**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-QSB**





(Mark
      One)





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





For
      the
      quarterly period ended June 30, 2007





OR





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





For
      the
      transition period from __________ to __________





Commission
      File Number **000-51699**





**CROSSPOINT
      ENERGY COMPANY**


(Exact
      name of small business issuer as specified in its charter)





**Nevada**
            
            **98-0434381**State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization
            
            Identification
                No.)





**2801
      Network Blvd., Suite 810, Frisco, Texas 75034**


(Address
      of principal executive offices)





**(972)
      818-1100**


Issuer's
      telephone number, including area code





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No
o





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





Number
      of
      shares outstanding of the issuer's class of common stock as of August 15, 2007
      was 18,306,114.





Transitional
      Small Business Disclosure Format (Check one): Yes o No
x









**ITEM
      1. FINANCIAL STATEMENTS**





**CrossPoint
      Energy Company**


**Condensed
      Consolidated Balance Sheets**


**(Unaudited)**




**June
                30,**
              **2007**
            
            **September
                30,**
              **2006****ASSETS****CURRENT
                ASSETS:**Cash
                and cash equivalents
            
            $
            89,059
            
            $
            6,073,298Restricted
                cash
            
            
            261,126
            
            
            385,521Accounts
                receivable
            
            
            75,264
            
            
            634,010Oil
                and gas revenue receivable
            
            
            264,259
            
            
            273,764Prepaid
                expenses
            
            
            189,342
            
            
            129,791Deferred
                financing costs
            
            
            170,376
            
            
            260,621Oil
                & gas assets held for sale
            
            
            7,553,554
            
            
            -Other
                assets held for sale
            
            
            35,573
            
            
            -Total
                current assets
            
            
            8,638,553
            
            
            7,757,005**PROPERTY
                & EQUIPMENT:**Oil
                & gas property and equipment, successful efforts
                method
            
            
            1,022,295
            
            
            12,722,224Less
                accumulated impairment, depletion, depreciation &
                amortization
            
            
            (610,111
            )
            
            (4,952,894
            )Other
                property and equipment, net
            
            
            -
            
            
            110,831Other
                Assets
            
            
            63,085
            
            
            30,860**Total
                assets**
            
            $
            **9,113,822**
            ****
            **$**
            **15,668,026****LIABILITIES
                AND STOCKHOLDERS' DEFICIT****CURRENT
                LIABILITIES:**Accounts
                payable
            
            $
            685,712
            
            $
            1,751,148Notes
                payable, net of discount at September 30, 2006
            
            
            7,137,208
            
            
            4,101,439Liquidated
                damages payable
            
            
            2,727,900
            
            
            -Oil
                and gas revenues payable
            
            
            240,300
            
            
            326,859Oil
                and gas joint interest prepayments
            
            
            -
            
            
            556,598Interest
                payable
            
            
            255,729
            
            
            234,603Other
                current liabilities
            
            
            -
            
            
            31,444Convertible
                note, net of discount
            
            
            8,111,588
            
            
            -Obligations
                associated with assets held for sale
            
            
            174,106
            
            
            -Total
                current liabilities
            
            
            19,332,543
            
            
            7,002,091Convertible
                debt, net of discount
            
            
            -
            
            
            7,838,277Asset
                retirement obligation
            
            
            13,574
            
            
            150,136Other
                long-term liabilities
            
            
            3,252
            
            
            84,058Total
                liabilities
            
            
            19,349,369
            
            
            15,074,562**COMMITMENTS
                AND CONTINGENCIES (Note 6)****Shares
                subject to redemption, net of offering cost**
            
            
            -
            
            
            4,022,354**STOCKHOLDERS'
                DEFICIT:**Capital
                stock
            
            
            1,831
            
            
            -Capital
                in excess of par value
            
            
            11,471,943
            
            
            6,290,872Treasury
                Stock, 5,879 shares and 0 shares, respectively, at cost
            
            
            (17,985
            )
            
            -Accumulated
                deficit
            
            
            (21,691,336
            )
            
            (9,719,762
            )Total
                Stockholders' deficit
            
            
            (10,235,547
            )
            
            (3,428,890
            )**Total
                liabilities and Stockholders' deficit**
            
            **$**
            **9,113,822**
            ****
            **$**
            **15,668,026**








***See
      accompanying notes to these financial statements.***




2




**CrossPoint
      Energy Company**


**Condensed
      Consolidated Statement of Operations**




**Three
                Months Ended**
            
            **Nine
                Months Ended****June
                30,**
            
            **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006****OPERATING
                REVENUES:**Crude
                oil & natural gas sales
            
            $
            607
            
            $
            4,499
            
            $
            3,879
            
            $
            13,238Contract
                services revenue
            
            
            90,110
            
            
            239,710
            
            
            499,792
            
            
            551,398Total
                operating revenues
            
            
            90,717
            
            
            244,209
            
            
            503,671
            
            
            564,636**OPERATING
                EXPENSES:**Lease
                operating expenses
            
            
            3,181
            
            
            2,634
            
            
            5,472
            
            
            10,376Production
                and ad valorem taxes
            
            
            45
            
            
            229
            
            
            224
            
            
            812Dry
                hole & abandonment expenses
            
            
            590
            
            
            -
            
            
            3,945
            
            
            -Depreciation,
                depletion and amortization
            
            
            92,606
            
            
            9,697
            
            
            340,719
            
            
            34,147Accretion
                of asset retirement obligations
            
            
            450
            
            
            -
            
            
            1,350
            
            
            -Contract
                services expense
            
            
            52,455
            
            
            143,086
            
            
            300,843
            
            
            323,373General
                and administrative expenses, including stock compensation expense
                reversal
                of $227,779 and $0 in 2007 & 2006, respectively
            
            
            824,806
            
            
            515,284
            
            
            2,536,092
            
            
            1,812,697Impairment
                of oil and gas properties
            
            
            385,524
            
            
            -
            
            
            385,524
            
            
            -Restructure
                expenses
            
            
            789,093
            
            
            -
            
            
            789,093
            
            
            -Total
                operating expenses
            
            
            2,148,750
            
            
            670,930
            
            
            4,363,262
            
            
            2,181,405**OPERATING
                LOSS**
            
            $
            (2,058,033
            )
            $
            (426,721
            )
            $
            (3,859,591
            )
            $
            (1,616,769
            )**OTHER
                INCOME & EXPENSE:**Interest
                income
            
            
            28,266
            
            
            10,559
            
            
            127,498
            
            
            14,281Interest
                expense
            
            
            (492,871
            )
            
            (158,122
            )
            
            (1,107,013
            )
            
            (339,877
            )Merger
                expense
            
            
            -
            
            
            -
            
            
            (119,672
            )
            
            -Liquidated
                damages
            
            
            (2,273,250
            )
            
            -
            
            
            (3,334,100
            )
            
            -Total
                other expenses
            
            
            (2,737,855
            )
            
            (147,563
            )
            
            (4,433,287
            )
            
            (325,596
            )**LOSS
                FROM CONTINUING OPERATIONS**
            
            
            (4,795,888
            )
            
            (574,284
            )
            
            (8,292,878
            )
            
            (1,942,365
            )**INCOME
                (LOSS) FROM DISCONTINUED OPERATIONS**
            
            
            (2,927,360
            )
            
            153,339
            
            
            (3,678,696
            )
            
            381,315**Net
                Loss**
            
            $
            (7,723,248
            )
            $
            (420,946
            )
            $
            (11,971,574
            )
            $
            (1,561,050
            )**Preferred
                dividends**
            
            $
            -
            
            
            **(75,348**
            **)**
            **$**
            **-**
            
            **$**
            **(75,348**
            **)****Net
                Loss applicable to common shares**
            
            **$**
            **(7,723,248**
            **)**
            **$**
            **(496,294**
            **)**
            **$**
            **(11,971,574**
            **)**
            **$**
            **(1,636,398**
            **)****Basic
                and Diluted Net Loss per common share:****Basic
                and Diluted Net Loss from continuing operations**
            
            **$**
            **(0.26**
            **)**
            **$**
            **(0.05**
            **)**
            **$**
            **(0.47**
            **)**
            **$**
            **(0.17**
            **)****Basic
                and Diluted Net Loss from discontinued operations**
            
            **$**
            **(0.16**
            **)**
            **$**
            **0.01**
            
            **$**
            **(0.21**
            **)**
            **$**
            **0.03****Basic
                and Diluted Net Loss per common share**
            
            **$**
            **(0.42**
            **)**
            **$**
            **(0.04**
            **)**
            **$**
            **(0.68**
            **)**
            **$**
            **(0.14**
            **)****Weighted
                Average Number of Shares Outstanding**
            
            
            **18,173,469**
            
            
            **11,098,005**
            
            
            **17,709,121**
            
            
            **11,098,005**





***See
      accompanying notes to these financial statements.***




3




**CrossPoint
      Energy Company**


**Condensed
      Consolidated Statement of Stockholders' Deficit**


**(Unaudited)**




Common
                Shares
            
            
            Capital
                Stock
            
            
            Capital
                in Excess of Par
            
            
            Treasury
                Stock
            
            
            Accumulated
                Deficit
            
            
            TotalBalance,
                September 30, 2006
            
            
            11,400,000
            
            $
            1,140
            
            $
            6,289,732
            
            $
            -
            
            $
            (9,719,762
            )
            $
            (3,428,890
            )Merger
                Adjustments:Common
                stock acquired in merger
            
            
            1,372,451
            
            
            137
            
            
            (137
            )
            
            -
            
            
            -
            
            
            -Other:Reclass
                shares subject to redemption to common shares
            
            
            5,051,667
            
            
            505
            
            
            4,021,849
            
            
            -
            
            
            -
            
            
            4,022,354Stock
                compensation expense
            
            
            (17,604
            )
            
            (2
            )
            
            9,994
            
            
            
            
            
            
            
            
            9,992Forfeited
                options/warrants
            
            
            
            
            
            
            
            
            (237,765
            )
            
            -
            
            
            -
            
            
            (237,765
            )Interest
                on convertible debt paid in shares
            
            
            176,833
            
            
            18
            
            
            518,055
            
            
            
            
            
            
            
            
            518,073Liquidated
                damages
            
            
            328,646
            
            
            33
            
            
            870,215
            
            
            -
            
            
            -
            
            
            870,248Purchases
                of treasury stock
            
            
            (5,879
            )
            
            -
            
            
            
            
            
            (17,985
            )
            
            
            
            
            (17,985
            )Net
                loss
            
            
            
            
            
            -
            
            
            -
            
            
            -
            
            
            (11,971,574
            )
            
            (11,971,574
            )Balance,
                June 30, 2007
            
            
            18,306,114
            
            $
            1,831
            
            $
            11,471,943
            
            $
            (17,985
            )
            $
            (21,691,336
            )
            $
            (10,235,547
            )






***See
      accompanying notes to these financial statements.***




4




**CrossPoint
      Energy Company**


**Consolidated
      Statement of Cash Flows**


**(Unaudited)**




**Nine
                Months ended June 30,****2007**
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (11,971,574
            )
            
            (1,561,050
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depletion,
                depreciation and amortization
            
            
            1,546,988
            
            
            305,147Accretion
                of asset retirement obligations
            
            
            19,286
            
            
            -Shares
                issued in lieu of cash for interest and liquidated damages
            
