FORM 10-KSB
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X] ANNUAL  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
    1934 For the fiscal year ended: April 30, 2007



                         Commission file number 0-27485

                             SUN RIVER ENERGY, INC.
                               -------------------
                 (Name of small business issuer in its charter)



                                 CIK: 0001066551



Colorado                                         84-1491159
----------                                   --------------------
State or other jurisdiction of              IRS Employer ID Number
Incorporation or organization


            Suite 210 E., 10200 W. 44th Ave., Wheat Ridge, CO 80033
           ---------------------------------------------------------
                    (Address of principal executive offices)

Issuer's telephone number:             (303) 940-2090
                                      -----------------

Securities registered under Section 12(b) of the Exchange Act: None
                                                               -----

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
no par value (Title of class)

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

        Yes X      No
           ----       ----

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of issuer'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]

State issuer's  revenues for its most recent fiscal year: $0
                                                          ---

Indicate  by  check mark  whether the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). __ Yes X No


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

As of July 30, 2007 5,048,935 shares of the Company's Common Stock, were held by
non-affiliates,  of a market  value of  $6,816,062  based  upon the bid price of
$1.35 per share on July 30, 2007.

As of July 30, 2007,  there were  14,845,768  common shares of the issuer issued
and outstanding.



<PAGE>


                                TABLE OF CONTENTS


PART I

        Item 1.   Description of Business                                      3
        Item 2.   Description of Property                                     30
        Item 3.   Legal Proceedings                                           32
        Item 4.   Submission of Matters to a Vote of Security Holders         32

PART II

        Item 5.   Market for Common Equity and Related Stockholder
                  Matters                                                     36
        Item 6.   Management's Discussion and Analysis or Plan of
                  Operation                                                   31
        Item 7.   Financial Statements                                        38
        Item 8.   Changes in and Disagreements With Accountants on
                  Accounting and Financial Disclosure                         38
        Item 8a.  Controls and Procedures                                     38
        Item 8b.  Other Information                                           39

PART III

        Item 9.   Directors, Executive Officers, Promoters and Control
                  Persons; Compliance with Section 16(a) of the Exchange Act  39
        Item 10.  Executive Compensation                                      43
        Item 11.  Security Ownership of Certain Beneficial Owners and
                  Management                                                  46
        Item 12.  Certain Relationships and Related Transactions              47
        Item 13.  Exhibits                                                    47
        Item 14.  Principal Accountant Fees and Services                      48

SIGNATURES                                                                    49




<PAGE>


PART I


ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------
General

     Sun River Energy,  Inc.  ("Sun River" or the  "Company")  was  incorporated
under the laws of the State of Colorado  on April 30, 1998 as Dynadapt  System,
Inc. to raise capital for an Internet  website  related  project.  On August 18,
2006, the Company changed its name to Sun River Energy, Inc. in connection with
the acquisition of its wholly-owned  subsidiary Sun River Energy, Inc. on April
21, 2006.

     On April 21, 2006,  we acquired 100% of the issued and  outstanding  shares
(8,633,333)  of Sun River Energy,  Inc. in exchange for 8,633,333  shares of the
Company's common stock, as part of a Plan and Agreement of Reorganization, dated
April 21,  2006.  As a result of the Plan and  Agreement of  Reorganization,  we
changed our business  operations to focus on the  development  as an independent
energy  company  engaged in the  exploration  of North  American  unconventional
natural gas properties and conventional oil and gas oil and gas exploration.

     As part of the  acquisition,  we acquired 120,000 acres of a mixture of fee
oil and gas mineral  interest,  some coal bed methane fee interest  and,  30,000
acres  approximately of other fee mineral rights and 4,000 gross acres of leases
that we have now begun to explore for methane.

Business Activities and Recent Developments
-------------------------------------------
Our business operations are in the exploration and development of oil and gas in
the exploration of North America  including  unconventional  natural gas in the
Rocky Mountain region. Specifically, in the areas described below:

-       Raton Basin;
-       Johnson and Natrona Counties, Wyoming and Colfax County, New Mexico.

Raton Basin

     Our recent  field  operations  have been  focused on  exploring  a coal bed
methane prospect located in the Raton Basin in Northern New Mexico.

     We have  approximately  11,000 gross acres of coal bed methane prospects in
the Raton Basin,  of which 5,640 acres are fee (90% interest) and 4,730 acres of
which are a lease  assignment.  After the year  ended  April 30,  2007,  we have
drilled 3 coalbed  methane  wells in the Raton Basin,  Myers #1, #2, and #3. All
three wells have shown  multiple  coal zones,  which will be  completed  to seek
methane gas.  Based upon the data  provided in the  drilling of these wells,  we
believe  that in the  next 12  months  we  will  be able to  develope  a 20 well
drilling plan for approximately 11,000 acres on 640 acre spacing.

                                       3

<PAGE>

     We intend  to  operate  all of our  prospects  in the Raton  Basin and hold
working  interests  of 100% on a 80% NRI our  leases,  except that we have a 25%
working  interest in the Sun River #1, LLC a drilling  syndication for the Myers
#1 and #2 wells which was assembled in fiscal 2006.

     The Raton Basin covers an area that is  approximately  80 miles long, north
to  south,  and about 50 miles  wide,  east to west,  encompassing  southeastern
Colorado and northeastern New Mexico.  The Raton Basin contains two coal-bearing
formations,  the Vermejo  formation  coals  located at depths of between 450 and
4,000 feet and the shallower  Raton formation  coals,  located at the surface to
approximately 3,000 feet in depth.  Production from the Vermejo coals represents
approximately 79% of the total production from the Raton Basin and approximately
78% of the total proved  reserves in the Raton Basin.  To date,  the majority of
methane  production  has been  from the  Vermejo  formation  coals in  Colorado;
and New Mexico.

Development History

        Exploration  for coal bed  methane in the Raton  Basin began in the late
1970s and continued through the late 1980s, with several companies  drilling and
testing  more than 100 wells  during this  period.  The absence of a pipeline to
transport  gas from the  Raton  Basin  prevented  full-scale  development  until
January 1995, when Colorado Interstate Gas Company completed the construction of
the Picketwire Lateral.

Raton Basin Geology

     We intend to explore for and produce coal bed methane from the high quality
bituminous  coal  resource of the Raton Basin.  The basin is a large  asymmetric
sedimentary  trough that developed  along the western margin of an ancient Rocky
Mountain  seaway  during the  Cretaceous  and Tertiary  period  between 65 to 45
million years ago. Today,  the geologic history of what was once a lush tropical
coastline  and  alluvial  plain cut by  meandering  rivers,  which  subsequently
underwent deep burial, tectonism,  igneous intrusion, and uplift, is recorded in
the rocks of the region; the continued exploration of the basin by geologists is
increasing  the  understanding  of  the  coal  bed  methane  resource  base  and
identifying  new  hydrocarbon  systems and additional  unconventional  reservoir
types.

     Our lease and fee mineral coal bed prospect  acreage sits in the southerly
half of the basin. In the region, the coal-bearing  strata are located primarily
in two major  groups,  the  Vermejo and Raton  formations,  and  represent  coal
development  in  two  slightly  contrasting  environments.   The  Vermejo  coals
represent peat  accumulation on an expansive  flat-lying  flood-plain  which was
partially  protected  from erosion by sandy coastal  barriers of the  underlying
Trinidad Sandstone, while the Raton coals represent peat development on a broad,
open, humid alluvial fan. Collectively,  both formations reflect the development
of  substantial  peat swamps and thick boggy  mires,  which  covered most of the
region  during  Cretaceous  and  Tertiary  times.  Subsequent  burial under high
pressures and temperatures has caused the original peat  accumulation to convert
into coal, which has high rank and  consequentially  high gas storage  capacity.
During burial,  small fractured surfaces (cleats) developed throughout the coal,
which, coupled with the tectonic forces acting on the region during the building
of the Rocky Mountains,  has provided significant permeability within the coals,
allowing for the extraction of coal bed methane gas and associated water.

                                       4

<PAGE>

     We intend to produce  methane from Vermejo  coal.  Individual  Vermejo coal
seams can be often traced over several miles,  commonly from well to well. Total
net  Vermejo  coal  thickness  can  locally  approach  up to 20 feet in  various
individual seams, which seem may vary in thickness from one to 10 feet.

     The shallower Raton formation coals are generally less continuous from well
to well, but increasingly  represent a very significant  resource throughout the
basin.  Total  net  Raton  coal  thickness  locally  approaches  90 feet in many
individual seams, which may vary in thickness from one to 10 feet.  Occasionally
interbedded with the Raton coals are large sandstone  channel  complexes,  which
are increasingly identified as additional potential tight-gas and unconventional
sand reservoirs.  We intend to attempt completion in the Raton Formation when we
find it. We have it in our wells; Myers #1, #2 and #3.

Johnson County; Powder River Basin, Wyoming

     On  November  22 2006,  we  acquired  an 85%  working  interest,  from Nova
Leasing, LLC, in an 80% Net Revenue Interest in certain leases for approximately
13, 500 acres in Johnson  County,  Wyoming in the Powder River Basin.  Since the
acquisition  of this  working  interest  we have our  activities  assessing  and
evaluating the area of these prospects in order to determine a drilling  program
for the  area.  at this  time,  we have  been in the  process  of  planning  and
developing  a 3-D seismic  program.  As of this time,  we do not have any proven
reserves or producing wells on these leases.

PRODUCT INFORMATION

Coal Bed Methane Versus Traditional Natural Gas

        Methane is the primary  commercial  component  of the natural gas stream
produced from traditional gas wells. Methane also exists in its natural state in
coal seams.  Natural gas  produced  from  traditional  wells also  contains,  in
varying amounts, other hydrocarbons. However, the natural gas produced from coal
beds  generally  contains only methane and,  after simple  dehydration,  becomes
pipeline-quality gas.

        Coal bed  methane  production  is similar  to  traditional  natural  gas
production  in  terms  of the  physical  producing  facilities  and the  product
produced.  However, the subsurface  mechanisms that allow the gas to move to the
wellbore  and the  producing  characteristics  of coal bed methane  wells differ
greatly from traditional natural gas production.  Unlike conventional gas wells,
which  require a porous and  permeable  reservoir,  hydrocarbon  migration and a
natural structural and/or stratigraphic trap, coal bed methane gas is trapped in
the molecular  structure of the coal itself until  released by pressure  changes
resulting  from the  removal of in situ water or  natural  gas in the  micropore
system.

                                       5

<PAGE>

        Methane is created as part of the  coalification  process,  though coals
vary in their methane content per ton. In addition to residing in open spaces in
the coal structure,  methane is absorbed onto the inner coal surfaces.  When the
coal is hydraulically fracture stimulated and exposed to lower pressures through
the  de-watering  process,  the gas is released  from  (desorbs  from) the coal.
Whether a coal bed will produce commercial  quantities of methane gas depends on
the coal quality,  its original content of gas per ton of coal, the thickness of
the coal beds,  the reservoir  pressure,  the rate at which gas is released from
the coal  (diffusivity)  and the  existence  of natural  fractures  and cleating
(permeability)  through  which  the  released  gas  can  flow  to the  wellbore.
Frequently,  coal beds are partly or  completely  saturated  with water.  As the
water is produced,  internal  pressures on the coal are decreased,  allowing the
gas to desorb from the coal and flow to the  wellbore.  Unlike  traditional  gas
wells,  new coal bed methane wells often  produce  water for several  months and
then, as the water production decreases, natural gas production increases as the
coal seams de-water.

        In order to  establish  commercial  gas  production  rates,  a permanent
conduit between the individual coal seams and the wellbore must be created. This
is  accomplished  by  hydraulically  creating,  and  propping  open with special
quality sand,  artificial fractures within the coal seams (known as "fracing" in
the  industry)  so the pathway for water and gas  migration  to the  wellbore is
enhanced.  These  fractures  are filled  (propped)  with uniform  sized sand and
become the enhanced  conduits for water and methane to reach the well.  The rate
at which  the gas is  released  from the  coal  and the  ability  of gas to move
through the coal to the wellbore are the key determinants of the rate at which a
well will produce.

Deep Fractured Shales, Raton Conglomerate and Sandstone Reservoirs

     There are possible additional  unconventional  reservoir systems throughout
the Raton  Basin.  The  Company  intends  to study  gas-charged  sandstones  and
conglomerates  interbedded  within the  currently  producing  Vermejo  and Raton
formation coals and deeper gas-bearing shales, which underlie the entire region.

        The conglomerate and sandstones sought, reflect stacked large scale
meandering river channel complexes and regional sandy braided alluvial fans that
at one time crosscut the Cretaceous-Tertiary  peat swamps. During burial, excess
gas generated during the coalification process locally became trapped within the
pore spaces of these  sandstones and now form "Tight-Gas Sand"  reservoirs.  The
increasing  recognition  of the  orientation  in the  subsurface of such ancient
drainage  system is allowing the  strategic  sighting of wells in specific  sand
prone areas, which may ultimately increase the region's total resource base.

     The Raton Basin  shales,  termed the Niobrara and Pierre Shale  formations,
are approximately 1,000 to 3,000-feet thick and underlie the currently producing
intervals. The shales collectively reflect deposits of blanket-like organic rich
mudstones,  which accumulated in quiet water condition on the sea floor.  Deeper
exploratory  test wells  (2,000 to 6,000 feet) may  identify  areas of enhanced
fracture permeability and could open a significant "Shale Gas" resource.

                                       6

<PAGE>

Coal Bed Methane Technology

        Thin   multi-layer  coal  bed  methane  and   unconventional   tight-gas
reservoirs  create  a  multitude  of  challenges  for  drilling,  reservoir  and
production engineers, including the challenge of minimizing formation damage and
then isolating and completing  individual zones in order to maximize recovery of
the resource in place.

        Damage to the Raton Basin coals from  conventional  drilling mud systems
invading the cleat fracture  surfaces and reducing their  permeability  has been
mitigated by utilizing  specialized  air-drilling  techniques  using  percussion
air-hammers.

     All coals in the Raton Basin  require  hydraulic  fracture  stimulation  to
attain economic  production  rates.  New techniques  uses high quality  nitrogen
foamed fluids as the fracturing media and combined with coiled tubing fracturing
units to selectively  place proppant in individual  seams.  The Company believes
that this  fracturing  technique  will assist  developing  some of the  region's
resources.

Water Production and Disposal

     Based on  industry  practice,  management  believes  that  the  groundwater
produced  from the Raton Basin coal seams will not exceed permit levels and will
be suitable  for  discharge  into  arroyos,  surface  water,  well-site  pits or
evaporation  ponds pursuant to permits obtained from the State laws.  Recent gas
analyses  confirm  that the gas  stream  is 99% pure  methane  and  lacks  other
hydrocarbon sources of contamination. In some cases the water is of such quality
that it can be  discharged  to arroyos and surface  water  under  general  water
discharge  permits.  These permits may give the Company the  flexibility  to add
water  discharge  points on an as-needed  basis.  The Company  contract  with an
independent  water sampling company that collects the water samples and monitors
all the Company's water management program.  These monitoring costs are directly
related to the number of well-site pits, evaporation ponds and discharge points.
Because  water  originates  in a  natural  groundwater  system,  there  is  some
uncertainty whether water currently being discharged to streams and arroyos will
continue to meet permit standards for total iron and suspended solids. Water not
meeting  these  discharge  standards  can be disposed of in  well-site  pits and
evaporation  ponds.  When water of lesser quality is discovered or Company wells
produce water in excess of the applicable permit limits, the Company may have to
drill  additional  disposal  wells to re-inject  the produced  water into deeper
sandstone  horizons.  Such  drilling and disposal  would  require the Company to
obtain permits, similar to those obtained in the past.

                                       7

<PAGE>

Raton Basin Production Characteristics

     Because of the  importance of removing water from the coal seams to enhance
gas  production,  the Company  expects  that  production  from meagre  wells may
increase  because of the  beneficial  ambient  effect of pressure  reduction  in
adjacent,  more productive wells. Each well creates its own "cone of depression"
around the  wellbore.  The Company  believes  that Raton Basin wells on adjacent
160-acre  sites will  create  overlapping  cones of  depression,  enhancing  gas
production  in each well  within  this  pattern.  In some cases this  pattern of
interference  can be enhanced by drilling a fifth and sixth well in the 640-acre
section.

