**Washington,      D. C. 20549**
** **

| Nevada                                                                        | 98-0422451                                          |
|-------------------------------------------------------------------------------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) | (I.R.S.                Employer Identification No.) |

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|                                                |                                                                                                                                       | Page   |
|-----------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **PART                  I - FINANCIAL INFORMATION** |                                                                                                                                       |
|                                                |                                                                                                                                       |
| Item                  1.                            | Financial                  Statements                                                                                                      |   |
|                                                |                                                                                                                                       |   |
|                                                | Consolidated                  Balance Sheets as of June 30, 2007 and March 31, 2007                                                        | 1      |
|                                                |                                                                                                                                       |   |
|                                                | Consolidated                  Statements of Operations for the Three Months ended June 30, 2007                  and                  2006 | 2      |
|                                                |                                                                                                                                       |   |
|                                                | Consolidated                  Statement of Changes in Stockholders’ Equity for the Three Months ended                  June 30, 2007 | 3      |
|                                                |                                                                                                                                       |   |
|                                                | Consolidated                  Statements of Cash Flows for the Three Months ended June 30, 2007                  and                  2006 | 4      |
|                                                |                                                                                                                                       |   |
|                                                | Notes                  to Consolidated Financial Statements                                                                                | 6      |
|                                                |                                                                                                                                       |   |
| Item                  2.                            | Management's                  Discussion and Analysis of Financial Condition and Results of                  Operations                    | 12     |
|                                                |                                                                                                                                       |   |
| Item                  3.                            | Quantitative                  and Qualitative Disclosures About Market Risk                                                                | 16     |
|                                                |                                                                                                                                       |   |
| Item                  4.                            | Controls                  and Procedures                                                                                                   | 16     |
|                                                |                                                                                                                                       |   |
| **PART                  II - OTHER INFORMATION**    |                                                                                                                                       |
|                                                |                                                                                                                                       |   |
| Item                1A.                             | Risk                Factors                                                                                                                | 18     |
|                                                |                                                                                                                                       |   |
| Item                2.                              | Unregistered                Sales of Equity Securities and Use of Proceeds                                                            | 18     |
|                                                |                                                                                                                                       |   |
| Item                  6.                       | Exhibits                                                                                                                                   | 18     |
|                                                |                                                                                                                                       |   |
| **SIGNATURES**                                      | 21                                                                                                                                         |

----

**PART      I - FINANCIAL INFORMATION**

**Item      1. Financial Statements**
**.**

|                                                                                                                                                                                                                                 |   | June                30,2007 |        | March                31,2007 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-------------|------------------------------|--------|
| **ASSETS**                                                                                                                                                                                                                           |   |                        |        |                         |   |
|                                                                                                                                                                                                                                 |   |                        |        |                         |   |
| Current                assets:                                                                                                                                                                                                       |   |                        |        |                         |   |
| Cash                and cash equivalents                                                                                                                                                                                             |   | $                           | 3,105,791   |                         | $      | 5,129,883 |   |
| Accounts                receivable                                                                                                                                                                                                   |   |                        | 519,877     |                         |   | 453,709 |   |
| Total                current assets                                                                                                                                                                                                  |   |                        | 3,625,668   |                         |   | 5,583,592 |   |
|                                                                                                                                                                                                                                 |   |                        |             |                         |   |   |   |
| Oil                & gas properties, at cost (successful efforts method):                                                                                                                                                        |   |                        |             |                         |   |   |   |
| Unproved                                                                                                                                                                                                                             |   |                        | 56,052,765  |                         |   | 56,079,133 |   |
| Proved                                                                                                                                                                                                                               |   |                        | 18,642,261  |                         |   | 18,552,188 |   |
| Less:                Accumulated depletion, depreciation, and amortization                                                                                                                                                           |   |                        | (648,327    | )                            |   | (347,821 | ) |
| Net                oil & gas properties                                                                                                                                                                                          |   |                        | 74,046,699  |                         |   | 74,283,500 |   |
|                                                                                                                                                                                                                                 |   |                        |             |                         |   |   |   |
| Other                assets, net of accumulated depreciation of $58,906 and $27,880,                respectively                                                                                                                     |   |                        | 2,120,235   |                         |   | 1,610,939 |   |
| Total                assets                                                                                                                                                                                                          |   | $                           | 79,792,602  |                         | $      | 81,478,031 |   |
|                                                                                                                                                                                                                                 |   |                        |        |                         |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                        |   |                        |             |                         |   |  |   |
|                                                                                                                                                                                                                                 |   |                        |             |                         |   |  |   |
| Current                liabilities:                                                                                                                                                                                                  |   |                        |             |                         |   |  |   |
| Accounts                payable and accrued liabilities                                                                                                                                                                              |   | $                           | 1,077,726   |                         | $      | 1,542,840 |   |
| Accrued                oil & gas property costs                                                                                                                                                                                  |   |                        | 724,359     |                         |   | 250,000 |   |
| Asset                retirement obligation                                                                                                                                                                                           |   |                        | 175,187     |                         |   | 196,000 |   |
| Liquidated                damages pursuant to registration rights arrangement                                                                                                                                                        |   |                        | 2,349,195   |                         |   | 2,705,531 |   |
| Total                current liabilities                                                                                                                                                                                             |   |                        | 4,326,467   |                         |   | 4,694,371 |   |
|                                                                                                                                                                                                                                 |   |                        |        |                         |   |   |   |
| Long-term                liabilities:                                                                                                                                                                                                |   |                        |        |                         |   |   |   |
| Asset                retirement obligation                                                                                                                                                                                           |   |                        | 1,064,178   |                         |   | 1,025,567 |   |
|                                                                                                                                                                                                                                 |   |                        |        |                         |   |   |   |
| Commitments                and contingencies                                                                                                                                                                                         |   |                        |        |                         |   |   |   |
|                                                                                                                                                                                                                                 |   |                        |        |                         |   |   |   |
| Stockholders’                equity:                                                                                                                                                                                           |   |                        |        |                         |   |   |   |
| Common                stock, $0.00001 par value, 275,000,000 shares authorized,                 105,421,709 and 102,041,432 shares issued and outstanding at June                30, 2007 and March 31, 2007, respectively |   |                        | 1,055       |                         |   | 1,021 |   |
| Additional                paid-in capital                                                                                                                                                                                            |   |                        | 87,407,685  |                         |   | 84,985,934 |   |
| Accumulated                deficit                                                                                                                                                                                                   |   |                        | (13,006,783 | )                            |   | (9,228,862 | ) |
| Total                stockholders’ equity                                                                                                                                                                                      |   |                        | 74,401,957  |                         |   | 75,758,093 |   |
|                                                                                                                                                                                                                                 |   |                        |        |                         |   |   |   |
| Total                liabilities and stockholders’ equity                                                                                                                                                                      |   | $                           | 79,792,602  |                         | $      | 81,478,031 |   |

