**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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|  **PART                I - FINANCIAL INFORMATION** |
|---------------------------------------------------------|
|                                                    |   |   | Page |
| Item                1.                                  |   | Financial                Statements | 4 |
|                                                    |   |   |   |
|                                                    |   | Balance                Sheets as of December 31, 2006 and March 31, 2006 | 5-6 |
|                                                    |   |   |   |
|                                                    |   | Statements                of Operations for the Nine and Three Months ended December 31, 2006                and                2005, and for the Period from February 4, 2004 (Inception) through                December 31, 2006 | 7 |
|                                                    |   |   |   |
|                                                    |   | Statement                of Changes in Stockholders’ Equity for the Period from February 4, 2004                (Inception) through December 31, 2006 | 8 |
|                                                    |   |   |   |
|                                                    |   | Statements                of Cash Flows for the Nine Months ended December 31, 2006 and 2005                , and                for the Period from February 4, 2004 (Inception) through December                31,                2006 | 9 |
|                                                    |   |   |   |
|                                                    |   | Notes                to Financial Statements | 10 |
|                                                    |   |   |   |
| Item                2.                                  |   | Management's                Discussion and Analysis of Financial Condition and Results of                Operations | 21 |
|                                                    |   |   |   |
| Item                3.                                  |   | Quantitative                and Qualitative Disclosures About Market Risk | 27 |
|                                                    |   |   |   |
| Item                4.                                  |   | Controls                and Procedures | 27 |
|                                                    |   |   |   |
| **PART              II - OTHER INFORMATION**       | 27 |
|                                                    |   |   |   |
| Item                1A.                                 |   | Risk                Factors | 27 |
|                                                    |   |   |   |
| Item                6.                             |   | Exhibits | 32 |
|                                                    |   |   |   |
| SIGNATURES                                              |   |   | 34 |

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**Explanatory      Note**

*Accounting      for Stock-Based*
*Compensation*

----

**Part      I. Financial Information**

|                                                                                                  |   | December                31,2006                         |       | March                31,2006 |   |
|-------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|------------|------------------------------|--------|
| **ASSETS**                                                                                            |   | (as                restated, see                Note 6) |       |                         |   |
|                                                                                                  |   |                                                    |       |                         |   |
| Current                assets:                                                                        |   |                                                    |       |                         |   |
| Cash                and cash equivalents                                                              |   | $                                                       | 31,927,351 |                         | $      | 46,081 |   |
| Accounts                receivable                                                                    |   |                                                    | 292,596    |                         |   | - |   |
| Total                current assets                                                                   |   |                                                    | 32,219,947 |                         |   | 46,081 |   |
|                                                                                                  |   |                                                    |            |                         |   |  |   |
| Oil                & gas properties at cost (successful efforts                method): |   |                                                    |            |                         |   |  |   |
| Unproved                                                                                              |   |                                                    | 35,318,020 |                         |   | - |   |
| Proved                                                                                                |   |                                                    | 16,795,063 |                         |   | - |   |
| Less:                Accumulated depletion, depreciation and amortization                             |   |                                                    | (33,000    | )                            |   | - |   |
| Net                oil & gas properties                                                           |   |                                                    | 52,080,083 |                         |   | - |   |
|                                                                                                  |   |                                                    |            |                         |   |  |   |
| Other                assets:                                                                          |   |                                                    |            |                         |   |  |   |
| Other                property, net of accumulated depreciation of $4,155                              |   |                                                    | 120,689    |                         |   | - |   |
| Other                assets                                                                           |   |                                                    | 42,826     |                         |   | 476 |   |
| Total                other assets                                                                     |   |                                                    | 163,515    |                         |   | 476 |   |
|                                                                                                  |   |                                                    |            |                         |   |  |   |
| Total                assets                                                                           |   | $                                                       | 84,463,545 |                         | $      | 46,557 |   |

----

|                                                                                                                                                                                                                                  |   | December                31,2006                         |       | March                31,2006 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|------------|------------------------------|--------|
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                         |   | (as                restated, see                Note 6) |       |                         |   |
|                                                                                                                                                                                                                                  |   |                                                    |       |                         |   |
| Current                liabilities:                                                                                                                                                                                                   |   |                                                    |       |                         |   |
| Convertible                notes payable                                                                                                                                                                                              |   | $                                                       | 8,112,862  |                         | $      | - |   |
| Accounts                payable:                                                                                                                                                                                                      |   |                                                    |            |                         |   |  |   |
| Trade                                                                                                                                                                                                                                 |   |                                                    | 539,152    |                         |   | 2,070 |   |
| Purchase                of oil & gas properties                                                                                                                                                                                   |   |                                                    | 500,000    |                         |   | - |   |
| Commissions                on sales of common stock                                                                                                                                                                                   |   |                                                    | 1,784,032  |                         |   | - |   |
| Stock                over-subscription payable                                                                                                                                                                                        |   |                                                    | 555,020    |                         |   | - |   |
| Asset                retirement obligation                                                                                                                                                                                            |   |                                                    | 109,274    |                         |   | - |   |
| Total                current liabilities                                                                                                                                                                                              |   |                                                    | 11,600,340 |                         |   | 2,070 |   |
|                                                                                                                                                                                                                                  |   |                                                    |            |                         |   |  |   |
| Long-term                liabilities:                                                                                                                                                                                                 |   |                                                    |            |                         |   |  |   |
| Asset                retirement obligation                                                                                                                                                                                            |   |                                                    | 792,184    |                         |   | - |   |
|                                                                                                                                                                                                                                  |   |                                                    |            |                         |   |  |   |
| Commitments                and contingencies                                                                                                                                                                                          |   |                                                    |            |                         |   |  |   |
|                                                                                                                                                                                                                                  |   |                                                    |            |                         |   |  |   |
| Stockholders’                equity:                                                                                                                                                                                            |   |                                                    |            |                         |   |  |   |
| Common                stock, $0.00001 par value, 100,000,000 shares authorized, 95,045,090                and 28,500,000 shares issued and outstanding at December 31, 2006                and March 31, 2006, respectively |   |                                                    | 951        |                         |   | 285 |   |
| Additional                paid-in capital                                                                                                                                                                                             |   |                                                    | 75,338,930 |                         |   | 570,809 |   |
| Accumulated                deficit during the development stage                                                                                                                                                                       |   |                                                    | (3,268,860 | )                            |   | (526,607 | ) |
| Total                stockholders’ equity                                                                                                                                                                                       |   |                                                    | 72,071,021 |                         |   | 44,487 |   |
|                                                                                                                                                                                                                                  |   |                                                    |            |                         |   |  |   |
| Total                liabilities and stockholders’ equity                                                                                                                                                                       |   | $                                                       | 84,463,545 |                         | $      | 46,557 |   |