        Raton Basin gas contains insignificant amounts of contaminants,  such as
hydrogen  sulfide,  carbon  dioxide or nitrogen,  that are sometimes  present in
conventional  natural gas production.  Therefore,  the properties of Raton Basin
gas, such as heat content per unit volume (British Thermal units, or "Btu"), are
close to the average properties of pipeline gas from conventional gas wells.

     The Company has no proven oil or gas or coalbed methane  reserves,  nor any
production.  The Company intends to explore its Wyoming Acreage for conventional
Oil & Gas.

MARKET INFO

Gas Marketing and Transportation

     We  intend to sell any  produced  gas on an index  basis to  credit  worthy
companies  including  utilities,  other end users and possibly energy  marketing
companies.  Natural  gas  production  from the Raton  Basin  maybe sold into the
Mid-Continent  through  Colorado  Interstate Gas Company to the North, or to Zia
Natural Gas to the South.

     In the United States,  oil and natural gas liquids are sold under contracts
extending  up to a  year  based  upon  monthly  refiner  price  postings,  which
generally  approximate  the price of West Texas  Intermediate  for crude oil and
Applicable Conway,  Kansas posting for natural gas liquids,  adjusted to reflect
transportation  costs and  quality.  In Canada,  oil and natural gas liquids are
sold under  short-term  contracts  at refiner  posted  prices  for  Alberta  and
Saskatchewan,  adjusted to reflect  transportation costs and quality. Our intent
is to sell our oil and natural  gas  liquids  are sold at spot market  prices or
under short-term contracts.

        At this time, we do not have any transportation commitments in place.

Major Customers

     We don not have any customers  that represent in excess of 10% of our total
sales,  since there have been no sales. The Company does not believe that a loss
of any or all of these  customers  would have a material  adverse  effect on its
business.

                                       8

<PAGE>

Competition

     We intend to compete in virtually  all facets of oil and gas business  with
numerous  other  companies,  including  many  that  have  significantly  greater
resources.  Such competitors may be able to pay more for desirable leases and to
evaluate,  bid for,  and  purchase  a  greater  number  of  properties  than the
financial  or personnel  resources  of the Company will permit.  Our ability to
increase  reserves in the future will be  dependent on our ability to select and
acquire suitable  producing  properties and prospects for future exploration and
development.  The  availability  of a market for oil and natural gas  production
depends upon numerous factors beyond the control of producers, including but not
limited to the  availability  of other  domestic  or  imported  production,  the
locations and capacity of pipelines and the effect of federal, state, provincial
and local regulation on such production.

GOVERNMENT REGULATION OF THE OIL AND GAS INDUSTRY

General

     Our business is affected by numerous laws and regulations, including, among
others, laws and regulations relating to energy,  environment,  conservation and
tax.  Failure  to comply  with  these  laws and  regulations  may  result in the
assessment of administrative, civil and/or criminal penalties, the imposition of
injunctive  relief  or  both.  Moreover,  changes  in  any  of  these  laws  and
regulations could have a material adverse effect on our business. In view of the
many  uncertainties  with  respect to current and future  laws and  regulations,
including  their  applicability  to the Company,  we cannot  predict the overall
effect of such laws and regulations on its future operations.

     We  believe  that our  operations  comply  in all  material  respects  with
applicable  laws and  regulations and that the existence and enforcement of such
laws and regulations have no more restrictive effect on our method of operations
than on other similar companies in the energy industry.

     The following discussion contains summaries of certain laws and regulations
and is qualified in its entirety by the foregoing.

Federal Regulation of the Sale and Transportation of Oil and Gas

     Various  aspects of our oil and natural gas  operations  are  regulated  by
agencies of the federal  government.  The Federal Energy  Regulatory  Commission
("FERC")  regulates  the  transportation  and sale for resale of natural  gas in
interstate  commerce  pursuant to the  Natural  Gas Act of 1938  ("NGA") and the
Natural Gas Policy Act of 1978 ("NGPA"). In the past, the federal government has
regulated the prices at which oil and gas could be sold.  While "first sales" by
producers of natural gas and all sales of crude oil,  condensate and natural gas
liquids can currently be made at  uncontrolled  market  prices,  Congress  could
reenact  price  controls in the future.  Deregulation  of wellhead  sales in the
natural gas industry began with the enactment of the NGPA in 1978. In 1989,

                                       9
<PAGE>



Congress enacted the Natural Gas Wellhead  Decontrol Act (the "Decontrol  Act").
The  Decontrol  Act  removed  all NGA and  NGPA  price  and  non-price  controls
affecting wellhead sales of natural gas effective January 1, 1993.

        Commencing in April 1992, the FERC issued Orders Nos. 636, 636-A, 636-B,
636-C and 636-D ("Order No. 636"), which require interstate pipelines to provide
transportation  services separate,  or "unbundled," from the pipelines' sales of
gas.   Also,   Order  No.  636   requires   pipelines  to  provide  open  access
transportation  on a  nondiscriminatory  basis that is equal for all natural gas
shippers.  Although  Order No.  636 does not  directly  regulate  the  Company's
production activities,  the FERC has stated that it intends for Order No. 636 to
foster increased  competition within all phases of the natural gas industry.  It
is unclear what impact,  if any,  increased  competition  within the natural gas
industry under Order No. 636 will have on the Company's activities.

        The courts have largely  affirmed the significant  features of Order No.
636 and numerous related orders pertaining to the individual pipelines, although
certain  appeals  remain pending and the FERC continues to review and modify its
open access regulations. In particular, the FERC is conducting a broad review of
its transportation  regulations,  including how they operate in conjunction with
state  proposals  for retail gas marketing  restructuring,  whether to eliminate
cost-of-service  rates for  short-term  transportation,  whether to allocate all
short-term capacity on the basis of competitive auctions, and whether changes to
long-term transportation policies may also be appropriate to avoid a market bias
toward  short-term  contracts.  In February  2000, the FERC issued Order No. 637
amending certain regulations governing interstate natural gas pipeline companies
in response to the development of more  competitive  markets for natural gas and
natural gas transportation. The goal of Order No. 637 is to "fine tune" the open
access  regulations  implemented by Order No. 636 and to accommodate  subsequent
changes in the market.  Key provisions of Order No. 637 include:  (1) permitting
value-oriented  peak/off peak rates to better  allocate  revenue  responsibility
between  short-term and long-term  markets;  (2) permitting  term-differentiated
rates, in order to better allocate risks between shippers and the pipeline;  (3)
revising  the   regulations   related  to   scheduling   procedures,   capacity,
segmentation,  imbalance management,  and penalties;  (4) retaining the right of
first refusal ("ROFR") and the five-year  matching cap for long-term shippers at
maximum rates, but significantly  narrowing the ROFR for customers that the FERC

                                       10
<PAGE>

does not deem to be captive; and (5) adopting new website reporting requirements
that include daily  transactional  data on all firm and interruptible  contracts
and daily  reporting of scheduled  quantities at points or segments.  Most major
aspects of Order No. 637 were upheld on judicial review,  though certain issues,
such as capacity  segmentation and rights of first refusal, were remanded to the
FERC,  which issued a remand order in October of 2002.  In January of 2004,  the
FERC denied  rehearing  of its October  2002 remand  order.  The Company  cannot
predict  whether  judicial review will be sought of the FERC's remand order and,
if so, whether and to what extent FERC's market reforms will survive such review
and, if they do,  whether the FERC's actions will achieve the goal of increasing
competition in markets in which the Company's natural gas is sold. However,  the
Company does not believe that it will be affected by any action taken materially
differently  than  other  natural  gas  producers  and  marketers  with which it
competes.

        Commencing  in October  1993,  the FERC issued a series of rules  (Order
Nos. 561 and 561-A)  establishing  an indexing  system under which oil pipelines
will be able to change their transportation rates, subject to prescribed ceiling
levels.  The indexing  system,  which  allows  pipelines to make rate changes to
track changes in the Producer Price Index for Finished Goods, minus one percent,
became effective  January 1, 1995. The Company does not believe that these rules
affect the Company any  differently  than other oil producers and marketers with
which it competes.

        The  FERC  has  also  issued  numerous  orders  confirming  the sale and
abandonment of natural gas gathering  facilities  previously owned by interstate
pipelines and  acknowledging  that if the FERC does not have  jurisdiction  over
services provided  thereon,  then such facilities and services may be subject to
regulation by state authorities in accordance with state law. A number of states
have either  enacted new laws or are  considering  the adequacy of existing laws
affecting gathering rates and/or services.

Other state  regulation  of  gathering  facilities  generally  includes  various
safety,  environmental,  and  in  some  circumstances,   nondiscriminatory  take
requirements,  but does not generally entail rate regulation.  Thus, natural gas
gathering  may receive  greater  regulatory  scrutiny  of state  agencies in the
future.  The Company's  gathering  operations could be adversely affected should
they be  subject  in the  future  to  increased  state  regulation  of  rates or
services,  although  the Company  does not believe  that it would be affected by
such regulation any  differently  than other natural gas producers or gatherers.
In addition,  the FERC's approval of transfers of previously regulated gathering
systems to independent or pipeline  affiliated  gathering companies that are not
subject to FERC  regulation may affect  competition for gathering or natural gas
marketing services in areas served by those systems and thus may affect both the
costs and the nature of gathering  services  that may be available to interested
producers or shippers in the future.

                                       11

<PAGE>

     We own certain  natural gas pipeline  facilities  that we believes meet the
traditional  tests  the FERC has used to  establish  a  pipeline's  status  as a
gatherer  not  subject to the FERC's  jurisdiction.  Whether on state or federal
land,  natural gas  gathering  may receive  greater  regulatory  scrutiny in the
post-Order No. 636 environment.

     We may conduct  certain  operations on federal oil and gas leases,
which are  administered  by the Minerals  Management  Service  ("MMS").  Federal
leases contain  relatively  standard terms and require  compliance with detailed
MMS  regulations  and  orders,   which  are  subject  to  change.   Among  other
restrictions,  the MMS has  regulations  restricting  the  flaring or venting of
natural gas, and the MMS has proposed to amend such  regulations to prohibit the
flaring  of liquid  hydrocarbons  and oil  without  prior  authorization.  Under
certain  circumstances,  the MMS may require any company  operations  on federal
leases to be suspended or terminated.  Any such suspension or termination  could
materially and adversely affect the Company's  financial  condition,  cash flows
and  operations.  The MMS  issued a final  rule  that  amended  its  regulations
governing the valuation of crude oil produced  from federal  leases.  This rule,
which  became  effective  June 1,  2000,  provides  that  the MMS  will  collect
royalties  based on the market value of oil produced  from  federal  leases.  On
August  20,  2003,  the MMS issued a proposed  rule that  would  change  certain
components of its valuation procedures for the calculation of royalties owed for
crude oil sales. The proposed changes included  changing the valuation basis for
transactions not at arm's-length from spot to NYMEX prices adjusted for locality
and quality differentials,  and clarifying the treatment of transactions under a
joint  operating  agreement.  Final  comments on the  proposed  rule were due on
November  10,  2003.  We has no way of knowing  whether  the MMS will
implement the proposed  changes in a final rule or what effect such changes,  if
implemented,  will have on the Company's  results of  operations,  However,  the
Company does not believe that this proposed rule would affect it any differently
than other producers and marketers of crude oil. We have no federal leases as of
date hereof.

     Additional  proposals  and  proceedings  that might  affect the oil and gas
industry are pending before Congress,  the FERC, the MMS, state  commissions and
the  courts.  Our  cannot  predict  when  or  whether  any  such  proposals  and
proceedings may become effective. In the past, the natural gas industry has been
heavily regulated.  There is no assurance that the regulatory approach currently
pursued by various  agencies will  continue  indefinitely.  Notwithstanding  the
foregoing, we do not anticipate that compliance with existing federal, state and
local laws, rules and regulations will have a material or significantly  adverse
effect upon the capital  expenditures,  earnings or competitive  position of the
Company or its  subsidiaries.  No material portion of our business is subject to
re-negotiation  of profits or  termination of contracts or  subcontracts  at the
election of the federal government.

                                       12

<PAGE>

     The BLM  controls  isolated  parcels  of  federally  owned  surface  and/or
minerals in the areas of interests. Drilling and development of federal minerals
and  construction  activities  on federal  surface are  subject to the  National
Environmental  Policy  Act  ("NEPA").  BLM has not  completed  an  environmental
assessment  under NEPA.  To date,  no wells have been drilled on BLM minerals in
the Raton Basin.  In the Raton  Basin,  the BLM must  complete an  environmental
assessment,  and any future wells would need to be approved based on the results
of the environmental assessment.  Development of adjacent fee lands and minerals
within the Raton  Basin may  proceed  unhindered  and access to fee lands is not
expected  to hinder by the  presence  of  isolated  parcels of federal  surface.
Future activities within the Piceance and Uintah Basins will be subject to NEPA.
The scope and effect are not known at the present  time.  We do not have any BLM
leases as of this date.

State Regulations

     Our  operations  are also subject to  regulation at the state level and, in
some cases,  county,  municipal and local governmental  levels.  Such regulation
includes  (1)  requiring  permits  for the  drilling of wells,  (2)  maintaining
bonding  requirements  in order to drill or operate wells and (3) regulating the
location of wells,  the method of drilling and casing wells, the surface use and
restoration  of  properties  upon which  wells are  drilled,  the  plugging  and
abandoning  of wells and the disposal of fluids used and produced in  connection
with operations.  Our operations are also subject to various  conservation  laws
and  regulations.  These include (1) proration  units,  (2) the density of wells
that  may be  drilled,  and  (3)  the  unitization  or  pooling  of oil  and gas
properties.  In addition,  state  conservation  laws establish  maximum rates of
production from oil and gas wells,  which generally limit the venting or flaring
of gas and impose certain  requirements  regarding the ratability of production.
State  regulation of gathering  facilities  generally  includes  various safety,
environmental and, in some circumstances,  nondiscriminatory  take requirements,
but (except as noted above) does not  generally  entail rate  regulation.  These
regulatory  burdens  may  affect  profitability,  and the  Company  is unable to
predict the future cost or impact of complying with such regulations.

                                       13

<PAGE>

Environmental Regulations

     We are subject to extensive  federal,  state, and local  environmental laws
and regulations that, among other things,  regulate the discharge or disposal of
substances  into the  environment  and  otherwise  are  intended  to protect the
environment.  Numerous  governmental  agencies  issue rules and  regulations  to
implement and enforce such laws,  which are often difficult and costly to comply
with and which carry substantial administrative, civil and/or criminal penalties
and,  in some  cases,  injunctive  relief for  failure to comply.  Some laws and
regulations  relating  to the  protection  of the  environment  may,  in certain
circumstances,  impose "strict liability" for environmental contamination.  Such
laws and  regulations  render a person or company liable for  environmental  and
natural  resource  damages,  cleanup  costs  and,  in the case of oil  spills in
certain  states,  consequential  damages  without regard to negligence or fault.
Other  laws  and  regulations  may  require  the  rate  of oil and  natural  gas
production  to be below the  economically  optimal rate or may even  restrict or
prohibit  exploration  or  production  activities in  environmentally  sensitive
areas.  In addition,  state laws often require some form of remedial action such
as closure of inactive pits and plugging of abandoned wells to prevent pollution
from former or suspended operations. Moreover, from time to time, legislation or
other  initiatives  are  proposed to Congress or to state and local  governments
that would place more onerous conditions on the treatment,  storage, disposal or
clean-up of certain  oil and gas  exploration  and  production  wastes.  If such
legislation or other initiatives were to be enacted or adopted, it could have an
adverse impact on the operating costs of the Company, as well as the oil and gas
industry in general.  The regulatory  burden on the oil and natural gas industry
increases  our cost and risk of doing  business  and  consequently  affects  its
profitability.