----

|                                                                          |   | Three                Months EndedJune                30, |        |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------------|-------------|
|                                                                          |   | 2007                                                     |        | 2006 |   |
|                                                                          |   |                                                     |        |   |   |
| Revenues:                                                                     |   |                                                     |        |   |   |
| Oil                & gas sales                                            |   | $                                                        | 1,330,479   |   | $ | - |   |
|                                                                          |   |                                                     |        |   |   |   |   |
| Operating                expenses:                                            |   |                                                     |        |   |   |   |   |
| Production                taxes                                               |   |                                                     | 161,469     |   |   | - |   |
| Lease                operating expenses                                       |   |                                                     | 599,914     |   |   | - |   |
| Depreciation,                depletion, and amortization                      |   |                                                     | 331,532     |   |   | - |   |
| Accretion                expense                                              |   |                                                     | 45,990      |   |   | - |   |
| Exploration                expense                                            |   |                                                     | 41,158      |   |   | - |   |
| General                and administrative expense                             |   |                                                     | 2,584,426   |   |   | 571,068 |   |
| Total                operating expenses                                       |   |                                                     | 3,764,489   |   |   | 571,068 |   |
|                                                                          |   |                                                     |        |   |   |   |   |
| Loss                from operations                                           |   |                                                     | (2,434,010  | ) |   | (571,068 | ) |
|                                                                          |   |                                                     |        |   |   |   |   |
| Other                income (expense):                                        |   |                                                     |        |   |   |   |   |
| Liquidated                damages pursuant to registration rights arrangement |   |                                                     | (1,377,110  | ) |   | - |   |
| Interest                expense                                               |   |                                                     | (71,239     | ) |   | (34,644 | ) |
| Interest                and other income                                      |   |                                                     | 104,438     |   |   | 1,365 |   |
| Total                other income (expense)                                   |   |                                                     | (1,343,911  | ) |   | (33,279 | ) |
|                                                                          |   |                                                     |        |   |   |   |   |
| Net                loss                                                       |   | $                                                        | (3,777,921  | ) | $ | (604,347 | ) |
|                                                                          |   |                                                     |        |   |   |   |   |
| Basic                and fully diluted net loss per share                     |   | $                                                        | (0.04       | ) | $ | (0.02 | ) |
|                                                                          |   |                                                     |        |   |   |   |   |
| Basic                and fully diluted weighted average shares outstanding    |   |                                                     | 103,734,995 |   |   | 29,027,000 |   |

