**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


_______________





**Form 10-KSB**





R
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**For
                the fiscal year ended December 31, 2007**OR**£
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**For
                the transition period from ________to ___**__**





**Commission
      File No. 000-29463**





**SONTERRA
      RESOURCES, INC.**


**(formerly
      known as River Capital Group, Inc.)**


*(Exact
      Name of Small Business Issuer as Specified in Its Charter)*





**Delaware**
            **51-0392750***(State
                or other jurisdiction of*
              *incorporation
                or organization)*
            *(I.R.S.
                Employer*
              *Identification
                Number)*





**300
      East Sonterra Blvd., Suite 1220**


**San
      Antonio, Texas 78258**


*(Address
      of principal executive offices, including zip code)*


**(210) 545-5994**


*(Issuer’s
      telephone number, including area code)*





**Securities
      registered pursuant to Section 12(b) of the Act:**





**Title
                of Each Class**
            **Name
                of Each Exchange on Which Registered**Common
                Stock, $0.001 par value
            OTC
                Bulletin Board





**Securities
      registered pursuant to Section 12(g) of the Act:**


None





Check
      whether the issuer is not required to file reports pursuant to Section 13
      or Section 15(d) of the Exchange Act. £





Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the preceding 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 R No £





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. £





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





The
      issuer did not have any revenues for fiscal year 2007.





The
      aggregate market value of the registrant’s common stock held by non-affiliates
      of the registrant (treating all directors, executive officers and 10%
      stockholders as if they may be affiliates of the registrant) was $2,885,147
      as
      of April 11, 2008 ,
      based
      on $2.24 per share, the closing sale price as reported on **** the
      OTC
      Bulletin Board on such date.





The
      registrant had 25,702,198 common shares outstanding as of April 11,
      2008.





**DOCUMENTS
      INCORPORATED BY REFERENCE:** **None**













**TABLE
      OF CONTENTS**





**Part
                I**
            
            
            **Page**Item 1.
            
            Description
                of Business
            1Item 2.
            
            Description
                of Property
            4Item 3.
            
            Legal
                Proceedings
            5Item 4.
            
            Submission
                of Matters to a Vote of Security Holders
            5**Part
                II**Item 5.
            
            Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchases of Equity Securities
            6Item 6.
            
            Management’s
                Discussion and Analysis or Plan of Operation
            7Item 7.
            
            Financial
                Statements
            10Item 8.
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            10Item 8A(T).
            
            Controls
                and Procedures
            10Item 8B.
            
            Other
                Information
            11**Part
                III**Item 9.
            
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(a) of the Exchange Act
            11Item 10.
            
            Executive
                Compensation
            13Item 11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            13Item 12.
            
            Certain
                Relationships and Related Transactions, and Director
                Independence
            14Item 13.
            
            Exhibits
            15Item 14.
            
            Principal
                Accountant Fees and Services
            15








**Forward-Looking
      Statements**




This
      Annual Report on Form 10-KSB contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. This Annual Report
      on
      Form 10-KSB includes statements regarding our plans, goals, strategies, intent,
      beliefs or current expectations. These statements are expressed in good faith
      and based upon a reasonable basis when made, but there can be no assurance
      that
      these expectations will be achieved or accomplished. These forward- looking
      statements can be identified by the use of terms and phrases such as “believe,”
“plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like,
      and/or future-tense or conditional constructions (“will,” “may,” “could,”
“should,” etc.). Items contemplating, or making assumptions about, actual or
      potential future sales, market size, collaborations, and trends or operating
      results also constitute such forward-looking statements.





Although
      forward-looking statements in this report reflect the good faith judgment of
      management, forward-looking statements are inherently subject to known and
      unknown risks, business, economic and other risks and uncertainties that may
      cause actual results to be materially different from those discussed in these
      forward-looking statements. Readers are urged not to place undue reliance on
      these forward-looking statements, which speak only as of the date of this Annual
      Report on Form 10-KSB. We assume no obligation to update any forward-looking
      statements in order to reflect any event or circumstance that may arise after
      the date of this report, other than as may be required by applicable law or
      regulation. Readers are urged to carefully review and consider the various
      disclosures made by us in our reports filed with the SEC which attempt to advise
      interested parties of the risks and factors that may affect our business,
      financial condition, results of operation and cash flows. If one or more of
      these risks or uncertainties materialize, or if the underlying assumptions
      prove
      incorrect, our actual results may vary materially from those expected or
      projected.





**PART I**





**Item 1.** ***Description
      of Business.***




**Overview**





We
      were
      incorporated in Florida on June 17, 1997, as Permastoprust International, Inc.
      We changed our name to Greystone Credit Inc. in June 1999. On August 4, 1999,
      we
      acquired whOOdoo.com, Inc., a Florida corporation incorporated on April 9,
      1999,
      in a share exchange. In connection with the share exchange, we changed our
      state
      of incorporation to Delaware and our name to whOOdoo.com, Inc. On July 17,
      2000,
      we changed our name to Ballistic Ventures, Inc. and on June 5, 2004, we changed
      our name to River Capital Group, Inc. We intended to establish and grow a core
      reinsurance business based on the development and acquisition of insurance
      and
      reinsurance assets and businesses. We were, however, unable to raise equity
      or
      debt capital in the public or private markets and abandoned our efforts to
      establish a reinsurance business.




On
          August
          3, 2007, we entered into a Securities Exchange and Additional Note Purchase
          Agreement (the “Securities Exchange Agreement”) with The Longview Fund, L.P.
          (“Longview”), our majority stockholder. Pursuant to and subject to the
          conditions of the Securities Exchange Agreement, we agreed to acquire all
          of the
          issued and outstanding equity and debt securities of Sonterra Resources,
          Inc.
          (“Old Sonterra”), an entity wholly owned by Longview, in exchange for our
          securities. On February 14, 2008, we consummated the transactions contemplated
          by the Securities Exchange Agreement and changed our name to Sonterra Resources,
          Inc. As part of the Securities Exchange Agreement (i) our 38,552,749 issued
          and
          outstanding shares of common stock were combined into 3,855,275 shares
          of common
          stock in a 1-for-10 reverse stock split and (ii) Longview exchanged all
          of its
          shares of common stock of Old Sonterra, a $5,990,010 equity note from Old
          Sonterra and a warrant to purchase 50 shares of Old Sonterra common stock
          for
          21,846,558 shares of our common stock and a warrant to purchase 4,958,678
          shares
          of our common stock. Longview also exchanged its $2,000,000 non-equity
          note from
          Old Sonterra for a senior secured note made by us in an equal principal
          amount.
          Following the closing of the Securities Exchange Agreement, Old Sonterra
          became
          our wholly owned subsidiary and changed its name to Sonterra Oil & Gas,
          Inc., and we began operating and developing the oil and gas properties
          owned by
          Old Sonterra, indirectly through Sonterra Operating, Inc., as described
          below.


1




Old
      Sonterra was incorporated in Delaware in April 2007 by Michael J. Pawelek,
      Wayne
      A. Psencik and Sherry L. Spurlock, who served as the executive management team
      of Old Sonterra, with the intention of becoming an independent oil and gas
      exploration and production company primarily engaged in the acquisition,
      exploration and development of oil and gas properties in the Texas Gulf Coast
      region. The properties and related assets of Old Sonterra constituted
      substantially all of the assets of Old Sonterra and, pursuant to the Securities
      Exchange, now constitute substantially all of our assets on a consolidated
      basis.





In
      September 2007, Old Sonterra formed a wholly owned subsidiary, Sonterra
      Operating, Inc., to act as the named operator of its oil and gas properties
      in
      Matagorda Bay located offshore the Texas coast. Through two acquisitions in
      August 2007, Old Sonterra assembled combined acreage of approximately 3,500
      gross (1,135 net) acres with the opportunity to explore for, develop and produce
      oil and natural gas in several prospects, an interest in two gross producing
      gas
      wells (a 54.75% aggregate net interest in the wells before payout and 51.55%
      aggregate net interest after payout), and a seven-mile pipeline that connects
      both of Old Sonterra’s current producing offshore wells to an onshore separation
      facility. In one acquisition, Old Sonterra purchased for approximately $5.0
      million cash 60% of the interests held by Cinco Natural Resources Corporation
      in
      the Texas State Tract 150 Wells No. 1 and No. 2 located in Matagorda Bay, Texas,
      as well as the 320-acre oil and gas lease related to those wells and certain
      other leases covering approximately 3,200 additional acres located in Matagorda
      Bay. In another acquisition, Old Sonterra purchased for approximately $1.2
      million cash all of the interests held by Flash Gas and Oil Southwest, Inc.
      in
      the Texas State Tract 150 Wells No. 1 and No. 2 and a seven-mile pipeline that
      connects the wells to the Keller Bay onshore facility located in Calhoun County,
      Texas. In December 2007, Old Sonterra acquired an additional 1,920 gross (960
      net) offset acres for one of the undrilled Matagorda Bay prospects. We
      have identified four additional drilling locations on the acquired acreage
      and expect to drill a well on the first location during the second quarter
      of
      2008. Old Sonterra had proved reserves of approximately 81% gas
      and 52.6% proved developed as of December 31, 2007 .




On
        April
        8, 2008, Sonterra Operating, Inc. entered into a definitive contract operating
        agreement with South Texas Oil Company, to be effective as of April 1, 2008,
        pursuant to which Sonterra Operating began overseeing daily operations of
        both
        operating services and accounting services for the operated and non-operated
        properties of South Texas Oil Company as an independent contractor acting
        in the role of contract operator for a fee of $75,000 per month.


In
      this
      report, the term “Sonterra,” as well as the terms “us,” “our,” “we,” and “its”
are sometimes used as abbreviated references to Sonterra Resources, Inc.,
      Sonterra Oil & Gas, Inc. and Sonterra Operating, Inc., and for time periods
      prior to the Securities Exchange, River Capital Group, Inc.




**Competition**





The
      oil
      and natural gas industry is highly competitive in all phases. We encounter
      competition from other oil and natural gas companies in all areas of operation,
      including the acquisition of oil and natural gas properties to the exploration
      and development of those properties. Our competitors include major integrated
      oil and natural gas companies, numerous independent oil and natural gas
      companies, individuals and drilling and income programs. Many of our competitors
      are large, well established companies that have substantially larger operating
      staffs and greater capital resources than we do. Such companies may be able
      to
      pay more for oil and natural gas properties and exploratory prospects and to
      define, evaluate, bid for and purchase a greater number of properties and
      prospects than our financial or human resources permit. Our ability to acquire
      additional properties and to discover reserves in the future will depend upon
      our ability to evaluate and select suitable properties and to consummate
      transactions in a highly competitive environment.





