**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**




(Mark
      one)





**|X|**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**




For
      the
      fiscal year ended **:** **March
      31, 2007**




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




For
      the
      transition period from _________ to ___________




Commission
      file number 000-51430





**INDEX
      OIL AND GAS INC.**


(Name
      of
      small business issuer in its charter)





**Nevada**
              (State
                or other jurisdiction of incorporation or organization)
            
            **20-0815369**
              (I.R.S.
                Employer Identification No.)





**10000
                Memorial Drive, Suite 440**
              **Houston,
                Texas**
              (Address
                of principal executive offices)
            
            **77024**
              (Zip
                Code)





Issuer’s
      telephone Number: **(713)
      683-0800**





Securities
      registered under Section 12(b) of the Exchange Act: **NONE**





Securities
      registered under Section 12(g) of the Exchange Act:





**Title
                of Each Class**
            **Name
                of each exchange on which registered**Common
                Stock, $0.001 par value
            Over
                The Counter Bulletin Board




Check
      whether the issuer: (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act of 1934 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 |X| No |_|




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




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




Issuer’s
      revenues for its most recent fiscal year: $457,046.




The
      aggregate market value of the voting stock held by non-affiliates of the
      Registrant based on the closing price of the Registrant’s common stock as
      reported on the OTC Bulletin Board on May 31, 2007 was $67,888,495.




As
      of
      June 15, 2007, there were outstanding 65,737,036 shares of common
      stock.




Transitional
      Small Business Disclosure Format (check one): Yes [  ] No [X]








**TABLE
      OF CONTENTS**





**PAGE****PART
                I**ITEM
                1.
            Description
                of Business.
            4ITEM
                2.
            Description
                of Properties.
            26ITEM
                3.
            Legal
                Proceedings.
            30ITEM
                4.
            Submission
                of Matters to a Vote of Security Holders.
            30**PART
                II**ITEM
                5.
            Market
                for Registrant’s Common Equity and Related Stockholder
                Matters.
            30ITEM
                6.
            Management’s
                discussion and analysis of financial condition and results of
                operations.
            34ITEM
                7.
            Financial
                Statements and Supplementary Data.
            47ITEM
                8.
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure.
            48ITEM
                8A.
            Controls
                and Procedures.
            48ITEM
                8A(T).
            Controls
                and Procedures.
            48ITEM
                8B.
            Other
                Information.
            48**PART
                III**ITEM
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance With Section 16(a) of the Exchange Act.
            49ITEM
                10.
            Executive
                Compensation
            52ITEM
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            56ITEM
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            58ITEM
                13.
            Exhibits.
            59ITEM
                14.
            Principal
                accounting fees and services.
            61Signatures
            
            63




2


**Information
      Regarding Forward Looking Statements**





This
      Annual Report on Form 10-KSB (the “Annual Report”) contains ‘‘forward-looking
      statements’’ that represent our beliefs, projections and predictions about
      future events. All statements other than statements of historical fact are
      ‘‘forward-looking statements’’, including any projections of earnings, revenue
      or other financial items, any statements of the plans, strategies and objectives
      of management for future operations, any statements concerning proposed new
      projects or other developments, any statements regarding future economic
      conditions or performance, any statements of management’s beliefs, goals,
      strategies, intentions and objectives, and any statements of assumptions
      underlying any of the foregoing. Words such as ‘‘may’’, ‘‘will’’, ‘‘should’’,
‘‘could’’, ‘‘would’’, ‘‘predicts’’, ‘‘potential’’, ‘‘continue’’, ‘‘expects’’,
‘‘anticipates’’, ‘‘future’’, ‘‘intends’’, ‘‘plans’’, ‘‘believes’’, ‘‘estimates’’
and similar expressions, as well as statements in the future tense, identify
      forward-looking statements.





These
      statements are necessarily subjective and involve known and unknown risks,
      uncertainties and other important factors that could cause our actual results,
      performance or achievements, or industry results, to differ materially from
      any
      future results, performance or achievements described in or implied by such
      statements. Actual results may differ materially from expected results described
      in our forward-looking statements, including with respect to correct measurement
      and identification of factors affecting our business or the extent of their
      likely impact, the accuracy and completeness of the publicly available
      information with respect to the factors upon which our business strategy is
      based or the success of our business. Furthermore, industry forecasts are likely
      to be inaccurate, especially over long periods of time and in relatively new
      and
      rapidly developing industries such as oil and gas. Factors that may cause actual
      results, our performance or achievements, or industry results, to differ
      materially from those contemplated by such forward-looking statements include
      without limitation:





**•**
            
            our
                ability to attract and retain management;**•**
            
            our
                growth strategies;**•**
            
            anticipated
                trends in our business;**•**
            
            our
                future results of operations;**•**
            
            our
                ability to make or integrate acquisitions;**•**
            
            our
                liquidity and ability to finance our exploration, acquisition and
                development activities;**•**
            
            our
                ability to successfully and economically explore for and develop
                oil and
                gas resources;**•**
            
            market
                conditions in the oil and gas industry;**•**
            
            the
                timing, cost and procedure for proposed acquisitions;**•**
            
            the
                impact of government regulation;**•**
            
            estimates
                regarding future net revenues from oil and natural gas reserves and
                the
                present value thereof;**•**
            
            planned
                capital expenditures (including the amount and nature
                thereof);**•**
            
            increases
                in oil and gas production;**•**
            
            the
                number of wells we anticipate drilling in the future;**•**
            
            estimates,
                plans and projections relating to acquired properties;**•**
            
            the
                number of potential drilling locations;**•**
            
            our
                financial position, business strategy and other plans and objectives
                for
                future operations;**•**
            
            the
                possibility that our acquisitions may involve unexpected
                costs;**•**
            
            the
                volatility in commodity prices for oil and gas;**•**
            
            the
                accuracy of internally estimated proved reserves;**•**
            
            the
                presence or recoverability of estimated oil and gas
                reserves;**•**
            
            the
                ability to replace oil and gas reserves;**•**
            
            the
                availability and costs of drilling rigs and other oilfield
                services;**•**
            
            environmental
                risks;






3




**•**
            
            exploration
                and development risks;**•**
            
            competition;**•**
            
            the
                inability to realize expected value from acquisitions;**•**
            
            the
                ability of our management team to execute its plans to meet its
                goals;**•**
            
            general
                economic conditions, whether internationally, nationally or in the
                regional and local market areas in which we are doing business, that
                may
                be less favorable than expected; and**•**
            
            other
                economic, competitive, governmental, legislative, regulatory, geopolitical
                and technological factors that may negatively impact our businesses,
                operations and pricing.




Forward-looking
      statements should not be read as a guarantee of future performance or results,
      and will not necessarily be accurate indications of whether, or the times by
      which, our performance or results may be achieved. Forward-looking statements
      are based on information available at the time those statements are made and
      management’s belief as of that time with respect to future events, and are
      subject to risks and uncertainties that could cause actual performance or
      results to differ materially from those expressed in or suggested by the
      forward-looking statements. Important factors that could cause such differences
      include, but are not limited to, those factors discussed under the headings
      ‘‘Risk factors’’, ‘‘Management’s discussion and analysis of financial condition
      and results of operations’’, ‘‘Business’’ and elsewhere in this
      prospectus.





**PART
      I**





**Item
      1. Description of Business**





**Overview**





Index
      Oil
      and Gas Inc. (“Index”, “Index, Inc.,” “the Company”, “we”, “us” or “our”) is an
      independent oil and gas company engaged in the acquisition, exploration,
      appraisal, development, production and disposition phases of oil and gas
      properties located in North America. Index was originally incorporated under
      the
      name Thai One On, Inc. (“Thai”) on March 3, 2004 under the laws of the State of
      Nevada.





In
      November 2005, Thai entered into a Letter of Intent agreement (the “Letter of
      Intent”) with Index Oil and Gas Ltd. (“Index Ltd.” or “Index Limited”) for the
      proposed acquisition of all of the outstanding shares of the Index Ltd.’s equity
      stock by Index. Subsequently, Thai changed its name from Thai One On Inc. to
      Index Oil and Gas Inc.





On
      January 20, 2006, in connection with the Letter of Intent, the stockholders
      of
      Index Ltd. entered into Acquisition and Share Exchange Agreements with the
      Company (the “Agreements”). As a result of the Acquisition, there was a change
      in control of the public entity.





Index
      is
      the parent company with four group subsidiaries: Index Ltd. comprises a United
      Kingdom holding company, which provides management services and United States
      operating subsidiaries; Index Oil & Gas (USA), LLC, an operating company;
      Index Investments North America Inc. (“Index Investments”) and Index Offshore
      LLC (“Index Offshore”), a wholly owned subsidiary of Index Investments and also
      an operating company. Index, Inc., through its subsidiaries, is engaged in
      the
      exploration for and development, production and sale of oil and natural gas.
      The
      Company does not currently operate any of its properties and sells its oil
      and
      gas production to domestic purchasers.





In
      addition, the Company completed a private placement on January 20, 2006 for
      8,533,333 shares of its common stock, $0.001 par value per share at a price
      of
      $0.60 per share for aggregate gross proceeds of $5,120,000, received by the
      Company, in order to raise capital for investment in select oil and gas projects
      identified by the Company and for operating and working capital
      purposes.





On
      August
      29, 2006, the Company completed a private placement for 7,097,898 shares of
      its
      Common Stock at a price of $1.00 per share for aggregate gross proceeds of
      approximately $7.1 million.


4


On
      October 4, 2006, the Company completed a private placement for 3,867,700 shares
      of its Common Stock at a price of $1.00 per share for aggregate proceeds of
      approximately $3.9 million.





The
      net
      proceeds of these latter two placements have been and will be applied to the
      expansion of the Company’s operations in the United States as the Company hopes
      to fund additional Phase 2 and 3 Growth Strategies consisting of drilling
      generated by successful new ventures, as well as, potential success in existing
      ventures such as the Supple Jack Creek (formerly West 1) and New Taiton, both
      higher potential prospects.





**Exploration
      Business Strategy, Recent Developments and Business
      Operations**





The
      Company has expanded its activities in North America, beginning in Kansas,
      and
      expanded into Texas and Louisiana. A key strategy is to continue to seek growth
      at an accelerated pace. The Company uses industry best practices in prospect
      characterization that focuses on analogs, available data, risk, uncertainty,
      volume, costs, and value. By combining a number of key metrics, the Company's
      management is able to select and invest in what it believes to be the very
      best
      prospects on offer. The Company has adjusted its business strategy to include
      more high-impact wells that can deliver, if successful, much higher value,
      volume, and follow-on drilling that has the potential to deliver exponential
      growth. The Company also protects itself and its investors by limiting any
      single prospect investment to a small percentage of the overall funding that
      the
      Company has at its disposal.




***Three
      Phases of the Start-Up Business Model***





The
      Company’s business start-up model consisted of three successive stages. The
      first phase of the business plan, or Phase I, has been completed and resulted
      in
      the initial startup of Index Ltd.’s business operations in the U.S. and the
      establishment of early stage operations and cashflow. The second phase of the
      business plan, or Phase II, commenced in 2005 and focused on establishing a
      reserve and production base which Management believes is capable of supporting
      expansion into the future. Phase III commenced in fiscal year 2007 and resulted
      in entry into several larger potential prospects with risk-appropriate working
      interests as part of a balanced portfolio approach. The Company has essentially
      completed Phases I and II of its start-up business model. Through its recent
      and
      future private placement equity fund raisings, the Company will now continue
      with its Phase III projects. Going forward, the Company will simply refer to
      its
      business model as one that allows the company to grow exponentially by investing
      in those projects that can deliver significant growth.





***Phase
      I*** **





The
      Company’s initial project in Kansas comprised of areas called Seward North,
      Globe and Seward Townsite (“Seward”) was initiated by Index Ltd. in 2003 as
      a start-up project aimed at a low risk, low cost, and low equity or working
      interest (“WI”) oil exploration. This project was selected by the Company’s
      management (“Management”) to act upon its core business concept and to establish
      initial operations and business relationships.





The
      Company’s Seward project consists of a 5% working interest in leases covering
      currently approximately 4,533 acres which are located in Stafford County,
      Kansas. Management believes that the acquisition and processing of new 3D
      seismic data has enabled Seward project participants including the Company
      to
      identify undrilled structural highs in a proven petroleum province. The Company
      currently has 19 producing wells in Stafford county including the recently
      drilled and producing Hay Witt Unit 1-11 and Hayden 1-14 wells. A workover
      was
      also performed on the Witt 1-14 well, significantly increasing production with
      a
      low cost investment. The Hull-Witt Unit 1-11 was a dry hole.





The
      Seward project has been a catalyst to providing the Company with an additional
      opportunity to expand into the nearby Katy area in Barton County, Kansas.
      Towards the end of the 2006 fiscal year we acquired a 5% working interest in
      an
      exploration project in Barton County, Kansas. The 5% working interest was
      reduced to 3.25% after a cross-assignment resulting in the Company having the
      same net acreage in the Area
      of
      Mutual Interest (“AMI”) of approximately 6,555 acres. To support the exploration
      drilling of this project, the operator acquired approximately 17.25 square
      miles
      of new 3 Dimensional (“3D”) seismic data in Barton County. This data was used to
      evaluate and identify drilling locations. Wells that have been drilled in the
      Seward project target primarily the Lansing and Arbuckle formations at depths
      of
      approximately 3,500 to 3,800 feet. Three wells have been drilled on the Barton
      leases. Rogers Unit 1-1 and Schartz 1-18 were successful and have been brought
      on production. Pan-John Unit 1-11 was a dry hole.


5





Both
      the
      Stafford and Barton County producing wells are located on a regional structural
      feature known as the Central Kansas Uplift. Since the early 1900’s, several
      billion barrels of oil have been produced from the Central Kansas Uplift,
      primarily from carbonate reservoirs of the Pennsylvanian period including the
      Lansing Group through to the Arbuckle Group of Cambro-Ordovician
      period.





***Phase
      II***





The
      Company has made progress with its onshore Phase 2 drilling program in Louisiana
      and Texas and announced in August 2006 that the Walker 1 discovery well drilled
      in Louisiana began producing. Initial gross production of the well, in which
      Index has a 12.5% working interest, was approximately 200 barrels of oil per
      day
      with associated gross gas production of approximately 175 thousand cubic feet
      per day. Walker 1 is the first productive well from the Company's Phase 2
      Portfolio.





The
      remaining wells in the current Phases 2 program are in South Texas. Vieman
      1, a
      production well in Brazoria County, was spudded in October 2006 with a goal
      of
      converting Proved Undeveloped reserves to Proved Developed reserves. Index
      built
      its working interest from an original 12.5% to a final 19.5% prior to spudding.
      In December 2006, Index announced that the deviated well had been drilled to
      a
      total depth of 10,383 feet true vertical depth or 11,340 feet measured depth.
      Electric logs indicated two potential pay zones below 10,000 feet true vertical
      depth totaling approximately 15 feet of net gas bearing reservoir. The well
      took
      longer than anticipated to drill due to unplanned sidetrack operations and
      pressure control requirements in the lower of the two pay sections, and has
      incurred costs significantly in excess of pre-drill estimate. Vieman 1 came
      on
      production in February 2007, as part of an initial extended flow test and after
      completion of this flow test has recently come back on production following
      further completion operations.





The
      three-well Taffy drilling program was announced in December 2006. Originally
      planned as a two-well program, a third well was added prior to drilling. The
      Company originally agreed to a 7.5% working interest in the two Taffy wells.
      The
      Company increased its working interest to 12.5% in Taffy 1, renamed Hawkins
      1,
      and to 30% in Taffy 2, renamed Dark 1. The Company took a 30% working interest
      in a third Taffy well named Ruse 1. The three wells targeted relatively shallow
      Miocene gas reservoirs between 5,000 and 7,000 feet in Matagorda
      County.





In
      January 2007, the Company announced the Hawkins 1 commercial discovery. A
      completion test confirmed gas flow at a measured rate of approximately 1.04
      million cubic feet per day through a choke of 9/64th inch with a flowing tubing
      pressure of 1,850 pounds per square inch. The well is scheduled to begin
      production into the local pipeline grid in mid calendar year 2007.




Ruse
      1
      and Dark 1 were dry holes and have been plugged and abandoned.




Not
      to be
      confused with the company’s three phases of its business model, the Company
      announced on May 2, 2006 and July 12, 2006, respectively, that it had entered
      into two Phases, I and II, of an exploration agreement with ADC Petroleum,
      L.P
      (“ADC”) to reprocess seismic data and develop prospects to drill in up to three
      areas in Texas and one area in Mississippi and Alabama. This project is capable
      of delivering projects having Business Model Phase 2 and potentially Phase
      3
      growth characteristics. The first drillable prospect generated as a result
      of
      these agreements is an exploration well in the Fern Lake area of Nacogdoches
      County. The well, named George Cason 1, will target multiple gas reservoirs
      with
      the Travis Peak sandstone being the primary target. The well is planned to
      be
      drilled mid 2007.





6


***Phase
      III Business Model and Strategy***


With
      business model Phases 1 and 2 essentially complete, going forward, the Company
      has adopted a more aggressive strategy that will build upon Phase 3. The
      following are key elements of our evolved strategy:





· Index
      intends to focus its short and medium term efforts on known petroleum basins
      within the U.S. and initially which are proximal to its current ongoing projects
      in the onshore part of the Gulf of Mexico basin;




· Index’s
      short to mid term objective is to develop its oil and gas reserves to a point
      where the cash flow will contribute not only to the Company’s overhead and
      later, to contribute to its capital requirements for investing in new and
      additional projects. Index believes that it can achieve its objective by
      utilizing a risk managed approach of investing in a portfolio of drilling
      opportunities. By
      combining a number of key metrics, Management is able to select and invest
      in
      the very best prospects on offer. Index has adjusted its business strategy
      to
      include more high-impact wells that can deliver, if successful, much higher
      value, volume, and follow-on drilling that has the potential to deliver
      exponential growth. Index also protects itself and its investors by limiting
      any
      single prospect investment to a small percentage of the overall funding that
      the
      company has at its disposal.





Index’s
      current focus is directed towards:





•
            Efficiently
                influencing the management of ongoing projects;•
            Identifying,
                characterizing, and capturing appropriate gas and oil opportunities;
                and•
            Efficiently
                using its business assets to raise additional capital as
                needed.





This
      current stage of the development of the Company includes new alliances.
      Furthermore, the Company has built a strong portfolio of prospects during 2007
      fiscal year for drilling in 2008 fiscal year, which include potential high
      impact wells. In summary, the Company’s strategy is to increase shareholder
      value by profitably increasing its reserves, production, cash flow and earnings
      through a risk and equity balanced program of exploration and production
      drilling. The Company will also consider acquisitions provided they can meet
      the
      Company’s metrics and they can augment its growth strategy and
      objectives.





***Recent
      Projects***





In
      September 2006, the Company signed an agreement to participate in the New Taiton
      Project in Wharton County.  The
      first
      well Ilse 1 spudded on December 1, 2006. It targets stacked Wilcox sands on
      trend with large nearby gas fields producing gas from the same Wilcox
      reservoirs. The prospect is defined by modern 3D seismic data. If Ilse 1 proves
      successful, the Company may participate in further wells to develop the
      potential of the New Taiton Project. The Company has a 10% working interest
      before payout and an 8% working interest after payout in the New Taiton
      Project.





The
      Ilse
      1 well has been drilled to total depth of 17,000 feet and logged. Analysis
      of
      the logs revealed two zones of interest in the Wilcox C and Wilcox A,
      respectively. The lowest zone, the Wilcox C, has been perforated and stimulated
      by a “frac” process. Gas flow from the formation to surface has not been
      achieved. The preliminary decision is that this interval will not be productive
      and will not have any proved reserves.





A
      decision making process is currently underway by the joint venture participants
      of the New Taiton Project and individually by the Company as to whether to
      perform work to attempt to achieve gas flows from the upper zone of interest,
      the Wilcox A. As part of this decision making process, joint venture
      participants are awaiting a formal analysis and recommendation from the
      operator. The path forward is not currently clear with the options ranging
      from
      all of the participants testing the Wilcox A to none of the participants testing
      the Wilcox A. Should the latter option be chosen, the next step would likely
      lead to a plug and abandonment of this well.





In
      December 2006, the Company announced that it signed an exploration agreement
      to
      participate at 15% working interest in the Supple Jack Creek Project, formerly
      referred to as West, targeting the high-potential Edwards
      Limestone in Lavaca County, Texas. The proposed total depth of the first well
      is
      approximately 15,000 feet. The Company announced in January 2007 that it had
      increased its working interest in the Supple Jack Creek project to 20%. The
      well
      is planned to spud in 2007. If the first well in the Supple Jack Creek lease
      area is successful in finding commercial gas, it will pave the way for follow-on
      drilling activity in the leased area defined in the exploration agreement.
      The
      prospect is adjacent to fields producing from the Edwards Limestone. Combined
      cumulative gas production from these fields exceeds 400 billion cubic feet.


7




In
      February 2007, the Company announced the signing of a letter of intent to
      participate in the first exploration well in the Shadyside prospect, located
      in
      St. Mary Parish, Louisiana. Participation and Operating agreements were signed
      effective March 2007. The Company will have an initial 15% working interest
      in
      the first exploration well, reduced to a 13.5% working interest, after payout.
      The first well will be drilled during the second half of 2007 with a planned
      depth of approximately 16,500 feet. The Shadyside prospect is near the Garden
      City field that has produced from the same age reservoirs as Shadyside
      has.





In
      March
      2007, the Company announced a commitment to drill two wells in south Texas.
      The
      wells are located in Victoria and Goliad Counties, respectively, and targeted
      shallow Frio reservoirs. Both wells were successful. The Serrano well, renamed
      Friedrich Gas Unit 1, in Victoria County, found 13 feet of net gas pay. The
      Habanero well, renamed Schroeder Gas Unit 1, in Goliad County, found 10 feet
      of
      net gas pay. The
      Friedrich well commenced producing in May 2007 with
      initial average daily production at 275 MCF of gas (46 BOE) per day.
      T he Schroeder well is
      expected to be connected to local pipeline infrastructure and to be brought
      on-line in mid 2007. The Company has a 37.5% working interest and a 28.125%
      net
      revenue interest in each well. In all respects, these two wells represent a
      return to Phase 2 but expose the Company to a new source for prospect
      generation.





**Subsequent
      Events**





Index
      announced in April 2007 that it has signed a Participation Agreement to explore
      for gas in the West Wharton prospect. This could consist of up to four
      exploration wells within the area of mutual interest in Wharton County, Texas.
      Index has a 12.5% working interest in the project that will reduce to 9.375%
      after payout. The first well is planned to spud during the third calendar
      quarter of 2007.





Index
      announced in May 2007 that it had signed a participation agreement for
      exploration of the Fern Lake prospect in Nacogdoches County, Texas. George
      Cason
      1 is the name of the first well planned for the Fern Lake prospect as well
      as
      the first well resulting from the ADC Agreements. The well is expected to spud
      in the second calendar quarter 2007.





**Industry
      Overview**





Over
      the
      past few years, oil and gas prices have been high; however, over the last couple
      of years, the cost of services has increased to offset most of the gain from
      high product prices. In general, very large companies have focused on onshore
      plays in which they have a significant acreage position and technological
      supremacy. Smaller companies have searched for niche plays that have been
      overlooked. Index has tried to capitalize by using smaller company intelligence
      to select those prospects that rank highly against Index’s current portfolio.
      Because exploration has developed offshore, the onshore is lagging in
      exploitation of the latest offshore ideas. Index hopes to capitalize on this
      oversight.





**Business
      Strategy - Maintain Risk Managed Approach**





The
      Company has adjusted its business strategy to include more high-impact wells
      that can deliver, if successful, much higher value, volume, and follow-on
      potential that has the potential to deliver exponential growth. The Company
      also
      protects itself and its investors by limiting any single prospect investment
      to
      a small percentage of the overall funding that the company has at its
      disposal.


8


**Competitive
      Conditions in the Business**





Index
      is
      a small independent oil and gas exploration and production company that
      represents much less than 1% of the oil and gas industry. It faces competition
      from other oil and gas companies in all aspects of its business, including
      acquisition of producing properties and oil and gas leases, and obtaining goods,
      services and labor.  Many of its competitors have substantially greater
      financial and other resources.  Factors that affect Index’s ability to
      acquire properties include available funds, available information about the
      property and its standards established for minimum projected return on
      investment.  Many of these companies explore for, produce and market oil
      and natural gas, carry on refining operations and market the resultant products
      on a worldwide basis. The primary areas in which we encounter substantial
      competition are in locating and acquiring desirable leasehold acreage for our
      drilling operations, locating and acquiring attractive producing oil and natural
      gas properties, and obtaining purchasers and transporters of the oil and natural
      gas we produce. There is also competition between producers of oil and natural
      gas and other industries producing alternative energy and fuel. Furthermore,
      competitive conditions may be substantially affected by various forms of energy
      legislation and/or regulation considered from time to time by the government
      of
      the United States; however, it is not possible to predict the nature of any
      such
      legislation or regulation that may ultimately be adopted or its effects upon
      our
      future operations. Such laws and regulations may, however, substantially
      increase the costs of exploring for, developing or producing natural gas and
      oil
      and may prevent or delay the commencement or continuation of a given operation.
      The effect of these risks cannot be accurately predicted.





**Customers**





Index
      sells its crude oil and natural gas production to independent purchasers. 
Title to the produced quantities transfers to the purchaser at the time the
      purchaser collects or receives the quantities.  Prices for such production
      are defined in sales contracts and are readily determinable based on certain
      publicly available indices.  The purchasers of such production have
      historically made payment for crude oil and natural gas purchases within
      thirty-five days of the end of each production month.  We periodically
      review the difference between the dates of production and the dates we collect
      payment for such production to ensure that receivables from those purchasers
      are
      collectible. All transportation costs are accounted for as costs that are offset
      against oil and natural gas sales revenue. In the 2007 fiscal year ended March
      31, 2007, approximately 47% and 53% of revenues from the Company’s share of oil
      production were sold to two independent crude oil purchasers, together with
      low
      levels of gas sales, and for the 2006 fiscal year ended March 31, 2006,
      approximately 91% of oil sales were sold to a single independent crude oil
      purchaser. The Company does not believe the loss of any one of its purchasers
      would materially affect its ability to sell the oil and gas it produces. The
      Company believes that other purchasers are available in its areas of
      operations.





**Seasonality
      of Business**





Weather
      conditions affect the demand for, and prices of, oil and natural gas and can
      also delay drilling activities, disrupting our overall business plans. Demand
      for natural gas is typically higher in the fourth and first quarters resulting
      in higher natural gas prices. Conversely, oil is in greater demand in the summer
      months. Due to these seasonal fluctuations, results of operations for individual
      quarterly periods may not be indicative of results, which may be realized on
      an
      annual basis.





**Operational
      Risks**





Oil
      and
      gas exploration and development involves a high degree of risk, which even
      a
      combination of experience, knowledge and careful evaluation may not be able
      to
      overcome. There is no assurance that the Company will discover or acquire
      additional oil and gas in commercial quantities. Oil and gas operations also
      involve the risk that well fires, blowouts, equipment failure, human error
      and
      other circumstances that may cause accidental leakage of toxic or hazardous
      materials, such as petroleum liquids or drilling fluids into the environment,
      or
      cause significant injury to persons or property may occur. In such event,
      substantial liabilities to third parties or governmental entities may be
      incurred, the payment of which could substantially reduce available cash and
      possibly result in loss of oil and gas properties. Such hazards may also
      cause damage to or destruction of wells, producing formations, production
      facilities and pipeline or other processing facilities. The Company is not
      aware
      of any of these instances that have occurred to date that need to be accrued
      for. As is common in the oil and gas industry, the Company will not be insured
      fully against all risks associated with its business either because such
      insurance is not available or because premium costs are considered prohibitive.
      A loss not fully covered by insurance could have a materially adverse effect
      on
      its financial position and results of operations. For further discussion on*risks*see
      section titled “*Risk
      Factors”*set
      forth
      in**“*Item 1
      Description of Business*.”


9





**Governmental
      Regulation**





Domestic
      exploration for, and production and sale of, oil and gas are extensively
      regulated at both the federal and state levels. Legislation affecting the oil
      and gas industry is under constant review for amendment or expansion, frequently
      increasing the regulatory burden. Also, numerous departments and agencies,
      both
      federal and state, are authorized by statute to issue, and have issued, rules
      and regulations binding on the oil and gas industry that often are costly to
      comply with and that carry substantial penalties for failure to comply. In
      addition, production operations are affected by changing tax and other laws
      relating to the petroleum industry, constantly changing administrative
      regulations and possible interruptions or termination by government
      authorities.





State
      regulatory authorities have established rules and regulations requiring permits
      for drilling operations, drilling bonds and reports concerning operations.
      Most
      states in which we operate also have statutes and regulations governing a number
      of environmental and conservation matters, including the unitization or pooling
      of oil and gas properties and establishment of maximum rates of production
      from
      oil and gas wells. Many states also restrict production to the market demand
      for
      oil and gas. Such statutes and regulations may limit the rate at which oil
      and
      gas could otherwise be produced from our properties.





Thus,
      the
      Company’s operations are subject to extensive and continually changing
      regulation affecting the oil and natural gas industry. Many departments and
      agencies, both federal and state, are authorized by statute to issue, and have
      issued, rules and regulations binding on the oil and natural gas industry
      and its individual participants. The failure to comply with such rules and
      regulations can result in substantial penalties. The regulatory burden on the
      oil and natural gas industry increases its cost of doing business and,
      consequently, affects its profitability. The Company does not believe that
      we
      are affected in a significantly different manner by these regulations than
      are
      its competitors.




*Transportation
      and Sale of Natural Gas*





Even
      though Index initially focused on crude oil production, management believes
      that
      natural gas sales could contribute a substantial part to its total sales. The
      interstate transportation and sale for resale of natural gas is subject to
      federal regulation, including transportation rates and various other matters,
      by
      the Federal Energy Regulatory Commission (“FERC”). Federal wellhead price
      controls on all domestic natural gas were terminated on January 1, 1992 and
      none of Index’s natural gas sales prices are currently subject to FERC
      regulation. Index cannot predict the impact of future government regulation
      on
      any natural gas operations.




*Regulation
      of Production*





The
      production of crude oil and natural gas is subject to regulation under a wide
      range of state and federal statutes, rules, orders and regulations. State and
      federal statutes and regulations require permits for drilling operations,
      drilling bonds, and reports concerning operations. Texas, Louisiana and Kansas,
      the states in which Index owns properties, have regulations governing
      conservation matters, including provisions for the unitization or pooling of
      oil
      and natural gas properties, the establishment of maximum rates of production
      from oil and natural gas wells, the spacing of wells, and the plugging and
      abandonment of wells and removal of related production equipment. Texas,
      Louisiana and Kansas also restrict production to the market demand for crude
      oil
      and natural gas. These regulations can limit the amount of oil and natural
      gas
Index
      can
      produce from its wells, limit the number of wells, or limit the locations at
      which it can conduct drilling operations. Moreover, each state generally imposes
      a production or severance tax with respect to production and sale of crude
      oil,
      natural gas and gas liquids within its jurisdiction.


10




*Environmental
      Regulations*





Index’s
      operations are subject to numerous stringent and complex laws and regulations
      at
      the federal, state and local levels governing the discharge of materials into
      the environment or otherwise relating to human health and environmental
      protection. These laws and regulations may, among other things, require
      acquisition of a permit before drilling or development commences, restrict
      the
      types, quantities and concentrations of various materials that can be released
      into the environment in connection with development and production activities,
      and limit or prohibit construction or drilling activities in certain
      ecologically sensitive and other protected areas.  Failure to comply with
      these laws and regulations or to obtain or comply with permits may result in
      the
      assessment of administrative, civil and criminal penalties, imposition of
      remedial requirements and the imposition of injunctions to force future
      compliance. Index’s business and prospects could be adversely affected to the
      extent laws are enacted or other governmental action is taken that prohibits
      or
      restricts its development and production activities or imposes environmental
      protection requirements that result in increased costs to it or the oil and
      natural gas industry in general.





Oil
      and
      natural gas exploration and production activities on federal lands are subject
      to the National Environmental Policy Act, or NEPA. NEPA requires federal
      agencies, including the Department of Interior and various other federal, state,
      and local environmental, zoning, health and safety agencies, to evaluate major
      agency actions having the potential to significantly impact the environment
      human, animal and plant health, and affect our operations and costs. In recent
      years, environmental regulations have taken a cradle to grave approach to waste
      management, regulating and creating liabilities for the waste at its inception
      to final disposition. Our oil and gas exploration, development and production
      operations are subject to numerous environmental programs, some of which include
      solid and hazardous waste management, water protection, air emission controls
      and situs controls affecting wetlands, coastal operations and
      antiquities.





In
      the
      course of evaluations, an agency will have an “Environmental Assessment (EA)
      prepared that assesses the potential direct, indirect and cumulative impacts
      of
      a proposed project and, if necessary, will prepare a more detailed Environmental
      Impact Statement (“EIS”) that may be made available for public review and
      comment. All of our current exploration and production activities, as well
      as
      proposed exploration and development plans, on federal lands require
      governmental permits that are subject to the requirements of NEPA. This process
      has the potential to delay the development of oil and natural gas
      projects.




In
      addition, environmental programs typically regulate the permitting, construction
      and operations of a facility. Many factors, including public perception, can
      materially impact the ability to secure an environmental construction or
      operation permit. Once operational, enforcement measures can include significant
      civil penalties for regulatory violations regardless of intent. Under
      appropriate circumstances, an administrative agency can request a cease and
      desist order to terminate operations.





Index
      conducts its development and production activities to comply with all applicable
      environmental regulations, permits and lease conditions, and it monitors
      subcontractors for environment compliance. While Index believes its operations
      conform to those conditions, it remains at risk for inadvertent noncompliance,
      conditions beyond its control and undetected conditions resulting from
      activities by prior owners or operators of properties in which it owns
      interests.  Pursuant to industry customs, a project’s operator obtains
      insurance policy coverage for the each of the participant’s in a particular
      project at a level of coverage that is commensurate with the potential loss.





*Occupational
      Safety Regulations*


11


Index
      is
      subject to various federal and state laws and regulations intended to promote
      occupational health and safety. Although all of its wells are drilled by
      independent subcontractors under its “footage” or “day rate” drilling contracts,
      Index has adopted environmental and safety policies and procedures designed
      to
      protect the safety of its own supervisory staff and to monitor all subcontracted
      operations for compliance with applicable regulatory requirements and lease
      conditions, including environmental and safety compliance. This program includes
      regular field inspections of its drill sites and producing wells by members
      of
      its operations staff or consultants and internal assessments of its compliance
      procedures. Index considers the cost of compliance a manageable and necessary
      part of our business.




*Federal,
      State or Native American Leases*





Index’s
      operations on federal, state or Native American oil and gas leases are subject
      to numerous restrictions, including nondiscrimination statutes. Such operations
      must be conducted pursuant to certain on-site security regulations and other
      permits and authorizations issued by the Bureau of Land Management, Minerals
      Management Service and other agencies.





*Waste
      Handling*





The
      Resource Conservation and Recovery Act, or RCRA, and comparable state statutes,
      affect oil and natural gas exploration and production activities by imposing
      regulations on the generation, transportation, treatment, storage, disposal
      and
      cleanup of “hazardous wastes” and on the disposal of non-hazardous wastes. Under
      the auspices of the Environmental Protection Agency, or EPA, the individual
      states administer some or all of the provisions of RCRA, sometimes in
      conjunction with their own, more stringent requirements. Drilling fluids,
      produced waters, and most of the other wastes associated with the exploration,
      development, and production of crude oil, natural gas, or geothermal energy
      constitute “solid wastes”, which are regulated under the less stringent
      non-hazardous waste provisions, but there is no guarantee that the EPA or the
      individual states will not adopt more stringent requirements for the handling
      of
      non-hazardous wastes or categorize some non-hazardous wastes as hazardous for
      future regulation. Indeed, legislation has been proposed from time to time
      in
      Congress to re-categorize certain oil and natural gas exploration and production
      wastes as “hazardous wastes”.





We
      believe that we are currently in substantial compliance with the requirements
      of
      RCRA and related state and local laws and regulations, and that we hold all
      necessary and up-to-date permits, registrations and other authorizations to
      the
      extent that our operations require them under such laws.





We
      are
      also subject to federal and state Hazard Communications and Community Right
      to
      Know statutes and regulations. These regulations govern record keeping and
      reporting of the use and release of hazardous substances. We believe we are
      in
      compliance with these requirements in all material respects.





We
      may be
      required in the future to make substantial outlays to comply with environmental
      laws and regulations. The additional changes in operating procedures and
      expenditures required to comply with future laws dealing with the protection
      of
      the environment cannot be predicted.





**Employees**





As
      of
      March 31, 2007, Index Ltd. had full time employment agreements with the
      following executive directors of the Company pursuant to which they provide
      services to the Company: Mr. Andy Boetius, CFO, Mr. Lyndon West, CEO, and Mr.
      Dan Murphy, Chairman. In addition, the Company had a full time employment
      Agreement with John Williams, Executive
      Vice President Exploration and Production and a director .
      In
      addition, the Company had employment letter agreements with Mr. David Jenkins
      and Mr. Michael Scrutton, its 2 non-executive directors. The Company also had
      one employee on its administrative staff.




The
      Company also contracts for the services of independent consultants involved
      in
      petroleum engineering, land, regulatory accounting, financial and other
      disciplines as needed. None of the Company’s employees are
      represented by labor unions or covered by any collective bargaining agreement.
      The Company believes that its relations with its employees are
      satisfactory.


12




**RISK
      FACTORS**





You
      should carefully consider the risks described below as well as other information
      provided to you in this document, including information in the section of this
      document entitled “Information Regarding Forward Looking Statements.” The risks
      and uncertainties described below are not the only ones facing the Company.
      Additional risks and uncertainties not presently known to the Company or that
      the Company currently believes are immaterial may also impair the Company’s
      business operations. If any of the following risks actually occur, the Company’s
      business, financial condition or results of operations could be materially
      adversely affected, the value of the Company’s Common Stock could decline, and
      you may lose all or part of your investment.




**Risks
      Related To Index’s Financial Results**





***Index
      is at an early stage of development and has a limited operating history.***





Index
      was
      formed in 2003 operating as a private company, Index Ltd, formed under the
      laws
      of the United Kingdom and through which entity operations were conducted prior
      to the revere merger which occurred in 2006. As of the date of this Annual
      Report, Index has a limited operating history upon which you can base an
      evaluation of its business and prospects. As a start-up company in the early
      stage of development, there are substantial risks, uncertainties, expenses
      and
      difficulties Index is subject to. You should consider an investment in Index
      in
      light of these risks, uncertainties, expenses and difficulties. To address
      these
      risks and uncertainties, Index must do the following:





§
            Successfully
                execute its business strategy;





§
            Continue
                to develop its oil exploration and production assets;





§
            Respond
                to competitive developments; and





§
            Attract,
                integrate, retain and motivate qualified personnel.