----

|                                                                 |   | Nine                Months EndedDecember                31, |       | Three                Months EndedDecember                31, |   | February                4, 2004 (inception) through December 31, |   |
|----------------------------------------------------------------------|--------|-------------------------------------------------------------|------------|--------------------------------------------------------------|--------|------------------------------------------------------------------|--------|
|                                                                 |   | 2006                                                        |       | 2005                                                         |   | 2006                                                             |   | 2005 |   | 2006 |   |
|                                                                 |   | (as                restated, see                Note 6)     |       |                                                         |   | (as                restated, see                Note 6)          |   |   |   | (as                restated, see                Note 6) |   |
| Revenues:                                                            |   |                                                        |       |                                                         |   |                                                             |   |   |   |   |   |
| Oil                & gas sales                                   |   | $                                                           | 105,416    |                                                         | $      | -                                                                |   | $ | 105,416 |   | $ | - |   | $ | 105,416 |   |
|                                                                 |   |                                                        |            |                                                         |   |                                                                  |   |   |  |   |   |  |   |   |  |   |
| Operating                expenses:                                   |   |                                                        |            |                                                         |   |                                                                  |   |   |  |   |   |  |   |   |  |   |
| Production                taxes                                      |   |                                                        | 11,192     |                                                         |   | -                                                                |   |   | 11,192 |   |   | - |   |   | 11,192 |   |
| Lease                operating expenses                              |   |                                                        | 73,725     |                                                         |   | -                                                                |   |   | 73,725 |   |   | - |   |   | 73,725 |   |
| Depreciation,                depletion and amortization              |   |                                                        | 37,155     |                                                         |   | 160                                                              |   |   | 37,155 |   |   | 54 |   |   | 37,155 |   |
| Impairment                of unproved properties                     |   |                                                        | 385,526    |                                                         |   | -                                                                |   |   | 4,681 |   |   | - |   |   | 385,526 |   |
| Exploration                Expense                                   |   |                                                        | 235,131    |                                                         |   | -                                                                |   |   | 220,191 |   |   | - |   |   | 235,131 |   |
| General                and administrative                       |   |                                                        | 2,166,687  |                                                         |   | 78,310                                                           |   |   | 1,200,405 |   |   | 46,504 |   |   | 2,641,390 |   |
| Exploration                expense - mining                          |   |                                                        | -          |                                                         |   | -                                                                |   |   | - |   |   | - |   |   | 51,904 |   |
|                  Total operating expenses                       |   |                                                        | 2,909,416  |                                                         |   | 78,470                                                           |   |   | 1,547,349 |   |   | 46,558 |   |   | 3,436,023 |   |
|                                                                 |   |                                                        |            |                                                         |   |                                                                  |   |   |  |   |   |  |   |   |  |   |
| Loss                from operations                                  |   |                                                        | (2,804,000 | )                                                            |   | (78,470                                                          | )      |   | (1,441,933 | ) |   | (46,558 | ) |   | (3,330,607 | ) |
|                                                                 |   |                                                        |            |                                                         |   |                                                                  |   |   |  |   |   |  |   |   |  |   |
| Other                income (expense):                               |   |                                                        |            |                                                         |   |                                                                  |   |   |  |   |   |  |   |   |  |   |
| Interest                income                                       |   |                                                        | 85,798     |                                                         |   | -                                                                |   |   | 71,262 |   |   | - |   |   | 85,798 |   |
| Interest                expense                                      |   |                                                        | (33,000    | )                                                            |   | -                                                                |   |   | - |   |   | - |   |   | (33,000 | ) |
| Other                income                                          |   |                                                        | 8,949      |                                                         |   | -                                                                |   |   | - |   |   | - |   |   | 8,949 |   |
| Total                other income (expense)                          |   |                                                        | 61,747     |                                                         |   | -                                                                |   |   | 71,262 |   |   | - |   |   | 61,747 |   |
|                                                                 |   |                                                        |            |                                                         |   |                                                                  |   |   |  |   |   |  |   |   |  |   |
| Net                loss                                              |   | $                                                           | (2,742,253 | )                                                            | $      | (78,470                                                          | )      | $ | (1,370,671 | ) | $ | (46,558 | ) | $ | (3,268,860 | ) |
|                                                                 |   |                                                        |            |                                                         |   |                                                                  |   |   |  |   |   |  |   |   |  |   |
| Basic                and diluted net loss per share                  |   | $                                                           | (0.07      | )                                                            | $      | (0.00                                                            | )      | $ | (0.03 | ) | $ | (0.00 | ) |   |  |   |
|                                                                 |   |                                                        |            |                                                         |   |                                                                  |   |   |  |   |   |  |   |   |  |   |
| Basic                and diluted weighted average shares outstanding |   |                                                        | 40,227,219 |                                                         |   | 93,317,658                                                       |   |   | 53,933,905 |   |   | 98,000,000 |   |   |  |   |