**Operating
      Hazards and Uninsured Risks**





Drilling
      activities are subject to many risks, including the risk that no commercially
      productive reservoirs will be encountered. There can be no assurance that the
      new wells we drill will be productive or that we will recover all or any portion
      of our investment. Drilling for oil and natural gas may involve unprofitable
      efforts, not only from dry wells, but also from wells that are productive,
      but
      do not produce sufficient net revenues to return a profit after drilling,
      operating and other costs. The cost and timing of drilling, completing and
      operating wells is often uncertain. Our drilling operations may be curtailed,
      delayed or canceled as a result of numerous factors, many of which are beyond
      our control, including title problems, weather conditions, delays by project
      participants, compliance with governmental requirements, shortages or delays
      in
      the delivery of equipment and services and increases in the cost for such
      equipment and services. Our future drilling activities may not be successful
      and, if unsuccessful, such failure may have a material adverse effect on our
      business, financial condition, results of operations and cash flows.




2




Our
      operations are subject to hazards and risks inherent in drilling for and
      producing and transporting oil and natural gas, such as fires, natural
      disasters, explosions, encountering formations with abnormal pressures,
      blowouts, cratering, pipeline ruptures and spills, any of which can result
      in
      the loss of hydrocarbons, environmental pollution, personal injury claims and
      other damage to our properties and those of others. We maintain insurance
      against some but not all of the risks described above. Furthermore, in certain
      circumstances in which insurance is available, we may not purchase it. The
      occurrence of an event that is not covered, or not fully covered by insurance
      could have a material adverse effect on our business, financial condition,
      results of operations and cash flows in the period such event may
      occur.





**Regulations**




*Government
      Regulation* .
      Exploration for, and production and sale of, crude oil and natural gas are
      extensively regulated at the federal, state and local levels. Crude oil and
      natural gas development and production activities are subject to various laws
      and regulations (and orders of regulatory bodies pursuant thereto) governing
      a
      wide variety of matters, including, among others, allowable rates of production,
      prevention of waste and pollution and protection of the environment. Laws
      affecting the crude oil and natural gas industry are under constant review
      for
      amendment or expansion and frequently increase the regulatory burden on
      companies. Our ability to economically produce and sell crude oil and natural
      gas is affected by a number of legal and regulatory factors, including federal,
      state and local laws and regulations. Many of these governmental bodies have
      issued rules and regulations that are often difficult and costly to comply
      with,
      and that carry substantial penalties for failure to comply. These laws,
      regulations and orders may restrict the rate of crude oil and natural gas
      production below the rate that would otherwise exist in the absence of such
      laws, regulations and orders. The regulatory burden on the crude oil and natural
      gas industry increases our costs of doing business and consequently affects
      our
      profitability.




*Environmental
      Matters* .
      As a
      developer, owner and operator of crude oil and natural gas properties, we are
      subject to various federal, state, and local laws and regulations relating
      to
      the discharge of materials into, and the protection of, the environment. We
      must
      take into account the cost of complying with environmental regulations in
      planning, designing, drilling, operating and abandoning wells. In most
      instances, the regulatory requirements relate to the handling and disposal
      of
      drilling and production waste products, water and air pollution control
      procedures, and the remediation of petroleum-product contamination. Under state
      and federal laws, we could be required to remove or remediate previously
      disposed wastes, including wastes disposed of or released by us or prior owners
      or operators in accordance with current laws or otherwise, to suspend or cease
      operations in contaminated areas, or to perform remedial well plugging
      operations or cleanups to prevent future contamination. The US Environmental
      Protection Agency and various state agencies have limited the disposal options
      for hazardous and non-hazardous wastes. The owner and operator of a site, and
      persons that treated, disposed of or arranged for the disposal of hazardous
      substances found at a site, may be liable, without regard to fault or the
      legality of the original conduct, for the release of a hazardous substance
      into
      the environment. The US Environmental Protection Agency, state environmental
      agencies and, in some cases, third parties are authorized to take actions in
      response to threats to human health or the environment and to seek to recover
      from responsible classes of persons the costs of such action. Furthermore,
      certain wastes generated by our crude oil and natural gas operations that are
      currently exempt from treatment as hazardous wastes may in the future be
      designated as hazardous wastes and, therefore, be subject to considerably more
      rigorous and costly operating and disposal requirements.





Certain
      state or local laws or regulations and common law may impose liabilities in
      addition to, or restrictions more stringent than, those described
      herein.





We
      have
      made and will continue to make expenditures in our efforts to comply with
      environmental requirements. We do not believe that we have, to date, expended
      material amounts in connection with such activities or that compliance with
      such
      requirements will have a material adverse effect upon our capital expenditures,
      earnings or competitive position. Although such requirements do have a
      substantial impact upon the crude oil and natural gas industry, they do not
      appear to affect us to any greater or lesser extent than other companies in
      the
      industry.




3




**Employees**





As
      of
      March 31, 2008, we had six employees, five of whom are full-time
      employees.





**Item
      2.** ***Description
      of Property.***





As
      of
      December 31, 2007, we used the offices of Concorde Capital Limited, a company
      100% owned and controlled by Howard Taylor, a director and the Chief Executive
      Officer of the Company as our principal offices, which are located at Suite
      312,
      7 Reid Street, Hamilton HM11, Bermuda. Following the closing of the Securities
      Exchange Agreement, we moved our corporate
      offices to 300 E. Sonterra Blvd., Suite 1220, San Antonio, Texas. We lease
      this office on a month to month basis at a current rental rate of $7,620 per
      month.





We
      do not
      have investments in real estate, real estate mortgages or real estate securities
      and do not intend to invest in real estate, real estate mortgages or real estate
      securities, nor have we formulated any investment policies regarding investments
      in real estate, real estate mortgages, or securities of or interests in persons
      engaged in real estate activities.





Descriptions
      of our oil and gas properties are included in Item 1. ** Description
      of Business and are incorporated herein by reference. Our oil and gas production
      activities commenced following the consummation of the Securities Exchange
      Agreement on February 14, 2008. We believe that we have satisfactory title
      to
      the properties owned and used in our business, subject to liens for taxes not
      yet payable, liens incident to minor encumbrances, liens for credit arrangements
      and easements and restrictions that do not materially detract from the value
      of
      these properties, our interests in these properties, or the use of these
      properties in our business. We believe that our properties are adequate and
      suitable for us to conduct business in the foreseeable future.


**Production,
        Prices and Operating Expenses**
  Our
        oil
        and gas activities commenced following the closing of the Securities
        Exchange Agreement on February 14, 2008.


**Productive
      Wells**




The
      following table sets forth the number of gross and net productive natural gas
      and oil wells in which we owned an interest as of March 31, 2008:




**Total Productive**
              **Wells
                (1)****Gross (2)**
            
            **Net (3)**Gas
            
            
            2
            
            
            1.02Oil
            
            
            -
            
            
            -Total
            
            
            2
            
            
            1.02





(1)
              Productive
                  wells are producing wells and wells capable of production.
 (2)
              A
                  gross well is a well in which we own an interest.
 (3)
              The
                  number of net wells is the sum of our fractional working interests
                  owned
                  in gross wells.




4




**Exploration
      and Development Acreage**




The
      following table indicates our interests in developed and undeveloped acreage
      as
      of March 31, 2008.




**Developed**
              **Acreage
                (1)**
            
            **Undeveloped**
              **Acreage
                (2)****Gross (3)**
            
            **Net (4)**
            
            **Gross (3)**
            
            **Net
                (4)**Offshore
                Gulf CoastMatagorda
                Bay
            
            
            320
            
            
            175
            
            
            5,100
            
            
            1,920


(1)
              Developed
                  acreage consists of acres spaced or assignable to productive wells.
 (2)
              Undeveloped
                  acreage is considered to be those leased acres on which wells have
                  not
                  been drilled or completed to a point that would permit the production
                  of
                  commercial quantities of oil and gas, regardless of whether or
                  not such
                  acreage contains proved reserves.
 (3)
              Gross
                  acres refer to the number of acres in which we own a working interest.
 (4)
              Net
                  acres represents the number of acres attributable to an owner’s
                  proportionate working interest and/or royalty interest in a lease
                  (e.g., a
                  50% working interest in a lease covering 320 acres is equivalent
                  to 160
                  net acres).





**Drilling
      Activity**




Our
      drilling program has not yet been initiated and we have drilled no exploratory
      or development wells. We are expecting to commence our drilling program during
      the second quarter of 2008.




**Present
      Activities**





As
      of
      March 31, 2008, we do not have any wells in the process of drilling, or any
      other field operations in progress of material significance.





**Delivery
      Commitments**





We
      are
      not obligated under the terms of any existing contract or agreement to provide
      a
      fixed and determinable quantity of oil or gas in the future.




**Item
      3.** ***Legal
      Proceedings.***





None.




**Item
      4.** ***Submission
      of Matter to a Vote of Security Holders.***





No
      matters were submitted to a vote of security holders during the fourth quarter
      of the fiscal year ended December 31, 2007.





5


**PART
      II**





**Item
      5.**  ***Market
      for Common Equity and Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities.***





Since
      May
      10, 2006, our common stock has been quoted on the OTC Bulletin Board. Prior
      to
      May 10, 2006, our common stock was traded on the “pink sheets.”




The
      following sets forth the prices reported to us by the “pink sheets” trading
      information. The prices reflected are the high and low closing bids, for each
      period as shown below.





HIGH
            
            LOWYear
                2006
            
            
            January
                1-March 31
            
            $
            0.65
            
            $
            0.25Year
                2006
            
            
            April
                1- May 9
            
            $
            0.65
            
            $
            0.25





The
      following table sets forth the range of high and low bid quotations for each
      period as shown below. These quotations reflect inter-dealer prices without
      retail mark-up, markdown, or commissions and may not necessarily represent
      actual transactions.





HIGH
            
            LOWYear
                2006
            
            
            May
                10-June 30
            
            $
            0.50
            
            $
            0.30Year
                2006
            
            
            July
                1-September 30
            
            $
            0.35
            
            $
            0.16Year
                2006
            
            
            October
                1-December 31
            
            $
            0.35
            
            $
            0.13Year
                2007
            
            
            January
                1-March 31
            
            $
            0.23
            
            $
            0.13Year
                2007
            
            
            April
                1-June 30
            
            $
            0.40
            
            $
            0.13Year
                2007
            
            
            July
                1-September 30
            
            $
            0.36
            
            $
            0.24Year
                2007
            
            
            October
                1-December 31
            
            $
            0.57
            
            $
            0.08





As
      of
      April 11, 2008, there were 563 record holders of our common stock.





