                     *


31.1                Certification of Chief Executive Officer
                    pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.

31.2                Certification of Chief Financial Officer
                    pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.

32.1                Certification of Chief Executive Officer
                    pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.

32.2                Certification of Chief Financial Officer
                    pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.


* Incorporated by reference to a previously filed exhibit or report.

                                       21

<PAGE>



                                   XDOGS, INC.

                          INDEX TO FINANCIAL STATEMENTS


                                                                           Page
                                                                          ------

Report of Independent Registered Public Accounting Firm..............       F2

Balance sheet, March 31, 2005........................................       F3

Statements of operations, for the years
     ended March 31, 2005 and 2004...................................       F4

Statement of changes in shareholders' deficit, for the years
     ended March 31, 2005 and 2004...................................       F5

Statements of cash flows, for the years
     ended March 31, 2005 and 2004...................................       F6

Notes to financial statements........................................       F7

                                      F-1

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
XDOGS, Inc.:


We have audited the balance sheet of XDOGS, Inc. as of March 31, 2005, and the
related statements of operations, changes in shareholders' deficit, and cash
flows for the years ended March 31, 2005 and 2004. 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of XDOGS, Inc. as of March 31,
2005, and the results of its operations and its cash flows for the years ended
March 31, 2005 and 2004, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1, the Company has a net
capital deficit at March 31, 2005 and has suffered significant operating losses
since inception, which raise a substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note A. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.




/s/  Cordovano and Honeck LLP
----------------------------------
     Cordovano and Honeck LLP


Denver, Colorado
June 9, 2005

                                      F-2

<PAGE>


                                   XDOGS, INC.
                                  BALANCE SHEET

                                 March 31, 2005





                                     Assets


Current assets:
     Cash...........................................................$        51
                                                                    ===========

                      Liabilities and Shareholders' Deficit


Current liabilities:
     Accounts and notes payable:
        Accounts payable............................................$   164,407
        Accounts payable, related party (Note 2)....................      3,882
        Notes payable, related party (Note 2).......................    229,960
     Accrued expenses...............................................     52,247
     Accrued dividends payable (Note 2).............................      6,667
                                                                    -----------
                 Total current liabilities..........................    457,163
                                                                    -----------

Commitments and contingencies (Note 7) .............................       --


Shareholders' deficit (Note 5):
     Preferred stock, Series A, $.10 par value, 1,000,000 shares
        authorized, 100 shares issued and outstanding...............         10
     Common stock, $0.001 par value, 500,000,000 shares authorized,
        79,638,543 shares issued and outstanding....................     79,639
     Additional paid-in capital..................................... 14,690,452
     Retained deficit...............................................(15,227,213)
                                                                     ----------
                 Total shareholders' deficit........................   (457,112)
                                                                    -----------
                                                                    $        51
                                                                    ===========


                 See accompanying notes to financial statements

                                      F-3

<PAGE>
<TABLE>
<CAPTION>



                                         XDOGS, INC.
                                  STATEMENTS OF OPERATIONS



                                                                   For the Years Ended
                                                                        March 31,
                                                               ----------------------------
                                                                   2005            2004
                                                               ------------    ------------

<S>                                                            <C>             <C>
Operating expenses:
    Selling, general and administrative expenses ...........   $    128,992    $    144,171
       Officer compensation (Note 2) .......................           --             3,000
       Directors fees (Note 2) .............................         30,000            --
       Legal and consulting (Note 5) .......................         87,000         142,000
    Asset impairment (Note 3) ..............................            726            --
    Loss on asset disposals (Note 3) .......................           --             4,299
    Gain on debt settlements (Note 6) ......................        (64,926)        (19,555)
                                                               ------------    ------------
                    Total operating expenses ...............        181,792         273,915
                                                               ------------    ------------

                    Operating income (loss) ................       (181,792)       (273,915)
Non-operating income (expense):
    Interest expense (Notes 2 and 4) .......................        (30,653)        (26,452)
    Other income ...........................................           --              --
                                                               ------------    ------------
                    Income (loss) before income taxes ......       (212,445)       (300,367)
Provision (benefit) for income taxes (Note 6) ..............           --              --
                                                               ------------    ------------