            
            1,388,330
            
            
            158,350Debt
                issued in lieu of cash for services
            
            
            362,622
            
            
            125,000Impairment
                of oil and gas properties
            
            
            3,317,336
            
            
            -Impairment
                of other property and equipment
            
            
            68,777
            
            
            -Amortization
                of deferred financing costs
            
            
            603,740
            
            
            149,820Stock
                compensation
            
            
            (227,779
            )
            
            -Deferred
                rent amortization
            
            
            (110,345
            )
            
            75,319Other
                non-cash items
            
            
            -
            
            
            (2,989
            )Changes
                in assets and liabilities:Restricted
                cash
            
            
            124,395
            
            
            (67,058
            )Accounts
                receivable
            
            
            568,250
            
            
            (1,077,386
            )Prepaid
                expenses
            
            
            (59,551
            )
            
            262,952Other
                assets
            
            
            (32,224
            )
            
            9,595Accounts
                payable and accrued liquidated damages
            
            
            1,575,903
            
            
            1,647,898Oil
                and gas joint interest prepayments
            
            
            (556,598
            )
            
            -Interest
                payable
            
            
            21,126
            
            
            -**Net
                cash provided by (used in) operating activities**
            
            **$**
            **(3,361,318**
            **)**
            ****
            **25,598****CASH
                FLOWS FROM INVESTING ACTIVITIES:**Expenditures
                for oil & gas property and equipment
            
            $
            (4,843,360
            )
            
            (11,238,939
            )Purchases
                of other fixed assets
            
            
            (18,951
            )
            
            (52,591
            )**Net
                cash used in investing activities**
            
            **$**
            **(4,862,311**
            **)**
            ****
            **(11,291,530**
            **)****CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from issuance of equity before the private placement
            
            $
            -
            
            
            865,000Proceeds
                from issuance of equity subject to redemption, net
            
            
            -
            
            
            3,445,208Proceeds
                from convertible debt
            
            
            -
            
            
            4,823,292Cash
                paid for issuance cost
            
            
            -
            
            
            (461,340
            )Purchase
                of treasury stock
            
            
            (17,985
            )
            
            -Proceeds
                from notes payable
            
            
            2,476,806
            
            
            10,423,776Repayment
                of notes payable
            
            
            (219,431
            )
            
            (6,619
            )**Net
                cash provided by financing activities**
            
            **$**
            **2,239,390**
            ****
            ****
            **19,089,317****NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
            
            **$**
            **(5,984,239**
            **)**
            ****
            **7,823,385****CASH
                AND CASH EQUIVALENTS**,
                beginning of period
            
            **$**
            **6,073,298**
            ****
            ****
            **845,790****CASH
                AND CASH EQUIVALENTS**,
                end of period
            
            **$**
            **89,059**
            ****
            ****
            **8,669,175****SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION**Cash
                paid for interest
            
            $
            566,622
            
            
            677,113**SUPPLEMENTAL
                DISCLOSURES FOR NON-CASH INVESTING AND FINANCING
                ACTIVITIES**Preferred
                dividends, paid in common
            
            $
            -
            
            
            75,348







***See
      accompanying notes to these financial statements.***




5




**CrossPoint
      Energy Company**


*Notes
      to Condensed Unaudited Financial Statements*





**1.
      Basis of Presentation and use of estimates**





The
      interim consolidated financial statements of CrossPoint Energy Company are
      unaudited and, in the opinion of management, contain adjustments (consisting
      of
      a restructuring charge, see Note 8 “Restructuring Expenses and Discontinued
      Operations”, liquidated damages charges, see Note 7 “Liquidated Damages” ,
      impairments of oil and gas properties and other normal recurring accruals)
      necessary for a fair statement of the results for the interim periods presented.
      Results for interim periods are not necessarily indicative of results to be
      expected for a full year or for previously reported years due, in part, to
      the
      volatility in prices for crude oil and natural gas, the success of drilling
      and
      completions of wells, product demand, market competition or interruption in
      production. These consolidated interim financial statements should be read
      in
      conjunction with the audited consolidated financial statements for the year
      ended September 30, 2006 and notes thereto included in the Company's Form SB-2/A
      dated April 25, 2007.





In
      preparing the accompanying financial statements, management has made certain
      estimates and assumptions that affect reported amounts in the financial
      statements and disclosure of contingencies. Actual results may differ from
      those
      estimates. Significant assumptions are required in the valuation of proved
      oil
      and gas reserves, which may affect the amount at which oil and gas properties
      are recorded, most significant is the estimate of oil and gas reserves and
      their
      value. These estimates may be revised in the future, and such revisions could
      be
      material.





***Going
      Concern and current plans***





During
      the nine month period ended June 30, 2007, we have experienced drilling and
      completion delays, well cost over-runs, dry holes and significant costs for
      SEC
      compliance and liquidated damages penalties for failure to meet SEC registration
      and filing requirements. We have a history of losses and limited liquidity
      and
      we have suspended interest payments on our convertible notes. Despite our
      efforts, the Securities and Exchange Commission (“SEC”) has rejected the size of
      our registration as a secondary offering; specifically, the SEC has rejected
      the
      current registration of all shares underlying the investor documents.  At
      this time, we have suspended all efforts to register the stock.





We
      are
      seeking to restructure to allow us to re-capitalize, reduce debt and seek other
      venues for the Company.  We have engaged Energy Capital Solutions and Venn
      Capital as financial advisors to assist us in seeking strategic
      restructuring alternatives, including the marketing of all or substantially
      all
      of our assets. To preserve cash, we have suspended all new drilling and
      exploration activities, transferred the operatorship of one of our properties,
      and have terminated the employment of the majority of our staff. As of August
      15, 2007, two full-time employees, one part-time employee and one contract
      employee remain to assist in our restructuring. With the reduction in staff,
      we
      have discontinued the operational contract services that we previously provided.
      Subsequent to June 30, 2007 we have made an offer to a third party to assume
      our
      office lease and purchase the majority of our office furniture and
      fixtures.





In
      May
      2007, our Board of Directors authorized management and our financial advisors
      to
      commence the process of marketing our oil and gas properties with an
      authorization to market for sale our Elkhart, Hoskins and Waskom properties.
      As
      a result, we have reclassified these properties and the associated asset
      retirement obligations to assets held for sale and obligations associated with
      assets held for sale, respectively and reclassified current and historical
      results of operations of these properties as discontinued operations. The
      remainder of our properties, which include one marginally producing property
      and
      three prospect areas, may be sold or retained by the Company, depending on
      restructuring alternatives and market conditions. Considering the current
      financial condition of the company, we evaluated our oil and gas properties
      held
      for sale and our other oil and gas properties for potential impairment and
      recorded an impairment of $3.3 million ($2.9 million relating to discontinued
      operations) and recorded a restructuring expense of $0.8 million in the current
      period (See Note 8, “Restructuring Expenses and Discontinued Operations”)..





While
      there can be no assurance, we anticipate at the completion of our restructuring
      we may continue to own one marginally producing property and certain
      non-producing oil and gas prospects and we will have a limited staff.





We
      recorded a loss from continuing operations of $8.3 million and a net loss of
      $12.0 million for the nine months ended June 30, 2007 and had an accumulated
      deficit at June 30, 2007 of $21.7 million. Our results of operations for the
      three and nine month periods ended June 30, 2007 included the aforementioned
      oil
      and gas properties impairment and restructuring expenses and an expense for
      liquidated damages. Our convertible debt and private placement of our stock
      were
      issued with registration rights agreements, which required us to register all
      the common shares and all the common shares underlying the conversion features
      in a secondary offering in a timely manner or we could be assessed penalties
      up
      to 24% of the private issuance of $15,155,000 in June 2006. Since we have
      suspended attempting to register the shares from the private placement, due
      to
      the SEC disallowing the current registration of all such common shares, we
      have
      accrued for the full 24%, as further described in Note 7, “Liquidated Damages”.




6


Considering
      the amount of debt owed and the value of our assets, it is unknown if the
      existing common shareholders will receive any value for their shares. The
      financial statements do not include adjustments relating to the recoverability
      and classification of recorded assets, or the amounts and classifications of
      liabilities that might be necessary in the event the Company cannot continue
      as
      a going concern.




***Organization
      and business***





CrossPoint
      Energy Company was incorporated in the State of Nevada on August 4, 2004 as
      "Electrum Mining Limited."  On November 27, 2006 we completed a merger
      between one of our subsidiaries, CrossPoint Acquisition, LLC, and CrossPoint
      Energy, LLC ("CrossPoint LLC") (the "Merger").  As a result of the Merger
      we changed our business to that of CrossPoint LLC's prior to the
      merger.




From
      inception until the merger with CrossPoint LLC, Electrum's business was as
      a
      start-up, exploration stage corporation, engaged in the search for mineral
      deposits or reserves which are not in either the development or production
      stage.  CrossPoint LLC was formed as a limited liability company under the
      laws of the State of Texas in November 2004 and commenced operations in the
      first calendar quarter of 2005.  Prior to the Merger, CrossPoint LLC had
      two subsidiaries, CrossPoint Energy Holdings, LLC which was formed in
      August 2005 to hold CrossPoint LLC's oil and gas properties and Dallas
      Operating Corp. (“DOC”) which was incorporated in 1993 and is an established
      service company, engaged in oil and gas operations for the Company and third
      parties, strategically to add to the Company's cashflow and/or reserve
      base.  As a result of the Merger, we acquired both of these
      subsidiaries.




Subsequent
      to the Merger, we changed our name to "CrossPoint Energy Company" to
      reflect the change in our business to a petroleum and natural gas exploration,
      development and production company.




On
      June
      30, 2006, CrossPoint LLC completed a private placement with gross proceeds
      of
      $15 million, for issuance of equity, convertible debt and warrant shares. The
      placement included performance obligations including CrossPoint LLC becoming
      a
      publicly-traded company. On July 7, 2006, CrossPoint LLC entered into an
      Agreement and Plan of Merger with Electrum Mining Limited, a Nevada corporation
      involved in the mining business.





Effective
      November 27, 2006, CrossPoint LLC merged with a subsidiary of Electrum Mining
      Limited (“Electrum”), a publicly-traded company, and CrossPoint LLC was
      dissolved. Pursuant to the merger, Electrum changed its name to CrossPoint
      Energy Company and acquired 100% of the outstanding membership interests in
      CrossPoint LLC. CrossPoint Energy Company issued, as consideration to the
      security holders of the CrossPoint LLC, aggregate consideration of 16,451,667
      shares of common stock, debt convertible into 5,051,667 shares of common stock,
      and warrants to acquire 2,525,833 shares of common stock. In accordance with
      the
      merger agreement, an additional 1,372,553 shares (6 percent of the issued and
      convertible shares) were issued to Electrum's majority shareholder.





The
      merger was accounted for as a reverse merger, with CrossPoint Energy Company
      as
      the surviving public reporting entity. CrossPoint LLC, which previously had
      reported on a calendar year, adopted Electrum's fiscal year end of September
      30 th .





All
      references to the Company refer to CrossPoint Energy Company or its predecessor
      CrossPoint , LLC.