We
      have
      not paid dividends on our stock and do not anticipate paying any dividends
      thereon in the foreseeable future, and we are restricted from declaring
      dividends under the terms of the Securities Exchange Agreement.





As
      of
      December 31, 2007, we did not have any equity securities authorized for issuance
      pursuant to compensation plans.




6




**Item
      6.** ***Management’s
      Discussion and Analysis or Plan of Operation.***





In
      Note 2
      of our Financial Statements for the year ended December 31, 2007, our
      independent registered public accounting firm noted that there is substantial
      doubt about our ability to continue as a going concern. Our existence is
      dependent upon management funding operations and raising sufficient capital.





We
      incurred a cumulative net loss of $2,908,754 for the period from inception
      to
      December 31, 2007. At December 31, 2007, we had working capital of $(473,009).
      We have no history of earnings.





The
      following discussion provides information with respect to our results of
      operations, liquidity, and capital resources on a comparative basis for the
      years ended December 31, 2007 and 2006, respectively, and should be read in
      conjunction with the Financial Statements and related notes appearing elsewhere
      in this report.





**Results
      of Operations**





Selling,
      general and administrative expenses during the years ended December 31, 2007
      and
      December 31, 2006 of $712,018 and $640,564, respectively, consisted primarily
      of expenses incurred to effect the acquisition and subsequent management of
      River Holdings and professional fees necessary to complete certain corporate
      filings with the SEC. Interest expense in connection with the $500,000 principal
      amount of convertible notes and five-year warrants to purchase 925,000 shares
      of
      common stock at $0.05 per share amounted to $0 and $208,881 for the years ended
      December 31, 2007 and 2006, respectively. For the year ended December 31, 2007,
      we recognized $130,000 of other income related to the forgiveness of an existing
      accounts payable for management and administrative fees due to officers and
      directors. Accordingly, we incurred losses of $579,464 and $847,372 for the
      years ended December 31, 2007 and 2006, respectively.





**Liquidity
      and Capital Resources**





Net
      cash
      used in operating activities was $224,585 for the year ended December 31, 2007,
      as compared to $343,448 for the year ended December 31, 2006. The primary use
      of
      cash from operations in 2007 was the payment of general and administrative
      expenses for our management. The primary use of cash from operations in 2006
      was
      to fund operations relating to the business acquisition of River
      Holdings.





Net
      cash
      provided by financing activities was $0 for the year ended December 31, 2007,
      as
      compared to $346,250 for the year ended December 31, 2006.





At
      December 31, 2007, we had working capital of $(473,009), as compared to working
      capital of $82,405 at December 31, 2006.





**2008
      Operations**





As
      of
      February 14, 2008, we are principally engaged in the business of oil and gas
      exploration and production in the Texas Gulf Coast region. We are the operator
      of the wells acquired from Cinco Natural Resources Corporation and Flash Gas
      and
      Oil Southwest, Inc. and intend to drill wells in the exploratory prospects
      that
      we acquired through those acquisitions. In addition to drilling the exploratory
      prospects, we anticipate making at least one production acquisition within
      the
      next six months, which would require additional funds to be raised. We do not
      presently have any agreements or commitments to make any such additional
      acquisitions, and there is no assurance that we will have available the funds
      necessary to complete any acquisition or that we will be able to reach an
      agreement to acquire additional prospects on acceptable terms, if at
      all.




Our
      business model is based on growing the company by completing production
      acquisitions with upside proven locations to be drilled and by participating
      in
      drilling prospects generated in-house and by third parties. Acquisitions will
      have associated production equipment. The number of acquisitions we complete
      and
      number of prospects in which we participate, if any, will determine whether
      we
      will hire additional employees. There is the potential for a significant
      increase in the number of employees in the event that we acquire or develop
      additional oil and gas properties and related assets.




7




**Critical
      Accounting Policies**





The
      discussion and analysis of our financial condition and results of operations
      is
      based upon the consolidated financial statements, which have been prepared
      in
      accordance with U.S. generally accepted accounting principals (“GAAP”). The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses. Our significant accounting policies related to our December 31, 2007
      reporting period are described in Note 1
      to the Financial Statements .
      With
      the consummation of the Securities Exchange on February 14, 2008, our critical
      accounting policies have changed. Certain of these policies are of particular
      importance to the portrayal of our financial position and results of operations,
      and require the application of significant judgment by management. We analyze
      our estimates, including those related to reserves, depletion and impairment
      of
      oil and gas properties, and the ultimate utilization of the deferred tax asset,
      and base our estimates on historical experience and various other assumptions
      that we believe to be reasonable under the circumstances. Actual results may
      differ from these estimates under different assumptions or conditions. We
      believe the following critical accounting policies affect our more significant
      judgments and estimates used in the preparation of our financial statements
      subsequent to the Securities Exchange.





*Full
      Cost Method of Accounting* .  Oil
      and
      gas properties are stated at historical cost using the full-cost method of
      accounting. Under this method, all costs associated with acquisition,
      exploration and development of oil and gas properties are capitalized. Costs
      capitalized include acquisition costs, geological and geophysical expenditures,
      lease rentals on undeveloped properties and costs of drilling and equipping
      productive and non-productive wells. Capitalized costs are categorized as either
      being subject to amortization or not subject to amortization.





All
      capitalized costs of oil and gas properties, including the estimated future
      costs to develop proved reserves and estimated future costs to plug and abandon
      wells and costs of site restoration, are amortized on the unit-of-production
      method using estimates of proved reserves as determined by independent
      engineers. Investments in unproved properties and major development projects
      are
      not amortized until proved reserves associated with the projects can be
      determined or until impairment occurs. If the results of an assessment indicate
      that the properties are impaired, the amount of the impairment is added to
      the
      capitalized costs to be amortized.





In
      addition, capitalized costs, less accumulated amortization and related deferred
      income taxes, shall not exceed an amount (the full cost ceiling) equal to the
      sum of:





1)
      the
      present value of estimated future net revenues computed by applying current
      prices of oil and gas reserves to estimated future production of proved oil
      and
      gas reserves, less estimated future expenditures (based on current costs) to
      be
      incurred in developing and producing the proved reserves computed using a
      discount factor of ten percent and assuming continuation of existing economic
      conditions;


2)
      plus
      the cost of properties not being amortized;


3)
      plus
      the lower of cost or estimated fair value of unproven properties included in
      the
      costs being amortized;


4)
      less
      income tax effects related to the differences between the book and tax basis
      of
      the properties.





Sales
      of
      proved and unproved properties are accounted for as adjustments of capitalized
      costs with no gain or loss recognized, unless such adjustments would
      significantly alter the relationship between capitalized costs and proved
      reserves of oil and gas, in which case the gain or loss is recognized in
      income.





*Revenue
      Recognition* .  We
      recognize oil and gas revenue from our interest in producing wells as the oil
      and gas is sold to third parties. Gas gathering operations revenues are
      recognized upon delivery of the product to third parties.




8




*Reserve
      Estimates* .  Our
      estimates of oil and gas reserves, by necessity, are projections based on
      geologic and engineering data, and there are uncertainties inherent in the
      interpretation of such data as well as the projection of future rates of
      production and the timing of development expenditures. Reserve engineering
      is a
      subjective process of estimating underground accumulations of oil and gas that
      are difficult to measure. The accuracy of any reserve estimate is a function
      of
      the quality of available data, engineering and geological interpretation and
      judgment. Estimates of economically recoverable oil and gas reserves and future
      net cash flows depend upon a number of variable factors and assumptions, all
      of
      which may in fact vary considerably from actual results. These factors and
      assumptions include historical production from the area compared with production
      from other producing areas, the assumed effects of regulations by governmental
      agencies and assumptions governing future oil and gas prices, future operating
      costs, severance taxes, development costs and workover costs. The future
      drilling costs associated with reserves assigned to proved undeveloped locations
      may ultimately increase to an extent that these reserves may be later determined
      to be uneconomic. For these reasons, estimates of economically recoverable
      quantities of oil and gas attributable to any particular group of properties,
      classifications of such reserves based on risk of recovery, and estimates of
      future net cash flows expected there from, may vary substantially. Any
      significant variance in the assumptions could materially affect the estimated
      quantity and value of the reserves, which could affect the carrying value of
      our
      oil and gas properties and/or the rate of depletion of the oil and gas
      properties. Actual production, revenues and expenditures, with respect to our
      reserves, will likely vary from estimates and such variances may be material.
      We
      contract with independent engineering firms to provide reserve estimates for
      reporting purposes.





*Income
      Taxes* .  Significant
      management judgment is required to determine the provisions for income taxes
      and
      to determine whether deferred tax assets will be realized in full or in part.
      Deferred income tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled. When it is more likely
      than
      not that all or some portion of specific deferred income tax assets will not
      be
      realized, a valuation allowance must be established for the amount of deferred
      income tax assets that are determined not to be realizable.





Additionally,
      despite our belief that our tax return positions are consistent with applicable
      tax law, we believe that certain positions may be challenged by taxing
      authorities. Settlement of any challenge can result in no change, a complete
      disallowance, or some partial adjustment reached through negotiations.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in a
      company's financial statements in accordance with SFAS No. 109, “Accounting for
      Income Taxes.” Effective January 1, 2007, we adopted FIN 48. FIN 48 clarified
      the accounting for uncertainty in income taxes recognized in the financial
      statements by prescribing a recognition threshold and measurement attribute
      for
      a tax position taken or expected to be taken in a tax return. FIN 48 prescribes
      how a company should recognize, measure, present and disclose uncertain tax
      positions that the company has taken or expects to take in its income tax
      returns. FIN 48 requires that only income tax benefits that meet the “more
      likely than not” recognition threshold be recognized or continue to be
      recognized on its effective date. The
      adoption of FIN 48 did not have a material effect on our financial
      statements.





**New
      Accounting Standards**





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS
      No. 157”). SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value measurements.
      The
      standard applies whenever other standards require (or permit) assets or
      liabilities to be measured at fair value, but does not expand the use of fair
      value in any new circumstances. In February 2008, the FASB granted a one-year
      deferral of the effective date of this statement as it applies to non-financial
      assets and liabilities that are recognized or disclosed at fair value on a
      nonrecurring basis (e.g. those measured at fair value in a business combination
      and goodwill impairment). SFAS No. 157 is effective for all recurring measures
      of financial assets and financial liabilities (e.g. derivatives and investment
      securities) for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those years. We have completed
      our
      initial evaluation of the impact of SFAS No. 157 as it relates to our financial
      assets and liabilities and determined that its adoption is not expected to
      have
      a material impact on our financial position or results of
      operations.