     Compliance  with  these  environmental  requirements,  including  financial
assurance  requirements  and the costs associated with the cleanup of any spill,
could have a material adverse effect upon our capital expenditures,  earnings or
competitive  position.  We believe  that it is in  substantial  compliance  with
current  applicable  environmental  laws  and  regulations  and  that  continued
compliance with existing requirements will not have a material adverse impact on
it.  Nevertheless,  changes  in  environmental  laws  and  regulations  have the
potential  to  adversely  affect  our  operations.   For  example,  the  federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"),  also known as the "Superfund" law, and analogous state laws
impose  liability,  without  regard  to fault or the  legality  of the  original
conduct,  on  certain  classes  of  persons  with  respect  to the  release of a
"hazardous substance" into the environment. These persons include the current or
prior owner or operator of the disposal site or sites where the release occurred
and  companies  that  transported,  disposed or arranged  for the  transport  or
disposal of the hazardous  substances found at the site. Persons who are or were
responsible for releases of hazardous  substances under CERCLA may be subject to
strict  and  joint  and  several  liability  for the  costs of  cleaning  up the
hazardous  substances  that  have been  released  into the  environment  and for
damages to natural  resources,  and it is not  uncommon for the federal or state
government  to pursue  such  claims.  It is also not  uncommon  for  neighboring
landowners  and other  third  parties  to file  claims  for  personal  injury or
property  or  natural  resource  damages   allegedly  caused  by  the  hazardous
substances  released into the  environment.  Under  CERCLA,  certain oil and gas
materials and products  are, by  definition,  excluded from the term  "hazardous
substances."

                                       14

<PAGE>


     We may own or lease,  numerous  properties that have long been used for oil
and gas  exploration and  production.  Although the predecessor  owners utilized
operating  and  disposal  practices  that were  standard for the industry at the
time,  hazardous substances in the past may have been disposed of or released on
or under the  properties  owned or leased by the  Company  or on or under  other
locations  where such  substances  have been taken or placed  for  disposal.  In
addition, many of these properties have from time to time been operated by third
parties  whose  management  of  substances  was not  under  our  control.  These
properties and the  substances  disposed  thereon may be subject to CERCLA,  the
Resource Conservation and Recovery Act, as amended, and analogous state laws and
regulations.  Under such laws and regulations, we could be required to remove or
remediate  previously  disposed wastes (including wastes disposed of or released
by prior owners or operators) or property  contamination  (including groundwater
contamination by prior owners or operators),  or to perform remedial plugging or
pit closure operations to prevent future contamination.  We have no knowledge of
any environmental hazards as of date hereof.

     In connection with our coal bed methane gas exploration we may from time to
time may conduct production enhancement techniques, including various activities
designed to induce  hydraulic  fracturing of the coal bed.  While we may perform
its  production  enhancement  techniques  in  substantial  compliance  with  the
requirements  set  forth  by the  State  laws,  neither  State  nor the  federal
Environmental  Protection  Agency  ("EPA")  regulates  this  coal bed  formation
hydraulic  fracturing as a form of  underground  injection.  It is possible that
hydraulic  fracturing  of coal  beds for  methane  gas  production  will  become
regulated within the United States as a form of underground injection, resulting
in the imposition of stricter  performance  standards  (which, if not met, could
result in diminished  opportunities for methane gas production  enhancement) and
increased administrative and operating costs for the Company.

     Management  cannot predict whether potential future regulation of hydraulic
fracturing as a form of  underground  injection  would have an adverse  material
effect on our operations or financial position.  However, such regulation is not
expected  to be any more  burdensome  to the  Company  than it would be to other
similarly  situated  companies  involved in coal bed methane gas  production  or
tight gas sands production within the United States.

                                       15

<PAGE>

     In our coal bed methane gas  exploration  the Company  typically  may bring
naturally occurring groundwater to the surface as a by-product of the production
of methane gas. This "produced water" is either  re-injected into the subsurface
or stored or disposed of in evaporation  ponds or permitted  natural  collection
features  located on the surface at or near the  well-site  in  compliance  with
federal and state statutes and regulations. In some cases, the produced water is
used for stock watering,  agricultural  or dust  suppression  purposes,  also in
substantial compliance with federal, state and local laws and regulations. Under
the Federal Water  Pollution  Control Act (also  referred to as the "Clean Water
Act") and various  other state  requirements  and  regulations,  the EPA and the
State of  Colorado's  Department  of Public  Health and the  Environment  assert
administrative  and  regulatory  enforcement  authority  over the  discharge  of
produced water. Where we can meet federal and state regulatory  requirements and
applicable water quality  standards,  disposal of produced water by discharge to
surface water is an option.

     The Clean Water Act imposes  restrictions and strict controls regarding the
discharge of produced waters and other oil and gas wastes into navigable waters.
Permits must be obtained to discharge  pollutants into state and federal waters.
The Clean Water Act and  analogous  state laws  provide for civil,  criminal and
administrative  penalties  for any  unauthorized  discharges  of oil  and  other
hazardous  substances  in  reportable  quantities  and  may  impose  substantial
potential  liability for the costs of removal,  remediation  and damages.  State
water  discharge  regulations  and  the  federal  National  Pollutant  Discharge
Elimination  System  permits  applicable  to the oil and gas industry  generally
prohibit the discharge of produced  water,  sand and some other  substances into
coastal waters.  The cost to comply with zero discharges  mandated under federal
and state law is not expected to have a material adverse impact on the Company's
financial condition and results of operations.  Some oil and gas exploration and
production  facilities  are  required  to obtain  permits  for their storm water
discharges.  Costs may be incurred in connection with treatment of wastewater or
developing storm water pollution prevention plans.

     Our  operations  may involve the use of gas-fired  compressors to transport
collected gas; these  compressors  are subject to federal and state  regulations
for the  control of air  emissions.  We will  obtain  construction  permits  for
compression  it enjoys  production  from any coal bed methane.  However,  in the
future,  additional facilities could become subject to additional monitoring and
pollution control requirements as compressor facilities are expanded.

                                       16
<PAGE>

     The Oil Pollution Act of 1990 ("OPA")  imposes  regulations on "responsible
parties"  related to the  prevention  of oil spills and  liability  for  damages
resulting  from spills in waters of the United  States.  A  "responsible  party"
includes the owner or operator of an onshore  facility,  vessel or pipeline,  or
the lessee or  permittee  of the area in which an offshore  facility is located.
OPA assigns strict,  joint and several  liability to each responsible  party for
oil removal costs and a variety of public and private damages, including natural
resource damages.  While liability limits apply in some  circumstances,  a party
cannot  take  advantage  of  liability  limits if the spill was  caused by gross
negligence or willful misconduct or resulted from violation of a federal safety,
construction or operating regulation, or if the party fails to report a spill or
to cooperate fully in the cleanup. Even if applicable,  the liability limits for
onshore  facilities require the responsible party to pay all removal costs, plus
up to $350 million in other damages. Few defenses exist to the liability imposed
by OPA.  Failure to comply with ongoing  requirements or inadequate  cooperation
during a spill event may subject a responsible party to administrative, civil or
criminal enforcement.

     At this time,  we are is not  required and  otherwise  have no plans to
make any material capital  expenditures to install  pollution control devices at
any facilities.

Title to Properties

     As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time the Company  acquires  leases of properties
believed to be suitable for drilling  operations.  Prior to the  commencement of
drilling  operations,  a thorough  title  examination of the drill site tract is
conducted  by  independent  attorneys.  Once  production  from a  given  well is
established,  the Company prepares a division order title report  indicating the
proper parties and  percentages  for payment of production  proceeds,  including
royalties.  The Company believes that the titles to its leasehold properties are
good and defensible in accordance with standards generally acceptable in the oil
and gas industry.


RISK FACTORS

     Oil and gas prices are  volatile,  and an extended  decline in prices would
     ---------------------------------------------------------------------------
hurt the Company's profitability and financial condition.
--------------------------------------------------------

     We believe  that the markets for oil and gas will  continue to be volatile.
Any substantial or extended  decline in the price of oil or gas would negatively
affect the Company's  financial  condition and results of operations.  Revenues,
operating results,  profitability,  future rate of growth and the carrying value
of oil and gas properties depend heavily on prevailing market prices for oil and
gas. A material decline could reduce tour cash flow and borrowing  capacity,  as
well as the value and the amount of its oil and gas  reserves.  Various  factors
beyond our control can affect prices of oil and gas. These factors include:

                                       17
<PAGE>

o    worldwide and domestic supplies of oil and gas;

o    the  ability of the  members of the  Organization  of  Petroleum  Exporting
     Countries  (OPEC)  to  agree  to and  maintain  oil  price  and  production
     controls;

o    political instability or armed conflict in oil or gas producing regions;

o    the price and level of foreign imports;

o    worldwide economic conditions;

o    marketability of production;

o    the level of consumer demand;

o    the price, availability and acceptance of alternative fuels;

o    the availability of pipeline capacity;

o    weather conditions; and

o    actions of federal, state, and local authorities.

     These external  factors and the volatile  nature of the energy markets make
it difficult to estimate future commodity prices.

     In addition,  we may be required to write down or impair the carrying value
of the Company's oil and gas properties when oil and gas prices are depressed or
unusually volatile.  If a write-down is required, it would result in a charge to
earnings and book value.  Once incurred,  a write-down of oil and gas properties
is not  reversible  at a later date.  We  reviews,  on a  quarterly  basis,  the


                                       18

<PAGE>

carrying  value of its oil and gas  properties  under the full  cost  accounting
rules of the SEC.  Under these  rules,  capitalized  costs of proved oil and gas
properties,  as adjusted for estimated  asset  retirement  obligations,  may not
exceed the present value of estimated  future net revenues from proved reserves,
discounted at 10%.  Application of the ceiling test generally  requires  pricing
future revenue at the unescalated  prices in effect as of the end of each fiscal
quarter,  after  giving  effect to our cash  flow  hedge  positions,  if any and
requires a write-down for accounting  purposes if the ceiling is exceeded,  even
if prices were depressed for only a short period of time.

     Our intended  operations will require large amounts of capital that may not
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be recovered.
------------

     If the  Company's  future  revenues  were to decrease  due to lower oil and
natural gas prices,  decreased  production or other reasons, and if it could not
obtain  capital  through  its credit  facilities  or  otherwise,  our ability to
execute its development  plans,  replace its reserves or maintain its production
levels could be greatly limited.  Our current  development plans will require it
to make large capital  expenditures  for the  exploration and development of its
oil and natural gas properties.

     Historically,  the Company has funded its  capital  expenditures  through a
combination of funds generated the issuance of equity, and short-term  financing
arrangements.  Additional  financing  may not be  available  to the  Company  on
acceptable  terms.  Future cash flows and the  availability of financing will be
subject to a number of variables, such as:

o    the  success of the  Company's  prospects  in the Raton,  and Powder  River
     Basins;

o    the Company's success in locating and producing reserves;

o    the prices of oil and natural gas.

     Issuing equity securities to satisfy the Company's  financing  requirements
could cause substantial  dilution to existing  stockholders.  In addition,  debt
financing  could  lead to a  diversion  of cash flow to satisfy  debt  servicing
obligations and restrictions on the Company's operations.

     Our exploratory and development drilling activities may not be successful.

                                       19
<PAGE>

     The Company's  future  drilling  activities may not be successful,  and our
management  cannot  be  sure  that  our  overall  drilling  success  rate or the
Company's  drilling  success rate for activity within a particular area will not
decline. In addition, the wells that we drill may not recover all or any portion
of  the  Company's  capital  investment  in  the  wells,  infrastructure  or the
underlying  leaseholds.  We are is  currently  in the early  stages  of  various
exploration  projects in the Rocky Mountain area of the United States and we can
offer  no  assurance  that  the  development  of these  projects  will  occur as
scheduled  or that actual  results  will be in line with our initial  estimates.
Unsuccessful   drilling  activities  could  negatively  affect  our  results  of
operations  and  financial  condition.  The  cost of  drilling,  completing  and
operating wells is often uncertain, and a number of factors can delay or prevent
drilling operations, including: o unexpected drilling conditions;

o    pressure or irregularities in formations;

o    equipment failures or accidents;

o    ability to hire and train personnel for drilling and completion services;

o    adverse weather conditions;

o    compliance with governmental requirements; and

o    shortages or delays in the  availability  of drilling rigs and the delivery
     of equipment.

     In  addition,  we may not be able to obtain any options or lease  rights in
potential drilling locations that it identifies.  There is no guarantee that the
potential  drilling  locations that we have  identified will ever produce oil or
natural gas.

        Our Acquisition Activities may not be successful.
        ------------------------------------------------

     As part of our growth  strategy,  we may make  additional  acquisitions  of
businesses and properties.  However,  suitable acquisition candidates may not be
available on terms and  conditions we find  acceptable,  and  acquisitions  pose
substantial  risks  to  our  business,   financial   condition  and  results  of
operations. In pursuing acquisitions,  we competes with other companies, many of
which have greater financial and other resources to acquire attractive companies
and properties.  Even if future  acquisitions  are completed,  the following are
some of the risks  associated with  acquisitions:

                                       20

<PAGE>

o    the acquired businesses or properties may not produce revenues, earnings or
     cash flow at anticipated levels;

o    the Company may assume  liabilities  that were not disclosed or that exceed
     our estimates;

o    We may be unable to integrate acquired businesses successfully and
     realize  anticipated  economic,  operational and other benefits in a timely
     manner,  which  could  result  in  substantial  costs  and  delays or other
     operational, technical or financial problems;

o    acquisitions  could  disrupt our  ongoing  business,  distract  management,
     divert  resources  and make it difficult  to maintain our current  business
     standards, controls and procedures;

o    We may finance  future  acquisitions  by issuing  common stock for
     some  or all of the  purchase  price,  which  could  dilute  the  ownership
     interests of the Company's stockholders; and

o    We may incur additional debt related to future acquisitions.

     We may be  affected  by the  gas  prices  in  the  Rocky  Mountain  region.
     ---------------------------------------------------------------------------

     Oversupply  of gas and  pipeline  capacity  issues,  as well as spot market
prices may affect prices achievable for any gas sales.

     We face strong  competition  in the oil and gas  industry,  and many of its
     ---------------------------------------------------------------------------
competitors have greater resources than the Company.
---------------------------------------------------

     We operate in a highly  competitive  industry.  We will competes with major
oil companies, independent producers and institutional and individual investors,
which are actively  seeking oil and gas properties  throughout the world,  along
with the equipment, labor and materials required to operate properties.  Many of
our competitors  have financial and  technological  resources  vastly  exceeding
those  available  to us Many oil and gas  properties  are sold in a  competitive
bidding process in which we may lack the technological  information or expertise
available to other bidders. We can offer no assurance that it will be successful
in  acquiring  and  developing   profitable  properties  in  the  face  of  this
competition.

                                       21

<PAGE>

     Our  operations  are subject to the business and financial  risk of oil and
     ---------------------------------------------------------------------------
gas exploration.
---------------

     The business of exploring for and, to a lesser  extent,  developing oil and
gas  properties  is an activity  that  involves a high  degree of  business  and
financial risk.  Property  acquisition  decisions generally are based on various
assumptions and subjective  judgments that are speculative.  It is impossible to
predict accurately the ultimate  production  potential,  if any, of a particular
property or well. Moreover, the successful completion of an oil or gas well does
not ensure a profit on  investment.  A variety of factors,  both  geological and
market-related, can cause a well to become uneconomic or marginally economic.

     Our  business  is  subject  to  operating  hazards  that  could  result  in
     ---------------------------------------------------------------------------
substantial losses.
------------------

     The oil and natural gas business  involves  operating  hazards such as well
blowouts,  craterings,  explosions,  uncontrollable flows of oil, natural gas or
well fluids,  fires,  formations with abnormal  pressures,  pipeline ruptures or
spills,  pollution,  releases of toxic gas and other  environmental  hazards and
risks, any of which could cause the Company a substantial loss. In addition,  we
may be held  liable  for  environmental  damage  caused  by  previous  owners of
property  it owns or  leases.  As a result,  the  Company  may face  substantial
liabilities  to third parties or  governmental  entities,  which could reduce or
eliminate funds available for exploration,  development or acquisitions or cause
the  Company  to  incur   losses.   An  event  that  is  not  fully  covered  by
insurance--for example, losses resulting from pollution and environmental risks,
which are not  fully  insurable--could  have a  material  adverse  effect on the
Company's financial condition and results of operations.

                                       22

<PAGE>

     The Company may face unanticipated water disposal costs.
     -------------------------------------------------------

     Where groundwater produced from coal bed methane projects fails to meet the
quality requirements of applicable  regulatory agencies or methane wells produce
water in excess of the applicable  volumetric permit limit, we may have to drill
additional  disposal  wells to  re-inject  the  produced  water  back  into deep
underground  rock  formations.  The costs to dispose of this produced  water may
increase if any of the following occur:

o    We cannot obtain future permits from applicable regulatory agencies;

o    water of lesser quality is produced;

o    Methane wells produce excess water; or

o    new laws or  regulations  require  water to be  disposed  of in a different
     manner.