**2.
      Summary of Significant Accounting Policies**




**Accounting
      for Merger Transaction**




In
      connection with the June 30, 2006 private placement, CrossPoint LLC was required
      to merge into a public company within 120 days of the receipt of approximately
      $15 million or incur penalties equal to a fixed percentage of the proceeds.
      The
      penalties escalated every 30 day period thereafter until 180 days. If the merger
      had not closed by 180 days following receipt of the private placement proceeds,
      the company could be required to repurchase the non debt portion of the private
      placement proceeds. As of September 30, 2006, the merger had not taken place.
      Thus the gross proceeds attributable to common stock shares, less the allocation
      of issuance costs to shares subject to redemption of $2,292,229, were recorded
      outside of permanent equity at September 30, 2006. On November 27, 2006,
      CrossPoint LLC merged into a subsidiary of Electrum Mining Limited and the
      common shares value of $6,290,872 was moved to permanent equity as $1,140 to
      capital stock and $6,289,732 to capital in excess of par value.




7


The
      costs
      totaling $119,672 in the nine months ended June 30, 2007 that were attributable
      to the merger were expensed as required in a reverse merger.





**Income
      taxes**




CrossPoint
      LLC had elected to be taxed as a partnership for federal income tax purposes
      and, accordingly, items of income and loss were reported to the members
      according to their ownership percentage. One of the Company's subsidiaries,
      DOC,
      is a registered C corporation. However, it is not expected to have a material
      tax liability and there are no material differences in the book and tax basis
      of
      assets and liabilities. Therefore, no provision for income taxes was necessary
      before November 27, 2006. Subsequent to the merger, the Company had net
      operating losses. The deferred tax asset was fully reserved resulting in no
      provision at June 30, 2007.




Certain
      transactions of the Company may be subject to accounting methods for income
      tax
      purposes which differ from the accounting methods used in preparing these
      financial statements in accordance with accounting principles generally accepted
      in the United States of America. Accordingly, the net income or loss and the
      resulting balances in shareholders equity reported for income tax purposes
      may
      differ from the balances reported for these same items in the accompanying
      financial statements.





Prior
      to
      the Merger, CrossPoint LLC was properly classified as a partnership for federal
      income tax purposes. CrossPoint LLC owned 100% of the membership interests
      of
      CrossPoint Energy Holdings, LLC and 100% of the stock of Dallas Operating
      Corp.





Pursuant
      to the Merger, CrossPoint LLC merged into CrossPoint Acquisition LLC. As a
      result of the Merger, CrossPoint Energy Holdings, LLC and Dallas Operating
      Corp.
      became wholly owned by CrossPoint Acquisition LLC as of the date of
      Merger.





As
      a
      result of the change in taxable entity status, (i.e., as a result of the
      Merger), CrossPoint LLC filed a final Form 1065 as of November 27, 2006. This
      filing included the activity of CrossPoint LLC's 100% ownership interest in
      CrossPoint Holdings, LLC (a disregarded entity for federal income tax purposes).
      In addition, Dallas Operating Corp will file a short-year Form 1120 as of
      November 27, 2006.





Subsequent
      to the Merger, we changed our name to CrossPoint Energy Company. CrossPoint
      Energy Company will file a consolidated corporate income tax return for its
      fiscal year ended September 30, 2007 and future years.




**Recent
      Accounting Pronouncements**




**SAB
      108**


In
      September, 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108)
      which provides interpretive guidance on how the effects of the carryover or
      reversal of prior year misstatements should be considered in quantifying a
      current year misstatement.  SAB 108 is effective for fiscal years ending
      after November 15, 2006 and early application is encouraged for any interim
      period of the first fiscal year ending after that date.  We adopted SAB 108
      in the second quarter and it did not have a material impact our financial
      statements.





**FIN
      48**


In
      July
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an
      Interpretation of FASB Statement 109 (“FIN 48”), which clarifies the
      accounting for uncertainty in tax positions taken or expected to be taken in
      a
      tax return, including issues relating to financial statement recognition and
      measurement. FIN 48 provides that the tax effects from an uncertain tax
      position can be recognized in the financial statements only if the position
      is
“more-likely-than-not” of being sustained if the position were to be challenged
      by a taxing authority. The assessment of the tax position is based solely on
      the
      technical merits of the position, without regard to the likelihood that the
      tax
      position may be challenged. If an uncertain tax position meets the
“more-likely-than-not” threshold, the largest amount of tax benefit that is
      greater than 50 percent likely of being recognized upon ultimate settlement
      with the taxing authority, is recorded. The provisions of FIN 48 are
      effective for fiscal years beginning after December 15, 2006, with the
      cumulative effect of the change in accounting principle recorded as an
      adjustment to opening retained earnings. We expect to adopt FIN 48 for our
      fiscal year beginning October 1, 2007. At this time, we are not able to estimate
      the effect the adoption will have on our financial statements.




8


**SFAS
      No. 157**


In
      September 2006, the FASB issued SFAS No. 157, *“Fair
      Value Measurements.”* SFAS No. 157
      defines fair value, establishes a framework for measuring fair value under
      Generally Accepted Accounting Principles and requires enhanced disclosures
      about
      fair value measurements. It does not require any new fair value measurements.
      SFAS No. 157 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007 and interim periods within those
      fiscal years. SFAS No. 157 is not expected to have a material impact
      on the Company.




**SFAS
      No. 159**


In
      February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option
      for
      Financial Assets and Financial Liabilities - Including an Amendment of FASB
      Statement No. 115 (“SFAS 159”). The fair value option established by SFAS 159
      permits all entities to choose to measure eligible items at fair value at
      specified election dates. A business entity will report unrealized gains and
      losses on items for which the fair value option has been elected in earnings
      (or
      another performance indicator if the business entity does not report earnings)
      at each subsequent reporting date. The fair value option: (a) may be applied
      instrument by instrument, with a few exceptions, such as investments otherwise
      accounted for by the equity method; (b) is irrevocable (unless a new election
      date occurs); and (c) is applied only to entire instruments and not to portions
      of instruments. FASB No. 159 is effective as of the beginning of fiscal years
      beginning after November 15, 2007.  The adoption of SFAS 159 is not
      expected to be material to the Company’s financial statements.





**3.
      Asset Retirement Obligation**





The
      following table shows changes in the Company's asset retirement obligations
      for
      the nine month period ended:




**June
                30,**
              **2007**Asset
                retirement obligation at September 30, 2006
            
            $
            150,136Asset
                retirement accretion expense
            
            
            19,286Additions
            
            
            18,258Total
                asset retirement obligations
            
            $
            187,680Asset
                retirement obligation associated with assets held for sale. Reclassified
                to obligations associated with assets held for sale
            
            
            (174,106
            )Asset
                Retirement Obligation, June 30, 2007
            
            $
            13,574








**4.
      Private Placement**





On
      June
      30, 2006, the Company entered into a Securities Purchase Agreement for gross
      proceeds of $15,155,000. For every $3.00, the Company issued one share at $1.25
      per share, one warrant to purchase 0.25 shares in the Company at an exercise
      price of $1.95, and one convertible note in a principal amount of $1.75 per
      share. The proceeds were allocated as follows:





#
                Shares
            
            Price
                per Share
            
            ProceedsShares
                subject to redemption
            
            
            5,051,667
            
            $
            1.25
            
            $
            6,314,583Convertible
                debt
            
            
            5,051,667
            
            $
            1.75
            
            
            8,840,417Warrants
            
            
            
            
            
            
            
            
            1,874,133Less
                costs of issuance
            
            
            
            
            
            
            
            
            (3,385,473
            )Total
                net proceeds
            
            
            
            
            
            
            
            $
            13,643,660





***Shares
      subject to redemption***





The
      merger was completed on November 27, 2006, and the shares subject to redemption
      were reclassified to capital stock and capital in excess of par value for the
      proceeds of $6,290,872 less the issuance costs of $2,292,229.




9




***Convertible
      debt***





See
      Note
      6 “Convertible Note” for discussion of the convertible note and interest
      payments.





**5.
      Note payable**





***Credit
      Agreement***





On
      September 2, 2005, the Company entered into a $40,000,000 credit agreement
      (the
“Credit Agreement”) with two participating lenders for the purpose of funding
      the Company's development projects. The term of the agreement is three years.
      The Credit Agreement is facilitated by an Administrative Agent who approves
      the
      amounts and purposes for the advances under the Credit Agreement, referred
      to as
      the commitment. The Company's oil and gas properties collateralize the Credit
      Agreement. According to the Credit Agreement, all of the Company's production
      receipts have been assigned to a lock box administered by the Administrative
      Agent.





Beginning
      June 30, 2006, the Company was subject to certain restrictive financial
      covenants that include debt coverage, fixed charge and current ratios, reserve
      ratios to total debt and net sales requirements. The Company was not in
      compliance with certain ratios at any time. The covenant violations have been
      waived and penalties paid as follows:




Three-month
              Period
                ended
            
            Cash
                Penalty
            
            Penalty
                added to DebtMarch
                31, 2006
            
            $
            –
            
            $
            125,000June
                30, 2006
            
            
            –
            
            
            –September
                30, 2006
            
            
            10,000
            
            
            –December
                31, 2006and
                March 31, 2007
            
            
            –
            
            
            75,000June
                30, 2007
            
            
            –
            
            
            75,000





The
      lenders under the Credit Agreement agreed to fund up to $525,000 for general
      and
      administrative expenses, of which $0 was borrowed as of June 30, 2007, and
      up to
      $ 532,875
      to complete certain oil and gas development operations, of which $497,378 was
      borrowed as of June 30, 2007. In
      exchange for continuing to fund the operations of the Company through its
      restructuring, the Company agreed to pay the lenders an exit fee of $262,500
      and
      to grant the lenders an overriding royalty interest in the company’s oil and gas
      properties of 1 percent for each month after October 31, 2007 that the
      outstanding debt under the credit agreement is not paid in full. The exit fee
      was recorded as a component of the restructuring expense. (See Note 8
“Restructuring Expenses and Discontinued Operations”). The outstanding debt
      balance at June 30, 2007 of $7,137,008 under the Credit Agreement is
      reflected as a current liability in the consolidated financial
      statements.





Proceeds
      from the sale of our oil and gas properties are required to be used to first
      repay outstanding amounts due under the Credit Agreement. At June 30, 2007,
      the
      unamortized discount of $251,918 was expensed as a component of restructuring
      expenses (See Note 8 “Restructuring Expenses and Discontinued Operations”).
      During the nine months ended June 30, 2007, the Company capitalized interest
      on
      development activities totaling $564,882.





**6.
      Convertible Note**





Convertible
      debt of $8,111,588, net of the unamortized discount of $728,829 was outstanding
      as of June 30, 2007.





The
      Company paid interest due from the convertible note, for the period from June
      30, 2006 to March 31, 2007. The convertible note provided for the election
      of
      the Company to issue registered common stock in lieu of cash through December
      31, 2007. Due to the circumstances surrounding the registration of the Company’s
      common stock, registered shares were not available. The Company opted to issue
      unregistered shares as an alternative. For the interest due for the three month
      period ended December 31, 2006, the Company calculated the number of shares
      using 90% of the volume weighted average price, or $3.06/share. While the
      majority of the investors agreed to the issuance of unregistered stock,
      $17,985 was paid in cash and 118,781 shares were issued to the investors in
      the
      first week of January 2007. Initially the interest was paid and accepted 100%
      in
      shares, however 2 investors subsequently required cash payments. Their
      certificates for 5,879 shares have been repurchased for cash and are recorded
      as
      treasury stock at June 30, 2007. For the interest due for the three month period
      ended March, 31, 2007, the Company again opted to issue unregistered shares
      and
      calculated the number of shares using 90% of the volume weighted average price,
      or $2.66/share. In April 2007, the Company issued 58,052 shares as payment
      of
      interest for the three month period ended March 31, 2007. In August 2007, the
      Company was notified that convertible note holders that received 19,148 of
      the
      shares issued in April 2007 would not accept such shares as the interest payment
      due for the three month period ended March 31, 2007. Such shares have not been
      returned to the Company.