----

|                                                                          |   | Shares |        | Amount |   | Additional                Paid- In Capital |   | AccumulatedDeficit |       | TotalStockholders’Equity |   |
|-------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------------------------------------------|--------|--------------------|------------|--------------------------------|--------|
|                                                                          |   |   |        |   |   |                                       |   |               |       |                           |   |
| Balance,                April 1, 2007                                         |   |   | 102,041,432 |   | $      | 1,021                                      |   | $                  | 84,985,934 |                           | $      | (9,228,862 | ) | $ | 75,758,093 |   |
|                                                                          |   |   |             |   |   |                                            |   |               |            |                           |   |  |   |   |  |   |
| Liquidated                damages pursuant to registration rights arrangement |   |   | 1,880,277   |   |   | 19                                         |   |               | 1,803,979  |                           |   | - |   |   | 1,803,998 |   |
|                                                                          |   |   |        |   |   |                                       |   |               |       |                           |   |   |   |   |   |   |
| Stock                issued upon exercise of stock options                    |   |   | 1,000,000   |   |   | 10                                         |   |               | -          |                           |   | - |   |   | 10 |   |
|                                                                          |   |   |        |   |   |                                       |   |               |       |                           |   |   |   |   |   |   |
| Restricted                stock award                                         |   |   | 500,000     |   |   | 5                                          |   |               | 129,245    |                           |   | - |   |   | 129,250 |   |
|                                                                          |   |   |        |   |   |                                       |   |               |       |                           |   |   |   |   |   |   |
| Common                stock exchanged for services - non-employee directors   |   |   | -           |   |   | -                                          |   |               | 74,250     |                           |   | - |   |   | 74,250 |   |
|                                                                          |   |   |        |   |   |                                       |   |               |       |                           |   |   |   |   |   |   |
| Common                stock exchanged for services - non-employee             |   |   | -           |   |   | -                                          |   |               | 112,500    |                           |   | - |   |   | 112,500 |   |
|                                                                          |   |   |        |   |   |                                       |   |               |       |                           |   |   |   |   |   |   |
| Stock-based                compensation                                       |   |   | -           |   |   | -                                          |   |               | 343,133    |                           |   | - |   |   | 343,133 |   |
|                                                                          |   |   |        |   |   |                                       |   |               |       |                           |   |   |   |   |   |   |
| Offering                costs                                                 |   |   | -           |   |   | -                                          |   |               | (41,356    | )                              |   | - |   |   | (41,356 | ) |
|                                                                          |   |   |        |   |   |                                       |   |               |       |                           |   |   |   |   |   |   |
| Net                loss                                                       |   |   | -           |   |   | -                                          |   |               | -          |                           |   | (3,777,921 | ) |   | (3,777,921 | ) |
|                                                                          |   |   |             |   |   |                                            |   |               |            |                           |   |  |   |   |  |   |
| Balance,                June 30, 2007                                         |   |   | 105,421,709 |   | $      | 1,055                                      |   | $                  | 87,407,685 |                           | $      | (13,006,783 | ) | $ | 74,401,957 |   |