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|                                                                                                  |   |    Shares |        |    Amount |   |   Additional                Paid- In Capital |   | AccumulatedDeficit                during DevelopmentStage |       |  TotalStockholders’Equity                (Deficit) |   |
|-------------------------------------------------------------------------------------------------------|--------|--------------------------|-------------|--------------------------|--------|--------------------------------------------------------|--------|-----------------------------------------------------------|------------|---------------------------------------------------------------|--------|
|                                                                                                  |   |                     |        |                     |   |                                                   |   | (as                restated, see                Note 6)   |       | (as                restated, see                Note 6)       |   |
| Balance,                February 4, 2004 (inception)                                                  |   |                     | -           |                     | $      | -                                                      |   | $                                                         | -          |                                                          | $      | - |   | $ | - |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Stock                issued for expenses and consulting services                                      |   |                     | 70,000,000  |                     |   | 700                                                    |   |                                                      | 374,300    |                                                          |   | - |   |   | 375,000 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Net                loss                                                                               |   |                     | -           |                     |   | -                                                      |   |                                                      | -          |                                                          |   | (375,000 | ) |   | (375,000 | ) |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Balance,                March 31, 2004                                                                |   |                     | 70,000,000  |                     |   | 700                                                    |   |                                                      | 374,300    |                                                          |   | (375,000 | ) |   | - |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Net                loss                                                                               |   |                     | -           |                     |   | -                                                      |   |                                                      | -          |                                                          |   | (27,154 | ) |   | (27,154 | ) |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Balance,                March 31, 2005                                                                |   |                     | 70,000,000  |                     |   | 700                                                    |   |                                                      | 374,300    |                                                          |   | (402,154 | ) |   | (27,154 | ) |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Common                stock issued for cash, net of offering costs of $3,906                          |   |                     | 28,000,000  |                     |   | 280                                                    |   |                                                      | 195,814    |                                                          |   | - |   |   | 196,094 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Shares                returned by founding stockholder                                                |   |                     | (69,500,000 | )                        |   | (695                                                   | )      |                                                      | 695        |                                                          |   | - |   |   | - |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Net                loss                                                                               |   |                     | -           |                     |   | -                                                      |   |                                                      | -          |                                                          |   | (124,453 | ) |   | (124,453 | ) |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Balance,                March 31, 2006                                                                |   |                     | 28,500,000  |                     |   | 285                                                    |   |                                                      | 570,809    |                                                          |   | (526,607 | ) |   | 44,487 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Common                stock issued for cash, net of offering costs of $529,749                        |   |                     | 17,075,221  |                     |   | 171                                                    |   |                                                      | 8,106,967  |                                                          |   | - |   |   | 8,107,138 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Common                stock issued on conversion of note payable                                      |   |                     | 1,006,905   |                     |   | 10                                                     |   |                                                      | 503,443    |                                                          |   | - |   |   | 503,453 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Common                stock issued on exercise of stock options                                       |   |                     | 1,000,000   |                     |   | 10                                                     |   |                                                      | -          |                                                          |   | - |   |   | 10 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Common                stock issued for cash, net of offering costs of $41,212                         |   |                     | 1,522,454   |                     |   | 15                                                     |   |                                                      | 720,001    |                                                          |   | - |   |   | 720,016 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Warrants                issued in exchange for acquisition of oil & gas                properties |   |                     | -           |                     |   | -                                                      |   |                                                      | 616,140    |                                                          |   | - |   |   | 616,140 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Common                stock issued for cash, net of offering costs of $5,109,474                      |   |                     | 45,940,510  |                     |   | 460                                                    |   |                                                      | 63,800,831 |                                                          |   |  |   |   | 63,801,291 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Stock-based                compensation                                                               |   |                     | -           |                     |   | -                                                      |   |                                                      | 1,020,739  |                                                          |   | - |   |   | 1,020,739 |   |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Net                loss                                                                               |   |                     | -           |                     |   | -                                                      |   |                                                      | -          |                                                          |   | (2,742,253 | ) |   | (2,742,253 | ) |
|                                                                                                  |   |                     |             |                     |   |                                                        |   |                                                      |            |                                                          |   |  |   |   |  |   |
| Balance,                December 31, 2006                                                             |   |                     | 95,045,090  |                     | $      | 951                                                    |   | $                                                         | 75,338,930 |                                                          | $      | (3,268,860 | ) | $ | 72,071,021 |   |

----

|                                                                                                   |   | Nine                Months Ended December 31,           |        | February                4, 2004 (inception) through December 31, |   |
|--------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|-------------|------------------------------------------------------------------|--------|
|                                                                                                   |   | 2006                                                    |        | 2005                                                             |   | 2006 |   |
| Cash                flows from operating activities:                                                   |   | (as                restated, see                Note 6) |        |                                                             |   | (as                restated, see                Note 6) |   |
| Net                loss                                                                                |   | $                                                       | (2,742,253  | )                                                                | $      | (78,470 | ) | $ | (3,268,860 | ) |
| Adjustments                to reconcile net loss to cash used for operating                activities: |   |                                                    |             |                                                             |   |  |   |   |  |   |
| Depreciation,                depletion and amortization                                                |   |                                                    | 37,155      |                                                             |   | 160 |   |   | 37,569 |   |
| Impairment                of unproved properties                                                       |   |                                                    | 385,526     |                                                             |   | - |   |   | 385,526 |   |
| Stock-based                compensation expense                                                        |   |                                                    | 1,020,739   |                                                             |   | - |   |   | 1,383,835 |   |
| Interest                expense from convertible note beneficial conversion                            |   |                                                    | 30,000      |                                                             |   | - |   |   | 30,000 |   |
| Interest                expense on debt converted to equity                                            |   |                                                    | 3,453       |                                                             |   | - |   |   | 3,453 |   |
| Other                                                                                                  |   |                                                    | -           |                                                             |   | - |   |   | 11,904 |   |
| Changes                in operating assets and liabilities:                                            |   |                                                    |             |                                                             |   |  |   |   |  |   |
| Accounts                receivable                                                                     |   |                                                    | (94,727     | )                                                                |   | - |   |   | (94,727 | ) |
| Other                assets                                                                            |   |                                                    | (42,352     | )                                                                |   | - |   |   | (42,352 | ) |
| Accounts                payable                                                                        |   |                                                    | 382,260     |                                                             |   | (457 | ) |   | 384,330 |   |
| Net                cash used for operating activities                                                  |   |                                                    | (1,020,199  | )                                                                |   | (78,767 | ) |   | (1,169,322 | ) |
|                                                                                                   |   |                                                    |             |                                                             |   |  |   |   |  |   |
| Cash                flows from investing activities:                                                   |   |                                                    |             |                                                             |   |  |   |   |  |   |
| Acquisition                of South Cole Creek and South Glenrock B Fields                             |   |                                                    | (47,115,437 | )                                                                |   | - |   |   | (47,115,437 | ) |
| Pre-acquisition                costs of Big Muddy Field                                                |   |                                                    | (3,110,507  | )                                                                |   | - |   |   | (3,110,507 | ) |
| Capital                expenditures for oil & gas properties                                       |   |                                                    | (298,114    | )                                                                |   | - |   |   | (298,114 | ) |
| Increase                in other assets                                                                |   |                                                    | (124,843    | )                                                                |   | - |   |   | (125,733 | ) |
| Net                cash used for investing activities                                             |   |                                                    | (50,648,901 | )                                                                |   | - |   |   | (50,649,791 | ) |
| Cash                flows from financing activities:                                                   |   |                                                    |             |                                                             |   |  |   |   |  |   |
| Proceeds                from issuance of convertible notes payable                                     |   |                                                    | 8,112,862   |                                                             |   | - |   |   | 8,112,862 |   |
| Proceeds                from notes payable converted to common stock                                   |   |                                                    | 500,000     |                                                             |   | - |   |   | 500,000 |   |
| Proceeds                from shareholder loans                                                         |   |                                                    | -           |                                                             |   | - |   |   | 30,000 |   |
| Payment                of shareholder loans                                                            |   |                                                    | -           |                                                             |   | (30,000 | ) |   | (30,000 | ) |
| Proceeds                from sale of common stock and warrants                                         |   |                                                    | 74,382,488  |                                                             |   | 196,094 |   |   | 74,578,582 |   |
| Proceeds                from sale of common stock and warrants - over -                subscription    |   |                                                    | 555,020     |                                                             |   | - |   |   | 555,020 |   |
| Net                cash provided by financing activities                                               |   |                                                    | 83,550,370  |                                                             |   | 166,094 |   |   | 83,746,464 |   |
|                                                                                                   |   |                                                    |             |                                                             |   |  |   |   |  |   |
| Increase                in cash and cash equivalents                                                   |   |                                                    | 31,881,270  |                                                             |   | 87,327 |   |   | 31,927,351 |   |
| Cash                and cash equivalents, beginning of period                                          |   |                                                    | 46,081      |                                                             |   | 4,060 |   |   | - |   |
| Cash                and cash equivalents, end of period                                                |   | $                                                       | 31,927,351  |                                                             | $      | 91,387 |   | $ | 31,927,351 |   |