10




For
      the
      three month period ended June 30, 2007, the Company has not paid the interest
      due of $178,773. While the Company has not been formally notified, failure
      to
      pay interest when due is an event of default under the convertible note and
      the
      note holders may accelerate the convertible notes at their option. As a result,
      we have reclassified the convertible notes to current liabilities.




**7.
      Liquidated Damages**





***Securities
      Purchase Agreement - to be merged within 120 days of
      funding***





Included
      in the Securities Purchase Agreement were liquidated damages if the Company
      was
      not merged within 120 days of the private placement on June 30, 2006. The merger
      was consummated on November 27, 2006 which was outside the 120-day period
      resulting in liquidated damages of $37,888. Discussions with the
      investors and a proposal to pay with either (1) cash or (2) a payment in kind,
      in the same manner defined as a payment-in-kind (“PIK”) payment in the
      convertible note, using unregistered shares, has been consummated, with a
      majority of the investors accepting a PIK payment for the liquidated damages.
      While the majority of the investors agreed to the issuance of unregistered
      stock, $1,875 has been paid in cash and 11,778 shares were issued to the
      investors in the February of 2007.





***Registration
      Rights Agreement - to file with the SEC within 30
      days***





By
      the
      terms of the Registration Rights Agreement (“RRA”) Article 2.b. between the
      investors and the Company, the registration statement was required to be filed
      on December 27, 2006.  In as much as the audit for the Company was not
      completed at such date, due to complexities in the merger, multiple company
      subsidiary considerations and the adoption of a September 30, 2006 fiscal year,
      the filing was delayed, and the Company’s failure to meet the deadline, defined
      in the RRA as an “Event”, resulted in the Company being required to pay the
      investors 2% of their aggregate investment of $15,155,000 or $303,100.





An
      amendment to the RRA was agreed upon on January 25, 2007 by a majority of the
      investors which allowed the Company to pay such majority of investors liquidated
      damages for future Events through April 28, 2007 with either (1) cash or (2)
      a
      payment in kind, in the same manner defined as a PIK payment in the convertible
      note, using unregistered shares.





With
      a
      majority of the investors agreeing to the issuance of unregistered stock, the
      $303,100 liquidated damages were paid with $25,020 in cash and 90,883 shares
      in
      the February of 2007, using a stock price of $3.06, which was 90% of the
      volume-weighted-average-price (VWAP) of the common stock for the ten trading
      days immediately prior to the Event date.




***Registration
      Rights Agreement - requirement for the shares to be
      registered***





By
      the
      terms of the RRA Article 2.b.iv, as amended on January 25, 2007, between the
      investors and the Company, the registration statement must be declared effective
      by the Commission within 120 calendar days following the date of the merger.
      The
      merger was consummated on November 27, 2006, which required that the shares
      be
      effective on March 27, 2007. The Company filed the registration statement to
      register the shares on January 27, 2007, however the SEC had not completed
      its
      review by March 27, 2007 and another Event of $303,100 was
      triggered.





While
      the
      majority of the investors agreed to the issuance of unregistered stock, $25,020
      was paid in cash and 104,572 shares were issued to the investors in March,
      using
      a stock price of $2.66, which was 90% of the volume-weighted-average-price
      (VWAP) of the common stock for the ten trading days immediately prior to the
      Event date.





In
      April,
      the liquidated damages were paid $25,020 in cash and 121,413 shares of
      unregistered common stock, using a stock price of $2.29, which was 90% of the
      volume-weighted-average-price (VWAP) of the common stock for the ten trading
      days immediately prior to the Event date. In addition, as of March 31, 2007
      we
      accrued an additional $757,750 in liquidated damages, based on our then current
      probability-weighted assessment of the timing of the registration of the
      shares.





Despite
      our efforts, the SEC has rejected the size of our registration as a secondary
      offering; specifically, the SEC has rejected the current registration of all
      shares underlying the investor documents and we have suspended all registration
      efforts. Accordingly,
      during the three month period ended June 30, 2007 we expensed $2,273,250
      bringing our recognized liquidated damages up to the maximum liquidated damages
      of 24% of the private placement issuance of $15,155,000 or $3,637,200. $303,100
      was expensed in the fiscal year ended September 30, 2006 and $3,334,100 has
      been
      expensed in the nine month period ended June 30, 2007.




11




**8.
      Restructuring Expenses and Discontinued Operations**





In
      May
      2007, the Board of Directors engaged investment advisors to assist in developing restructuring
      alternatives, including marketing for sale, all or substantially
      all of CrossPoint’s assets or CrossPoint stock to a third party or the
      merger or consolidation of CrossPoint with a third party. In late May, the
      Board
      of Directors authorized a plan to reduce G&A and terminate the employment of
      a majority of the Company’s personnel, commence marketing efforts for the
      Company’s oil and gas properties with an authorization to market for sale
      Elkhart, Hoskins and Waskom properties, to market for sale the company’s office
      furniture and fixtures and to sublease the Company’s office space. The lenders
      to the Company’s senior debt agreed to continue to fund certain operations in
      exchange for termination of the lenders’ agreement upon sale of the
      aforementioned properties and an exit fee of $262,500. As a result of the
      restructuring plan, the Company recorded a restructuring expense during the
      three and nine month periods ended June 30, 2007 as follows:




Severance
                pay
            
            $
            95,466Lender
                exit fee to fund operations through restructure
            
            
            262,500Recognition
                of debt discount on Note Payable due to acceleration of due
                date
            
            
            251,918Advisors
                to the restructure
            
            
            50,000Legal
                fees related to the restructure
            
            
            94,320Prepaid
                office rent from warrants issued in 2005
            
            
            29,545Reversal
                of deferred rent
            
            
            (63,433
            )Impairment
                of office furniture & fixtures
            
            
            68,777Total
            
            $
            789,093





Each
      of
      the properties currently being marketed represents a field area and in
      accordance with SFAS No. 144, the results of operations relating to
      Elkhart, Hoskins and Waskom properties have been reflected as discontinued
      operations in the accompanying statements of operations. Considering our current
      marketing plans, we reviewed the individual carrying values of each of the
      properties held for sale and determined that the book value exceeded estimated
      fair value for two of the properties. Included in the loss from discontinued
      operations is an impairment charge of $2,931,812 to write down the carrying
      value of two of the properties to estimated net realizable value.





The
      following table shows the total revenues and expenses included in discontinued
      operations for the above mentioned oil and gas properties for the three and
      nine
      month periods ended June 30, 3007 and 2006:




Three
                Months Ended June 30,
            
            Nine
                Months Ended June 30,2007
            
            2006
            
            2007
            
            2006Revenues
            
            $
            563,038
            
            $
            489,070
            
            $
            1,505,386
            
            $
            1,019,067Expenses:Lease
                operating
              Production
                and ad valorem taxes
            
            
            156,565
            
            
            144,718
            
            
            453,358
            
            
            366,755Dry
                hole and abandonment
            
            
            2,229
            
            
            –
            
            
            566,067
            
            
            –Impairment
            
            
            2,931,812
            
            
            –
            
            
            2,931,812
            
            
            –Depreciation,
                depletion and amortization
            
            
            393,813
            
            
            191,013
            
            
            1,214,909
            
            
            270,997Accretion
                of asset retirement obligation
            
            
            5,979
            
            
            –
            
            
            17,936
            
            
            –Total
                Expenses
            
            
            3,490,398
            
            
            335,731
            
            
            5,184,082
            
            
            637,752Income
                (Loss) from discontinued operations
            
            $
            (2,927,360
            )
            $
            153,339
            
            $
            (3,678,696
            )
            $
            381,315




12




No
      taxes
      have been provided on the discontinued operations because the Company was as
      a
      pass-through tax entity in 2006 and the properties generated losses in 2007
      Any
      deferred tax asset is fully reserved.





**9.
      Commitments and Contingencies**





***Litigation***





The
      Company has had no litigation since inception. However, the Company may be
      subject to various claims or legal actions arising in the normal course of
      business. Management does not believe the resolution of such matters would
      have
      a material adverse effect on the Company’s financial position or results of
      operations.





***Environmental***





To
      date,
      expenditures to comply with environmental or safety regulations have not been
      significant and are not expected to be significant in the future. However,
      new
      regulations, enforcement policies, claims for damages or other events could
      result in significant future costs.





***Capital
      Development Plan***





Other
      than our commitments on the Elkhart property, we have suspended all of our
      exploration and development activities.




***Operating
      leases***




The
      Company had an office lease agreement with unrelated third parties extending
      through 2010. The Company's rent expense was $95,622 for the nine months ended
      June 30, 2007, which includes cash expenditures of $103,442. Considering the
      financial condition of the Company, we are seeking to sublease or terminate
      the
      office lease agreement.





***Employment
      Contracts***




Effective
      with the merger, new employment contracts were signed. The salaries were changed
      to reflect salaries of $195,242 and $189,132 for the Chief Executive Officer
      and
      President and Executive Vice President, respectively, with the same salary
      and
      bonus reviews by the board as previously discussed. The term of both contracts
      was five years. Effective January 1, 2007, a five percent cost of living and
      merit increase was approved, adjusting the salaries to $205,004 and $198,589,
      respectively.





With
      the
      restructure, both of the aforementioned contracts were cancelled and replaced
      with new agreements. In
      accordance with the new agreements, the Executive Vice President resigned as
      of
      May 31, 2007 and received one month’s salary. The Chief Executive Officer and
      President will continue his employment as CrossPoint’s President and Chief
      Executive Officer until his resignation or his termination by CrossPoint’s Board
      of Directors. Any resignation by him or termination of his employment by
      CrossPoint’s Board of Directors will be effective 30 days after written notice
      by him of his resignation or written notice by the CrossPoint Board of Directors
      of his termination of employment, or by other mutual agreement. Until his
      employment is terminated pursuant to the new agreement, he will continue to
      receive his prior base salary and the same employee benefits as former
      CrossPoint employees. Upon his execution of a release of claims and his
      reasonable assistance in transitioning of a new President and Chief Executive
      Officer, if any, he will receive the a retention payment of three months salary.




13




In
      June
      2007, the Board of Directors authorized the payment of a retention bonus to
      the
      Controller, Principal Financial Officer and Secretary, of $25,000 in
      consideration of retaining her services until her resignation effective July
      23,
      2007.





***Indemnification
      Agreement***




The
      Chief
      Executive Officer and President and Executive Vice President (together with
      their spouses) had personally guaranteed P5 operator guaranty for all of the
      CrossPoint LLC's wells with the Texas Railroad Commission. On February 15,
      2006,
      the CrossPoint LLC and the aforementioned parties entered into an
      indemnification agreement whereby the CrossPoint LLC will indemnify the
      aforementioned parties if the Texas Railroad Commission pursues collection
      of
      any amounts for any of them under such guaranties. No limit was specified with
      the indemnifications.