----

|                                                                                                   |   | Three                Months Ended June 30, |       |
|--------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|
|                                                                                                   |   | 2007                                       |       | 2006 |   |
| Cash                flows from operating activities:                                                   |   |                                       |       |   |   |
| Net                loss                                                                                |   | $                                          | (3,777,921 | ) | $ | (604,347 | ) |
| Adjustments                to reconcile net loss to cash used for operating                activities: |   |                                       |       |   |   |   |   |
| Depreciation,                depletion, and amortization                                               |   |                                       | 331,532    |   |   | - |   |
| Accretion                expense                                                                       |   |                                       | 45,990     |   |   | - |   |
| Settlement                of asset retirement obligation                                               |   |                                       | (46,665    | ) |   | - |   |
| Liquidated                damages pursuant to registration rights arrangement                          |   |                                       | 1,377,110  |   |   | - |   |
| Imputed                interest expense                                                                |   |                                       | 70,552     |   |   | 30,000 |   |
| Stock-based                compensation expense                                                        |   |                                       | 343,133    |   |   | 423,500 |   |
| Restricted                stock compensation expense                                                   |   |                                       | 129,250    |   |   | - |   |
| Services                exchanged for common stock - non-employee directors                            |   |                                       | 74,250     |   |   | - |   |
| Services                exchanged for common stock - non-employee                                      |   |                                       | 112,500    |   |   | - |   |
| Other                                                                                                  |   |                                       | -          |   |   | 2,284 |   |
| Changes                in operating assets and liabilities:                                            |   |                                       |       |   |   |   |   |
| Accounts                receivable                                                                     |   |                                       | (66,168    | ) |   | (40,344 | ) |
| Other                assets                                                                            |   |                                       | (6,420     | ) |   | - |   |
| Accounts                payable and accrued liabilities                                                |   |                                       | (465,114   | ) |   | 56,443 |   |
| Net                cash used for operating activities                                                  |   |                                       | (1,877,971 | ) |   | (132,464 | ) |
|                                                                                                   |   |                                       |       |   |   |   |   |
| Cash                flows from investing activities:                                                   |   |                                       |       |   |   |   |   |
| Capital                expenditures for oil & gas properties                                       |   |                                       | (95,873    | ) |   | (106,393 | ) |
| Proceeds                from conveyance of unproved oil & gas properties                           |   |                                       | 525,000    |   |   | - |   |
| Increase                in other assets                                                                |   |                                       | (476,687   | ) |   | (11,118 | ) |
| Net                cash used for investing activities                                             |   |                                       | (47,560    | ) |   | (117,511 | ) |
|                                                                                                   |   |                                       |       |   |   |   |   |
| Cash                flows from financing activities:                                                   |   |                                       |       |   |   |   |   |
| Payment                of deferred financing costs                                                     |   |                                       | (57,215    | ) |   | - |   |
| Proceeds                from issuance of convertible notes payable                                     |   |                                       | -          |   |   | 150,000 |   |
| Payments                of convertible notes payable                                                   |   |                                       | -          |   |   | (150,000 | ) |
| Proceeds                from notes payable converted to common stock                                   |   |                                       | -          |   |   | 500,000 |   |
| Proceeds                from sale of common stock and warrants                                         |   |                                       | -          |   |   | 500,010 |   |
| Proceeds                from issuance of common stock upon exercise of stock                options    |   |                                       | 10         |   |   | - |   |
| Payment                of offering costs                                                               |   |                                       | (41,356    | ) |   | - |   |
| Net                cash provided by (used for) financing activities                                    |   |                                       | (98,561    | ) |   | 1,000,010 |   |
|                                                                                                   |   |                                       |       |   |   |   |   |
| Increase                (decrease) in cash and cash equivalents                                        |   |                                       | (2,024,092 | ) |   | 750,035 |   |
| Cash                and cash equivalents, beginning of period                                          |   |                                       | 5,129,883  |   |   | 46,081 |   |
|                                                                                                   |   |                                       |       |   |   |   |   |
| Cash                and cash equivalents, end of period                                                |   | $                                          | 3,105,791  |   | $ | 796,116 |   |

----

|                                                                                                                                                       |   | Three                Months Ended June 30, |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|-----------|
|                                                                                                                                                       |   | 2007                                       |      | 2006 |   |
| Non-cash                investing and financing activities:                                                                                                |   |                                       |      |   |   |
| Payables                for purchase of oil & gas properties                                                                                           |   | $                                          | 474,359   |   | $ | 515,214 |   |
| Asset                retirement asset and obligation                                                                                                       |   | $                                          | 18,473    |   | $ | - |   |
| Common                stock and warrants issued on payment of liquidated damages pursuant                to                registration rights arrangement |        | $                                          | 1,803,998 |  | $ | - |  |

----

**Note      1—Organization and Summary of Significant Accounting      Policies**

|                                                               |   | For                  the Three Months EndedJune                  30, |        |
|--------------------------------------------------------------------|--------|----------------------------------------------------------------------|-------------|
|                                                               |   | 2007                                                                 |        | 2006 |   |
|                                                               |   |                                                                 |        |   |   |
| Net                  loss                                          |   | $                                                                    | (3,777,921  | ) | $ | (604,347 | ) |
| Basic                  weighted-average common shares outstanding  |   |                                                                 | 103,734,995 |   |   | 29,027,000 |   |
| Basic                  and fully-diluted net loss per common share |   | $                                                                    | (0.04       | ) | $ | (0.02 | ) |

----

**Note      2—Property Acquisitions**

*Pro      Forma Results of Operations*

|                                                        |   | Three                  Months Ended June                  30, 2006 |      |
|-------------------------------------------------------------|--------|--------------------------------------------------------------------|-----------|
| Revenue                                                     |   | $                                                                  | 1,204,145 |   |
| Net                  loss                                   |   |                                                               | (511,820  | ) |
| Net                  loss per basic and fully-diluted share |   |                                                               | (0.01     | ) |

**Note      3—Asset Retirement Obligations**

| Balance,                  April 1, 2007 |   | $      | 1,221,567 |   |
|-----------------------------------------|--------|--------|-----------|--------|
| Liabilities                  incurred   |   |   | 18,473    |   |
| Liabilities                  settled    |   |   | (46,665   | )      |
| Accretion                  expense      |   |   | 45,990    |   |
| Balance,                  June 30, 2007 |   | $      | 1,239,365 |   |
|                                    |   |   |           |   |
| Current                                 |   | $      | 175,187   |   |
| Long-term                               |   |   | 1,064,178 |   |
|                                    |   | $      | 1,239,365 |   |