     We have limited  protection  for its  technology  and depends on technology
     ---------------------------------------------------------------------------
owned by others.
---------------

     We intend to use operating  practices that management believes are of value
in  developing  coal bed  methane  resources.  In most  cases,  patent  or other
intellectual property protection is unavailable for this technology.  Our use of
independent  contractors  in most aspects of its  drilling  and some  completion
operations makes the protection of such technology more difficult.  Moreover, we
rely on the  technological  expertise  of the  independent  contractors  that it
retains for its oil and gas operations. We don not have any long-term agreements
with these  contractors,  and management cannot be sure that we will continue to
have access to this expertise.

     We must comply with complex federal, state, and local laws and regulations.
     --------------------------------------------------------------------------

     Federal,  state, and local authorities extensively regulate the oil and gas
industry.  Noncompliance  with  these  statutes  and  regulations  may  lead  to
substantial  penalties,  and  the  overall  regulatory  burden  on the  industry
increases  the cost of doing  business  and, in turn,  decreases  profitability.
Regulations  affect  various  aspects  of oil and gas  drilling  and  production
activities,  including the pricing and marketing of oil and gas production,  the
drilling of wells (through permit and bonding requirements),  the positioning of
wells,  the  unitization  or  pooling of oil and gas  properties,  environmental
matters,  safety  standards,  the  sharing of markets,  production  limitations,
plugging and abandonment and  restoration.  These laws and regulations are under
constant review for amendment or expansion.

                                       23

<PAGE>

     We may incur  substantial  costs to  comply  with  stringent  environmental
     ---------------------------------------------------------------------------
regulations.
-----------

     Our   operations   are  subject  to  stringent  and   constantly   changing
environmental  laws  and  regulations  adopted  by  federal,  state,  and  local
governmental authorities.  We could be forced to expend significant resources to
comply  with  new laws or  regulations,  or  changes  to  current  requirements.
Governmental  environmental  agencies have relatively little experience with the
regulation of coal bed methane operations,  which are technologically  different
from  conventional  oil  and  gas  operations.  This  inexperience  has  created
uncertainty  regarding how these  agencies will  interpret  air, water and waste
laws and  regulations  and  other  requirements  to coal bed  methane  drilling,
fracture stimulation methods,  production and water disposal operations. We will
continue  to  be  subject  to   uncertainty   associated   with  new  regulatory
interpretations   and   inconsistent    interpretations   between   governmental
environmental  agencies. We could face significant liabilities to the government
and third parties for discharges of oil,  natural gas or other  pollutants  into
the air,  soil or  water,  and we could  have to spend  substantial  amounts  on
investigations,  litigation and remediation. Moreover, failure by the Company to
comply  with  these  laws  and  regulations  may  result  in the  assessment  of
administrative,  civil and criminal  penalties,  the imposition of investigatory
and  remedial  obligations  and the  issuance of  injunctions  that  restrict or
prohibit the performance of operations.  See "--Government Regulation of the Oil
and Gas Industry--Environmental Matters."

     Our business will depend on transportation facilities owned by others.
     ---------------------------------------------------------------------

     The   marketability   of  our  gas  production   depends  in  part  on  the
availability, proximity and capacity of pipeline systems owned by third parties,
and changes in our contracts  with these third parties could  materially  affect
the Company's  operations.  The Company,  through its subsidiaries,  has entered
into a series of firm transportation  service agreements with pipeline companies
providing for the  transportation  of our natural gas production  from the Raton
Basin to the Mid-Continent  markets. See "--Customers and Markets--Gas Marketing
and Transportation."

     In addition, federal, state, and local regulation of gas and oil production
and  transportation,  tax and energy  policies,  changes  in supply and  demand,
pipeline  pressures,  and general economic conditions could adversely affect our
ability to transport its natural gas.

     Market  conditions  could  cause us to incur  losses on any  transportation
contracts.

                                       24
<PAGE>

General Risk Factors
1.  Conflicts of Interest.
-------------------------

Certain conflicts of interest may exist between the Company and its officers and
directors.  They have  other  business  interests  to which  they  devote  their
attention,  and may be expected to  continue to do so although  management  time
should be devoted to the  business of the  Company.  As a result,  conflicts  of
interest may arise that can be resolved  only through  exercise of such judgment
as is consistent with fiduciary  duties to the Company.  See  "Management,"  and
"Conflicts of Interest."

2. Need For Additional Financing.
--------------------------------

For its business plan to exploit oil, gas, and coal bed methane opportunities we
must seek additional financing,  which may or may not be available.  The Company
is  investigating  the  availability,  source,  or terms that  might  govern the
acquisition of additional  capital and will not do so until it determines a need
for additional  financing.  If not available,  our operations will be limited to
those that can be financed with its available capital.

3. Regulation of Penny Stocks.
------------------------------

Our  securities are subject to a Securities  and Exchange  Commission  rule that
imposes special sales practice  requirements upon  broker-dealers  who sell such
securities to persons other than established  customers or accredited investors.
For purposes of the rule, the phrase  "accredited  investors"  means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of  $1,000,000  or  having  an annual  income  that  exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000).  For
transactions  covered  by the  rule,  the  broker-dealer  must  make  a  special
suitability  determination for the purchaser and receive the purchaser's written
agreement  to the  transaction  prior to the  sale.  Consequently,  the rule may
affect the ability of  broker-dealers to sell our securities and also may affect
the  ability of  purchasers  in this  offering to sell their  securities  in any
market that might develop therefore.

    In addition,  the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3,  15g-4,  15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act
of 1934, as amended. Because the securities of the Company may constitute "penny
stocks" within the meaning  of the rules, the  rules would apply  to the Company
and to its  securities.  The rules may further  affect the ability  of owners of
Shares to sell the  securities  of the  Company in any market that might develop
for them.

     Shareholders  should be aware that,  according to  Securities  and Exchange
Commission,  the  market  for penny  stocks has  suffered  in recent  years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the  security  by one or a few  broker-dealers  that are  often  related  to the
promoter or issuer; (ii) manipulation of prices through prearranged  matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices   involving   high-pressure   sales  tactics  and  unrealistic   price
projections  by  inexperienced  sales persons;  (iv)  excessive and  undisclosed
bid-ask  differentials  and  markups  by  selling  broker-dealers;  and  (v) the
wholesale dumping of the same securities by promoters and broker-dealers after

                                      25

<PAGE>

prices  have been  manipulated  to a desired  level,  along  with the  resulting
inevitable  collapse of those prices and with consequent  investor  losses.  The
Company's  management is aware of the abuses that have occurred  historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of  broker-dealers  who  participate in
the market,  management will strive within the confines of practical limitations
to prevent the  described  patterns from being  established  with respect to the
Company's securities.

4. Lack of  Operating  History.
------------------------------

The Company was  organized in April 1998 and remained  dormant until Spring 1999
when it raised money to explore a business plan involving internet websites. The
Company is not profitable. We have not had successful operating history. We face
all of the  risks  of a new  business  and the  special  risks  inherent  in the
investigation,  acquisition,  or involvement in a new business opportunity.  The
Company  must  be  regarded  as a new  or  "start-up"  venture  with  all of the
unforeseen costs,  expenses,  problems,  and difficulties to which such ventures
are subject.

5. Lack of Diversification.
---------------------------

Because of the limited  financial-resources that we have, it is unlikely that we
will be able to diversify its acquisitions or operations. The Company's probable
inability to diversify its activities into more than one area will subject us to
economic  fluctuations  within a particular  business or industry and  therefore
increase the risks associated with our operations.

6. Dependence upon Management;
-----------------------------

Limited  Participation  of  Management.  The  Company  currently  has only three
individuals  who are serving as its officers and  directors.  We will be heavily
dependent  upon their skills,  talents,  and abilities to implement its business
plan,  and may,  from time to time,  find that the inability of the officers and
directors  to devote  their full time  attention  to the business of the Company
results in a delay in  progress  toward  implementing  its  business  plan.  See
"Management."  Because  investors  will not be able to  evaluate  the  merits of
possible business decisions by us, they should critically assess the information
concerning our officers and directors.

                                       26

<PAGE>

7. Lack of  Continuity in  Management.
-------------------------------------

The  Company  does not  have an  employment  agreement  with  its  officers  and
directors,  and as a result,  there is no assurance they will continue to manage
the  Company  in the  future.  In  connection  with  acquisition  of a  business
opportunity,  it is likely the current officers and directors of the Company may
resign subject to compliance with Section 14f of the Securities  Exchange Act of
1934.  A decision  to resign  will be based upon the  identity  of the  business
opportunity  and the nature of the  transaction,  and is likely to occur without
the vote or consent of the stockholders of the Company.

8. Indemnification of Officers and Directors.
--------------------------------------------

Colorado  Revised  Statutes  provide for the  indemnification  of its directors,
officers, employees, and agents, under certain circumstances, against attorney's
fees and other expenses  incurred by them in any litigation to which they become
a party arising from their association with or activities on our behalf. We will
also  bear  the  expenses  of  such  litigation  for  any  directors,  officers,
employees,  or agents,  upon such person's promise to repay the Company therefor
if it is ultimately determined that any such person shall not have been entitled
to  indemnification.  This  indemnification  policy could result in  substantial
expenditures by us, which we will be unable to recoup.

                                       27

<PAGE>

9. Director's  Liability  Limited.
---------------------------------

Colorado Revised  Statutes  exclude  personal  liability of its directors to the
Company and its  stockholders  for monetary damages for breach of fiduciary duty
except in certain specified circumstances. Accordingly, we will have a much more
limited right of action against its directors than otherwise  would be the case.
This  provision  does not affect the liability of any director  under federal or
applicable state securities laws.

10. Dependence upon Outside Advisors.
------------------------------------

To supplement the business  experience of its officers and directors,  we may be
required to employ accountants,  technical experts,  appraisers,  attorneys,  or
other consultants or advisors.  The Company's President,  without any input from
stockholders,  will make the selection of any such advisors.  Furthermore, it is
anticipated  that such persons may be engaged on an "as needed"  basis without a
continuing  fiduciary  or other  obligation  to the  Company.  In the  event the
President of the Company considers it necessary to hire outside advisors, he may
elect to hire  persons  who are  affiliates,  if they are  able to  provide  the
required services.

11.  Leveraged  Transactions.
----------------------------

Acquisitions  of a assets by the Company maybe  leveraged,  i.e., we may finance
the  acquisition of the assets by borrowing  against the assets of the business,
or against the projected future revenues or profits of the assets. If done, this
could  increase  our  exposure  to  larger  losses.  Assets  acquired  through a
leveraged  transaction  are profitable  only if it generates  enough revenues to
cover the  related  debt and  expenses.  Failure  to make  payments  on the debt
incurred to purchase  the  business  opportunity  could  result in the loss of a
portion or all of the assets  acquired.  There is no  assurance  that any assets
acquired through a leveraged  transaction will generate  sufficient  revenues to
cover the related debt and expenses.

                                       28

<PAGE>

12. Loss of Control by Present  Management and Stockholders.
-----------------------------------------------------------

We may consider an acquisition in which we would issue, as consideration for the
business  opportunity to be acquired,  an amount of the Company's authorized but
unissued common stock that could, upon issuance, represent the great majority of
the voting  power and equity of the Company.  The result of such an  acquisition
would be that the acquired  company's  stockholders and management would control
the Company, and persons unknown could replace our management at this time. Such
a merger  would  result in a greatly  reduced  percentage  of  ownership  of the
Company by its current shareholders.

13. Volatility of Stock Price.
-----------------------------

There is no  significant  recent  history  relating  to the market  price of our
stock,  but what exists  indicates the market price is highly volatile and it is
very thinly  traded.  Factors  such as those  discussed  in this "Risk  Factors"
section may have a significant  impact upon the market price of the  securities.
Due to the low price of the securities,  many brokerage firms may not be willing
to effect  transactions in the securities.  Further,  many lending  institutions
will not permit the use of such securities as collateral for any loans.

14. We depend on key personnel and do not have employment agreements with our
--------------------------------------------------------------------------------
executive  officers.
-------------------

Our success  depends on the continued  services of our executive  officers and a
limited number of other senior management and technical personnel, and we do not
have employment agreements with these employees.  Loss of the services of any of
these people could result in financial losses and interruptions in operations.

15. We do not pay dividends.
---------------------------

     We have never  declared nor paid any cash dividends on our common stock and
management has no intention to do so in the near future.

RESERVES
--------

     The Company has no proven oil or gas or coalbed methane  reserves,  nor any
production.

                                       29
<PAGE>

Employees

     The Company is a  development  stage  company and currently has no fulltime
employees.  Management of the Company expects to use consultants,  attorneys and
accountants as necessary,  and anticipates a need to engage at least 3 full-time
employees as it expands its oil and gas operations.

Office and Operations Facilities

     The Company  leases its  corporate  offices in Wheat Ridge,  Colorado.  The
lease covers approximately 400 square feet and is month to month.

ITEM 2. DESCRIPTION OF PROPERTIES/ASSETS/OIL AND GAS PROSPECTS
--------------------------------------------------------------

         (a) Real Estate.                   None.

         (b) Title to properties.

     The  Company  owns fee title to various  minerals  on 150,000  gross  acres
approximately  in Colfax County,  New Mexico subject to a 10% royalty  interest.
These  interests  constitute  oil,  gas or coalbed  methane  on  120,000  acres,
approximately,  and 50% of oil and gas rights on approximately  10,000 acres and
20,000 acres approximately of other miscellaneous mineral rights.

         (c) Oil and Gas Leases and Interests

         (d) Patents.                       None.

 At April 30, 2007, the Company held undeveloped acreage as set forth below:

                                       30

<PAGE>

<TABLE>
<CAPTION>
<S>             <C>                <C>               <C>                <C>              <C>                <C>

                    Developed Acres                     Undeveloped Acres                      Total Acres

Location

                Gross              Net               Gross              Net              Gross              Net

Colfax Co
New Mexico      0                   0                   44,000             3,520                  0                 0
Colfax Co
New Mexico      0                   0                  120,000           108,000            120,000           108,000
Colfax Co
New Mexico      0                   0                   10,000             5,000             10,000             5,000
Wyoming         0                   0                    2,560             2,137              2,560             2,137
Wyoming         0                   0                      640               512                640               512
Wyoming         0                   0                   13,500            10,125             13,500            10,125

Total           0                   0                  190,700           129,294            190,700           129,294


</TABLE>

<TABLE>
<CAPTION>

                        Historical Oil or Gas Production for Company
                        --------------------------------------------

<S>                                    <C>          <C>       <C>      <C>         <C>      <C>



                                                2007                2006                2005
                                                ----                ----                ----

                                       Natural       Oil      Natural   Oil        Natural   Oil
                                         Gas        (Mbbl)      Gas    (Mbbl)        Gas    (Mbbl)
                                       (MMcf)                 (MMcf)               (MMcf)

Raton Basin                            0             0          0         0          0        0
Wyoming                                0             0          0         0          0        0
Wyoming                                0             0          0         0          0        0
New Mexico                             0             0          0         0          0        0

Total                                  0             0          0         0          0        0

</TABLE>

                                       31

<PAGE>




Productive Wells

     The following  table sets forth the number of gross and net producing wells
the Company had as of April 30, 2007: None
                                      ----


ITEM 3. LEGAL PROCEEDINGS
-------------------------

     We are not a party to any material pending legal  proceedings,  and no such
proceedings are known to be contemplated.

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

     On August 17, 2006, we held an Annual Meeting of the Shareholders.  At that
meeting, the following items were approved by a majority note:

-    the election of 5 nominated  directors to our Board of  Directors,  all of
     whom will hold office until the next annual meeting of the shareholders;

-    the  satisfaction  of  the  appointment  of  Jaspers  +  Hall,  PC  as  our
     Independent Accountants for the annual period ended April 30, 2007; and

-    the change of our name from Dynadapt System, Inc. to Sun River Energy, Inc.