Index
      may
      be unable to accomplish one or more of these objectives, which could cause
      its
      business to suffer. In addition, accomplishing one or more of these objectives
      might be very expensive, which could harm its financial results. As a result,
      there can be no assurance that Index will be successful in its oil and gas
      activities. Index’s future performance will depend upon its management and their
      ability to locate and negotiate additional oil and gas opportunities in which
      it
      is solely involved or participate in as a project partner. There can be no
      assurance that it will be successful in its efforts. Its inability to locate
      additional opportunities, successfully execute its business strategy, hire
      additional management and other personnel, or respond to competitive
      developments, could have a material adverse effect on its results of operations.
      There can be no assurance that its operations will be profitable.





***Index
      has incurred significant losses since inception and anticipates that it will
      continue to incur losses for the foreseeable future.***





As
      of
      March 31, 2007, Index had incurred a financial loss after taxation of
      approximately $4.8 million. Index plans to significantly increase its corporate
      expenses and general overhead. Management believes that its business proposition
      will be appealing to the oil exploration and development community. There is
      no
      assurance, however, that Index will be able to successfully achieve an increase
      in production and reserves at its existing properties or future acquisitions,
      so
      as to operate in a profitable manner. If the business of oil and gas well
      exploration and development slows, and commodity prices notably decline, its
      margins
      and profitability will suffer. Index is unable to predict whether its operating
      results will be profitable.


13





Management
      believes that long-term profitability and growth will depend on its ability
      to:





·
            Develop
                the reputation of Index as a successful oil and gas exploration and
                production company;





·
            Successfully
                identify and exploit appropriate opportunities;





·
            Develop
                viable strategic alliances; and





·
            Maintain
                sufficient volume of successful new oil and gas opportunities.





***Index
      will need to raise substantial additional capital to fund its operations, and
      its failure to obtain funding when needed may force it to delay, reduce or
      eliminate its operations, or cause its business to fail in its entirety.***





Index’s
      operations have consumed a substantial amount of cash since inception. Index
      expects to continue to spend substantial amounts to:





·
            identify
                and exploit oil and gas opportunities;





·
            maintain
                and increase the company’s human resource including full time and
                consultant resources;





·
            evaluate
                drilling opportunities; and





·
            evaluate
                future projects and areas for long term development.





Index
      expects that its cash requirement for operations (Capex) will increase
      significantly over the next several years. Index will be required to raise
      additional capital to meet anticipated needs. Index’s future funding
      requirements will depend on many factors, including, but not limited to:





·
            success
                of ongoing operations;





·
            forward
                commodity prices; and





·
            operating
                costs (including human resource costs).





To
      date,
      Index’s sources of cash have been primarily limited to the sale of equity
      securities. Index cannot be certain that additional funding will be available
      on
      acceptable terms, or at all. To the extent that Index raises additional funds
      by
      issuing equity securities, its stockholders may experience significant dilution.
      Any debt financing, if available, may involve restrictive covenants that impact
      Index’s ability to conduct its business. If Index is unable to raise additional
      capital, when required, or on acceptable terms, it may have to significantly
      delay, scale back or discontinue its operations, or cause its business to fail
      in its entirety.





***Index
      may be unable to effectively maintain its oil and gas exploration business.***





Timely,
      effective and successful oil exploration and production is essential to
      maintaining Index’s reputation as a developing oil exploration company. Lack of
      opportunities or success may significantly affect Index’s viability. The
      principal components of Index’s operating costs include salaries paid to
      corporate staff, costs of retention of qualified independent engineers and
      geologists, annual system maintenance and rental costs, insurance,
      transportation costs and substantial equipment and machinery costs.
      Because the majority of these expenses are fixed, a reduction in the number
      of
      successful oil exploration projects, failures in discovery of new opportunities
      or termination of ongoing projects will result in lower revenues and margins.
      Prior success in exploration or production of oil wells does not guarantee
      future success in similar ventures; thus, its revenues could decline and its
      ability to effectively engage in oil recovery business would be harmed.


14





***Fluctuations
      in Index’s operating results and announcements and developments concerning its
      business affect its stock price.***





Index’s
      quarterly operating results, the number of stockholders desiring to sell their
      shares, changes in general economic conditions and the financial markets, the
      execution of new contracts and the completion of existing agreements and other
      developments affecting it, could cause the market price of its common stock
      to
      fluctuate substantially.




**Risks
      Related to Index’s Business**





***Index
      may be unable to renew or maintain its contracts with independent purchasers,
      which would harm its business and financial results.***





Upon
      expiration of its independent purchasers’ contracts, Index is subject to the
      risk that the oil and natural gas purchasers will cease buying Index’s oil and
      gas production output. It is not always possible to immediately obtain
      replacement oil and gas purchasers as the industry is extremely competitive.
      If
      these contracts are not renewed, it could result in a significant negative
      impact on Index’s business.





Management
      believes that long-term profitability and growth will depend on its ability
      to:





·
            Develop
                the reputation of Index as a successful oil and gas exploration and
                production company;





***Index
      may be subject to liability risks, which could be costly and negatively impact
      its business and financial results.***





Index
      may
      be subject to liability claims. There are currently many known hazards
      associated with the exploration, discovery and delivery of natural gas and
      oil.
      Other significant hazards may be discovered in the future. To protect against
      possible liability, Index and its purchasers maintain liability insurance with
      coverage that they believe is consistent with industry practice and appropriate
      in light of the risks attendant to its business. However, if Index and its
      purchasers are unable to maintain insurance in the future at an acceptable
      cost
      or at all, or if its insurance does not fully cover it and a successful claim
      was made against Index and/or its purchasers, Index could be exposed to
      liability. Any claim made against Index not fully covered by insurance could
      be
      costly to defend against, result in a substantial damage award against Index
      and
      divert the attention of management from Index’s operations, which could have an
      adverse effect on its financial performance.





***Loss
      of key executives and failure to attract qualified managers, technologists,
      independent engineers and geologists could limit Index’s growth and negatively
      impact its operations.***





Index
      depends upon its management team to a substantial extent. In particular, Index
      depends upon Mr. Lyndon West, its Chief Executive Officer, Mr. Daniel
      Murphy, its Chairman of the Board of Directors, Mr. John Williams, its Vice
      President Exploration and Production, and Mr. Andrew Boetius, its Chief
      Financial Officer, for their skills, experience, and knowledge of the company
      and industry contacts. Currently, Index has employment or non executive director
      agreements with all of its directors who are: Lyndon West, Daniel Murphy, John
      Williams, David Jenkins, Michael Scrutton and Andrew Boetius. The loss of any
      of
      these executives, or other members of Index’s management team, could have a
      material adverse effect on its business, results of operations or financial
      condition.


15





As
      Index
      grows, it may increasingly require field managers with experience in its
      industry and skilled engineers, geologists and technologists to operate its
      diagnostic, seismic and 3D equipment. It is impossible to predict the
      availability of qualified managers, technologists, skilled engineers and
      geologists or the compensation levels that will be required to hire them. In
      particular, there is a very high demand for qualified technologists who are
      particularly necessary to operate systems similar to the ones that Index
      operates Index may not be able to hire and retain a sufficient number of
      technologists, engineers and geologists and it may be required to pay bonuses
      and higher independent contractor rates to its technologists, engineers and
      geologists which would increase its expenses. The loss of the services of any
      member of its senior management or Index’s inability to hire qualified managers,
      technologists, skilled engineers and geologists at economically reasonable
      compensation levels could adversely affect Index’s ability to operate and grow
      its business.





***Complying
      with federal and state regulations is an expensive and time-consuming process,
      and any failure to comply could result in substantial penalties.***





Index’s
      operations are directly or indirectly subject to extensive and continually
      changing regulation affecting the oil and natural gas industry. Many departments
      and agencies, both federal and state, are authorized by statute to issue, and
      have issued, rules and regulations binding on the oil and natural gas
      industry and its individual participants. The failure to comply with such
      rules and regulations can result in substantial penalties. The regulatory
      burden on the oil and natural gas industry increases its cost of doing business
      and, consequently, affects its profitability. Index does not believe that we
      are
      affected in a significantly different manner by these regulations than are
      its
      competitors.





If
      Index’s operations are found to be in violation of any of the laws and
      regulations to which it is subject, it may be subject to the applicable penalty
      associated with the violation, including civil and criminal penalties, damages,
      fines and the curtailment of its operations. Any penalties, damages, fines
      or
      curtailment of Index’s operations, individually or in the aggregate, could
      adversely affect its ability to operate its business and its financial results.
      The risk of Index being found in violation of these laws and regulations is
      increased by the fact that many of them have not been fully interpreted by
      the
      regulatory authorities or the courts, and their provisions are open to a variety
      of interpretations. Any action against Index for violation of these laws or
      regulations, even if it successfully defends against it, could cause Index
      to
      incur significant legal expenses and divert management’s attention from the
      operation of its business.





***Index
      may experience competition from other oil and gas exploration and production
      companies and this competition could adversely affect Index’s revenues and its
      business.***





The
      market for oil and gas recovery projects is generally highly competitive.
      Index’s ability to compete depends on many factors, many of which are outside of
      its control. These factors include: timing and market acceptance, introduction
      of competitive technologies, price and purchaser’s interest in acquiring Index’s
      oil and natural gas output.





Many
      existing competitors, as well as potential new competitors, have longer
      operating histories, greater name recognition, substantial track records, and
      significantly greater financial, technical and technological resources than
      Index. This may allow them to devote greater resources to the development and
      promotion of their oil and gas exploration and production projects. Many of
      these competitors offer a wider range of oil and gas opportunities not available
      to Index and may attract business partners consequently resulting in a decrease
      of Index’s business opportunities. These competitors may also engage in more
      extensive research and development, adopt more aggressive strategies and make
      more attractive offers to existing and potential purchasers, and partners.
      Furthermore, competitors may develop technology and oil and gas exploration
      strategies that are equal or superior to Index’s and achieve greater market
      recognition. In addition, current and potential competitors have established
      or
      may establish cooperative relationships among themselves or with third parties
      to better address the needs of our target market. As a result, it is possible
      that new competitors may emerge and rapidly acquire significant market share.





16


Other
      very large companies that are primarily focused on offering competitive products
      include Exxon/Mobil, Shell and Yukos and numerous other large oil and gas
      recovery companies.





There
      can
      be no assurance that Index will be able to compete successfully against its
      current or future competitors or that competition will not have a material
      adverse effect on Index’s business, results of operations and financial
      condition.





***If
      Index is unable to protect its intellectual property effectively, it may be
      unable to prevent third parties from using its technologies and methods, which
      would impair its competitive advantage.***


****


Index
      does not believe that its operations or products infringe on the intellectual
      property rights of others. However, there can be no assurance that others will
      not assert infringement or trade secret claims against Index with respect to
      its
      current or future technologies or that any such assertion will not require
      it to
      enter into a license agreement or royalty arrangement with the party asserting
      the claim. Responding to and defending any such claims may distract the
      attention of Index’s management and have an adverse effect on its business,
      financial condition and results of operations.





Others
      may claim in the future that Index has infringed their past, current or future
      technologies. Index expects that participants in its markets increasingly will
      be subject to infringement claims as the number of competitors grows. Any claim
      like this, whether meritorious or not, could be time-consuming, and result
      in
      costly litigation and possibly result in agreements covering intellectual
      property secrets and technologies. These agreements might not be available
      on
      acceptable terms or at all. As a result, any claim like this could harm Index’s
      business.





Index
      regards the protection of its copyrights, service marks, trademarks, and trade
      secrets as critical to its success. Index relies on a combination of patent,
      copyright, trademark, service mark and trade secret laws and contractual
      restrictions to protect its proprietary rights in products and services. When
      applicable, it will enter into confidentiality and invention assignment
      agreements with employees and contractors, and nondisclosure agreements with
      parties it conducts business with in order to limit access to and disclosure
      of
      its proprietary information. These contractual arrangements and the other steps
      taken to protect its intellectual property may not prevent misappropriation
      of
      its technology or deter independent third-party development of similar
      technologies. Index intends to pursue the registration of trademarks and service
      marks in the U.S. and internationally. Effective trademark, service mark,
      copyright and trade secret protection may not be available in every country
      in
      which its services are made available.





***Index
      will need to increase the size of its organization, and may experience
      difficulties in managing growth.***





Index
      is
      a small company with minimal employees as of March 31, 2007. Index expects
      to
      experience a period of significant expansion in headcount, facilities,
      infrastructure and overhead and anticipates that further expansion will be
      required to address potential growth and market opportunities. Future growth
      will impose significant added responsibilities on members of management,
      including the need to identify, recruit, maintain and integrate additional
      independent contractors and managers. Index’s future financial performance and
      its ability to compete effectively will depend, in part, on its ability to
      manage any future growth effectively.





***Oil
      and natural gas prices are volatile, and low prices could have a material
      adverse impact on our business.***





Our
      revenues, profitability and future growth and the carrying value of our
      properties depend substantially on prevailing oil and gas prices. Prices also
      affect the amount of cash flow available for capital expenditures and our
      ability to borrow and raise additional capital. The amount we will be able
      to
      borrow under any senior revolving credit facility will be subject to periodic
      redetermination based in part on changing expectations of future prices. Lower
      prices may also reduce the amount of oil and gas that we can economically
      produce and have an adverse effect on the value of our properties. Prices for
      oil and gas have increased
      significantly and been more volatile over the past twelve months. Historically,
      the markets for oil and gas have been volatile, and they are likely to continue
      to be volatile in the future. Among the factors that can cause volatility
      are:


17





**•**
            
            the
                domestic and foreign supply of oil and gas;**•**
            
            the
                ability of members of the Organization of Petroleum Exporting Countries,
                or OPEC, and other producing countries to agree upon and maintain
                oil
                prices and production levels;**•**
            
            political
                instability, armed conflict or terrorist attacks, whether or not
                in oil or
                gas producing regions;**•**
            
            the
                level of consumer product demand;**•**
            
            the
                growth of consumer product demand in emerging markets, such as
                China;**•**
            
            labor
                unrest in oil and gas producing regions;**•**
            
            weather
                conditions, including hurricanes and other natural
                disasters;**•**
            
            the
                price and availability of alternative fuels;**•**
            
            the
                price of foreign imports;**•**
            
            worldwide
                economic conditions; and**•**
            
            the
                availability of liquid natural gas
                imports.





These
      external factors and the volatile nature of the energy markets make it difficult
      to estimate future prices of oil and gas and our ability to raise
      capital.





***Index’s
      profit margins may be adversely affected by fluctuations in the selling price
      and production cost of gasoline.*** ****





Oil
      prices are significantly influenced by the supply of and demand for gasoline.
      Index’s results of operations may be materially harmed if the demand for or the
      price of gasoline decreases. Conversely, a prolonged increase in the price
      of or
      demand for gasoline could lead the U.S. government to take actions that maybe
      adverse to us, such easing the import of foreign oil and gas into the
      U.S.





***Transportation
      delays, including as a result of disruptions to infrastructure, could adversely
      affect Index’s operations.***





Index’s
      business will depend on the availability of a distribution infrastructure.
      Any
      disruptions in this infrastructure network, whether caused by earthquakes,
      storms, other natural disasters or human error or malfeasance, could materially
      impact our business. Therefore, any unexpected delay in transportation of
      Index’s produced oil and gas could result in significant disruption to Index’s
      operations. Index relies upon others to maintain the production of its wells
      and
      distribution of oil and gas, and any failure on their part to maintain the
      wells
      and corresponding production could impede the delivery of Index’s oil and gas,
      impose additional costs on it or otherwise cause its results of operations
      or
      financial condition to suffer.





***Index’s
      business may be influenced by seasonal fluctuations.***





Index’s
      operating results may be influenced by seasonal fluctuations in the price of
      oil. The price of oil tends to rise during the winter and summer seasons and
      tends to decrease during the spring
      season. Furthermore, the price of unleaded gasoline tends to rise during each
      of
      the summer and winter. The price for natural gas, however, tends to be lower
      in
      the spring and summer and higher in the fall and winter. Given Index’s lack of
      operating history, Index do not know yet how these seasonal fluctuations will
      affect its operating results over time.







18


*Assets we acquire may prove to be worth less
      than
      we paid because of uncertainties in evaluating recoverable reserves and
      potential liabilities.*




Our
      initial growth is due to acquisitions of properties and undeveloped leaseholds.
      We expect acquisitions will also contribute to our future growth. Successful
      acquisitions require an assessment of a number of factors, including estimates
      of recoverable reserves, exploration potential, future oil and gas prices,
      operating and capital costs and potential environmental and other liabilities.
      Such assessments are inexact and their accuracy is inherently uncertain. In
      connection with our assessments, we perform a review of the acquired properties
      which we believe is generally consistent with industry practices. However,
      such
      a review will not reveal all existing or potential problems. In addition, our
      review may not permit us to become sufficiently familiar with the properties
      to
      fully assess their deficiencies and capabilities. We do not inspect every well.
      Even when we inspect a well, we do not always discover structural, subsurface
      and environmental problems that may exist or arise. We are generally not
      entitled to contractual indemnification for preclosing liabilities, including
      environmental liabilities. Normally, we acquire interests in properties on
      an
“as is” basis with limited remedies for breaches of representations and
      warranties.





As
      a
      result of these factors, we may not be able to acquire oil and gas properties
      that contain economically recoverable reserves or be able to complete such
      acquisitions on acceptable terms.





***Estimates
      of oil and gas reserves are uncertain and any material inaccuracies in these
      reserve estimates will materially affect the quantities and the value of our
      reserves.***





This
      Annual Report contains estimates of our proved oil and gas reserves. These
      estimates are based upon various assumptions, including assumptions required
      by
      the SEC relating to oil and gas prices, drilling and operating expenses, capital
      expenditures, taxes and availability of funds. The process of estimating oil
      and
      gas reserves is complex. This process requires significant decisions and
      assumptions in the evaluation of available geological, geophysical, engineering
      and economic data for each reservoir.





Actual
      future production, oil and gas prices, revenues, taxes, development
      expenditures, operating expenses and quantities of recoverable oil and gas
      reserves will vary from those estimated. Any significant variance could
      materially affect the estimated quantities and the value of our reserves. Our
      properties may also be susceptible to hydrocarbon drainage from production
      by
      other operators on adjacent properties. In addition, we may adjust estimates
      of
      proved reserves to reflect production history, results of exploration and
      development, prevailing oil and gas prices and other factors, many of which
      are
      beyond our control.





Recovery
      of undeveloped reserves requires significant capital expenditures and successful
      drilling operations. The reserve data assumes that we will make capital
      expenditures to develop our reserves. Although we have prepared estimates of
      these oil and gas reserves and the costs associated with development of these
      reserves in accordance with SEC regulations, we cannot assure you that the
      estimated costs or estimated reserves are accurate, that development will occur
      as scheduled or that the actual results will be as estimated.





***Our
      exploration and development drilling efforts and the operation of our wells
      may
      not be profitable or achieve our targeted returns.***





We
      require significant amounts of undeveloped leasehold acreage in order to further
      our development efforts. Exploration, development, drilling and production
      activities are subject to many risks, including the risk that commercially
      productive reservoirs will not be discovered. We invest in property, including
      undeveloped leasehold acreage, which we believe will result in projects that
      will add value over time. However, we cannot guarantee that all of our prospects
      will result in viable projects or that we will not abandon our initial
      investments. Additionally, we cannot guarantee that the leasehold acreage we
      acquire will be profitably developed, that new wells drilled by us will be
      productive or that we will recover all or any portion of our investment in
      such
      leasehold acreage or wells. Drilling for oil and gas may involve unprofitable
      efforts, not only from dry wells but also from wells that are productive but
      do
      not produce sufficient net reserves to return a profit after deducting operating
      and other costs. In addition, wells that are profitable may not achieve our
      targeted rate of return. Our ability to achieve our target results are dependent
      upon the current and future market prices for oil and gas, costs associated
      with
      producing oil and gas
      and
      our ability to add reserves at an acceptable cost. We rely to a significant
      extent on 3D seismic data and other advanced technologies in identifying
      leasehold acreage prospects and in conducting our exploration activities. The
      3D
      seismic data and other technologies we use do not allow us to know conclusively
      prior to acquisition of leasehold acreage or drilling a well whether oil or
      gas
      is present or may be produced economically. The use of 3D seismic data and
      other
      technologies also requires greater pre-drilling expenditures than traditional
      drilling strategies.


19





In
      addition, we may not be successful in implementing our business strategy of
      controlling and reducing our drilling and production costs in order to improve
      our overall return. The cost of drilling, completing and operating a well is
      often uncertain and cost factors can adversely affect the economics of a
      project. We cannot predict the cost of drilling, and we may be forced to limit,
      delay or cancel drilling operations as a result of a variety of factors,
      including:





**•**
            
            unexpected
                drilling conditions;**•**
            
            pressure
                or irregularities in formations;**•**
            
            equipment
                failures or accidents;**•**
            
            adverse
                weather conditions, including hurricanes or other natural
                disasters;**•**
            
            compliance
                with governmental requirements; and**•**
            
            shortages
                or delays in the availability of drilling rigs and the delivery of
                equipment.





***The
      unavailability or high cost of drilling rigs, equipment, supplies, personnel
      and
      oil field services could adversely affect our ability to execute our exploration
      and development plans on a timely basis and within our
      budget.***





Our
      industry is cyclical and, from time to time, there is a shortage of drilling
      rigs, equipment, supplies or qualified personnel. During these periods, the
      costs and delivery times of rigs, equipment and supplies are substantially
      greater. In addition, the demand for, and wage rates of, qualified drilling
      rig
      crews rise as the number of active rigs in service increases. As a result of
      increasing levels of exploration and production in response to strong prices
      of
      oil and natural gas, the demand for oilfield services has risen, and the costs
      of these services are increasing, while the quality of these services may
      suffer. If the unavailability or high cost of drilling rigs, equipment, supplies
      or qualified personnel were particularly severe in Kansas, Texas and Louisiana,
      we could be materially and adversely affected because our operations and
      properties are concentrated in those areas.





***The
      marketability of our oil and gas production depends on services and facilities
      that we typically do not own or control. The failure or inaccessibility of
      any
      such services or facilities could result in a curtailment of production and
      revenues.***





The
      marketability of our production depends in part upon the availability, proximity
      and capacity of gathering systems, pipelines and processing facilities. Pursuant
      to interruptible or short term transportation agreements, we generally deliver
      gas through gathering systems and pipelines that we do not own. Under the
      interruptible transportation agreements, the transportation of our gas may
      be
      interrupted due to capacity constraints on the applicable system, for
      maintenance or repair of the system, or for other reasons as dictated by the
      particular agreements. If any of the pipelines or other facilities becomes
      unavailable, we would be required to find a suitable alternative to transport
      and process the gas, which could increase our costs and reduce the revenues
      we
      might obtain from the sale of the gas.





***We
      are dependent on the skill, ability and decisions of third party
      operators.***





We
      do not
      operate any of our properties. The success of the drilling, development and
      production of the oil and gas properties are dependent upon the decisions of
      such third-party operators and their diligence to comply with various laws,
      rules and regulations affecting such properties. The failure of any third-party
      operator to make decisions, perform their services, discharge their obligations,
      deal with regulatory agencies,
      and comply with laws, rules and regulations, including environmental laws and
      regulations in a proper manner with respect to properties in which we have
      an
      interest could result in material adverse consequences to our interest in such
      properties, including substantial penalties and compliance costs. Such adverse
      consequences could result in substantial liabilities to us or reduce the value
      of our properties, which could negatively affect our results of
      operations.


20





***Our
      oil and gas activities are subject to various risks which are beyond our
      control.***





Our
      operations are subject to many risks and hazards incident to exploring and
      drilling for, producing, transporting, marketing and selling oil and gas.
      Although we may take precautionary measures, many of these risks and hazards
      are
      beyond our control and unavoidable under the circumstances. Many of these risks
      or hazards could materially and adversely affect our revenues and expenses,
      the
      ability of certain of our wells to produce oil and gas in commercial quantities,
      the rate of production and the economics of the development of, and our
      investment in the prospects in which we have or will acquire an interest. Any
      of
      these risks and hazards could materially and adversely affect our financial
      condition, results of operations and cash flows. Such risks and hazards
      include:





**•**
            
            human
                error, accidents, labor force and other factors beyond our control
                that
                may cause personal injuries or death to persons and destruction or
                damage
                to equipment and facilities;**•**
            
            blowouts,
                fires, hurricanes, pollution and equipment failures that may result
                in
                damage to or destruction of wells, producing formations, production
                facilities and equipment;**•**
            
            unavailability
                of materials and equipment;**•**
            
            engineering
                and construction delays;**•**
            
            unanticipated
                transportation costs and delays;**•**
            
            unfavorable
                weather conditions;**•**
            
            hazards
                resulting from unusual or unexpected geological or environmental
                conditions;**•**
            
            environmental
                regulations and requirements;**•**
            
            accidental
                leakage of toxic or hazardous materials, such as petroleum liquids
                or
                drilling fluids, into the environment;**•**
            
            changes
                in laws and regulations, including laws and regulations applicable
                to oil
                and gas activities or markets for the oil and gas
                produced;**•**
            
            fluctuations
                in supply and demand for oil and gas causing variations of the prices
                we
                receive for our oil and gas production; and**•**
            
            the
                internal and political decisions of OPEC and oil and natural gas
                producing
                nations and their impact upon oil and gas
                prices.





As
      a
      result of these risks, expenditures, quantities and rates of production,
      revenues and cash operating costs may be materially adversely affected and
      may
      differ materially from those anticipated by us.





***Governmental
      and environmental regulations could adversely affect our
      business.***





Our
      business is subject to federal, state and local laws and regulations on
      taxation, the exploration for and development, production and marketing of
      oil
      and gas and safety matters. Many laws and regulations require drilling permits
      and govern the spacing of wells, rates of production, prevention of waste,
      unitization and pooling of properties and other matters. These laws and
      regulations have increased the costs of planning, designing, drilling,
      installing, operating and abandoning our oil and gas wells and other facilities.
      In addition, these laws and regulations, and any others that are passed by
      the
      jurisdictions where we have production, could limit the total number of wells
      drilled or the allowable production from successful wells, which could limit
      our
      revenues.





Our
      operations are also subject to complex environmental laws and regulations
      adopted by the various jurisdictions in which we have or expect to have oil
      and
      gas operations. We could incur liability to governments
      or third parties for any unlawful discharge of oil, gas or other pollutants
      into
      the air, soil or water, including responsibility for remedial
      costs.


21





We
      could
      potentially discharge these materials into the environment in any of the
      following ways:





**•**
            
            from
                a well or drilling equipment at a drill site;**•**
            
            from
                gathering systems, pipelines, transportation facilities and storage
                tanks;**•**
            
            damage
                to oil and gas wells resulting from accidents during normal operations;
                and**•**
            
            blowouts,
                hurricanes, cratering and
                explosions.





Because
      the requirements imposed by laws and regulations are frequently changed, we
      cannot assure you that laws and regulations enacted in the future, including
      changes to existing laws and regulations, will not adversely affect our
      business. In addition, because we acquire interests in properties that may
      have
      been operated in the past by others and are currently operated by others, we
      may
      be liable for environmental damage caused by those operators.





***We
      cannot be certain that the insurance coverage maintained by us will be adequate
      to cover all losses that may be sustained in connection with all oil and gas
      activities.***





We
      maintain general and excess liability policies, which we consider to be
      reasonable and consistent with industry standards. These policies generally
      cover:





**•**
            
            personal
                injury;**•**
            
            bodily
                injury;**•**
            
            third
                party property damage;**•**
            
            medical
                expenses;**•**
            
            legal
                defense costs;**•**
            
            pollution
                in some cases;**•**
            
            well
                blowouts in some cases; and**•**
            
            workers
                compensation.





There
      can
      be no assurance that this insurance coverage will be sufficient to cover every
      claim made against us in the future. A loss in connection with our oil and
      natural gas properties could have a materially adverse effect on our financial
      position and results of operation to the extent that the insurance coverage
      provided under our policies cover only a portion of any such loss.





***Title
      to the properties in which we have an interest may be impaired by title
      defects.***





Our
      operators generally obtain title opinions on significant properties that we
      have
      working interests in. However, there is no assurance that we will not suffer
      a
      monetary loss from title defects or failure. Generally, under the terms of
      the
      operating agreements affecting our properties, any monetary loss is to be borne
      by all parties to any such agreement in proportion to their interests in such
      property. If there are any title defects or defects in assignment of leasehold
      rights in properties in which we hold an interest, we will suffer a financial
      loss  .





***We
      are subject to compliance with securities law, which exposes us to potential
      liabilities, including potential rescission rights*** .




We
      have
      periodically offered and sold our common stock to investors pursuant to certain
      exemptions from the registration requirements of the Securities Act of 1933,
      as
      well as those of various state securities laws. The basis for relying on such
      exemptions is factual; that is, the applicability of such exemptions depends
      upon our conduct and that of those persons contacting prospective investors
      and
      making the offering. We have not received a legal opinion to the effect that
      any
      of our prior offerings were exempt from registration under any federal or state
      law. Instead, we have relied upon the operative facts as the basis for such
      exemptions, including information provided by investors
      themselves.


22




If
      any
      prior offering did not qualify for such exemption, an investor would have the
      right to rescind its purchase of the securities if it so desired. It is possible
      that if an investor should seek rescission, such investor would succeed. A
      similar situation prevails under state law in those states where the securities
      may be offered without registration in reliance on the partial preemption from
      the registration or qualification provisions of such state statutes under the
      National Securities Markets Improvement Act of 1996. If investors were
      successful in seeking rescission, we would face severe financial demands that
      could adversely affect our business and operations. Additionally, if we did
      not
      in fact qualify for the exemptions upon which it has relied, we may become
      subject to significant fines and penalties imposed by the SEC and state
      securities agencies.





**The
      following risks relate principally to the Company’s Common Stock and its market
      value**





***There
      is a limited market for our common stock which may make it more difficult for
      you to dispose of your stock.***





Our
      common stock has been quoted on the OTC Bulletin Board under the symbol
      "IXOG.OB" since December 16, 2005. There is a limited trading market for our
      common stock. Furthermore, the trading in our common stock maybe highly
      volatile, as for example, approximately more than one-third of the trading
      days
      during April of 2007 saw trading in our stock of less than 100,000 shares per
      day. During that same period, the smallest number of shares trade in one day
      was
      500 and the largest number of shares traded in one day was 518,875. Accordingly,
      there can be no assurance as to the liquidity of any markets that may develop
      for our common stock, the ability of holders of our Common Stock to sell our
      Common Stock, or the prices at which holders may be able to sell our Common
      Stock.





***The
      price of our Common Stock may be volatile***





The
      trading price of our Common Stock may be highly volatile and could be subject
      to
      fluctuations in response to a number of factors beyond our control. Some of
      these factors are:




•
            our
                results of operations and the performance of our
                competitors;•
            the
                public’s reaction to our press releases, our other public announcements
                and our filings with the Securities and Exchange Commission, or
                SEC;•
            changes
                in earnings estimates or recommendations by research analysts who
                follow,
                or may follow, us or other companies in our industry;•
            changes
                in general economic conditions;•
            changes
                in market prices for oil and gas;


•
            actions
                of our historical equity investors, including sales of common stock
                by our
                directors and executive officers;•
            actions
                by institutional investors trading in our stock;•
            disruption
                of our operations;


•
            any
                major change in our management team;•
            other
                developments affecting us, our industry or our competitors;
                and•
            U.S.
                and international economic, legal and regulatory factors unrelated
                to our
                performance.





In
      recent
      years the stock market has experienced significant price and volume
      fluctuations. These fluctuations may be unrelated to the operating performance
      of particular companies. These broad market fluctuations may cause declines
      in
      the market price of our common stock. The price of our Common Stock could
      fluctuate based upon factors that have little or nothing to do with our company
      or its performance, and those fluctuations could materially reduce our Common
      Stock price.


23


***Our*** ***Common
      Stock*** ***is
      subject to the "penny stock" rules of the SEC and the trading market in our
      securities is limited, which makes transactions in our stock cumbersome and
      may
      reduce the value of an investment in our stock.***




The
      Securities and Exchange Commission has adopted Rule 15g-9 which establishes
      the
      definition of a "penny stock," for the purposes relevant to us, as any equity
      security that has a market price of less than $5.00 per share or with an
      exercise price of less than $5.00 per share, subject to certain exceptions.
      For
      any transaction involving a penny stock, unless exempt, the rules
      require:




·
            that
                a broker or dealer approve a person's account for transactions in
                penny
                stocks; and·
            the
                broker or dealer receive from the investor a written agreement to
                the
                transaction, setting forth the identity and quantity of the penny
                stock to
                be purchased.




In
      order
      to approve a person's account for transactions in penny stocks, the broker
      or
      dealer must:




·
            obtain
                financial information and investment experience objectives of the
                person;
                and·
            make
                a reasonable determination that the transactions in penny stocks
                are
                suitable for that person and the person has sufficient knowledge
                and
                experience in financial matters to be capable of evaluating the risks
                of
                transactions in penny stocks.




The
      broker or dealer must also deliver, prior to any transaction in a penny stock,
      a
      disclosure schedule prepared by the Commission relating to the penny stock
      market, which, in highlight form:





·
            sets
                forth the basis on which the broker or dealer made the suitability
                determination; and·
            that
                the broker or dealer received a signed, written agreement from the
                investor prior to the transaction.




Generally,
      brokers may be less willing to execute transactions in securities subject to
      the
      "penny stock" rules. This may make it more difficult for investors to dispose
      of
      our common stock and cause a decline in the market value of our stock.




Disclosure
      also has to be made about the risks of investing in penny stocks in both public
      offerings and in secondary trading and about the commissions payable to both
      the
      broker-dealer and the registered representative, current quotations for the
      securities and the rights and remedies available to an investor in cases of
      fraud in penny stock transactions. Finally, monthly statements have to be sent
      disclosing recent price information for the penny stock held in the account
      and
      information on the limited market in penny stocks.





***The
      requirements of being a public company, including compliance with the reporting
      requirements of the exchange act and the requirements of the Sarbanes Oxley
      act,
      strains our resources, increases our costs and may distract management, and
      we
      may be unable to comply with these requirements in a timely or cost-effective
      manner.***





As
      a
      public company, we need to comply with laws, regulations and requirements,
      including certain corporate governance provisions of the Sarbanes-Oxley Act
      of
      2002 and related regulations of the SEC and requirements of OTCBB. Complying
      with these statutes, regulations and requirements occupies a significant amount
      of the time of our board of directors and management. We are or may be required
      to:




•
            institute
                a comprehensive compliance function;•
            establish
                internal policies, such as those relating to disclosure controls
                and
                procedures and insider trading;


•
            design,
                establish, evaluate and maintain a system of internal controls over
                financial reporting in compliance with the requirements of
                Section 404 of the Sarbanes-Oxley Act and the related rules and
                regulations of the SEC and the Public Company Accounting Oversight
                Board;•
            prepare
                and distribute periodic reports in compliance with our obligations
                under
                the federal securities laws;


•
            involve
                and retain outside counsel and accountants in the above activities;
                and•
            establish
                an investor relations function.





24


In
      addition, rules adopted by the SEC pursuant to Section 404 of the
      Sarbanes-Oxley Act of 2002 will require annual assessment of our internal
      control over financial reporting, and attestation of the assessment by our
      independent registered public accountants. The requirement of an annual
      assessment of our internal control over financial reporting and the attestation
      of the assessment by our independent registered public accountants will first
      apply to our annual report for fiscal year ended March 31, 2009. As the
      standards that must be met for management to assess the internal control over
      financial reporting as effective are new and complex, when applicable to us,
      will require significant documentation, testing and possible remediation to
      meet
      the detailed standards, and we may encounter problems or delays in completing
      activities necessary to make an assessment of our internal control over
      financial reporting.





In
      the
      future, when these compliance standards are applicable to us, if we are unable
      to accomplish these objectives or achieve required compliance in a timely and
      effective fashion, our ability to comply with our financial reporting
      requirements and other rules that apply to reporting companies could be
      impaired, and we may be subject to sanctions or investigation by regulatory
      authorities such as the SEC or Nasdaq. In addition, failure to comply with
      Section 404 or a report of a material weakness may cause investors to lose
      confidence in us and may have a material adverse effect on our stock
      price.





***The
      Company does not expect to pay dividends in the future. Any return on investment
      may be limited to the value of the Company’s stock.***





The
      Company does not anticipate paying cash dividends on its stock in the
      foreseeable future. The payment of dividends on the Company’s stock will depend
      on its earnings, financial condition and other business and economic factors
      affecting the Company at such time as the board of directors may consider
      relevant. If the Company does not pay dividends, its stock may be less valuable
      because a return on your investment will only occur if the Company’s stock price
      appreciates.





***A
      sale of a substantial number of shares of the Company’s common stock may cause
      the price of its common stock to decline.***





If
      the
      Company’s stockholders sell substantial amounts of the Company’s common stock in
      the public market, including shares issued upon the exercise of outstanding
      options or warrants, the market price of its common stock could fall. These
      sales also may make it more difficult for the Company to sell equity or
      equity-related securities in the future at a time and price that the Company
      deems reasonable or appropriate. Stockholders who have been issued shares in
      the
      Acquisition will be able to sell their shares pursuant to Rule 144 under the
      Securities Act of 1933, beginning one year after the stockholders acquired
      their
      shares.





***The
      exercise of our outstanding warrants and options may depress our stock price***





We
      currently have 6,045,609 warrants and options to purchase shares of our common
      stock outstanding, at March 31, 2007. The exercise of warrants and/or options
      by
      a substantial number of holders within a relatively short period of time could
      have the effect of depressing the market price of our common stock and could
      impair our ability to raise capital through the sale of additional equity
      securities. See Note #11 “-Options and Warrants and Stock-Based Compensation” on
      page F-34 accompanying our audited financial statements filed
      herewith.




***We
      may need additional capital that could dilute the ownership interest of
      investors.***





We
      require substantial working capital to fund our business. If we raise additional
      funds through the issuance of equity, equity-related or convertible debt
      securities, these securities may have rights, preferences
      or privileges senior to those of the rights of holders of our common stock
      and
      they may experience additional dilution. We cannot predict whether additional
      financing will be available to us on favorable terms when required, or at all.
      Since our inception, we have experienced negative cash flow from operations
      and
      expect to experience significant negative cash flow from operations in the
      future. The issuance of additional common stock by our management may have
      the
      effect of further diluting the proportionate equity interest and voting power
      of
      holders of our common stock, including investors in this
      offering.


25





**Item
      2. Description of Property.**





**Principal
      Executive Offices**





We
      hold
      an arrangement to rent our main office comprising of approximately 300 square
      feet which is located at 10,000 Memorial Drive, Suite 440, Houston, Texas 77024.
      Lease payments at fiscal year ended March 31, 2007 were $4,500 per month and
      are
      due on a month-to-month basis.





We
      believe that we have satisfactory title to the properties in which we own an
      interest and used in our business, subject to liens for taxes not yet payable,
      liens incident to minor encumbrances 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
      future.