----

**Note      4—Income Taxes**

**Note      5—Common Stock**

*Accounting      for Registration Payment Arrangements*

| Balance,                  April 1, 2007                        |   | $      | 2,705,531  |   |
|----------------------------------------------------------------|--------|--------|------------|--------|
| Obligations                  incurred                          |   |   | 1,377,110  |   |
| Imputed                  interest expense                      |   |   | 70,552     |   |
| Common                  stock issued in payment of obligations |   |   | (1,803,998 | )      |
| Balance,                  June 30, 2007                        |   | $      | 2,349,195  |   |

----

      During      the Company’s second fiscal quarter, the portion of the current liability      attributable to the issuance of shares of the Company’s common stock on July 19,      2007 will be reclassified to stockholders’ equity. Should the Company issue      shares in connection with the liquidated damages that may come due on August      17,      2007 and September 17, 2007, the portion of the current liability attributable      to those issuances will also be reclassified to stockholders’equity.

| ·      | Common                stock is designated for quotation on OTC Bulletin Board, the New                York                Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global                Market,                the NASDAQ Capital Market, or the American Stock                Exchange; |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·      | Common                stock has not been suspended from trading, other than for two days                due to                business announcements; and |
|--------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·      | Delisting                or suspension has not been threatened, or is not                pending. |
|--------------------------------------|---------------------------------------------------------------------------------------------------|

| ·      | Shares                of common stock have been delivered upon conversion of Notes and                Warrants                on a timely basis; |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·      | Shares                may be issued in full without violating the rules and regulations                of the                exchange or market upon which they are listed or                quoted; |
|--------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·      | Payments                have been made within five business days of when due pursuant to                the                Securities Purchase Agreement, the Convertible Notes, the Registration                Rights Agreement, the Transfer Agent Instructions, or the Warrants                (Transaction Documents); |
|--------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·      | There                has not been a change in control of the company, a merger of the                company                or an event of default as defined in the Notes;                and |
|--------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·      | There                is material compliance with the provisions, covenants, representations                or                warranties of all Transaction                Documents. |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Note          6—Share-Based Compensation**

| Volatility                             | 76.00%                          |
|----------------------------------------|---------------------------------|
| Expected                option term    | Five                to 10 years |
| Risk-free                interest rate | 4.63%                to 4.68%   |
| Expected                dividend yield | 0.00%                           |

----

On      April 20, 2007, four new members were appointed to our Board of Directors.      Each newly appointed director received a stock grant of 100,000 shares of the      Company’s common stock that vests 20% (20,000 shares) on the date of grant with      vesting 20% per year thereafter. On May 31, 2007, the remaining independent      Board member not covered by the April 20, 2007 award received a stock grant      of 100,000 shares of the Company’s common stock that vests 20% (20,000 shares)      on the date of grant with vesting 20% per year thereafter.

*Consulting      Agreement*

*Board      of Director Fees*

----

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

|         | · |   | business                strategy;                                                                                                           |
|--------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|         |   |   |                                                                                                                                        |
|    | · |   | carbon                dioxide (CO2)                availability, deliverability, and tertiary production                targets;            |
|         |   |   |                                                                                                                                        |
|         | · |   | construction                of a CO2                pipeline                and surface facilities;                                         |
|         |   |   |                                                                                                                                        |
|    | · |   | inventories,                projects, and programs;                                                                                         |
|         |   |   |                                                                                                                                        |
|         | · |   | other                anticipated capital expenditures and budgets;                                                                          |
|         |   |   |                                                                                                                                        |
|         | · |   | future                cash flows and borrowings;                                                                                            |
|         |   |   |                                                                                                                                        |
|         | · |   | the                availability and terms of financing;                                                                                     |
|         |   |   |                                                                                                                                        |
|         | · |   | oil                reserves;                                                                                                                |
|         |   |   |                                                                                                                                        |
|         | · |   | reservoir                response to CO2                injection;                                                                          |
|         |   |   |                                                                                                                                        |
|         | · |   | ability                to obtain permits and governmental approvals;                                                                        |
|         |   |   |                                                                                                                                        |
|         | · |   | technology;                                                                                                                                 |
|         |   |   |                                                                                                                                        |
|         | · |   | financial                strategy;                                                                                                          |
|         |   |   |                                                                                                                                        |
|         | · |   | realized                oil prices;                                                                                                         |
|         |   |   |                                                                                                                                        |
|         | · |   | production;                                                                                                                                 |
|         |   |   |                                                                                                                                        |
|         | · |   | lease                operating expenses, general and administrative costs, and finding                and                development costs; |
|         |   |   |                                                                                                                                        |
|         | · |   | availability                and costs of drilling rigs and field services;                                                                  |
|         |   |   |                                                                                                                                        |
|         | · |   | future                operating results; and                                                                                                |
|         |   |   |                                                                                                                                        |
|         | · |   | plans,                objectives, expectations, and intentions.                                                                             |