9




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159
      allows entities the option to measure eligible financial instruments at fair
      value as of specified dates. Such election, which may be applied on an
      instrument by instrument basis, is typically irrevocable once elected. SFAS
      No.
      159 is effective for fiscal years beginning after November 15, 2007, and early
      application is allowed under certain circumstances. We do not expect the
      adoption of SFAS No. 159 to have a significant impact on our consolidated
      financial position, results of operations or liquidity.





In
      December 2007, Financial Accounting Standards Board (“FASB”) issued SFAS No.
      141(R), “Business Combinations” (“SFAS 141(R)”), which replaces SFAS 141. SFAS
      141(R) establishes principles and requirements for how an acquirer recognizes
      and measures in its financial statements the identifiable assets acquired,
      the
      liabilities assumed, any non-controlling interest in the acquiree and the
      goodwill acquired. The Statement also establishes disclosure requirements,
      which
      will enable users to evaluate the nature and financial effects of the business
      combination. SFAS 141(R) is effective for fiscal years beginning after December
      15, 2008. The adoption of SFAS 141(R) will have an impact on accounting for
      business combinations once adopted, but the effect is dependent upon
      acquisitions at that time.




In
      December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements -- an amendment of Accounting Research
      Bulletin No. 51” (“SFAS 160”), which establishes accounting and reporting
      standards for ownership interests in subsidiaries held by parties other than
      the
      parent, the amount of consolidated net income attributable to the parent and
      to
      the non-controlling interest, changes in a parent's ownership interest and
      the
      valuation of retained non-controlling equity investments when a subsidiary
      is
      deconsolidated. The Statement also establishes reporting requirements that
      provide sufficient disclosures that clearly identify and distinguish between
      the
      interests of the parent and the interests of the non-controlling owners. SFAS
      160 is effective for fiscal years beginning after December 15, 2008. We do
      not
      currently have non-controlling interests in any of our
      subsidiaries.





**Off-Balance
      Sheet Arrangements**





We
      did
      not have any off-balance sheet arrangements as of December 31,
      2007.





**Item
      7.** ***Financial
      Statements.***





The
      consolidated financial statements are set forth herein commencing on page F-1.





**Item
      8.** ***Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.***





Not
      applicable.





**Item
      8A(T).** ***Controls
      and Procedures.***





**Evaluation
      of Disclosure Controls and Procedures**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our filings with the Securities and
      Exchange Commission are recorded, processed, summarized and reported within
      the
      time period specified in the Securities and Exchange Commission’s rules and
      forms, and that such information is accumulated and communicated to management,
      including our chief executive and chief financial officer, as appropriate,
      to allow timely decisions regarding required disclosure based on the definition
      of “disclosure controls and procedures” as defined in Rule 13a-15(e) promulgated
      under the Securities Exchange Act of 1934. An
        evaluation was carried out under the supervision and with the participation
        of
        our management, including our chief executive officer and chief financial
        officer, of the effectiveness of our disclosure controls and procedures as
        of
        the end of the period covered by this report. Based on that evaluation, the
        chief executive officer and the chief financial officer concluded that our
        disclosure controls and procedures were effective as of December 31,
        2007.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Management
      acknowledges its responsibility for establishing and maintaining adequate
      internal control over financial reporting in accordance with Rule 13a-15(f)
      promulgated under the Securities Exchange Act of 1934. Management has also
      evaluated the effectiveness of its internal control over external financial
      reporting in accordance with generally accepted accounting principles within
      the
      guidelines of the Committee of Sponsoring Organizations of the Treadway
      Commission framework. Based on the results of this evaluation, Management has
      determined that our internal control over financial reporting was effective
      as
      of December 31, 2007. This annual report does not include an attestation report
      of our registered public accounting firm regarding internal control over
      financial reporting. Management’s report was not subject to attestation by our
      registered public accounting firm pursuant to temporary rules of the Securities
      and Exchange Commission that permit us to provide only management’s report in
      this annual report.




10




**Changes
      in Internal Controls**





There
      were no changes in our internal control over financial reporting (as defined
      in
      Rule 13a-15(f) of the Securities Exchange Act of 1934) during the quarter ended
      December 31, 2007, that have materially affected, or are reasonably likely
      to
      materially affect, our internal control over financial reporting.





**Item
      8B.** ***Other
      Information.***





None.


**PART
      III**





**Item
      9.** ***Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance with Section 16(a) of the Exchange Act.***





**Directors
      and Executive Officers**





The
      following sets forth the name, age, present principal occupation and employment
      history for Messrs. Gill, Pawelek, Psencik and Valdez and Ms. Spurlock during
      the past five years, all of whom assumed their positions subsequent to the
      Securities Exchange.





*Robert
      Terry Gill* ,
      59, has
      served as a director since April 2008. Mr. Gill is currently a partner at Spirit
      where he joined in 2004. From 1996 to 2003, Mr. Gill was employed by Newpark
      Resources as a technical manager. From 1988 to 1996 he served as the South
      Texas
      Area Manager for International Drilling Fluids. In 1986, Mr. Gill started
      Cablevest, a cable television business, where he served as president for two
      years. Prior to forming Cablevest, Mr. Gill started Gilden Laboratories where
      he
      served as president and was in chare of all financial aspects of operation
      for
      five years. From 1975-1981, Mr. Gill was employed as a drilling fluid engineer
      at TG Coast. Mr. Gill is a graduate of the University of Houston, Bachelor
      of
      Science 1971.




*Michael
      J. Pawelek* ,
      49, has
      served as a director and as our President since February 2008. Mr. Pawelek
      served as the President of Old Sonterra from its inception April 2007 until
      February 2008. Through October 2007, Mr. Pawelek was also the President of
      Boss
      Exploration & Production Corporation, a position he held since 2004. Mr.
      Pawelek was responsible for the operations of Boss Exploration. From 2000 to
      2004, Mr. Pawelek served as a Vice President in control of operations for IBC
      Petroleum, Inc., an oil and gas exploration company, where he oversaw the
      operations of the company. Mr. Pawelek has a bachelor of science degree from
      Texas A&M University in civil engineering.




*Wayne
      A. Psencik* ,
      44, has
      served as our Vice-President-Operations since February 2008. Mr. Psencik served
      as the Vice President—Operations of Old Sonterra from its inception in April
      2007 until February 2008. Through October 2007, Mr. Psencik was also the Vice
      President of Operations of Boss Exploration & Production Corporation, a
      position he held since June 2005. Mr. Psencik was responsible for the operations
      of Boss Exploration. Prior to his employment with Boss Exploration, Mr. Psencik
      served as an engineer and drilling manager at El Paso Energy, where he was
      responsible for the design and implementation of drilling and completion
      operations and the supervision of staff engineers. Mr. Psencik has a bachelor
      of
      science degree from Texas A&M University in petroleum
      engineering.




*Sherry
      L. Spurlock,* 46, has
      served as our Chief Financial Officer since February 2008. Ms. Spurlock served
      as the Chief Financial Officer of Old Sonterra from its inception in April
      2007
      through February 2008. Through October 2007, Ms. Spurlock was also the Chief
      Financial Officer of Boss Exploration & Production Corporation, a position
      she held since August 2005. Ms. Spurlock was responsible for the preparation
      of
      the financial statements and other financial and accounting matters for Boss
      Exploration. Prior to her employment with Boss Exploration, Ms. Spurlock was
      the
      controller and held various other financial positions with United Oil &
Minerals, LP, an oil and gas exploration company. Ms. Spurlock is a CPA and
      has
      a bachelors of business administration degree from Stephen F. Austin State
      University in accounting.




11




*Doyle
      Valdez* ,
      52, has
      served as a director since April 2008. Mr. Valdez is currently the president
      of
      Valco Resource Management, Inc. where he has been since 1987. From 2001 to
      2003
      he served as Vice-President of Marketing for United Resources, LP. From
      1986-1987, Mr. Valdez was the Marketing Director of EnerPro, Inc. Prior to
      that,
      Mr. Valdez was employed as an Engineering Administrative Assistant for Thomas
      D.
      Coffman, Inc. for four years. Mr. Valdez is a graduate of St. Edwards
      University, B.B.A. concentration in Finance, 1981 and Austin Community College,
      A.A. Sociology and Business, 1977.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Exchange Act requires our directors, officers and persons who
      own
      more than 10% of our common units to file with the Securities and Exchange
      Commission initial reports of ownership and reports of changes in ownership
      of
      common units. Directors, officers and 10% holders of the common units are
      required by Securities and Exchange Commission rules and regulations to furnish
      us with copies of all Section 16(a) forms they file. To our knowledge, based
      solely on a review of the copies of such reports furnished to us, all Section
      16(a) filing requirements applicable to our directors, officers and 10% holders
      were met but for the fact that Longview filed a Form 5 dated March 6, 2007
      reporting the sale of 12,500 shares of our common stock on April 11, 2006 and
      the acquisitions of 11,054,474 shares of our common stock from conversion of
      certain convertible notes it owned and 925,000 shares of our common stock from
      exercise of warrants, respectively, on December 21, 2006. Longview failed to
      file the required Form 4 for each of the above described transactions within
      two
      business days after the completion of the transactions as required by the rules
      promulgated under Section 16(a) of the Exchange Act.





**Corporate
      Governance**





Our
      common stock trades on the OTC Bulletin Board. As such, we are not currently
      subject to corporate governance standards applicable to companies listed on
      national securities exchanges, which require, among other things, that the
      majority of the board of directors of a listed company be
      independent.




Since
      we
      are not currently subject to corporate governance standards relating to the
      independence of our directors, we have chosen to define an “independent”
director in accordance with the American Stock Exchange’s requirements for
      independent directors. The American Stock Exchange independence definition
      includes a series of objective tests, such as that the director is not an
      employee of the company or any of its subsidiaries and has not engaged in
      various types of business dealings with the company. We currently have two
      directors that we believe are “independent” under the above
      definition.




We
      currently do not have an audit committee, compensation committee, nominating
      committee, executive committee of our Board of Directors, stock plan committee
      or any other committees. We do not have an audit committee financial
      expert.




We
      will
      become subject to the governance rules of any stock exchange on which our common
      stock may be listed in the future. However, the rules of many such exchanges,
      including the American Stock Exchange and NASDAQ, provide that a controlled
      company (i.e., a company more than 50% of whose voting power is held by an
      individual, a group or another company) is exempt from certain of such
      governance rules, including the requirement that the company’s board consist of
      a majority of independent directors and that executive compensation and
      nominations of directors be determined by independent directors. We are a
      controlled company and we therefore believe that we will be entitled to rely
      on
      these exemptions upon any listing our common stock on a stock exchange providing
      such exemptions.