**10.
      Stockholders' Deficit**





***Compensation
      expense for options and warrants***





Warrants




In
      October 2006 a member of the Board of Directors of CrossPoint LLC resigned
      in
      anticipation of the merger and, as a result, forfeited a total of 858,710
      warrants of which 214,678 were vested. In accordance with SFAS 123(R), the
      Company reversed previously recognized compensation expense of $216,583 during
      the nine month period ended June 30, 2007 since the Board member had not
      served through the initial vesting period.





The
      Chairman of the Board resigned in October, in anticipation of the merger with
      a
      publicly traded company. In accordance with SFAS 123(R), the Company expensed
      $9,992 for his service in October 2006. He had previously been issued
      shares for the entire year of 2006.  Effective with his resignation, the
      Board agreed to compensate him for his services for January - October 2006.
      Accordingly, 17,604 shares were returned to the Company.





Options





On
      March 29, 2006 an employee of the CrossPoint LLC received 88,019 options to
      purchase shares at an exercise price of $1.14. CrossPoint LLC had a stock option
      plan for management which terminated with the merger on November 27, 2006.
      As of
      date of the merger, 836,178 options had been granted, 278,711 options had vested
      and none had been exercised. The options outstanding under the plan had a
      weighted average remaining contractual life of 3.56 years. Pursuant to the
      merger, the plan for the aforementioned options terminated.  The
      Company reversed previously recognized compensation expense of $21,188 in
      conjunction with the forfeited options.





As
      of
      June 30, 2007 the Company has not granted any equity awards.





**11.
      Related Party Transactions**





The
      Chief
      Executive Officer and President and Executive Vice President (together with
      their spouses) had personally guaranteed a subsidiary of the Company's P5
      operator guaranty for all of the Company's wells with the Texas Railroad
      Commission. On February 15, 2006, the parties entered into an indemnification
      agreement with the Company whereby the Company will indemnify the parties if
      the
      Texas Railroad Commission pursues collection of any amounts for any of them
      under such guaranties.





The
      Chief
      Executive Officer and President and Executive Vice President are individual
      working interest owners in certain production properties. Joint interest
      receivables from related parties at June 30, 2007 were $733.





The
      Chairman of the Board had previously guaranteed the Company's office lease.
      In
      November, the lease guaranty was renegotiated and the Chairman of the Board
      was
      released from all associated liability. There were no fees paid related to
      that
      guaranty in the nine months ended June 30, 2007.





Effective
      January 1, 2007, J.W. Brown, the general partner of AJAE Limited Partnership,
      became a director of the Company. As a director, he receives the same
      compensation as each other outside director: (i) $1,000 per meeting attended,
      (ii) $40,000 annually in stock options; and (iii) $10,000 in stock options
      annually if he serves as Chairman of the Board of Directors, a member of any
      committee or as the audit committee financial expert. In addition, Mr. Brown
      owns a 2.85% working interest in the Elkhart leases in which the Company owns
      a
      40.375-43.275% working interest.




14


In
      May
      2007, we entered into a Letter Agreement with Energy Capital Solutions (“ECS”),
      pursuant to which ECS will act as a financial advisor to assist us in seeking
      restructuring alternatives, including the sale of all or substantially
      all of our assets or CrossPoint stock to a third party or the merger or
      consolidation of the Company with a third party. ECS previously served as our
      financial advisor in the first half of 2006 to pursue an equity offering and
      a
      reverse merger that resulted in a $15 million private placement in mid-2006
      and
      a reverse merger in November 2006. ECS currently owns 2% of our outstanding
      stock and holds a convertible note in the principal amount of $630,875. In
      accordance with the terms of the agreement, ECS will receive $15,000 per month
      in advisory fees.





Also
      in
      May 2007, we entered into a Letter Agreement with Venn Capital Advisors, L.P.,
      (“Venn Capital”), to provide us with strategic financial advisory services in
      evaluating the aforementioned restructuring alternatives. One of the co-founders
      and principals of Venn Capital Advisors is Ross Welgehausen, who is a CrossPoint
      director. In accordance with the terms of the agreement, Venn Capital will
      receive a fee of $10,000 per month.




**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATIONS**





*The
      following discussion and analysis should be read in conjunction with the
      consolidated financial statements and related notes included elsewhere in this
      Report on Form 10-QSB. This discussion contains forward-looking statements
      reflecting our current expectations and estimates and assumptions concerning
      events and financial trends that may affect our future operating results or
      financial position. Actual results and the timing of events may differ
      materially from those contained in these forward-looking statements due to
      a
      number of factors.*





On
      November 27, 2006, CrossPoint LLC merged with CrossPoint Acquisition, LLC,
      a
      wholly owned subsidiary of Electrum formed for the sole purpose of acquiring
      CrossPoint LLC. CrossPoint Acquisition, LLC survived the Merger and became
      the
      sole owner of CrossPoint Energy Holdings, LLC and Dallas Operating Corp. At
      the
      time of the merger, Electrum was a public company with limited operations.
      After
      the Merger, Electrum changed its name to CrossPoint Energy
      Company.





The
      Merger was accounted for as a reverse merger with CrossPoint LLC deemed to
      be
      the accounting acquirer and we were the legal acquirer. Accordingly, the
      historical financial information presented herein is that of CrossPoint LLC.
      The
      basis of the assets, liabilities and equity of CrossPoint LLC, the accounting
      acquirer, has been carried over in the Merger.




**Overview
      & Recent Developments**





We
      are a
      natural gas and petroleum exploration, development and production company. During
      the nine month period ended June 30, 2007, we have experienced drilling and
      completion delays, well cost over-runs, dry holes and significant costs for
      SEC
      compliance and liquidated damages penalties for failure to meet SEC registration
      and filing requirements. We have a history of losses and limited liquidity
      and
      we have suspended interest payments on our convertible notes. Despite our
      efforts, the SEC has rejected the size of our registration as a secondary
      offering; specifically, the SEC has rejected the current registration of all
      shares underlying the investor documents.  At this time, we have suspended
      all efforts to register the stock.





We
      are
      seeking to restructure to allow us to re-capitalize, reduce debt and seek other
      venues for the Company.  We have engaged ECS and Venn Capital as
      financial advisors to assist us in seeking strategic restructuring
      alternatives, including the marketing of all or substantially all of our assets.
      To preserve cash, we have suspended all new drilling and exploration activities,
      transferred the operatorship of one of our properties, and have terminated
      the
      employment of the majority of our staff. As of August 15, 2007, two full-time
      employees, one part-time employee and one contract employee remain to assist
      in
      our restructuring. With the reduction in staff, we have discontinued the
      operational contract services that we previously provided. Subsequent to June
      30, 2007 we have made an offer to a third party to assume our office lease
      and
      purchase the majority of our office furniture and fixtures.





In
      May
      2007, our Board of Directors authorized management and our financial advisors
      to
      commence the process of marketing our Elkhart, Hoskins and Waskom properties
      for
      sale. As a result, we have reclassified these properties and the associated
      asset retirement obligations to assets held for sale and obligations associated
      with assets held for sale, respectively, and reclassified current and historical
      results of operations of these properties to discontinued operations. The
      remainder of our properties, which include one marginally producing property
      and
      three prospect areas, may be sold or retained by the company, depending on
      restructuring alternatives and market conditions. Considering the current
      financial condition of the company, we evaluated our oil and gas properties
      held
      for sale and our other oil and gas properties for potential impairment and
      recorded an impairment of $3.3 million ($2.9 million relating to discontinued
      operations) and recorded a restructuring expense of $0.8 million in the current
      period.




15




While
      there can
      be no assurance, we anticipate at the completion of our restructuring we may
      continue to own one marginally producing property and certain non-producing
      oil
      and gas prospects and we will have a limited staff.





We
      recorded a loss from continuing operations of $8.3 million and a net loss of
      $12.0 million for the nine months ended June 30, 2007 and had an accumulated
      deficit at June 30, 2007 of $21.7 million. Our results of operations for the
      three and nine month periods ended June 30, 2007 included the aforementioned
      oil
      and gas properties impairment and restructuring expenses and an expense for
      liquidated damages. Our convertible debt and private placement of our stock
      were
      issued with registration rights agreements which required us to register all
      the
      common shares and all the common shares underlying the conversion features
      in a
      secondary offering in a timely manner or we could be assessed penalties up
      to
      24% of the private issuance of $15,155,000 in June 2006. Since we have suspended
      attempting to register the shares from the private placement, due to the SEC
      disallowing the current registration of all such common shares, we have accrued
      for the full 24%, as further described in Note 7 “Liquidated Damages”.





Considering
      the amount of debt owed and the value of our assets, it is unknown if the
      existing common shareholders will receive any value for their shares. The
      financial statements do not include adjustments relating to the recoverability
      and classification of recorded assets, or the amounts and classifications of
      liabilities that might be necessary in the event the Company cannot continue
      as
      a going concern.





**Liquidity
      and Capital Resources**





***Cash
      Flows***





At
      June
      30, 2007 we had $89,059 in cash and cash equivalents, which is a decrease of
      $953,651 from the balance of $1,042,710 at March 31, 2007 and is a decrease
      of
      $5,984,239 from the balance of $6,073,298 at September 30, 2006.




Historically,
      our cash receipts from sales of oil and gas have been insufficient to cover
      our
      cash expenses. During the nine month period ended June 30, 2007 net cash used
      in
      operations was $3,361,318. Our cash expenses primarily include lease operating
      expenses, production and ad valorem taxes, contract services and general and
      administrative expenses.





During
      the nine month period ended June 30, 2007, we spent $4,862,311 principally
      on
      the development of our oil and gas properties. Our 2007 operating cash flow
      shortfall and our capital expenditure program were funded in part from net
      proceeds of $13,643,660 from our June 2006 private placement and an additional
      $2,476,806 from borrowings under our credit agreement. We used $8,690,505 of
      the
      proceeds received in the private placement to repay part of our outstanding
      credit agreement indebtedness. During the nine months ended June 30, 2006 we
      spent $8,758,507 principally on acquisitions of oil and gas properties. During
      the nine months ended June 30, 2006 our operating cash shortfall and investing
      activities was funded by sale of shares and long-term borrowings under our
      credit agreement.





***Financing
      and Investing Activities during the Nine-Month Period Ended June 30,
      2007***




*Credit
      Agreement*





On
      September 2, 2005, we entered into a three year $40.0 million credit agreement,
      or the Credit Agreement. Loans under the Credit Agreement may only be used
      to
      fund development projects approved by the lenders, to pay commitment fees and
      administrative expenses under the Credit Agreement, to pay legal fees incurred
      by the lenders and administrative agent and to fund the acquisition of
      additional oil and gas properties that have been approved by the lenders. Under
      the terms of the Credit Agreement, we request additional advances from our
      lenders based on presentment of a project plan.