**Oil
      and Gas Reserves**





The
      March 31, 2007 proved reserve estimates presented in this document were
      prepared by Ancell Energy Consulting, Inc. (“Ancell”). The estimates of
      quantities of proved reserves below were made in accordance with the definitions
      contained in SEC Regulation S-X, Rule 4-10(a). For additional
      information regarding estimates of proved reserves, the preparation of such
      estimates by Ancell and other information about our oil and gas reserves, see
      Item 7 “Financial Statements and Supplementary Data, *Supplemental Oil and Gas Information* .”
Our
      reserves are sensitive to commodity prices and their effect on economic
      producing rates. Our estimated proved reserves are based on oil and gas spot
      market prices in effect for the periods presented in this report on the last
      trading day of March 2007, 2006 and 2005, respectively. There are a number
      of
      uncertainties inherent in estimating quantities of proved reserves, including
      many factors beyond our control, such as commodity pricing. Therefore, the
      reserve information in this Annual Report represents only estimates. Reservoir
      engineering is a subjective process of estimating underground accumulations
      of
      oil and gas that cannot be measured in an exact manner. The accuracy of any
      reserve estimate is a function of the quality of available data and of
      engineering and geological interpretation and judgment. As a result, estimates
      of different engineers may vary. In addition, results of drilling, testing
      and
      production subsequent to the date of an estimate may justify revising the
      original estimate. Accordingly, initial reserve estimates are often different
      from the quantities of oil and gas that are ultimately recovered. The
      meaningfulness of such estimates depends primarily on the accuracy of the
      assumptions upon which they were based. Except to the extent we acquire
      additional properties containing proved reserves or conduct successful
      exploration and development activities or both, our proved reserves will decline
      as reserves are produced.





At
      March 31, 2007, our estimated total proved oil and gas reserves were
      approximately 114.578 Mboe, consisting of 24.333 thousand barrels of oil (MBbls)
      and 541.470 million cubic feet (Mmcf) of natural gas. Approximately 113.198
      Mboe
      or 99.0% of our proved reserves were classified as proved developed and proved
      behind pipe. We focus on maintaining a portfolio of long-lived, lower risk
      reserves along with shorter lived, higher margin reserves. We believe that
      this
      balanced reserve mix provides a diversified cash flow foundation to fund our
      development and exploration drilling program.




26


The
      following table presents certain information as of March 31, 2007 and for our
      reserves and properties all located onshore in the United States. Shut-in wells
      currently not capable of production are excluded from the producing well
      information.




**South****In
                Mboe:**
            
            **Kansas**
            
            **Louisiana**
            
            **Texas**
            
            **Total**Proved
                Reserves at Year EndDeveloped
            
            14.479
            
            
            8.110
            
            
            90.609
            
            
            113.198Undeveloped
            
            1.380
            
            
            -
            
            
            -
            
            
            1.380Total
            
            15.859
            
            
            8.110
            
            
            90.609
            
            
            114.578Gross
                Wells(1)
            
            21.0000
            
            
            1.0000
            
            
            4.0000
            
            
            26.0000Net
                Wells(1)
            
            1.015
            
            
            0.1250
            
            
            1.070
            
            
            2.210




(1)
            *The
                term net as used throughout this document refers to amounts that
                include
                only acreage or production that is owned by the Company and produced
                to
                its interest, less royalties and production due to others. Gross
                Wells
                represents the Operators working interest and Net Wells represents
                our
                working interest share of each well included in the reserve
                report.*




The
      oil
      reserves shown include crude oil and condensate. Oil volumes are expressed
      in
      barrels (Bbl) or thousands barrels (MBbl); a barrel is equivalent to 42 United
      States gallons. Gas volumes are expressed in thousands of standard cubic feet
      (Mcf) at the contract temperature and pressure bases. The term Mboe which is
      defined as thousand of barrels of equivalent oil is also used and is calculated
      by converting gas volumes to oil volumes at the ratio of 6:1.




The
      estimated reserves and future revenue shown in this report are for proved
      developed producing, proved developed non-producing, proved behind pipe and
      proved undeveloped reserves. In accordance with SEC guidelines, our estimates
      do
      not include any probable or possible reserves, which may exist for these
      properties. This report does not include any value, which could be attributed
      to
      interests in undeveloped acreage beyond those tracts for which undeveloped
      reserves have been estimated.




This
      table above is for properties located in Stafford and Barton Counties in Kansas,
      Calcasieu Parish in Louisiana and Brazoria, Goliad, Matagorda and Victoria
      Counties in Texas.




Future
      gross revenue to Index interest is prior to deducting state production taxes
      and
      ad valorem taxes. Future net revenue is calculated after deducting these taxes,
      future capital costs, and operating expenses but before consideration of federal
      income taxes; future net revenue for those properties is calculated after
      deducting net abandonment costs. In accordance with SEC guidelines, the future
      net revenue has been discounted at an annual rate of 10 percent to determine
      its
“present worth.” The present worth is shown to indicate the effect of time on
      the value of money and should not be construed as being the fair market value
      of
      the properties.




Oil
      prices used in this report are based on the March 31, 2007 oil price received
      at
      various points and averaged $58.19 per barrel. Gas prices used in this report
      are based on a March 31, 2007 NYMEX spot market price and averaged of $6.71
      per
      MMBTU, adjusted by lease for energy content, transportation fees, and regional
      price differentials. Oil and gas prices are held constant in accordance with
      SEC
      guidelines.




Lease
      and
      well operating costs are based on operating expense records of Index. For
      non-operated properties, these costs include the per-well overhead expenses
      allowed under joint operating agreements along with costs estimated to be
      incurred at and below the district and field levels. As requested, lease and
      well operating costs for the operated properties include only direct lease
      and
      field level costs. For all properties, headquarters general and administrative
      overhead expenses of Index are not included. Lease and well operating costs
      are
      held constant in accordance with SEC guidelines. Capital costs are included
      as
      required for workovers, new development wells, and production equipment.


27





***Productive
      Wells and Acreage***





As
      of
      March 31, 2007, we had 22 gross productive wells (1.280 net productive
      wells).  Our oil (only) wells totaled 20 gross productive wells and 0.960
      net productive oil wells and our mixed oil and gas wells totaled 2 gross and
      0.320 net mixed oil and gas productive wells. We had no gas only productive
      wells. We reported in our press release dated June 11, 2007, containing our
      operations summary for fiscal year ended March 31, 2007, that oil and gas was
      produced from a total of 23 wells. The difference in the reported number of
      productive wells is due to the fact that this Annual Report represents wells
      and
      reserves information in accordance with SEC guidelines, including the use of
      a
      reserve report prepared by Ancell Energy Consulting, an independent oil and
      gas
      reservoir engineering consulting firm.





*Acreage*





We
      own
      interest in developed and undeveloped oil and gas acreage in the locations
      set
      forth in the table below. These ownership interests generally take the form
      of
      working interests in oil and gas leases or licenses that have varying terms.
      The
      following table presents a summary of our acreage interests as of March 31,
      2007:





**Developed
                Acreage**(1)
            
            **Undeveloped
                Acreage**(1)
            
            **Total
                Acreage**(1)**State**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**Kansas
            
            
            4,533.00
            
            
            181.97
            
            
            6,035.00
            
            
            184.58
            
            
            11,088.00
            
            
            366.55Louisiana
            
            
            132.00
            
            
            12.35
            
            
            -
            
            
            -
            
            
            132.00
            
            
            12.35Texas
            
            
            761.00
            
            
            102.01
            
            
            4,561.00
            
            
            604.99
            
            
            5322.00
            
            
            707.00**Total
                Acreage**
            
            
            5,426.00
            
            
            296.33
            
            
            10,596.00
            
            
            789.57
            
            
            16,542.00
            
            
            1,085.90





(1)
            
            *The
                term Gross Acres represents the Operators interest in acreage and
                Net
                Acreage represents acreage to our interest, less royalties and production
                due to others for each well.*




The
      following is the expiration of the undeveloped acreage by year of
      expiration:





**2007**
            
            **2008**
            
            **2009**
            
            **Thereafter****Gross**
            
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**Undeveloped
                Acreage
            
            
            4,322.00
            
            
            255.32
            
            
            4,152.00
            
            
            357.41
            
            
            2,015.00
            
            
            169.05
            
            
            107.00
            
            
            7.79




We
      account for our oil and gas producing activities using the full cost method
      of
      accounting as prescribed by the SEC. Accordingly, all costs incurred in the
      acquisition, exploration, and development of proved oil and gas properties,
      including the costs of abandoned properties, dry holes, geophysical costs,
      and
      annual lease rentals are capitalized. All general corporate costs are expensed
      as incurred. Sales or other dispositions of oil and gas properties are accounted
      for as adjustments to capitalized costs, with no gain or loss recorded unless
      the ratio of cost to proved reserves would significantly change. Depletion
      of
      evaluated oil and gas properties is computed on the units of production method
      based on proved reserves. The net capitalized costs of evaluated oil and gas
      properties are subject to a full cost ceiling test.





28


Capitalized
      costs of our evaluated and unevaluated properties at March 31, 2007, 2006 and
      2005 are summarized as follows:




**March
                31,****2007**
            
            **2006**
            
            **2005**Capitalized
                costs:Proved
                and evaluated properties
            
            $
            3,254,211
            
            $
            722,056
            
            $
            334,080Unproved
                and unevaluated properties
            
            
            1,927,776
            
            
            356,729
            
            
            76,5295,181,987
            
            
            1,078,785
            
            
            410,609Less
                accumulated depreciation and depletion
            
            
            (315,937
            )
            
            (127,586
            )
            
            (62,275
            )$
            4,866,050
            
            $
            951,199
            
            $
            348,334





***Production***





Our
      oil
      and gas production volumes and average sales price for the twelve months ended
      March 31, 2007, 2006 and 2005, respectively, are as follows:




**Years
                Ended March 31,****2007**
            
            **2006**
            
            **2005**Gas
                production (Mcf)
            
            8.490
            
            -
            
            -Oil
                production (MBbl)
            
            6.660
            
            3.42
            
            2.07Equivalent
                production (Mboe)
            
            8.075
            
            3.42
            
            2.07Average
                price per unit:Gas
                (per Mcf)
            
            $
            6.61
            
            $
            -
            
            $
            -Oil
                (per Bbl)
            
            $
            60.20
            
            $
            55.89
            
            $
            42.64Equivalent
                (per boe)
            
            $
            56.60
            
            $
            55.89
            
            $
            42.64





The
      Company has not entered into any derivative contracts for any purpose from
      the
      period of inception through March 31, 2007.




***Drilling
      Activity*** ****





The
      table
      below sets forth the results of our drilling activities for the periods
      indicated:




**Years
                Ended March 31,****2007**
            
            
            **2006**
            
            
            **2005****Gross**
            
            
            **Net**
            
            
            **Gross**
            
            
            **Net**
            
            
            **Gross**
            
            
            **Net**Gross
                Exploratory Wells:Productive(1)
            
            
            5.00
            
            
            0.2150
            
            
            6.00
            
            
            0.3750
            
            
            5.00
            
            
            0.2500Dry
            
            
            4.00
            
            
            0.6825
            
            
            1.00
            
            
            0.0500
            
            
            -
            
            
            -Total
                Exploratory
            
            
            9.00
            
            
            0.8975
            
            
            7.00
            
            
            0.4250
            
            
            5.00
            
            
            0.2500Gross
                Development Wells:Productive(1)
            
            
            1.00
            
            
            0.195
            
            
            -
            
            
            -
            
            
            -
            
            
            -Dry
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                Development
            
            
            1.00
            
            
            0.195
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                Gross Wells:Productive(1)
            
            
            6.00
            
            
            0.323
            
            
            19.00
            
            
            0.75
            
            
            11.00
            
            
            0.55Dry
            
            
            4.00
            
            
            0.518
            
            
            1.00
            
            
            -
            
            
            -
            
            
            -Total
            
            
            10.00
            
            
            0.841
            
            
            11.00
            
            
            0.55
            
            
            8.00
            
            
            .40





(1)
            
            *Although
                a well may be classified as productive upon completion, future production
                may deem the well to be uneconomical, particularly exploratory wells
                where
                there is no production history. The terms used throughout this document
                are: Gross Wells represents the Operators working interest and Net
                Wells
                represents our working interest share of each well.*




29


We
      reported in our press release dated June 11, 2007, containing our operations
      summary for fiscal year ended March 31, 2007, that operationally we had drilled
      and/or completed 13 wells. The difference in the reported number of drilled
      wells is due to the fact that this Annual Report represents wells information
      in
      accordance with SEC guidelines.





***Present
      Activities***





We
      intend
      to implement the capital expenditures program as detailed in “Item 6 -
      Management’s Discussion and Analysis or Plan of Operation”





***Delivery
      Commitments*** **





At
      March
      31, 2007, we had no delivery commitments with our purchasers.





**Item
      3. Legal Proceedings**





From
      time
      to time we may be a defendant and plaintiff in various legal proceedings arising
      in the normal course of our business. We are currently not a party to any
      material pending legal proceedings or government actions, including any
      bankruptcy, receivership, or similar proceedings. In addition, management is
      not
      aware of any known litigation or liabilities involving the operators of our
      properties that could affect our operations. Should any liabilities be incurred
      in the future, they will be accrued based on management’s best estimate of the
      potential loss. As such, there is no adverse effect on our consolidated
      financial position, results of operations or cash flow at this time.
      Furthermore, Management of the Company does not believe that there are any
      proceedings to which any director, officer, or affiliate of the Company, any
      owner of record of the beneficially or more than five percent of the common
      stock of the Company, or any associate of any such director, officer, affiliate
      of the Company, or security holder is a party adverse to the Company or has
      a
      material interest adverse to the Company.





**Item
      4. Submission Of Matters To A Vote Of Security Holders**





None.


**PART
      II**




**Item
      5. Market For Common Equity and Related Stockholder
      Matters.**





**Market
      Information**


30





The
      Company's Common Stock has been quoted on the OTC Bulletin Board under the
      symbol IXOG.OB since December 16, 2005.





The
      following sets forth the range of the closing bid prices for the Company's
      Common Stock for the period starting December 16, 2005 through March 31, 2007.
      Such prices represent inter-dealer quotations, do not represent actual
      transactions, and do not include retail mark-ups, markdowns or commissions.
      Such
      prices were determined from information provided by a majority of the market
      makers for the Company's Common Stock.




****
              **2006
                Fiscal Year**
            
            **High
                Close**
            
            **Low
                Close**Third
                Quarter, 2006
            
            
            -
            
            
            -Fourth
                Quarter, 2006
            
            $
            1.66
            
            $
            0.97**2007
                Fiscal Year**First
                Quarter, 2007
            
            $
            1.65
            
            $
            1.32Second
                Quarter, 2007
            
            
            1.
                54
            
            
            1.15Third
                Quarter, 2007
            
            
            1.70
            
            
            1.36Fourth
                Quarter, 2007
            
            
            1.65
            
            
            1.18





The
      shares quoted are subject to the provisions of Section 15(g) and Rule 15g-9
      of
      the Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly
      referred to as the "penny stock" rule. Section 15(g) sets forth certain
      requirements for transactions in penny stocks and Rule 15(g)9(d)(1) incorporates
      the definition of penny stock as that used in Rule 3a51-1 of the Exchange
      Act.





The
      Commission generally defines penny stock to be any equity security that has
      a
      market price less than $5.00 per share, subject to certain exceptions. Rule
      3a51-1 provides that any equity security is considered to be a penny stock
      unless that security is: registered and traded on a national securities exchange
      meeting specified criteria set by the Commission; authorized for quotation
      on
      The NASDAQ Stock Market; issued by a registered investment company; excluded
      from the definition on the basis of price (at least $5.00 per share) or the
      registrant's net tangible assets; or exempted from the definition by the
      Commission. Trading in the shares is subject to additional sales practice
      requirements on broker-dealers who sell penny stocks to persons other than
      established customers and accredited investors, generally persons with assets
      in
      excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
      with their spouse.




For
      transactions covered by these rules, broker-dealers must make a special
      suitability determination for the purchase of such securities and must have
      received the purchaser's written consent to the transaction prior to the
      purchase. Additionally, for any transaction involving a penny stock, unless
      exempt, the rules require the delivery, prior to the first transaction, of
      a
      risk disclosure document relating to the penny stock market. A broker-dealer
      also must disclose the commissions payable to both the broker-dealer and the
      registered representative, and current quotations for the securities. Finally,
      the monthly statements must be sent disclosing recent price information for
      the
      penny stocks held in the account and information on the limited market in penny
      stocks. Consequently, these rules may restrict the ability of broker dealers
      to
      trade and/or maintain a market in the company’s common stock and may affect the
      ability of stockholders to sell their shares.




**Holders** ****





As
      of
      March 31, 2007, the approximate number of stockholders of record of the Common
      Stock of the Company was 325.





31


**Dividends**





We
      have
      not declared any dividends to date. We have no present intention of paying
      any
      cash dividends on our common stock in the foreseeable future, as we intend
      to
      use earnings, if any, to generate growth. The payment by us of dividends, if
      any, in the future, rests within the discretion of our Board of Directors and
      will depend, among other things, upon our earnings, our capital requirements
      and
      our financial condition, as well as other relevant factors. There are no
      material restrictions in our certificate of incorporation or bylaws that
      restrict us from declaring dividends.





**Securities
      Authorized for Issuance Under Equity Compensation
      Plans**





The
      following table shows information with respect to each equity compensation
      plan
      under which the Company’s common stock is authorized for issuance as of March
      31, 2007:




Plan
                  category
              
              Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights
              
              Weighted
                  average exercise price of outstanding options, warrants and rights
              
              Number
                  of securities remaining available for future issuance under equity
                  compensation plans
                (excluding
                  securities reflected in column (a)(a)
              
              (b)
              
              (c)Equity
                  compensation plans approved
                by
                  security holders
              
              5,077,526
              
              $0.46
              
              147,474Equity
                  compensation plans not
                approved
                  by security holders
              
              -0-
              
              $
                  -0-
              
              -0-Total
              
              5,077,526
              
              $0.46
              
              147,474




**Recent
      Sales of Unregistered Securities**





*Subsequent
      to March 1, 2007*





None.





*Fiscal
      year ended March 31, 2007 and 2006*





Other
      then set forth below, the information regarding our sales of our unregistered
      securities for the fiscal years ended March 31, 2006, 2005 and 2004, has been
      previously furnished in our Annual Reports on Form 10-KSB, Quarterly Reports
      on
      Form 10-QSB and/or our Current Reports on Form 8-K.





On
      August
      29, 2006, the Board of Directors appointed John Williams as Executive Vice
      President Exploration and Production and a director of the Company effective
      August 1, 2006. In addition to his salary, Mr. Williams was awarded a restricted
      bonus stock award of 50,000 shares of the Company’s common
      stock contingent on 183 days of continuous service to the Company. Total
      compensation expense over the vesting period of $60,000 was recorded on the
      award at the market price of $1.20 per share, the market price at the date
      of
      the grant. The terms of the award were satisfied in January 2007 and Mr.
      Williams was issued 50,000 shares of restricted Common Stock of the Company.
      Additionally, Mr. Williams was awarded a performance bonus of 37,500 shares
      of
      restricted Common Stock per the terms of his bonus program. One-third of the
      awarded shares vest on the date of the grant, March 31, 2007, with the remaining
      shares vesting in equal portions in each of the next two consecutive years.


32





In
      February 2007, 40,000 restricted shares of Common Stock of the Company were
      issued for legal services rendered to the Company related to the filing of
      the
      Registration Statement and other services at a value of $1.60 per share for
      a
      total cost of $64,000.





In
      February 2007, 124,593 common stock purchase warrants were exercised into
      124,593 shares of the Common Stock at an exercise price of $0.14 per share
      or
      $17,443 by the holder of the warrants.





All
      of
      the above issuances were deemed to be exempt from the registration requirements
      of the Act for the private placement of these securities pursuant to Regulations
      S, Section 4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”), and/or Regulation D promulgated thereunder since, among other things, the
      transaction did not involve a public offering, the investors were accredited
      investors and/or qualified institutional buyers, the investors had access to
      information about the company and their investment, the investors took the
      securities for investment and not resale, and the Company took appropriate
      measures to restrict the transfer of the securities. None of the purchasers
      who
      received shares under Regulation S are U.S. Person as defined in Rule 902(k)
      of
      Regulation S, and no sales efforts were conducted in the U.S., in accordance
      with Rule 903(c). Such purchasers acknowledged that the securities purchased
      must come to rest outside the U.S., and the certificates contain a legend
      restricting the sale of such securities until the Regulation S holding period
      is
      satisfied.





**Registration
      Statement**






On
      August
      29, 2006, the Company completed a private placement offering in which it sold
      1419.58 units of its securities at a price of $5,000 per unit to certain
      accredited investors (“Investors #1”), each unit consisting of 5,000 shares of
      common stock of the Company for a total of 7,097,898 shares of common stock
      of
      the Company at a price of $1.00 per share for aggregate proceeds of
      approximately $7.1 million. Furthermore on October 4, 2006, the company
      completed a second closing of the private placement offering in which the
      Company sold an additional 693.54 units of its securities at a price of $5,000
      per unit to certain accredited investors (“Investors #2”, Investors #1 and
      Investors #2 shall collectively be referred to as the “Investors”), each unit
      consisting of 5000 shares of common stock of the Company for gross proceeds
      of
      approximately $3.5 million and subsequently sold another 80 units on October
      5,
      2006, all to the group of Investors #2, for an overall total of 3,867,700 shares
      of common stock of the Company at a price of $1.00 per share for overall
      aggregate proceeds of approximately $3.9 million. The net proceeds of the two
      placements have been and will be applied to the expansion of the Company’s
      operations in the United States as the Company hopes to fund additional Phase
      2
      and 3 Growth Strategies consisting of drilling generated by successful new
      ventures, as well as, possible success in existing ventures such as the Supple
      Jack Creek (formerly West 1) and New Taiton, both higher potential prospects.





Subsequently,
      on October 11, 2006 pursuant to the requirements of the Registration Rights
      Agreement entered into by and among the Company and the Investors, the Company
      filed a Registration Statement with the SEC on Form SB-2 to register, among
      other securities, the units of common stock sold in the private placement
      offering, and obtained effectiveness within the specified time frame. This
      Registration Statement was declared effective by the SEC on February 9, 2007.
      By
      filing and having the Registration Statement declared effective by the SEC
      within the described timeframe, the Company has therefore, not incurred any
      contingent liability associated with the liquidated damages
      provisions.


**P** **urchases
        of Equity Securities by the Issuer and Affiliated
        Purchasers**
  None.


33





**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR****PLAN
      OF OPERATION.**




**Forward
      Looking Statements**





Please
      see page 3 of this Annual Report for “Information Regarding Forward Looking
      Statements” appearing throughout this Annual Report.





**Business
      Overview**





For
      this
      information please see Part 1, Item 1 “Description of Business.”




**RESULTS
      OF OPERATIONS**





***Year
      Ended March 31, 2007 Compared to Year Ended March 31,
      2006***





We
      had a
      net loss of $2,225,656 for the fiscal year ended March 31, 2007 compared to
      a
      net loss of $1,690,806 for the fiscal year ended March 31, 2006, primarily
      resulting from increased costs of operating as a public company for an entire
      fiscal year with additional director fees and travel costs and expenses,
      investor relations, filing fees and other professional and consulting costs.
      This is in addition to higher operating costs and depletion on increased
      production offset by an increase in interest income on available cash from
      additional fund raisings. The following table summarizes key items of comparison
      and their related increase (decrease) for the fiscal years ended
      March 31, 2007 and 2006.




**Years
                Ended March 31,**
            
            **Increase****2007**
            
            **2006**
            
            **(Decrease)**Oil
                and gas sales
            
            $
            457,046
            
            $
            191,114
            
            $
            265,932Production
                expenses:Lease
                operating
            
            
            80,186
            
            
            33,859
            
            
            46,327Taxes
                other than income
            
            
            34,549
            
            
            8,094
            
            
            26,455General
                and administrative:General
                and administrative
            
            
            1,848,142
            
            
            702,278
            
            
            1,145,864Stock-based
                compensation
            
            
            875,092
            
            
            1,043,823
            
            
            (168,731
            )Depletion
                — Full cost
            
            
            188,351
            
            
            65,311
            
            
            123,040Depreciation
                — Other
            
            
            1,028
            
            
            6,260
            
            
            (5,232
            )Impairment
            
            
            -
            
            
            10,000
            
            
            (10,000
            )Interest
                expense (income) and other
            
            
            (344,646
            )
            
            12,295
            
            
            (356,941
            )Income
                tax benefit (provision)
            
            
            -
            
            
            -
            
            
            -Net
                (loss)
            
            $
            (2,225,656
            )
            $
            (1,690,806
            )
            $
            (534,850
            )Production:Natural
                Gas — Mcf
            
            
            8.490
            
            
            -
            
            
            8.490Crude
                Oil — Mbbl
            
            
            6.660
            
            
            3.420
            
            
            3.240Equivalent
                — Mboe
            
            
            8.075
            
            
            3.420
            
            
            4.655Average
                price per unit:Gas
                price per Mcf
            
            $
            6.61
            
            $
            -
            
            $
            6.61






34






Oil
                price per Bbl
            
            $
            60.20
            
            $
            55.89
            
            $
            4.31Equivalent
                per Boe
            
            $
            56.60
            
            $
            55.89
            
            $
            0.71Average
                cost per Boe:Production
                expenses:Lease
                operating
            
            $
            9.93
            
            $
            9.90
            
            $
            0.03Taxes
                other than income
            
            $
            4.28
            
            $
            2.37
            
            $
            1.91General
                and administrative expense:General
                and administrative
            
            $
            228.87
            
            $
            205.34
            
            $
            23.53Stock-based
                compensation
            
            $
            108.37
            
            $
            305.21
            
            $
            (196.84
            )Depletion
                expense
            
            $
            23.32
            
            $
            19.10
            
            $
            4.22




For
      the
      year ended March 31, 2007, oil and gas sales increased $265,932, from the same
      period in 2006, to $457,046. The increase for the year was primarily due to
      the
      increase in production volumes of 4.655 MBoe from 3.42 MBoe to 8.075 MBoe or
      approximately $264,000. The increase in volumes of 4.655 MBoe is primarily
      due
      to increased volumes from Walker of 3.713 MBoe and Vieman of 0.841 MBoe. The
      Walker and Vieman wells produced natural gas volumes of 3.618 MMcf and 4.872
      MMcf, respectively. The Walker well also produced 3.109 Mbbl with the remaining
      oil production primarily from the Kansas Seward County wells and a small amount
      from Vieman. Additionally, revenue increased slightly by approximately $2,200
      due to higher commodity prices as our average price per Boe increased by $0.71,
      or 1.0%, in fiscal 2007 to $56.60 per Bbl from $55.89 per Bbl in fiscal 2006.
      This is based on weighted average gas volumes at a price of $6.61 and weighted
      average volumes of oil volumes at an increased price per barrel of $4.31.





Lease
      operating expenses increased $46,327 for the year ended March 31, 2007 as
      compared to the same period in 2006. The increase was primarily due to
      production from the Walker and Vieman wells that came on production in fiscal
      year 2007, together with four recent new wells that came on production in our
      Kansas properties. On a per unit basis, lease operating expenses remained flat
      from $9.90 per Boe in 2007 to $9.93 per Boe in 2006 due to an increase in
      production volumes offset by industry-wide service costs associated with the
      overall increase in commodity prices.




Taxes
      other than income increased $26,455 for the year ended March 31, 2007 as
      compared to the same period in 2006 due to higher oil and gas revenues and
      on a
      per unit basis increased $1.91 per Boe to $4.28 per Boe. The primary increase
      is
      attributable to the Walker well located in Louisiana which came on production
      in
      fiscal 2007 and had $24,355 in production taxes for an increase of $6.56 per
      Boe. Production taxes are generally assessed as a percentage of gross oil and/or
      natural gas sales.





General
      and administrative expenses, excluding stock-based compensation
      expense, for the twelve months ended March 31, 2007 increased $1,145,864 to
      $1,848,142 compared to the same period in 2006 primarily due to a full year
      of
      costs related to being a public company with increased costs of SEC filing
      fees,
      investor relations costs and other professional fees of approximately $103,000,
      as well as, an increase in salaries, benefits and business expenses for
      employees/directors of approximately $936,000 including a bonus of approximately
      $210,000 payable to various officers for the satisfaction of certain performance
      measures during fiscal year 2007. Rent expense increased approximately $61,000
      due to a full year of utilization and increased charges.




Stock-based
      compensation expense, within general and administrative expenses, was
      $875,092 for the year ended March 31, 2007 as compared to stock-based
      compensation of $1,043,823 for the year ended March 31, 2006 for a net
      decrease of $168,731 in fiscal 2007. This is primarily due to a larger
      stock-based award in 2006 granted to all officers and directors, at the
      effective date of the reverse merger with Index Ltd., which vested at 50% in
      that year, offset by a smaller award of stock to a new officer and director
      in
      fiscal 2007, which also vested at 50% in 2007. All stock compensation was
      calculated at fair market value and other required inputs at the date of the
      grant in accordance with SFAS 123(R).


35





Depletion
      expense increased $123,040 from the same period in 2006 to $188,351 for the
      year
      ended March 31, 2007. This increase is primarily due to production from the
      Walker well and test production from the Vieman well, together with four recent
      new wells on our Kansas properties that came on production in fiscal 2007,
      as
      well as, the Witt 1 which was recompleted in fiscal 2007. Depletion for oil
      and
      gas properties is calculated using the unit of production method, which
      essentially depletes the capitalized costs associated with the proved properties
      based on the ratio of production volume for the current period to total
      remaining reserve volume for the evaluated properties. On a per unit basis,
      depletion expense increased 22% from $19.10 to $23.32 per Boe.





Interest
      income and other increased $356,941 for the year ended March 31, 2007
      compared to the same period 2006. This increase is primarily due to amortization
      of debt issue costs in 2006 of approximately $43,000 offset by interest income
      through 2007 earned on $5.12 million received in a private placement equity
      fund
      raising in the fourth quarter of fiscal 2006 and two private placement equity
      fund raisings in fiscal year 2007.





There
      was
      no provision for income taxes for the fiscal years ended 2007 and 2006 due
      to a
      valuation allowance of $2,358,427 and $912,038 recorded for the years ended
      March 31, 2007 and 2006, respectively on the total tax provision as the Company
      believed that it is more likely than not that the asset will not be utilized
      during the next year.





***Year
      Ended March 31, 2006 Compared to Year Ended March 31,
      2005***





We
      had a
      net loss of $1,690,806 for the fiscal year ended March 31, 2006 compared to
      a
      net loss of $422,027 for the fiscal year ended March 31, 2005, primarily
      resulting from approximately $1.0 million of compensation expense related to
      the
      issuance of options under the Employee Stock Option Plan at fair market value,
      as per SFAS 123-R. The following table summarizes key items of comparison and
      their related increase (decrease) for the fiscal years ended March 31,
      2006 and 2005.





**Years
                Ended March 31,**
            
            **Increase****2006**
            
            **2005**
            
            **(Decrease)**Oil
                and gas sales
            
            $
            191,114
            
            $
            88,176
            
            $
            102,938Production
                expenses:Lease
                operating
            
            
            33,859
            
            
            19,897
            
            
            13,962Taxes
                other than income
            
            
            8,094
            
            
            3,687
            
            
            4,407General
                and administrative:General
                and administrative
            
            
            702,278
            
            
            442,645
            
            
            259,633Stock-based
                compensation
            
            
            1,043,823
            
            
            -
            
            
            1,043,823Depletion
                — Full cost
            
            
            65,311
            
            
            36,155
            
            
            29,156Depreciation
                — Other
            
            
            6,260
            
            
            2,140
            
            
            4,120Impairment
            
            
            10,000
            
            
            
            
            
            10,000Interest
                expense (income) and other
            
            
            12,295
            
            
            5,679
            
            
            6,616Income
                tax benefit (provision)
            
            
            -
            
            
            -
            
            
            -Net
                (loss)
            
            $
            (1,690,806
            )
            $
            (422,027
            )
            $
            (1,268,779
            )Production:Natural
                Gas — Mcf
            
            
            -
            
            
            -
            
            
            -Crude
                Oil — Mbbl
            
            
            3.42
            
            
            2.07
            
            
            1.35Equivalent
                — Mboe
            
            
            3.42
            
            
            2.07
            
            
            1.35






36






Average
                price per unit:Gas
                price per Mcf
            
            $
            -
            
            $
            -
            
            $
            -Oil
                price per Bbl
            
            $
            55.89
            
            $
            42.64
            
            $
            13.25Equivalent
                per Boe
            
            $
            55.89
            
            $
            42.64
            
            $
            13.25Average
                cost per Boe:Production
                expenses:Lease
                operating
            
            $
            9.90
            
            $
            9.61
            
            $
            0.29Taxes
                other than income
            
            $
            2.37
            
            $
            1.78
            
            $
            0.59General
                and administrative expense:General
                and administrative
            
            $
            205.34
            
            $
            213.84
            
            $
            (8.50
            )Stock-based
                compensation
            
            $
            305.21
            
            $
            -
            
            $
            305.21Depletion
                expense
            
            $
            19.10
            
            $
            17.47
            
            $
            1.63




For
      the
      year ended March 31, 2006, oil and gas sales increased $102,938, from the same
      period in 2005, to $191,114. The increase for the year was primarily due to
      the
      increase in volumes of 1.35 MBbls from 2.07 MBbls to 3.42 MBbls or approximately
      $58,000. Additionally, revenue increased approximately $45,000 due to higher
      commodity prices as our average price per barrel increased $13.25, or 31.0%,
      in
      2006 to $55.89 per Bbl from $42.64 per Bbl in 2005. Continued lower natural
      gas
      storage levels, supply uncertainty due to global events and a weaker U.S. dollar
      favorably impacted crude oil prices again in 2006.





Lease
      operating expenses increased $13,962 for the year ended March 31, 2006 as
      compared to the same period in 2005. The increase was primarily due to increased
      production on our Kansas properties acquired in 2005. On a per unit basis,
      lease
      operating expenses increased only 3% from $9.61 per Bbl in 2006 to $9.90 per
      Bbl
      in 2005 due to an increase in production volumes offset by industry-wide service
      costs associated with the overall increase in commodity prices.




Taxes
      other than income increased $4,407 for the year ended March 31, 2006 as compared
      to the same period in 2005 due to higher oil and gas revenues and on a per
      unit
      basis increased $0.59 per Bbl to $2.37 per Bbl. Production taxes are generally
      assessed as a percentage of gross oil and/or natural gas sales.





General
      and administrative expenses for the twelve months ended March 31, 2006 increased
      $259,633 to $702,278 compared to the same period in 2005 primarily due to
      transaction costs of $168,612 related to the reverse merger and increased costs
      of consulting, audit and professional fees, as well as, an increase in salaries
      for employees/directors.





Stock-based
      compensation expense was $1,043,823 for the year ended March 31, 2006 with
      no stock-based compensation in 2005. During the year ended March 31, 2005,
      the
      Company granted an aggregate of stock options and warrants to certain directors
      and stockholders. Since there was no public market for the Company’s stock and
      operations were not comparable to a peer group during the years ended March
      31,
      2006 and 2005, the latest stock issuance price used in previous fundraising
      was
      used as the share market price. The exercise price and this fair market value
      of
      the stock options granted were $0.35 and $0.60, respectively. All options vested
      50% on the date of the grant with the remaining amounts to vest 25% in each
      of
      the next two years. The expense was calculated based on the difference of the
      fair market value at the date of the grant in accordance with SFAS
      123(R).





Depletion
      expense increased $29,156 from the same period in 2005 to $65,311 for the year
      ended March 31, 2006. Depletion for oil and gas properties is calculated
      using the unit of production method, which essentially depletes the capitalized
      costs associated with the evaluated properties based on the ratio of production
      volume for the current period to total remaining reserve volume for the
      evaluated properties. On a per unit basis, depletion expense increased 9% from
      $17.47 to $19.10 per Bbl.


37




Interest
      expense and other increased $6,616 for the year ended March 31, 2006
      compared to the same period 2005. This increase is primarily due to amortization
      of debt issue costs offset by interest income earned on $5.12 million received
      in a private placement equity fund raising in the fourth quarter of fiscal
      2006.





There
      was
      no provision for income taxes for the fiscal years ended March 31, 2006 and
      2005
      due to a valuation allowance of $912,038 and $305,308 recorded for the years
      ended March 31, 2006 and 2005, respectively on the total tax provision as the
      Company believed that it is more likely than not that the asset will not be
      utilized during the next year.





**LIQUIDITY
      AND CAPITAL RESOURCES**





Our
      primary sources of cash in fiscal 2007 were from financing and equity
      transactions. Proceeds from private placement equity fund raisings were offset
      by cash used in operating and investing activities for our properties. Operating
      cash flow fluctuations were substantially driven by commodity prices and changes
      in our production volumes. Prices for oil and gas have historically been subject
      to seasonal influences characterized by peak demand and higher prices in the
      winter heating season for natural gas and summer travel for oil; however, the
      impact of other risks and uncertainties have influenced prices throughout the
      recent years. Working capital was substantially influenced by these variables.
      Fluctuation in cash flow may result in an increase or decrease in our capital
      and exploration expenditures. See Results of Operations for a review of the
      impact of prices and volumes on sales. Cash flows provided by operating
      activities were primarily used to fund exploration and development expenditures.
      See below for additional discussion and analysis of cash flow.




**Year
                Ended March 31,****2007**
            
            **2006**
            
            **2005**Cash
                flows used (in) operating activities
            
            $
            (1,041,751
            )
            $
            (190,961
            )
            $
            (337,040
            )Cash
                flows used (in) investing activities
            
            
            (4,098,743
            )
            
            (649,358
            )
            
            (66,140
            )Cash
                flows provided by financing activities
            
            
            9,740,729
            
            
            6,351,191
            
            
            161,805Effect
                of exchange rate changes
            
            
            4,884
            
            
            16,461
            
            
            (5,984
            )Net
                increase (decrease) in cash and cash equivalents
            
            $
            4,605,119
            
            $
            5,527,333
            
            $
            (247,359
            )





**Operating
      Activities**





Net
      cash
      outflow from operating activities during fiscal year ended March 31, 2007 was
      $1,041,751 which was an increase in use of cash of $850,790 from $190,961 net
      cash outflow during the fiscal year ended March 31, 2006. This decrease was
      primarily due to higher commodity prices and an increase in sales volumes offset
      by increased general and administrative costs related to a full year of public
      company expense with increased costs of SEC filing fees, investor relations
      costs and other professional fees, as well as, an increase in salaries, benefits
      and business expenses for employees/directors.




Net
      cash
      outflow from operating activities during fiscal year ended March 31, 2006 was
      $(190,961) which was a decrease of $146,079 or 43% from $(337,040) net cash
      outflow during the fiscal year ended March 31, 2005. This decrease was primarily
      due to higher commodity prices and an increase in sales volumes offset by
      transaction costs of $168,612 due to the reverse merger.


38


**Investing
      Activities**





The
      primary driver of cash used in investing activities was capital spending.