**Code
      of Ethics**




We
      have
      not adopted a code of ethics that applies to our principal executive officer,
      principal financial officer, and principal accounting officer or controller,
      or
      persons performing similar functions, since we have been focusing our efforts
      on
      obtaining financing.




12




**Item
      10.** ***Executive
      Compensation.***





The
      following table sets forth information about the remuneration of our former
      executive officers for our last two completed fiscal years. Messrs. Taylor
      and
      Freer resigned upon consummation of the Securities Exchange.




**SUMMARY
      COMPENSATION TABLE**





**Name and principal**
              **position**
            
            **Year**
            
            **Salary**
            
            **Total**Howard
                Taylor, Chief Executive Officer (1)
            
            2007
            
            $
            170,000
            
            $
            170,0002006
            
            $
            198,000
            
            $
            198,000Richard
                Freer, Secretary
            
            2007
            
            $
            15,000
            
            $
            15,0002006
            
            $
            18,000
            
            $
            18,000





(1)  We incurred
      management and administrative fees totaling approximately $170,000 from
      Concorde Capital Limited, a company 100% owned by Howard Taylor, for the year
      ended December 31, 2007. A total of $93,333 was due to Concorde Capital Limited
      as of December 31, 2007.





There
      were no outstanding equity awards at December 31, 2007.





We
      did
      not pay any compensation to our directors for their services as such for the
      year ended December 31, 2007.





**Item
      11.** ***Security
      Ownership of Certain Beneficial Owners and Management and
      Related*** ***Stockholder
      Matters.***





The
      following table provides information known to us about the beneficial ownership
      of our common stock as of April 11, 2008 for: (1) each person, entity or group
      that is known by us to beneficially own five percent or more of our common
      stock; (2) each of our directors; (3) each of our executive officers; and (4)
      our directors and executive officers as a group.




**Name and Address**
              **of Beneficial Owner**
            
            **Amount and Nature**
              **of Beneficial****Ownership**
            
            **Percent of Class**The
                Longview Fund, LP (2)
              600
                Montgomery Street
              44thFloor
              San
                Francisco, CA 94111
            
            
            29,033,798
            
            
            94.7
            %Longview
                Fund
              International,
                Ltd. (“LFI”) (2)
              c/o
                Nemours Trustees Limited,
              Nemours
                Chambers, Quomar Complex
              4F,
                Road Town, Tortola, British Virgin Islands
            
            
            339,066
            
            
            1.3
            %Michael
                Pawelek (3)
            
            
            0
            
            
            0
            %Wayne
                A. Psencik (3)
            
            
            0
            
            
            0
            %Sherry
                L. Spurlock (3)
            
            
            0
            
            
            0
            %





13





(1)  This
      table is based on 25,702,198 shares
      of
      common stock outstanding as of April 11, 2008. If a person listed on this table
      has the right to obtain additional shares of Common Stock within sixty (60)
      days
      from April 11, 2008, the additional shares are deemed to be outstanding for
      the
      purpose of computing the percentage of class owned by such person, but are
      not
      deemed to be outstanding for the purpose of computing the percentage of any
      other person.




(2)  Longview
      beneficially owns 29,033,798 shares of common stock, 24,075,120 of which are
      issued and outstanding and 4,958,678 of which are issuable pursuant to a
      warrant. According to a Schedule 13D filed on February 20, 2008 by Viking Asset
      Management, LLC (“Viking”), Longview, LFI and certain other persons (the “Viking
      Group 13D”), the sole general partner of Longview is Viking Asset Management
      Ltd., a British Virgin Islands international business company (“Longview GP”),
      which provides managerial, investment and administrative services to affiliated
      entities. The address of Longview GP is c/o Nemours Chambers, Quomar Complex
      4F,
      Road Town, Tortola, British Virgin Islands. Longview GP has delegated its
      investment advisory responsibilities with respect to Longview to Viking which,
      in its capacity as the investment advisor of Longview GP, makes all investment
      decisions for Longview. Viking’s principal address is 600 Montgomery Street,
      44th Floor, San Francisco, California 94111.




According
      to the Viking Group 13D, LFI is a British Virgin Islands international business
      company that (directly and indirectly through subsidiaries or affiliated
      companies or both) is principally engaged in the business of investing in
      equity, debt and other securities and assets. Longview GP is the investment
      manager of LFI, and Viking is the sub-investment manager of LFI. In accordance
      with such relationships, LFI has delegated to Longview GP investment advisory
      responsibilities with respect to LFI. In its capacity as the investment advisor
      of Longview GP, Viking makes all investment decisions for LFI. According
      to the Viking Group 13D, Mr. Peter Benz is the Chairman and Chief Executive
      Officer and a Managing Member of Viking and may be deemed to control the
      business activities, including the investment activities, of one or more of
      Viking, Longview GP, Longview and LFI. According
      to the Viking Group 13D, Viking and Longview GP each may be deemed to have
      shared voting and dispositive authority over the shares of our common stock
      owned by Longview and LFI. Mr. Benz, as a control person of Viking, Longview
      GP,
      Longview and/or LFI, may be deemed to beneficially own all such
      shares.




(3)  The
      address of each of Messrs. Pawelek and Psencik and Ms. Spurlock is c/o Sonterra
      Resources, Inc., 300 East Sonterra Boulevard, Suite 1220, San Antonio Texas,
      78258.





**Item
      12.** ***Certain
      Relationships and Related Transactions, and Director Independence.***





We
      paid
      Concorde Capital Limited, a company 100% owned by our former chief executive
      officer and director, Howard Taylor, management and administrative fees totaling
      of $191,087 for the year ended December 31, 2007. We also reimbursed Concorde
      Capital Limited $38,088 for out of pocket expenses for the year ended December
      31, 2007. As of December 31, 2007, a total of $93,333 was outstanding and due
      to
      Concorde Capital Limited, after the effect of an agreement signed on August
      3,
      2007, whereby Concorde Capital Limited agreed to forgive $130,000 of its
      existing accounts receivable from us. These services were provided for fees
      that
      could be obtained from unrelated parties for the same amounts. These fees were
      paid to Concorde pursuant to a service agreement between us and
      Concorde.




We
      paid
      Cognate Engineering Services Inc., a company 100% owned by our former director
      William Dickie, management and administrative fees totaling of $10,000 for
      the
      year ended December 31, 2007.




In
      connection with certain financing Longview provided for our
      August 2007 acquisitions, Sonterra reimbursed Longview for its expenses
      incurred in connection therewith, the related transaction documents and
      consummation of the transactions contemplated by those documents, and Longview
      received a fee of 1% in connection with the $2,000,000 non-equity note issued
      by
      Old Sonterra on August 29, 2007.




14


**Item
      13.** ***Exhibits***





See
      the
      attached Index to Exhibits.





**Item 14.** ***Principal
      Accountant Fees and Services.*** ****





The
      following set forth fees billed by De Meo, Young, McGrath of Ft. Lauderdale,
      LLP
      for the audit of our annual financial statements and other services rendered
      for
      the fiscal years ended December 31, 2007 and 2006:




**2007**
            
            **2006**Audit
                fees(1)
            
            $
            12,050
            
            $
            17,050Audit
                related fees
            
            
            —
            
            
            —Tax
                fees(2)
            
            
            —
            
            
            —All
                other fees
            
            
            —
            
            
            —Total
            
            $
            12,050
            
            $
            17,050





(1)  Audit
      fees represent services provided in connection with the fiscal year audit of
      our
      financial statements and review of our quarterly financial statements,
      notwithstanding when the fees were billed or when the service was
      rendered.


(2)  Tax
      fees
      principally included tax advice, tax planning and tax return preparation, for
      services billed from January through December of the fiscal year.





**Pre-Approval
      Policies**





The
      Board
      of Directors’ policy is to pre-approve all audit services and all permitted
      non-audit services (including the fees and terms thereof) provided by our
      independent auditor; provided, however, pre-approval requirements for non-audit
      services are not required if all such services (1) do not aggregate to more
      than
      five percent of total revenues paid by us to our independent auditor in the
      fiscal year when services are provided; (2) were not recognized as on-audit
      services at the time of the engagement; and (3) are promptly brought to the
      attention of the Board of Directors and approved prior to the completion of
      the
      audit. The Board pre-approved all fees described above.




15




**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized, on April 14, 2008.





**SONTERRA
                RESOURCES, INC.**
              
              By:/s/  Michael
                J.
                Pawelek
              Name: Michael
                J. Pawelek
              Title: President







In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacity and on the
      dates indicated:





**Signature**
            
            **Title**
            
            **Date**/s/
                Michael J. Pawelek
            
            President
                and Director
            
            April
                14, 2008Michael
                J. Pawelek
            
            (Principal
                Executive Officer)/s/
                Sherry L. Spurlock
            
            Chief
                Financial Officer
            
            April
                14, 2008Sherry
                L. Spurlock
            
            (Principal
                Financial and Accounting Officer)/s/
                Rober Terry Gill
            
            Director
            
            April
                14, 2008Rober Terry
              Gill/s/
              Doyle Valdez
            
            Director
            
            April
                14, 2008Doyle Valdez










**SONTERRA
      RESOURCES, INC. AND SUBSIDIARIES**


**(formerly
      River Capital Group, Inc.)**




**INDEX
      TO FINANCIAL STATEMENTS**




**Page**Report
                of Independent Registered Public Accounting Firm
            
            F-2Balance
                Sheet as of December 31, 2007
            
            F-3Statements
                of Operations for the Years Ended December 31, 2007 and
                2006
            
            F-4Statements
                of Shareholders’ Deficit for the Years Ended December 31, 2007 and
                2006
            
            F-5Statements
                of Cash Flows for the Years Ended December 31, 2007 and
                2006
            
            F-6Notes
                to Financial Statements
            
            F-7





F-1
 
 **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
          the
          Board of Directors of
 Sonterra
          Resources, Inc. f/k/a River Capital Group, Inc.
 
 We
          have
          audited the accompanying consolidated balance sheet of Sonterra Resources,
          Inc.
          f/k/a River Capital Group, Inc. and subsidiaries (the “Company”) as of December
          31, 2007 and 2006, and the related consolidated statements of operations,
          changes in shareholders’ equity and cash flows for the years
          ended December
          31, 2007 and 2006. These consolidated financial statements are the
          responsibility of the Company’s management. Our responsibility is to express an
          opinion on these financial statements based on our audit.
 