Beginning
      June 30, 2006, the Company was subject to certain restrictive financial
      covenants that include debt coverage, fixed charge and current ratios, reserve
      ratios to total debt and net sales requirements. The Company was not in
      compliance with certain ratios at any time. The covenant violations have been
      waived and penalties paid as follows:




16




Three-month
              Period
                ended
            
            Cash
                Penalty
            
            Penalty
                added to DebtMarch
                31, 2006
            
            $
            –
            
            $
            125,000June
                30, 2006
            
            
            –
            
            
            –September
                30, 2006
            
            
            10,000
            
            
            –December
                31, 2006and
                March 31, 2007
            
            
            –
            
            
            75,000June
                30, 2007
            
            
            –
            
            
            75,000





The
        lenders under the Credit Agreement agreed to fund up to $525,000 for general
        and
        administrative expenses, of which $0 was borrowed as of June 30, 2007, and
        up to
        $ 532,875
        to complete certain oil and gas development operations, of which $497,378
        was
        borrowed as of June 30, 2007. In
        exchange for continuing to fund the operations of the Company through its
        restructuring, the Company agreed to pay the lenders an exit fee of $262,500
        and
        to grant the lenders an overriding royalty interest in the company’s oil and gas
        properties of 1 percent for each month after October 31, 2007 that the
        outstanding debt under the credit agreement is not paid in full. The exit
        fee
        was recorded as a component of the restructuring expense. (See Note 8
“Restructuring Expenses and Discontinued Operations”). The outstanding debt
        balance at June 30, 2007 of $7,137,008 under the Credit Agreement is
        reflected as a current liability in the consolidated financial
        statements.


Proceeds
      from the sale of our oil and gas properties are required to be used to repay
      outstanding amounts due under the Credit Agreement. At June 30, 2007, the
      unamortized discount of $251,918 was expensed as a component of restructuring
      expenses.





During
      the nine months ended June 30, 2007 and the nine months ended June 30, 2006,
      under the Credit Agreement we paid the lenders interest expenses of $566,622
      and
      $677,113, respectively, and fees of $15,000 and $15,000, respectively.





Convertible
      Notes


As
      of
      June 30, 2007, we had $8.1 million of convertible notes outstanding. Each
      convertible note accrues interest at a rate of 8% per annum and has a maturity
      date of June 30, 2009. Each convertible note is convertible into shares of
      our
      common stock at a conversion price of $1.75 per share, subject to adjustment
      for
      stock splits, stock dividends, subsequent equity sales at a price per share
      lower than the conversion price and other similar transactions.





The
      interest is payable quarterly. Prior to December 31, 2007, we may pay the
      interest on the convertible note in the form of shares of registered common
      stock. In addition, at any time prior to the maturity date of each convertible
      note and so long as we have on file an effective registration statement covering
      the resale of the shares of registered common stock underlying the convertible
      note, we may prepay the convertible notes, in whole and not in part, by payment
      of 110% of the principal amount then outstanding.





No
      payments of principal are due until June 30, 2009.





The
      Company paid interest due from the convertible note, for the period from June
      30, 2006 to March 31, 2007. The convertible note provided for the election
      of
      the Company to issue registered common stock in lieu of cash through December
      31, 2007. Due to the circumstances surrounding the registration of the Company’s
      common stock, registered shares were not available. The Company opted to issue
      unregistered shares as an alternative. For the interest due for the three month
      period ended December 31, 2006, the Company calculated the number of shares
      using 90% of the volume weighted average price, or $3.06/share. While the
      majority of the investors agreed to the issuance of unregistered stock,
      $17,985 was paid in cash and 118,781 shares were issued to the investors in
      the
      first week of January 2007. Initially the interest was paid and accepted 100%
      in
      shares, however 2 investors required cash payments. Their certificates for
      5,879
      shares have been repurchased for cash and are recorded as treasury stock at
      June
      30, 2007. For the interest payable during the three month period ended March,
      31, 2007, the Company again opted to issue unregistered shares and calculated
      the number of shares using 90% of the volume weighted average price, or
      $2.66/share. In April 2007, the Company issued 58,052 shares as payment of
      interest for the three period ended March 31, 2007. In August 2007, the Company
      was notified that convertible note holders that received 19,148 of the shares
      issued in April 2007 would not accept such shares as the interest payment for
      the three month period ended March 31, 2007. Such shares have not been returned
      to the Company.





For
      the
      three month period ended June 30, 2007, the Company has not paid the interest
      due of $178,773. While the Company has not been formally notified, failure
      to
      pay interest when due is an event of default under the convertible notes and
      the
      note holders may accelerate the convertible notes at their option. As a result,
      we have reclassified the convertible notes to current liabilities.





17





***Capital
      Resources***





At
      this
      time, the cash flow from our oil & gas properties is not sufficient to cover
      operations and we have used the available equity from the private placement
      in
      our capital development program. We have engaged financial advisors to assist
      us
      in seeking strategic restructuring alternatives, including the marketing of
      all
      or substantially all of our assets. We have suspended all new exploration and
      development activities pending completion of our restructuring.  In
      May
      2007, our Board of Directors authorized management and our financial advisors
      to
      commence the process of marketing our oil and gas properties with an
      authorization to market for sale our Elkhart, Hoskins and Waskom properties. The
      lenders under the Credit Agreement agreed to fund up to $525,000 for general
      and
      administrative expenses, of which $0 was borrowed as of June 30, 2007, and
      up to
      $ 532,875
      to complete certain oil and gas development operations, of which $497,298 was
      borrowed as of June 30, 2007 .





***Properties
      of the Company***





We
      have
      suspended all new exploration and development activities and are currently
      completing our commitments to drill three wells on the Elkhart property until
      the property can be sold.




The
      table
      below summarizes the Company's areas of operations, including the number of
      gross and net wells as of June 30, 2007.  The Hoskins, Elkhart and Waskom
      properties are classified as assets held for sale.




**Completed
                / Productive****Field**
            
            
            **Oil**
            
            
            **Gas**
            
            
            **Pending
                Completion or Recompletion**
            
            
            **Currently**
              **Drilling**
            
            
            **Dry**
              **Hole**
            
            
            **Total****Operated
                wells**Hoskins
            
            
            4
            
            
            0
            
            
            0
            
            
            0
            
            
            1
            
            
            5Waskom
            
            
            0
            
            
            2
            
            
            0
            
            
            0
            
            
            0
            
            
            2Humber
            
            
            1
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            1**Total
                operated wells**
            
            
            **5**
            
            
            **2**
            
            
            **0**
            
            
            **0**
            
            
            **1**
            
            
            **8****Non-operated
                wells**Elkhart
            
            
            0
            
            
            2
            
            
            3
            
            
            0
            
            
            0
            
            
            5Hoskins
            
            
            2
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            2NW
                Vienna
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            2
            
            
            2**Total
                non-operated wells**
            
            
            **2**
            
            
            **2**
            
            
            **3**
            
            
            **0**
            
            
            **2**
            
            
            **9****Total
                wells (gross)**
            
            
            **7**
            
            
            **4**
            
            
            **3**
            
            
            **0**
            
            
            **3**
            
            
            **17**




***Capital
      Development Plan***





Other
      than our commitments on the Elkhart property, we have suspended all of our
      exploration and development activities.





**Results
      of Continuing Operations**





***Overall***





For
      the
      nine months ended June 30, 2007, the Company had a loss from continuing
      operations of $8,292,878, compared to the $1,942,365 loss for the same period
      ended June 30, 2006. The loss from continuing operations for the three months
      ended June 30, 2007 was $4,795,888, compared to a loss of $574,284 for the
      same
      period ended June 30, 2006.




18




**Nine
                months ended June 30,**
            
            **Increase
                / (Decrease)****2007**
            
            **2006**
            
            **$**
            
            **%**OPERATING
                REVENUES:Crude
                oil & natural gas sales
            
            $
            3,879
            
            $
            13,238
            
            $
            (9,359
            )
            
            (71
            %)Contract
                services revenue
            
            
            499,792
            
            
            551,398
            
            
            (51,606
            )
            
            (9
            %)Total
                operating revenues
            
            
            503,671
            
            
            564,636
            
            
            -60,965
            
            
            (11
            %)**OPERATING
                EXPENSES:**Lease
                operating expenses
            
            
            5,472
            
            
            10,376
            
            
            (4,904
            )
            
            (47
            %)Production
                and ad valorem taxes
            
            
            224
            
            
            812
            
            
            (588
            )
            
            (72
            %)Dry
                hole & abandonment expenses
            
            
            3,945
            
            
            -
            
            
            3,945
            
            
            -Impairment
                of oil & gas properties
            
            
            385,524
            
            
            -
            
            
            385,524
            
            
            -Depreciation,
                depletion and amortization
            
            
            340,719
            
            
            34,147
            
            
            306,572
            
            
            898
            %Accretion
                of asset retirement obligations
            
            
            1,350
            
            
            -
            
            
            1,350
            
            
            -Contract
                services expense
            
            
            300,843
            
            
            323,373
            
            
            (22,530
            )
            
            (7
            %)General
                and administrative expenses
            
            
            2,536,092
            
            
            1,812,697
            
            
            723,395
            
            
            40
            %Restructure
                expenses
            
            
            789,093
            
            
            -
            
            
            789,093
            
            
            -Total
                operating expenses
            
            
            4,363,262
            
            
            2,181,405
            
            
            2,181,857
            
            
            100
            %**OPERATING
                LOSS**
            
            $
            (3,859,591
            )
            $
            (1,616,769
            )
            $
            (2,242,822
            )
            
            139
            %








**Threemonths ended June 30,**
            
            **Increase
                / (Decrease)****2007**
            
            **2006**
            
            **$**
            
            **%**OPERATING
                REVENUES:Crude
                oil & natural gas sales
            
            $
            607
            
            $
            4,499
            
            $
            (3,892
            )
            
            (987
            %)Contract
                services revenue
            
            
            90,110
            
            
            239,710
            
            
            (149,600
            )
            
            (62
            %)Total
                operating revenues
            
            
            90,717
            
            
            244,209
            
            
            (153,492
            )
            
            (63
            %)**OPERATING
                EXPENSES:**Lease
                operating expenses
            
            
            3,181
            
            
            2,634
            
            
            547
            
            
            21
            %Production
                and ad valorem taxes
            
            
            45
            
            
            229
            
            
            (184
            )
            
            (80
            %)Dry
                hole & abandonment expenses
            
            
            590
            
            
            -
            
            
            590Impairment
                of oil & gas properties
            
            
            385,524
            
            
            -
            
            
            385,524Depreciation,
                depletion and amortization
            
            
            92,606
            
            
            9,697
            
            
            82,909
            
            
            855
            %Accretion
                of asset retirement obligations
            
            
            450
            
            
            -
            
            
            450Contract
                services expense
            
            
            52,455
            
            
            143,086
            
            
            (90,631
            )
            
            (63
            %)General
                and administrative expenses
            
            
            824,806
            
            
            515,284
            
            
            309,522
            
            
            60
            %Restructure
                expenses
            
            
            789,093
            
            
            -
            
            
            789,093Total
                operating expenses
            
            
            2,148,750
            
            
            670,930
            
            
            1,477,820
            
            
            220
            %**OPERATING
                LOSS**
            
            $
            (2,058,033
            )
            $
            (426,721
            )
            $
            (1,631,312
            )
            
            382
            %





19





***Operating
      Revenues***





Operating
      revenues decreased in the three and nine month periods ended June 30, 2007
      from
      the same periods in 2006 due to the decreased production associated with the
      Humber well and lower gas price realizations. The decrease in Contract services
      for the three and nine month periods ended June 30, 2007 as compared to the
      same
      periods in 2006 was due to the termination of our contract in May 2007.