                    Net income (loss) ......................       (212,445)       (300,367)
Preferred stock dividend requirements (Note 2) .............        (40,000)        (40,000)
                                                               ------------    ------------

                    Income (loss) applicable to common stock   $   (252,445)   $   (340,367)
                                                               ============    ============


Basic and diluted income (loss) per common share ...........   $      (0.01)   $      (0.01)
                                                               ============    ============

Basic and diluted weighted average
    common shares outstanding ..............................     47,175,722      37,429,376
                                                               ============    ============


                       See accompanying notes to financial statements

                                             F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                      XDOGS, INC.
                                     STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT



                                                             Preferred Stock, Series A            Common Stock
                                                            ---------------------------   ---------------------------
                                                               Shares       Par Value        Shares       Par Value
                                                            ------------   ------------   ------------   ------------

<S>                                                                 <C>   <C>              <C>          <C>
                              Balance, April 1, 2003 ....            100   $         10     31,328,543   $     31,329

Common stock sold for cash ..............................           --             --        4,200,000          4,200
Common stock issued to attorney in exchange for
    services recorded at fair value (Note 5) ............           --             --          600,000            600
Common stock issued to consultants in exchange for
    services recorded at fair value (Note 5) ............           --             --        6,510,000          6,510
Common stock issued to an officer in exchange for
    compensation recorded at quoted market value (Note 2)           --             --          100,000            100
Common stock options and warrants expired (Note 5) ......           --             --             --             --
Dividends on preferred stock (Note 2) ...................           --             --             --             --
Net loss ................................................           --             --             --             --
                                                            ------------   ------------   ------------   ------------
                                Balance, March 31, 2004 .            100             10     42,738,543         42,739


Common stock sold for cash ..............................           --             --        7,000,000          7,000
Common stock issued to directors in exchange for
    directors fees (Note 2) .............................           --             --        3,000,000          3,000
Common stock issued to consultants in exchange for
    services recorded at fair value (Note 5) ............           --             --        8,700,000          8,700
Common stock issued to an officer as payment for
    accrued compensation (Note 2) .......................           --             --        4,400,000          4,400
Common stock issued to an officer as payment for
    accrued preferred stock dividends (Note 2) ..........           --             --        2,800,000          2,800
Common stock issued in litigation settlement (Note 5) ...           --             --          500,000            500
Common stock issued as payment for outstanding
    promissory notes and accrued interest (Note 5) ......           --             --       10,500,000         10,500
Dividends on preferred stock (Note 2) ...................           --             --             --             --
Net loss ................................................           --             --             --             --
                                                            ------------   ------------   ------------   ------------
                                Balance, March 31, 2005 .            100   $         10     79,638,543   $     79,639
                                                            ============   ============   ============   ============

                                                         F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                      XDOGS, INC.
                                     STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
                                                      (Continued)


                                                            Additional
                                                              Paid-in         Accrued        Retained
                                                              Capital      Compensation      Deficit          Total
                                                            ------------   ------------    ------------    ------------

<S>                                                        <C>            <C>             <C>             <C>
                              Balance, April 1, 2003 ....   $ 13,874,724   $    204,063    $(14,634,401)   $   (524,275)

Common stock sold for cash ..............................         60,300           --              --            64,500
Common stock issued to attorney in exchange for
    services recorded at fair value (Note 5) ............         29,400           --              --            30,000
Common stock issued to consultants in exchange for
    services recorded at fair value (Note 5) ............        105,490           --              --           112,000
Common stock issued to an officer in exchange for
    compensation recorded at quoted market value (Note 2)          2,900           --              --             3,000
Common stock options and warrants expired (Note 5) ......        204,063       (204,063)           --              --
Dividends on preferred stock (Note 2) ...................           --             --           (40,000)        (40,000)
Net loss ................................................           --             --          (300,367)       (300,367)
                                                            ------------   ------------    ------------    ------------
                                Balance, March 31, 2004 .     14,276,877           --       (14,974,768)       (655,142)