                                       32

<PAGE>

PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

     The  Company's  common  stock is presently  quoted on the  over-the-counter
bulletin board  maintained by the National  Association  of Securities  Dealers,
Inc. (the "NASD") under the symbol "SNRV"

     The following table sets forth the range of high and low quotations for the
common stock of each full quarterly  period during the fiscal year or equivalent
period for the fiscal periods indicated below. The quotations were obtained from
information published by the NASD and reflect interdealer prices, without retail
mark-up,  markdown  or  commission  and may  not  necessarily  represent  actual
transactions.


2007 FISCAL YEAR                     HIGH        LOW
------------------                  -----       -----

April 30, 2007                      $1.50       $0.92
January 31, 2007                     1.75        1.01
October 31, 2006                     1.75        0.55
July 31, 2006                        2.00        0.55

2006 FISCAL YEAR                     HIGH        LOW
----------------                    -----       -----

April 30, 2006                      $0.10       $  -
January 31, 2006                        -          -
October 31, 2005                        -          -
July 31, 2005                           -          -

     As of July 30, 2007, there were approximately 89 holders of record of the
Company's common stock.

DIVIDEND  POLICY

     The Company has not paid any cash dividends on its common stock in the past
and  does  not  anticipate  paying  any  dividends  in the  foreseeable  future.
Earnings,  if any, are expected to be retained to fund future  operations of the
Company.  There can be no assurance  that the Company will pay  dividends at any
time in the future.

                                       33

<PAGE>

     Effective  August 11, 1993,  the Securities  and Exchange  Commission  (the
"Commission")  adopted Rule 15g-9,  which established the definition of a "penny
stock," for purposes relevant to the Company,  as any equity security that has a
market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions.  For any transaction involving a
penny  stock,  unless  exempt,  the rules  require:  (i) that a broker or dealer
approve a person's account for  transactions in penny stocks;  and (ii) that the
broker  or  dealer  receive  from  the  investor  a  written  agreement  to  the
transaction,  setting  forth the  identity and quantity of the penny stock to be
purchased.  In order to approve a person's  account  for  transactions  in penny
stocks,  the  broker  or  dealer  must  (i)  obtain  financial  information  and
investment  experience and objectives of the person;  and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient  knowledge and experience in financial matters to
be capable of evaluating the risks of transactions  in penny stocks.  The broker
or dealer  must also  deliver,  prior to any  transaction  in a penny  stock,  a
disclosure  schedule  prepared  by the  Commission  relating  to the penny stock
market,  which,  in highlight form, (i) sets forth the basis on which the broker
or dealer made the suitability determination; and (ii) states that the broker or
dealer  received a signed,  written  agreement  from the  investor  prior to the
transaction.  Disclosure  also has to be made  about the risks of  investing  in
penny  stock in both  public  offerings  and in  secondary  trading,  and  about
commissions payable to both the broker-dealer and the registered representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in cases of fraud in penny stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.

                                       34
<PAGE>


Recent Sales of Unregistered Securities
---------------------------------------

Unregistered sales for the year ended April 30, 2007 are set forth below.

                                                Business
Date            Title           Number of       Associate       Consideration
----            -----           Shares          Holder          -------------
                                ---------       ---------
06/01/06        Common Stock      740,000       -               $370,000

10/31/06        Common Stock       55,000       -               $ 27,500
                Warrant

10/23/06        Common Stock      241,935       -               Payment of debt
                                                                of $150,000

10/23/06        Common Stock      800,000       -               $400,000

09/14/06        Common Stock      309,000       -               Services

11/01/06        Common Stock      880,000                       Lease assignment
                                                                on Wyoming
                                                                Leases

04/30/07        Common Stock    2,200,000       -               $1,100,000
                                                                 cash

Exemptions  From  Registration  Claimed

     The above issuance by the Company of its  unregistered  securities was made
by the Company in reliance upon Section 4(2) of the  Securities  Act of 1933, as
amended (the "Act").  The  entities/individuals  that purchased the unregistered
securities  were  made  known  to  the  Company  or  its   management,   through
pre-existing  business  relationships.  The  entities/individuals  were provided
access to all material  information  which they  requested,  and all information
necessary to verify such  information  and was afforded  access to management of
the Company in  connection  with the  issuance.  The holder of the  unregistered
securities  acquired such  securities  for investment and not with a view toward
distribution,  acknowledging  such intent to the Company.  All  certificates  or
agreements  representing such securities that were issued contained  restrictive
legends,   prohibiting  further  transfer  of  the  certificates  or  agreements
representing  such  securities,  without  such  securities  either  being  first
registered or otherwise  exempt from  registration  under the Act in any further
resale or disposition.

                                       35

<PAGE>

ITEM  6.  MANAGEMENT'S   DISCUSSION  AND  ANALYSIS  OF  OPERATIONS  OR  PLAN  OF
--------------------------------------------------------------------------------
OPERATIONS.
----------

CHANGES IN FINANCIAL CONDITIONS

     Certain statements  contained in this Form 10-KSB contain  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995 and involve risks and  uncertainties  that could cause actual results to
differ   materially  from  the  results,   financial  or  otherwise,   or  other
expectations described in such forward-looking  statements.  Any forward-looking
statement or statements  speak only as of the date on which such statements were
made,  and the Company  undertakes no  obligation to update any  forward-looking
statement  to  reflect  events or  circumstances  after  the date on which  such
statements  are  made  or  reflect  the  occurrence  of  unanticipated   events.
Therefore, forward-looking statements should not be relied upon as prediction of
actual future results.

     Our independent registered public accounting firm's report on the Company's
consolidated  financial  statements  as of April 30,  2007,  and for each of the
years in the two-year period then ended,  includes a "going concern" explanatory
paragraph,  that  describes  substantial  doubt about the  Company's  ability to
continue  as a going  concern.  Management's  plans  in  regard  to the  factors
prompting the  explanatory  paragraph are discussed  below and also in Note 3 to
Notes to the Consolidated Financial Statements.


RESULTS OF  OPERATIONS  FOR THE YEAR ENDED APRIL 30, 2007  COMPARED TO THE YEAR
--------------------------------------------------------------------------------
ENDED APRIL 30, 2007
--------------------

     We did not recognize  any revenues  during the year ended April 30, 2007 or
2006. During the year end April 30, 2007, we incurred total operating expenses
of $319,916 compared to $350,050 during the year ended April 30, 2006.  The
decrease of $30,134 was due to a decrease in consulting and accounting and legal
expenses offset by an increase in operating expenses such as lease and office
expense.

     During  the year  ended  April 30,  2007 we  incurred  interest  expense of
$279,271 as a result of the notes payables  incurred by the Company as discussed
below.

     During the year ended April 30, 2007,  we recognized a net loss of $661,339
compared  to a net loss of  $350,050  for the year  ended  April 30,  2006.  The
$311,289  increase in net losses was a result of the $341,423  increase in other
income and expenses, specifically, the $279,271 in interest expense.

     Losses  should be  expected to continue  revenues  can be achieved  through
production of hydrocarbons of which there can be no assurance.

                                       36
<PAGE>



Liquidity and Capital Resources
---------------------------------

     At April 30, 2007, we had cash of $17,572.  During the year ended April 30,
2007, net cash used by operating activities was $1,714,316 compared to $0 in the
prior year.  We used  $7,040,000 in investing  activities  during the year ended
April 30, 2007.  Investing  activities primarily consisted of the acquisition of
oil leases in Wyoming. We received $8,770,889 in financing during the year ended
April 30, 2007.

During the year ended April 30, 2007,  we received  $1,497,500  from the sale of
2,995,500 shares of our common stock. On April 30, 2007 we signed a subscription
agreement for $1,100,000 and issued 2,200,000 shares of common stock.

During the year ended April 30, 2007 we issued notes for $6,528,087. These funds
were primarily used in the acquisition of oil leases in Johnson County, Wyoming.
The funds were also used to support operations.

On August 17, 2006, in exchange for 800,000  shares of the Company's  restricted
common stock, we acquired  200,000  tradable shares of the common stock of Tonga
Capital  Corporation from a non-affiliate.  At the time of the acquisition,  the
shares had a market value of $400,000. The 800,000 shares of the Company's stock
issued for the  shares  had a value of  $400,000  ($0.50  per  share),  but were
restricted.

NEED FOR ADDITIONAL FINANCING

     The Company did not have  capital  sufficient  to meet the  Company's  cash
needs.  The Company will have to seek loans or equity  placements  to cover such
cash needs.  Lack of its  existing  capital may be a  sufficient  impediment  to
prevent it from accomplishing the goal of expanding its operations.

The Company will need to raise  significant  additional  funds to expand its oil
and gas operations in the future.  No commitments  to provide  additional  funds
have been made by management or other stockholders. Accordingly, there can be no
assurance that any additional funds will be available to the Company to allow it
to cover its expenses as they may be incurred.

The  Company  intends to  occasionally  compensate  providers  of  services  by
issuances of stock in lieu of cash.

                                       37

<PAGE>

GOING CONCERN

The  Company's  auditor has issued a "going  concern"  qualification  as part of
their opinion in the Audit Report.  There is substantial doubt about the ability
of the Company to continue as a "going concern." During the year ended April 30,
2007, the Company generated no revenue,  has a working capital  deficiency,  and
current  liabilities  exceed  current  assets by  approximately, $6,263,265.

Critical Accounting Policies

Management is require to make judgments, assumptions and estimates that affect
the amounts reported when we prepare financial statements and related
disclosures in conformity with generally accepted accounting principles in the
United States.  Note, "Summary of Significant Accounting Policies," to the
financial statements for the fiscal year ended April 30, 2007, describes the
significant accounting policies and methods used in preparation of our financial
statements. Estimates are used for, but not limited to, our accounting for
contingencies and income taxes.  Actual results could differ from these
estimates.

ITEM 7 - FINANCIAL STATEMENTS
------------------------------

     The  response to this item is submitted  as a separate  attachment  of this
report beginning on page F-1 to F 10.


 ITEM 8.  CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------------------------------------------------

Not Applicable.

ITEM 8a CONTROLS AND PROCEDURES
-------------------------------

Evaluation of Internal and Disclosure Controls
----------------------------------------------

     The  management  of the  Company has  evaluated  the  effectiveness  of the
issuer's  disclosure  controls and procedures as of the end of the period of the
report, April 30, 2007 and have concluded that the disclosure controls, internal
controls and procedures are adequate and effective  based upon their  evaluation
as of the evaluation date.

                                       38

<PAGE>

There  were no changes  in the small  business  issuers  internal  control  over
financial  reporting  identified  in  connection  with  the  Company  evaluation
required by  paragraph  (d) of Rule 13a-15 or Rule 15d-15 under the Exchange act
that occurred  during the small business  issuers fourth fiscal quarter that has
materially  affected or is  reasonably  likely to materially  affect,  the small
business issuers internal control over financial reporting.

ITEM 8a. (T) CONTROLS AND PROCEDURES
------------------------------------

Not Applicable

ITEM 8b. OTHER INFORMATION
--------------------------

Not Applicable

PART III

ITEM 9. DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16a OF THE EXCHANGE ACT
------------------------------------

    The directors and executive  officers  currently  serving the Company are as
follows:

Name                       Position                                    Term
------                     --------                                    ----

Wesley F. Whiting          President and Director                      Annual

Redginald T. Green         Secretary, and Director                     Annual

Thomas Anderson            Director                                    Annual

Stephen W. Weathers        Director                                    Annual

David Surgnier             Director                                    Annual


                                       39
<PAGE>

     The directors  named above will serve until the next annual  meeting of the
Company's  stockholders.  Directors  will be elected for  one-year  terms at the
annual stockholders' meeting. Officers will hold their positions at the pleasure
of the board of  directors,  absent  any  employment  agreement,  of which  none
currently  exists or is  contemplated.  There is no arrangement or understanding
between the directors and officers of the Company and any other person  pursuant
to which any  director  or officer  was or is to be  selected  as a director  or
officer.

     Our directors  and officers will devote such time to the Company's  affairs
on an "as needed" basis. As a result, the actual amount of time, which they will
devote to the Company's affairs,  is unknown and is likely to vary substantially
from month to month.

DIRECTORS AND EXECUTIVE OFFICERS

WESLEY F.  WHITING,  age 74.  Mr.  Whiting  has  served as the  President  and a
Director of the Company,  since 1999. Mr. Whiting was President,  Director, and
Secretary of Berge Exploration,  Inc.  (1978-88) and President,  Vice President,
and director of NELX, Inc.  (1994-1998),  and was Vice President and director of
Intermountain  Methane  Corporation  (1988-1991),   and  President  of  Westwind
Production,  Inc.  (1997-1998).  He was a director of Kimbell deCar  Corporation
from 1998,  until 2000 and he has been  President  and a  director  of  Dynadapt
System,  Inc. since 1998. He was a Director of Colorado Gold & Silver, Inc. from
1999 to 2000. He was President and director of Business  Exchange  Holding Corp.
from 2000 to 2002 and Acquisition Lending, Inc. (2000-2002). He was director and
Vice  President of Utilitec,  Inc, 1999 to 2002, and has been Vice President and
director of Agro  Science,  Inc.  since 2001.  He was  President and director of
Premium  Enterprises,  Inc.  From October 2002 to December 31, 2002.  He is Vice
President and director of Evergreen Associates,  Inc. and Resource Science, Inc.
He was appointed  Director and Secretary of BSA SatelLINK,  Inc. in 2002. He was
President and Director of Fayber Group, Inc. 2003, 2005 when he resigned. He has
also been  Director of Life USA, Inc.  since 2003.  He has been  appointed as an
officer and  director  of Captech  Financial,  Inc. in May 2006.  He served as a
director of Baymark  Technologies,  Inc.  2005-2006.  He is a director of Cavion
Technologies, Inc. (2006) and Aspeon, Inc. (2006).

REGINALD T. GREEN, age 54, Mr. Green has served as the Secretary and Director of
the Company,  since 1999.  Mr. Green has been Secretary and Director of Dynadapt
Systems,  Inc.  since 1998.  Mr. Green has been co-owner and operator of Green's
B&R  Enterprises,  a wholesale  donut  baker  since 1983.  He has been an active
investor in small capital and high-tech  adventures  since 1987. Mr. Green was a
director of Colorado Gold & Silver,  Inc. in 2000. He was a director for Houston
Operating  Company in late 2004 until  December  2004.  He recently  served as a
director for Mountains West Exploration, Inc in 2005. He is a Director of Cavion
Technologies,  Inc. (2006) and Aspeon,  Inc. (2006) and has been appointed as an
officer and  director  of Captech  Financial,  Inc. in May 2006.  He served as a
director of Baymark Technologies, Inc. 2005-2006.


                                       40

<PAGE>

THOMAS ANDERSON, age 40, presently works as a Senior Environmental Scientist for
the Energy and Environmental  Engineering Division of Apogen Technologies in Los
Alamos,  New Mexico.  He earned his B.S. in Geology from Denison  University and
his M.S. in Environmental Science and Engineering from Colorado School of Mines.
Mr. Anderson has worked for past 16 years in the environmental consulting field,
providing environmental compliance, characterization and remediation services to
Department of Energy, Department of Defense, and industrial clients. He formerly
worked as a Senior Environmental Scientist at Concurrent Technologies Corp. from
November 2000 to December 2004. From March 2000 to November 2000 he was employed
as a hydrologist  at Stone & Webster  Engineering,  Inc. From July 1998 to March
2000  he  was  employed  by  advanced  Integrated   Management  Services  as  an
Environmental  Scientist/Engineer.  From 1997 to 1998 he was a graduate research
assistant  at  Colorado  School  of  Mines  in  the  Environmental  Science  and
Engineering Program.

STEPHEN  W.  WEATHERS,  age 44,  earned his B. S. in  Geology  from Boise  State
University.  He has  worked as an  environmental  geologist  both in the  mining
industry and oil and gas industry. His duties included permitting, environmental
compliance,   environmental   remediation/reclamation   and  natural  gas  asset
acquisitions  both in the United  States and  Canada.  Mr.  Weathers  worked for
Maxxim  Environmental/Terracon from 1997 through 1999 and presently works in the
environmental  remediation  division for a Duke Energy Field Services which is a
natural  gas  processing  company  (1999-2002).  Mr.  Weathers  also serves as a
director of Sun River Mining, Inc. which is seeking a business acquisition.