----

|   | · | Borrow                funds to implement our development plans;                                                                         |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                    |
|   | · | Construct                a CO2                pipeline;                                                                                 |
|   |   |                                                                                                                                    |
|   | · | Initiate                development activities in our fields; and                                                                       |
|   |   |                                                                                                                                    |
|   | · | Pursue                additional asset and project opportunities that are expected to be                accretive to stockholder value. |

----

*Three      Months Ended June 30, 2007 Compared to Three Months Ended June 30,      2006*

|                                                                            |   | Three                  Months EndedJune                  30, |       |
|---------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|
|                                                                            |   | 2007                                                         |       | 2006 |   |
|                                                                            |   |                                                         |       |   |   |
| Revenues:                                                                       |   |                                                         |       |   |   |
| Oil                  production (in barrels)                                    |   |                                                         | 22,434     |   |   | - |   |
| Oil                  price (per barrel)                                         |   | $                                                            | 59.31      |   | $ | - |   |
| Oil                  & gas sales                                            |   |                                                         | 1,330,479  |   |   | - |   |
|                                                                            |   |                                                         |            |   |   |  |   |
| Operating                  expenses:                                            |   |                                                         |            |   |   |  |   |
| Production                  taxes                                               |   |                                                         | 161,469    |   |   | - |   |
| Lease                  operating expenses                                       |   |                                                         | 599,914    |   |   | - |   |
| Depreciation,                  depletion, and amortization                      |   |                                                         | 331,532    |   |   | - |   |
| Accretion                  expense                                              |   |                                                         | 45,990     |   |   | - |   |
| Exploration                  expense                                            |   |                                                         | 41,158     |   |   | - |   |
| General                  and administrative expense                             |   |                                                         | 2,584,426  |   |   | 571,068 |   |
| Total                  operating expenses                                       |   |                                                         | 3,764,489  |   |   | 571,068 |   |
|                                                                            |   |                                                         |            |   |   |  |   |
| Loss                  from operations                                           |   |                                                         | (2,434,010 | ) |   | (571,068 | ) |
|                                                                            |   |                                                         |            |   |   |  |   |
| Other                  income (expense):                                        |   |                                                         |            |   |   |  |   |
| Liquidated                  damages pursuant to registration rights arrangement |   |                                                         | (1,377,110 | ) |   | - |   |
| Interest                  expense                                               |   |                                                         | (71,239    | ) |   | (34,644 | ) |
| Interest                  and other income                                      |   |                                                         | 104,438    |   |   | 1,365 |   |
| Total                  other income (expense)                                   |   |                                                         | (1,343,911 | ) |   | (33,279 | ) |
|                                                                            |   |                                                         |            |   |   |  |   |
| Net                  loss                                                       |   | $                                                            | (3,777,921 | ) | $ | (604,347 | ) |

*Overview*

*Revenue,      production taxes, and lease operating expenses*

*Depreciation,      depletion, and amortization*

*Accretion      expense*

----

*Exploration      expense*

*General      and administrative expense*

*Liquidated      damages pursuant to registration rights agreement*

*Interest      expense.*

*Interest      income*

----

*Cash      Flows*

|                                |   | For                the Three Months EndedJune                30, |       |
|-------------------------------------|--------|------------------------------------------------------------------|------------|
|                                |   | 2007                                                             |       | 2006 |   |
| Cash                flows from:     |   |                                                             |       |   |   |
| Operating                activities |   | $                                                                | (1,877,971 | ) | $ | (132,464 | ) |
| Investing                activities |   |                                                             | (47,560    | ) |   | (117,511 | ) |
| Financing                activities |   |                                                             | (98,561    | ) |   | 1,000,010 |   |

**Item      3.**
**Quantitative      and Qualitative Disclosure About Market Risk.**

**Commodity      Price Risk** 

**Item      4.**
**Controls      and Procedures.**

**Disclosure      Controls and Procedures**

----

** **
**Changes      in Internal Control over Financial Reporting**

| 1.                   | The                appointment of four new independent                directors; |
|------------------------------------------|----------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 2.                   | The                establishment of an Audit                Committee; |
|------------------------------------------|------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 3.                   | The                establishment of a Compensation                Committee; |
|------------------------------------------|------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 4.                   | The                establishment of a Nominating and Corporate Governance                Committee; |
|------------------------------------------|-----------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 5.                   | The                adoption of an updated Code of Business Conduct and Ethics;                and |
|------------------------------------------|---------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 6.                   | The                adoption of an Insider Trading                Policy. |
|------------------------------------------|--------------------------------------------------------------------------|