Common stock sold for cash ..............................         47,000           --              --            54,000
Common stock issued to directors in exchange for
    directors fees (Note 2) .............................         27,000           --              --            30,000
Common stock issued to consultants in exchange for
    services recorded at fair value (Note 5) ............         78,300           --              --            87,000
Common stock issued to an officer as payment for
    accrued compensation (Note 2) .......................        105,600           --              --           110,000
Common stock issued to an officer as payment for
    accrued preferred stock dividends (Note 2) ..........         70,533           --              --            73,333
Common stock issued in litigation settlement (Note 5) ...          4,500           --              --             5,000
Common stock issued as payment for outstanding
    promissory notes and accrued interest (Note 5) ......         80,642           --              --            91,142
Dividends on preferred stock (Note 2) ...................           --             --           (40,000)        (40,000)
Net loss ................................................           --             --          (212,445)       (212,445)
                                                            ------------   ------------    ------------    ------------
                                Balance, March 31, 2005 .   $ 14,690,452   $       --      $(15,227,213)   $   (457,112)
                                                            ============   ============    ============    ============


                                    See accompanying notes to financial statements

                                                      F-5(Con't)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                XDOGS, INC.
                                          STATEMENTS OF CASH FLOWS



                                                                                    For the Years Ended
                                                                                         March 31,
                                                                                   ----------------------
                                                                                     2005         2004
                                                                                   ---------    ---------
<S>                                                                                <C>          <C>
Cash flow from operating activities:
    Net loss ...................................................................   $(212,445)   $(300,367)
       Transactions not requiring cash:
         Preferred stock dividends .............................................     (40,000)     (40,000)
         Loss on asset impairment (Note 3) .....................................         726         --
         Loss on asset disposals (Note 3) ......................................        --          4,299
         Stockbased compensation (Notes 2 and 5) ...............................     117,000      145,000
         Gain on settlement of liabilties ......................................     (64,926)     (20,555)
         Changes in current assets and current liabilities:
            Accounts payable and other accrued expenses ........................     161,674       86,442
                                                                                   ---------    ---------
                                         Net cash (used in) operating activities     (37,971)    (125,181)
                                                                                   ---------    ---------

Cash flow from financing activities:
        Net proceeds from sale of common stock (Note 5) ........................      54,000       64,500
        Payment of litigation payable (Note 7) .................................     (16,000)     (85,000)
        Proceeds from note payable to officer (Note 2) .........................     (50,000)      84,840
        Proceeds from other note payable (Note 4) ..............................      50,000       50,000
        Payments on other promissory notes .....................................        --           --
                                                                                   ---------    ---------
                                       Net cash provided by financing activities      38,000      114,340
                                                                                   ---------    ---------

                                                              Net change in cash          29      (10,841)
Cash at beginning of year ......................................................          22       10,863
                                                                                   ---------    ---------

Cash at end of year ............................................................   $      51    $      22
                                                                                   =========    =========


Supplemental cash flow information:
        Cash paid during the year for interest .................................   $   6,598    $    --
                                                                                   =========    =========
        Cash paid during the year for income taxes .............................   $    --      $    --
                                                                                   =========    =========

       Noncash investing and financing activities:
         Stock issued to pay promissory notes and accrued interest .............   $  91,142    $    --
                                                                                   =========    =========
         Stock issued to pay litigation settlement .............................   $   5,000    $    --
                                                                                   =========    =========


                              See acconpanying notes to financial statements

                                                   F-6
</TABLE>

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Xdogs, Inc. (the "Company") was incorporated in Colorado in 1991 as a
distributor of SnowRunner snow skates. Between 1991 and 1994, the Company was
restructured, and the name of the Company was changed several times, including
such names as SnowRunner (USA) Inc., SnowRunners, Inc., and The Sled Dogs
Company. The Company filed for bankruptcy protection in 1997. As a result of the
bankruptcy, the Company was reorganized and in 1999 was renamed XDOGS, Inc.
Subsequently, the Company focused its effort on an Internet based distribution
model and a traditional wholesale to retail distribution model. These efforts
have not been successful. The Company's current business plan is to evaluate,
structure and complete a merger with, or acquisition of, a privately owned
corporation. The Company's ability to sustain future operations is dependent
upon the Company's ability to achieve the objectives of its business plan
described above.