DAVID SURGNIER, age 57, Director Nominee, earned his B.S. in Mathematics in 1971
from the University of Oklahoma,  his B.S. in Petroleum Engineering in 1972 from
the University of Oklahoma,  and his M.S. in Petroleum  Engineering in 1984 from
the University of Texas.

Mr. Surgnier  currently serves as  President/Engineer  for Delta Gas Corporation
and Delta  Environmental since 1992. From 1986 to 1992 he was the Rocky Mountain
Regional Manager for Completion  Technology  International of Denver,  Colorado.
Mr.  Surgnier  was the  Manager  of  Special  Projects  for Texas  Iron Works of
Houston,  Texas from  1980-1986.  Mr.  Surgnier was the Drilling and  Production
Engineer from 1972-1980 for Atlantic  Richfield Oil Company  located in Houston,
Texas and ARCO Alaska.

                                       41
<PAGE>





Mr.  Surgnier  has 33 years  experience  as a  Petroleum  Engineer,  Project and
Regional  Manager,  Technical  writer and  presenter.  Developer,  Inventor  and
co-Inventor  of  Patented  and  Proprietary  equipment  and  products,  for  the
Petroleum  and  Environmental  Industry.  He has operated  and managed  projects
onshore and offshore in North & South America, North Slope of Alaska, Cook Inlet
of Alaska and the Middle East.

He has also drilled and completed  domestic water supply wells for  individuals,
the Chickasaw,  Choctaw and Seminole  Nations,  and U.S.  Public Health Service.
Oilfield water supply wells for Cities Service Co., Framers Energy  Corporation,
Botcher Gas  Company,  Cameron Oil Company and Phillips  Petroleum  Corporation.
Municipal Water Supply Wells for the Cities of Stewart, McAlister, Stonewall Ada
and Tribbey, Oklahoma.

He has been  Environmental  Consultant  to  Environmental  Resource  Management,
Biotreatment,  Inc., Aarow Environmental,  Inc., Argonne National Laboratory and
the University of Chicago.  He has numerous Patents & Inventions and has written
many professional Articles involving petroleum engineering.

Indemnification of Officers and Directors

     As permitted by Colorado Revised  Statutes,  we may indemnify its directors
and officers against expenses and liabilities they incur to defend,  settle,  or
satisfy any civil or criminal  action  brought  against them on account of their
being or having been Company's directors or officers unless, in any such action,
they are  adjudged to have acted with gross  negligence  or willful  misconduct.
Insofar as indemnification  for liabilities  arising under the Securities Act of
1933 may be permitted to directors,  officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the  Securities  and Exchange  Commission,  such  indemnification  is
against public policy as expressed in that Act and is, therefore, unenforceable.

Exclusion of Liability

     The Colorado Corporation Code excludes personal liability for its directors
for  monetary  damages  based upon any  violation of their  fiduciary  duties as
directors, except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law,  acts in violation  of the  Colorado  Corporation  Act, or any
transaction from which a director receives an improper  personal  benefit.  This
exclusion of liability does not limit any right, which a director may have to be
indemnified,  and does not  affect any  director's  liability  under  federal or
applicable state securities laws.

Conflicts of Interest

     Our  officers  and  directors  will not devote more than a portion of their
time to the  affairs  of the  Company.  There  will be  occasions  when the time
requirements  of our business  conflict with the demands of their other business
and investment activities.  Such conflicts may require that we attempt to employ
additional  personnel.  There is no assurance  that the services of such persons
will be  available  or that they can be  obtained  upon terms  favorable  to the
Company.

                                       42

<PAGE>

Officers and  directors  of the Company may  participate  in business  ventures,
which could be deemed to compete directly with the Company. Additional conflicts
of interest and non-arms length transactions may also arise in the future in the
event our officers or directors are involved in the  management of any firm with
which we transact business. Our Board of Directors has adopted a policy that the
Company  will not seek a merger  with,  or  acquisition  of, any entity in which
management  serve as officers  or  directors,  or in which they or their  family
members own or hold a  controlling  ownership  interest.  Although  the Board of
Directors  could  elect to change this  policy,  the Board of  Directors  has no
present intention to do so.

ITEM 10 EXECUTIVE COMPENSATION

The following table sets forth certain information concerning  compensation paid
by the Company to the President  and the  Company's two most highly  compensated
executive officers for the fiscal years ended April 30, 2007, 2006 and 2005 (the
"Named Executive Officers"):

<TABLE>
<CAPTION>
<S>                 <C>       <C>         <C>      <C>       <C>         <C>             <C>             <C>              <C>


                                            SUMMARY COMPENSATION TABLE

                                                                          Non-equity      Non-qualified
                                                                          incentive        deferred
                                                   Stock     Option          plan        compensation     All other
                              Salary      Bonus     awards    awards     compensation      earnings      compensation     Total
Name & Position     Year        ($)        ($)       ($)        ($)          ($)             ($)             ($)           ($)
----------------- ---------- ---------- ---------- --------- ---------- --------------- --------------- --------------- ----------

Wesley F.           2007       $-0-       $-0-      $ -0-      $ -0-        $ -0-            $-0-            $-0-         $-0-
Whiting, CEO &      2006       $-0-       $-0-      $ -0-      $ -0-        $ -0-            $-0-            $-0-         $-0-
Director            2005       $-0-       $-0-      $ -0-      $ -0-        $ -0-            $-0-            $-0-         $-0-


Redginald T.        2007       $-0-       $-0-      $ -0-      $ -0-        $ -0-            $-0-            $-0-         $-0-
Green, Secretary    2006       $-0-       $-0-      $ -0-      $ -0-        $ -0-            $-0-            $-0-         $-0-
& Director          2005       $-0-       $-0-      $ -0-      $ -0-        $ -0-            $-0-            $-0-         $-0-

</TABLE>


                                       43

<PAGE>


                                   OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table sets forth certain information concerning outstanding equity
awards held by the  President  and the  Company's  two most  highly  compensated
executive  officers  for the fiscal  years  ended  December  31, 2006 the "Named
Executive Officers": (included in Director Compensation Table below under "Stock
Awards")


<TABLE>
<CAPTION>
<S>                <C>              <C>              <C>              <C>             <C>              <C>              <C>

                                               DIRECTOR COMPENSATION

The following table sets forth certain information concerning  compensation paid
to the Company's directors during the year ended April 30, 2007:  (excluding any
amounts paid as officers)


                                                                                       Non-qualified
                                                                        Non-equity       deferred
                   Fees earned or                                       incentive      compensation       All other
                    paid in cash     Stock awards     Option awards        plan          earnings       compensation         Total
      Name               ($)              ($)              ($)         compensation         ($)            ($) (1)            ($)
                                                                           ($)

------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
Wesley F. Whiting       $ 50,000         $ -0-            $ -0-           $ -0-            $ -0-          $ -0-            $ 25,000
------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
Redginald T. Green      $ 50,000         $ -0-            $ -0-           $ -0-            $ -0-          $ -0-            $ 25,000
------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
Stephen W. Weathers     $ 50,000         $ -0-            $ -0-           $ -0-            $ -0-          $ -0-            $ 25,000
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------
Thomas Anderson         $ 50,000         $ -0-            $ -0-           $ -0-            $ -0-          $ -0-            $ 25,000
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------
David Surgnier          $ 50,000         $ -0-            $ -0-           $ -0-            $ -0-          $ -0-            $ 25,000
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------

</TABLE>

                                       44

<PAGE>

<TABLE>
<CAPTION>
<S>             <C>          <C>           <C>          <C>           <C>          <C>           <C>          <C>          <C>


--------------- ------------------------------------------------------------------ -------------------------------------------------
                                          Option Awards                                                Stock awards
--------------- ------------------------------------------------------------------ -------------------------------------------------
                                                                                                                              Equity
                                                                                                                           incentive
                                             Equity                                                                            plan
                                            incentive                                                           Equity       awards:
                                              plan                                                             incentive   Market or
                                             awards:                                                             plan         payout
                 Number of    Number of     Number of                               Number of      Market       awards:     value of
                securities    securities   securities                               shares or     value of     Number of    unearned
                underlying    underlying   underlying                                units of     shares of    unearned      shares,
                unexercised  unexercised   unexercised     Option       Option      stock that    units of      shares,     units or
                  options    options (#)    unearned      exercise    expiration     have not    stock that    units or       others
     Name           (#)      unexercisable   options       price         date         vested      have not       other   rights that
                exercisable                    (#)          ($)                         (#)        vested       rights      have not
                                                                                                     ($)       that have      vested
                                                                                                              not vested       ($)
                                                                                                                  (#)
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------
Wesley F.          -0-          -0-           -0-         $ -0-           -           -0-          $ -0-         -0-          -0-
Whiting
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------
Redginald          -0-          -0-           -0-         $ -0-           -           -0-          $ -0-         -0-          -0-
T. Green
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------
Stephen W. Weathers-0-          -0-           -0-         $ -0-           -           -0-          $ -0-         -0-          -0-
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------
Thomas Anderson    -0-          -0-           -0-         $ -0-           -           -0-          $ -0-         -0-          -0-
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------
David Surgnier     -0-          -0-           -0-         $ -0-           -           -0-          $ -0-         -0-          -0-
--------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ ------------ ---------

</TABLE>


                                       45

<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     The  following  table  sets  forth,  as of the  date of  this  Registration
Statement, the number of shares of Common Stock owned of record and beneficially
by  executive  officers,  directors  and  persons  who hold  5.0% or more of the
outstanding  Common Stock of the Company.  Also  included are the shares held by
all executive officers and directors as a group.

SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT AS OF JUNE 30,
2007.


Title of Class    Name and Address        Amount and Nature          Percent of
                  Of Beneficial Owner     of Beneficial Ownership    Class


Common Stock      Wesley F. Whiting       50,000                  0.34%
                  Presiden/Director
                  Suite 210 E.
                  10200 W. 44th Ave.
                  Wheat Ridge, CO 80033

Common Stock      Redginald T. Green      63,500                  0.42%
\                 Secretary/Director
                  Suite 210 E.
                  10200 W. 44th Ave.
                  Wheat Ridge, CO 80033

Common Stock      Thomas Anderson         50,000                  0.3%
                  Director
                  Suite 210 E.
                  10200 W. 44th Ave.
                  Wheat Ridge, CO 80033

Common Stock      Stephen W. Weathers     50,000                  0.3%
                  Director
                  Suite 210 E.
                  10200 W. 44th Ave.
                  Wheat Ridge, CO 80033

Common Stock      David Surgnier          50,000                  0.3%
                  Director
                  Suite 210 E.
                  10200 W. 44th Ave.
                  Wheat Ridge, CO 80033

Common Stock      LCP Investments, LLC   2,200,000                 14.8%
                  (Benefically owned by Kevin Paul)
                  2005 Wilcox St., #154
                  Castle Rock, CO 80104

Common Stock      New Mexico Energy LLC  7,333,333                 49%
                  PO Box 754
                  Trinidad, CO 81082

Common Stock      Nova Leasing, LLC      1,180,000                  7.9%
                  214 S. Center
                  Casper, WY

Common Stock      Michael A. Littman       801,000                  5.3%
                  7609 Ralston Road
                  Arvada, CO 80002

All Directors and Executive
 Officers as a Group (5 persons)           263,500                  1.8%
-----------------------------

Based on 14,845,768 shares of our common stock issued and outstanding on July
30, 2007.

                                       46

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------



   No officer,  director, or affiliate of the Company has any direct or indirect
material  interest in any asset  proposed to be acquired by the Company  through
security holdings, contracts, options, or otherwise.

PART IV

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

The following documents are filed as a part of this Report.

(i)  Financial Statements.  See Index Financial Statements on Page F-__ of this
Report.

(ii) Exhibits.  The following is a complete list of exhibits filed as a part of
this Form 10KSB.  Exhibit numbers in this Exhibit Table of Item 601 of
Regulation SB.

Exhibits

 3.3   Articles of Incorporation - (1)

 3.4   Bylaws (1)

 3.6   Articles of Amendment (2)

 3.7   Articles of Amendment (2)

 10.3  Commercial Promissory Note, April 10, 2006 (1)

 10.4  Commercial Promissory Note, April 12, 2006 (1)

 10.5  Commercial Promissory Note, April 20, 2006 (1)

 10.6  Assignment of Oil & Gas Lease, April 17, 2006 (1)

 10.7  Assignment of Oil & Lease, April 25, 2006 (1)

 10.8  Assignment of Oil & Lease, March 23, 2006 (1)

                                       47

<PAGE>

 10.9  Asset Purchase Agreement, April 12, 2006 (1)

 10.10 Quit Claim Deed, March 23, 2006 (1)

 10.11 Asset Purchase Agreement, September 25, 2006 (3)

 10.12 Mortgage, Assignment of Production, Security Agreement and Financing
       Statement, November 2006 (4)

 31 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act (*)

 32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act (*)

--------------------------------------------------------------------------------

(*) Filed Herewith

(1)      Filed with Report on Form 8-K 12G3, filed on May 3, 2006

(2)      FIled with Report on Form 8-K, filed on August 30, 2006

(3)      Filed with Report on Form 8-K, filed on October 13, 2006

(4)      Filed with Report on Form 8-K, filed on November 21, 2006



ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
------------------------------------------------

General.  Jaspers + Hall,  PC, CPAs ("JH") is the Company's  principal  auditing
accountant  firm. The Company's  Board of Directors has  considered  whether the
provisions of audit  services is compatible  with  maintaining  Jasper + Hall PC
independence.


     Audit Fees. JH is billing the Company $7,500 for the following professional
services: reviews of interim financial statements, audit of the annual financial
statement of the Company for the fiscal year ended April 30, 2007.

         There were no audit related fees in 2007 or 2006. There were no
tax fees or other fees in  2007 or 2006 paid to Auditors or Auditors
affiliates.

         The Company's Board acts as the audit committee and had no
"pre-approval policies and procedures" in effect for the auditors' engagement
for the audit year, 2007 and 2006.

         All audit work was performed by the auditors' full time employees.




                                      48



<PAGE>

                               SUN RIVER ENERGY, INC.

                                    FORM 10-K

                          INDEX OF FINANCIAL STATEMENTS



                                                                          Pages

Auditors Report- Jaspers + Hall, PC                                          F-1

Balance Sheets                                                               F-2

Statements of Operations                                                     F-3

Statements of Cash Flow                                                      F-4

Statements of Stockholders'                                                  F-5

Notes to Financial Statements                                          F-6 - F-8






<PAGE>

JASPERS + HALL, PC
CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
9175 Kenyon Avenue, Suite 100
Denver, CO 80237
303-796-0099


REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM

To the Board of Directors
of Sun River Energy, Inc. and subsidiary

We have  audited  the  accompanying  consolidated  balance  sheets  of Sun River
Energy,  Inc. and its subsidiary as of April 30, 2007, and 2006, and the related
consolidated statements of operations,  cash flows, and changes in stockholders'
equity for the years then  ended,  and for the period  October 22, 2002 (date of
inception) to April 30, 2007. 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  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Sun River Energy,
Inc.  and its  subsidiary  at April 30, 2007,  and 2006,  and the results of its
operations  and its cash  flows for the years  then  ended,  and for the  period
October 22, 2002 (date of  inception)  to April 30,  2007,  in  conformity  with
accounting principles generally accepted in the United States.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  described  in  Note 3 to the
financial statements,  conditions exists which raise substantial doubt about the
Company's ability to continue as a going concern.  Management's  plans in regard
to these matters are also  discussed in Note 1. The financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.