----

|                                                                                                                                                 |   | Nine                Months Ended December 31, |    | February                4, 2004 (inception) through December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|------------------------------------------------------------------|--------|
|                                                                                                                                                 |   | 2006                                          |    | 2005                                                             |   | 2006 |   |
| Non-cash                investing and financing activities:                                                                                          |   |                                          |    |                                                             |   |   |   |
| Payables                for purchase of oil & gas properties                                                                                     |   | $                                             | 500,000 |                                                             | $      | - |   | $ | 500,000 |   |
| Asset                retirement asset and obligation                                                                                                 |   | $                                             | 901,458 |                                                             | $      | - |   | $ | 901,458 |   |
| Value                of warrants issued in connection with acquisition of South Cole Creek                and                South Glenrock B Fields |   | $                                             | 616,140 |                                                             | $      | - |   | $ | `616,140 |   |
| Common                stock and warrants issued on conversion of notes payable                                                                       |   | $                                             | 503,453 |                                                             | $      | - |   | $ | 503,453 |   |

----

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

*Share-Based      Payment*
*Share-Based      Payment*

----

Chief      Executive Officer (CEO) Option Grant

| Volatitily                                     |   |   | 87.00                   | %      |
|------------------------------------------------|--------|--------|-------------------------|--------|
| Expected                  option term     |   |   | 1                  year |   |
| Risk-free                  interest rate  |   |   | 5.22                    | %      |
| Expected                  dividend yield  |   |   | 0.00                    | %      |

| Volatility                             |   |   | 76.00                        | %      |
|----------------------------------------|--------|--------|------------------------------|--------|
| Expected                option term    |   |   | 5                years       |   |
| Risk-free                interest rate |   |   | 4.34%                to 4.57 | %      |
| Expected                dividend yield |   |   | 0.00                         | %      |

----

|                                                           |   | Outstanding                Options |       |
|----------------------------------------------------------------|--------|------------------------------------|------------|
|                                                           |   | Number                of Shares    |       | Weighted                Average Exercise Price |   | Weighted                Average RemainingContractual                Term(in                years) |   | Total                Intrinsic Value |   |
| Outstanding,                April 1, 2006                      |   |                               | —    |   |   |  |   |   |   |  |   |
| Granted                                                        |   |                               | 6,325,000  |   | $ | 0.73000 |   |   |  |   |   | 3.35 |   |   |  |   |
| Exercised                                                      |   |                               | (1,000,000 | ) |   | 0.00001 |   |   |  |   |   | 2.75 |   |   |  |   |
| Outstanding,                December 31, 2006                  |   |                               | 5,325,000  |   |   | 0.86000 |   |   |  |   |   | 3.51 |   | $ | 13,405,000 |   |
| Vested                or expected to vest at December 31, 2006 |   |                               | 1,687,500  |   |   | 0.19000 |   |   |   |   |   | 2.75 |   | $ | 5,376,000 |   |
|                                                           |   |                               |            |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Exercisable,                December 31, 2006                  |   |                               | 687,500    |   |   | 0.48000 |   |   |  |   |   | 3.11 |   | $ | 1,996,000 |   |

Stock      Options for the Nine Months Ended December 31, 2005

**Note      2—Property Acquisitions**

----

| Acquisition                costs:                                        |   |   |       |
|--------------------------------------------------------------------------|--------|--------|------------|
| Cash                consideration                                        |   | $      | 46,907,257 |   |
| Direct                acquisition costs                                  |   |   | 165,132    |   |
| Estimated                fair value of warrants to purchase common stock |   |   | 616,140    |   |
| Total                                                                    |   | $      | 47,688,529 |   |
|                                                                     |   |   |            |   |
| Allocation                of acquisition costs:                          |   |   |            |   |
| Oil                & gas properties:                                 |   |   |            |   |
| Unproved                                                                 |   | $      | 31,794,924 |   |
| Proved                                                                   |   |   | 16,795,063 |   |
| Asset                retirement obligation                               |   |   | (901,458   | ) |
| Total                                                                    |   | $      | 47,688,529 |   |

| Volatility                          |   |   | 76.00                  | %      |
|-------------------------------------|--------|--------|------------------------|--------|
| Expected                option term |   |   | 5                years |   |

| Risk-free                interest rate |   |   | 4.51 | % |
|----------------------------------------|--------|--------|------|---|
| Expected                dividend yield |   |   | 0.00 | % |

*Pro      Forma Results of Operations*

|                                                         |   | Nine                Months Ended December 31,          |       | Three                Months Ended December 31, |   |
|--------------------------------------------------------------|--------|--------------------------------------------------------|------------|------------------------------------------------|--------|
|                                                         |   | 2006                                                   |       | 2005                                           |   | 2006 |   | 2005 |   |
|                                                         |   | (as                restated,see                Note 6) |       |                                           |   | (as                  restated,see                  Note 6) |   |   |   |
| Revenue                                                      |   | $                                                      | 4,500,447  |                                           | $      | 3,713,964 |   | $ | 1,100,169 |   | $ | 1,508,886 |   |
| Net                income (loss)                             |   |                                                   | (2,340,433 | )                                              |   | 864,103 |   |   | (1,434,105 | ) |   | 324,382 |   |
| Net                income (loss) per basic and diluted share |   |                                                   | (0.03      | )                                              |   | 0.01 |   |   | (0.01 | ) |   | 0.00 |   |