On May 23, 2005, the Company entered into an Asset Purchase Agreement with
Mid-Continent Investments, Inc. ("MCI"), in which the Company acquired a net
revenue interest in certain oil and gas leasehold interests in exchange for
stock (see Note 8).

Basis of Presentation - Going Concern

The Company has a net capital deficit at March 31, 2005 resulting from among
other things; recurring operating losses. In addition, the Company is unable to
meet its obligations as they come due and is in default on certain debt
obligations. The Company's ability to achieve its business plan, which may be
necessary to permit the realization of assets and satisfaction of liabilities in
the ordinary course of business, is uncertain.

The Company's future success will be dependent upon its ability (1) to locate
and consummate a merger or acquisition with an operating company and,
ultimately, (2) to attain profitability. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities of three months or less when acquired, to be cash equivalents. The
Company had no cash equivalents at March 31, 2005.

Income Taxes

Deferred taxes are provided on an asset and liability method whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss and tax credit carryforwards, and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax basis.
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. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.

Impairment of Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. Statement No. 144 requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are

                                      F-7

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying value or fair value, less
costs to sell.

Income (Loss) Per Share

Basic earnings/loss per share is computed by dividing income available to common
shareholders (the numerator) by the weighted-average number of common shares
(the denominator) for the period. The computation of diluted earnings per share
is similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if potentially dilutive common shares had been issued.

At March 31, 2005, there was no variance between basic and diluted loss per
share as all outstanding common stock equivalents (conversion of preferred stock
- see Note 2) were anti-dilutive.

Use of Estimates

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Fair Value

The Company's financial instruments consist of cash and short-term debt. The
carrying amounts of these instruments approximate fair value due to their
short-term maturity. The fair value of the Company's short-term debt is
estimated based on the quoted market prices for the same or similar issues or on
the current rates to the Company for debt of the same remaining maturities with
similar collateral requirements.

Stock-Based Compensation

The Company accounts for compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and complies with the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), and SFAS No. 148,
"Accounting for Stock-Based Compensation-Transition and Disclosure". Under APB
25, compensation expense of fixed stock options is based on the difference, if
any, on the date of the grant between the deemed fair value of the Company's
stock and the exercise price of the option. Compensation expense is recognized
on the date of grant or on the straight-line basis over the option-vesting
period. The Company accounts for stock issued to nonemployees in accordance with
the provisions of SFAS 123 and EITF Issue No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services".

The Company has no stock options outstanding at March 31, 2005.

Recent accounting pronouncements

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- an amendment of APB Opinion No. 29." This Statement eliminates the exception
for nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have

                                      F-8

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


commercial substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. This Statement is effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. The Company does not
expect application of SFAS No. 153 to have a material affect on its financial
statements.

In December 2004, the FASB issued a revision to SFAS No. 123, "Share-Based
Payment." This Statement supercedes APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and its related implementation guidance. It establishes
standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or 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. This Statement does not
change the accounting guidance for share-based payment transactions with parties
other than employees provided in Statement No. 123 as originally issued and EITF
Issue No. 96-18. This Statement is effective for public entities that file as
small business issuers as of the beginning of the first fiscal period that
begins after December 15, 2005. The Company has not yet determined the impact of
SFAS No. 123 (revised) on its financial statements.

NOTE 2: RELATED PARTY TRANSACTIONS

Promissory Notes

As of March 31, 2005, the Company owed an officer two promissory notes totaling
$229,960, which were issued in prior years. The $145,120 note carries a 10
percent interest rate and matured in June 2004. The $84,840 note also carries a
10 percent interest rate and matured in July 2004. Both notes are in default.

The Company paid the officer $6,598 for interest expense during the year ended
March 31, 2005. Accrued interest payable and interest expense on the notes
totaled $17,247 and $22,996, respectively, as of and for the year ended March
31, 2005.