August 3, 2007
/s/Jasper + Hall PC

                                      F-1

<PAGE>
<TABLE>
<CAPTION>

                             SUN RIVER ENERGY, INC.
                       (Formerly Dynadapt Systems, Inc.)
                         (A Development Stage Company)
                                 Balance Sheet
<S>                                                                                      <C>                 <C>



                                                                                          ----------------------------------
                                                                                           April 30,
                                                                                             2007                2006
                                                                                         --------------      --------------
ASSETS:

   Current Assets:
      Cash                                                                                    $ 17,572               $ 999
      Marketable Securities                                                                    299,200                   -
      Stock Subscription Receivable                                                          1,100,000                   -
                                                                                         --------------      --------------
Total Current Assets                                                                         1,416,772                 999
                                                                                         --------------      --------------
   Other Assets:
      Leases                                                                                 7,324,000             284,000
      Mineral Rights                                                                           100,000             100,000
                                                                                         --------------      --------------
Total Other Assets                                                                           7,424,000             384,000
                                                                                         --------------      --------------
TOTAL ASSETS                                                                                $8,840,772           $ 384,999
                                                                                         ==============      ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):

    Current Liabilities:
        Accounts Payable and accrued interest                                                $ 505,298           $ 366,375
        Notes Payable                                                                        6,746,637             218,550
        Notes Payable - Related Parties                                                        408,102             600,000
                                                                                         --------------      --------------
Total Current Liabilities                                                                    7,680,037           1,184,925
                                                                                         --------------      --------------
Stockholders' Equity  (Deficit):
    Common stock, $0.0001 par value; 100,000,000 shares                                          1,475                 952
        authorized, 14,745,768 shares issued and outstanding
        as of April 30, 2007 and 9,518,833 shares as of April 30, 2006
    Additional paid-in capital                                                               2,190,699            (450,778)
    Deficit accumulated during the development stage                                        (1,011,439)           (350,100)
Total Stockholders' Equity (Deficit)                                                         1,180,735            (799,926)
                                                                                         --------------      --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                        $8,840,772           $ 384,999
                                                                                         ==============      ==============


The accompanying notes are an integral part of these financial statements.
</TABLE>

                                      F-2


<PAGE>
<TABLE>
<CAPTION>

                             SUN RIVER ENERGY, INC.
                       (Formerly Dynadapt Systems, Inc.)
                         (A Development Stage Company)
                            Statements of Operations

<S>                                                <C>                      <C>                      <C>





                                                     Year ended                                      October 22, 1002
                                                     April 30,                                         Inception to
                                                   ----------------------------------------

                                                        2007                     2006                 April 30, 2007
                                                   ---------------          ---------------          -----------------
Revenue:
   Miscellaneous Income                                       $ -                      $ -                        $ -
                                                   ---------------          ---------------          -----------------
Costs and Expenses:
      Consulting                                          171,676               150,000.00                    321,726
      Accounting & Legal                                   58,416               200,050.00                    258,466
      Lease Expenses                                       41,296                        -                     41,296
      Office Expenses                                      48,267                        -                     48,317
      Bank Charges                                            261                        -                        261
                                                   ---------------          ---------------          -----------------
Total Expenses                                            319,916                  350,050                    670,016
                                                   ---------------          ---------------          -----------------
Net Loss From Operations                                 (319,916)                (350,050)                  (670,016)
                                                   ---------------          ---------------          -----------------

Other Income and (Expenses)
      Interest expense                                   (279,271)                       -                   (279,271)
      Interest income                                         689                        -                        689
      Realized (Loss) on sale of investments              (10,041)                       -                    (10,041)
      Unrealized (Loss) on investments                    (52,800)                       -                    (52,800)
                                                   ---------------          ---------------          -----------------
Net Loss                                                $(661,339)               $(350,050)              $ (1,011,439)
                                                   ===============          ===============          =================
Per Share Information
Loss per common share                                   $   (0.06)               $   (0.66)
                                                   ===============          ===============

Weighted average number
of shares outstanding                                  11,588,530                  532,806
                                                   ---------------          ---------------
</TABLE>

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

                                      F-3

<PAGE>
<TABLE>
<CAPTION>

                             SUN RIVER ENERGY, INC.
                       (Formerly Dynadapt Systems, Inc.)
                         (A Development Stage Company)
                  Statements of Stockholders' Equity (Deficit)

                                 April 30, 2007
<S>                              <C>           <C>         <C>          <C>         <C>

                                                                        Deficit
                                      COMMON STOCK          Additional   Accum. During  Total
                                 -----------------------
                                                            Paid-in     Development    Stockholders'
                                  # of Shares   Amount      Capital      Stage         Equity
                                 -----------------------   ----------   ---------   ----------

Balance - October 22, 2002                -         $ -          $ -         $ -          $ -
Stock issued for cash                 1,000           1           49           -           50
Net Loss for Period                       -           -            -         (50)         (50)
                                 -------------------------------------------------------------
Balance - December 31, 2002           1,000           1           49         (50)           -
                                 -------------------------------------------------------------
Net Loss for Year                         -           -            -           -            -
                                 -----------   ---------   ----------   ---------   ----------
Balance - December 31, 2003           1,000           1           49         (50)           -
                                 -----------   ---------   ----------   ---------   ----------
Net Loss for Year                         -           -            -           -            -
                                 -----------   ---------   ----------   ---------   ----------
Balance - December 31, 2004           1,000           1           49         (50)           -
                                 -----------   ---------   ----------   ---------   ----------

Issuance of shares for Merger     9,033,333         903      436,763           -      437,666
Merger accounting                   484,500          48      (20,923)                 (20,875)
Value of subsidiary in excess
 of related party's basis                                   (866,667)                (866,667)
Net Loss for Year                         -           -            -    (350,050)    (350,050)
                                 -----------   ---------   ----------   ---------   ----------
Balance - April 30, 2006          9,518,833         952     (450,778)   (350,100)    (799,926)
                                 -----------   ---------   ----------   ---------   ----------
Issuance of Stock for Cash          795,000          80      397,420           -      397,500
  at $0.50 per share plus
  warrant at $0.75
Issuance of Stock for Debt          242,935          24      149,976                  150,000
  at $0.62 per share
Issuance of Stock for Marketable
 Securities                         800,000          80      399,920                  400,000
 at $0.50 per share
Issuance of Stock for Services      309,000          31      154,469                  154,500
  at $0.50 per share
Issuance of Stock for Lease
 acquisitions                       880,000          88      439,912                  440,000
Issuance of Stock Subscription
 Receivables                      2,200,000         220    1,099,780                1,100,000
Net Loss for Year                                                         (661,339)  (661,339)
                                 -----------   ---------   ----------   ---------   ----------
Balance - April 30, 2007         14,745,768     $ 1,475    $2,190,699 $ (1,011,439) $1,180,735
                                 ===========   =========   ==========   =========   ==========

</TABLE>
The accompanying notes are an integral part of these financial statements.

                                      F-4

<PAGE>
<TABLE>
<CAPTION>

                             SUN RIVER ENERGY, INC.
                       (Formerly Dynadapt Systems, Inc.)
                         (A Development Stage Company)
                            Statements of Cash Flows

<S>                                                                     <C>              <C>              <C>



                                                                         Year ended                            October 22, 2002
                                                                         April 30,                          Inception to
                                                                            2007             2006          April 30, 2007
                                                                        -------------    -------------    -----------------
Cash Flows from Operating Activities

     Net Loss                                                              $(661,339)      $ (350,050)        $ (1,011,439)
      Adjustments to reconcile net loss to
      net cash used by operating activities:
         Unrealized loss on marketable securities                             52,800                -               52,800
         Stock issued for services                                           154,500                -              154,500
         (Increase) in current assets                                     (1,399,200)               -           (1,399,200)
         Increase in accounts payable and accrued expenses                   138,923          350,050              505,298
                                                                        -------------    -------------    -----------------
Net Cash Used by Operating Activities                                     (1,714,316)               -           (1,698,041)
                                                                        -------------    -------------    -----------------
Cash Flows from Investing Activities
     Acquisition of Wyoming lease                                         (7,040,000)               -           (7,040,000)
     Acquisition - net of cash acquired                                            -         (848,001)            (813,001)
                                                                        -------------    -------------    -----------------
Net Cash Used for Investing Activities                                    (7,040,000)        (848,001)          (7,853,001)
                                                                        -------------    -------------    -----------------
Cash Flows from Financing Activities
     Stock issued for cash                                                 1,444,700                -            1,444,750
     Stock issued for debt/assets                                            990,000           35,000              990,000
     Proceeds from/(Payments to) notes payable                             6,528,087          214,000            6,746,637
     Proceeds from/(Payments to) notes payable - related party              (191,898)         600,000              408,102
     Merger accounting                                                             -                -              (20,875)
                                                                        -------------    -------------    -----------------

Net Cash Provided by Financing Activities                                  8,770,889          849,000            9,568,614
                                                                                                           `
Net Increase in Cash & Cash Equivalents                                       16,573              999               17,572

Beginning Cash & Cash Equivalents                                                999                -                    -

Ending Cash & Cash Equivalents                                              $ 17,572            $ 999             $ 17,572
                                                                        =============    =============    =================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

     Cash paid for interest expense                                         $ 13,739              $ -             $ 13,739
                                                                        =============    =============    =================

     Cash paid for income taxes                                                  $ -              $ -                  $ -
                                                                        =============    =============    =================

NON-CASH TRANSACTIONS
     Stock issued for debt                                                 $ 150,000              $ -            $ 150,000
     Stock issued for marketable securities                                  400,000                -              400,000
     Stock issued for other assets                                           440,000                -              440,000
     Stock issued for services                                               154,500                -              154,500
                                                                        -------------    -------------    -----------------
      Total non-cash transactions                                         $1,144,500              $ -          $ 1,144,500

</TABLE>
The accompanying notes are an integral part of these financial statements.

                                      F-5

<PAGE>
                             SUN RIVER ENERGY, INC.
                          (A Development Stage Company)
                   (Formerly known as Dynadapt Systems, Inc.)
                   Notes to Consolidated Financial Statements
                                 April 30, 2007

Note 1 - Organization and Summary of Significant Accounting Policies:

Organization:

Sun River Energy,  Inc. was incorporated on April 30, 1998, as Dynadapt Systems,
Inc., under the laws of the State of Colorado. The Company is in the development
stages and was originally organized for the purpose of internet acquisitions. On
April  28,  2006,   the  Company   entered  into  an  "Agreement   and  Plan  of
Reorganization"  with Sun River Energy,  Inc.  (SRE),  a privately held Colorado
Corporation,  whereby  the  Company  acquired  SRE for  the  purchase  price  of
8,633,333  shares of the Company's  common  stock.  The  acquisition  of SRE was
accounted for by the purchase method of accounting.  Under purchase  accounting,
the total purchase price was allotted to the tangible and intangible  assets and
liabilities  of SRE based upon their  respective  fair  values as of the closing
date based upon  valuations and other  studies.  On August 31, 2006, the company
voted to change its name from Dynadapt Systems,  Inc. to Sun River Energy,  Inc.
to better reflect the focus and business purposes of the company.

The Company's new business is as an independent  energy company  engaged in the,
exploration  of  North  American   unconventional  natural  gas  properties  and
conventional  oil and gas exploration.  Its intended  operations are principally
energy  prospects  in the Rocky  Mountain  region  including  a coal bed methane
prospect  located in the Raton Basin in  Northern  New Mexico and the Company is
seeking  other  opportunities.  The Company is also  evaluating  the  additional
prospects it has obtained in Johnson and Natrona Counties in Wyoming.

The Company's fiscal year end is April 30th.

Basis of Presentation - Development Stage Company:

The Company has not earned any significant  revenues from its limited  principal
operations.  Accordingly,  the Company's  activities  have been accounted for as
those of a "Development  Stage Enterprise" as set forth in Financial  Accounting
Standards Board  Statement No. 7 ("SFAS 7"). Among the  disclosures  required by
SFAS 7 are that the Company's  financial  statements be identified as those of a
development stage company,  and that the statements of operation,  stockholders'
equity  (deficit)  and  cash  flows  disclose  activity  since  the  date of the
Company's inception.

                                      F-6

<PAGE>





Basis of Accounting:

The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting  principles  generally  accepted in the
United States.

Use of Estimates:

The  preparation  of  financial   statements,   in  conformity  with  accounting
principles generally accepted in the United States,  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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents:

The Company  considers all highly  liquid debt  instruments,  purchased  with an
original maturity of three months or less, to be cash equivalents.

Marketable Securities:

On August 17, 2006, in exchange for 800,000  shares of the Company's  restricted
common stock,  the Company  acquired 200,000 shares of the common stock of Tonga
Capital  Corporation  ("Tonga")  from  a  non-affiliate.  At  the  time  of  the
acquisition,  the Tonga shares had a market value of $400,000 ($0.50 per share).
The 800,000  shares of the Company's  stock issued for the shares had a value of
$400,000 ($0.50 per share).

At April 30, 2007,  marketable  securities consist of 176,000 shares of common
stock of Tonga.  These  securities  are  carried  at  estimated  fair value
($299,200 at April 30, 2007) based upon quoted market  prices,  and are included
in current assets in the Company's April 30, 2007 balance sheet.

Unrealized gains and losses are computed on the basis of specific identification
and are reported as a component of other income  (loss),  included as a separate
item  on  the  Company's  statement  of  operations.  The  Company  reported  an
unrealized loss on marketable  securities of $52,800 during the year ended April
30, 2007.

                                      F-7

<PAGE>




Realized  gains,   realized  losses,  and  declines  in  value,   judged  to  be
other-than-temporary,  are  included  in other  income  (expense).  The  Company
recognized a loss on the sale of these  shares of $10,041  during the year ended
April 30, 2007.

Net Loss Per Share:

Net loss per share is based on the  weighted  average  number  of common  shares
outstanding during the period.

Fair Value of Financial Instruments:

The carrying amount of cash, accounts payable and notes payable is considered to
be  representative  of its fair value because of the  short-term  nature of this
financial instrument.

Other Comprehensive Income:

The Company has no material components of other comprehensive income (loss), and
accordingly, net loss is equal to comprehensive loss in all periods.

Note 2 - Federal Income Taxes:

The Company has made no provision  for income taxes  because  there have been no
operations to date causing income for financial statements or tax purposes.

The  Financial  Accounting  Standards  Board  (FASB)  has  issued  Statement  of
Financial Accounting  Standards Number 109 ("SFAS 109").  "Accounting for Income
Taxes",  which  requires  a change  from the  deferred  method  to the asset and
liability  method of accounting for income taxes.  Under the asset and liability
method,  deferred  income  taxes  are  recognized  for the tax  consequences  of
"temporary  differences" by applying  enacted  statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities.

Note 3 - Going Concern:

The Company's financial  statements have been prepared on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company reported a net loss
of $661,339 for the year ended April 30, 2007 and an accumulated deficit during
the development stage of $1,011,439 as of April 30, 2007.  At April 30, 2007,
the Company's total current liabilities exceed total current assets by
$6,263,265.

                                      F-8

<PAGE>




The  Company is in the  development  stage and has not earned any  revenue  from
operations.  The  Company's  ability to continue as a going concern is dependent
upon its  ability  to develop  additional  sources of capital or locate a merger
candidate  and  ultimately,  achieve  profitable  operations.  The  accompanying
financial  statements do not include any adjustments  that might result from the
outcome of these uncertainties.  Management is seeking new capital to revitalize
the Company.

Note 4 - Leases and Mineral Rights:

The property is valued at $214,000 for 3,200 acres of leases in Wyoming assigned
from Nova Leasing,  Inc., and Sharon  Fowler.  This is the amount of the 2 notes
listed in Note 6. The Mineral rights in New Mexico are valued at $100,000, which
is based on the predecessor basis in mineral rights.

On October 12, 2006, the Company filed for 8-K disclosing an agreement with Nova
Leasing,  LLC to acquire an 85% working  interest in an 80% Net Revenue Interest
on certain leases totaling  approximately 14,000 acres (gross) in Johnson County
Wyoming,  in the Powder River Basin.  The purchase price includes  $6,600,000 in
the form of a secured  promissory note bearing interest at 7.5% with payments of
$1,100,000 on March 15, 2007,  $2,800,000 on October 15, 2007, and $2,700,000 on
October 15, 2008, plus interest and 880,000 shares of restricted common stock of
Sun River Energy,  Inc. The transaction  closed on November 3, 2006. The Company
intends to  immediately  commence  planning  and  development  of a 3-D  seismic
program on the  acreage  with the intent to explore the  acreage  with  industry
partners.

In February of 2007 the Company  entered into an agreement with Sun River #1 LLC
to drill two wells on acreage  controlled by the Company in the Raton Basin area
of New Mexico. Terms of the agreement provide for a carried 25% working interest
in the two wells.  As of the date of these financial  statements  drilling is in
progress.