Cash
      used
      in investing activities during the fiscal year ended March 31, 2007 was
      $4,098,743, which was an increase of $3,449,385 from $649,358 of cash used
      in
      investing activities during the fiscal year ended March 31, 2006. This increase
      was primarily due to increased exploration and development activity This
      activity was primarily for the Walker well of approximately $296,000, the Ilse
      well of approximately $1,217,000, the Vieman well of approximately $1,358,000,
      the Supple Jack Creek (formerly West) well of $206,000, Friedrich 1 well of
      $219,000 and Schroeder 1 well of $175,000 and the Taffy wells of
      $520,000.





Cash
      used
      in investing activities during the fiscal year ended March 31, 2006 was
      $649,358, which was an increase of $583,218 or 782% from $66,140 of cash used
      in
      investing activities during the fiscal year ended March 31, 2005. This increase
      was primarily due to increased exploration and development activity.





**Financing
      Activities.** Net cash
      provided by financing activities increased $3,389,538 during the fiscal year
      ended March 31, 2007 to $9,740,729 as compared to $6,351,191 during the fiscal
      year ended March 31, 2006. At March 31, 2007 and 2006, we had no long-term
      debt
      outstanding. Management believes that we may have the ability to finance through
      new debt or equity offerings, if necessary, our capital requirements, including
      acquisitions.




On
      January 20, 2006 we sold in a private placement 8,533,333 shares of our common
      stock at a per share price equal to $0.60. The gross proceeds were $5,120,000,
      and will be used for general corporate purposes and working capital.





On
      September 9, 2006, the Company completed a private placement for 7,097,898
      shares of $0.001 par value common stock of the Company at a price of $1.00
      per
      share for aggregate gross proceeds of approximately $7.1 million.





On
      October 4, 2006, the Company completed a private placement for 3,867,700 shares
      of $0.001 par value common stock of the Company at a price of $1.00 per share
      for aggregate proceeds of approximately $3.9 million.





The
      Company filed a Registration Statement with the SEC on Form SB-2 to register,
      among other securities, the units of common stock sold in the private placement
      offerings. The Company obtained effectiveness on February 9, 2007, within the
      time frame prescribed by the private placement agreements.





As
      of
      March 31, 2007 and 2006, our common stock is the only class of stock outstanding
      and we have no  outstanding
      long-term debt financing.





Based
      on
      reserve reports prepared by Ancell Energy Consulting, Inc., an independent
      oil
      and gas reservoir engineering consulting firm, the following table presents
      certain information as of March 31, 2007 and for our reserves and properties
      all
      located onshore in the United States. Shut-in wells currently not capable of
      production are excluded from the producing well information.




**In
                Mboe:**
            
            **Kansas**
            
            
            **Louisiana**
            
            
            **South**
              **Texas**
            
            
            **Total**Proved
                Reserves at Year EndDeveloped
            
            14.4790
            
            
            8.110
            
            
            90.609
            
            
            113.198Undeveloped
            
            1.380
            
            
            -
            
            
            -
            
            
            1.380Total
            
            15.859
            
            
            8.110
            
            
            90.609
            
            
            114.578






39




Gross
                Wells(1)
            
            21.0000
            
            
            1.0000
            
            
            4.0000
            
            
            26.0000Net
                Wells(1)
            
            1.0150
            
            
            0.1250
            
            
            1.0700
            
            
            2.2100




(1)
                The
                    term net as used throughout this document refers to amounts that
                    include
                    only acreage or production that is owned by the Company and produced
                    to
                    its interest, less royalties and production due to others. Gross
                    Wells
                    represents the Operators working interest and Net Wells represents
                    our
                    working interest share of each
                    well.




The
      oil
      reserves shown include crude oil and condensate. Oil volumes are expressed
      in
      barrels (BBL); a barrel is equivalent to 42 United States gallons. Gas volumes
      are expressed in thousands of standard cubic feet (Mcf) at the contract
      temperature and pressure bases.




The
      estimated reserves and future revenue shown in this report are for proved
      developed producing, proved developed non-producing, proved behind pipe and
      proved undeveloped reserves. In accordance with SEC guidelines our estimates
      do
      not include any probable or possible reserves, which may exist for these
      properties. This report does not include any value, which could be attributed
      to
      interests in undeveloped acreage beyond those tracts for which undeveloped
      reserves have been estimated.




This
      table above is for properties located in Stafford and Barton Counties in Kansas,
      Calcasieu Parish in Louisiana, and Brazoria, Victoria and Dewitt Counties in
      Texas.





Based
      on
      our current cash resources and other current assets, management believes we
      have
      sufficient liquidity to fund operations for the next twelve months. We are
      contemplating additional debt and / or equity financing transactions that,
      if
      successful, are expected to sufficiently fund expenditures for potential
      acquisitions and other discretionary expansions of our business. We do not
      currently have any commitments for such financing and there is no assurance
      that
      we will be successful in obtaining such funds. If we cannot obtain additional
      financing, we will have to significantly curtail our acquisition plans and
      possibly our operations.





**Contractual
      Obligations**





We
      have
      no material long-term commitments associated with our capital expenditure plans
      or operating agreements. Consequently, we believe we have a significant degree
      of flexibility to adjust the level of such expenditures as circumstances
      warrant. Our level of capital expenditures will vary in future periods depending
      on the success we experience in our acquisition, developmental and exploration
      activities, oil and gas price conditions and other related economic factors.
      Currently no sources of liquidity or financing are provided by off-balance
      sheet
      arrangements or transactions with unconsolidated, limited-purpose
      entities.





The
      following table summarizes our contractual obligations and commitments by
      payment periods (in thousands).





**Payments
                Due by Period****Less
                than**
            
            
            
            
            
            **More
                than****Contractual
                Obligations**
            
            **Total**
            
            **one
                year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **5
                years**Operating
                leases*(1)*
            $
            19,800
            
            $
            19,800
            
            $
            -
            
            $
            -
            
            $
            -Total
                contractual obligations
            $
            19,800
            
            $
            19,800
            
            $
            -
            
            $
            -
            
            $
            -




*(1)*
              The
                  Company holds an arrangement to rent its main office in Houston
                  with
                  rentals due on a month-to-month basis of $4,500 and an apartment
                  in
                  Houston (for use by UK Executives) for nine months of $1,700 per
                  month
                  (from April 2007).
  40


Amounts
      related to our asset retirement obligations are not included in the table above
      given the uncertainty regarding the actual timing of such expenditures. Of
      the
      total ARO, $41,552 and $25,300 are classified as a long-term liability at March
      31, 2007 and 2006, respectively. For each of the years ended March 31, 2007
      and
      2006, the Company recognized no accretion expense related to its ARO, due to
      the
      assumption of a full offset of salvage values.





**Off-Balance
      Sheet Arrangements**





At
      March 31, 2007 and March 31, 2006, we did not have any off-balance
      sheet arrangements.





**Plan
      of Operation for 2007/8**





On
      an
      annual basis, we generally fund most of our capital and exploration activities,
      including oil and gas property acquisitions, with cash generated from operations
      and from equity financings. We have budgeted for capital expenditures relating
      to the work program described in the Business section in Part 1, Item
      1.





**Critical
      Accounting Policies and Estimates**





The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of our consolidated financial statements requires
      us to
      make estimates and assumptions that affect our reported results of operations
      and the amount of reported assets, liabilities and proved oil and gas reserves.
      Some accounting policies involve judgments and uncertainties to such an extent
      that there is reasonable likelihood that materially different amounts could
      have
      been reported under different conditions, or if different assumptions had been
      used. Actual results may differ from the estimates and assumptions used in
      the
      preparation of our consolidated financial statements. Described below are the
      most significant policies we apply in preparing our consolidated financial
      statements, some of which are subject to alternative treatments under accounting
      principles generally accepted in the United States of America. We also describe
      the most significant estimates and assumptions we make in applying these
      policies. We discussed the development, selection and disclosure of each of
      these with our audit committee. See Results of Operations above and Item 8.
      Consolidated Financial Statements and Supplementary Data Note 1, *Organization and Summary of Significant Events and Accounting
      Policies* ,
      for a
      discussion of additional accounting policies and estimates made by
      management.





*Oil
      and Gas Activities*





Accounting
      for oil and gas activities is subject to special, unique rules. Two generally
      accepted methods of accounting for oil and gas activities are available —
successful efforts and full cost. The most significant differences between
      these
      two methods are the treatment of exploration costs and the manner in which
      the
      carrying value of oil and gas properties are amortized and evaluated for
      impairment. The successful efforts method requires exploration costs to be
      expensed as they are incurred while the full cost method provides for the
      capitalization of these costs. Both methods generally provide for the periodic
      amortization of capitalized costs based on proved reserve quantities. Impairment
      of oil and gas properties under the successful efforts method is based on an
      evaluation of the carrying value of individual oil and gas properties against
      their estimated fair value, while impairment under the full cost method requires
      an evaluation of the carrying value of oil and gas properties included in a
      cost
      center against the net present value of future cash flows from the related
      proved reserves, using period-end prices and costs and a 10% discount
      rate.


41


*Full
      Cost Method*





We
      use
      the full cost method of accounting for our oil and gas activities. Under this
      method, all costs incurred in the acquisition, exploration and development
      of
      oil and gas properties are capitalized into a cost center (the amortization
      base). Such amounts include the cost of drilling and equipping productive wells,
      dry hole costs, lease acquisition costs and delay rentals. Costs associated
      with
      production and general corporate activities are expensed in the period incurred.
      The capitalized costs of our oil and gas properties, plus an estimate of our
      future development and abandonment costs are amortized on a unit-of-production
      method based on our estimate of total proved reserves. Our financial position
      and results of operations would have been significantly different had we used
      the successful efforts method of accounting for our oil and gas
      activities.





*Proved
      Oil and Gas Reserves*





Our
      engineering estimates of proved oil and gas reserves directly impact financial
      accounting estimates, including depreciation, depletion and amortization expense
      and the full cost ceiling limitation. Proved oil and gas reserves are the
      estimated quantities of oil and gas reserves that geological and engineering
      data demonstrate with reasonable certainty to be recoverable in future years
      from known reservoirs under period-end economic and operating conditions. The
      process of estimating quantities of proved reserves is very complex, requiring
      significant subjective decisions in the evaluation of all geological,
      engineering and economic data for each reservoir. The data for a given reservoir
      may change substantially over time as a result of numerous factors including
      additional development activity, evolving production history and continual
      reassessment of the viability of production under varying economic conditions.
      Changes in oil and gas prices, operating costs and expected performance from
      a
      given reservoir also will result in revisions to the amount of our estimated
      proved reserves.





Our
      estimated proved reserves for the four years ended March 31, 2007 were prepared
      by Ancell Energy Consulting, Inc., an independent oil and gas reservoir
      engineering consulting firm. For more information regarding reserve estimation,
      including historical reserve revisions, refers to Item 7. Consolidated
      Financial Statements and Supplementary Data, *Supplemental Oil and Gas Disclosure* .





*Depreciation,
      Depletion and Amortization*





The
      quantities of estimated proved oil and gas reserves are a significant component
      of our calculation of depletion expense and revisions in such estimates may
      alter the rate of future expense. Holding all other factors constant, if
      reserves are revised upward, earnings would increase due to lower depletion
      expense. Likewise, if reserves are revised downward, earnings would decrease
      due
      to higher depletion expense or due to a ceiling test write-down.





*Full
      Cost Ceiling Limitation*





Under
      the
      full cost method, we are subject to quarterly calculations of a ceiling or
      limitation on the amount of our oil and gas properties that can be capitalized
      on our balance sheet. If the net capitalized costs of our oil and gas properties
      exceed the cost center ceiling, we are subject to a ceiling test write-down
      to
      the extent of such excess. If required, it would reduce earnings and impact
      stockholders’ equity in the period of occurrence and result in lower
      amortization expense in future periods. The discounted present value of our
      proved reserves is a major component of the ceiling calculation and represents
      the component that requires the most subjective judgments. However, the
      associated prices of oil and gas reserves that are included in the discounted
      present value of the reserves do not require judgment. The ceiling calculation
      dictates that prices and costs in effect as of the last day of the quarter
      are
      held constant. However, we may not be subject to a write-down if prices increase
      subsequent to the end of a quarter in which a write-down might otherwise be
      required. If oil and gas prices decline, even if for only a short period of
      time, or if we have downward revisions to our estimated proved reserves, it
      is
      possible that write-downs of our oil and gas properties could occur in the
      future.


42





*Future
      Development and Abandonment Costs*





Future
      development costs include costs incurred to obtain access to proved reserves
      such as drilling costs and the installation of production equipment. Future
      abandonment costs include costs to dismantle and relocate or dispose of our
      production platforms, gathering systems and related structures and restoration
      costs of land and seabed. Our operators develop estimates of these costs for
      each of our properties based upon their geographic location, type of production
      structure, well depth, currently available procedures and ongoing consultations
      with construction and engineering consultants. Because these costs typically
      extend many years into the future, estimating these future costs is difficult
      and requires management to make judgments that are subject to future revisions
      based upon numerous factors, including changing technology and the political
      and
      regulatory environment. We review our assumptions and estimates of future
      development and future abandonment costs on an annual basis.





The
      accounting for future abandonment costs changed on January 1, 2003 with the
      adoption of SFAS No. 143, *Accounting for Asset Retirement Obligations* .
      This
      new standard requires that a liability for the discounted fair value of an
      asset
      retirement obligation be recorded in the period in which it is incurred and
      the
      corresponding cost capitalized by increasing the carrying amount of the related
      long-lived asset. The liability is accreted to its present value each period,
      and the capitalized cost is depreciated over the useful life of the related
      asset. Holding all other factors constant, if our estimate of future abandonment
      and development costs is revised upward, earnings would decrease due to higher
      depreciation, depletion and amortization (DD&A) expense. Likewise, if these
      estimates are revised downward, earnings would increase due to lower DD&A
      expense. Of the total ARO, $41,552 and $25,300 are classified as a long-term
      liability at March 31, 2007 and 2006, respectively. For each of the years ended
      March 31, 2007 and 2006, the Company recognized no depreciation expense related
      to its ARO, due to the assumption of a full offset of salvage values.





*Allocation
      of Purchase Price in Business Combinations*





As
      part
      of our business strategy, we actively pursue the acquisition of oil and gas
      properties. The purchase price in an acquisition is allocated to the assets
      acquired and liabilities assumed based on their relative fair values as of
      the
      acquisition date, which may occur many months after the announcement date.
      Therefore, while the consideration to be paid may be fixed, the fair value
      of
      the assets acquired and liabilities assumed is subject to change during the
      period between the announcement date and the acquisition date. Our most
      significant estimates in our allocation typically relate to the value assigned
      to future recoverable oil and gas reserves and unproved properties. As the
      allocation of the purchase price is subject to significant estimates and
      subjective judgments, the accuracy of this assessment is inherently
      uncertain.





Effective
      January 1, 2002, we adopted SFAS No. 142, *Goodwill and Other Intangible Assets* ,
      under
      which goodwill is no longer subject to amortization. Rather, goodwill of each
      reporting unit is tested for impairment on an annual basis, or more frequently
      if an event occurs or circumstances change that would reduce the fair value
      of
      the reporting unit below its carrying amount. In making this assessment, we
      rely
      on a number of factors including operating results, economic projections and
      anticipated cash flows. As there are inherent uncertainties related to these
      factors and our judgment in applying them to the analysis of goodwill
      impairment, there is risk that the carrying value of our goodwill may be
      overstated. If it is overstated, such impairment would reduce earnings during
      the period in which the impairment occurs and would result in a corresponding
      reduction to goodwill.





*Revenue
      Recognition*





We
      recognize revenue when crude oil and natural gas quantities are delivered to
      or
      collected by the respective purchaser. We sell our crude oil production to
      two
      independent purchasers and as of March 31, 2007, we did not have any natural
      gas
      sales. Title to the produced quantities transfers to the purchaser at the time
      the purchaser collects or receives the quantities. Prices for such production
      are defined in sales contracts
      and are readily determinable based on certain publicly available indices. The
      purchasers of such production have historically made payment for crude oil
      and
      natural gas purchases within thirty-five days of the end of each production
      month. We periodically review the difference between the dates of production
      and
      the dates we collect payment for such production to ensure that receivables
      from
      those purchasers are collectible. All transportation costs are accounted for
      as
      a reduction of oil and natural gas sales revenue.


43





**Recently
      Issued Accounting Standards**





*Certain
      Hybrid Instrument* *s* .
      On
      February 16, 2006 the FASB issued SFAS 155, “Accounting for Certain Hybrid
      Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and
      Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial
      instruments that have embedded derivatives to be accounted for as a whole
      (eliminating the need to bifurcate the derivative from its host) if the holder
      elects to account for the whole instrument on a fair value basis. SFAS 155
      also
      clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This
      statement is effective for all financial instruments acquired or issued in
      fiscal years beginning after September 15, 2006. The Company does not
      expect its adoption of this new standard to have a material impact on its
      financial position, results of operations or cash flows as it currently does
      not
      have any hybrid instruments outstanding at March 31, 2007.





*Accounting
      for Servicing of Financial Assets* .
      In
      March 2006, the FASB issued SFAS No. 156, “ *Accounting
      for Servicing of Financial Assets—an amendment of FASB Statement No.
      140”(“* SFAS
      No.
      156”), which amends FASB Statement No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities,* with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities.





This
      Statement:





1.
            Requires
                an entity to recognize a servicing asset or servicing liability each
                time
                it undertakes an obligation to service a financial asset by entering
                into
                a servicing contract in any of the following situations:




a.
            A
                transfer of the servicer’s financial assets that meets the requirements
                for sale accounting





b.
            A
                transfer of the servicer’s financial assets to a qualifying
                special-purpose entity in a guaranteed mortgage securitization in
                which
                the transferor retains all of the resulting securities and classifies
                them
                as either available-for-sale securities or trading securities in
                accordance with FASB Statement No. 115,*Accounting
                for Certain Investments in Debt and Equity Securities*





c.
            An
                acquisition or assumption of an obligation to service a financial
                asset
                that does not relate to financial assets of the servicer or its
                consolidated affiliates.





2.
            Requires
                all separately recognized servicing assets and servicing liabilities
                to be
                initially measured at fair value, if practicable.





3.
            Permits
                an entity to choose either of the following subsequent measurement
                methods
                for each class of separately recognized servicing assets and servicing
                liabilities:





a.
            *Amortization
                method*—Amortize
                servicing assets or servicing liabilities in proportion to and over
                the
                period of estimated net servicing income or net servicing loss and
                assess
                servicing assets or servicing liabilities for impairment or increased
                obligation based on fair value at each reporting date.





44





b.
            *Fair
                value measurement method*—Measure
                servicing assets or servicing liabilities at fair value at each reporting
                date and report changes in fair value in earnings in the period in
                which
                the changes occur.





4.
            At
                its initial adoption, permits a one-time reclassification of
                available-for-sale securities to trading securities by entities with
                recognized servicing rights, without calling into question the treatment
                of other available-for-sale securities under Statement 115, provided
                that
                the available-for-sale securities are identified in some manner as
                offsetting the entity’s exposure to changes in fair value of servicing
                assets or servicing liabilities that a servicer elects to subsequently
                measure at fair value.





5.
            Requires
                separate presentation of servicing assets and servicing liabilities
                subsequently measured at fair value in the statement of financial
                position
                and additional disclosures for all separately recognized servicing
                assets
                and servicing liabilities.




This
      Statement requires that all separately recognized servicing assets and servicing
      liabilities be initially measured at fair value, if practicable. The Board
      concluded that fair value is the most relevant measurement attribute for the
      initial recognition of all servicing assets and servicing liabilities, because
      it represents the best measure of future cash flows. This Statement permits,
      but
      does not require, the subsequent measurement of servicing assets and servicing
      liabilities at fair value. An entity that uses derivative instruments to
      mitigate the risks inherent in servicing assets and servicing liabilities is
      required to account for those derivative instruments at fair value. Under this
      Statement, an entity can elect subsequent fair value measurement of its
      servicing assets and servicing liabilities by class, thus simplifying its
      accounting and providing for income statement recognition of the potential
      offsetting changes in fair value of the servicing assets, servicing liabilities,
      and related derivative instruments. An entity that elects to subsequently
      measure servicing assets and servicing liabilities at fair value is expected
      to
      recognize declines in fair value of the servicing assets and servicing
      liabilities more consistently than by reporting other-than-temporary
      impairments.




The
      Board
      decided to require additional disclosures and separate presentation in the
      statement of financial position of the carrying amounts of servicing assets
      and
      servicing liabilities that an entity elects to subsequently measure at fair
      value to address concerns about comparability that may result from the use
      of
      elective measurement methods.





An
      entity
      should adopt this Statement as of the beginning of its first fiscal year that
      begins after September 15, 2006. Earlier adoption is permitted as of the
      beginning of an entity’s fiscal year, provided the entity has not yet issued
      financial statements, including interim financial statements, for any period
      of
      that fiscal year. The effective date of this Statement is the date an entity
      adopts the requirements of this Statement.  The
      Company does not expect adoption of this standard will have a material impact
      on
      its financial position, operations or cash flows.




*Income
      Taxes.* In
      June
      2006, the FASB issued FASB Interpretation No 48 (“FIN 48”), “Accounting for
      Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109”, which
      clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with FASB 109. The
      Interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. The Interpretation also provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. The Interpretation is effective for fiscal
      years beginning after December 15, 2006. The
      Company has not yet determined the impact on the Company’s consolidated
      financial position or results of operations.





45


*Fair
      Value Measurements.* In
      September 2006, the FASB issued SFAS 157, “Fair Value Measurements”, which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (“GAAP”), and expands disclosures about
      fair value measurements. Prior to this Statement, there
      were different definitions of fair value and limited guidance for applying
      those
      definitions in GAAP. This Statement provides the definition to increase
      consistency and comparability in fair value measurements and for expanded
      disclosures about fair value measurements. The Statement emphasizes that fair
      value is a market-based measurement, not an entity-specific measurement. The
      Statement clarifies that market participant assumptions include assumptions
      about risk, i.e. the risk inherent in a particular valuation technique used
      to
      measure fair value and/or the risk inherent in the inputs to the valuation
      technique. The Statement expands disclosures about the use of fair vale to
      measure assets and liabilities in interim and annual periods subsequent to
      initial recognition. The disclosures focus on the inputs used to measure fair
      value and for recurring fair value measurements using significant unobservable
      inputs, theeffect
      of
      the measurements on earnings for the period. The Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Earlier application is
      encouraged, provided that the reporting entity has not yet issued financial
      statements for that fiscal year, including the financial statements for an
      interim period within that fiscal year.The
      Company does not expect adoption of this standard will have a material impact
      on
      its financial position, operations or cash flows





In
      December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
      Payment Arrangements (" FSP
      00-19 -2")
      which addresses accounting for registration payment arrangements. FSP
      00-19 -2
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      FASB Statement No. 5, Accounting for Contingencies. FSP
      00-19 -2
      further clarifies that a financial instrument subject to a registration payment
      arrangement should be accounted for in accordance with other applicable
      generally accepted accounting principles without regard to the contingent
      obligation to transfer consideration pursuant to the registration payment
      arrangement. For registration payment arrangements and financial instruments
      subject to those arrangements that were entered into prior to the issuance
      of
      EITF 00-19-2, this guidance shall be effective for financial statements issued
      for fiscal years beginning after December 15, 2006 and interim periods within
      those fiscal years. The Company has not yet determined the impact that the
      adoption of FSP
      00-19 -2
      will
      have on its financial statements.





*The
      Fair Value Option for Financial Assets and Financial Liabilities.* In
      February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities—including an amendment of FASB Statement No.
      115”, permitting entities to choose to measure many financial instruments and
      certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reported earnings caused by measuring related assets and liabilities differently
      without having to apply complex hedge accounting measurement. The statement
      applies to all entities, including not-for profit organizations. Most of the
      provisions of this Statement apply only to entities that elect the fair value
      option. However, the amendment to FASB Statement No. 115, “Accounting for
      Certain Investments in Debt and Equity Securities”, applies to all entities with
      available-for-sale and trading securities. The
      Company does not expect adoption of this standard will have a material impact
      on
      its financial position, operations or cash flows


46


**Item
      7. Financial Statements and Supplementary Data**


**Index
        To Consolidated Financial Statements**
 
 
 PageReports
                  of Independent Registered Certified Public Accounting Firm
              
              
              F-1Consolidated
                  Balance Sheets at March 31, 2007 and 2006
              
              
              F-2Consolidated
                  Statements of Losses for the Years Ended March 31, 2007 and
                  2006
              
              
              F-3Consolidated
                  Statements of Changes in Stockholders’ Equity for the Years Ended
                  March 31, 2007 and 2006
              
              
              F-4Consolidated
                  Statements of Cash Flows for the Years Ended March 31, 2007 and
                  2006
              
              
              F-5Notes
                  to the Consolidated Financial Statements
              
              
              F-6
                  - F-39Supplemental
                  Oil and Gas Information (Unaudited)
              
              
              F-40
 
  
 
 
  47
  **RBSM
        LLP**
 **CERTIFIED
        PUBLIC ACCOUNTANTS**
 
  REPORT
        OF
        INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
 
 Board
        of
        Directors
 Index
        Oil
        and Gas, Inc.
 Houston,
        USA
 
 We
        have
        audited the accompanying consolidated balance sheets of Index Oil and Gas,
        Inc.
        (and subsidiaries) (the “Company”) as of March 31, 2007 and 2006 and the related
        consolidated statements of losses, stockholders’ equity, and cash flows for each
        of the two years in the period ended March 31, 2007. These financial statements
        are the responsibility of the company’s management. Our responsibility is to
        express an opinion on the financial statements based upon our
        audits.
 
 We
        have
        conducted our audits in accordance with standards of the Public Company
        Accounting Oversight Board (United States of America). Those standards require
        that we plan and perform the audit to obtain reasonable assurance about whether
        the financial statements are free of material misstatement. An audit includes
        examining on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements. An audit also includes assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe 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 Index Oil and Gas, Inc. at March
        31, 2007 and 2006 and the results of its operations and its cash flows for
        each
        of the two years in the period ended March 31, 2007, in conformity with
        accounting principles generally accepted in the United States of
        America.
 
 New
                  York, New York
              
              /s/ RBSM
                  LLPJune
                  13, 2007
              RBSM
                  LLPCertified
                  Public Accountants
   
 F-1
 
 **INDEX
        OIL AND GAS, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **MARCH
        31, 2007 AND 2006**
 **2007**
              
              **2006****ASSETS**Current
                  Assets:Cash
                  and cash equivalents (Note 3)
              
              $
              10,141,125
              
              $
              5,536,006Trade
                  receivables (Note 4)
              
              
              80,342
              
              
              12,501Other
                  receivables (Note 3)
              
              
              6,688
              
              
              6,254Other
                  current assets (Note 3)
              
              
              72,936
              
              
              8,600Total
                  Current Assets
              
              
              10,301,091
              
              
              5,563,361Oil
                  & Gas Properties, full cost, net of accumulated depletion (Notes
                  3, 5,
                  7 and 15)
              
              
              4,866,050
              
              
              951,199Property
                  and Equipment, net of accumulated depreciation (Note 3 and
                  5)
              
              
              12,493
              
              
              1,727Total
                  Oil & Gas  Properties and Property and Equipment
              
              
              4,878,543
              
              
              952,926Total
                  Assets
              
              **$**
              **15,179,634**
              
              **$**
              **6,516,287****LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  Liabilities:Accounts
                  payable and accrued expenses (Note 3)
              
              $
              814,449
              
              $
              555,452Bank
                  loan (Note 6)
              
              
              -
              
              
              48,569Other
                  current liability (Note 14 )
              
              
              -
              
              
              1,007Total
                  Current Liabilities
              
              
              814,449
              
              
              605,028Long-Term
                  Liabilities:Asset
                  Retirement Obligation (Notes 3 and 7)
              
              
              41,552
              
              
              25,300Total
                  Liabilities
              
              
              856,001
              
              
              630,328Commitments
                  and Contingencies (Note 9)
              
              
              -
              
              
              -Stockholders
                  Equity: (Note 6 and 11)Preferred
                  stock, par value $0.001, 10 million shares authorized, no shares
                  issued
                  and outstanding at March 31, 2007 and 2006 (see Note 10)
              
              
              -
              
              
              -Common
                  stock, par value $0.001, 500 million shares authorized,
                65,737,036
                  and 54,544,346 issued and outstanding at March 31, 2007 and 2006,
                  respectively (see Note 10)
              
              
              65,737
              
              
              54,544Additional
                  paid in capital
              
              
              19,043,734
              
              
              8,387,306Accumulated
                  deficit
              
              
              (4,801,237
              )
              
              (2,575,581
              )Other
                  comprehensive income (Note 3)
              
              
              15,399
              
              
              19,690Total
                  Stockholders’ Equity
              
              
              14,323,633
              
              
              5,885,959Total
                  Liabilities and Stockholders’ Equity
              
              **$**
              **15,179,634**
              
              **$**
              **6,516,287**
   See
        accompanying notes to consolidated financial statements
    F-2
   **INDEX
        OIL AND GAS, INC.**
 **CONSOLIDATED
        STATEMENT OF LOSSES**
 **FOR
        THE YEARS ENDED MARCH 31, 2007 AND 2006**
 
 **2007**
              
              **2006**Revenue:Oil
                  & gas sales
              
              $
              457,046
              
              $
              191,114Operating
                  Expenses:Operating
                  costs
              
              
              114,735
              
              
              41,953Depreciation
                  and amortization (Note 5)
              
              
              189,379
              
              
              71,571Impairment
              
              
              -
              
              
              10,000General
                  and administrative expenses
              
              
              2,723,235
              
              
              1,746,101Total
                  Operating Expenses
              
              
              3,027,349
              
              
              1,869,625Loss
                  from Operations
              
              
              (2,570,303
              )
              
              (1,678,511
              )Other
                  Income (Expenses)
              
              
              -
              
              
              (43,234
              )Interest
                  income
              
              
              344,646
              
              
              30,939Total
                  Other Income (Expense)
              
              
              344,646
              
              
              (12,295
              )Loss
                  before Income Taxes
              
              
              (2,225,656
              )
              
              (1,690,806
              )Income
                  Taxes Benefit (Note 8)
              
              
              -
              
              
              -Net
                  Loss
              
              $
              (2,225,656
              )
              $
              (1,690,806
              )Loss
                  per share (Note 12):Basic
                  and assuming dilution
              
              $
              (0.03
              )
              $
              (0.08
              )Weighted
                  average shares outstanding:Basic
                  and assuming dilution
              
              
              65,623,189
              
              
              22,391,357
  See
        accompanying notes to consolidated financial statements
 
 
 F-3
 
 
 
 
 **INDEX
        OIL AND GAS, INC.**
 **CONSOLIDATED
        STATEMENT OF STOCKHOLDERS’ EQUITY**
 **FOR
        THE YEARS ENDED MARCH 31, 2007 AND 2006**
 
 
 **Common
                  Stock****Shares**
              
              **Amount**
              
              **Additional
                  Paid in Capital**
              
              **(Accumulated
                  Deficit)**
              
              **Other
                  Comprehensive Income/(Loss)**
              
              **Total
                  Stockholders’ Equity**Balance
                  at March 31, 2005
              
              
              12,303,674
              
              $
              12,304
              
              $
              944,140
              
              $
              (884,775
              )
              $
              3,571
              
              $
              75,240Issuance
                  of common stocks
              
              
              9,596,735
              
              
              9,597
              
              
              1,176,449
              
              
              -
              
              
              -
              
              
              1,186,046Stock
                  issue costs
              
              
              -
              
              
              -
              
              
              (23,219
              )
              
              -
              
              
              -
              
              
              (23,219
              )Issuance
                  of common stock on conversion of stockholder loan
              
              
              715,143
              
              
              715
              
              
              86,043
              
              
              -
              
              
              -
              
              
              86,758Shares
                  relating to Index Ltd cancelled in relation to reverse merger in
                  January
                  2006 (Note 2)
              
              
              (22,615,552
              )
              
              (22,616
              )
              
              -
              
              
              -
              
              
              -
              
              
              (22,616
              )Shares
                  issued to Index Ltd shareholders relating to reverse merger in
                  January
                  2006 (Note 2)
              
              
              22,615,552
              
              
              22,616
              
              
              -
              
              
              -
              
              
              -
              
              
              22,616Stock
                  compensation, net of tax of $0
              
              
              -
              
              
              -
              
              
              1,043,823
              
              
              -
              
              
              -
              
              
              1,043,823Stock
                  compensation, net of tax of $0
              
              
              303,793
              
              
              303
              
              
              37,274
              
              
              -
              
              
              -
              
              
              37,577Shares
                  issued to Index Inc shareholders in relation to merger with Index
                  Ltd in
                  January 2006 (Note 2)
              
              
              23,091,667
              
              
              23,092
              
              
              -
              
              
              -
              
              
              -
              
              
              23,092Issuance
                  of common stock on private offering
              
              
              8,533,333
              
              
              8,533
              
              
              5,111,467
              
              
              -
              
              
              -
              
              
              5,120,000Issuance
                  of warrants
              
              
              -
              
              
              -
              
              
              11,329
              
              
              -
              
              
              -
              
              
              11,329Other
                  comprehensive income foreign currency
                translation
                  adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              16,119
              
              
              16,119Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,690,806
              )
              
              -
              
              
              (1,690,806
              )Balance
                  at March 31, 2006
              
              
              54,544,345
              
              $
              54,544
              
              $
              8,387,306
              
              $
              (2,575,581
              )
              $
              19,690
              
              $
              5,885,959Issuance
                  of common stock on private offerings
              
              
              10,965,598
              
              
              10,966
              
              
              10,954,632
              
              
              -
              
              
              -
              
              
              10,965,598Stock
                  issue costs
              
              
              -
              
              
              -
              
              
              (1,190,512
              )
              
              -
              
              
              -
              
              
              (1,190,512
              )Stock
                  compensation, net of tax of $0
              
              
              -
              
              
              -
              
              
              792,342
              
              
              -
              
              
              -
              
              
              792,342Issuance
                  of stock upon vesting of stock award
              
              
              50,000
              
              
              50
              
              
              (50
              )
              
              -
              
              
              -
              
              
              -Issuance
                  of stock for services, net of tax of $0
              
              
              40,000
              
              
              40
              
              
              63,960
              
              
              -
              
              
              -
              
              
              64,000Issuance
                  of stock upon exercise of warrants
              
              
              124,593
              
              
              125
              
              
              17,318
              
              
              -
              
              
              -
              
              
              17,443Issuance
                  of stock for performance bonuses
              
              
              12,500
              
              
              12
              
              
              18,738
              
              
              -
              
              
              -
              
              
              18,750Other
                  comprehensive income foreign currency
                translation
                  adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,291
              )
              
              (4,291
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,225,656
              )
              
              -
              
              
              (2,225,656
              )Balance
                  at March 31, 2007
              
              
              65,737,036
              
              $
              65,737
              
              $
              19,043,734
              
              $
              (4,801,237
              )
              $
              15,399
              
              $
              14,323,633
 
 
 
 See
        accompanying notes to consolidated financial statements
  F-4
 
 
 **INDEX
        OIL AND GAS, INC.**
 **CONSOLIDATED
        STATEMENT OF CASH FLOWS**
 **FOR
        THE YEARS ENDED MARCH 31, 2007 AND 2006**
 
 **2007**
              
              **2006**Cash
                  Flows From Operating Activities:Net
                  loss
              
              $
              (2,225,656
              )
              $
              (1,690,806
              )Adjustments
                  to reconcile net loss to net cash (used in) operating
                  activities:Organization
                  costs arising from acquisition
              
              
              -
              
              
              1,578Non
                  cash stock based compensation cost
              
              
              875,092
              
              
              1,043,823Amortization
                  of debt issue costs-current year
              
              
              -
              
              
              43,234Non-cash
                  interest expense on warrant issuance on loan conversion
              
              
              -
              
              
              1,476Depreciation
                  and amortization
              
              
              189,379
              
              
              71,571Impairment
              
              
              -
              
              
              10,000(Increase)
                  in receivables
              
              
              (131,908
              )
              
              (14,104
              )Increase
                  in accounts payable and accrued expenses
              
              
              251,342
              
              
              342,267Net
                  Cash (Used In) Operating Activities
              
              
              (1,041,751
              )
              
              (190,961
              )Cash
                  Flows From Investing Activities:Cash
                  received in reverse merger
              
              
              -
              
              
              10,018Payments
                  for property and equipment
              
              
              (11,794
              )
              
              -Payments
                  for oil and gas properties
              
              
              (4,086,949
              )
              
              (659,376
              )Net
                  Cash (Used In) Investing Activities
              
              
              (4,098,743
              )
              
              (649,358
              )Cash
                  Flows From Financing Activities:Proceeds
                  from issuance of shares
              
              
              10,983,039
              
              
              5,681,229Proceeds
                  from issue of warrants
              
              
              -
              
              
              8,377Proceeds
                  from convertible notes payable
              
              
              -
              
              
              676,664(Payments
                  for) Proceeds from bank term debt
              
              
              (51,797
              )
              
              51,374Payment
                  for share issue costs
              
              
              (1,190,513
              )
              
              (23,219Payment
                  for debt issue costs
              
              
              -
              
              
              (43,234
              )Net
                  Cash Provided by Financing Activities
              
              
              9,740,729
              
              
              6,351,191Effect of exchange rate
                  changes on cash and cash equivalents
              
              
              4,884
              
              
              16,461Net
                  Increase/(Decrease) in Cash And Cash Equivalents
              
              
              4,605,119
              
              
              5,527,333Cash
                  and cash equivalents at beginning of period
              
              $
              5,536,006
              
              $
              8,673Cash
                  and cash equivalents at the end of period
              
              $
              10,141,125
              
              $
              5,536,006Supplemental
                  Disclosures of Cash Flow Information:Cash
                  paid (received) during the year for interest
              
              $
              (344,646
              )
              $
              (32,415
              )Cash
                  paid during the year for taxes
              
              $
              -
              
              $
              -Non-cash
                  Financing and Investing Transactions:Conversion
                  of loan capital into share capital
              
              $
              -
              
              $
              750,630Non-cash
                  stock based compensation cost
              
              $
              875,092
              
              $
              1,043,823Non-cash
                  interest expense on warrant issuance on loan conversion
              
              $
              -
              
              $
              1,476Acquisitions
                  :Common
                  stock retained by Index Inc.
              
              $
              -
              
              $
              23,092Assets
                  acquired
              
              $
              -
              
              $
              (23,500
              )Liabilities
                  acquired
              
              $
              -
              
              $
              1,986Total
                  consideration paid
              
              $
              -
              
              $
              1,578
 
 See
        accompanying notes to consolidated financial statements
   F-5
 
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        1 - ORGANIZATION AND OPERATIONS OF THE COMPANY**
 
 Organization
 
 In
        March
        2004, a company named Thai One On, Inc. (“Thai”) was incorporated under the laws
        of the State of Nevada. Thai subsequently acquired a wholly owned subsidiary,
        Thai Pasta Enterprise Sdn. Bhd., a privately held Malaysian company (“Thai
        Pasta”). In December of 2005, Thai changed its name from Thai One On Inc. to
        Index Oil and Gas, Inc (the “Company” or “Index Inc.”).
 