----

**PART      II - OTHER INFORMATION**

**Item      1A. Risk Factors.**

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

**Item      6. Exhibits.**

| **Exhibit** |   | **Description**                                                                                                                                                                                                                    |
|-------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1         |   | Amended                and Restated Articles of Incorporation (17)                                                                                                                                                                 |
| 3.4         |   | Amended                and Restated Bylaws (2)                                                                                                                                                                                     |
| 4.1         |   | Form                of Stock Certificate for Fully Paid, Non-Assessable Common Stock                of the                Company (1)                                                                                              |
| 4.2         |   | Form                of Unit Purchase Agreement (2)                                                                                                                                                                                 |
| 4.3         |   | Form                of Warrant Certificate (2)                                                                                                                                                                                     |
| 4.4         |   | Form                of Registration Rights Agreement, dated December 21, 2006                (3)                                                                                                                              |
| 4.5         |   | Form                of Warrant to Purchase Common Stock (3)                                                                                                                                                                        |
| 10.1        |   | Burke                Ranch Unit Purchase and Participation Agreement between Hot Springs                Resources Ltd. and PIN Petroleum Partners Ltd., dated February 6,                2006                (4)              |
| 10.2        |   | Employment                Agreement between John Works and Rancher Energy Corp., dated June 1,                2006 (5)                                                                                                        |
| 10.3        |   | Assignment                Agreement between PIN Petroleum Partners Ltd. and Rancher Energy                Corp.,                dated June 6, 2006 (5)                                                                        |
| 10.4        |   | Loan                Agreement between Enerex Capital, Corp. and Rancher Energy Corp.,                dated                June 6, 2006 (5)                                                                                    |
| 10.5        |   | Letter                Agreement between NITEC LLC and Rancher Energy Corp., dated June 7,                2006 (5)                                                                                                             |
| 10.6        |   | Loan                Agreement between Venture Capital First LLC and Rancher Energy Corp.,                dated June 9, 2006 (6)                                                                                               |
| 10.7        |   | Exploration                and Development Agreement between Big Snowy Resources, LP and Rancher                Energy Corp., dated June 15, 2006 (5)                                                                         |
| 10.8        |   | Assignment                Agreement between PIN Petroleum Partners Ltd. and Rancher Energy                Corp.,                dated June 21, 2006 (5)                                                                       |
| 10.9        |   | Purchase                and Sale Agreement between Wyoming Mineral Exploration, LLC and Rancher                Energy Corp., dated August 10, 2006 (4)                                                                        |
| 10.10       |   | South                Glenrock and South Cole Creek Purchase and Sale Agreement by and                between                Nielson & Associates, Inc. and Rancher Energy Corp., dated                October 1, 2006 (7) |
| 10.11       |   | Rancher                Energy Corp. 2006 Stock Incentive Plan                (7)                                                                                                                                                   |
| 10.12       |   | Rancher                Energy Corp. 2006 Stock Incentive Plan Form of Option Agreement                (7)                                                                                                                          |
| 10.13       |   | Employment                Agreement by and between John Dobitz and Rancher Energy Corp., dated                October 2, 2006 (7)                                                                                             |