----

**Note      3 — Impairment**

**Note      4—Convertible Notes Payable**

----

**Note      5—Sale of Common Stock and Warrants**

----

|                                                                                                         |   | Warrants |       | Exercise                Price |   | Expiration                Date |   |
|--------------------------------------------------------------------------------------------------------------|--------|----------|------------|-------------------------------|--------|--------------------------------|--------|
| Warrants                issued in connection with the following:                                             |   |     |       |                          |   |                           |   |
|                                                                                                         |   |     |       |                          |   |                           |   |
| Sale                of common stock pursuant to Regulation S                                                 |   |     | 18,133,500 |                          | $      | 0.75                           |   |   | July                5, 2008to                October 18, 2008 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Conversion                of notes payable into common stock                                                 |   |     | 1,006,905  |                          | $      | 0.75                           |   |   | July                19, 2008 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement of common stock                                                             |   |     | 45,940,510 |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement of convertible notes payable                                                |   |     | 5,408,575  |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement agent commissions                                                           |   |     | 2,488,919  |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Acquisition                of oil and gas properties                                                         |   |     | 250,000    |                          | $      | 1.50                           |   |   | December                22, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Warrants                outstanding as of December 31, 2006                                                  |   |     | 73,228,409 |                          |   |                           |   |   |   |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement agent commissions                                                           |   |     | 1,144,394  |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement of convertible notes payable subsequent to December 31,                2006 |   |     | 1,587,747  |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Warrants                issued subsequent to December 31, 2006                                               |   |     | 2,732,141  |                          |   |                           |   |   |   |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Total                warrants                                                                                |   |     | 75,960,550 |                          |   |                           |   |   |   |   |

----

*Accounting      for Registration Payment Arrangements*

| **Document** | **Topic** | **Summary** |
|--------------|-----------|-------------|

|   |                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SPA    | Listing                of Shares                                   | The                Company is obligated to use its best efforts to cause its common                stock,                including all Registrable Securities to be approved for listing or                quotation (the **“Listing”**                )                on any Approved Market as promptly as practicable, but in no event                later                than one (1) year after the Closing Date (the **“Required                Listing Date”**                ).                If the Company meets the applicable listing requirements of an Approved                Market and the Listing has not occurred on or prior to the Required                Listing Date (a **“Listing                Failure”**                ),                then, the Company is required pay to each holder of Registrable Securities                an amount in cash equal to 0.25% of the aggregate purchase price                of such                investor's Registrable Securities on each of the following dates:                the day                of the Listing Failure and on every 30 th                day (pro rated for periods totaling less than 30 days) thereafter                until                such Listing Failure is cured; provided that in no event shall the                aggregate payments for all Listing Failures exceed 24% of the purchase                price paid by such holder of Registrable Securities. |
| SPA    | Stockholder                Approval of Increased Authorized Shares | If,                prior to 60 days following the Closing Date (or 120 days after the                Closing                Date if the SEC reviews the proxy statement relating to the meeting                for                such Stockholder Approval), Stockholder Approval is not obtained,                then on                such day and on each 30 th                day (pro rated for periods less than 30 days) thereafter until Stockholder                Approval is received, the Company is required to pay each holder                an amount                equal to 2.0% of the aggregate purchase price. This                amount is payable, with certain qualifications, in shares of cash,                common                stock or notes as the case may be.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| RRA    | Filing                of Initial Registration Statement            | If,                on or before the 75 th                day after the Closing Date, the Company has not filed the Initial                Registration Statement (covering the Initial Registrable Securities),                then                on such day and every 30 th                day thereafter until such filing is made, the Company must pay to                each                holder of Registrable Securities relating to the Initial Registration                Statement an amount equal to 1.0% of the aggregate purchase price                of such                investor’s Registrable Securities included in the Initial Registration                Statement. This                amount is payable, with certain qualifications, in shares of common                stock,                cash or notes as the case may be. In the event the Company fails                to make                these payments in a timely manner, the payments shall bear interest                at a                rate of 1.5% per month until paid in full, provided that all of the                payments described in this table required by the RRA (unless payable                pursuant to events within the Company’s control) in the aggregate may not                exceed 24% of the aggregate purchase                price.                                                                                                                           |

----

|  **Document** | **Topic**                                               | **Summary**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------------------|---------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| RRA                | Filing                Additional Registration Statement | ***Stockholder                Approval Received; No Cutback Shares*** ***:***If,                within 5 days after Stockholder Approval is received (and assuming                such                Stockholder Approval was not received 75 days after the Closing Date                and                no Cutback Shares are required to be included in an Additional                Registration Statement (covering the Additional Registrable Securities)),                the Company has not filed an Additional Registration Statement, then                on                such day and every 30 th                day thereafter until such filing is made, the Company must pay to                each                holder of Registrable Securities relating to such Additional Registration                Statement an amount equal to 1.0% of the aggregate purchase price                of such                investor’s Registrable Securities included in such Additional Registration                Statement. ***Cutback                Shares*** **:**                If, within 6 months from the 75 th                day following the Closing Date (and assuming Cutback Shares are involved,                regardless of Stockholder Approval), the Company has not filed an                Additional Registration Statement, then on such day and every 30                th                day thereafter until such filing is made, the Company must pay to                each                holder of Registrable Securities relating to such Additional Registration                Statement an amount equal to 1.0% of the aggregate purchase price                of such                investor’s Registrable Securities included in such Additional Registration                Statement This                amount is payable, with certain qualifications, in shares of cash,                common                stock or notes as the case may be. In the event the Company fails                to make                these payments in a timely manner, the payments shall bear interest                at a                rate of 1.5% per month until paid in full, provided that all of the                payments described in this table required by the RRA (unless payable                pursuant to events within the Company’s control) in the aggregate may not                exceed 24% of the aggregate purchase                price. |