 On
        January 20, 2006, the stockholders of Index Oil & Gas Ltd., a company formed
        under the laws of United Kingdom (“Index Ltd.”), entered into Acquisition and
        Share Exchange Agreements (“Acquisition Agreements”, the “Transaction” or
“Merger”) with the Company. Effective with the Acquisition Agreements, all
        previously outstanding equity stock of Index Ltd. owned by Index Ltd.’s
        stockholders was exchanged for an aggregate of 22,615,552 shares of the
        Company’s common stock and all issued warrants to purchase shares of equity
        stock in Index Ltd. were exchanged for 1,092,676 warrants to purchase shares
        of
        common stock of the Company.
 
 Prior
        to
        the Merger, the Company’s year-end for accounting purposes was December 31,
        2005. As a result of the Merger, there was a change in control of the public
        entity. In accordance with Statement of Financial Accounting Standards 141,
        Index Ltd. was deemed to be the acquiring entity. While the transaction is
        accounted for using the purchase method of accounting, in substance the Merger
        was a recapitalization of Index Ltd.’s capital structure. For accounting
        purposes, the Company accounted for the transaction as a reverse acquisition
        and
        Index Inc. was the surviving entity. The total purchase price and carrying
        value
        of net assets acquired was $1,578. The Company did not recognize goodwill
        or any
        intangible assets in connection with the transaction.
 
 Index,
        Inc. is the parent company with four group subsidiaries: Index Ltd. comprises
        a
        United Kingdom holding company, which provides management services to the
        Company, and United States operating subsidiaries; Index Oil & Gas (USA),
        LLC, an operating company; Index Investments North America Inc. (“Index
        Investments”) and Index Offshore LLC (“Index Offshore”), a wholly owned
        subsidiary of Index Investments and also an operating company. Index Inc.,
        through its subsidiaries, is engaged in the exploration for, development,
        production and sale of oil and natural gas. The Company does not currently
        operate any of its properties and sells its oil and gas production to domestic
        purchasers.
 
 During
        the year ending March 31, 2007 the Company transferred the ordinary shares
        of
        Thai Pasta to a third party as part of a voluntary process to liquidate the
        entity and Thai Pasta ceased to be a subsidiary of the Company. This resulted
        in
        no impact to the financial position, results of operations or cash flows
        of the
        Company for the year ended March 31, 2007 as there was no value assigned
        to the
        assets, liabilities or equity of Thai Pasta following the reverse merger
        transaction.
 
  F-6
  
 **INDEX
        OIL AND GAS, INC.**
  **NOTES**  **TO**  **CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        1 - ORGANIZATION AND OPERATIONS OF THE COMPANY (continued)**
 
 Funding
 
 On
        January 20, 2006, the Company completed a private placement for 8,533,333
        shares
        of the Company’s common stock at a price of $0.60 per share for aggregate
        proceeds of approximately $5.1 million .
 
 On
        September 9, 2006, the Company announced the completion of a private placement
        for 7,097,898 shares of $0.001 par value common stock of the Company at a
        price
        of $1.00 per share for aggregate gross proceeds of approximately $7.1 million.
 
 On
        October 11, 2006, the Company announced the completion of a private placement
        for 3,867,700 shares of $0.001 par value common stock of the Company at a
        price
        of $1.00 per share for aggregate proceeds of approximately $3.9
        million.
 
 The
        net
        proceeds of these two placements will be applied to the expansion of the
        Company’s operations in the United States per Phases 2 and 3 of the Company’s
        Growth Strategies.
 
 The
        Company filed a registration statement on Form SB-2 (the “Registration
        Statement”), which was declared effective on February 9, 2007, to register a
        total of 43,510,952 shares of the Company’s common stock, including the shares
        included in the units of common stock described above, of which 1,092,676
        shares
        are issuable upon the exercise of warrants.
 
 Operations
 
 The
        Company has a three phased approach to its growth strategy. Phase 1, largely
        completed, consists of exploration projects with very low risk, low cost,
        low
        working interest, and limited upside. Phase 2, largely completed, consists
        of
        projects with low risk, low to medium cost, low to medium working interests
        commensurate with funding capability and risk. These projects have increased
        upside. Phase 3, recently commenced, consists of projects with low to medium
        risk, medium to high costs, and working interests commensurate with the funding
        capability and risk.
 
 PHASE
        1
        GROWTH STRATEGY: DRILLING PROGRAM IN KANSAS
 
 On
        August
        21, 2006, the Company announced an update to its Kansas drilling program
        that
        consisted of up to eight-wells. On January 9, 2007, the Company announced
        that
        six of the eight wells had been drilled, three in Barton County and three
        in
        Stafford County. All well locations are supported by modern 3D seismic
        data.
 
 On
        January 9, 2007, the company announced that in Barton County where the Company
        has a 3.25% working interest, two of the wells drilled were completed as
        oil
        producers. Schartz 1-18 and Rogers Unit 1-1 wells began producing in October
        2006 with gross daily oil production of seven barrels and eight barrels,
        respectively. Pan John 1-11 was a dry hole. Panning 1-1 is unlikely to be
        drilled.
 
 In
        Stafford County where the Company has a 5% working interest, two wells were
        completed as oil producers. The Hay Witt 1-11 and the Hayden 1-14 wells began
        producing in November 2006 and
  F-7
  **INDEX
        OIL AND GAS, INC.**
  **NOTES**  **TO**  **CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        1 - ORGANIZATION AND OPERATIONS OF THE COMPANY (continued)**
 
 December
        2006, respectively, with a gross daily oil production of forty-two barrels
        and
        eight barrels, respectively. The Hull Witt 1-11 was a dry hole. No further
        wells
        were drilled.
 
 PHASES
        2
& 3 GROWTH STRATEGIES: DRILLING PROGRAMS IN TEXAS AND LOUISIANA
 
 Phase
        2
        Growth Strategy
 
 The
        Company has made progress with its onshore Phase 2 drilling program and
        announced on August 21, 2006 that the Walker 1 discovery well drilled in
        Louisiana began producing on August 18, 2006. Initial gross production of
        the
        well, in which Index has a 12.5% working interest, was approximately 200
        barrels
        of oil per day with associated gross gas production of approximately 175
        thousand cubic feet per day. Walker 1 is the first productive well from the
        Company's initial Phase 2 "Four Well Portfolio.”
 
 The
        remaining seven wells in the current Phases 2 and 3 eight-well program are
        in
        Texas. Vieman 1 in Brazoria County was spudded October 15, 2006. Index built
        its
        working interest from an original 12.5% WI to a final 19.5% prior to spudding.
        On December 20, 2006, the Company announced that the deviated well had been
        drilled to a total depth of 10,383 feet true vertical depth, 11,340 feet
        measured depth. Electric logs indicated two potential pay zones below 10,000
        feet true vertical depth totaling approximately 15 feet of net gas bearing
        reservoir. The well took longer than anticipated to drill due to unplanned
        sidetrack operations and pressure control requirements in the lower of the
        two
        pay sections, and has incurred costs significantly in excess of pre-drill
        estimate. Vieman 1 came on production in February 2007, as part of an initial,
        extended flow test, and after the completion of this flow test has recently
        come
        back on production following further completion operations.
 
 The
        three-well Taffy drilling program was announced on December 5, 2006. Originally
        planned as a two-well program, a third well was added prior to drilling.
        The
        Company originally agreed to a 7.5% working interest in the two Taffy wells.
        The
        Company increased its working interest to 12.5% in Taffy 1, renamed Hawkins
        1,
        and to 30% in Taffy 2, renamed Dark 1. The company took a 30% working interest
        in a third Taffy well named Ruse 1. The three wells target relatively shallow
        Miocene gas reservoirs between 5,000 and 7,000 feet in Matagorda
        County.
 
 On
        January 25, 2007, the Company announced the Hawkins 1 commercial discovery.
        A
        completion test confirmed gas flow at a measured rate of approximately 1.04
        million cubic feet per day through a choke of 9/64th inch with a flowing
        tubing
        pressure of 1,850 pounds per square inch. The well is scheduled to begin
        production into the local pipeline grid during the second quarter of calendar
        year 2007.
  Ruse
        1
        was non-commercial and Dark 1 was a dry hole and both have been plugged and
        abandoned.
  As
        announced on May 2, 2006 and July 12, 2006, the Company entered into two
        Phases,
        I and II of an exploration agreement executed with ADC to reprocess seismic
        data
        and develop prospects to drill in four areas in Texas, Mississippi, and Alabama.
        This project is capable of delivering projects having Phase 2 and 3 growth
        characteristics. The first drillable prospect generated as a result of these
        agreements that the Company has committed to drill is an exploration well
        in the
        Fern Lake area of Nacogdoches County.
 
 
  F-8
  **INDEX
        OIL AND GAS, INC.**
  **NOTES**  **TO**  **CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        1 - ORGANIZATION AND OPERATIONS OF THE COMPANY (continued)**
 
 Phase
        3
        Growth Strategy
 
 On
        September 10, 2006, the Company signed an agreement to participate in the
        New
        Taiton Project in Wharton County. The first well, Ilse 1, spudded on December
        1,
        2006. It targets stacked Wilcox sands on trend with large nearby gas fields
        producing gas from the same Wilcox reservoirs. The prospect is defined by
        modern
        3D seismic data. If Ilse 1 proves successful, the Company may participate
        in
        further wells to develop the potential of the New Taiton Project. The Company
        has a 10% working interest before payout and an 8% working interest after
        payout
        in the New Taiton Project.
 
 The
        Ilse
        1 well has been drilled to total depth of 17,000 feet and logged. Analysis
        of
        the logs revealed two zones of interest in the Wilcox C and Wilcox A,
        respectively. The lowest zone, the Wilcox C, has been perforated and stimulated
        by a “frac” process. Gas flow from the formation to surface has not been
        achieved. The preliminary decision is that this interval will not be productive
        and will not have any proved reserves.
 
 A
        decision making process is currently underway within the joint venture as
        to
        whether to perform work to attempt to achieve gas flows from the upper zone
        of
        interest, the Wilcox A. As part of this decision making process, joint venture
        participants are awaiting a formal analysis and recommendation from the
        operator.
 
 Capital
        costs associated with the Ilse 1 well have been held outside the full cost
        pool,
        because a determination as to whether the well has found proved reserves
        has not
        been completed. At the future point when a determination is made, the costs
        associated with Ilse 1 will be included in the full cost pool. To the extent
        that Ilse 1 does not find any proved reserves, ignoring all other unrelated
        factors, this will lead to higher unit depletion charges in future periods
        and
        makes it highly likely Index will suffer a ceiling test impairment charge.
        Index
        is carrying approximately $1.3mm of costs at March 31, 2007 related to the
        Ilse
        1 well, and has also incurred further costs subsequent to fiscal year
        end.
 
 On
        December 4, 2006, the Company announced that it has signed an exploration
        agreement to participate at 15% working interest in the West 1 exploration
        well
        targeting the high-potential Edwards Limestone in Lavaca County, Texas. The
        proposed total depth of the well is approximately 14,700 feet. The company
        announced on January 23, 2007 that it had increased its working interest
        in the
        West 1 well to 20%. The well is planned to spud during the remainder of calendar
        year 2007.
  On
        February 16, 2007, the Company announced the signing of a letter of intent
        to
        participate in the first exploration well in the Shadyside prospect, located
        in
        St. Mary Parish, Louisiana. Index will have an initial 15% working interest
        in
        the first exploration well, reduced to a 13.5% working interest, after payout.
        The first well will be drilled during the first half of calendar year 2007
        with
        a planned depth of approximately 16,500 feet.
 
 On
        March
        5, 2007, the Company announced a commitment to drill two wells in south Texas.
        The wells are located in Victoria and Goliad Counties and target shallow
        Frio
        and Vicksburg reservoirs. Both wells were successful. The Serrano well, renamed
        Friedrich Gas Unit 1, in Victoria County, found 13 feet of net gas pay with
        daily production expected at 275 MCF of gas (46 Boe) per day. The Habanero
        well,
        renamed Schroeder Gas Unit 1, in Goliad County, found 10 feet of net gas
        pay
        with daily production expected at 197 MCF of gas (33 Boe) per day.
 
 **NOTE
        2 - MERGER AND CORPORATE RESTRUCTURE**
 
 In
        March
        2004, a company named Thai One On, Inc. (“Thai”) was incorporated under the laws
        of the State of Nevada. Thai then acquired a wholly-owned subsidiary, Thai
        Pasta
        Enterprise Sdn. Bhd., a privately-held Malaysian company (“Thai Pasta”), from an
        officer and director of Thai. Thai Pasta commenced operations as a restaurant
        operator in June 2004, but subsequently ceased operations in the fourth quarter
        of 2005 calendar year. Thai Pasta then sold a portion of its surplus assets,
        leaving it with no significant assets. In November 2005, a Letter of Intent
        agreement was entered into for the proposed acquisition (“the Letter of Intent”)
        of all outstanding shares of Index Ltd.’s common stock by Thai. Subsequently,
        Thai changed its name from Thai One On Inc. to Index Inc.
 
 
  F-9
  **INDEX
        OIL AND GAS, INC.**
  **NOTES**  **TO**  **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        2 - MERGER AND CORPORATE RESTRUCTURE (continued)**
  At
        December 31, 2005, Thai had 33,220,000 shares outstanding. In January 2006,
        the
        Company retired 10,128,333 shares of stock leaving 23,091,667 shares
        outstanding.
 
 On
        January 20, 2006, the stockholders of Index Ltd. entered into Acquisition
        and
        Share Exchange Agreements (“Acquisition Agreements”, “the Transaction”, or
“Merger”) with the Company. The Company had a total of 75,000,000 authorized
        shares with a par value of $0.001 per share and 33,220,000 shares issued
        and
        outstanding as of December 31, 2005.
 
 The
        Company’s year end for accounting purposes was December 31, 2005. As a result of
        the Merger, there was a change in control of the public entity. In accordance
        with Statement of Financial Accounting Standards 141, Index Ltd. was deemed
        to
        be the acquiring entity. While the transaction is accounted for using the
        purchase method of accounting, in substance the Merger was a recapitalization
        of
        Index Ltd.’s capital structure.
 
 For
        accounting purposes, the Company accounted for the transaction as a reverse
        acquisition and Index is the surviving entity. The total purchase price and
        carrying value of net assets acquired was $ 1,578. The Company did not recognize
        goodwill or any intangible assets in connection with the transaction. As
        of the
        date of the Agreement, Thai was an inactive corporation with no significant
        assets and liabilities.
 
 Effective
        with the Acquisition Agreements, all previously outstanding common stock
        owned
        by Index Ltd.’s stockholders were exchanged for an aggregate of 22,615,552
        shares of the Company’s common stock, $0.001 par value (“the Common Stock”) and
        all issued warrants to purchase common shares of Index Ltd. were exchanged
        for
        1,092,676 warrants to purchase shares of Common Stock of the Company. As
        part of
        the Transaction, subsequent to the Transaction 10,128,333 shares of common
        stock
        held by the former directors and officers of the Company were retired and
        subsequently canceled by the transfer agent for the Company. The effect of
        the
        Transaction was that 23,091,667 shares of Common Stock were retained (see
        Note
        9).
 
 The
        value
        of the stock issued was the historical cost of the Company's net tangible
        assets
        of $1,578, which did not differ materially from their fair value. The total
        consideration paid of $1,578 is summarized further below.
 
 **January
                  20, 2006**Common
                  stock retained by Index Inc.
              
              $
              23,092Assets
                  acquired
              
              
              (23,500
              )Liabilities
                  assumed
              
              
              1,986Total
                  consideration paid
              
              $
              1,578
 
 In
        accordance with Statement of Position 98-5 (“SOP 98-5”), the Company will
        expense as organization costs the $1,578.
 
 Concurrent
        with the Transaction was a private placement totaling $5.12 million for
        8,533,333 shares of the Common Stock of the Company at a price of $0.60 per
        share.
 
 F-10
   **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 A
        summary
        of the significant accounting policies applied in the preparation of the
        accompanying consolidated financial statements follows:
 
 *Principles
        of Consolidation*
 
 The
        consolidated financial statements as of March 31, 2007 and 2006 and for the
        years ended March 31, 2007 and 2006 include the accounts of the Company and
        its
        wholly owned subsidiaries after eliminating all significant intercompany
        accounts and transactions. As described in Note 2, Merger and Corporate
        Restructure these consolidated financial statements are presented as a
        recapitalization of Index Ltd. For the reverse merger between the Company
        and
        Index Ltd. at January 20, 2006 the stockholder’s equity section and earnings per
        share in the consolidated balance sheet at March 31, 2006 was restated to
        reflect the exchange of shares using a conversion ratio of approximately
        2.857
        shares of the Company to 1 share of Index Ltd.
 
 *Use
        of Estimates*
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles generally accepted in the United States requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities and disclosure of contingent assets and liabilities
        at
        the date of the financial statements and the reported amounts of revenues
        and
        expenses during the reporting period. Certain accounting policies involve
        judgments and uncertainties to such an extent that there is reasonable
        likelihood that materially different amounts could have been reported under
        different conditions, or if different assumptions had been used. We evaluate
        our
        estimates and assumptions on a regular basis. We base our estimates on
        historical experience and various other assumptions that are believed to
        be
        reasonable under the circumstances, the results of which form the basis for
        making judgments about the carrying values of assets and liabilities that
        are
        not readily apparent from other sources. Actual results may differ from these
        estimates and assumptions used in preparation of our financial statements.
        The
        most significant estimates with regard to these financial statements relate
        to
        the provision for income taxes, dismantlement and abandonment costs, estimates
        to certain oil and gas revenues and expenses and estimates of proved oil
        and
        natural gas reserve quantities used to calculate depletion, depreciation
        and
        impairment of proved oil and natural gas properties and equipment.
 
 *Correction
        of Errors*
 
 The
        Company adopted SFAS 154, “Accounting Changes and Error Corrections—a
        replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”)” in
        April 1, 2007, in which it changed the requirements for the accounting for
        and
        the reporting of a change in accounting principle. The Company requires that
        a
        new accounting principle be applied to the balances of assets and liabilities
        as
        of the beginning of the earliest period for which retrospective application
        is
        practicable and that a corresponding adjustment is made to the opening balance
        of retained earnings (or other appropriate components of equity or net assets
        in
        the balance sheet) for that period rather than being reported in the statement
        of operations. When it is impracticable to determine the cumulative effect
        of
        applying a change in accounting principle to all prior periods, The Company
        applies the new accounting principle as if it were adopted prospectively
        from
        the earliest date practicable. The Company will also revise previously issued
        financial statements to reflect the correction of an error, should one occur,
        and limit the application to the direct effects of the change. Indirect effects
        of a change in accounting principle will be recognized in the period of the
        accounting change. The Company will continue to account for a change in
        accounting estimate in accordance with APB 20. The adoption of this
        pronouncement had no impact to the Company’s consolidated financial position or
        results of operations.
   F-11
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 *Cash
        and Cash Equivalents, and Concentrations of Credit Risk*
 
 Cash
        and
        cash equivalents represent cash in banks. The Company considers any highly
        liquid debt instruments purchased with a maturity date of three months or
        less
        to be cash equivalents. The Company’s accounts receivable are concentrated among
        entities engaged in the energy industry, within the United States. Financial
        instruments and related items, which potentially subject the Company to
        concentrations of credit risk, consist primarily of cash, cash equivalents
        and
        related party receivables. The Company places its cash and temporary cash
        investments with credit quality institutions. At times, such investments
        may be
        in excess of the FDIC insurance limit.
 
 *Accounting
        for Bad Debts and Allowances*
 
 Bad
        debts
        and allowances are provided based on historical experience and management's
        evaluation of outstanding accounts receivable. The management periodically
        evaluates past due or delinquency of accounts receivable in evaluating its
        allowance for doubtful accounts. There was no allowance for doubtful accounts
        at
        March 31, 2007 and 2006.
 
 *Other
        Current Assets*
 
 Other
        receivables at March 31, 2007 and 2006, of $6,688 and $6,254, respectively
        consist primarily of value added tax recoverable in the United Kingdom by
        the
        Company. Other current assets of $72,936 and $8,600 at March 31, 2007 and
        2006
        consist of accrued interest income from cash in banks and prepaid
        expenses.
 
 *Oil
        and Gas Properties*
 
 The
        Company follows the full cost method of accounting for oil and gas properties.
        Accordingly, all costs associated with acquisition, exploration, and development
        of properties within a relatively large geopolitical cost center are capitalized
        when incurred and are amortized as mineral reserves in the cost center are
        produced, subject to a limitation that the capitalized costs not exceed the
        value of those reserves. In some cases, however, certain significant costs,
        such
        as those associated with offshore U.S. operations, are deferred separately
        without amortization until the specific property to which they relate is
        found
        to be either productive or nonproductive, at which time those deferred costs
        and
        any reserves attributable to the property are included in the computation
        of
        amortization in the cost center. All costs incurred in oil and gas producing
        activities are regarded as integral to the acquisition, discovery, and
        development of whatever reserves ultimately result from the efforts as a
        whole,
        and are thus associated with the Company’s reserves. The Company capitalizes
        internal costs directly identified with performing or managing acquisition,
        exploration and development activities. The Company has not capitalized any
        internal costs or interest at March 31, 2007 and 2006. Unevaluated costs
        are
        excluded from the full cost pool and are periodically evaluated for impairment
        rather than amortized. Upon evaluation, costs associated with productive
        properties are transferred to the full cost pool and amortized. Gains or
        losses
        on the sale of oil and natural gas properties are generally included in the
        full
        cost pool unless the entire pool is sold.
 
 Capitalized
        costs and estimated future development costs are amortized on a
        unit-of-production method based on proved reserves associated with the
        applicable cost center. The Company has assessed the impairment for oil and
        natural gas properties for the full cost pool at March 31, 2007 and 2006
        and
        will assess quarterly thereafter using a ceiling test to determine if impairment
        is necessary. Specifically, the net unamortized costs for each full cost
        pool
        less related deferred income taxes should not exceed the
  
 F-12
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 *Oil
        and Gas Properties (continued)*
 
 following:
        (a) the present value, discounted at 10%, of future net cash flows from
        estimated production of proved oil and gas reserves plus (b) all costs being
        excluded from the amortization base plus (c) the lower of cost or estimated
        fair
        value of unproved properties included in the amortization base less (d) the
        income tax effects related to differences between the book and tax basis
        of the
        properties involved. The present value of future net revenues should be based
        on
        current prices, with consideration of price changes only to the extent provided
        by contractual arrangements, as of the latest balance sheet presented. The
        full
        cost ceiling test must take into account the prices of qualifying cash flow
        hedges in calculating the current price of the quantities of the future
        production of oil and gas reserves covered by the hedges as of the balance
        sheet
        date. In addition, the use of the hedge-adjusted price should be consistently
        applied in all reporting periods and the effects of using cash flow hedges
        in
        calculating the ceiling test, the portion of future oil and gas production
        being
        hedged, and the dollar amount that would have been charged to income had
        the
        effects of the cash flow hedges not been considered in calculating the ceiling
        limitation should be disclosed. Any excess is charged to expense during the
        period that the excess occurs. The Company did not have any hedging activities
        during the three year period ended March 31, 2007. Application of the ceiling
        test is required for quarterly reporting purposes, and any write-downs cannot
        be
        reinstated even if the cost ceiling subsequently increases by year-end. 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. **** Abandonment
        of properties is accounted for as adjustments of capitalized costs with no
        loss
        recognized.
 
 *Other
        Property, Plant and Equipment*
 
 Other
        property, plant and equipment primarily includes computer equipment, which
        is
        recorded at cost and depreciated on a straight-line basis over useful lives
        of
        five years. Repair and maintenance costs are charged to expense as incurred
        while acquisitions are capitalized as additions to the related assets in
        the
        period incurred. Gains or losses from the disposal of property, plant and
        equipment are recorded in the period incurred. The net book value of the
        property, plant and equipment that is retired or sold is charged to accumulated
        depreciation and amortization, and the difference is recognized as a gain
        or
        loss in the results of operations in the period the retirement or sale
        transpires.
 
 *Comprehensive
        Income*
 
 Statement
        of Financial Accounting Standards No. 130 (“SFAS 130”), “Reporting Comprehensive
        Income,” establishes standards for reporting and displaying of comprehensive
        income, its components and accumulated balances. Comprehensive income is
        defined
        to include all changes in equity except those resulting from investments
        by
        owners and distributions to owners. Among other disclosures, SFAS 130 requires
        that all items that are required to be recognized under current accounting
        standards as components
 
 
 F-13
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *Comprehensive
        Income (continued)*
 
 of
        comprehensive income be reported in a financial statement that is displayed
        with
        the same prominence as other financial statements. The Company reports foreign
        currency translation adjustments within other comprehensive income in the
        periods presented.
 
 *Net
        Earnings (Losses) Per Common Share*
 
 The
        Company computes earnings (losses) per share under Statement of Financial
        Accounting Standards No. 128, "Earnings Per Share" (“SFAS 128”). Net earnings
        (losses) per common share is computed by dividing net income (loss) by the
        weighted average number of shares of common stock and dilutive common stock
        equivalents outstanding during the year. Dilutive common stock equivalents
        consist of shares issuable upon conversion of convertible notes payable and
        the
        exercise of the Company's stock options and warrants (calculated using the
        treasury stock method). During the year ended March 31, 2007 and 2006, common
        stock equivalents are not considered in the calculation of the weighted average
        number of common shares outstanding because they would be anti-dilutive,
        thereby
        decreasing the net loss per common share. For the reverse merger between
        the
        Company and Index Ltd. at January 20, 2006, the stockholder’s equity section and
        earnings per share in the consolidated balance sheet at March 31, 2006 was
        restated (recapitalization) to reflect the exchange of shares using a conversion
        ratio of approximately 2.857 shares of the Company to 1 share of Index
        Ltd.
 
 *Revenue
        Recognition*
 
 The
        Company uses the sales method of accounting for the recognition of natural
        gas
        and oil revenues. The Company has an agreement with the operator of its
        properties to sell, on its behalf, production from the properties for which
        it
        has working interest ownership. Since there is a ready market for natural
        gas,
        crude oil and natural gas liquids (“NGLs”), production is sold at various
        locations at which time title and risk of loss pass to the buyer. Revenue
        is
        recorded when title passes based on the Company’s net interest or nominated
        deliveries of production volumes. The Company records its share of revenues
        based on sales volumes and contracted sales prices. The sales price for natural
        gas, natural gas liquids and crude oil are adjusted for transportation cost
        and
        other related deductions. The transportation costs and other deductions are
        based on contractual or historical data and do not require significant judgment.
        Subsequently, these deductions and transportation costs are adjusted to reflect
        actual charges based on third party documents once received by the Company.
        Historically, these adjustments have been insignificant. In addition, natural
        gas and crude oil volumes sold are not significantly different from the
        Company’s share of production.
 
 The
        Company receives its share of revenue after all calculated royalties are
        paid on
        natural gas, crude oil and NGLs in accordance with the particular contractual
        provisions of the lease, license or concession agreements and the laws and
        regulations applicable to those agreements. Therefore, there is no Royalties
        Payable on the Company’s Consolidated/Combined Balance Sheet.
 
 *Imbalances.* When
        actual natural gas sales volumes exceed delivered share of sales volumes,
        an
        over-produced imbalance could occur. To the extent an over-produced imbalance
        exceeds the remaining estimated proved natural gas reserves for a given
        property, the Company would record a liability. At and during the years ended
        March 31, 2007 and 2006, the Company had no imbalances.
 
 F-14
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *Derivative
        and Hedging*
 
 The
        Company has also not entered into any derivative contracts for any purpose
        from
        the period of inception through March 31, 2007.
 
 *Foreign
        Currency Translation*
 
 The
        Company translates the foreign currency financial statements in accordance
        with
        the requirements of Statement of Financial Accounting Standards No. 52, “Foreign
        Currency Translation.” Assets and liabilities of non-U.S. subsidiaries whose
        functional currency is not the U.S. dollar are translated into U.S. dollars
        at
        fiscal year-end exchange rates. Revenue and expense items are translated
        at
        average exchange rates prevailing during the fiscal year. Translation
        adjustments are included in Accumulated other comprehensive loss in the equity
        section of the balance sheet totaled $(4,292) and $16,119 for the years ended
        March 31, 2007 and 2006, respectively, and foreign currency transaction
        (losses)/gains are included in the statement of operations
 
 *Income
        Taxes*
 
 Deferred
        income taxes are provided using the asset and liability method for financial
        reporting purposes in accordance with the provisions of Statements of Financial
        Standards No. 109, “Accounting for Income Taxes”. Under this method, deferred
        tax assets and liabilities are recognized for temporary differences between
        the
        tax bases of assets and liabilities and their carrying values for financial
        reporting purposes and for operating loss and tax credit carry forwards.
        Deferred 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 removed or settled. The effect on deferred
        tax
        assets and liabilities of a change in tax rates is recognized in the statements
        of operations in the period that includes the enactment date. A valuation
        allowance is established to reduce deferred tax assets if it is more likely
        than
        not that the related tax benefits will not be realized.
 
 *Segment
        Information*
 
 Statement
        of Financial Accounting Standards No. 131, “Disclosures about Segments of an
        Enterprise and Related Information” (“SFAS 131”) establishes standards for
        reporting information regarding operating segments in annual financial
        statements and requires selected information for those segments to be presented
        in interim financial reports issued to stockholders. SFAS 131 also establishes
        standards for related disclosures about products and services and geographic
        areas. Operating segments are identified as components of an enterprise about
        which separate discrete financial information is available for evaluation
        by the
        chief operating decision maker, or decision-making group, in making decisions
        how to allocate resources and assess performance. The information disclosed
        herein materially represents all of the financial information related to
        the
        Company’s principal operating segment.
  *Stock
        Based Compensation*
 
 In
        determining our accounting policies prior to January 1, 2006, the Company
        chose
        to apply the intrinsic value method pursuant to Accounting Standards Board
        (“APB”) APB No. 25, “Stock Issued to Employees” (“APB No. 25”),
        effective February 2003. Under APB No. 25, no compensation cost was
        recognized when the exercise price for options granted equaled the fair value
        of
        the Company’s common stock on the date of the grant. Accordingly, the provisions
        of SFAS No. 123, “Accounting for Stock-Based Compensation,” permitted the
        continued use of the method prescribed by APB No. 25 but required
        additional disclosure, including pro forma calculations of net income (loss)
        per
        share as if the fair value method of accounting prescribed by SFAS No. 123
        had been applied. Although the Company applied the intrinsic method in
        accounting for stock issued to employees, it did record compensation expense
        for
        the difference between the fair market value and the exercise price at the
        date
        of the grant using the Black Scholes valuation model. Therefore, there was
        no
        pro forma impact for the fiscal years ended March 31, 2006 as shown below.
        See
        Notes 10 and 13 for further discussion of these transactions.
  F-15
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 For
                  the year ended March 31, 2006Net
                  loss, as reported
              
              $
              (1,690,806
              )Add:
                  Total stock based employee compensation expense as reported under
                  intrinsic value method, net of tax of $0
              
              
              -Deduct:
                  Total stock based employee compensation expense as reported under
                  fair
                  value based method, net of tax of $0
              
              
              -Net
                  loss , pro forma
              
              $
              (1,690,806
              )Basic
                  and fully diluted loss per share, as reported
              
              $
              (0.08
              )Basic
                  and fully diluted loss per share, pro forma
              
              $
              (0.08
              )
   In
        December 2003, the FASB issued SFAS No.148, "Accounting for Stock-Based
        Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
        amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
        alternative methods of transition for a voluntary change to the fair value
        based
        method of accounting for stock-based employee compensation. In addition,
        this
        statement amends the disclosure requirements of SFAS No. 123 to require
        prominent disclosures in both annual and interim financial statements about
        the
        method of accounting for stock-based employee compensation and the effect
        of the
        method used on reported results.
 
 In
        December 16, 2004, the Financial Accounting Standards Board ("FASB") published
        Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based
        Payment ("SFAS 123-R"). SFAS 123-R requires that compensation cost related
        to
        share-based payment transactions be recognized in the financial statements.
        Share-based payment transactions within the scope of SFAS 123-R include stock
        warrants, restricted stock plans, performance-based awards, stock appreciation
        rights, and employee share purchase plans. Prior to January 1 2006, the Company
        accounted for its share-based payment transactions under the provisions of
        APB
        25, whereby compensation expense is recognized using the intrinsic value
        of the
        options at the date of the grant.
 
 On
        April
        14, 2005, the SEC amended the effective date of the provisions of SFAS 123-R.
        Accordingly, the Company adopted the revised standard on January 1, 2006.
        Since
        there were no outstanding options at March 31, 2005 and the Company had no
        stock
        forfeitures since date of inception, there was no impact upon adoption of
        SFAS
        123-R to the company’s financial position, results of operations or cash flows.
   F-16
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *Asset
        Retirement Obligations*
  Our
        financial statements reflect the provisions of Statement of Financial Accounting
        Standards No. 143, Accounting for Asset Retirement Obligations. SFAS No.143
        provides that, if the fair value for an asset retirement obligation can be
        reasonably estimated, the liability should be recognized in the period when
        it
        is incurred. Oil and gas producing companies incur this liability upon acquiring
        or drilling a well. Under the method prescribed by SFAS No.143, the retirement
        obligation is recorded as a liability at its estimated present value at the
        asset’s inception, with an offsetting increase to producing properties on the
        balance sheet. Periodic accretion of discount of the estimated liability
        is
        recorded as an expense in the statement of operations. The Company’s asset
        retirement obligations relate to the abandonment of oil producing wells.
        The
        Company has recognized an asset retirement liability of $41,552 and $25,300
        at
        March 31, 2007 and 2006, respectively. It is estimated that salvage values
        of
        well equipment will be equal, in aggregate, to the cost of plugging and
        abandoning these wells at that point, and this estimate has been taken into
        account in the calculation of accretion expense.
  *Long-Lived
        Assets*
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 144 (SFAS
        144). The Statement requires that long-lived assets and certain identifiable
        intangibles held and used by the Company be reviewed for impairment whenever
        events or changes in circumstances indicate that the carrying amount of an
        asset
        may not be recoverable. Events relating to recoverability may include
        significant unfavorable changes in business conditions, recurring losses,
        or a
        forecasted inability to achieve break-even operating results over an extended
        period. The Company evaluates the recoverability of long-lived assets based
        upon
        forecasted undiscounted cash flows. Should any impairment in value be indicated,
        the carrying value of intangible assets will be adjusted, based on estimates
        of
        future discounted cash flows resulting from the use and ultimate disposition
        of
        the asset. SFAS No. 144 also requires assets to be disposed of be reported
        at
        the lower of the carrying amount or the fair value less costs to sell. In
        the
        year to March 31, 2006, the Company recorded an impairment of $10,000 related
        to
        restaurant equipment acquired during the reverse merger with Index Inc. These
        assets were deemed to be impaired as there is no future cash flow associated
        with these assets.
 
 *Conditional
        Asset Retirement Obligations* *.*
  In
          March
          2005, the FASB issued FASB Interpretation (FIN) No. 47, “Accounting for
          Conditional Asset Retirement Obligations, an interpretation of FASB Statement
          No. 143,” which requires an entity to recognize a liability for the fair value
          of a conditional asset retirement obligation when incurred if the liability's
          fair value can be reasonably estimated. The Company is required to adopt
          the
          provisions of FIN 47 no later than the first quarter of fiscal 2006. There
          was
          no impact to adoption of this Interpretation on its consolidated financial
          position, results of operations or cash flows since it currently does not
          have
          any conditional asset retirement obligations outstanding at March 31, 2007
          and
          2006.
 
 *Employers’
          Defined Benefit Pension and Other Postretirement Plans.*
 
 ** In
          September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined
          Benefit Pension and Other postretirement Plans”, which improves financial
          reporting by requiring an employer to recognize the overfunded or underfunded
          status of a defined benefit postretirement plan as an asset or liability
          in its
          statement of financial position and to recognize changes in that funded
          status
          in the year in which the changes occur through comprehensive income of
          a
          business entity or changes in unrestricted net asset of a net-for-profit
          organization. This Statement also improves financial reporting by requiring
          an
          employer to measure the funded status of a plan as of the date of its year-end
          statement of financial position with limited exceptions. The required date
          of
          adoption of the recognition and disclosure provisions of this Statement
          is as of
          the end of the fiscal year ending after December 15, 2006. The
          adoption of this statement did not impact the Company as the Company does
          not
          currently have a defined benefit pension plan.
 *New
        Accounting Pronouncements Not Yet Adopted*
 
 *Certain
        Hybrid Instrument* *s* .
        On
        February 16, 2006 the FASB issued SFAS 155, “Accounting for Certain Hybrid
        Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and
        Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of
        Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial
        instruments that have embedded derivatives to be accounted for as a whole
        (eliminating the need to bifurcate the derivative from its host) if the holder
        elects to account for the whole instrument on a fair value basis. SFAS 155
        also
        clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This
        statement is effective for all financial instruments acquired or issued in
        fiscal years beginning after September 15, 2006. The Company does not
        expect its adoption of this new standard to have a material impact on its
        financial position, results of operations or cash flows as it currently does
        not
        have any hybrid instruments outstanding at March 31, 2007.
 
   F-17
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *New
        Accounting Pronouncements Not Yet Adopted (continued)*
 
 *Accounting
        for Servicing of Financial Assets* .
        In
        March 2006, the FASB issued SFAS No. 156, “ *Accounting
        for Servicing of Financial Assets—an amendment of FASB Statement No.
        140”(“* SFAS
        No.
        156”), which amends FASB Statement No. 140, *Accounting
        for Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities,* with
        respect to the accounting for separately recognized servicing assets and
        servicing liabilities.
 
 This
        Statement:
 
 1.
              Requires
                  an entity to recognize a servicing asset or servicing liability
                  each time
                  it undertakes an obligation to service a financial asset by entering
                  into
                  a servicing contract in any of the following situations:
  a.
              A
                  transfer of the servicer’s financial assets that meets the requirements
                  for sale accounting
 
 b.
              A
                  transfer of the servicer’s financial assets to a qualifying
                  special-purpose entity in a guaranteed mortgage securitization
                  in which
                  the transferor retains all of the resulting securities and classifies
                  them
                  as either available-for-sale securities or trading securities in
                  accordance with FASB Statement No. 115,*Accounting
                  for Certain Investments in Debt and Equity Securities*
 
 c.
              An
                  acquisition or assumption of an obligation to service a financial
                  asset
                  that does not relate to financial assets of the servicer or its
                  consolidated affiliates.
 
 2.
              Requires
                  all separately recognized servicing assets and servicing liabilities
                  to be
                  initially measured at fair value, if practicable.
 
 3.
              Permits
                  an entity to choose either of the following subsequent measurement
                  methods
                  for each class of separately recognized servicing assets and servicing
                  liabilities:
 
 a.
              *Amortization
                  method*—Amortize
                  servicing assets or servicing liabilities in proportion to and
                  over the
                  period of estimated net servicing income or net servicing loss
                  and assess
                  servicing assets or servicing liabilities for impairment or increased
                  obligation based on fair value at each reporting date.
  b.
              *Fair
                  value measurement method*—Measure
                  servicing assets or servicing liabilities at fair value at each
                  reporting
                  date and report changes in fair value in earnings in the period
                  in which
                  the changes occur.
 