Preferred Stock

The 100 shares of Series A Preferred Stock, issued to the 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 of the fully diluted
shares outstanding after their issuance. The Series A Preferred Stock pays eight
percent dividends. The dividends are cumulative and payable quarterly. The
Series A Preferred Stock carries a 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.

Preferred dividends for the years ended March 31, 2005 and 2004 totaled $40,000
and $40,000, respectively. During February 2005, the Company issued 2,800,000
shares of its common stock to the officer/director as payment for $73,333 of
dividends earned for the period from April 2003 through January 2005. As of
March 31, 2005, the Company owed the officer $6,667 in accrued dividends.

Stock-Based Compensation

During the year ended March 31, 2005, the Company issued its directors 3,000,000
shares of its common stock for directors fees earned during the year. The
transactions were recorded at the quoted market price of the stock on the date
of issuance. The services, valued at $30,000, are included in the accompanying
financial statements as "stock-based compensation".

                                      F-9

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


In September 2003, the Company issued an officer 100,000 shares of its common
stock, valued at $3,000, as compensation for services rendered. For financial
accounting purposes, the Company valued the common stock transactions based on
the quoted market price.

Accrued Wages

The Company accrues wages for its president at a rate of $5,000 per month.
During the year ended March 31, 2005, the Company issued the officer 4,400,000
shares of its common stock as payment for $110,000 of salaries earned during the
period from April 2003 through January 2005. As of March 31, 2005, the Company
owed the officer $10,000 in wages related to February and March 2005.

NOTE 3: EQUIPMENT

As of March 31, 2005, the Company completed a balance sheet review and
determined that the carrying amount of its equipment exceeded its fair value. As
a result of this review, the Company recorded an asset impairment charge of
$726.

NOTE 4: SHAREHOLDERS' DEFICIT

Common Stock Issued For Debt, Interest and Other Liabilities

During the year ended March 31, 2005, the Company 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.

During the year ended March 31, 2005, the Company issued 500,000 shares of its
common stock as partial payment in a litigation settlement (see Note 6).

Common Stock Issued For Services

During the years ended March 31, 2005 and 2004, the Company issued 8,700,000 and
7,110,000 shares of common stock to outside service providers, in exchange for
legal and consulting services. The value of the stock issued was recorded at
fair value based on the stock's quoted market price on the date of issuance and
totaled $87,000 and $142,000, respectively. The services are included in the
accompanying financial statements as "stock-based compensation".

Sale of Common Stock

During the years ended March 31, 2005 and 2004, the Company sold, through its
officers and directors, 7,000,000 and 4,200,000 shares of its common stock for
$54,000 and $64,500, respectively.

NOTE 5: INCOME TAXES

At March 31, 2005, the Company has accumulated a net operating loss of
approximately $21,000,000 (including pre-reorganization), which may be used to
reduce future taxable income through 2025. 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
ownership of the Company. Deferred income taxes reflect the net tax effects of

                                      F-10

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


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:


                                                          March 31,
                                               --------------------------------
                                                  2005                 2004
                                               -----------          -----------
Deferred tax assets from net operating
  loss carryforward.......................     $ 8,671,350          $ 8,593,005

Less valuation allowance.................      $(8,671,350)         $(8,593,005)

Net deferred tax assets..................      $      --            $      --
                                               ===========          ===========


A reconciliation of the U.S. statutory federal income tax rate to the effective
rate is as follows:


                                                               March 31,
                                                        -----------------------
                                                         2005            2004
                                                        -------         -------

U.S. federal statutory graduated rate.................   30.22%          32.77%
State income tax rate,
   net of federal benefit.............................    6.84%           6.59%
Permanent differences.................................   -0.18%          -0.32%
Net operating loss for which no tax
   benefit is currently available.....................  -36.88%         -39.04%

                                                          0.00%           0.00%
                                                        =======         =======