 We
          conducted our audits in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. We were not engaged to perform
          an
          audit of the Company’s internal control over financial reporting. Our audit
          includes consideration of internal control over financial reporting as
          a basis
          for designing audit procedures that are appropriate in the circumstances,
          but
          not for the purpose of expressing an opinion on the effectiveness of the
          Company’s internal control over financial reporting. Accordingly, we express no
          such opinion. An audit also includes examining, on a test basis, evidence
          supporting the amounts and disclosures in the financial statements, assessing
          the accounting principles used and significant estimates made by management,
          and
          evaluating the overall financial statement presentation. We believe that
          our
          audits provide a reasonable basis for our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the financial position of the Company as of December
          31, 2007
          and 2006 and the results of their operations and their cash flows for the
          years
          then ended, in conformity with US generally accepted accounting principles.
  The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As discussed in Note 2 to the consolidated
          financial statements, the Company’s dependence on outside financing, lack of
          sufficient working capital, and recurring losses from operations raise
          substantial doubt about the Company’s ability to continue as a going concern.
          The financial statements do not include any adjustments that might result
          from
          the outcome of these uncertainties.
 
 
 /s/De
          Meo, Young McGrath
  Fort
          Lauderdale, Florida
 April
          14,
          2008


F-2


**SONTERRA
                  RESOURCES, INC. AND SUBSIDIARIES****(formerly
                  River Capital Group, Inc.)****Balance
                  Sheet**
  December
                  31, 2007**ASSETS**Cash
              
              $
              39,218Total
                  current assets
              
              
              39,218Total
                  assets
              
              $
              39,218**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**Accounts
                  payable and accrued expenses
              
              $
              384,640Accounts
                  payable to related parties
              
              
              127,587Total
                  current liabilities
              
              
              512,227Stockholders'
                  deficit:Common
                  stock, $.001 par value, 50,000,000 shares authorized: 38,552,749
                  shares
                  issued and outstanding
              
              
              38,552Additional
                  paid-in capital
              
              
              2,397,193Retained
                  deficit
              
              
              (2,908,754
              )Total
                  stockholders' deficit
              
              
              (473,009
              )Total
                  liablities and stockholders' deficit
              
              $
              39,218




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




F-3


**SONTERRA
                  RESOURCES, INC. AND SUBSIDIARIES****(formerly
                  River Capital Group, Inc.)****Statements
                  of Operations**
  For
                  the Year Ended
                December
                  31, 2007
              
              For
                  the Year Ended
                December
                  31, 2006Revenue
              
              $
              -
              
              $
              -Total
                  revenue
              
              
              -
              
              
              -Expenses:Selling
                  general and administrative
              
              
              712,018
              
              
              640,564Total
                  operating expenses
              
              
              712,018
              
              
              640,564Total
                  operating loss
              
              
              (712,018
              )
              
              (640,564
              )Other
                  income (expense):Interest
                  income
              
              
              2,554
              
              
              2,073Other
                  income
              
              
              130,000
              
              
              -Interest
                  expense
              
              
              -
              
              
              (208,881
              )132,554
              
              
              (206,808
              )Net
                  income (loss)
              
              $
              (579,464
              )
              $
              (847,372
              )Net
                  income (loss) per share - basic and diluted
              
              $
              (0.02
              )
              $
              (0.03
              )Weighted
                  average shares outstanding
              
              
              38,552,749
              
              
              26,064,226




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


F-4


**SONTERRA
                  RESOURCES, INC. AND SUBSIDIARIES****(formerly
                  River Capital Group, Inc.)****Statement
                  of Changes in Stockholders' Deficit**
  AdditionalCommon
                  Stock
              
              Paid-in
              
              AccumulatedShares
              
              Amount
              
              Capital
              
              Deficit
              
              TotalBalance
                  December 31, 2005
              
              
              25,382,275
              
              $
              25,382
              
              $
              1,368,300
              
              $
              (1,481,918
              )
              $
              (88,236
              )Issuance
                  of common stock for services
              
              
              1,070,000
              
              
              1,070
              
              
              262,180
              
              
              -
              
              
              263,250Restructuring of
                  warrants associated with convertible notes
              
              
              -
              
              
              -
              
              
              316,515
              
              
              -
              
              
              316,515Conversion
                  of convertible notes
              
              
              11,045,474
              
              
              11,045
              
              
              380,953
              
              
              -
              
              
              391,998Exercise
                  of warrants
              
              
              925,000
              
              
              925
              
              
              45,325
              
              
              -
              
              
              46,250Net
                  loss for the year ended December 31, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              (847,372
              )
              
              (847,372
              )Balance
                  December 31, 2006
              
              
              38,422,749
              
              
              38,422
              
              
              2,373,273
              
              
              (2,329,290
              )
              
              82,405Issuance
                  of common stock for services
              
              
              130,000
              
              
              130
              
              
              23,920
              
              
              
              
              
              24,050Net
                  loss for the year ended December 31, 2007
              
              
              
              
              
              
              
              
              
              
              
              (579,464
              )
              
              (579,464
              )Balance
                  December 31, 2007
              
              
              38,552,749
              
              $
              38,552
              
              $
              2,397,193
              
              $
              (2,908,754
              )
              $
              (473,009
              )




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




F-5


**SONTERRA
                  RESOURCES, INC. AND SUBSIDIARIES****(formerly
                  River Capital Group, Inc.)****Statements
                  of Cash Flows**
  For
                  the Year Ended December 31, 2007
              
              For
                  the Year Ended December 31, 2006Cash
                  flows from operating activities:Net
                  loss
              
              $
              (579,464
              )
              $
              (847,372
              )Adjustments
                  to reconcile net loss to net cash provided (used) by operating
                  activities:Stock
                  given for compensation
              
              
              24,050
              
              
              263,250Discount
                  on convertible notes
              
              
              -
              
              
              211,733Changes
                  in operating assets and liabilities:(Increase)
                  decrease in other current assets
              
              
              3,240
              
              
              3,240Increase
                  (decrease) in accounts payable
              
              
              347,335
              
              
              2,261Increase
                  (decrease) in accounts payable to related parties
              
              
              (19,746
              )
              
              23,440Total
                  adjustments
              
              
              354,879
              
              
              503,924Net
                  cash used by operations
              
              
              (224,585
              )
              
              (343,448
              )Cash
                  flows from financing activities:Proceeds
                  from warrant exercise
              
              
              -
              
              
              46,250Proceeds
                  from convertible notes
              
              
              -
              
              
              300,000Net
                  cash provided by financing activities
              
              
              -
              
              
              346,250Net
                  increase (decrease) in cash
              
              
              (224,585
              )
              
              2,802Cash
                  at beginning of period
              
              
              263,803
              
              
              261,001Cash
                  at end of period
              
              $
              39,218
              
              $
              263,803Supplemental
                  disclosure of cash flow information:Cash
                  paid during the period for:Interest
              
              $
              -
              
              $
              -Income
                  taxes
              
              $
              -
              
              $
              -




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




F-6




**SONTERRA
      RESOURCES, INC. AND SUBSIDIARIES**


**(formerly
        River Capital Group, Inc.)**


**Notes
      to Financial Statements**


**December
      31, 2007**




**NOTE
      1 - BASIS OF PRESENTATIONS AND SIGNIFICANT ACCOUNTING POLICIES**





Use
      of
      Estimates:





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





Principles
      of Consolidation:





The
      accompanying consolidated financial statements include the accounts of Sonterra
      Resources, Inc., formerly River Capital Group, Inc., and its wholly owned
      subsidiaries River Capital Holdings Limited and River Reinsurance Limited,
      both
      inactive subsidiaries. All significant intercompany balances and
      transactions are eliminated in consolidation.





Cash
      and Cash Equivalents:





For
      purposes of the statement of cash flows, the Company considers highly liquid
      financial instruments purchased with a maturity of three months or less to
      be
      cash equivalents.





Impairment
      of Long Lived Assets:





The
      Company evaluates the recoverability of its property and equipment and other
      assets in accordance with Statement of Financial Accounting Standards Board
      No.
      144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS
      144
      requires recognition of impairment of long-lived assets in the event the net
      book value of such assets exceeds the estimated future undiscounted cash flows
      attributable to such assets or the business to which such assets relate. SFAS
      144 excludes goodwill and intangible assets. When an asset exceeds its expected
      operating cash flow, it is considered to be impaired and is written down to
      fair
      value, which is determined based on either discounted future cash flows or
      appraised values.





Income
      Taxes:





Effective
      January 1, 2007, we adopted Financial Accounting Standard Board (“FASB”)
      Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes,” or
“FIN 48,” which clarifies the accounting for uncertainty in income taxes
      recognized in the financial statements in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes,” or
“SFAS No. 109.” We utilize a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return.





Loss
      per Common Share:





Basic
      loss per share is calculated using the weighted-average number of common shares
      outstanding during each reporting period. Diluted loss per share includes
      potentially dilutive securities such as outstanding options and warrants, using
      various methods such as the treasury stock or modified treasury stock method
      in
      the determination of dilutive shares outstanding during each reporting period.
      The Company does not have any potentially dilutive instruments.





Fair
      Value of Financial Instruments:





The
      carrying values of current assets and current liabilities approximate fair
      values due to the short period of time to maturity.




F-7




**SONTERRA
      RESOURCES, INC. AND SUBSIDIARIES**


**(formerly
        River Capital Group, Inc.)**


**Notes
      to Audited Consolidated Financial Statements**


**December
      31, 2007**


**NOTE
      1- BASIS OF PRESENTATIONS AND SIGNIFICANT ACCOUNTING POLICIES -
      continued**





Income
      (Loss) Per Share:




The
      Company accounts for earnings per share according to SFAS No. 128, "Earnings
      per
      Share". SFAS 128 requires presentation of basic and diluted earnings or loss
      per
      share. Earnings or loss per share is computed by dividing net income


or
      loss
      by the weighted average number of shares outstanding during the period. For
      all
      periods presented, warrants and options were excluded from the computation
      of
      net loss per share because inclusion would be anti-dilutive.





Stock
      Options:





The
      Company accounts for options issued according to FASB Statement No. 123R,
      "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R").
      FAS No. 123R requires companies to recognize in the statement of operations
      the
      grant-date fair value of stock options and other equity-based compensation
      issued to employees.





**NOTE
      2 - GOING CONCERN**





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of all
      liabilities in the normal course of business.





As
      of
      December 31, 2007, the Company had an accumulated deficit of $2,908,754. During
      the year ended December 31, 2007 the company suffered a net loss of $579,464.
      These factors raise substantial doubt about the Company's ability to continue
      as
      a going concern.