----

| **Exhibit** |   | **Description**                                                                                                                                                                                           |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14       |   | Denver                Place Office Lease between Rancher Energy Corp. and Denver Place                Associates Limited Partnership, dated October 30, 2006 (8)                                     |
| 10.15       |   | Employment                Agreement between Andrew Casazza and Rancher Energy Corp., dated                October 23, 2006 (9)                                                                       |
| 10.16       |   | Finder’s                Fee Agreement between Falcon Capital and Rancher Energy Corp. (10)                                                                                                          |
| 10.17       |   | Amendment                to Purchase and Sale Agreement between Wyoming Mineral Exploration,                LLC                and Rancher Energy Corp. (11)                                              |
| 10.18       |   | Letter                Agreement between Certain Unit Holders and Rancher Energy Corp.,                dated                December 8, 2006 (2)                                                      |
| 10.19       |   | Letter                Agreement between Certain Option Holders and Rancher Energy Corp.,                dated                December 13, 2006                (2)                                    |
| 10.20       |   | Product                Sale and Purchase Contract by and between Rancher Energy Corp. and                the                Anadarko Petroleum Corporation, dated December 15, 2006 (12)             |
| 10.21       |   | Amendment                to Purchase and Sale Agreement between Nielson & Associates, Inc. and                Rancher Energy Corp. (13)                                                               |
| 10.22       |   | Securities                Purchase Agreement by and among Rancher Energy Corp. and the Buyers                identified therein, dated December 21, 2006 (3)                                    |
| 10.23       |   | Lock-Up                Agreement between Rancher Energy Corp. and Stockholders identified                therein, dated December 21, 2006 (3)                                                        |
| 10.24       |   | Voting                Agreement between Rancher Energy Corp. and Stockholders identified                therein, dated as of December 13, 2006 (3)                                                   |
| 10.25       |   | Form                of Convertible Note (14)                                                                                                                                                              |
| 10.26       |   | Employment                Agreement between Daniel Foley and Rancher Energy Corp., dated                January 12, 2007 (15)                                                                        |
| 10.27       |   | First                Amendment to Securities Purchase Agreement by and among Rancher Energy                Corp. and the Buyers identified therein, dated as of January 18, 2007                (16) |
| 10.28       |   | Rancher                Energy Corp. 2006 Stock Incentive Plan Form of Restricted Stock Agreement                (19)                                                                                      |
| 10.29       |   | First                Amendment to Employment Agreement by and between John Works and Rancher                Energy Corp., dated March 14, 2007 (18)                                                       |
| 10.30       |   | Employment                Agreement between Richard Kurtenbach and Rancher Energy Corp., dated                August 3, 2007(20)                                                                          |
| 31.1        |   | Certification                Pursuant to Rule 13a-14(a)/15d-14(a) (Chief Executive Officer)                (21)                                                                                           |
| 31.2        |   | Certification                Pursuant to Rule 13a-14(a)/15d-14(a) (Chief Financial Officer)                (21)                                                                                           |
| 32.1        |   | Certification                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002 (21)                                  |
| 32.2        |   | Certification                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002 (21)                                  |

| (1) | Incorporated                  by reference from our Form SB-2 Registration Statement filed on                  June 9, 2004 (File No.                  333-116307). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated                  by reference from our Current Report on Form 8-K filed on                  December 18, 2006 (File No.                  000-51425). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated                  by reference from our Current Report on Form 8-K filed on                  December 27, 2006 (File No.                  000-51425). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated                  by reference from our Quarterly Report on Form 10-Q/A filed on                  August 28, 2006 (File No.                  000-51425). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated                  by reference from our Annual Report on Form 10-K filed on June 30,                  2006 (File No. 000-51425). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated                  by reference from our Current Report on Form 8-K filed on June 21,                  2006 (File No. 000-51425). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Incorporated                  by reference from our Current Report on Form 8-K filed on October 6,                  2006 (File No. 000-51425). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Incorporated                  by reference from our Current Report on Form 8-K filed on November 9,                  2006 (File No. 000-51425). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated                  by reference from our Current Report on Form 8-K filed on                  November 14, 2006 (File No.                  000-51425). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Incorporated                  by reference from our Current Report on Form 8-K/A filed on                  November 14, 2006 (File No.                  000-51425). |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Incorporated                  by reference from our Current Report on Form 8-K filed on December 4,                  2006 (File No. 000-51425). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (12) | Incorporated                  by reference from our Current Report on Form 8-K filed on                  December 22, 2006 (File No.                  000-51425). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | Incorporated                  by reference from our Current Report on Form 8-K filed on                  December 27, 2006 (File No.                  000-51425). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | Incorporated                  by reference from our Current Report on Form 8-K filed on January 8,                  2007 (File No. 000-51425). |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | Incorporated                  by reference from our Current Report on Form 8-K filed on January 16,                  2007 (File No. 000-51425). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16) | Incorporated                  by reference from our Current Report on Form 8-K filed on January 25,                  2007 (File No. 000-51425). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| (17) | Incorporated                  by reference from our Current Report on Form 8-K filed on April 3,                  2007 (File No. 000-51425). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| (18) | Incorporated                  by reference from our Current Report on Form 8-K filed on March 20,                  2007 (File No. 000-51425). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| (19) | Incorporated                  by reference from our Annual Report on Form 10-K filed on June 29,                  2007 (File No. 000-51425). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| (20) | Incorporated                  by reference from our Current Report on Form 8-K filed on August                  7, 2007                  (File No. 000-51425). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (21) | Filed                  herewith. |
|------|----------------------------------|

----

**SIGNATURES**

|                                        |      | **RANCHER                ENERGY CORP.**                                    |
|---------------------------------------------|-----------|----------------------------------------------------------------------------|
|                                        |      | (Registrant)                                                               |
|                                        |      |                                                                       |
| Dated:                  August 8, 2007 | By:  | /s/                John Works                                              |
|                                        |      | John                Works                                                  |
|                                        |      | President,                Chief Executive Officer, Secretary and Treasurer |
|                                        |      |                                                                       |
|                                        |      |                                                                       |
| Dated:                  August 8, 2007 | By:  | /s/                Daniel P. Foley                                         |
|                                        |      | Chief                Financial Officer                                     |

----