The
      table
      below summarizes the oil and gas sales data for the nine-month periods ending
      June 30, 2007 and 2006 and the three-month periods ending June 30, 2007 and
      2006:




**Continuing
                Operations**
            
            
            **Nine
                months ended June 30,**
            
            
            **Increase
                /****2007**
            
            
            **2006**
            
            
            **(Decrease)**Operating
                revenues
            
            $
            3,879
            
            $
            13,238
            
            $
            (9,359
            )SalesOil
                (Bbls)
            
            
            37
            
            
            122
            
            
            (85
            )Gas
                (Mcf)
            
            
            249
            
            
            362
            
            
            (113
            )Total
                (BOE)
            
            
            78
            
            
            182
            
            
            (104
            )Average
                PriceOil
                ($/Bbl)
            
            $
            61.88
            
            $
            61.55
            
            $
            0.33Gas
                ($/Mcf)
            
            $
            6.48
            
            $
            7.58
            
            $
            (1.10
            )




**Discontinued
                Operations**
            
            
            **Nine
                months ended June 30,**
            
            
            **Increase
                /****2007**
            
            
            **2006**
            
            
            **(Decrease)**Operating
                revenues
            
            $
            1,505,386
            
            $
            1,019,067
            
            $
            486,319SalesOil
                (Bbls)
            
            
            12,095
            
            
            8,848
            
            
            3,247Gas
                (Mcf)
            
            
            150,799
            
            
            66,291
            
            
            84,508Total
                (BOE)
            
            
            37,228
            
            
            19,897
            
            
            17,331Average
                PriceOil
                ($/Bbl)
            
            $
            57.39
            
            $
            63.65
            
            $
            (6.26
            )Gas
                ($/Mcf)
            
            $
            6.22
            
            $
            6.88
            
            $
            (0.66
            )




**Continuing
                Operations**
            
            
            **Three
                months ended June 30,**
            
            
            **Increase
                /****2007**
            
            
            **2006**
            
            
            **(Decrease)**Operating
                revenues
            
            $
            607
            
            $
            4,499
            
            $
            (3,892
            )SalesOil
                (Bbls)
            
            
            0
            
            
            55
            
            
            (55
            )Gas
                (Mcf)
            
            
            89
            
            
            117
            
            
            (28
            )Total
                (BOE)
            
            
            15
            
            
            74
            
            
            (59
            )Average
                PriceOil
                ($/Bbl)
            
            $
            0.00
            
            $
            68.43
            
            $
            (68.43
            )Gas
                ($/Mcf)
            
            $
            6.83
            
            $
            6.38
            
            $
            0.45




**Discontinued
                Operations**
            
            
            **Three
                months ended June 30,**
            
            
            **Increase
                /****2007**
            
            
            **2006**
            
            
            **(Decrease)**Operating
                revenues
            
            $
            563,038
            
            $
            489,070
            
            $
            73,968SalesOil
                (Bbls)
            
            
            2,871
            
            
            4,520
            
            
            (1,649
            )Gas
                (Mcf)
            
            
            58,175
            
            
            32,144
            
            
            26,031Total
                (BOE)
            
            
            12,566
            
            
            9,877
            
            
            2,690Average
                PriceOil
                ($/Bbl)
            
            $
            61.81
            
            $
            65.36
            
            $
            (3.55
            )Gas
                ($/Mcf)
            
            $
            6.63
            
            $
            6.03
            
            $
            0.60




20




***Operating
      Expenses***





The
      decrease in operating expenses for the nine month period ended June 30, 2007
      as
      compared to the same period in 2006 was attributable to a decrease in
      maintenance and repairs. The increase in the three month period ended June
      30,
      2007 as compared to the same period in 2006 was attributable to a general
      increase in oilfield service prices





As
      part
      of our strategic restructuring, we obtained indications of interest for all
      of
      our oil and gas interests and determined that the carrying value exceeded
      current market value. During the three and nine month period ended June 30,
      2007, we recorded an oil and gas property impairment of $385,524.





The
      increases in depreciation depletion and amortization during the three and nine
      month periods ended June 30, 2007 as compared to the same periods in 2006 was
      due to higher costs being depreciated in 2007








The
      general and administrative expenses have increased to $2,536,092, after a
      reversal of stock compensation expense of $227,779 from forfeited warrants
      and
      terminated options, for the nine months ended June 30, 2007, from $1,812,697
      for
      the nine months ended June 30, 2006 primarily to support the additional drilling
      activity and operations in early 2007. General and administrative expenses
      increased $309,522 from $515,284 for the three month period ended June 30,
      2006
      to $824,806 during the three month period ended June 30, 2007 due to additional
      personnel over the comparable period in 2006 prior to the termination of
      employment of the majority of our personnel. The components of general and
      administrative costs and the comparison between periods are as
      follows:




**Nine
                months ended June 30,**
            
            **Increase
                /****2007**
            
            **2006**
            
            **(Decrease)**General
                and administrative costsPersonnel
                expense
            
            
            466
            %
            
            59.9
            %
            
            (13.3
            )%Stock
                compensation expense reversal
            
            
            (9.0
            )%
            
            0.0
            %
            
            (9.0
            )%Professional
                services
            
            
            43.1
            %
            
            22.9
            %
            
            20.1
            %Facilities
            
            
            6.4
            %
            
            12.2
            %
            
            (5.8
            )%Operator
                overhead
            
            
            (5.5
            )%
            
            (3.9
            )%
            
            (1.6
            )%Insurance
            
            
            4.4
            %
            
            1.5
            %
            
            2.9
            %Penalties,
                fees and taxes
            
            
            14.1
            %
            
            7.4
            %
            
            6.7
            %Total
            
            
            100.0
            %
            
            100.0
            %
            
            -
            %




**Three
                Months ended June 30,**
            
            **Increase
                /****2007**
            
            **2006**
            
            **(Decrease)**General
                and administrative costsPersonnel
                expense
            
            
            41.1
            %
            
            58.0
            %
            
            (16.9
            )%Professional
                services
            
            
            22.3
            %
            
            25.4
            %
            
            (3.1
            )%Facilities
            
            
            6.3
            %
            
            11.8
            %
            
            (5.5
            )%Operator
                overhead
            
            
            (3.7
            )%
            
            (3.8
            )%
            
            0.0
            %Insurance
            
            
            1.7
            %
            
            1.4
            %
            
            0.3
            %Penalties,
                fees and taxes
            
            
            32.4
            %
            
            7.1
            %
            
            25.2
            %Total
            
            
            100.0
            %
            
            100.00
            %
            
            _
            %




21




***Interest
      income and expense***





In
      September 2005, the Company entered into the Credit Agreement to support
      CrossPoint LLC's capital development program. We incurred interest expense
      of
      $1,107,013 on this debt for the nine months ended June 30, 2007, compared to
      $339,877 for the nine months ended June 30, 2006. We incurred interest expense
      of $725,887 for the three month period ended June 30, 2007 as compared to
      interest expense of $56,426 in the comparable period of 2006. The Company
      capitalized $564,882 for the nine months ended June 30, 2007 and $547,411 for
      the nine months ended June 30, 2006. The Company capitalized $89,174 for the
      three months ended June 30, 2007 and $300,266 for the three months ended June
      30, 2006. The increase in the interest expense is due to the increase in the
      advances of $2,476,806 as we drilled more wells net of with the repayments
      of
      $219,431. The effective interest rate at June 30, 2007 was 13.75%. The
      balance of the note was $7,137,208 at June 30, 2007.





In
      connection with the private placement in June, 2006 of approximately $15
      million, CrossPoint LLC issued convertible debt at 8% interest per annum.
      Pursuant to the merger, the Company assumed the debt. The interest expense
      on
      the convertible debt was $536,319 for the nine months ended June 30, 2007 and
      $178,773 for the three month period ended June 30, 2007 and $0 for the
      comparable periods in 2006.





The
      remaining interest expense is the amortization of the capitalized interest
      and
      the debt discount on the two previously discussed debt instruments.




***Liquidated
      damages***





In
      connection with the June 2006 private placement, the Securities Purchase
      Agreement required payment of liquidated damages if the Company was not merged
      within 120 days of the private placement on June 30, 2006. The merger was
      consummated on November 27, 2006 which was outside the 120-day period resulting
      in liquidated damages of $37,888. Discussions with the investors and a
      proposal to pay with either (1) cash or (2) a PIK payment, in the same manner
      defined as a PIK payment in the convertible note, using unregistered shares,
      has
      been consummated with certain of the investors, with a majority of the investors
      accepting a PIK payment for the payment. While the majority of the investors
      agreed to the issuance of unregistered stock, $1,875 has been paid in cash
      and
      11,778 shares were issued to the investors in February of 2007.





By
      the
      terms of the RRA Article 2.b. between the investors and the Company, the
      Company's registration statement was required to be filed on December 27, 2006.
       In as much as the audit for the Company was not completed at such date,
      due to complexities in the merger, multiple company subsidiary considerations
      and the adoption of a September 30, 2006 fiscal year, the filing was delayed,
      and the Company’s failure to meet the deadline, defined in the RRA as an
“Event”, resulted in the Company being required to pay the investors 2% of their
      aggregate investment of $15,155,000 or $303,100.




22




An
      amendment to the RRA was agreed upon on January 25, 2007 by a majority of the
      investors which allowed the Company to pay liquidated damages to a majority
      of
      the investors for future Events through April 28, 2007 with either (1) cash
      or
      (2) a payment in kind, in the same manner defined as a PIK payment in the
      convertible note, using unregistered shares.





With
      a
      majority of the investors agreeing to the issuance of unregistered stock, the
      $303,100 liquidated damages were paid with $25,020 in cash and 90,883 shares
      in
      the February of 2007, using a stock price of $3.06, which was 90% of the
      volume-weighted-average-price (VWAP) of the common stock for the ten trading
      days immediately prior to the Event date.





By
      the
      terms of the RRA Article 2.b.iv, as amended on January 25, 2007, between the
      investors and the Company, the registration statement filed must be declared
      effective by the Commission within 120 calendar days following the date of
      the
      merger. The merger was consummated on November 27, 2006, which required that
      the
      shares be effective on March 27, 2007. The Company filed the registration
      statement to register the shares on January 27, 2007, however the SEC had not
      completed its review by March 27, 2007 and another Event of $303,100 was
      triggered.





While
      the
      majority of the investors agreed to the issuance of unregistered stock, $25,020
      was paid in cash and 104,572 shares were issued to the investors in March,
      using
      a stock price of $2.66, which was 90% of the volume-weighted-average-price
      (VWAP) of the common stock for the ten trading days immediately prior to the
      Event date.





In
      April,
      the liquidated damages were paid $25,020 was paid in cash and 121,413 shares
      of
      unregistered common stock, using a stock price of $2.29, which was 90% of the
      volume-weighted-average-price (VWAP) of the common stock for the ten trading
      days immediately prior to the Event date. In addition, as of March 31, 2007
      we
      accrued an additional $757,750 in liquidated damages based on our then current
      probability-weighted assessment of the timing of the registration of the
      shares.





Despite
      our efforts, the SEC has rejected the size of our registration as a secondary
      offering; specifically, the SEC has rejected the current registration of all
      shares underlying the investor documents and we have suspended all registration
      efforts. Accordingly,
      during the three month period ended June 30, 2007 we expensed $2,273,250
      bringing our recognized liquidated damages up to the maximum liquidated damages
      of 24% of the private placement issuance of $15,155,000 or $3,637,200. $303,100
      was expensed in the fiscal year ended September 30, 2006 and $3,334,100 has
      been
      expensed in the nine month period ended June 30, 2007.