  F-18
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *Accounting
        for Servicing of Financial Assets (continued).*
  4.
              At
                  its initial adoption, permits a one-time reclassification of
                  available-for-sale securities to trading securities by entities
                  with
                  recognized servicing rights, without calling into question the
                  treatment
                  of other available-for-sale securities under Statement 115, provided
                  that
                  the available-for-sale securities are identified in some manner
                  as
                  offsetting the entity’s exposure to changes in fair value of servicing
                  assets or servicing liabilities that a servicer elects to subsequently
                  measure at fair value.
 
 5.
              Requires
                  separate presentation of servicing assets and servicing liabilities
                  subsequently measured at fair value in the statement of financial
                  position
                  and additional disclosures for all separately recognized servicing
                  assets
                  and servicing liabilities.
  This
        Statement requires that all separately recognized servicing assets and servicing
        liabilities be initially measured at fair value, if practicable. The Board
        concluded that fair value is the most relevant measurement attribute for
        the
        initial recognition of all servicing assets and servicing liabilities, because
        it represents the best measure of future cash flows. This Statement permits,
        but
        does not require, the subsequent measurement of servicing assets and servicing
        liabilities at fair value. An entity that uses derivative instruments to
        mitigate the risks inherent in servicing assets and servicing liabilities
        is
        required to account for those derivative instruments at fair value. Under
        this
        Statement, an entity can elect subsequent fair value measurement of its
        servicing assets and servicing liabilities by class, thus simplifying its
        accounting and providing for income statement recognition of the potential
        offsetting changes in fair value of the servicing assets, servicing liabilities,
        and related derivative instruments. An entity that elects to subsequently
        measure servicing assets and servicing liabilities at fair value is expected
        to
        recognize declines in fair value of the servicing assets and servicing
        liabilities more consistently than by reporting other-than-temporary
        impairments.
  The
        Board
        decided to require additional disclosures and separate presentation in the
        statement of financial position of the carrying amounts of servicing assets
        and
        servicing liabilities that an entity elects to subsequently measure at fair
        value to address concerns about comparability that may result from the use
        of
        elective measurement methods.
 
 An
        entity
        should adopt this Statement as of the beginning of its first fiscal year
        that
        begins after September 15, 2006. Earlier adoption is permitted as of the
        beginning of an entity’s fiscal year, provided the entity has not yet issued
        financial statements, including interim financial statements, for any period
        of
        that fiscal year. The effective date of this Statement is the date an entity
        adopts the requirements of this Statement.  The
        Company does not expect adoption of this standard will have a material impact
        on
        its financial position, operations or cash flows.
 
 *Income
        Taxes.* In
        June
        2006, the FASB issued FASB Interpretation No 48 (“FIN 48”), “Accounting for
        Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109”, which
        clarifies the accounting for uncertainty in income taxes recognized in an
        enterprise’s financial statements in accordance with FASB 109. The
        Interpretation prescribes a recognition threshold and measurement attribute
        for
        the financial statement recognition and measurement of a tax position taken
        or
        expected to be taken in a tax return. The Interpretation also provides guidance
        on derecognition, classification, interest and penalties, accounting in interim
        periods, disclosure and transition. The Interpretation is effective for fiscal
        years beginning after December 15, 2006. The
        Company has not yet determined the impact on the Company’s consolidated
        financial position or results of operations.
 
 *Fair
        Value Measurements.* In
        September 2006, the FASB issued SFAS 157, “Fair Value Measurements”, which
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles (“GAAP”), and expands disclosures about
        fair value measurements. Prior to this Statement, there were different
        definitions of fair value and limited guidance for applying those definitions
        in
        GAAP. This Statement provides the definition to increase consistency and
        comparability in fair value measurements and for expanded disclosures about
        fair
        value measurements. The Statement emphasizes that fair value is a market-based
        measurement, not an entity-specific measurement. The Statement clarifies
        that
        market participant assumptions include assumptions about risk, i.e. the risk
        inherent in a particular
 
  F-19
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *Fair
        Value Measurements (continued)*
 
 valuation
        technique used to measure fair value and/or the risk inherent in the inputs
        to
        the valuation technique. The Statement expands disclosures about the use
        of fair
        vale to measure assets and liabilities in interim and annual periods subsequent
        to initial recognition. The disclosures focus on the inputs used to measure
        fair
        value and for recurring fair value measurements using significant unobservable
        inputs, the effect of the measurements on earnings for the period. The Statement
        is effective for financial statements issued for fiscal years beginning after
        November 15, 2007, and interim periods within those fiscal years. Earlier
        application is encouraged, provided that the reporting entity has not yet
        issued
        financial statements for that fiscal year, including the financial statements
        for an interim period within that fiscal year. The
        Company does not expect adoption of this standard will have a material impact
        on
        its financial position, operations or cash flows.
 
 In
        December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
        Payment Arrangements (" FSP
        00-19 -2")
        which addresses accounting for registration payment arrangements. FSP
        00-19 -2
        specifies that the contingent obligation to make future payments or otherwise
        transfer consideration under a registration payment arrangement, whether
        issued
        as a separate agreement or included as a provision of a financial instrument
        or
        other agreement, should be separately recognized and measured in accordance
        with
        FASB Statement No. 5, Accounting for Contingencies. FSP
        00-19 -2
        further clarifies that a financial instrument subject to a registration payment
        arrangement should be accounted for in accordance with other applicable
        generally accepted accounting principles without regard to the contingent
        obligation to transfer consideration pursuant to the registration payment
        arrangement. For registration payment arrangements and financial instruments
        subject to those arrangements that were entered into prior to the issuance
        of
        EITF 00-19-2, this guidance shall be effective for financial statements issued
        for fiscal years beginning after December 15, 2006 and interim periods within
        those fiscal years. The Company has not yet determined the impact that the
        adoption of FSP
        00-19 -2
        will
        have on its financial statements.
 
 *The
        Fair Value Option for Financial Assets and Financial Liabilities.* In
        February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities—including an amendment of FASB Statement No.
        115”, permitting entities to choose to measure many financial instruments and
        certain other items at fair value. The objective is to improve financial
        reporting by providing entities with the opportunity to mitigate volatility
        in
        reported earnings caused by measuring related assets and liabilities differently
        without having to apply complex hedge accounting measurement. The statement
        applies to all entities, including not-for profit organizations. Most of
        the
        provisions of this Statement apply only to entities that elect the fair value
        option. However, the amendment to FASB Statement No. 115, “Accounting for
        Certain Investments in Debt and Equity Securities”, applies to all entities with
        available-for-sale and trading securities. The
        Company does not expect adoption of this standard will have a material impact
        on
        its financial position, operations or cash flows
  F-20
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
  **NOTE
        4 - TRADE RECEIVABLES**
  Historically,
        through March 31, 2007, all of the Company’s trade receivables related to its
        working interest share of oil and gas sales have been collected. No allowance
        for doubtful accounts has been recorded at March 31, 2007 and 2006.
  **NOTE
        5 - PROPERTY, PLANT AND EQUIPMENT, PROPERTY ACQUISITIONS AND DISPOSITIONS
        AND
        CAPITALIZED INTEREST**
  *Oil
        and Gas Properties*
  Major
        classes of oil and gas properties under the full cost method of accounting
        at
        March 31, 2007 and 2006 consist of the following:
 
 **March
                  31,****2007**
              
              **2006**Proved
                  properties
              
              $
              3,254,211
              
              $
              722,056Unevaluated
                  and unproved properties
              
              
              1,927,776
              
              
              356,729Gross
                  oil and gas properties-onshore
              
              
              5,181,987
              
              
              1,078,785Less:
                  accumulated depletion
              
              
              (315,937
              )
              
              (127,586
              )Net
                  oil and gas properties-onshore
              
              $
              4,866,050
              
              $
              951,199
 
 Included
        in the Company's oil and gas properties are asset retirement obligations
        of
        $41,552 and $25,300 as of March 31, 2007 and 2006, respectively.
 
 Depletion
        expense was $188,351 and $65,311 or $23.33 and $19.10 per barrel of production
        for the years ended March 31, 2007 and 2006, respectively.
  It
        is
        anticipated that the cost of undeveloped acreage of $258,298 and exploration
        costs of $1,669,478 will be included in depreciation, depletion and amortization
        when the related projects are planned and drilled and completed. Included
        in
        exploration cost and undeveloped acreage are costs of approximately $1.3
        million
        related to costs of drilling the Ilse 1 well that has been drilled, but not
        tested or completed (see Note 1), approximately $0.2 million related to
        undeveloped leasehold for the West 1 that will be drilled in fiscal year
        2008,
        and approximately $0.3 million related to the ADC exploration
        agreements.
  At
        March
        31, 2007 and 2006, the Company excluded the following capitalized costs from
        depletion, depreciation and amortization:
  **March
                  31, 2007**
              
              **March
                  31, 2006**Not
                  subject to depletion-onshore:Exploration
                  costs
              
              $
              1,669,478
              
              $
              236,806Cost
                  of undeveloped acreage
              
              
              258,298
              
              
              119,923Total
                  not subject to depletion
              
              $
              1,927,776
              
              $
              356,729
 
 F-21
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
  *Acquisitions
        and Dispositions*
  During
        the fiscal year, the Company entered into Seismic Reprocessing and Exploration
        Agreements with ADC Petroleum, L.P. (“ADC”) covering prospective areas in the US
        Gulf Coast. The Agreements enable Index Inc to participate in the reprocessing
        of certain existing 3 Dimensional (“3D”) land seismic data already available to
        ADC as a result of its participation in an agreement signed between ADC and
        two
        of its other industry partners (the "ADC Agreements"). This seismic data
        covers
        prospective areas in the Gulf Coast U.S., throughout Texas, Alabama and
        Mississippi. The ADC Agreements set forth the rights of the parties in their
        joint participation of generating drilling prospects from such reprocessed
        data
        and allow the parties to jointly exploit the prospects generated. A total
        of
        $337,344 has not been ascribed to specific wells and is included in exploration
        costs and excluded from the depletion base at March 31, 2007.
 
 In
        September 2006, the Company signed an agreement to participate in the New
        Taiton
        Project in Wharton County. A total of $60,000 for unproved property acquisition
        costs is excluded from the depletion base. The first well, Ilse 1 with a
        planned
        total depth of over 17,000 feet, targeted stacked Wilcox sands on trend with
        large nearby gas fields producing gas from the same Wilcox reservoirs. The
        prospect is defined by modern 3D seismic data. Ilse 1 spudded in December
        2006.
        Total well costs of $1,216,864 are excluded from the depletion base as the
        well
        is still under evaluation (see Note #1).
 
 In
        December 2006, the Company announced that it signed an exploration agreement
        to
        participate at 15% working interest in the West 1 exploration well targeting
        the
        high-potential Edwards Limestone in Lavaca County, Texas. The well is planned
        to
        spud during the remainder of calendar year 2007. Leasehold and exploration
        costs
        of $206,175 are excluded from the depletion base.
 
  F-22
 
 
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
  **NOTE
        5 - PROPERTY, PLANT AND EQUIPMENT, PROPERTY ACQUISITIONS AND DISPOSITIONS
        AND
        CAPITALIZED INTEREST (continued)**
  *Other
        Property and Equipment*
 
 Property
        and equipment are stated at cost. When retired or otherwise disposed, the
        related carrying value and accumulated depreciation are removed from the
        respective accounts and the net difference less any amount realized from
        disposition, is reflected in earnings. For financial statement purposes,
        property and equipment are depreciated using the straight-line method over
        their
        estimated useful lives of the assets. Maintenance, repairs, and minor renewals
        are charged against earnings when incurred. Additions and major renewals
        are
        capitalized. Major assets at March 31, 2007 and 2006 were as
        follows:
 
 **March
                  31,****2007**
              
              **2006**Computer
                  Costs, including foreign translation
              
              $
              23,858
              
              $
              11,217Less:
                  accumulated depreciation
              
              
              (11,365
              )
              
              (9,490
              )Total
                  other property and equipment
              
              $
              12,493
              
              $
              1,727
 
 Depreciation
        expenses from continuing operations amounted to $1,028 and $6,260 for the
        years
        ended March 31, 2007 and 2006, respectively.
 
 *Capitalized
        Interest*
 
 There
        was
        no interest capitalized in property, plant and equipment at March 31, 2007
        and
        2006.
 
 F-23
  
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
  **NOTE
        6 - NOTES PAYABLE**
 
 Index
        Ltd
        incurred debt and raised capital through a series of rounds of fundraising
        from
        inception through March 31, 2006. All of the Index Ltd stockholder funding
        was
        later converted to common stock at par and additional paid in capital. There
        were no fundraising in fiscal year 2007 that involved convertible debt. The
        transactions involving debt or convertible debt are summarized below by period
        for Index Ltd.:
 
 **Equity
                  Issuances**
              
              **Debt
                  & Subsequent Equity Conversions (1)****Total
                  Proceeds**
              
              **Common**
                **Stock**
              
              **Additional
                  Paid**
                **In
                  Capital**
              
              **Convertible**
                **Debt**
              
              **Debt**
                **Converted**
                **To
                  Stock**
              
              **Common
                  Stock**
                **Converted**
                **From Debt**
              
              **Additional
                  Paid**
                **In
                  Capital**
                **Converted**
                **From
                  Debt****Year
                  Ended March 31, 2005**
              
              $
              1,003,503
              
              $
              268,840
              
              $
              71,445
              
              $
              669,048
              
              $
              (574,445
              )
              $
              451,088
              
              $
              117,527Round
                  4
              
              
              676,664
              
              
              -
              
              
              -
              
              
              676,664
              
              
              -
              
              
              -
              
              
              -Round
                  4 conversion
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (663,872
              )
              
              331,936
              
              
              331,936Conversion
                  of 2005 Stockholder loan
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (86,758
              )
              
              43,379
              
              
              43,379Foreign
                  currency translation
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (20,637
              )**Year
                  ended March 31, 2006**
              
              $
              676,664
              
              $
              -
              
              $
              -
              
              $
              676,664
              
              $
              771,267
              
              $
              375,315
              
              $
              375,315**Totals
                  through March 31, 2006**
              
              $
              1,680,167
              
              $
              268,840
              
              $
              71,445
              
              $
              1,345,712
              
              $
              (1,345,712
              )
              $
              826,403
              
              $
              492,842
 
 (1)
        The
        debt for Round 4 financing was convertible at a price per share which averaged
        $0.36 per share and conversion of 2005 stockholder loan averaged $0.35 per
        share. After all conversion of stock, there was no note payable-long term
        at
        March 31, 2007 and 2006.
 
  F-24
 
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        6 - NOTES PAYABLE (continued)**
 
 In
        addition, in the year to March 31, 2006 Index Ltd entered into a one-year
        term
        note for additional finance for operations. The amount borrowed was $51,374
        in
        April 2005 at the ruling transaction rate. The term loan is financed at a
        rate
        of 2% over the bank’s prime interest rate. At expiration date in April 2006, the
        bank renewed the loan for up to an additional year. This is shown on the
        balance
        sheet at March 31, 2006 in current liabilities as “Bank Loan”. The Company
        repaid the total amount of the loan in the first quarter of fiscal year 2007.
        As
        at March 31, 2006, Bank Loans of $48,569 was outstanding at the closing exchange
        rate. The bank held the following security: a secured debenture including
        fixed
        equitable charge over all present and future freehold and leasehold property
        of
        Index Ltd; first fixed charge over, among other things, book and other debts,
        chattels, goodwill and uncalled capital; first floating charge over all assets
        and undertakings both present and future of Index Ltd.; joint and severable
        guarantee given by Lyndon West and Michael Scrutton.
 
 The
        fund
        raising activities of Index Ltd during the year ended March 31, 2006 were
        generally offered to investors with minimum and maximum capital achievements
        and
        structured to be a range of one-third to one-half for common stock in the
        Company with the corresponding two-thirds to one-half for debt payable to
        investors. In each case the capital requirements were achieved with equity
        and
        debt summarized in the tables discussed above. Total loans to Index Ltd during
        the year ended March 31, 2006 totaled $676,664 ($663,872 at the transaction
        date
        foreign currency rate of $1.8088 to ₤1.0) in loans which converted into
        1,835,117 shares of common stock, and of which $94,603 ($91,303 at the original
        transaction date foreign currency rate, and $86,758 at the conversion date
        foreign currency rate) in loans converted to 250,325 shares of common stock
        (converted to 715,143 shares of Company stock) in the year ended March 31,
        2006.
 
 There
        was
        $43,234 in debt issue costs incurred during the year ended March 31, 2006.
        Total
        amortization expense in these same periods was $43,234. The debt issue costs
        were capitalized and were amortized up to the point of conversion to common
        stock. There was no unamortized debt issue cost at March 31, 2006.
 
 **NOTE
        7 - ASSET RETIREMENT OBLIGATION**
 
 Activity
        related to the Company’s ARO during the years ended March 31, 2006 is as
        follows:
 
 **March
                  31,****2007**
              
              **2006**ARO
                  as of beginning of period
              
              $
              25,300
              
              $
              16,500Liabilities
                  incurred during period
              
              
              16,252
              
              
              8,800Liabilities
                  settled during period
              
              
              -
              
              
              -Accretion
                  expense
              
              
              -
              
              
              -Balance
                  of ARO as of end of period
              
              $
              41,552
              
              $
              25,300
 
 Of
        the
        total ARO, $41,552 and $25,300 are classified as a long-term liability at
        March 31, 2007 and 2006, respectively. For each of the years ended
        March 31, 2007 and 2006, the Company recognized depreciation expense
        related to its ARO of $0, due to the assumption of a full offset of salvage
        values.
   F-25
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**


**NOTE
        8 - INCOME TAXES**
 
 Financial
        Accounting Standard No. 109 requires the recognition of deferred tax liabilities
        and assets for the expected future tax consequences of events that have been
        included in the financial statement or tax returns. Under this method, deferred
        tax liabilities and assets are determined based on the difference between
        financial statements and tax bases of assets and liabilities using enacted
        tax
        rates in effect for the year in which the differences are expected to reverse.
 
 At
        March
        31, 2007 and 2006, the Company generated for federal income tax purposes
        a net
        operating loss carry forward of approximately $6,900,000 and $2,700,000
        respectively, both inclusive of basis differences for net intangible drilling
        costs which are deductible for tax purposes but capitalized and depreciated
        for
        book purposes. The latest expiry date within the net operating loss carry
        forward at March 31, 2007 is in 2027, and this loss can be used to offset
        future
        taxable income. However, a valuation allowance of $1,411,719 and $912,038
        was
        recorded for the years ended March 31, 2007 and 2006, respectively on the
        total
        tax provision as the Company believes it is more likely than not that the
        asset
        will not be utilized during the next year. Of the total net operating loss
        carryforward, the United Kingdom (“UK”) total net operating loss of
        approximately $850,000 and $700,000 for the years ended March 31, 2007 and
        2006,
        respectively, are not expected to be utilized. The United States federal
        and
        state net operating loss carryforwards are generally subject to limitations
        on
        their annual usage. Realization of the deferred tax assets and net operating
        loss carryforwards is dependent, in part, on generating sufficient taxable
        income prior to expiration of the loss carryforwards. The amount of the deferred
        tax asset considered realizable, however, might be adjusted if estimates
        of
        future taxable income during a future period are expected.
 
 The
        Company’s income tax expense (benefit) from continuing operations consists of
        the following:
 
 **March
                  31,****2007**
              
              **2006**CurrentUK
              
              $
              -
              
              $
              -US
              
              
              -
              
              
              -State
              
              
              -
              
              
              -Total
                  current tax expense (benefit)
              
              
              -
              
              
              -DeferredUK
              
              
              (256,247
              )
              
              (210,174
              )US
              
              
              (1,004,758
              )
              
              (610,317
              )State
              
              
              (150,714
              )
              
              (91,548
              )Total
                  deferred tax expense (benefit)
              
              
              (1,411,719
              )
              
              (912,038
              )Less
                  valuation allowance
              
              
              1,411,719
              
              
              912,038Total
                  deferred tax expense (benefit)
              
              $
              -
              
              $
              -Total
                  tax provision-continuing operations
              
              $
              -
              
              $
              -
  F-26
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007 AND 2006**
 
 **NOTE
        8 - INCOME TAXES (continued)**
 
 The
        following tax rates have been used in the calculation of income taxes: US
        federal taxation 30%, US state taxation 4.5% and UK taxation 30%.
  Components
        of deferred tax amounts are as follows:
 
 **Deferred
                  Tax Components**
              
              **March
                  31,****2007**
              
              **2006**Deferred
                  tax assetsRestricted
                  stock compensation accrual
              
              $
              -
              
              $
              -Share
                  issue basis difference
              
              
              -
              
              
              -Foreign
                  currency translation
              
              
              -
              
              
              -Oil
                  & Gas basis differences
              
              
              -
              
              
              66,791Depreciation
              
              
              -
              
              
              -Net
                  operating loss carryforward
              
              
              2,358,427
              
              
              857,049Total
                  gross deferred tax assets
              
              
              2,358,427
              
              
              923,840Deferred
                  tax liabilitiesAmortization
                  of share issue costs
              
              
              -
              
              
              -Other
              
              
              -
              
              
              -Foreign
                  currency translation
              
              
              -
              
              
              -Oil
                  & Gas basis differences
              
              
              843,573
              
              
              -Depreciation
              
              
              103,135
              
              
              11,802State
                  taxes
              
              
              -
              
              
              -Total
                  gross deferred tax liabilities
              
              
              946,708
              
              
              11,802Less
                  valuation allowance
              
              
              (1,411,719
              )
              
              (912,038
              )Net
                  deferred tax assets
              
              $
              -
              
              $
              -


F-27






**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      9 - COMMITMENTS AND CONTINGENCIES**





The
      Company has various commitments to oil and gas exploration and production
      capital expenditure with ongoing planned expenditures on the Kansas properties,
      and commitments relating to new wells in Texas and Louisiana arising out of
      the
      normal course of business. The Company is currently not involved in any
      litigation matters arising from our oil and gas exploration and production
      activities and as such has accrued no liability or legal fees with respect
      to
      litigation.





At
      March
      31, 2007, the Company has entered into an Exploration Agreement on the West
      1
      well which had not commenced drilling and for which drilling expenditures have
      not been incurred.





Lease
      Commitments





The
      Company does not have any capital lease commitments. The Company rents its
      main
      operating office in Houston on a month-to-month basis for which payments began
      in November 2005. The Company also has a nine month lease, committed to in
      April
      2007, related to corporate housing for UK based officers while periodically
      working at the corporate office.





Consulting
      Agreements





The
      Company has held consulting agreements with outside contractors, certain of
      whom
      are also Company stockholders. The Agreements are generally for a fixed term
      from inception and renewable from time to time unless either the Company or
      Consultant terminates such engagement by written notice. See Note 14 for Related
      Party Transactions.





Stockholder
      Matters





As
      our
      Common Stock is a security registered pursuant to Section 12 of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”), we must solicit proxies
      or obtain consent or authorizations by or on behalf of our management from
      the
      holders of record of our common stock in accordance with the rules and
      regulations of the Exchange Act, including those prescribed in Section 14 of
      the
      Act. On November 25, 2005, prior management of the Company obtained the approval
      of the majority of its stockholders ratifying the increase of authorized common
      stock of the Company from 25,000,000 to 75,000,000 which occurred in November
      2005 pursuant to stockholder approval under Nevada Revised Statutes. On
      September 15, 2006, the stockholders of the Company holding the majority of
      issued and outstanding common stock of the Company ratified the increase in
      the
      authorized common stock of the Company from 25,000,000 shares to 75,000,000
      shares





In
      addition, on September 15, 2006, the stockholders of the Company holding the
      majority of issued and outstanding common stock of the Company approved the
      increase in authorized common stock of the Company from 75,000,000 shares to
      500,000,000 shares and approved for the Company to create 10,000,000 shares
      of
“blank check” preferred stock, $0.001 par value per share (the “Approvals”).
      Subsequently, the Company filed a Certificate of Amendment to its Articles
      of
      Incorporation, as amended, with the Secretary of State of the State of Nevada
      that was effective as of September 21, 2006. The Amendment was filed to effect
      the Approvals.




Additionally,
      on equal date, the stockholders of the Company holding the majority of issued
      and outstanding common stock of the Company approved the adoption of the 2006
      Incentive Stock Option Plan and ratified the selection of RBSM LLP (formerly
      Russell Bedford Stefanou Mirchandani LLP) (“RBSM”) as the Company’s independent
      auditors for the fiscal years ending March 31, 2007 and 2006.





F-28








**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      9 - COMMITMENTS AND CONTINGENCIES (continued)**




Registration
      Statement






On
      August
      29, 2006, the Company completed a private placement offering in which the
      Company sold 1419.58 units of its securities at a price of $5,000 per unit
      to
      certain accredited investors (“Investors #1”), each unit consisting of 5,000
      shares of common stock of the Company for a total of 7,097,898 shares of $0.001
      par value common stock of the Company at a price of $1.00 per share for
      aggregate proceeds of approximately $7.1 million. Furthermore on October 4,
      2006, the company completed a second closing of the private placement offering
      in which the Company sold an additional 693.54 units of its securities at a
      price of $5,000 per unit to certain accredited investors (“Investors #2”,
      Investors #1 and Investors #2 shall collectively be referred to as the
“Investors”), each unit consisting of 5000 shares of common stock of the Company
      for gross proceeds of approximately $3.5 million and subsequently sold another
      80 units on October 5, 2006, also to the group of Investors #2, for an overall
      total of 3,867,700 shares of $0.001 par value common stock of the Company at
      a
      price of $1.00 per share for overall aggregate proceeds of approximately $3.9
      million.





Subsequently,
      on October 11, 2006 pursuant to the requirements of the Registration Rights
      Agreement entered into by and among the Company and the Investors, the Company
      filed a Registration Statement with the SEC on Form SB-2 to register, among
      other securities, the units of common stock sold in the private placement
      offering. The Company had agreed to have the Registration Statement declared
      effective by the SEC no later than 180 days from August 29, 2006. If the Company
      should fail to have the Registration Statement declared effective on or before
      them time frame described, the Investors will entitled to the liquidated damages
      from the Company in an amount equal to 2% of the aggregate subscription amounts
      per month for each month that the Company is delinquent in failing to obtain
      the
      effectiveness of the Registration Statement, subject to an overall limit of
      up
      to 15 months of partial liquidated damages. The Company obtained effectiveness
      in the time frame described. The Company has therefore, not incurred any
      contingent liability associated with the liquidated damages.





Litigation





The
      Company is subject to various legal proceedings and claims, which arise in
      the
      ordinary course of its business. Although occasional adverse decisions or
      settlements may occur, the Company believes that the final disposition of such
      matters will not have material adverse effect on its financial position, results
      of operations or liquidity. Consequently, the Company has not recorded any
      reserve for legal matters.







F-29











**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      10 - CAPITAL STOCK**





During
      the fiscal year ended March 31, 2006:





The
      breakdown of stock issuances of 3,609,517 shares (converted into 10,311,898
      shares of the Company’s stock) and the breakdown of the related warrants issued
      of 333,923 (converted into 954,021 of Company warrants) by Index Ltd. and the
      related conversion to Company stock and warrants in the year to March 31, 2006
      were as follows:





#
                of Index Ltd. Shares
            
            #
                of Index Shares
            
            #
                of Index Ltd.
              Warrants
            
            #
                of Index WarrantsConversion
                of stockholder loan of $94,603
            
            
            250,325
            
            
            715,143
            
            
            50,065
            
            
            143,037Equity
                fundraising of $238,591
            
            
            687,500
            
            
            1,964,090
            
            
            137,500
            
            
            392,839Subscription
                of compensation of $274,517
            
            
            783,500
            
            
            2,238,349
            
            
            137,000
            
            
            391,410Private
                placement equity offering
            
            
            1,835,117
            
            
            5,242,669
            
            
            -
            
            
            -Subscription
                of Professional fees of $9,021
            
            
            25,000
            
            
            71,421
            
            
            -
            
            
            -Subscription
                of Professional fees of $9,900
            
            
            28,075
            
            
            80,206
            
            
            9,358
            
            
            26,735Totals
                during fiscal year 2006
            
            
            3,609,517
            
            
            10,311,878
            
            
            333,923
            
            
            954,021





The
      warrants totaling 333,923 (converted to 954,021 of Company warrants at the
      recapitalization (reverse merger) transaction date were issued as part of
      various fundraising and equity transactions.





The
      convertible stockholder loan described in Note 6 of $94,603 ($91,302 at the
      original transaction date foreign currency rate and $86,758 at the conversion
      date foreign currency rate) in loans converted to 250,325 shares of common
      stock
      (converted to 715,143 shares of Company stock) in November 2005 and 50,065
      of
      warrants to purchase shares of Index Ltd.’s common stock (converted to 143,037
      of Company warrants).





An
      equity
      fundraising for 687,500 shares (converted to 1,964,090 shares of Company stock)
      totaling $238,591 also included 137,500 of warrants to purchase shares of Index
      Ltd.’s common stock (converted to 392,839 of Company warrants).





Additionally,
      management compensation with a fair value of $274,517 for 783,500 shares of
      common stock (converted to 2,238,349 shares of Company stock) also included
      warrants of 137,000 to purchase shares of Index Ltd.’s common stock (converted
      to 391,410 of Company warrants).





As
      discussed in Note 6, total convertible stockholder loans to Index Ltd. during
      the year ended March 31, 2006 totaled $676,664 of which $676,664 ($663,872
      at
      the transaction date foreign currency rate of $1.8088 to ₤1.0) were converted
      into 1,835,117 shares of common stock (converted into 5,249,669 shares of the
      Company stock). Of this amount, 50,000 shares of common stock (converted into
      142,843 shares of Company stock) related to directors of Index Ltd. with
      the remaining shares for outside investors.








F-30







**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      10 - CAPITAL STOCK (continued)**





Professional
      fees with a fair value totaling approximately $9,021 for 25,000 shares
      (converted to 71,421 shares of Company stock).





Professional
      fees, issued to the same stockholder, with a fair value totaling approximately
      $9,900 for 28,075 shares (converted to 80,206 shares of Company stock) included
      warrants of 9,358 to purchase shares of Index Ltd.’s common stock (converted to
      26,735 of Company warrants).





Additionally,
      during fiscal year ended March 31, 2006, the Company issued 303,793 shares
      of
      common stock to management as compensation expense which was valued at $37,578.





On
      January 20, 2006, the stockholders of Index Ltd. entered into Acquisition and
      Share Exchange Agreements (“Acquisition Agreements”, “the Transaction”) with the
      Company. The Company had a total of 75,000,000 authorized shares with a par
      value of $0.001 per share and 33,220,000 shares issued and outstanding as of
      December 31, 2005. As part of the Transaction it was agreed that, subsequent
      to
      the Transaction, 10,128,333 shares of common stock held by the former directors
      and officers of the Company were retired and subsequently canceled by the
      transfer agent for the Company. The effect of the Transaction was that
      23,091,667 shares of Common Stock would be retained.





As
      part
      of the Transaction, a total of 7,916,232 Index Ltd. shares of common stock
      in
      issue were exchanged for a total of 22,615,552 shares of common stock of the
      Company.





Concurrent
      with the Transaction was a private placement totaling $5.12 million for
      8,533,333 shares of $0.001 par value common stock of the Company at a price
      of
      $0.60 per share.





The
      Company has reserved 455,655 shares of common stock for potential issuance
      related to compensation of directors and officers contingent upon meeting
      certain performance criteria.







F-31








**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      10 - CAPITAL STOCK (continued)**





During
      the fiscal year ended March 31, 2007:





The
      breakdown of stock issuances of 11,192,691 shares of the Company’s common stock,
      $0.001 par value, during the year ended March 31, 2007 was as
      follows:





Issuance
                of common stock on private offerings
            
            
            10,965,598Issuance
                of stock upon vesting of stock award
            
            
            50,000Issuance
                of stock for services
            
            
            40,000Issuance
                of stock upon exercise of warrants
            
            
            124,593Issuance
                of stock for performance bonuses
            
            
            12,500Total
            
            
            11,192,691





As
      our
      Common Stock is a security registered pursuant to Section 12 of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”), we must solicit proxies
      or obtain consent or authorizations by or on behalf of our management from
      the
      holders of record of our common stock in accordance with the rules and
      regulations of the Exchange Act, including those prescribed in Section 14.
      On
      November 25, 2005, prior management of the Company obtained the approval of
      the
      majority of stockholders of the Company authorizing it to increase the
      authorized common stock of the Company from 25,000,000 to 75,000,000 (the
“Increase”).





In
      September 2006, the stockholders of the Company holding the majority of issued
      and outstanding common stock of the Company approved the increase in authorized
      common stock of the Company from 75,000,000 shares to 500,000,000 shares and
      to
      create 10,000,000 shares of “blank check” preferred stock, $0.001 par value per
      share (the “Approvals”). Subsequently, the Company filed a Certificate of
      Amendment to its Articles of Incorporation, as amended, with the Secretary
      of
      State of the State of Nevada that was effective as of September 21, 2006. The
      Amendment was filed to effect the Approvals.





On
      August
      29, 2006, the Company completed the first closing under a private placement
      offering in which the Company sold 1419.58 units of its securities at a price
      of
      $5,000 per unit to certain accredited investors, each unit consisting of 5,000
      shares of common stock of the Company for a total of 7,097,898 shares of $0.001
      par value common stock of the Company at a price of $1.00 per share for
      aggregate gross proceeds of approximately $7.1 million. Total fees paid on
      the
      first closing of the private placement were approximately $730,000.





Furthermore
      on October 4, 2006, the Company completed a second closing of the private
      placement offering in which the Company sold an additional 693.54 units of
      its
      securities at a price of $5,000 per unit to certain accredited investors, each
      unit consisting of 5000 shares of common stock of the Company for gross proceeds
      of approximately $3.5 million and it subsequently sold another 80 units on
      October 5, 2006, for a total of 3,867,700 shares of common stock of the Company
      at a price of $1.00 per share for overall aggregate proceeds of approximately
      $3.9 million. Total fees paid on the second closing were approximately $316,000.
      The combined net proceeds of this placement are being applied to the expansion
      of Company's operations in the U.S.








F-32








**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      10 - CAPITAL STOCK (continued)**





The
      purchasers agreed not to sell the Common stock included in the units for a
      period of six months from the date of their purchase, unless permitted earlier
      by the Company. Notwithstanding the foregoing, the purchasers further agreed
      to
      be bound by any lock-up period required by state or federal regulation. The
      shares of common stock are restricted securities under Securities Act of 1933,
      as amended and applicable state securities laws and, therefore, may only be
      transferred pursuant to the registration requirements of federal and state
      securities laws or pursuant to an exemption from such registration
      requirements.





Subsequently,
      on October 11, 2006 pursuant to the requirements of the Registration Rights
      Agreement entered into by and among the Company and the Investors, the Company
      filed a Registration Statement with the SEC on Form SB-2 to register, among
      other securities, the units of common stock sold in the private placement
      offering. The Company agreed to have the Registration Statement declared
      effective by the SEC no later than 180 days from August 29, 2006. If the Company
      had failed to have the Registration Statement declared effective on or before
      them time frame described, the Investors would have been entitled to the
      liquidated damages from the Company in an amount equal to 2% of the aggregate
      subscription amounts per month for each month that the Company was delinquent
      in
      failing to obtain the effectiveness of the Registration Statement, subject
      to an
      overall limit of up to 15 months of partial liquidated damages. The Company
      obtained effectiveness on February 9, 2007, within the time frame prescribed.
      The Company has therefore, not incurred any liability associated with the
      liquidated damages.





On
      August
      29, 2006, the Board of Directors appointed John Williams as Executive Vice
      President of Exploration and Production and a director of the Company effective
      August 1, 2006. In addition to Mr. Williams’ salary, he was awarded a restricted
      bonus stock award of 50,000 shares of the Company’s common stock contingent on
      183 days of continuous service to the Company. Total compensation expense over
      the vesting period of $60,000 was recorded on the award at the market price
      of
      $1.20 per share, the market price at the date of the grant. The terms of the
      award were satisfied in January 2007 and Mr. Williams was issued 50,000 shares
      of restricted common stock of the Company. Additionally, Mr. Williams was
      awarded a performance bonus of 37,500 shares of restricted common stock per
      the
      terms of his bonus program. The shares vest one-third at the date of the grant,
      March 31, 2007, with the remaining shares vesting at one-third in each of the
      next two consecutive years. The shares were valued at $1.50 per share of the
      date of the first vesting award or March 31, 2007 for compensation expense
      of
      $18,750.





In
      February 2007, 40,000 shares of common stock of the Company were issued for
      legal services related to the filing of the Registration Statement and other
      services at a value of $1.60 per share for a total cost of $64,000.





In
      February 2007, 124,593 warrants were exercised into 124,593 shares of common
      stock at an exercise price of $0.14 per share or $17,443 by a stockholder.











F-33





**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION**





Warrants





The
      following tables summarize the changes in warrants outstanding and exercised
      and
      the related exercise prices for the shares of the Company's common stock issued
      as follows (See Note 10):





Number
                of Shares
            
            Weighted
                Average Exercise Price Per ShareOutstanding
                and Exercisable March 31, 2005
              (333,923
                of Index Ltd.)
            
            
            138,655
            
            $
            0.07Granted
            
            
            954,021
            
            
            0.14Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            -
            
            
            -Outstanding
                and Exercisable at March 31, 2006
            
            
            1,092,676
            
            $
            0.13Granted
            
            
            -
            
            
            -Exchanged
            
            
            -
            
            
            -Exercised
            
            
            (124,593
            )
            
            0.14Canceled
                or expired
            
            
            -
            
            
            -Outstanding
                and Exercisable at March 31, 2007
            
            
            968,083
            
            $
            0.13











F-34





**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
      (continued)**





Warrants
                Outstanding
            
            Warrants
                ExercisableExercise
                Prices
            Number
                Outstanding
            Weighted
                  AverageRemaining Contractual Life
                (Years)
            Weighted
                  AverageExercise Price
            Number
                Exercisable
            Weighted
                  Average Exercise PriceExercise Price$0.07
            
            138,655
            
            3.5
            
            $0.07
            
            138,655
            
            $0.07$0.14
            
            143,037
            
            3.5
            
            $0.14
            
            143,037
            
            $0.14$0.14
            
            268,246
            
            3.5
            
            $0.14
            
            268,246
            
            $0.14$0.14
            
            391,410
            
            3.5
            
            $0.14
            
            391,410
            
            $0.14$0.14
            
            26,735
            
            3.5
            
            $0.14
            
            26,735
            
            $0.14968,083
            
            3.5
            
            $0.13
            
            968,083
            
            $0.13








In
      February 2003 and July 2003, 45,882 warrants (converted into 131,078 of Company
      warrants) and 2,653 warrants (converted into 7,577 of Company warrants),
      respectively to acquire Index Ltd.’s common stock were issued to a third party
      advisor for services incurred.