On
      August
      3, 2007, the Company entered into a series of agreements (the “Agreement”) which
      resulted in the Company acquiring certain oil and gas leasehold interests and
      related assets, following which the Company will be engaged in the business
      of
      exploration and development of such properties. In addition, the Company will
      be
      obligated to divest its acquired insurance company, River Capital Holdings
      Limited and River Reinsurance Limited. The Company's continued existence is
      dependent upon management funding operations and raising sufficient capital.
      The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.





**NOTE
      3 - DUE TO RELATED PARTY**





A
      Company
      owned by Howard Taylor, an officer and director of the Company, received
      management and administrative fees totaling $191,087 and $125,000 for the years
      ended December 31, 2007 and 2006, respectively. An additional $38,088 and
      $35,082 was received as reimbursement of direct out of pocket travel and other
      expenses for the years ended December 31, 2007 and 2006, respectively. As of
      December 31, 2007 a total of $93,333 was outstanding and due to Concorde Capital
      Limited. In connection with the Agreement signed on August 3, 2007 Concord
      Capital Limited agreed to forgive $130,000 of its existing accounts payable,
      which is included in other income in the consolidated statement of .operation
      for the year ended December 31, 2007.




We
      paid
      Cognate Engineering Services Inc., a company 100% owned by our director William
      Dickie, management and administrative fees totaling of $10,000 and $4,000 for
      the years ended December 31, 2007 and 2006, respectively. As of December 31,
      2007 a total of $23,035 was outstanding and due to Cognate Engineering Services
      Inc.





We
      paid
      Richard Freer, an officer, management and administrative fees totaling of
      $18,000 and $15,000 for the years ended December 31, 2007 and 2006,
      respectively. As of December 31, 2007 a total of $11,219 was outstanding and
      due
      to Richard Freer.




F-8




**SONTERRA
      RESOURCES, INC. AND SUBSIDIARIES**


**(formerly
        River Capital Group, Inc.)**


**Notes
      to Audited Consolidated Financial Statements**


**December
      31, 2007**





**NOTE
      4 - CONVERTIBLE NOTES AND WARRANTS**





On
      May
      23, 2005, the Company entered into a Subscription Agreement with several
      accredited investors (the "Subscribers") pursuant to which the Company agreed
      to
      sell, and the Subscribers agreed to purchase in the aggregate, up to $200,000
      principal amount of convertible notes and five-year warrants to purchase 400,000
      shares of common stock at $0.75 per share. A total of $23,280 was ascribed
      to
      the warrants, valued at estimated fair market value at the date of the warrants'
      issuance. On May 31, 2006 a modification to the agreement was entered into
      whereby the due date of the notes was extended to May 23, 2007 and the five-year
      warrants were repriced at $0.35 per share. The repricing resulted in a
      further


discount
      to the notes of $142,206 (the ascribed value of the warrants valued at estimated
      fair market value of the Company's common stock at the date of the warrants
      repricing). On June 30, 2006, the Company issued an additional $300,000
      principal amount of convertible notes and five-year warrants to purchase 525,000
      shares of common stock at $0.35 per share. In connection with this transaction,
      20,000 shares of the Company's common stock were issued in payment of legal
      services rendered. A total of $174,309 was ascribed to the warrants, valued
      at
      estimated fair market value at the date of the warrants issuance. The resulting
      discount to all of the convertible notes would have been amortized to interest
      expense over the remaining life of the convertible notes. Amortization of the
      discount amounted to $211,733 for the year ended December 31, 2006.





The
      convertible notes were secured by a security interest in all of the assets
      of
      the Company. The convertible notes included the following terms:




Interest
                at the greater of (i) the prime rate plus 4% per annum or (ii) 10%,
                payable quarterly beginning August 1, 2005;Term
                of one year, but the note could prepaid at 110% of the principal
                if an
                insurance license were granted to River Reinsurance Limited and River
                Reinsurance Limited;Convertible
              at any time by the holders into shares of the Company’s common stock at a
              price equal to $0.50; andAnti-dilution
              protections. The Company had granted a one-time demand registration right
              to register the resale of the shares issuable upon conversion of the
              notes
              and the shares issuable upon exercise of the
              warrants.




On
      December 31, 2006, the Company entered into the Release and Settlement Agreement
      with Longview Fund, LP, Longview Equity Fund, LP, and Longview International
      Equity Fund, LP, (collectively, the "Noteholders". Under the terms of the
      Release and Settlement Agreement, the Company issued to the Noteholders: (i)
      11,045,474 shares of its $.001 par value common stock calculated at the rate
      of
      $0.05 per share, and (ii) an additional 925,000 shares of its $.001 par value
      common stock, also calculated at the rate of $0.05 per share as part of a
      warrant stock issuance, in exchange for forgiveness of the entire amount owing
      under the convertible notes.





**NOTE
      5 - STOCKHOLDERS' EQUITY**





During
      the year ended December 31, 2007, the Company issued 130,000 shares of its
      common stock as compensation for business consulting services. A charge of
      $24,050 was recorded for the year ended December 31, 2007, valued at fair market
      value, in connection with this transaction. The Company relied upon the
      exemption from registration contained in Section 4(2), as the recipient was
      deemed to be sophisticated with regard to an investment in the Company.





In
      May
      2004, the stockholders of the Company adopted a Stock Option Plan (the "Plan").
      Under the Plan, stock options may be granted at an exercise price not less
      than
      the fair market value of the Company's common stock at the date of grant.
      Options may be granted to key employees and other persons who contribute to
      the
      success of the Company. The Company has reserved 3,842,275 shares of common
      stock for the Plan. This number automatically shall be adjusted annually at
      the




F-9




**SONTERRA
      RESOURCES, INC. AND SUBSIDIARIES**


**(formerly
        River Capital Group, Inc.)**


**Notes
      to Audited Consolidated Financial Statements**


**December
      31, 2007**





**NOTE
      5 - STOCKHOLDERS’ EQUITY - continued**





beginning
      of the Company's fiscal year to a number equal to 10% of the number of shares
      of
      the Company issued and outstanding at the end of the Company's last completed
      fiscal year. As of December 31, 2005, options to purchase 275,000 shares at
      a
      price of $2.00 per share had been granted pursuant to the Plan. The options
      are
      exercisable through February 5, 2009. On November 1, 2005, the Company issued
      350,000 options at $0.50, which options were fully vested and expire on October
      31, 2007. There were no options issued in 2006. On June 13, 2007 all of the
      options issued pursuant to this plan were cancelled. There was no financial
      impact as a result of this cancellation. As of December 31, 2007, there are
      no
      options outstanding under the Plan.





For
      2006
      and 2007 transactions, the Company accounted for options issued according to
      FASB Statement No. 123R, “Share-Based Payment, an Amendment of FASB Statement
      No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in
      the
      statement of operations the grant-date fair value of stock options and other
      equity-based compensation issued to employees. There were no options issued
      in
      2006 and 2007.





**NOTE
      6 - INCOME TAXES**





The
      Company had available at December 31, 2007 net operating loss carryforwards
      for
      federal and state tax purposes of approximately $2,908,000 which could be
      applied against taxable income in subsequent years through 2026. The deferred
      tax asset for net operating losses was approximately $989,000 as of December
      31,
      2007 and a full valuation allowance was recorded since realization is
      uncertain.





Reconciliation
      of the differences between income taxes computed at the federal and state
      statutory tax rates and the provision for income taxes for the years ended
      December 31, 2007 and 2006 are approximately as follows:





**2007**
            
            **2006**Income
                tax loss at federal statutory tax rate
            
            
            (34
            )%
            
            (34
            )%State
                tax, net of federal benefit
            
            
            (3.63
            )%
            
            (3.63
            )%Valuation
                allowance
            
            
            37.63
            %
            
            37.63
            %Provision
                for taxes
            
            
            —
            
            
            —





The
      Company's deferred tax assets are as follows:





**December
                31,**
              **2007**Net
                operating loss
            
            $
            989,000Valuation
                allowance
            
            
            (989,000
            )Net
                deferred tax assets
            
            $
            —




**NOTE
      7 - COMMITMENTS AND CONTINGENCIES**





From
      time
      to time, we may be involved in various claims and legal actions arising in
      the
      ordinary course of business. In the opinion of management, the ultimate
      disposition of these matters will not have a material adverse effect on our
      financial position, results of operations, or liquidity.




F-10




**SONTERRA
      RESOURCES, INC. AND SUBSIDIARIES**


**(formerly
        River Capital Group, Inc.)**


**Notes
      to Audited Consolidated Financial Statements**


**December
      31, 2007**





**NOTE
      8 - RECENT ACCOUNTING PRONOUNCEMENTS**





In
      February 2007, the FASB issued Statement of Financial Accounting Standards,
      No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities (“ SFAS
      No. 159”)* .
      SFAS
      159 permits entities to choose to measure many financial instruments and certain
      other items at fair value. SFAS 159 expands the use of fair value measurement
      and applies to entities that elect the fair value option. The fair value option
      established by SFAS 159 permits all entities to choose to measure eligible
      items
      at fair value at specified election dates. SFAS 159 is effective as of the
      beginning of the first fiscal year that begins after November 15, 2007. The
      adoption of this standard will have no impact to the Company’s financial
      position, results of operations, or cash flows.





In
      December 2007, the FASB issued SFAS 160, *Noncontrolling
      Interests in Consolidated Financial Statements* , *an
      amendment of ARB No. 51* which
      applies to all entities that prepare consolidated financial statements, except
      not-for-profit organizations, but will affect only those entities that have
      an
      outstanding noncontrolling interest in one or more subsidiaries or that
      deconsolidate a subsidiary. The statement is effective for annual periods
      beginning after December 15, 2008. The adoption of this standard had no impact
      to the Company’s financial position, results of operations, or cash
      flows.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), *Business
      Combinations* ,
      or SFAS
      No. 141R, which replaces SFAS No. 141. SFAS No. 141R establishes
      principles and requirements for how an acquirer recognizes and measures in
      its
      financial statements the identifiable assets acquired, the liabilities assumed,
      any non-controlling interest in the acquiree and the goodwill acquired. SFAS
      No. 141R also establishes disclosure requirements which will enable users
      to evaluate the nature and financial effects of the business combination. SFAS
      No. 141R is effective for business combinations for which the acquisition
      date is on or after the beginning of the first annual reporting period beginning
      on or after December 15, 2008. The adoption of this standard had no impact
      to the Company’s financial position, results of operations, or cash
      flows.