| RRA | Effectiveness                of Initial Registration Statement    | If                (A) on or before the 5 th                day after the Company learns that the SEC will not review the Initial                Registration Statement or that the SEC has no further comments on                the                Initial Registration Statement, or (B) on or before the 120 th                day after the Closing Date (150 days in the event of a full review),                the                SEC does not declare the Initial Registration Statement, then on                such day                and every 30 th                day thereafter until such declaration is made, the Company must pay                to                each holder of Registrable Securities relating to the Initial Registration                Statement an amount equal to 1.0% of the aggregate purchase price                of such                investor’s Registrable Securities included in the Initial Registration                Statement. This                amount is payable, with certain qualifications, in shares of cash,                common                stock or notes as the case may be. In the event the Company fails                to make                these payments in a timely manner, the payments shall bear interest                at a                rate of 1.5% per month until paid in full, provided that all of the                payments described in this table required by the RRA (unless payable                pursuant to events within the Company’s control) in the aggregate may not                exceed 24% of the aggregate purchase price.                              |
|-----|-------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| RRA | Effectiveness                of Additional Registration Statement | If                (A) on or before the 5 th                day after the Company learns that the SEC will not review an Additional                Registration Statement or that the SEC has no further comments on                an                Additional Registration Statement, or (B) on or before the 120                th                day after the Closing Date (150 days in the event of a full review),                the                SEC does not declare the Additional Registration Statement, then                on such                date and every 30 th                day thereafter until such declaration is made, the Company must pay                to                each holder of Registrable Securities relating to the Additional                Registration Statement an amount equal to 1.0% of the aggregate purchase                price of such investor’s Registrable Securities included in the Additional                Registration Statement. This                amount is payable, with certain qualifications, in shares of cash,                common                stock or notes as the case may be. In the event the Company fails                to make                these payments in a timely manner, the payments shall bear interest                at a                rate of 1.5% per month until paid in full, provided that all of the                payments described in this table required by the RRA (unless payable                pursuant to events within the Company’s control) in the aggregate may not                exceed 24% of the aggregate purchase                price. |

----

| **Document** | **Topic** | **Summary** |
|--------------|-----------|-------------|

|   |                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|-------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| RRA    | Maintenance                of Registration Statements | If,                on any day after the date the SEC declares an applicable Registration                Statement effective, sales of all of the Registrable Securities required                to be included on such Registration Statement cannot be made (e.g.,                failure to keep Registration Statement effective, failure to maintain                listing, etc., as more fully described in §2.g.(a)), then on such day and                on every 30 th                day thereafter until such sales are allowed, the Company must pay                to each                holder of Registrable Securities relating to such Registration Statement                an amount equal to 1.0% of the aggregate purchase price of such investor’s                Registrable Securities included in such Registration                Statement. This                amount is payable, with certain qualifications, in shares of cash,                common                stock or notes as the case may be. In the event the Company fails                to make                these payments in a timely manner, the payments shall bear interest                at a                rate of 1.5% per month until paid in full, provided that all of the                payments described in this table required by the RRA (unless payable                pursuant to events within the Company’s control) in the aggregate may not                exceed 24% of the aggregate purchase price. |
| RRA    | Cutback                Shares                         | If,                on or before the 6-month anniversary of the Closing Date, all of                the                Cutback Shares, if any, have not been registered on a registration                statement which the SEC has declared effective, then on such day                and on                every 30 th                day thereafter until such declaration is made, the Company must pay                to                each holder of Cutback Shares relating to such registration statement                an                amount equal to 0.50% of the aggregate purchase price of such investor’s                Cutback Shares included in such registration statement. This                amount is payable, with certain qualifications, in shares of cash,                common                stock or notes as the case may be. In the event the Company fails                to make                these payments in a timely manner, the payments shall bear interest                at a                rate of 1.5% per month until paid in full, provided that all of the                payments described in this table required by the RRA (unless payable                pursuant to events within the Company’s control) in the aggregate may not                exceed 24% of the aggregate purchase price.                                                                                                                                                                         |
| Note   | Redemption                Right upon Triggering Event | If                a Trigger Event (e.g., Registration Statement not declared effective,                suspension from trading, insolvency, etc., as more fully described                in the                Note) occurs, a holder may redeem all or any portion of the Note                at a                price equal to the sum of (A) the portion of the principal to be                converted, redeemed or otherwise, (B) accrued and unpaid interest,                if any,                and (C) accrued and unpaid late charges, if                any.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

| Note | Redemption                Right upon Change of Control | Within                20 days after receiving notice from the Company of a change of control                (which notice shall be provided no sooner than 15 days nor later                than 10                days prior to the consummation of a change of control), the holder                may                redeem the Note at a redemption price as more fully described in§5(b) of                the Note. |
|------|--------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Note | Late                Charge                             | The                Company must pay a 12% per annum late charge on any amount of principal                or                other amounts due under the transaction documents which is not paid                when                due.                                                                                                                                                                                        |

**Note      6 - Restatement**

| ·   | balance                sheet as of December 31, 2006; |
|--------------------|-------------------------------------------------------|