The
      warrants totaling 333,923 (converted to 954,021 of Company warrants) were issued
      as part of various fundraising and equity transactions. The convertible
      stockholder loan described in Note 6 of $94,603 ($91,302 at the original
      transaction date foreign currency rate and $86,758 at the conversion date
      foreign currency rate) in loans converted to 250,325 shares of common stock
      (converted to 715,143 shares of Company stock) in November 2005 and 50,065
      of
      warrants to purchase shares of Index Ltd.’s common stock (converted to 143,037
      of Company warrants). An equity fundraising for 687,500 shares (converted to
      1,964,090 shares of Company stock) totaling $238,591 also included 137,500
      of
      warrants to purchase shares of Index Ltd.’s common stock (converted to 392,839
      of Company warrants, of which 124,593 were exercised in February 2007).
      Additionally, management compensation with a fair value of $274,517 for 783,500
      shares of common stock (converted to 2,238,349 shares of Company stock) also
      included warrants of 137,000 to purchase shares of Index Ltd.’s common stock
      (converted to 391,410 of Company warrants). Professional fees with a fair value
      totaling approximately $9,900 for 28,075 shares (converted to 80,206 shares
      of
      Company stock) included warrants of 9,358 to purchase shares of Index Ltd.’s
      common stock (converted to 26,735 of Company warrants). All transactions were
      valued at fair market value in accordance with SFAS 123-R.





Since
      there was no public market for Index Ltd.’s stock and operations were not
      comparable to a peer group, the latest stock issuance price of ₤0.20, or $0.35
      at a foreign currency rate of 1.7329, used in previous fundraising was used
      as
      the share market price and an exercise price of ₤0.20 or $0.35 at a foreign
      currency rate of 1.7329. The weighted-average fair value of warrants under
      the
      fair valued based method of $0.03, using the Black Scholes model, was determined
      using the following assumptions: (1) a risk free rate of 4.56%; (2) a volatility
      rate of 0% under the minimum value method allowed for non-public companies
      under
      SFAS 123; (3) a zero dividend rate; (4) a zero percent forfeiture rate; (5)
      the
      latest stock issuance price used as the share market price; and (6) 2 year
      life.





On
      January 20, 2006, these total warrants of 382,458 were exchanged as part of
      the
      transaction described in Note 2,  Merger  and Corporate Restructure,
      at a ratio of approximately 2.857 to 1 or a total of 1,092,676. The total
      warrants of 48,535 issued in fiscal year 2005 were exchanged for 138,655
      warrants. The warrants issued in fiscal year 2006 of 333,923 were also exchanged
      as part of the transaction described in Note 2,  Merger and Corporate
      Restructure, at a ratio of approximately 2.857 to 1 or a total of 954,021
      warrants.




In
      February 2007, a total of 124,593 warrants were exercised at a price of $0.14
      for a total of $17,443 and a total of 124,593 shares of common stock, $0.001
      par
      value, were issued to the stockholder.







F-35







**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
      (continued)**





There
      was
      no compensation expense recorded for the exchange of these warrants since there
      was no modification of terms upon exchange.





Stock
      Options





The
      following tables summarize the changes in options outstanding and exercised
      and
      the related exercise prices for the shares of the Company's common stock issued
      to certain directors and stockholders at March 31, 2007 and 2006 restated for
      the recapitalization which occurred on January 20, 2006 at an exchange rate
      of
      one Index Ltd. share or warrant for approximately 2.857 shares or warrants
      of
      the Company’s (See Note 10).





Number
                of Shares
            
            Weighted
                Average Exercise Price Per ShareOutstanding
                at March 31, 2005
            
            
            -
            
            
            -Granted
            
            
            4,577,526
            
            
            0.35Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            -
            
            
            -Outstanding
                at March 31, 2006
            
            
            4,577,526
            
            $
            0.35Granted
            
            
            500,000
            
            $
            1.42Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            -
            
            
            -Outstanding
                at March 31, 2007
            
            
            5,077,526
            
            $
            0.46











F-36





**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
      (continued)**








Options
                Outstanding
            
            Options
                ExercisableExercise
                Price
            
            Number
              Outstanding
            
            Weighted
                Average Remaining Contractual Life (Years)
            
            Weighted
                Average Exercise Price
            
            Number
              Exercisable
            
            Weighted
                Average Exercise Price$
                0.35
            
            4,577,526
            
            3.81
            
            $
                0.35
            
            3,433,145
            
            $
                0.35$1.42
            
            500,000
            
            1.97
            
            $1.42
            
            250,000
            
            $1.425,077,526
            
            
            
            $0.46
            
            3,683,145
            
            $0.42








Prior
      to
      the reverse merger with Index Inc., Index Ltd. adopted a Stock Option Plan
      to
      grant options to various officers, directors and others. As contemplated by
      the
      Acquisition Agreements, following the completion of the acquisition the Board
      of
      Directors of Index Inc. agreed to the adoption of the Stock Option Plan and
      ratified it on March 14, 2006 effective as of January 20, 2006, providing for
      the issuance of up to 5,225,000 shares of Common Stock of Index Inc. to
      officers, directors, employees and consultants of Index Inc. and/or its
      subsidiaries. Pursuant to the Stock Option Plan, Index Inc. allowed for the
      issuance of options to purchase 4,577,526 shares of Common Stock at $0.35 per
      share to newly appointed directors and officers of Index Inc. that had held
      options to purchase ordinary shares of Index Ltd. prior to the completion of
      the
      acquisition. Total compensation expense recorded for the issuance of these
      options in the fourth quarter and the twelve months ended March 31, 2007 was
      $79,862 and $594,599, respectively. At March 31, 2007, John Williams, an officer
      and director was awarded options to purchase 500,000 shares of Common Stock
      at
      $1.42 per share under the Stock Option Plan.







F-37





**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
      (continued)**





The
      principal terms and conditions of the share options granted under the Share
      Option Plan are that vesting of the options granted occurs in three stages:
      (1)
      50% on grant; (2) 25% one year after grant; and (3) 25% two years after grant.
      The 2006 options granted are exercisable at $0.35 per share. Furthermore, the
      share options granted under the Share Option Plan are generally non-transferable
      other than to a legal or beneficial holder of the options upon the option
      holder’s death. The rights to vested but unexercised options cease to be
      effective: (1) 18 months after death of the stock options holder; (2) 6 months
      after Change of Control of Index Inc.; (3) 12 months after loss of **** office
      due to health related incapacity or redundancy; or (4) 12 months after the
      retirement of the options holder from a position with Index Inc. All options
      have a 5 years expiring term.





Since
      there was no public market for the Company’s stock and operations were not
      comparable to a peer group prior to the acquisition, the stock issuance price
      for the private placement equity raising at the date of acquisition of $0.60
      was
      used as the share market price for the 2006 options with an exercise price
      of
      $0.35. The weighted-average fair value of options granted under the fair valued
      based method or $0.398, using the Black Scholes model, was determined using
      the
      following assumptions: (1) a risk free rate of 4.38%; (2) a volatility rate
      of
      100%; (3) a zero dividend rate; (4) a zero percent forfeiture rate; (5) the
      latest stock issuance price used as the share market price; and (6) 2 year
      life.
      The weighted-average fair value of the 2007 options granted to John Williams
      under the fair valued based method or $0.53, using the Black Scholes model,
      was
      determined using the following assumptions: (1) a risk free rate of 4.60%;
      (2) a
      volatility rate of 66%; (3) a zero dividend rate; (4) a zero percent forfeiture
      rate; (5) the latest stock issuance price used as the share market price or
      $1.42; and (6) 2 year life.





**NOTE
      12 - EARNINGS PER SHARE**




Basic
        earnings per share is computed by dividing income available to common
        stockholders by the weighted average number of shares outstanding for the
        period. Diluted EPS reflects the potential dilution that could occur if
        contracts to issue common stock and related stock options were exercised
        at the
        end of the period. For the years ended March 31, 2007 and 2006, excluded
        from
        diluted earnings per share are 968,083 and 1,092,676, respectively of warrants
        to acquire common stock. As of both March 31, 2007 and 2006, there are 4,577,
        526 of options to acquire the Company’s common stock that were excluded from the
        computation of diluted earnings per share, and which excluded 500,000 of
        out of
        the money options at March 31, 2007. As of March 31, 2007 25,000 shares yet
        to
        vest under a performance bonus award have been excluded from the computation
        of
        diluted earnings per share.


The
      following is a calculation of basic and diluted weighted average shares
      outstanding:





**For
                the year ended March 31,****2007**
            
            **2006**Shares—basic
            
            65,623,365
            
            22,391,357Dilution
                effect of stock option and awards at end of period
            
            
            -
            
            
            -Shares—diluted
            
            
            65,623,365
            
            
            22,391,357Stock
                awards and shares excluded from diluted earnings per share due to
                anti-dilutive effect
            
            
            5,570,609
            
            
            5,670,202




F-38











**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**








**NOTE
      13 - MAJOR CUSTOMERS**




For
      the
      fiscal year 2007, approximately 100% of revenues from the Company’s share of oil
      production were sold to two independent crude oil purchasers, together with
      low
      levels of gas sales, and for the fiscal year 2006, approximately 91%, of oil
      sales were sold to a single independent crude oil purchaser.





**NOTE
      14 - RELATED PARTY TRANSACTIONS**




As
      discussed in Note 6, total stockholder loans to Index Ltd. during the year
      ended
      March 31, 2006 totaled $676,664 of which $676,664 ($663,872 at the transaction
      date foreign currency rate of $1.8088 to ₤1.0) were converted into 1,835,117
      shares of common stock in the year ended March 31, 2006. Of this amount, 50,000
      shares of common stock related to directors of Index Ltd. with the remaining
      shares for outside investors. The $94,603 ($91,302 at the original transaction
      date foreign currency rate and $86,758 at the conversion date foreign currency
      rate) stockholder loans converted to 250,325 shares of common stock (converted
      to 715,143 shares of Company stock) in November 2005, together with the issue
      of
      50,065 warrants (converted to 143,029 of Company warrants). Of these totals
      119,585 shares (converted to 341,637 of Company stock) and 23,917 warrants
      (converted to 68,327 of Company warrants) were issued to directors of Index
      Ltd.





At
      March
      31, 2006, the Company owes various directors $1,007 for refunds of payroll
      taxes.





Lyndon
      West and Michael Scrutton, jointly and severally, guaranteed the bank loan
      until
      it was paid off in June 2006.





During
      fiscal year 2007, the Company incurred a fee of $750 for real
      estate location services from a firm in


Which,
      a
      principal partner is related to an officer of the Company .
      The fee
      was paid in May 2007.







F-39











**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**NOTE
      15 - SUBSEQUENT EVENTS**





In
      April,
      2007, the Company announced success on two exploration wells in Goliad and
      Victoria Counties, Texas. The Serrano well commenced producing in May 2007
      and
      the Habanero well is expected to be connected to local pipeline infrastructure
      and to be brought on-line during the second calendar quarter 2007. Index has
      a
      37.5% working interest and a 28.125% net revenue interest in each
      well.





The
      Company announced in April 2007 that it has signed a Participation Agreement
      to
      explore for gas in the West Wharton prospect. This could consist of up to four
      exploration wells within the area of mutual interest in Wharton County, Texas.
      Index has a 12.5% working interest in the project that will reduce to 9.375%
      after payout. The first well is planned to spud during the third calendar
      quarter of 2007.





The
      Company announced in May 2007 that it had signed a participation agreement
      for
      exploration of the Fern Lake prospect in Nacogdoches County, Texas, through
      the
      Cason 1 well (a first well resulting from the ADC Agreements). The well is
      expected to spud in the second calendar quarter 2007.





In
      April
      2007, the Company committed to a nine month lease, related to corporate housing
      for UK based officers while periodically working at the corporate
      office.








F-40








**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





**Oil
      and Natural gas Producing Activities**





The
      following disclosures for the Company are made in accordance with Statement
      of
      Financial Accounting Standards (“SFAS”) No. 69, “Disclosures About Oil and
      Natural gas Producing Activities (an amendment of FASB Statements 19, 25, 33
      and
      39)” (“SFAS No. 69”). Users of this information should be aware that the
      process of estimating quantities of proved, proved developed and proved
      undeveloped crude oil and natural gas reserves is very complex, requiring
      significant subjective decisions in the evaluation of all available geological,
      engineering and economic data for each reservoir. The data for a given reservoir
      may also change substantially over time as a result of numerous factors
      including, but not limited to, additional development activity, evolving
      production history and continual reassessment of the viability of production
      under varying economic conditions. Consequently, material revisions to existing
      reserve estimates occur from time to time. Although every reasonable effort
      is
      made to ensure that reserve estimates reported represent the most accurate
      assessments possible, the significance of the subjective decisions required
      and
      variances in available data for various reservoirs make these estimates
      generally less precise than other estimates presented in connection with
      financial statement disclosures.





Proved
      reserves represent estimated quantities of natural gas and crude oil that
      geological and engineering data demonstrate, with reasonable certainty, to
      be
      recoverable in future years from known reservoirs under economic and operating
      conditions existing at the time the estimates were made.





Proved
      developed reserves are proved reserves expected to be recovered, through wells
      and equipment in place and under operating methods being utilized at the time
      the estimates were made.





Proved
      undeveloped reserves are reserves that are expected to be recovered from new
      wells on undrilled acreage or from existing wells where a relatively major
      expenditure is required for recompletion. Reserves on undrilled acreage are
      limited to those drilling units offsetting productive units that are reasonably
      certain of production when drilled. Proved reserves for other undrilled units
      can be claimed only where it can be demonstrated with certainty that there
      is
      continuity of production from the existing productive formation. Estimates
      for
      proved undeveloped reserves are not attributed to any acreage for which an
      application of fluid injection or other improved recovery technique is
      contemplated, unless such techniques have been proved effective by actual tests
      in the area and in the same reservoir.





Estimates
      of proved developed and proved undeveloped reserves as of March 31, 2007,
      2006 and 2005 were based on estimates made by Ancell Energy Consulting, Inc,
      independent petroleum engineers. Our independent engineers, Ancell Energy
      Consulting, Inc. are engaged by and provide their reports to our senior
      management team. We make representations to the independent engineers that
      we
      have provided all relevant operating data and documents, and in turn, we review
      these reserve reports provided by the independent engineers to ensure
      completeness and accuracy. Our Vice President, Exploration and Production,
      and
      Managing Director make the final decision on booked proved reserves by
      incorporating the proved reserves from the independent engineers’
reports.





Our
      relevant management controls over proved reserve attribution, estimation and
      evaluation include:




•
            
            controls
                over and processes for the collection and processing of all pertinent
                operating data anddocuments
                needed by our independent reservoir engineers to estimate our proved
                reserves;




•
            
            engagement
                of well qualified and independent reservoir engineers for review
                of our
                operating data and documents and preparation of reserve reports annually
                in accordance with all SEC reserve estimation guidelines;
                and




•
            
            review
                by our Vice President, Exploration and Production, of the independent
                reservoir engineers’ reserves reports for completion and
                accuracy.








F-41







**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





Market
      prices as of each year-end were used for future sales of natural gas, crude
      oil
      and natural gas liquids. Future operating costs, production and ad valorem
      taxes
      and capital costs were based on current costs as of each year-end, with no
      escalation. There are numerous uncertainties inherent in estimating quantities
      of proved reserves and in projecting the future rates of production and timing
      of development expenditures. Reserve data represent estimates only and should
      not be construed as being exact. Moreover, the standardized measure should
      not
      be construed as the current market value of the proved oil and natural gas
      reserves or the costs that would be incurred to obtain equivalent reserves.
      A
      market value determination would include many additional factors including
      (a) anticipated future changes in natural gas and crude oil prices,
      production and development costs, (b) an allowance for return on
      investment, (c) the value of additional reserves, not considered proved at
      present, which may be recovered as a result of further exploration and
      development activities, and (d) other business risk.





***Capitalized
      Costs Relating to Oil and Gas Producing Activities***





The
      following table sets forth the capitalized costs relating to the Company’s
      natural gas and crude oil producing activities at March 31, 2007, 2006 and
      2005:




**March
                31,******
            
            **March
                31,******
            
            **March
                31,**********
            
            **2007**
            
            **2006**
            
            **2005**Evaluated
                properties
            
            $
            3,254,211
            
            $
            722,056
            
            $
            334,080Unevaluated
                properties
            
            
            1,927,776
            
            
            356,729
            
            
            76,529Total
            
            
            5,181,987
            
            
            1,078,785
            
            
            410,609Less:
                accumulated depreciation, depletion, amortization
            
            
            315,937
            
            
            127,586
            
            
            62,275Net
                capitalized costs
            
            $
            4,866,050
            
            $
            951,199
            
            $
            348,334






F-42














**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





***Costs
      Incurred in Oil and Natural Gas Property Acquisition, Exploration and
      Development Activities***





The
      following table sets forth costs incurred related to the Company’s oil and
      natural gas activities for the twelve months ended March 31, 2007, 2006 and
      2005:





The
      following estimates of proved and proved developed reserve quantities are
      estimates only. The Company emphasizes that reserve estimates are inherently
      imprecise and that estimates of new discoveries are more imprecise than those
      of
      producing oil and gas properties. Accordingly, these estimates are expected
      to
      change as future information becomes available. All of the Company's reserves
      are located in the United States.





Proved
      reserves are estimated reserves of crude oil (including condensate and natural
      gas liquids) that geological and engineering data demonstrate with reasonable
      certainty to be recoverable in future years from known reservoirs under existing
      economic and operating conditions. Proved developed reserves are those expected
      to be recovered through existing wells, equipment, and operating
      methods.




**Continuing**
                **Operations**
              
              **Discontinued**
                **Operations****Year
                  Ended March 31, 2005:**
              
              $
              415,516
              
              $
              -Acquisition
                  costs of propertiesProved
              
              $
              -
              
              $
              -Unproved
              
              
              -
              
              
              -Subtotal
              
              
              -
              
              
              -Exploration
                  and development costs
              
              
              70,540
              
              
              -Total
              
              $
              486,056
              
              $
              -**Year
                  Ended March 31, 2006:**Acquisition
                  costs of propertiesProved
              
              $
              -
              
              $
              -Unproved
              
              
              -Subtotal
              
              
              -Exploration
                  and development costs
              
              
              659,376Total
              
              $
              1,145,432
              
              $
              -**Year
                  Ended March 31, 2007:**Acquisition
                  costs of propertiesProved
              
              $
              -
              
              $
              -Unproved
              
              
              355,641Subtotal
              
              
              355,641Exploration
                  and development costs
              
              
              3,731,308Total
              
              $
              4,086,949
              
              $
              -


F-43





**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





***Results
      of Operations for Oil and Natural Gas Producing
      Activities***




**Year
                Ended**
              **March 31,**
              **2007**
            
            **Year
                Ended**
              **March 31,**
              **2006**
            
            **Year
                Ended**
              **March 31,**
              **2005**Oil
                and natural gas production revenuesThird-party
            
            $
            457,046
            
            $
            191,114
            
            $
            88,176Affiliate
            
            
            -
            
            
            -
            
            
            -Total
                revenues
            
            
            457,046
            
            
            191,114
            
            
            88,176Exploration
                expenses, including dry hole
            
            
            -
            
            
            -
            
            
            -Production
                costs
            
            
            (114,735
            )
            
            (41,953
            )
            
            (23,584
            )Impairment
            
            
            -
            
            
            -
            
            
            -Depreciation,
                depletion and amortization
            
            
            (188,351
            )
            
            (65,311
            )
            
            (36,154
            )Income
                (loss) before income taxes
            
            
            153,960
            
            
            83,850
            
            
            28,438Income
                tax provision (benefit)
            
            
            -
            
            
            -
            
            
            -Results
                of continuing operations
            
            $
            153,960
            
            $
            83,850
            
            $
            28,438Results
                of discontinued operations
            
            $
            -
            
            $
            -
            
            $
            -





The
      results of operations for oil and natural gas producing activities excludes
      interest charges and general and administrative expenses. Sales are based on
      market prices.










F-44








**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





***Net
      Proved and Proved Developed Reserve Summary***





The
      following table sets forth the Company’s net proved and proved developed
      reserves (all within the United States) at March 31, 2007, 2006 and 2005,
      and the changes in the net proved reserves for each of the two years in the
      period then ended as estimated by the independent petroleum consultants. See
      Note 3.




**Continuing**
              **Operations******
            
            **Discontinued**
              **Operations****Natural
                gas (Bcf)(1):**Net
                proved reserves at March 31, 2004
            
            
            -
            
            
            -Revisions
                of previous estimates
            
            
            -
            
            
            -Purchases
                in place
            
            
            -
            
            
            -Extensions,
                discoveries and other additions
            
            
            -
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            -
            
            
            -Net
                proved reserves at March 31, 2005
            
            
            -
            
            
            -Revisions
                of previous estimates
            
            
            -
            
            
            -Purchases
                in place
            
            
            0.144
            
            
            -Extensions,
                discoveries and other additions
            
            
            -
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            -
            
            
            -Net
                proved reserves at March 31, 2006
            
            
            0.144
            
            
            -Revisions
                of previous estimates
            
            
            0.157
            
            
            -Purchases
                in place
            
            
            0.008
            
            
            -Extensions,
                discoveries and other additions
            
            
            0.240
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            (0.008
            )
            
            -Net
                proved reserves at March 31, 2007
            
            
            0.541
            
            
            -







F-45








**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





**Natural
                gas liquids and crude oil (MBbls)(2)(3):**Net
                proved reserves at March 31, 2004
            
            
            11.069
            
            
            -Revisions
                of previous estimates
            
            
            4.832
            
            
            -Purchases
                in place
            
            
            -
            
            
            -Extensions,
                discoveries and other additions
            
            
            6.758
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            (2.068
            )
            
            -Net
                proved reserves at March 31, 2005
            
            
            20.591
            
            
            -Revisions
                of previous estimates
            
            
            1.566
            
            
            -Purchases
                in place
            
            
            11.565
            
            
            -Extensions,
                discoveries and other additions
            
            
            5.060
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            (3.381
            )
            
            -Net
                proved reserves at March 31, 2006
            
            
            35.401
            
            
            -Revisions
                of previous estimates
            
            
            (5.349
            )
            
            -Purchases
                in place
            
            
            0.066
            
            
            -Extensions,
                discoveries and other additions
            
            
            0.875
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            (6.660
            )
            
            -Net
                proved reserves at March 31, 2007
            
            
            24.333
            
            
            -







F-46










**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**








**(MBO)(2)
                equivalents(4):**Net
                proved reserves at March 31, 2004
            
            
            11.069
            
            
            -Revisions
                of previous estimates
            
            
            4.832
            
            
            -Purchases
                in place
            
            
            -
            
            
            -Extensions,
                discoveries and other additions
            
            
            6.758
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            (2.068
            )
            
            -Net
                proved reserves at March 31, 2005
            
            
            20.591
            
            
            -Revisions
                of previous estimates
            
            
            1.566
            
            
            -Purchases
                in place
            
            
            35.635
            
            
            -Extensions,
                discoveries and other additions
            
            
            5.060
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            (3.381
            )
            
            -Net
                proved reserves at March 31, 2006
            
            
            59.471
            
            
            -Revisions
                of previous estimates
            
            
            20.748
            
            
            -Purchases
                in place
            
            
            1.478
            
            
            -Extensions,
                discoveries and other additions
            
            
            40.956
            
            
            -Sales
                in place
            
            
            -
            
            
            -Production
            
            
            (8.075
            )
            
            -Net
                proved reserves at March 31, 2007
            
            
            114.578
            
            
            -













F-47








**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





**Net
                  proved developed reserves:****Natural
                  gas (Bcf)(1)**March
                  31, 2005
              
              
              -
              
              
              -March
                  31, 2006
              
              
              0.090
              
              
              -March
                  31, 2007
              
              
              0.541
              
              
              -**Natural
                  gas liquids and crude oil (MBbls)(2)(3)**March
                  31, 2005
              
              
              12.354
              
              
              -March
                  31, 2006
              
              
              28.942
              
              
              -March
                  31, 2007
              
              
              22.953
              
              
              -**MBO(2)
                  equivalents(4)**March
                  31, 2005
              
              
              12.354
              
              
              -March
                  31, 2006
              
              
              30.518
              
              
              -March
                  31, 2007
              
              
              113.198
              
              
              -
 _______________





(1)
            Billion
                cubic feet or billion cubic feet equivalent, as
                applicable.




(2)
            Thousand
                barrels.




(3)
            Includes
                crude oil, condensate and natural gas
                liquids.




(4)
            Natural
                gas volumes have been converted to equivalent natural gas liquids
                and
                crude oil volumes using a conversion factor of six thousand cubic
                feet of
                natural gas to one barrel of natural gas liquids or crude
                oil.









F-48











**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





***Standardized
      Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Natural
      Gas Reserves***





The
      following information has been developed utilizing procedures prescribed by
      SFAS
      No. 69 and based on natural gas and crude oil reserve and production
      volumes estimated by the independent petroleum reservoir engineers. This
      information may be useful for certain comparison purposes but should not be
      solely relied upon in evaluating the Company or its performance. Further,
      information contained in the following table should not be considered as
      representative of realistic assessments of future cash flows, nor should the
      standardized measure of discounted future net cash flows be viewed as
      representative of the current value of the Company’s oil and natural gas
      assets.





The
      future cash flows presented below are based on sales prices, cost rates and
      statutory income tax rates in existence as of the date of the projections.
      It is
      expected that material revisions to some estimates of natural gas and crude
      oil
      reserves may occur in the future, development and production of the reserves
      may
      occur in periods other than those assumed, and actual prices realized and costs
      incurred may vary significantly from those used. Income tax expense has been
      computed using expected future tax rates and giving effect to tax deductions
      and
      credits available, under current laws, and which relate to oil and natural
      gas
      producing activities.





Management
      does not rely upon the following information in making investment and operating
      decisions. Such decisions are based upon a wide range of factors, including
      estimates of probable as well as proved reserves and varying price and cost
      assumptions considered more representative of a range of possible economic
      conditions that may be anticipated.





The
      following table sets forth the standardized measure of discounted future net
      cash flows from projected production of the Company’s natural gas and crude oil
      reserves for the years ended March 31, 2007, 2006 and 2005:





**Continuing**
              **Operations**
            
            **Discontinued
                Operations**(in
                $’000)**March
                31, 2005:**Future
                cash inflows
            
            $
            1,088.787
            
            $
            -Future
                production costs
            
            
            (474.193
            )
            
            -Future
                development costs
            
            
            (131.248
            )
            
            -Future
                income taxes
            
            
            -
            
            
            -Future
                net cash flows
            
            
            483.346
            
            
            -Discount
                to present value at 10% annual rate
            
            
            (131.571
            )
            
            -Standardized
                measure of discounted future net cash flows relating to proved natural
                gas, natural gas liquids and crude oil reserves
            
            $
            351.775
            
            $
            -







F-49








**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





**Continuing**
            
            **Discontinued****Operations**
            
            **Operations****March 31,
                2006:**Future
                cash inflows
            
            $
            3,080.376
            
            $
            -Future
                production costs
            
            
            (855.120
            )
            
            -Future
                development costs
            
            
            (515.632
            )
            
            -Future
                income taxes
            
            
            -
            
            
            -Future
                net cash flows
            
            
            1,709.624
            
            
            -Discount
                to present value at 10% annual rate
            
            
            (362.391
            )
            
            -Standardized
                measure of discounted future net cash flows relating to proved natural
                gas, natural gas liquids and crude oil reserves
            
            $
            1,347.233
            
            $
            -








**Continuing**
            
            **Discontinued****Operations**
            
            **Operations****March 31,
                2007:**Future
                cash inflows
            
            $
            5,049.821
            
            $
            -Future
                production costs
            
            
            (1,055.600
            )
            
            -Future
                development costs
            
            
            (53.403
            )
            
            -Future
                income taxes
            
            
            -
            
            
            -Future
                net cash flows
            
            
            3,940.818
            
            
            -Discount
                to present value at 10% annual rate
            
            
            (841.922
            )
            
            -Standardized
                measure of discounted future net cash flows relating to proved natural
                gas, natural gas liquids and crude oil reserves
            
            $
            3,098.896
            
            $
            -








F-50










**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





***Changes
      in Standardized Measure of Discounted Future Net Cash
      Flows***





The
      following table sets forth the changes in the standardized measure of discounted
      future net cash flows at March 31, 2007, 2006 and 2005:





**Continuing**
            
            **Discontinued****Operations**
            
            **Operations**(in
                $’000)**Balance,
                April 1, 2004**
            
            $
            113.318
            
            $
            -Sales
                and transfers of natural gas, natural gas liquids and crude oil produced,
                net of production costs
            
            
            (64.592
            )
            
            -Net
                changes in prices and production costs
            
            
            155.685
            
            
            -Extensions,
                discoveries, additions and improved recovery, net of related
                costs
            
            
            81.085
            
            
            -Development
                costs incurred
            
            
            70.540
            
            
            -Revisions
                of previous quantity estimates and development costs
            
            
            (3.657
            )
            
            -Accretion
                of discount
            
            
            (2.291
            )
            
            -Net
                change in income taxes
            
            
            -
            
            
            -Purchases
                of reserves in place
            
            
            -
            
            
            -Sales
                of reserves in place
            
            
            -
            
            
            -Changes
                in timing and other
            
            
            1.687
            
            
            -**Balance,
                March 31, 2005**
            
            $
            351.775
            
            $
            -







F-51








**INDEX
      OIL AND GAS, INC.**


**SUPPLEMENTAL
      INFORMATION (UNAUDITED)**


**FOR
      THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005**





Sales
                and transfers of natural gas, natural gas liquids and crude oil produced,
                net of production costs
            
            $
            (149.200
            )
            $
            -Net
                changes in prices and production costs
            
            
            92.288
            
            
            -Extensions,
                discoveries, additions and improved recovery, net of related
                costs
            
            
            86.546
            
            
            -Development
                costs incurred
            
            
            659.376
            
            
            -Revisions
                of previous quantity estimates and development costs
            
            
            (412.504
            )
            
            -Accretion
                of discount
            
            
            (97.672
            )
            
            -Net
                change in income taxes
            
            
            -
            
            
            -Purchases
                of reserves in place
            
            
            813.43
            
            
            -Sales
                of reserves in place
            
            
            -
            
            
            -Changes
                in timing and other
            
            
            3.194
            
            
            -**Balance,
                March 31, 2006**
            
            $
            1,347.233
            
            $
            -








Sales
                and transfers of natural gas, natural gas liquids and crude oil produced,
                net of production costs
            
            $
            (342.311
            )
            $
            -Net
                changes in prices and production costs
            
            
            (46.758
            )
            
            -Extensions,
                discoveries, additions and improved recovery, net of related
                costs
            
            
            1,180.549
            
            
            -Development
                costs incurred
            
            
            1,320.745
            
            
            -Revisions
                of previous quantity estimates and development costs
            
            
            (820.626
            )
            
            -Accretion
                of discount
            
            
            134.723
            
            
            -Net
                change in income taxes
            
            
            -
            
            
            -Purchases
                of reserves in place
            
            
            486.467
            
            
            -Sales
                of reserves in place
            
            
            -
            
            
            -Changes
                in timing and other
            
            
            (161.126
            )
            
            -**Balance,
                March 31, 2007**
            
            $
            3,098.896
            
            $
            -









F-52




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





None.





**Item
      8A. Controls and Procedures.**





(a)
      Evaluation of Disclosure Controls and Procedures




Based
      on
      an evaluation of our disclosure controls and procedures (as defined in Rules
      13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended)
      required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of March 31, 2007,
      our Chief Executive Officer and Chief Financial Officer have concluded that
      our
      disclosure controls and procedures were effective in ensuring that information
      required to be disclosed by us in the reports that we file or submit under
      the
      Exchange Act is recorded, processed, summarized and reported within the time
      periods specified in the Commission's rules and forms. Our Chief Executive
      Officer and Chief Financial Officer also concluded that, as of March 31, 2007,
      our disclosure controls and procedures were effective in ensuring that
      information required to be disclosed by us in the reports that we file or submit
      under the Exchange Act is accumulated and communicated to our management,
      including our Chief Executive Officer and Chief Financial Officer, to allow
      timely decisions regarding required disclosure.





*Limitations
      on the Effective of Controls*





Our
      management does not expect that our disclosure controls or our internal controls
      over financial reporting will prevent all error and fraud. A control system,
      no
      matter how well conceived and operated, can provide only reasonable, but no
      absolute, assurance that the objectives of a control system are met.
 Further, any control system reflects limitations on resources, and the
      benefits of a control system must be considered relative to its costs.
 These limitations also include the realities that judgments in
      decision-making can be faulty and that breakdowns can occur because of simple
      error or mistake.  Additionally, controls can be circumvented by the
      individual acts of some persons, by collusion of two or more people or by
      management override of a control.  A design of a control system is also
      based upon certain assumptions about potential future conditions; over time,
      controls may become inadequate because of changes in conditions, or the degree
      of compliance with the policies or procedures may deteriorate.  Because of
      the inherent limitations in a cost-effective control system, misstatements
      due
      to error or fraud may occur and may not be detected.




(b)
      Changes in Internal Controls




There
      were no changes in our internal controls over financial reporting that could
      significantly, or are reasonably likely to materially affect, our affect
      internal controls over financial reporting that occurred during the our fiscal
      quarter ended March 31, 2007.





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





Not
      applicable.




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




None.




48


**PART
      III**




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




The
      following table sets forth the names and ages of the members of our Board of
      Directors and our executive officers and the positions held by each, as of
      March
      31, 2007.




Name
            Age
            Position
            **Director
                Since**Lyndon
                West (1)
            47
            Director
                and Chief Executive Officer
            January
                2006Andrew
                Boetius (1)
            43
            Director
                and Chief Financial Officer (acting Principal Accounting
                Officer)
            January
                2006Daniel
                Murphy (1)
            64
            Chairman
                and Secretary
            January
                2006Michael
                Scrutton (1)
            61
            Director
            January
                2006John
                Williams (2)
            57
            Executive
                Vice President Exploration and Production and Director
            August
                2006David
                Jenkins (1)
            57
            Director
            January
                2006




(1)
      Each
      of the respective directors and officers of the Company was appointed to his
      position effective as of January 20, 2006, except for John Williams who was
      appointed in August 2006.


(2)
      Mr.
      Williams was appointed as the Company’s Executive Vice President Exploration and
      Production and a Director in August of 2006.





**Background
      of Executive Officers and Directors**





The
      following sets the biographical information about our executive officers and
      directors as provided to us each respective individual:





**Mr.
      Lyndon West,** who
      founded Index Ltd. in February of 2003, has been the Chief Executive Officer
      of
      the Company since January 20, 2006. From October of 1998 to December of 2003,
      Mr. West was employed at IHS Energy as New Venture Services Practice Director,
      and prior thereto as a CEO of IHS Energy’s International Division. In this
      position, he was responsible for the development of business relations
      worldwide. Prior thereto, from June of 1987 to October of 1998, Mr. West was
      employed at IEDS Limited, a company which he co founded, as the Managing
      Director. In this position, he was responsible for developing business direction
      and strategy implementation for the company. IEDS Limited was subsequently
      acquired by IHS Energy in 1998. Mr. West has 25 years of experience in the
      Oil
      and Gas Industry.





**Mr.
      Andrew Boetius,** a UK
      Chartered Management Accountant, has been the Chief Financial Officer and a
      Director of the Company since January 20, 2006. From September of 1988 to March
      of 2002, Mr. Boetius was employed at Amerada Hess Limited (“Amerada”), a UK
      subsidiary of Amerada Hess Corporation. Mr. Boetius has held a number of roles
      during his career with Amerada Hess Corporation, both in its upstream and
      downstream businesses. In addition, from February of 1999 to June 2002, he
      was
      the Finance Director for Amerada’s UK Energy Marketing and Trading business. Mr.
      Boetius was a part of the management team that divested this business to the
      TXU
      Group in March 2002. He remained in his role after the divesture to TXU Group
      through June of 2002. Subsequently Mr. Boetius performed an interim management
      role for a UK business in the Fortum Group. Mr. Boetius joined Index Ltd. as
      a
      Director on its inception in February of 2003. Prior to 1988, Mr. Boetius worked
      for the UK divisions of GEC group.


49


**Mr.
      Daniel Murphy** has
      been
      the Chairman of the Company since January 20, 2006. From October 1996
      to July, 2004, Mr. Murphy was employed at Intrepid Energy (North
      Sea) Ltd. as Engineering and Production Director. Prior thereto,
      from January 1994 to October, 1996, Mr. Murphy was employed
      at C.C. Management Associates as the Managing Director. From
      December 1996 to present date, Mr. Murphy has continuously been a Non-Executive
      Director of Aker Kvaerner Offshore Partners Limited, a United Kingdom registered
      company.




**Mr.
      John Williams,** has
      been
      Executive Vice President, Exploration and Production and a Director of the
      Company since August 1, 2006. Mr. Williams has
      thirty-one years of global oil and gas exploration and business development
      in
      various technical and managerial roles with Exxon, Conoco and ConocoPhillips.
      Latterly, Mr. Williams held positions including Manager of Exploration
      Geoscience and Global Chief Geophysicist at ConocoPhillips and General Manager
      of Exploration (Aberdeen) at Conoco. Mr. Williams has worked basins in over
      twenty five countries and conducted business in more than ten countries, having
      managed successful exploration programs in Alaska, the United Kingdom, Indonesia
      and Venezuela. Mr. Williams is a member of the American Association of Petroleum
      Geologists, the Society of Exploration Geophysicists and the Society of
      Petroleum Engineers. Mr. Williams is certified by the Texas Board of
      Professional Geoscientists and the American Association of Petroleum
      Geologists.





**Mr.
      David Jenkins** has been
      a Director of the Company since January 20, 2006. From December of 2002, to
      July
      of 2005, Mr. Jenkins was the President of Exploration Performance LLC
      (“Exploration Performance”), a Houston consulting company specializing in design
      and implementation of complete, integrated global exploration processes for
      oil
      and gas companies desiring to improve their exploration performance or to expand
      their exploration business. Mr. Jenkins areas of consultancy services included
      goal setting, strategy development, project evaluation, portfolio risk analysis,
      budget optimization, project implementation and post-audit analysis. Exploration
      Performance’s clients included Marathon Oil Company, Norsk Hydro, Robertson
      Research International, CNODC, IHS Energy and Fairfield
      Geophysical.





During
      the same period, he also acted as the Technical Director of Index Ltd. Prior
      to
      December 2002, he was employed at Conoco Phillips Inc. (“Conoco”) for 28 years
      in a number of senior management positions. Mr. Jenkins was instrumental in
      developing the integrated exploration processes, which resulted in Conoco
      becoming an industry leader in terms of commercial success rate and the number
      of significant oil field discoveries. In addition Mr. Jenkins was responsible
      for the analysis that led to major discoveries in the Gulf of Paria and in
      the
      CUU Long basins in Vietnam. Mr. Jenkins has also participated in evaluation
      of
      projects for Conoco, which included the evaluation and ranking of over 50 basins
      and 100+ oil exploration plays. Mr. Jenkins has 31 years of experience in global
      hydrocarbon exploration.