**Restructure
      Expense**





In
      May
      2007, the Board of Directors engaged investment advisors to assist in developing restructuring
      alternatives, including marketing for sale, all or substantially
      all of CrossPoint’s assets or CrossPoint stock to a third party or the
      merger or consolidation of CrossPoint with a third party. In late May, the
      Board
      of Directors authorized a plan to reduce G&A and terminate the employment of
      a majority of the Company’s personnel, commence marketing efforts for the
      Company’s oil and gas properties with an authorization to market for sale
      Elkhart, Hoskins and Waskom properties, to market for sale the company’s office
      furniture and fixtures and to sublease the Company’s office space. The lenders
      the Company’s senior debt agreed to continue to fund certain operations in
      exchange for termination of the lenders’ agreement upon sale of the
      aforementioned properties and an exit fee of $262,500. As a result of the
      restructuring plan, the Company recorded a restructuring expense during the
      three and nine month periods ended June 30, 2007 as follows:




Severance
                pay
            
            $
            95,466Lender
                exit fee to fund operations through restructure
            
            
            262,500Recognition
                of debt discount on Note Payable due to acceleration of due
                date
            
            
            251,918Advisors
                to the restructure
            
            
            50,000Legal
                fees related to the restructure
            
            
            94,320Prepaid
                office rent from warrants issued in 2005
            
            
            29,545Reversal
                of deferred rent
            
            
            (63,433
            )Impairment
                of office furniture & fixtures
            
            
            68,777Total
            
            $
            789,093





Each
      of
      the properties currently being marketed represents a field area and in
      accordance with SFAS No. 144, the results of operations relating to
      Elkhart, Hoskins and Waskom properties have been reflected as discontinued
      operations in the accompanying statements of operations. Considering our current
      marketing plans, we reviewed the individual carrying values of each of the
      properties held for sale and determined that the book value exceeded estimated
      fair value for two of the properties. Included in the loss from discontinued
      operations is an impairment charge of $2,931,812 to write down the carrying
      value of two of the properties to estimated net realizable value.





The
      following table shows the total revenues and expenses included in discontinued
      operations for the above mentioned oil and gas properties for the three and
      nine
      month periods ended June 30, 3007 and 2006:




23




Three
                Months Ended June 30,
            
            Nine
                Months Ended June 30,2007
            
            2006
            
            2007
            
            2006Revenues
            
            $
            563,038
            
            $
            489,070
            
            $
            1,505,386
            
            $
            1,019,067Expenses:Lease
                operating
              Production
                and ad valorem taxes
            
            
            156,565
            
            
            144,718
            
            
            453,358
            
            
            366,755Dry
                hole and abandonment
            
            
            2,229
            
            
            –
            
            
            566,067
            
            
            –Impairment
            
            
            2,931,812
            
            
            –
            
            
            2,931,812
            
            
            –Depreciation,
                depletion and amortization
            
            
            393,813
            
            
            191,013
            
            
            1,214,909
            
            
            270,997Accretion
                of asset retirement obligation
            
            
            5,979
            
            
            –
            
            
            17,936
            
            
            –Total
                Expenses
            
            
            3,490,398
            
            
            335,731
            
            
            5,184,082
            
            
            637,752Income
                (Loss) from discontinued operations
            
            $
            (2,927,360
            )
            $
            153,339
            
            $
            (3,678,696
            )
            $
            381,315





No
      taxes
      have been provided on the discontinued operations because the Company was
      treated as a pass-through tax entity in 2006 and the properties generated losses
      in 2007.





We
      expect
      to complete the sale of the properties held for sale within the next 12 months
      at net proceeds that at are at least equal to the current book value. Any gains
      or additional losses as a result of the sale of the assets held for sale will
      be
      recognized when a sale is realizable or it becomes evident that an additional
      loss has been incurred.




***Equity***





The
      Company paid no dividends in nine months ended June 30, 2007 or in the nine
      months ended June 30, 2006.





CrossPoint
      LLC had a stock option plan for management which terminated with the merger
      on
      November 27, 2006. As of date of the merger, 836,178 options had been granted,
      278,711 options had vested and none had been exercised. The options outstanding
      under the plan had a weighted average remaining contractual life of 3.56 years.
      Pursuant to the merger, the plan for the aforementioned options terminated
      and
      $21,188 of stock compensation expense that had been expensed in 2006 was
      reversed. In addition, a board member who had received 858,710 warrants resigned
      from the board and forfeited 100% of his warrants before the first vesting
      period, resulting in a reversal of the previously expensed stock compensation
      expense of $216,583. Compensation expense of $9,992 was taken on the shares
      issued to the Chairman of the Board for his services in October 2006. He
      resigned in October and thus no additional expense was taken.




**ITEM
      3. CONTROLS AND PROCEDURES**





The
      Company's Chief Executive Officer (our principle executive officer and principle
      financial officer) conducted an evaluation of the Company's "disclosure controls
      and procedures" (as defined in Exchange Act Rules 13a-15(e) or 15d-15(e)) as
      of
      the end of the period covered by this report. Based on that evaluation, the
      Chief Executive Officer concluded that the Company's disclosure controls and
      procedures were effective as of the end of the period covered by this
      report.





There
      were no changes to our internal control over financial reporting during our
      last
      fiscal quarter that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting. Subsequent
      to
      June 30, 2007, we terminated the majority of our staff, including our controller
      and other accounting personnel and have hired a consulting firm to assist in
      our
      accounting and financial reporting areas.





24




**PART
      II - OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





The
      Company is currently not involved in any pending legal proceedings.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





***Interest
      payment on Convertible Note***





For
      the
      interest payable during the three month period ended March, 31, 2007, the
      Company issued unregistered shares and calculated the number of shares using
      90%
      of the volume weighted average price, or $2.66/share. In April 2007, the Company
      issued 154,630 shares as payment of interest for the three period ended March
      31, 2007. In August 2007, the Company was notified that convertible note holders
      that received 19,148 of the shares issued in April 2007 would not accept such
      shares as the interest payment due for the three month period ended March 31,
      2007. Such shares have not been returned to the Company.





***Registration
      Rights Agreement - requirement for the shares to be registered***





By
      the
      terms of the RRA Article 2.b.iv, as amended on January 25, 2007, between the
      investors and the Company, the registration statement filed must be declared
      effective by the Commission within 120 calendar days following the date of
      the
      merger. The merger was consummated on November 27, 2006, which required that
      the
      shares be effective on March 27, 2007. The Company filed a registration
      statement to register the shares on January 27, 2007, however the SEC had not
      completed its review by March 27, 2007 and another Event was
      triggered.





The
      majority of the investors agreed to the issuance of unregistered stock, which
      resulted in the issuance in April 2007 of 121,413 shares of unregistered common
      stock, using a stock price of $2.29, which was 90% of the
      volume-weighted-average-price (VWAP) of the common stock for the ten trading
      days immediately prior to the Event date of March 27, 2007.





The
      Company relied on Rule 506 of Regulation D and Section 4(2) of the Securities
      Act of 1933, as amended, for these issuances, which were to accredited
      investors. The Company did not engage in any public advertising or general
      solicitation in connection with the issuance of these shares of Company common
      stock.




**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





As
      of
      June 30, 2007 and subsequent to June 30, 2007, we have not paid interest due
      on
      our convertible notes which is an event of default under the convertible notes.
      Although, we have not been notified of any acceleration, the note holders have
      the right to accelerate the convertible notes.





As
      of
      June 30, 2007 we were in default under the Credit Agreement for failing to
      satisfy any of the financial covenants on our senior debt and for failing to
      deliver our reserve report on time. On August 15, 2007, but effective August
      13,
      2007 we entered into a waiver of the events of default from the lenders
      .





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





Not
      applicable.





**ITEM
      5. OTHER INFORMATION**





In
      April
      2007, the Board of Directors authorized management to develop a plan to effect
      the orderly termination of the employment of the majority of our personnel.
      With
      the exception of the Chief Executive Officer and President the Executive
      Vice President and the controller, employees received two weeks salary upon
      termination. The Executive Vice President resigned as of May 31, 2007 and
      received one month’s salary. The Chief Executive Officer and President will
      continue his employment as CrossPoint’s Chief Executive Officer and President
      until his resignation or his termination by CrossPoint’s Board of Directors. Any
      resignation by him or termination of his employment by CrossPoint’s Board of
      Directors will be effective 30 days after written notice by him of his
      resignation or written notice by the CrossPoint Board of Directors of his
      termination of employment, or by other mutual agreement. Until his employment
      is
      terminated pursuant to the new agreement, he will continue to receive his prior
      base salary and the same employee benefits as former CrossPoint employees.
      Upon
      his execution of a release of claims and his reasonable assistance in
      transitioning of a new President and Chief Executive Officer, if any, he will
      receive the a retention payment of three months salary. In June 2007, the Board
      of Directors authorized the payment of a retention bonus to the Controller,
      Principal Financial Officer and Secretary, of $25,000 in consideration of
      retaining her services until her resignation effective July 23, 2007.




25




On
      August
      15, but effective August 13, 2007, we entered into a waiver with the
      Administrative Agent under the Credit Agreement. This waiver waived certain
      violations by us under the Credit Agreement, including for failing to deliver
      a
      reserve report on a timely basis and for failure to comply with certain
      financial covenants and production volumes for the quarters ended March 31,
      2007
      and June 30, 2007. The waiver also ratified the increasing of the commitment
      by
      $532,875, of which $497,298 was previously provided by the lenders. In exchange
      for the waiver, we agreed to pay $75,000 which was added to the outstanding
      amount under the Credit Agreement, agreed to pay an exit fee of $262,500 and
      agreed that if the Credit Agreement is not terminated on or prior to October
      31,
      2007, each of the two lenders will obtain an overriding royalty interest of
      0.5%
      with respect to our oil and gas properties for each month after October 31,
      2007
      until the Credit Agreement is terminated.





**ITEM
      6. EXHIBITS**





**EXHIBIT
                NUMBER**
            
            **DESCRIPTION
                OF EXHIBITS**10.1
            
            Engagement
                Letter with Venn Capital Advisors, L.P. dated May 21, 2007.(1)10.2
            
            Agreement
                by and between CrossPoint Energy Company and Jeffrey A. Krakos dated
                May
                24, 2007.(2)10.3
            
            Agreement
                by and between CrossPoint Energy Company and Daniel F. Collins dated
                June
                21, 2007.(3)10.4
            
            Summary
                of Retention Agreement of Margaret Coughlin.(1)10.5
            
            Waiver
                letter by and between D.B. Zwirn Special Opportunities Fund, L.P.
                and
                CrossPoint Energy Company dated August 13, 2007.(1)31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification .(1)32.1
            
            Section
                1350 Certification.(1)





(1)
            Filed
                herewith.


(2)
            Incorporated
                by reference from Exhibit 10.1 to Current Report of CrossPoint Energy
                Company filed with the Securities and Exchange Commission on May
                29,
                2007.


(3)
            Incorporated
                by reference from Exhibit 10.1 to Current Report of CrossPoint Energy
                Company filed with the Securities and Exchange Commission on June
                26,
                2007.




26




**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized, on this 20th day of August,
      2007.




**CROSSPOINT
                ENERGY COMPANY**Date:August
              20, 2007
            By:
            /s/
              Daniel F. CollinsDaniel
              F. Collins, President and Chief Executive
              Officer




27