NOTE 6: LITIGATION

Mr. Henry Furst filed a complaint against the Company in the U.S. District
Court, for the District of Minnesota, alleging that the Company breached its
contractual obligations to him and seeking $144,300 in damages. The parties
subsequently negotiated a settlement whereby the Company agreed to pay Mr. Furst
$94,000 in installments and executed a confession of judgment in favor of Mr.
Furst for that amount. The Company has failed to pay Mr. Furst in accordance
with the settlement agreement. During the year ended March 31, 2002, the Company
paid Mr. Furst a total of $22,363 in interest and principal. As of March 31,
2004, the balance due on the litigation settlement totaled $85,926. During
February 2005, Mr. Furst agreed to accept $16,000 and 500,000 shares of the
Company's stock to settle the judgment. The 500,000 shares issued in the
settlement were valued at traded market price of the stock on the settlement
date, or $.01 per share. The settlement resulted in the Company recognizing a
gain on the extinguishment of the judgment totaling $64,926.

NOTE 7: LETTERS OF INTENT

On June 1, 2004, the Company signed a non-binding letter of intent to acquire
the business and operations of Legion Media Partners, ("LMP"), a Los Angeles,
California based financier and distributor of theatrical motion pictures and
television programming on a world-wide basis. Under the terms of the LOI, the
Company planned to issue shares of its common stock to the shareholders of LMP
in exchange for either (a) all of the issued and outstanding capital stock of
LMP, or (b) all of the assets necessary for, used in or useful to LMP's
operations. The Company and LMP contemplated a one-for-one share exchange with
the shareholders of LMP receiving seventy-three percent (73%) of the new entity.
The LOI subsequently expired and the Company decided not to proceed with the
proposed acquisition.

On August 7, 2003, the Company signed a non-binding letter of intent to acquire
the business and operations of Katherine Baumann, LLC ("KB"), a Beverly Hills
based, California Limited Liability Company and designer of specialty women's

                                      F-11

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


handbags. The Company had a ninety day option to acquire 25 percent of KB's
fully-diluted capital stock for $250,000, payable in cash. In November 2003, the
option expired and the parties agreed not to proceed with the acquisition.

On November 17, 2003, the Company signed a non-binding letter of intent to
acquire the business and operations of StravinSOFT, Inc. ("StravinSOFT"), a
Dallas, Texas based provider of Business and Custom Solutions, Best in Class
Data Transmission, and File Maker Application Software. In February 2004, the
letter of intent expired and the parties agreed not to proceed with the
acquisition.

NOTE 8: SUBSEQUENT EVENT

Asset Purchase Agreement

Effective May 23, 2005, the Company acquired an eighty percent (80%) Net Revenue
Interest in certain oil and gas leasehold interests located primarily in
Montgomery County, Kansas from MCI, an unrelated entity. In connection with the
acquisition, the Company also acquired certain oil field equipment along with
the oil and gas net revenue interests in exchange for an aggregate of 85,000,000
shares of authorized, but previously unissued, shares the Company's common
stock.

The acquired oil and gas properties include a three hundred twenty (320) acre
leasehold and oil field equipment.

With the issuance of 85,000,000 shares of Common Stock to MCI in connection with
the acquisition, MCI became the holder of approximately 51.66% of the issued and
outstanding securities of the Company. The change of control of the Company was
effected solely by the issuance of newly issued shares of the Company to MCI
upon the acquisition without any other consideration.

Directors and Officers

On February 17, 2005, the following individuals were elected to serve on the
Company's Board of Directors until the next shareholder meeting:

         1. Bruce Schreiner
         2. James Iman
         3. Gerald McIlhargey
         4. Ronald Abercrombie

Also, on February 17, 2005, the Company named Ronald Abercrombie the Interim
Chief Operating Officer, to assist the Company with the proposed transaction as
contemplated in the Letter of Intent between the Company and MCI.

In addition, Messrs Schreiner, Iman, and McIlhargey were each granted options to
purchase 2,500,000 shares of the Company's common stock at an exercise price of
$.01 per share. Mr. Abercrombie was granted options to purchase 10,000,000
shares of the Company's common stock at an exercise price of $.01 per share.

During April 2005, each of the above four directors resigned their position and
all of the above options to purchase 17,500,000 shares of the Company's common
stock were cancelled.

                                      F-12