**Dr.
      Michael Scrutton** has been
      a Director of the Company since January 20, 2006. From 1969 to the end of 2002,
      Dr. Scrutton was employed by the Robertson Research Group (“Robertson”), a
      leading British consulting company involved in the upstream oil and gas
      business. During his tenure with Robertson, he became a director of the
      Robertson Research Holdings Ltd. and several of its subsidiary companies. In
      his
      employment with Robertson, he has fulfilled a variety of technical, management,
      planning and business development roles. From 1970 to 1986 he worked from
      Robertson's offices in Singapore, Indonesia and the United States of America,
      returning to the head office in North Wales in 1986. Dr. Scrutton is a geologist
      by training and during his 33 years of involvement in the upstream petroleum
      business, has gained experience in most of the world's oil and gas
      provinces.





All
      directors hold office until the next annual meeting of our stockholders and
      until their successors have been duly elected and qualified. Our executive
      officers are elected by, and serve at the designation and appointment of the
      board of directors. Some of our directors and executive officers also serve
      in
      various capacities with our subsidiaries.





**Family
      Relationships**





There
      are
      no family relationships among any of our directors and executive officers.


50


**Code
      of Ethics**





On
      March
      31, 2006 the Company’s Board of Directors adopted a formal Code of Ethics and
      Business Conduct that applies to its Chief Executive Officer and Chief Financial
      Officer, as well as to the directors, officers and employees of the Company.
      A
      copy of the Company’s Code of Ethics was filed as Exhibit 14.1 to its Annual
      Report filed with the SEC on Form 10-KSB on April 10, 2006.





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





Section
      16(a) of the Securities Exchange Act of 1934 requires our directors and
      executive officers and persons who beneficially own more than ten percent of
      a
      registered class of our equity securities to file with the SEC initial reports
      of ownership and reports of change in ownership of common stock and other equity
      securities of our Company. Officers, directors and greater than ten percent
      stockholders are required by SEC regulations to furnish us with copies of all
      Section 16(a) forms they file. To our knowledge, the following persons have
      failed to file, on a timely basis, the identified reports required by Section
      16(a) of the Exchange Act as of March 31, 2007:


*Name
                and Relationship*
            *Number*
              *of
                late reports*
            Transactions
                not timely reported
            Known
                failures to file a required formLyndon
                West
            0
            0
            0Andrew
                Boetius
            0
            0
            0Daniel
                Murphy
            0
            0
            0Michael
                Scrutton
            0
            0
            0David
                Jenkins
            0
            0
            0John
                Williams
            2
            2
            0





51


**Item
      10. Executive Compensation**





The
      following table sets forth information concerning the total compensation that
      the Company has paid or that has accrued on behalf of Company’s chief executive
      officer and other named executive officers and directors with annual
      compensation exceeding $100,000 during the year ended March 31,
      2007:





**Summary
      Compensation Table**


Name
                & Principal Position
            Year
            Salary
                ($)
            Bonus
                ($)
              (5)
            Stock
                Awards($)
              (5)
            Option
                Awards ($)
            Non-Equity
                Incentive Plan Compensation ($)
            Change
                in Pension Value and Non-Qualified Deferred Compensation Earnings
                ($)
            All
                Other Compensation ($) (1)
            Total
                ($)**Lyndon
                West**
              CEO
                and Director (2)
            2007
            118,501
                (5)
            73,553
            --
            --
                (6)
            --
            --
            --
            192,054**Andrew
                Boetius**
              CFO
                and
              Director(3)
            2007
            114,415
                (5)
            68,649
            --
            --
                (6)
            --
            --
            --
            189,064**John
                Williams**
              Executive
                Vice President Exploration and Production and
              Director
                (4)
            2007
            125,000
                (5)
            56,250
                (8)
            60,000
                (7)
            135,767
                (7)
            --
            --
            8,952
                (9)
            385,969**Daniel
                Murphy**
              Chairman
            2007
            114,415
                (5)
            68,649
            --
            --
                (6)
            --
            --
            --
            189,064





(1)
      With
      the exception of reimbursement of expenses incurred by our named executive
      officers during the scope of their employment, none of the named executive
      received any other compensation, perquisites or personal benefits in excess
      of
      $10,000.


(2)
      Appointed as the Company’s CEO and a director in January of 2006.


(3)
      Appointed as the Company’s CFO and a director in January of 2006.


(4)
      Appointed as the Executive Vice President Exploration and Production and a
      director of the Company in August of 2006.


(5)
      From
      April 1, 2006 to October 30, 2007, Mr. West, Mr. Boetius and Mr. Murphy received
      an annual salary of $98,070 each. Effective as of November 1, 2006, their annual
      salaries were increased to $147,105, $137,298 and $137,298, respectively. The
      amounts stated represent their aggregate salaries paid based on pro rata
      portions of the applicable annual base salary amounts. The amount of salary
      paid
      to Mr. Williams represents (i) pro rata portion of his annual base salary of
      $150,000 for the period from August 1, 2006 (effective date of Mr. Williams’
employment agreement) to March 31, 2007, and (ii) 25,000 paid by the Company
      to
      Mr. Williams for services rendered as a consultant to the Company prior to
      the
      effective date of his full time employment agreement.


(6)
      370,916 stock options out of the original grant by the Company of 1,482,584
      stock options made on January 20, 2006 to each of Mr. West and Mr. Boetius
      vested during the fiscal year ended March 31, 2007. 277,717 stock options out
      of
      the original grant by the Company of 1,110,870 stock options made on January
      20,
      2006 to Mr. Murphy vested during the fiscal year ended March 31,
      2007.


(7)
      Amounts represented as stock-based compensation expense for the fiscal year
      ended March 31, 2007, for restricted stock awards and stock options granted
      in
      2007 under FAS 123 R as discussed in Note 11, “Options and
      Warrants and Stock-Based Compensation” of the Notes to Consolidated Financial
      Statements included elsewhere in this Annual Report. On March 20, 2007, Mr.
      Williams was awarded 500,000 stock options, of which 250,000 options vested
      on
      the date of the grant, and the remainder shall vest on the successive two year
      anniversaries of the date of the grant, subject to Mr. Williams continued
      employment with the Company. During 2007 fiscal year, Mr. Williams was also
      awarded 50,000 restricted shares of the Company’s common stock.


(8)
      Represents the dollar value of Mr. Williams’ bonus received for the fiscal year
      ended March 31, 2007, which converted into 37,500 shares, at a price of $1.50
      per share. Per the terms of Mr. Williams’ employment agreement, Mr. Williams
      was awarded 37,500 shares which shall vest in three equal installments, of
      which
      12,500 shares vested on March 31, 2007, and the remainder shall vest on the
      successive two year anniversaries of the date of the grant, subject to Mr.
      Williams continued employment with the Company. (9)
        Represents pro rata portion for the 8 months of Mr. William’s employment with
        the Company for the fiscal year ended March 31, 2007, of the annual contribution
        by the Company to Mr. Williams’ medical health insurance in the amount of
        $13,428. The Company further agreed to cover any cost increases to said medical
        health insurance policy.


52





The
      following table sets forth information concerning the total compensation that
      the Company has paid or that has accrued on behalf of Company’s chief executive
      officer and other executive officers with annual compensation exceeding $100,000
      during the year ended March 31, 2006:





**Long-term
                compensation****Other**
            
            
            
            
            
            **All
                other****Other**
            
            **Restricted**
            
            **Options**
            
            **LTIP**
            
            **Compensa-****Name
                & Principal**
            
            
            
            **Salary**
            
            **Bonus**
            
            **Compen-**
            
            **Stock**
            
            **SARs**
            
            **payouts**
            
            **tion****Position**
            
            **Year**
            
            $
            
            $
            
            **sation**
            
            **Awards
                ($)**
            
            **(#)**
            
            **($)**
            
            **($)****Lyndon
                West**(1)
            
            
            2006
            
            
            90,909
            
            
            --
            
            $
            12,526
            
            
            --
            
            
            741,292
            
            
            0
            
            
            0CEO
                and Director**Andrew
                Boetius**(2)
            
            
            2006
            
            
            90,909
            
            
            --
            
            $
            12,526
            
            
            --
            
            
            741,292
            
            
            0
            
            
            0Chief
                FinancialOfficer
                and Director





(1)
            The
                Company granted 101,265 shares of Common Stock to Lyndon West as
                compensation expense, effective as of January 20, 2006 valued at
                $12,526.(2)
            The
                Company granted 101,264 shares of Common Stock to Andrew Boetius
                as
                compensation expense, effective as of January 20, 2006 valued at
                $12,526.





**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END**




The
      following table sets forth information for the named executive officers and
      directors regarding the number of shares subject to both exercisable and
      unexercisable stock options, as well as the exercise prices and expiration
      dates
      thereof, as of March 31, 2007:




**Option
                Awards**
            
            **Stock
                Awards****Name**
            
            **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
              **Exercisable**
            
            **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
              **Unexercisable**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options**
              **(#)**
            
            **Option**
              **Exercise**
              **Price**
              **($)**
            
            **Option**
              **Expiration**
              **Date**
            
            **Number**
              **of**
              **Shares**
              **or Units**
              **of Stock**
              **That**
              **Have**
              **Not**
              **Vested**
              **(#)**
            
            **Market**
              **Value**
              **of**
              **Shares**
              **or**
              **Units**
              **of**
              **Stock**
              **That**
              **Have**
              **Not**
              **Vested**
              **($)**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number**
              **of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights**
              **That**
              **Have**
              **Not**
              **Vested**
              **(#)**
            
            **Equity Incentive**
              **Plan Awards:**
              **Market or Payout**
              **Value**
              **of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights**
              **That Have**
              **Not**
              **Vested**
              **($)****Lyndon
                West**
            
            1,111,938
            
            370,916
            
            --
            
            0.35
            
            1/20/11
            
            N/A
            
            N/A
            
            N/A
            
            N/A**Andrew
                Boetius**
            
            1,111,938
            
            370,916
            
            --
            
            0.35
            
            1/20/11
            
            N/A
            
            N/A
            
            N/A
            
            N/A**Daniel
                Murphy**
            
            833,153
            
            277,717
            
            --
            
            0.35
            
            1/20/11
            
            N/A
            
            N/A
            
            N/A
            
            N/A**John
                Williams**
            
            250,000
            
            250,000
            
            --
            
            1.42
            
            3/20/12
            
            N/A
            
            N/A
            
            N/A
            
            N/A--
            
            --
            
            --
            
            --
            
            --
            
            25,000
            
            37,500
                (1)
            
            --
            
            --**David
                Jenkins**
            
            226,032
            
            75,344
            
            --
            
            0.35
            
            1/20/11
            
            N/A
            
            N/A
            
            N/A
            
            N/A**Michael Scrutton**
            
            150,083
            
            75,344
            
            --
            
            0.35
            
            1/20/11
            
            N/A
            
            N/A
            
            N/A
            
            N/A






(1)
            Represents
                the dollar value of portions of Mr. Williams’ bonus received for the
                fiscal year ended March 31, 2007, which in its entirety converted
                into
                37,500 shares, at a price of $1.50 per share, which have not vested
                to
                date. Per the terms of Mr. Williams’ employment contract, 37,500 shares
                vest in three equal installments, of which 12,500 shares vested on
                March
                31, 2007, and the remainder shall vest on the successive two year
                anniversaries of the date of the grant, subject to Mr. Williams’
                continuous employment with the Company.Market
                value of the underlying securities is based on the closing price,
                $1.50,
                of the Company’s common stock on March 30, 2007, the last trading day of
                2007 fiscal year.






53


**Directors
      Compensation**




**Name**
              **(a)**
            
            **Fees Earned**
              **or Paid in**
              **Cash**
              **($)**
              **(b)**
            
            **Stock**
              **Awards**
              **($)**
              **(c)**
            
            **Option**
              **Awards**
              **($)**
              **(d)(1)**
            
            **Non-Equity Incentive**
              **Plan Compensation**
              **($)**
              **(e)**
            
            **Change in Pension Value and**
              **Nonqualified Deferred**
              **Compensation Earnings**
              **(f)**
            
            **All Other**
              **Compensation**
              **($)**
              **(g)**
            
            **Total**
              **($)**
              **(h)****Lyndon
                West**
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —**Andrew
                Boetius**
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —**Daniel
                Murphy**
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —**John
                Williams**
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —**David
                Jenkins**
            
            30,450
                (1)
            
            —
            
            —
            
            —
            
            —
            
            —
            
            30,450**Michael
                Scrutton**
            
            34,128
                (1)
            
            —
            
            —
            
            —
            
            —
            
            —
            
            34,128





(1)
            From
                April 1, 2006 to October 30, 2007, Mr. Jenkins and Mr. Scrutton received
                compensation based on the pro rata portion of their annual salaries
                of
                $25,200 and $28,244, respectively. Effective as of November 1, 2006,
                their
                annual salaries were increased to $37,800 and $42,366, respectively.
                The
                amounts stated represent their aggregate annual compensation paid
                based on
                pro rata of the applicable annual salaries.





With
      the
      exception of Michael Scrutton and David Jenkins, we do not currently pay our
      directors for attending meetings of our Board of Directors, although we expect
      to adopt a policy for compensating directors for attending meetings of our
      Board
      of Directors in the future. Our directors, who are also our officers, receive
      compensation for the services rendered to us pursuant to their employment
      agreements entered into with either our company or Index Ltd., our wholly owned
      subsidiary.





**Employment
      Agreements**





Index
      Ltd. had initially entered into employment and non-executive agreements, with
      the following five directors of Index Ltd. which became effective as of January
      1, 2006. Subsequently, Mr. Jenkins’ non-executive agreement was assigned and
      transferred from Index Ltd. to Index Oil. In connection with these agreements,
      Mr. West, Mr. Boetius, Mr. Murphy and Mr. Scrutton serve as directors and/or
      officers of Index Oil and will be compensated for the provision of services
      to
      Index Oil pursuant to the agreements entered into with Index Ltd, and Mr.
      Jenkins serves as a non-executive director of Index Oil and will be compensated
      for the provision of his services to Index Oil solely by Index Oil pursuant
      to
      his employment agreement as assigned by Index Ltd. The following are the
      material terms of these agreements:





·
            Mr.
                West and Mr. Boetius. The agreements initially provided for Mr. West
                and
                Mr. Boetius to receive each an annual salary of $90,909 per year.
                Effective as of April 1, 2007, Mr. West’s salary was increased to $167,700
                and Mr. Boetius’ salary was increased to $156,520. Mr. West’s and Mr.
                Boetius’ employment agreements provide for continuous employment without a
                set date of termination. Index Ltd. may terminate Mr. West’s or Mr.
                Boetius’ employment when Mr. West or Mr. Boetius respectively reach such
                age as Index’s Board of Directors determines as the appropriate retirement
                age for the senior employees of company. Mr. West and Mr. Boetius
                may
                terminate their employment with the company upon not less than 3
                months
                notice. Additionally, Index may terminate Mr. West’s and/or Mr. Boetius’
                employment agreement upon not less than 6 months notice. Pursuant
                to
                Termination of Control protection, upon termination of Mr. West’s or Mr.
                Boetius’ employment due to a change of control of Index, Mr. West and/or
                Mr. Boetius are entitled to severance pay. The severance pay is equal
                to
                four times the amount of Mr. West’s or Mr. Boetius’ compensation package,
                respectively, as defined in the
                agreements;






54





·
            A
                full time Employment Agreement with Mr. Murphy. The agreement initially
                provided for Mr. Murphy to receive an annual salary of $75,000 per
                year,
                which effective as of April 1, 2007, was increased to $156,520. Mr.
                Murphy’s is employed continuously by Index Ltd. without a set date of
                termination; however, his employment is terminated immediately upon
                his
                death or permanent disability. Index Ltd. may also terminate Mr.
                Murphy’s
                employment upon six months notice. Mr. Murphy may terminate his employment
                upon 3 months notice to Index Ltd. Pursuant to his employment agreement
                Index Ltd. provides Mr. Murphy with Directors Liability Insurance
                and
                contributes to his Private pension plan. Furthermore, the employment
                agreement provides for a Termination of Control Protection which
                entitles
                Mr. Murphy to receive an amount equivalent to 4 times of annual
                compensation amount; and





·
            A
                non executive director Service Agreement with Mr. Scrutton and Mr.
                Jenkins, whose non-executive director Service Agreement was subsequently
                assigned to Index Oil by Index Ltd. The Agreements initially provided
                for
                Mr. Jenkins to receive a salary of $1,050 per month which effective
                as of
                November 2006 was increased to $1,575 per month, and Mr. Scrutton
                to
                receive a salary of $1,091 per month, which effective as of November
                2006
                was increased to $1,765 per month. Mr. Jenkins’ and Mr. Scrutton’s
                employment is terminated immediately upon their death or permanent
                disability. Mr. Jenkins’ or Mr. Scrutton’s employment may also be
                terminated by Index Oil or Index Ltd., as applicable, upon three
                months
                written notice. Mr. Jenkins and Mr. Scrutton may terminate their
                employment upon 3 months written notice to the applicable entity.
                Pursuant
                to their employment agreements, as an alternative to serving notice,
                Index
                Oil or Index Ltd., as applicable, may, in its absolute discretion,
                terminate their employment without prior notice and make a payment
                in
                compensation for loss of employment equal to the salaries which they
                would
                otherwise have received during their notice period. Furthermore,
                the
                employment agreements provide for a Termination of Control Protection
                which entitles Mr. Jenkins and Mr. Scrutton to achieve vesting of
                their
                unvested stock options up to the date of
                termination.





*
      Certain
      compensation amounts are based on salaries that are to be paid in British
      Pounds. All 2007 British Pound denominated executive compensation amounts were
      translated into U.S. dollars at the 2007 fiscal year end based on March 30,
      2007
      exchange rate of U.S. $1.9614 = £1.





On
      August
      29, 2006, and effective as of August 1, 2006, Index Oil entered into a full
      time
      employment agreement, with Mr. John Williams, our Executive Vice President
      Exploration and Production and a member of our board of directors. The material
      terms of Mr. Williams’ employment agreement are:





· The
      agreement provides for Mr. Williams to receive an annual salary of $150,000
      per
      year, which effective as of April 1, 2007 was increased to $200,000. Mr.
      Williams also received a sign on bonus of 50,000 restricted shares of the
      Company’s common stock which fully vested in January of 2007. Mr. Williams’ base
      salary is subject to review annually based on performance and cost of living
      increases, as determined by the remuneration committee. Furthermore, Mr.
      Williams may be eligible for an annual bonus based on the decision of the
      Company’s board of directors as more fully set forth in his employment
      agreement.


55


Mr.
      Williams’ employment with Index shall continue for a term of one year, such
      that, thereafter, his employment shall be extended on an annual basis unless
      terminated per the terms of his employment agreement. Mr. Williams’ employment
      is terminated immediately upon his death or permanent disability, shall
      automatically terminate when Mr. Williams reaches the age of 62, and maybe
      further terminated by Index upon giving Mr. Williams not less than 180 days
      notice in writing given at any time while Mr. Williams shall have been prevented
      by reason of ill health or accident from performing his duties under this
      Agreement for a period of or periods aggregating 180 days in the preceding
      365
      consecutive days. Index may also terminate Mr. Williams’ employment by summary
      notice if Mr. Williams shall have been subject to one of the termination
      provisions set forth in Section 14(c) of his employment agreement (termination
      for cause). Index further reserved the right (at its sole and absolute
      discretion) to terminate Mr. Williams without
      cause  at
      any
      time and with immediate effect by paying to Mr. Williams a payment of a
      sum equal to
      his monthly salary for the greater of the remaining portion of his then term
      of
      the employment or 180 days.





Mr.
      Williams may terminate his employment upon 90 days written notice to Index.
      Pursuant to his employment agreement, Index provides Mr. Williams with Directors
      and Officers Liability Insurance. Furthermore, the employment agreement provides
      for a Termination of Control Protection which entitles Mr. Williams to receive
      an amount equivalent to 4 times his annual compensation amount.





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





The
      following table sets forth the number of and percent of the Company's common
      stock beneficially owned by:





·
            all
                directors and nominees, naming them,·
            our
                named executive officers,





·
            our
                directors and executive officers as a group, without naming them,
                and·
            persons
                or groups known by us to own beneficially 5% or more of our Common
                Stock
                or our Preferred Stock having voting rights:





The
      percentages in the table have been calculated on the basis of treating as
      outstanding for a particular person, all shares of our capital stock outstanding
      on May 31, 2007, and all shares of our common stock issuable to that person
      in
      the event of the exercise of outstanding options and other derivative securities
      owned by that person which are exercisable within 60 days of May 31, 2007.
      Except as otherwise indicated, the persons listed below have sole voting and
      investment power with respect to all shares of our capital stock owned by
      them.




Name
                and address of owner
            Title
                of Class
            Capacity
                with Company
            Number
                of Shares Beneficially Owned (1) (2)
            Percentage
                of ClassLyndon
                West
              c/o
                Index Oil & Gas Ltd.,
              Lawrence
                House, Lower Bristol Road,
              Bath
                BA2 9ET, United Kingdom.
            Common
                Stock
            CEO
                and Director
            5,431,025
                (4)
            8.09%Andrew
                Boetius
              c/o
                Index Oil & Gas Ltd.,
              Lawrence
                House, Lower Bristol Road,
              Bath
                BA2 9ET, United Kingdom.
            Common
                Stock
            Chief
                Financial Officer and Director
            2,369,907
                (5)
            3.54%Daniel
                Murphy
              c/o
                Index Oil & Gas Ltd.,
              Lawrence
                House, Lower Bristol Road,
              Bath
                BA2 9ET, United Kingdom.
            Common
                Stock
            Chairman
                of the Board and Secretary
            1,271,206
                (3)
            1.91%






56




John
                Williams
              c/o
                Index Oil and Gas Inc.
              10,000
                Memorial, Ste 440
              Houston,
                TX 77024
            CommonStock
            Executive
                Vice President Exploration and Production and Director
            312,500
                (9)
            *Michael
                Scrutton
              c/o
                Index Oil & Gas Ltd.,
              Lawrence
                House, Lower Bristol Road,
              Bath
                BA2 9ET, United Kingdom.
            Common
                Stock
            Director
            2,711,761
                (7)
            4.11%David
                Jenkins
              c/o
                Index Oil & Gas Ltd.,
              Lawrence
                House, Lower Bristol Road,
              Bath
                BA2 9ET, United Kingdom.
            Common
                Stock
            Director
            1,253,198
                (6)
            1.90%Douglas
                Wordsworth
              44
                Heath Lane,
              Little
                Sutton, Ellesmere Port, Cheshire, UK CH66 NT.
            Common
                Stock
            --
            3,829,433
                (8)
            5.82%All
                Officers and
              Directors
                as a Group
              (6
                persons)
            
            
            13,349,597
            19.09%





*Less
      then one percent.


(1)
      This
      column represents the total number of votes each named stockholder is entitled
      to vote upon matters presented to the stockholders for a vote.


(2)
      Applicable percentage ownership is based on 65,737,036 shares of Common Stock
      outstanding as of July 6, 2006, together with securities exercisable or
      convertible into shares of Common Stock within 60 days of May 31, 2007, for
      each
      stockholder. Beneficial ownership is determined in accordance with the rules
      of
      the Securities and Exchange Commission and generally includes voting or
      investment power with respect to securities. Shares of Common Stock that are
      currently exercisable or exercisable within 60 days of May 31, 2007, are deemed
      to be beneficially owned by the person holding such securities for the purpose
      of computing the percentage of ownership of such person, but are not treated
      as
      outstanding for the purpose of computing the percentage ownership of any other
      person.


(3)
      Includes (i) warrants to purchase 66,662 shares of Common Stock of the Company
      exercisable at $0.14 per share and (ii) options to purchase 833,153 shares
      of
      Common Stock of the Company exercisable at $0.35 per share, which are presently
      exercisable or exercisable within 60 days.


(4)
      Includes (i) warrants to purchase 266,380 shares of Common Stock of the Company
      exercisable at $0.14 per share, and (ii) options to purchase 1,111,938 shares
      of
      Common Stock of the Company exercisable at $0.35 per share, which are presently
      exercisable or exercisable within 60 days.


(5)
      Includes (i) warrants to purchase 124,488 shares of Common Stock of the Company
      exercisable at $0.14 per share, and (ii) options to purchase
      1,111,938  shares
      of
      Common Stock of the Company exercisable at $0.35 per share, which are presently
      exercisable or exercisable within 60 days.


(6)
      Includes (i) warrants to purchase 12,539 shares of Common Stock of the Company
      exercisable at $0.14 per share, and (ii) options to purchase 150,082 shares
      of
      Common Stock of the Company exercisable at $0.35 per share, which are presently
      exercisable or exercisable within 60 days.


(7)
      Includes (i) warrants to purchase 33,095 shares of Common Stock of the Company
      exercisable at $0.14 per share and (ii) options to purchase 226,032 shares
      of
      Common Stock of the Company exercisable at $0.35 per share, which are presently
      exercisable or exercisable within 60 days.


(8)
      Includes warrants to purchase 42,126 shares of Common Stock of the Company
      exercisable at $0.14 per share which are presently exercisable or exercisable
      within 60 days.


(9)
      Includes (i) options to purchase 250,000 shares of Common Stock of the Company
      exercisable at $1.42 per share, which are presently exercisable or exercisable
      within 60 days, and (iii) 62,500 shares of Common Stock granted as executive
      bonus compensation.







57


2006
      Incentive Stock Option Plan




On
      March
      14, 2006, and effective as of January 20, 2006, the Company adopted the 2006
      Incentive Stock Option Plan (the “Plan”) providing for the issuance of up to
      5,225,000 shares of Common Stock underlying the incentive stock options and
      759,448 shares of Common Stock reserved for a specific performance bonus award
      program, to be awarded to the Company’s and/or its subsidiaries’ officers,
      directors, employees and consultants. Pursuant to the Plan, (i) during the
      2006
      fiscal year the Company granted options to purchase an aggregate of 4,577,526
      shares of the Company’s Common Stock exercisable at $0.35 per share to the newly
      appointed directors and officers that held options to purchase ordinary shares
      of Index Ltd. prior to the completion of the Acquisition, as well as to the
      newly appointed directors and officers of the Company, and (ii) during the
      2007
      fiscal year, the Company granted options to purchase 500,000 shares of the
      Company’s Common Stock exercisable at $1.42 per share to John
      Williams.





The
      principal terms and conditions of the stock options granted under the Plan
      are
      that vesting of the options granted occurs in three stages (unless otherwise
      agreed to by the board of directors): (1) 50% on the date of the grant; (2)
      25%
      on the first anniversary of the grant date; and (3) 25% on the second
      anniversary of the grant date. The stock options granted under the Plan are
      generally non transferable other than to a legal or beneficial holder of the
      options upon the option holder’s death. The rights to vested but unexercised
      stock options cease to be effective: (1) 18 months after death of the stock
      options holder; (2) 6 months after Change of Control of the Company; 12 months
      after loss of office due to health related incapacity or redundancy; or (5)
      12
      months after the retirement of the options holder from a position with Index
      Oil.





Of
      the
      options to purchase an aggregate of 5,077,526 shares of Common Stock that were
      granted under the Plan, the following stock options have been granted to
      directors and/or officers of the Company:




Lyndon
                West
            1,482,584
                optionsAndrew
                Boetius
            1,482,584
                optionsDaniel
                Murphy
            1,110,871
                optionsJohn
                Williams
            500,000
                optionsDavid
                Jenkins
            200,112
                optionsMichael
                Scrutton
            301,375
                options





**Stock
      Grants**





Effective
      as of January 20, 2006, the Company granted bonus awards, in the form of shares
      of common stock of the Company as follows: 101,265 to Mr. Lyndon West and
      101,264 to each of Messrs. Andrew Boetius and David Jenkins, in consideration
      of
      Index Ltd. reaching certain performance objectives. On March 31, 2007, the
      Company granted bonus awards, in the form of 37,500 shares of common stock
      of
      the Company to John Williams in consideration of the Company reaching certain
      performance objectives.





**Item
      12. Certain Relationships and Related Transactions**





**Transactions
      with Related Persons**





During
      the Company’s fiscal year ended March 31, 2007, Mr. John
      Williams, the Company’s Executive Vice President Exploration and Production and
      a director, in addition to his base salary, received a restricted bonus stock
      award of 50,000 shares of the Company’s Common Stock. Total compensation expense
      of $60,000 was recorded on the award at the market price of $1.20 per share,
      the
      market price at the date of the grant.





Additionally,
      Mr. Williams was awarded a performance bonus of 37,500 shares of restricted
      common stock per the terms of his bonus program included in his employment
      agreement. The shares vest 1/3 at the date of the grant, March 31, 2007, with
      the remaining shares vesting in equal increments on the next two successive
      anniversary dates of the bonus award. The shares were valued at $1.50 per share
      of the date of the first vesting award or March 31, 2007 for total compensation
      expense of $18,750. Performance bonuses for other officers and directors were
      accrued at March 31, 2007 and totaled $210,851.


58


Management
      believes that all of the above transactions were on terms at least as favorable
      as could have been obtained from unrelated third parties.





**Parents**





None.




**Promoters
      and control persons**





None.





**Board
      Determination of Independence**





Our
      board
      of directors has determined that Dr. Michael Scrutton is “independent” as that
      term is defined by the National Association of Securities Dealers Automated
      Quotations (“NASDAQ”).  Under the NASDAQ definition, an independent
      director is a person who (1) is not currently (or whose immediate family members
      are not currently), and has not been over the past three years (or whose
      immediate family members have not been over the past three years), employed
      by
      the company; (2) has not (or whose immediate family members have not) been
      paid
      more than $60,000 during the current or past three fiscal years;  (3) has
      not (or whose immediately family has not) been a partner in or controlling
      shareholder or executive officer of an organization which the company made,
      or
      from which the company received, payments in excess of the greater of $200,000
      or 5% of that organizations consolidated gross revenues, in any of the most
      recent three fiscal years; (4) has not (or whose immediate family members have
      not), over the past three years been employed as an executive officer of a
      company in which an executive officer of the Company has served on that
      company’s compensation committee; or (5) is not currently (or whose immediate
      family members are not currently), and has not been over the past three years
      (or whose immediate family members have not been over the past three years)
      a
      partner of the Company’s outside auditor. A director who is, or at any time
      during the past three years, was employed by the Company or by any parent or
      subsidiary of the Company, shall not be considered independent.





**Item
      13. Exhibits**




(a) *Financial
      Statements*




**Page**Reports
                of Independent Registered Certified Public Accounting Firm
            
            
            F-1Consolidated
                Balance Sheets at March 31, 2007 and 2006
            
            
            F-2Consolidated
                Statements of Losses for the Years Ended March 31, 2007 and
                2006
            
            
            F-3Consolidated
                Statements of Changes in Stockholders’ Equity for the Years Ended
                March 31, 2007 and 2006
            
            
            F-4Consolidated
                Statements of Cash Flows for the Years Ended March 31, 2007 and
                2006
            
            
            F-5Notes
                to the Consolidated Financial Statements
            
            
            F-6
                - F-39Supplemental
                Oil and Gas Information (Unaudited)
            
            
            F-40





Consolidated
      Financial Statements Schedules:





All
      schedules are omitted because they are inapplicable or because the required
      information is contained in the financial statements or included in the notes
      thereto.





59


(b)  *Exhibits*




**Exhibit**
              **Number**
            
            **Description**3(i)1
            
            Articles
                of Incorporation of Index Oil & Gas, Inc. (4)3(i)(2)
            
            Certificate
                of Amendment to the Articles of Incorporation of Index Oil and Gas
                Inc.
                (the "Company"), filed with the Secretary of the State of Nevada
                on
                November 28, 2005, changing the name of the Company from Thai One
                On Inc.
                to Index Oil & Gas, Inc., and increasing the number of authorized
                shares from 25,000,000 to 75,000,000. (1)3(i)(2)
            
            Certificate
                of Amendment to the Articles of Incorporation of Index Oil and Gas
                Inc.
                (the "Company"), filed with the Secretary of the State of Nevada
                on
                September 21, 2006, increasing the number of authorized shares from
                75,000,000 to 500,000,000, and creating a class of preferred stock,
                authorizing the issuance of 10,000,000 shares, $0.001 par value per
                share,
                of preferred stock. (7)3(ii)
            
            By-laws
                of Index Oil and Gas Inc. (4)5.1
            
            Legality
                Opinion of Sichenzia Ross Friedman Ference LLP. *10.1
            
            Acquisition
                Agreement between Index Oil and Gas, Inc., certain stockholders of
                Index
                Oil & Gas Ltd., and Briner Group Inc. dated January 20, 2006.
                (1)10.2
            
            Form
                of Share Exchange Agreement entered into by and between Index Oil
&
                Gas, Inc. and certain Index Oil & Gas Ltd. stockholders.
                (1)10.3+
            
            Employment
                Agreement entered into by and between Index Oil & Gas Ltd. and Lyndon
                West, dated January 20, 2006. (1)10.4+
            
            Employment
                Agreement entered into by and between Index Oil & Gas Ltd. and Andrew
                Boetius, dated January 20, 2006. (1)10.5+
            
            Employment
                Agreement entered into by and between Index Oil & Gas Ltd. and Daniel
                Murphy, dated January 20, 2006. (1)10.6+
            
            Letter
                Agreement entered into by and between Index Oil & Gas Ltd. and David
                Jenkins, dated January 20, 2006. (1)10.7+
            
            Letter
                Agreement entered into by and between Index Oil & Gas Ltd. and Michael
                Scrutton, dated January 20, 2006. (1)10.8+
            
            Employment
                Agreement entered into by and between Index Oil and Gas Inc. and
                John G.
                Williams, dated August 31, 2006. (5)10.9
            
            Form
                of Subscription Agreement dated as of January 20, 2006.
                (1)10.10
            
            Form
                of Subscription Agreement dated as of August 29 and October 4, 2006.
                (6)10.11
            
            Form
                of Registration Rights Agreement dated as of August 29, 2006.
                (6)14.1
            
            Code
                of Ethics and Business Conduct for officers, directors and employees
                of
                Index Oil and Gas, Inc. adopted by the Company’s Board of Directors on
                March 31, 2006. (3)








60




21.1
            
            List
                of subsidiaries of the Company. *31.1
            
            Certification
                by Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
                of
                the Exchange Act. *31.2
            
            Certification
                by Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
                of
                the Exchange Act. *32.1
            
            Certification
                by Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b)
                of
                the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
                United
                States Code. *32.2
            
            Certification
                by Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b)
                of
                the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
                United
                States Code. *





*
                Filed Herewith+
                Compensatory plan or arrangement(1)
                Incorporated by reference to the Company’s Amended Current Report filed on
                Form 8-K/A with the SEC on March 15, 2006.(2)
                Incorporated by reference to the Company’s Annual Report filed on Form
                10-K with the SEC on March July 17, 2006.(3)
                Incorporated by reference to the Company’s Annual Report filed on Form
                10-KSB with the SEC on March April 10, 2006.(4)
                Incorporated by reference to the Company’s Registration Statement filed on
                Form SB-2 with the SEC on May 24, 2004.(5)
                Incorporated by reference to the Company’s Current Report filed on Form
                8-K with the SEC on September 8, 2006.(6)
                Incorporated by reference to the Company’s Current Report filed on Form
                8-K with the SEC on September 11, 2006.(7)
                Incorporated by reference to the Company’s Current Report filed on Form
                8-K with the SEC on September 28, 2006.(8)
                Incorporated by reference to the Company’s Registration Statement filed on
                Form SB-2 with the SEC on October 11,
                2006.




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





**Audit
      Fees**





We
      incurred the following fees billed for professional services rendered by our
      principal accountants for the audit of our financial statements, for the reviews
      of the quarterly financial reports on Form 10-Q and financial statements
      included in our annual report on Form 10-KSB, and for other services normally
      provided in connection with statutory filings: approximately $222,000 and
      $52,500 for the fiscal years ended March 31, 2007 and March 31, 2006,
      respectively.





**Audit-Related
      Fees**





We
      incurred no fees for the period from March 31, 2005 to March 31, 2007 for
      professional services rendered by our principal accountants that are reasonably
      related to the performance of the audit or review of our financial statements
      and not included in “Audit Fees”.





**Tax
      Fees**





We
      incurred approximately $200 in tax fees for the period ended March 31, 2006
      and
      $15,000 in tax fees during fiscal year ended March 31, 2007, for professional
      services rendered by our principal accountants for tax compliance, tax advice,
      and tax planning.





61


**All
      Other Fees**





We
      incurred approximately $17,000 in fees for other professional services related
      to our Registration Statement that we filed with the SEC on Form SB-2 rendered
      by our principal accountants during the fiscal years ended March 31, 2007.
      We
      did not incur any fees for other professional services rendered by our principal
      accountants during the fiscal year ended March 31, 2006.





**Audit
      Committee Pre-Approval Policies and Procedures**





As
      of the
      fiscal year ended March 31, 2007, the Company has not formed an Audit Committee
      nor has it appointed any members of its board of directors to such committee.
      It
      is expected, that the Company’s Audit Committee will be formed and will hold its
      first meeting sometime in the fiscal year of 2008. Prior to the initial
      meeting of the Audit Committee, the fees for audit services were approved by
      the
      majority of our board of directors and the majority of our board of directors
      reviewed, discussed and approved the financials statements filed on Forms 10-QSB
      and 10-KSB.  At our first Audit Committee meeting the board of directors
      expects to establish a policy to pre-approve all audit and permissible non-audit
      services provided by our independent auditors. These services may include audit
      services, audit-related services, tax services and other services. Pre-approval
      periods will be provided for these services as determined by the board of
      directors. The Company’s board of directors expects to require the independent
      auditor and management to periodically report to the Audit Committee regarding
      the extent of services provided by the independent auditor in accordance with
      this pre-approval. It is further expected, that the chair of the Audit Committee
      will also be authorized, pursuant to delegated authority, to pre-approve
      services on a case-by-case basis, and that such approvals will be communicated
      to the full Audit Committee at its next meetings.  The Company believes
      that RBSM LLP’s, formerly Russell Bedford Stefanou Mirchandani
      LLP, services and Esther Yap & Co.’s services under the category “All
      Other Fees” were compatible with RBSM LLP and Esther Yap & Co. maintaining
      its independence.





62


**SIGNATURES**




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




**INDEX
                OIL AND GAS, INC.**Date: June
                22, 2007
            By:
            */s/ Lyndon
                West*Lyndon
                WestPresident
                  and Chief Executive Officer




**INDEX
                OIL AND GAS, INC.**Date: June
                22, 2007
            By:
            */s/ Andrew
                Boetius*Andrew
                BoetiusChief
                Financial Officer, acting Principal Accounting Officer and acting
                Principal
              Financial
                Officer




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





**Signature**
            
            **Title**
            
            **Date**/s/*Daniel
                Murphy*
            
            
            
            June
                22, 2007Daniel Murphy
            
            Chairman
                of the Board/s/*Lyndon
                West*
            
            Chief
                Executive Officer and Director
            
            June
                22, 2007Lyndon West/s/*Andrew
                Boetius*
            
            Chief
                Financial Officer, acting
            
            June
                22, 2007Andrew Boetius
            
            Principal
                Accounting Officer,acting
                Principal Financial Officerand
                Director/s/*John
                Williams*
            
            Executive
                Vice President
            
            June
                22, 2007John
                Williams
            
            Exploration
                and Production and Director/s/
            
            Director
            
            June
                22, 2007David Jenkins/s/
            
            Director
            
            June
                22, 2007Michael Scrutton