| ·   | statements                of operations for the three and nine months ended December 31, 2006,                and                for the period from February 4, 2004 (inception) through December                31,                2006; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | statement                of changes in shareholders’ equity for the nine months ended December 31,                2005, and for the period from February 4, 2004 (inception) through                December 31, 2006; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | statements                of cash flows for the nine months ended December 31, 2005, and for                the                period from February 4, 2004 (inception) through December 31,                2006. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                      |   | As                Previously Reported |        |  Adjustments |   |  As                Restated |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-------------|-------------------|--------|----------------------------------|--------|
| Balance                sheet                                                                                                                                              |   |                                  |        |              |   |                             |   |
| As                of December 31, 2006:                                                                                                                                   |   |                                  |        |              |   |                             |   |
| Oil                & gas properties, at cost (successful efforts method)                                                                                              |   |                                  |        |              |   |                             |   |
| Unproved                                                                                                                                                                  |   | $                                     | 47,616,734  |              | $      | (12,298,714                      | )      | $ | 35,318,020 |   |
| Proved                                                                                                                                                                    |   |                                  | 4,716,540   |              |   | 12,078,523                       |   |   | 16,795,063 |   |
| Total                assets                                                                                                                                               |   |                                  | 84,683,736  |              |   | (220,191                         | )      |   | 84,463,545 |   |
| Accumulated                deficit during the development stage                                                                                                           |   |                                  | (3,048,669  | )                 |   | (220,191                         | )      |   | (3,268,860 | ) |
| Total                liabilities and shareholders’ equity                                                                                                           |   |                                  | 84,683,736  |              |   | (220,191                         | )      |   | 84,463,545 |   |
|                                                                                                                                                                      |   |                                  |        |              |   |                             |   |   |   |   |
| Statements                of operations                                                                                                                                   |   |                                  |        |              |   |                             |   |   |   |   |
| For                the nine months ended December 31, 2006:                                                                                                               |   |                                  |        |              |   |                             |   |   |   |   |
| Impairment                                                                                                                                                                |   |                                  | 400,466     |              |   | (14,940                          | )      |   | 385,526 |   |
| Exploration                expense                                                                                                                                        |   |                                  | -           |              |   | 235,131                          |   |   | 235,131 |   |
| Net                loss                                                                                                                                                   |   |                                  | (2,522,062  | )                 |   | (220,191                         | )      |   | (2,742,253 | ) |
| For                the three months ended December 31, 2006:                                                                                                              |   |                                  |        |              |   |                             |   |   |   |   |
| Exploration                expense                                                                                                                                        |   |                                  | -           |              |   | 220,191                          |   |   | 220,191 |   |
| Net                loss                                                                                                                                                   |   |                                  | (1,150,480  | )                 |   | (220,191                         | )      |   | (1,370,671 | ) |
| For                the period from February 4, 2004 (inception) through December 31,                2006:                                                                 |   |                                  |        |              |   |                             |   |   |   |   |
| Impairment                                                                                                                                                                |   |                                  | 400,466     |              |   | (14,940                          | )      |   | 385,526 |   |
| Exploration                expense                                                                                                                                        |   |                                  | -           |              |   | 235,131                          |   |   | 235,131 |   |
| Net                loss                                                                                                                                                   |   |                                  | (3,048,669  | )                 |   | (220,191                         | )      |   | (3,268,860 | ) |
| Statement                of changes in shareholders’ equity                                                                                                         |   |                                  |        |              |   |                             |   |   |   |   |
| For                the nine months ended December 31, 2005, and for the period from                February                4, 2004 (inception) through December 31, 2006: |   |                                  |        |              |   |                             |   |   |   |   |
| Accumulated                deficit during the development stage                                                                                                           |   |                                  | (3,048,669  | )                 |   | (220,191                         | )      |   | (3,268,860 | ) |
| Total                shareholders’ equity                                                                                                                           |   |                                  | 72,291,212  |              |   | (220,191                         | )      |   | 72,071,021 |   |
|                                                                                                                                                                      |   |                                  |        |              |   |                             |   |   |   |   |
| Statements                of cash flows                                                                                                                                   |   |                                  |        |              |   |                             |   |   |   |   |
| For                the nine months ended December 31, 2006:                                                                                                               |   |                                  |        |              |   |                             |   |   |   |   |
| Net                loss                                                                                                                                                   |   |                                  | (2,522,062  | )                 |   | (220,191                         | )      |   | (2,742,253 | ) |
| Impairment                                                                                                                                                                |   |                                  | 400,466     |              |   | (14,940                          | )      |   | 385,526 |   |
| Net                cash used for operating activities                                                                                                                     |   |                                  | (785,068    | )                 |   | (235,131                         | )      |   | (1,020,199 | ) |
| Capital                expenditures for oil & gas properties                                                                                                          |   |                                  | (533,245    | )                 |   | 235,131                          |   |   | (298,114 | ) |
| Net                cash used for financing activities                                                                                                                     |   |                                  | (50,884,032 | )                 |   | 235,131                          |   |   | (50,648,901 | ) |
| For                the period from February 4, 2004 (inception) through December 31,                2006:                                                                 |   |                                  |        |              |   |                             |   |   |   |   |
| Net                loss                                                                                                                                                   |   |                                  | (3,048,669  | )                 |   | (220,191                         | )      |   | (3,268,860 | ) |
| Impairment                                                                                                                                                                |   |                                  | 400,466     |              |   | (14,940                          | )      |   | 385,526 |   |
| Net                cash used for operating activities                                                                                                                     |   |                                  | (934,191    | )                 |   | (235,131                         | )      |   | (1,169,322 | ) |
| Capital                expenditures for oil & gas properties                                                                                                          |   |                                  | (533,245    | )                 |   | 235,131                          |   |   | (298,114 | ) |
| Net                cash used for financing activities                                                                                                                     |   |                                  | (50,884,922 | )                 |   | 235,131                          |   |   | (50,649,791 | ) |

----

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

| Acquisition                costs:                                        |   |   |       |
|--------------------------------------------------------------------------|--------|--------|------------|
| Cash                consideration                                        |   | $      | 46,907,257 |   |
| Direct                acquisition costs                                  |   |   | 165,132    |   |
| Estimated                fair value of warrants to purchase common stock |   |   | 616,140    |   |
| Total                                                                    |   | $      | 47,688,529 |   |
|                                                                     |   |   |            |   |
| Allocation                of acquisition costs:                          |   |   |            |   |
| Oil                & gas properties:                                 |   |   |            |   |
| Unproved                                                                 |   | $      | 31,794,924 |   |
| Proved                                                                   |   |   | 16,795,063 |   |
| Asset                retirement obligation                               |   |   | (901,458   | ) |
| Total                                                                    |   | $      | 47,688,529 |   |

----

----

|   | · | Prepare                and have declared effective a registration statement to register                for                resale by security holders of the Company the common stock and common                stock that may be acquired upon exercise of warrants or conversion                of                notes payable that have been or will be issued; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | Borrow                funds to implement its development plans;                                                                                                                                                                                                                                                                                                    |
|   | · | Expand                Rancher Energy’s operating capabilities; and                                                                                                                                                                                                                                                                                           |
|   | · | Pursue                additional asset and project opportunities that are expected to be                accretive to shareholder value.                                                                                                                                                                                                                            |

*Nine      Months Ended December 31, 2006 Compared to Nine Months Ended December 31,      2005*

*Three      Months Ended December 31, 2006 Compared to Three Months Ended December 31,      2005*

*Convertible      Debt Transactions*

----

*Equity      Transactions*

*Equity      Transactions*

*Equity      Transactions*

----

|                                                                                                         |   | Warrants |       | Exercise                Price |   | Expiration                Date |   |
|--------------------------------------------------------------------------------------------------------------|--------|----------|------------|-------------------------------|--------|--------------------------------|--------|
| Warrants                issued in connection with the following:                                             |   |     |       |                          |   |                           |   |
|                                                                                                         |   |     |       |                          |   |                           |   |
| Sale                of common stock pursuant to Regulation S                                                 |   |     | 18,133,500 |                          | $      | 0.75                           |   |   | July                5, 2008to                October 18, 2008 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Conversion                of notes payable into common stock                                                 |   |     | 1,006,905  |                          | $      | 0.75                           |   |   | July                19, 2008 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement of common stock                                                             |   |     | 45,940,510 |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement of convertible notes payable                                                |   |     | 5,408,575  |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement agent commissions                                                           |   |     | 2,488,919  |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Acquisition                of oil and gas properties                                                         |   |     | 250,000    |                          | $      | 1.50                           |   |   | December                22, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Warrants                outstanding as of December 31, 2006                                                  |   |     | 73,228,409 |                          |   |                           |   |   |   |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement agent commissions                                                           |   |     | 1,144,394  |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Private                placement of convertible notes payable subsequent to December 31,                2006 |   |     | 1,587,747  |                          | $      | 1.50                           |   |   | December                21, 2011 |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Warrants                issued subsequent to December 31, 2006                                               |   |     | 2,732,141  |                          |   |                           |   |   |   |   |
|                                                                                                         |   |     |       |                          |   |                           |   |   |   |   |
| Total                warrants                                                                                |   |     | 75,960,550 |                          |   |                           |   |   |   |   |