**NOTE
      9 - NOTE PURCHASE AGREEEMENT AND SUBSEQUENT EVENT
      (Unaudited)**




On
      February 14, 2008, the Company consummated the transactions (the “Securities
      Exchange”) contemplated by the Securities Exchange and Additional Note Purchase
      Agreement entered into on August 3, 2007 with The Longview Fund, L.P., the
      beneficial owner, at the time, together with an affiliated fund, of
      approximately 66.6% of our common stock (“Longview”). As part of the Securities
      Exchange (i) our 38,552,749 then issued and outstanding shares of common stock
      were combined into 3,855,275 shares of common stock in a 1-for-10 reverse stock
      split; (ii) our name was changed to “Sonterra Resources, Inc.”; and (iii)
      Longview exchanged all of its shares of common stock of our now wholly owned
      subsidiary, Sonterra Oil & Gas, Inc., formerly known as Sonterra Resources,
      Inc. (“Old Sonterra”), a $5,990,010 equity note from Old Sonterra and a warrant
      to purchase 50 shares of Old Sonterra common stock for 21,846,558 shares of
      our
      common stock and a warrant to purchase 4,958,678 shares of our common stock.
      Longview also exchanged its $2,000,000 non-equity note from Old Sonterra for
      a
      senior secured note made by us in an equal principal amount.




As
      a
      result of the Securities Exchange (i) we own 100% of the issued and outstanding
      capital stock of Old Sonterra; (ii) we are engaged, through Old Sonterra, in
      the
      operation and development of oil and gas properties and related assets; (iii)
      our management is comprised of the management of Old Sonterra; (iv) the former
      stockholders of Old Sonterra now hold 95.8% of our common stock; and (v) we
      have
      ceased to be a “shell company.”




F-11




**SONTERRA
      OIL & GAS, INC.**


**(formerly
        River Capital Group, Inc.)**


**Notes
      to Audited Consolidated Financial Statements**


**December
      31, 2007**




**NOTE
      9 - NOTE PURCHASE AGREEMENT AND SUBSEQUENT EVENT (Unaudited) -
      continued**




The
      following pro forma condensed consolidated balance sheet presents the effects
      of
      the Securities Exchange as if it was effective on December 31,
      2007.





**Sonterra
                Resources, Inc.**
              **(formerly
                River Capital Group, Inc.)**
            
            **Sonterra**
              **Oil
                & Gas, Inc.**
            
            **Pro
                Forma**
              **Adjustments**
              **Related
                to**
              **Subsequent
                Event**
            
            
            
            **Pro
                Forma**
              **Consolidated**
              **Balance
                Sheet**AssetsCurrent
                Assets
            
            $
            39,218
            
            $
            5,249,399
            
            $
            —
            
            
            
            
            $
            5,288,617Property
                and Equipment, Net
            
            
            —
            
            
            5,856,692
            
            
            —
            
            
            
            
            
            5,856,692Other
                Assets
            
            
            —
            
            
            285,353
            
            
            (213,925
            )
            
            (c)
            
            
            71,428Total
                Assets
            
            $
            39,218
            
            $
            11,391,444
            
            $
            (213,925
            )
            
            
            
            $
            11,216,737Liabilities
                and Shareholders’ Equity (Deficit)Current
                Liabilities
            
            $
            512,227
            
            $
            4,485,859
            
            $
            (337,000
            )
            
            (f)
            
            $
            4,661,086Noncurrent
                Liabilities
            
            
            —
            
            
            8,106,761
            
            
            (5,990,010
            )
            
            (b)
            
            
            2,116,751Shareholders’
                Equity (Deficit)
            
            
            (473,009
            )
            
            (1,201,176
            )
            
            5,990,010
            
            
            (b)
            
            
            4,438,900(213,925
            )
            
            (c)—
            
            
            (e)337,000
            
            
            (f)Total
                Liabilities and Shareholders’ Equity (Deficit)
            
            $
            39,218
            
            $
            11,391,444
            
            $
            (213,925
            )
            
            
            
            $
            11,216,737Common
                Share Data:Shares
                Authorized
            
            
            50,000,000
            
            
            1,000
            
            
            (45,000,000
            )
            
            (a)
            
            
            5,000,000(1,000
            )
            
            (d)Shares
                Issued
            
            
            38,552,749
            
            
            363
            
            
            (34,697,444
            )
            
            (a)
            
            
            26,347,02421,846,558
            
            
            (c)(363
            )
            
            (d)645,161
            
            
            (e)Shares
                Outstanding
            
            
            38,552,749
            
            
            333
            
            
            (34,697,474
            )
            
            (a)
            
            
            26,346,99421,846,558
            
            
            (c)(333
            )
            
            (d)645,161
            
            
            (e)





(a)
              Reduce
                  the number of Sonterra Resources, Inc. shares authorized, issued
                  and
                  outstanding to reflect the 10:1 reverse stock
                  split.


(b)
              Convert
                  the Equity Note from debt to
                  equity.


(c)
              Adjust
                  debt issuance costs for balances related to the Equity Note which
                  was
                  converted from debt to
                  equity.


(d)
              Eliminate
                  shares authorized, issued and outstanding for Sonterra Oil & Gas,
                  Inc.


(e)
              New
                  shares of Sonterra Resources, Inc. common stock issued concurrent
                  with the
                  Securities Exchange as compensation for third party advisory services
                  received in relation to the
                  transaction.


(f)
              Accrue
                  expenses of Sonterra Resources, Inc. incurred through the date
                  of and
                  related to the Securities
                  Exchange.




F-12




**INDEX
            TO EXHIBITS**
 
 3.1
                  Certificate
                      of Incorporation (incorporated by reference to Exhibit 2.1
                      to the
                      Registrant’s Registration Statement on Form 10-SB filed February 11,
                      2000).
 
 3.2
                  Certificate
                      of Amendment to the Certificate of Incorporation (incorporated
                      by
                      reference to Exhibit 2.1 to the Registrant’s Form 8-K filed June 7,
                      2004).
 
 3.3
                  Certificate
                      of Amendment to the Certificate of Incorporation (incorporated
                      by
                      reference to Exhibit 3.1 to the Registrant’s Form 8-K filed February 14,
                      2008)
 
 3.4
                  Bylaws
                      (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K
                      filed February 14, 2008).
 
 10.1
                  Settlement
                      Agreement dated December 31, 2006 (incorporated by reference
                      to Exhibit
                      10.1 to the Registrant’s Form 8-K filed January 8,
                      2007).
 
 10.2
                  Securities
                      Exchange and Additional Note Purchase Agreement, dated August
                      3, 2007, by
                      and between the Registrant and The Longview Fund, L.P. (incorporated
                      by
                      reference to Exhibit 10.1 to the Registrant’s Form 8-K filed August 9,
                      2007).
  10.3
                  Schedules
                      to Securities Exchange and Additional Note Purchase Agreement
                      (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K
                      filed August 9, 2007).
  10.4
                  Security
                      Agreement, dated as of July 9, 2007, between Sonterra Resources,
                      Inc.
                      (“Sonterra”) and Viking Asset Management, LLC, as Collateral Agent (the
                      “Collateral Agent”) (incorporated by reference to Exhibit 10.3 to the
                      Registrant’s Form 8-K filed August 9,
                      2007).
  10.5
                  First
                      Amendment to Security Agreement, dated as of August 3, 2007,
                      between
                      Sonterra and the Collateral Agent (incorporated by reference
                      to Exhibit
                      10.4 to the Registrant’s Form 8-K filed August 9,
                      2007).
  10.6
                  Mortgage,
                      Deed of Trust, Assignment of Production, Security Agreement,
                      Fixture
                      Filing and Financing Statement, dated August 3, 2007 from Sonterra
                      to the
                      Collateral Agent (incorporated by reference to Exhibit 10.5
                      to the
                      Registrant’s Form 8-K filed August 9,
                      2007).
  10.7*
                  Joinder
                      to Security Agreement by Sonterra Resources,
                      Inc.
  10.8*
                  Guaranty
                      dated February 14, 2008 by Sonterra Oil & Gas, Inc. and Sonterra
                      Operating, Inc. in favor of Viking Asset Management
                      LLC.
  10.9*
                  Pledge
                      Agreement dated February 14, 2008, between Sonterra Oil & Gas, Inc.
                      and Viking Asset Management LLC.
  10.10*
                  First
                      Amendment To Mortgage, Deed of Trust, Assignment of Production,
                      Security
                      Agreement, Fixture Filing and Financing Statement, dated August
                      29, 2007,
                      by Sonterra Resources, Inc. for the benefit of Viking Asset
                      Management,
                      LLC.
 
 10.11*
                  Warrant
                      to Purchase Common Stock dated February 14, 2008 and issued
                      to The
                      Longview Fund, L.P.
  10.12*
                  Senior
                      Secured Note dated February 14, 2008 and issued to The Longview
                      Fund,
                      L.P.
  10.13*
                  Registration
                      Rights Agreement, dated February 14, 2008, between Sonterra
                      Resources,
                      Inc. and The Longview Fund, L.P.
  
 10.14*
                  Employment
                      Agreement, dated February 14, 2008, between Sonterra Resources,
                      Inc. and
                      Michael J. Pawelek.
  10.15*
                  Employment
                      Agreement, dated February 14, 2008, between Sonterra Resources,
                      Inc. and
                      Wayne A. Psencik.
  10.16*
                  Employment
                      Agreement, dated February 14, 2008, between Sonterra Resources,
                      Inc. and
                      Sherry L. Spurlock.
  10.17*
                  February
                      2008 Amendment Agreement, dated February 14, 2008, between
                      Sonterra
                      Resources, Inc. and The Longview Fund,
                      L.P.
 
 10.18
                  2007
                      Stock Option Plan (incorporated by reference to Exhibit 10.16
                      to the
                      Registrant’s Form 8-K filed August 9,
                      2007).
  10.19
                  Form
                      of Stock Option Agreement for Employees under Registrant’s 2007 Stock
                      Option Plan (incorporated by reference to Exhibit 10.17 to
                      the
                      Registrant’s Form 8-K filed August 9,
                      2007).
 
 10.20
                  First
                      Amendment to Registration Rights Agreement, dated March 12,
                      2008
                      (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K
                      filed March 18, 2008).
 
 21*
                  Subsidiaries
                      of the Registrant
 
 31.1*
                  Rule
                      13a-14(a) Certification
 
 31.2*
                  Rule
                      13a-14(a) Certification
 
 32.1*
                  Section
                      1350 Certification
 
 32.2*
                  Section
                      1350 Certification
 
 *
                  Filed
                      herewith.