Note 5 - Notes Payable:
<TABLE>
<CAPTION>
<S>               <C>       <C>      <C>          <C>         <C>           <C>        <C>         <C>

As of April 30, 2007, Notes Payable consisted of the following:

----------------- --------- -------- ------------ ----------- ------------- ---------- ----------- ----------
                            Rate     Principal    Repay       Balance       Interest   Due         Security
----------------- --------- -------- ------------ ----------- ------------- ---------- ----------- ----------
Nova    Leasing,  4/12/06   6.00%    $64,000      -           $64,000       $3,786     3/31/07     Lease
----------------- --------- -------- ------------ ----------- ------------- ---------- ----------- ----------
Sharon K. Fowler  4/20/06   6.00%    $150,000     $119,363    $30,637       $191       7/15/07     Lease
----------------- --------- -------- ------------ ----------- ------------- ---------- ----------- ----------
Robert  A.  Doak  4/10/06   6.00%    $600,000     $191,898    $408,102      $19,924    03/31/07    Mineral
----------------- --------- -------- ------------ ----------- ------------- ---------- ----------- ----------
Nova    Leasing,  11/3/06   7.5%     $6,600,000   -           $6,600,000    $241,397   10/15/07    Lease
----------------- --------- -------- ------------ ----------- ------------- ---------- ----------- ----------

</TABLE>

                                      F-9

<PAGE>




The Company has a verbal  agreement  with Nova Leasing to extend the due date of
the  payment  due to  September  30,  2007.  The note  with  Sharon  Fowler  was
delinquent  by May 30, 2007 but was under a verbal  agreement  to extend the due
date to September 30, 2007.  The note with Robert A. Doak, Jr. was delinquent in
the amount of $408,102 at January 31, 2007,  but has been  verbally  extended to
September 30, 2007.

Note Payable - Related Party

On April 10, 2006, the Company issued a 6% secured corporate promissory note for
$600,000,  to a  shareholder  of the  Company,  Mr.  Robert  A.  Doak,  Jr.  The
promissory  note had an  original  due date of March 31,  2007.  During the year
ended April 30,  2007,  the Company  made  payments of $191,898 on the note.  On
April 10, 2007, Mr. Doak agreed to extend the payment of note for 6 months.  The
note is secured by the Company's mineral rights.

Note 6 -Stockholders' Equity (Deficit):

The  authorized  capital  stock of the Company is  100,000,000  shares of common
stock at $.0001 par value.

Common Stock

During the year ended April 30, 2007,  the Company  issued 795,000 shares of its
restricted common stock for cash of $397,500. The shares were sold for $0.50 per
share. In addition the Company,  issued warrants  exercisable for 397,500 shares
of common  stock.  The warrants have an exercise  price of $0.50 per share.  The
warrants were to expire on December 31, 2006,  but the Company  agreed to extend
their expiration date to June 30, 2007.

During the year ended April 30,  2007,  the  Company  issued  242,935  shares of
common stock as payment of outstanding debt of $150,000.

During the year ended April 30, 2007,  the Company  issued 800,000 shares of its
restricted  common  stock to a  non-affiliate  of the  Company,  in exchange for
400,000 shares of Tonga Capital Corporation.  The shares at the time of issuance
had a value of $400,000 ($0.50 per share) (Note 1).

During the year ended April 30, 2007,  the Company  issued 309,000 shares of its
restricted common stock for services. Of the 309,000 shares, 250,000 shares were
issued to officers and  directors of the Company.  The  remaining  59,000 shares
were  issued to an  unrelated  party for  services.  The  shares  had a value of
$154,500 ($0.50 per share) and were expensed at the time of issuance.

                                      F-10

<PAGE>




During the year ended April 30, 2007,  the Company  issued 880,000 shares of its
restricted  common  stock as part of the  acquisition  of leases of  property in
Jackson County,  Wyoming.  The  acquisition  included the issuance of promissory
notes  totaling  $6,600,000  (Note 5). The shares were deemed to have a value of
$440,000 ($0.50 per share).

On April 30,  2007,  the  Company in a  subscription  agreement  agreed to issue
2,200,000  shares  of its  restricted  common  stock  in  exchange  for  cash of
$1,100,000. The shares had a purchase price of $0.50 per share. In May 2007, the
Company issued the 2,200,000 shares of its common stock and received $1,100,000,
in cash.

Warrants


At April 30,  2007,  the  following  warrants  to  purchase  common  stock  were
outstanding:

      Number of common
 shares covered by warrants        Exercise Price             Expiration Date
 --------------------------        --------------             ---------------


           397,500                      $0.25                 June 30, 2007
        -------------
           397,500

During the year ended April 30, 2007,  the Company issued  warrants  exercisable
for  397,500  shares  of its  restricted  common  stock in  connection  with its
financing efforts.  The warrants have an expiration date of June 30, 2007 and an
exercise price of $0.75 per share.

Note 7 - Segment Information:

Sun River Energy Inc.  operates  primarily in a single  operating  segment,  the
business of Oil and Gas well drilling and mineral rights.

                                      F-11

<PAGE>




Note 8 - Financial Accounting Developments:

Recently Issued Accounting Pronouncements

In December  2004,  the FASB issued SFAS No. 123R  (revised  2004)  "Share-Based
Payment"  which amends FASB  Statement  No. 123 and will be effective for public
companies for the interim or annual  periods  beginning  June 15, 2005.  The new
statement  will require  entities to expense  employee  stock  options and other
share-based payments. The new standard may be adopted in one of three ways - the
modified  prospective  transition method, a variation of the modified transition
method or the  modified  retrospective  transition  method.  The  Company  is to
evaluate how it will adopt the standard and the  evaluation  the effect that the
adoption  of SFAS  123R will  have on the  financial  position  and  results  of
operations.

In November 2004, the FASB issued SFAS No. 151,  "Inventory  Costs, an amendment
of ARB No. 43,  Chapter  4." The  statement  amends the  guidance in ARB No. 43,
Chapter 4, Inventory Pricing,  to clarify the accounting for abnormal amounts of
idle facility expense,  freight,  handling costs and wasted material (spoilage).
Paragraph  5 of ARB No.  43,  Chapter  4  previously  stated  that  "under  some
circumstances,  items such as idle facility expense,  excessive spoilage, double
freight  and  rehandling  costs may be so abnormal  as to require  treatment  of
current period charges." SFAS No. 151 requires that those items be recognized as
current  period  charges  regardless  of whether they meet the  criterion of "so
abnormal".  In  addition,  this  statement  requires  that  allocation  of fixed
production overhead to the costs of conversion be based on the prospectively and
are effective for inventory  costs incurred  during fiscal years beginning after
June 15, 2005, with earlier  application  permitted for inventory costs incurred
during  fiscal years  beginning  after the date this  Statement  is issued.  The
adoption  of SFAS No.  151 does not have an  impact on the  Company's  financial
position and results of operations.

In December 2004, the FASB issued SFAS No. 153, Exchange of Non-monetary Assets,
an  amendment  of APB  Opinion  No.  23. The  guidance  in APB  opinion  No. 29,
Accounting  for  Non-monetary  Transactions,  is  based  on the  principle  that
exchange  of  non-monetary  assets  should be  measured on the fair value of the
assets'  exchanges.  The guidance in that  Opinion,  however,  included  certain
exceptions to that principle.  This Statement amends Opinion 29 to eliminate the
exception for non-monetary  exchanges of similar  productive  assets that do not
have commercial substance. A non-monetary has commercial substance if the future
cash flows of the entity are expected to change significantly as a result of the
exchange.  SFAS No. 153 is effective  for  non-monetary  exchanges  occurring in
fiscal  periods  beginning  June 15,  2005.  The adoption of SFAS No. 153 is not
expected to have an impact on the  Company's  financial  position and results of
operations.

                                      F-12

<PAGE>

In March 2005,  the FASB  issued FASB  Interpretation  No. 47,  "Accounting  for
Conditional Asset Retirement  Obligations"  ("FIN 47"). FIN 47 provides guidance
relating to the identification of and financial  reporting for legal obligations
to perform an asset retirement activity. The Interpretation requires recognition
of a liability for the fair value of a conditional  asset retirement  obligation
when incurred for the liability's fair value can be reasonably estimated. FIN 47
also defines  when an entity would have  sufficient  information  to  reasonably
estimate  the fair value of an asset  retirement  obligation.  The  provision is
effective no later than the end of fiscal years ending after  December 15, 2005.
The Company  will adopt FIN 47 beginning  the first  quarter of fiscal year 2006
and  does  not  believe  the  adoption  will  have  a  material  impact  on  its
consolidated financial position or results of operations or cash flows.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections"  ("SFAS 154") which replaces  Accounting  Principles Board Opinions
No. 20,  "Accounting  Changes" and SFAS No. 3, "Reporting  Accounting Changes in
Interim  Financial  Statements  - An  Amendment of APB Opinion No. 28." SFAS 154
provides guidance on the accounting for and reporting of accounting  changes and
error  correct9ions.  It establishes  retrospective  application,  or the latest
practicable  date,  as the required  method for reporting a change in accounting
principle and the  reporting of a correction of an error.  SFAS 154 is effective
for accounting changes and a correction of errors made in fiscal years beginning
after  December  15,  2005 and is  required  to be adopted by the Company in the
first quarter of 2006.  The Company is currently  evaluating the effect that the
adoption  of SFAS 154 will  have on its  results  of  operations  and  financial
condition but does not expect it to have a material impact.

In June,  2005, the Emerging Issues Task Force, or EITF,  reached a consensus on
Issue 05-6,  Determining  the  Amortization  Period for Leasehold  Improvements,
which requires that leasehold  improvements  acquired in a business  combination
purchased subsequent to the inception of a lease be amortized over the lesser of
the  useful  life of the  assets  or a term  that  includes  renewals  that  are
reasonably  assured at the date of the business  combination  or purchase.  EITF
05-6 is effective for periods beginning after July 1, 2005. We do not expect the
provisions  of  this  consensus  to  have a  material  impact  on the  financial
position, results of operations or cash flows.

                                      F-13

<PAGE>


In  February  2006,  the FASB  issued SFAS 155,  Accounting  for Certain  Hybrid
Financial  Instruments,   which  amends  SFAS  133,  Accounting  for  Derivative
Instruments and Hedging  Activities,  and SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a replacement
of FASB  Statement  No. 125.  SFAS 155 will be effective for the Company for all
financial  instruments  issued or acquired  after the  beginning its fiscal year
ending  December 31, 2006.  The Company not yet  evaluated  and  determined  the
likely effect of SFAS 155 on future financial statements.

In June 2006, the FASB issued  Interpretation No. 48, Accounting for Uncertainty
in Income Taxes - An  Interpretation of FASB Statement No. 109, (FIN 48). FIN 48
clarifies  the  accounting  for  uncertainty  in income taxes  recognized  in an
enterprise's  financial  statements in accordance  with FASB  Statement No. 109,
Accounting for Income Taxes. FIN 48 also prescribes a recognition  threshold and
measurement attribute for the financial statement recognition and measurement of
a tax  position  taken or expected to be taken in a tax return that results in a
tax benefit. Additionally,

FIN 48 provides guidance on de-recognition,  income statement  classification of
interest  and  penalties,   accounting  in  interim  periods,   disclosure,  and
transition. This interpretation is effective for the Company for its fiscal year
ending  December 31, 2007. The Company has not yet evaluated the effect that the
application  of FIN 48 may have, if any, on its future results of operations and
financial condition.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". This
statement  defines fair value,  establishes a framework for measuring fair value
in generally accepted accounting principles,  and expands disclosures about fair
value measurements. This statement applies under other accounting pronouncements
that require or permit fair value  measurements.  SFAS No. 157 is effective  for
the  Company  for its fiscal  year  beginning  on July 1, 2008.  The  Company is
currently  assessing  the impact the  adoption  of SFAS No. 157 will have on its
financial statements.

In September  2006,  the SEC issued Staff  Accounting  Bulletin (SAB) No. 108 in
order to eliminate the diversity of practice  surrounding  how public  companies
quantify  financial  statement   misstatements.   In  SAB  108,  the  SEC  staff
established  an approach that  requires  quantification  of financial  statement
misstatements based on the effects of the misstatements on each of the Company's
financial  statements and the related financial statement  disclosures.  SAB No.
108 is effective  for the Company for its current  fiscal year.  The adoption of
SAB No. 108 did not have an impact on the Company's financial statements.


                                      F-14

<PAGE>

On February 15, 2007,  the FASB issued SFAS No. 159,  "The Fair Value Option for
Financial  Assets and  Financial  Liabilities  - Including  an Amendment of FASB
Statement  No. 115." This standard  permits an entity to measure many  financial
instruments  and  certain  other  items at  estimated  fair  value.  Most of the
provisions  of SFAS No. 115  ("Accounting  for Certain  Investments  in Debt and
Equity   Securities)   applies   to  all   entities   that   own   trading   and
available-for-sale  securities.  The fair value  option  created by SFAS No. 159
permits  an entity  to  measure  eligible  items at fair  value as of  specified
election dates. Among others,  eligible items exclude (1) financial  instruments
classified  (partially  or in total) as  permanent  or  temporary  stockholders'
equity (such as a convertible  debt security  with a  non-contingent  beneficial
conversion  feature)  and (2)  investments  in  subsidiaries  and  interests  in
variable interests that must be consolidated.  A for-profit business entity will
be  required to report  unrealized  gains and losses on items for which the fair
value option has been elected in its statements of operations at each subsequent
reposting date. The fair value option (a) may generally be applied instrument by
instruments, (b) is irrevocable unless a new elections date occurs, and (c) must
be applied to the entire instrument and not to only a portion of the instrument.
SFAS No. 159 is  effective  as of the  beginning  of the first  fiscal year that
begins after  November 15, 2007.  The Company has not yet  evaluated  the effect
that the application of SFAS No. 159, may have, if any, on its future results of
operations and financial condition.

STOCK BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-Based  Compensation" ("SFAS No. 123') allows
an entity to elect to continue  to measure  compensation  cost under  Accounting
Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to  Employees"
("APB No.  25"),  but requires  pro forma  disclosures  of net loss and loss per
share as if the  fair-valued-based  method of accounting  had been  applied.  In
accordance   with  SFAS  123,  the  Company   elected  to  continue  to  measure
compensation  cost under APB No. 25,  and comply  with the pro forma  disclosure
requirements.

The Company has adopted for footnote  disclosure  purposes  SFAS No. 123,  which
requires that companies disclose the cost of stock-based  employee  compensation
at the grant date based on the value of the award  (the fair value  method)  and
disclose this cost over the service period.  The value of the stock-based  award
is determined using a pricing model whereby  compensation  cost is the excess of
the fair  value of the award as  determined  by the model at grant date or other
measurement date over the amount an employee must pay to acquire the stock.

Transactions in which goods or services are received form  non-employees for the
issuance of equity  securities or stock-based  awards are accounted for based on
the fair value of the consideration received.

Restatement

The Company has restated its balance sheet,  statement of operations,  statement
of  stockholders'  equity,  and statement of cash flows for the year ended April
30, 2006, to properly disclose the recapitalization of Sun River Energy, Inc and
its subsidiary, Sun River Energy, Inc. whereby Sun River Energy is the surviving
entity and as such the historical  financial  statements  presented are those of
Sun River Energy, Inc.  Previously  reflected goodwill in the amount of $866,667
for the  acquisition of mineral rights was adjusted  against  additional paid in
capital to reflect predecessor basis of $100,000.

Note 9 - Subsequent Event:

On May 1, 2007,  the Company  received a  $1,100,000  payment for stock that had
been subscribed  during the month of April 2007. The funds were immediately paid
out to Nova Leasing LLC as their installment that was due on March 15, 2007.


                                      F-15

<PAGE>

SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                                    SUN RIVER ENERGY INC.

Date:   August 14, 2007                        By:/s/ Wesley F. Whiting
                                                    -------------------------
                                                    Wesley F. Whiting, President


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


Date: August 14, 2007           By:/s/Wesley F. Whiting
                                ----------------------------------------
                                Wesley F. Whiting, President and Director


Date: August 14, 2007            By:/s/Redginald T. Green
                                -----------------------------------------
                                Redginald T. Green, Secretary and Director


Date: August 14,  2007           By: /s/Thomas Anderson
                                -----------------------------------------
                                Thomas Anderson, Director

Date: August 14, 2007           By:/s/Stephen W. Weathers
                                -----------------------------------------
                                Stephen W. Weathers, Director

Date: August 14,  2007           By:/s/David Surginer
                                -----------------------------------------
                                David Surgnier, Director

                                       49