----

*Cash      Flows*

|                                |   | For                the Nine Months EndedDecember                31, |        |
|-------------------------------------|--------|---------------------------------------------------------------------|-------------|
|                                |   | 2006                                                                |        | 2005 |   |
| Cash                flows from:     |   |                                                                |        |   |   |
| Operating                activities |   | $                                                                   | (1,020,199  | ) | $ | (78,767 | ) |
| Investing                activities |   |                                                                | (50,648,901 | ) |   | - |   |
| Financing                activities |   |                                                                | 83,550,370  |   |   | 166,094 |   |

----

**Item      3.**
**QUANTITATIVE      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**

**Item      4.**
**CONTROLS      AND PROCEDURES**

**PART      II. OTHER INFORMATION**

**Item      1A. RISK FACTORS**

**Risks      related to our industry, business and strategy**

***We      may not be able to develop the three Powder River Basin properties as we      anticipate.***

***If      we are unable to obtain additional debt financing our business plans will not      be      achievable***
**.**

----

***We      have a limited operating history in the oil business, and we cannot predict      our      future operations with any certainty.***

***Oil      prices are volatile and a decline in oil prices can significantly affect our      financial results and impede our growth.***

***We      have incurred losses from operations in the past and expect to do so in the      future.***

***We      could be adversely impacted by changes in the oil      market.***

***We      may be unable to develop reserves.***

***We      are dependent on our management team and the loss of any of these individuals      would harm our business.***

***Oil      operations are inherently risky.***

***We      are subject to extensive government regulations.***

|   | · | the                prevention of waste;                                        |
|--------|--------|--------------------------------------------------------------------------------|
|   | · | the                discharge of materials into the                environment; |

----

|   | · | the                conservation of oil;                                                                                                          |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | pollution;                                                                                                                                       |
|   | · | permits                for drilling operations;                                                                                                  |
|   | · | drilling                bonds; and                                                                                                               |
|   | · | reports                concerning operations, the spacing of wells, and the unitization                and                pooling of properties. |

***Government      regulation and environmental risks could increase our      costs.***

***The      properties we have acquired are located in the Powder River Basin in the Rocky      Mountains, making us vulnerable to risks associated with operating in one major      geographic area.***

***Competition      in the oil & gas industry is intense, which may adversely affect our ability      to succeed.***

***Oil      prices may be impacted adversely by new taxes.***

***Shortages      of equipment, supplies and personnel could delay or otherwise adversely affect      our cost of operations or our ability to operate according to our business      plans.***

***Shortages      of transportation services and processing facilities may result in our receiving      a discount in the price we receive for oil sales or may adversely affect our      ability to sell our oil.***

----

**Risks      Related to our Common Stock**

***Our      common stock is illiquid, so investors may have difficulty selling any      significant number of shares of our stock.***

***Sales      of a substantial number of shares in the future may result in significant      downward pressure on the price of our common stock and could affect the ability      of our stockholders to realize the current trading price of our common      stock.***

***Our      stock price and trading volume may be volatile, which could result in losses      for      our stockholders.***

|   | · | Actual                or anticipated quarterly variations in our operating                results;                                                     |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | Changes                in expectations as to our future financial performance or changes                in                financial estimates, if any; |
|   | · | Announcements                relating to our business or the business of our                competitors;                                               |
|   | · | Conditions                generally affecting the oil and natural gas industry;                                                                        |
|   | · | The                success of our operating strategy; and                                                                                              |
|   | · | The                operating and stock performance of other comparable                companies.                                                       |

***There      are risks associated with forward-looking statements made by us and actual      results may differ.***

|   | · | discuss                our future expectations;                                                                          |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|
|   | · | contain                projections of our future results of operations or of our financial                condition; and |
|   | · | state                other “forward-looking”information.                                                     |

----

***NASD      sales practice requirements limit a stockholders' ability to buy and sell our      stock.***

***We      do not expect to pay dividends in the foreseeable future. As a result, holders      of our common stock must rely on stock appreciation for any return on their      investment.***

***If      we are required to make penalty payments with respect to registration and other      obligations incurred as part of our recent private placement financing, such      payments could have an adverse effect on our financial condition and liquidity      and operating plans.***

----

**ITEM      6. EXHIBITS**

|  **Exhibit** |   | **Description**                                                                                                                                                                                                                 |
|-------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1               |   | Articles                of Incorporation (1)                                                                                                                                                                                    |
| 3.2               |   | Certificate                of Amendment to Articles of Incorporation  (17)                                                                                                                                                 |
| 3.3               |   | 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 Sole 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)                                                                                               |
| 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                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)             |
| 31.1              |   | Certification                of the Chief Executive Officer pursuant to Rule 13a-14(a) of the                Securities Exchange Act, as adopted pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002. (18) |
| 31.2              |   | Certification                of the Chief Financial Officer pursuant to Rule 13a-14(a) of the                Securities Exchange Act, as adopted pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002. (18) |
| 32.1              |   | Certification                of the Chief Executive Officer pursuant to 18 U.S. C. Section 1350,                as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                (18)        |
| 32.2              |   | Certification                of the Chief Financial Officer pursuant to 18 U.S. C. Section 1350,                as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                (18)        |

----

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

| (16) | Incorporated                by reference from the Company's Quarterly Report at Form 10-Q                filed on February 14, 2007 (File No.                000-51425). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (18) | Filed                herewith. |
|------|--------------------------------|

----

**SIGNATURES**

|                                       |   | **RANCHER                ENERGY CORP.**                                    |
|--------------------------------------------|--------|----------------------------------------------------------------------------|
|                                       |   | (Registrant)                                                               |
|                                       |   |                                                                       |
| Dated:                  June 29, 2007 | By:    | /s/                John Works                                              |
|                                       |   | John                Works                                                  |
|                                       |   | President,                Chief Executive Officer, Secretary and Treasurer |
|                                       |   |                                                                       |
| Dated:                 June 29, 2007  | By:    | /s/                Daniel P. Foley                                         |
|                                       |   | Chief                Financial Officer                                     |

----