**SECURITIES
      AND EXCHANGE COMMISSION**




**** **WASHINGTON,
      D.C. 20549**




**FORM
      10-K**




(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, 2006**




**|_|**
            **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, $.001 par value
            Over
                The Counter Bulletin Board




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes |_| No |X|




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes |_| No |X|




Indicate
      by check mark whether the registrant: (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 |_|




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. |X|




Indicate
      by check mark whether the registrant is a large accelerated filer , an
      accelerated filer, or a non-accelerated filer. See definition of "accelerated
      filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
      one):




**Large
      Accelerate Filer |_| Accelerated Filer |_| Non-accelerated filer
      |X|**




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




The
      aggregate market value of the voting stock held by non-affiliates of the
      Registrant based on the last sale price reported on the OTC Bulleting Board
      as
      of July 6,
      2006
      was $54,207,894.




As
      of July 6,
      2006,
      there were outstanding 54,544,345 shares of Common Stock.










1


**TABLE
      OF CONTENTS**


**PAGE**PART
                  IITEM
                  1.
              Business
              4ITEM
                  1A.
              Risk
                  factors
              13ITEM
                  1B.
              Unresolved
                  staff comments
              22ITEM
                  2.
              Properties
              24ITEM
                  3.
              Legal
                  proceedings
              26ITEM
                  4.
              Submission
                  of matters to a vote of security holders
              26PART
                  IIITEM
                  5.
              Market
                  for registrant’s common equity and related stockholder
                  matters
              26ITEM
                  6.
              Selected
                  historical financial data
              28ITEM
                  7.
              Management’s
                  discussion and analysis of financial condition and results of
                  operations
              28ITEM
                  7A.
              Quantitative
                  and qualitative disclosures about market risk
              38ITEM
                  8.
              Consolidated
                  financial statements and supplementary data
              39ITEM
                  9.
              Changes
                  in and disagreements with accountants on accounting and financial
                  disclosure
              40ITEM
                  9A.
              Controls
                  and procedures
              40ITEM
                  9B.
              Other
                  information
              40PART
                  IIIITEM
                  10.
              Directors
                  and executive officers of the registrant
              40ITEM
                  11.
              Executive
                  compensation
              42ITEM
                  12.
              Security
                  ownership of certain beneficial owners and management and related
                  stockholder matters
              43ITEM
                  13.
              Certain
                  relationships and related transactions
              46ITEM
                  14.
              Principal
                  accounting fees and services
              46PART
                  IVITEM
                  15.
              Exhibits,
                  financial statement schedules
              47Signatures
              
              50

















2





**Information
      Regarding Forward Looking Statements**





Some
      of
      the statements contained in this Form 10-K that are not historical facts are
      "forward-looking statements" which can be identified by the use of terminology
      such as "estimates," "projects," "plans," "believes," "expects," "anticipates,"
      "intends," or the negative or other variations, or by discussions of strategy
      that involve risks and uncertainties. We urge you to be cautious of the
      forward-looking statements, that such statements, which are contained in this
      Form 10-K, reflect our current beliefs with respect to future events and involve
      known and unknown risks, uncertainties and other factors affecting our
      operations, market growth, services, products and licenses. No assurances can
      be
      given regarding the achievement of future results, as actual results may differ
      materially as a result of the risks we face, and actual events may differ from
      the assumptions underlying the statements that have been made regarding
      anticipated events. 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;**•**
            
            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;






3




**•**
            
            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.





All
      written and oral forward-looking statements made in connection with this Form
      10-K that are attributable to us or persons acting on our behalf are expressly
      qualified in their entirety by these cautionary statements. Given the
      uncertainties that surround such statements, you are cautioned not to place
      undue reliance on such forward-looking statements.

















4


**PART
      I**





**Item
      1. Business**





**Overview**





Index
      Oil
      and Gas, Inc. (“Index”, “the Company”, “we”, “us” or “our”) is an independent
      oil and gas company engaged in the acquisition, development, production and
      exploration 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 for the purpose of developing, owning
      and operating theme restaurants called "Khanom Jeen" in Malaysia. In
      March
      2004, Thai acquired a wholly-owned subsidiary, Thai Pasta Enterprise Sdn. Bhd.,
      a privately-held Malaysian company (“the Subsidiary”), from an officer and
      director of Thai. The Subsidiary commenced operations as a restaurant operator
      in June 2004, but subsequently ceased operations in the fourth quarter of 2005.
      The Subsidiary then sold a portion of its surplus assets, leaving it with no
      significant assets. 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 outstanding shares of the Index Ltd.’s equity stock
      by the Company. 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. In
      accordance with Statement of Financial Accounting Standards No. 141,
“ *Business
      Combinations”* ,
      the
      Company was deemed to be the acquiring entity. The transaction was accounted
      for
      as a recapitalization of the Company (reverse acquisition).





Pursuant
      to the Agreements, all common shares previously owned by Index Ltd.’s
      stockholders were exchanged for an aggregate of 23,375,000 shares of Index
      common stock, $0.001 par value (“the Common Stock”) of which
      759,448 shares of Common Stock were reserved for issuance by the
      Company, and
      1,092,676 warrants to purchase shares of Common Stock of Index. Out of the
      759,448 shares of Common Stock reserved for issuance 303,793 shares of Common
      Stock have been granted to certain directors of the Company in the form of
      stock
      grants, and 455,655 shares of Common Stock remain to be awarded. For more
      information please see Item 12 section entitled “ *Stock
      Grants* ”.
      The
      value of the Company’s stock that was issued was based on the historical cost of
      the Company’s net tangible assets of $1,578, which did not differ materially
      from their fair value.





Index
      Ltd. was incorporated on February 21, 2003 in the United Kingdom. The Company
      invested in a 5% working interest in oil and gas leases covering approximately
      8,500 acres located in Stafford County, Kansas (“Kansas Properties”) in July
      2003. In August 2003, Index Oil & Gas USA, LLC (“Index USA”), a wholly owned
      subsidiary of Index Ltd., was formed and the Kansas Properties were transferred
      into it. Index Ltd. is participating in an ongoing drilling program on these
      properties. Additionally, Index Investments North America Inc. (“Index
      Investments”) and Index Offshore LLC (“Index Offshore”), wholly owned
      subsidiaries of Index Investments, were both formed in July 2004 for future
      potential investments in the United States. Index Ltd. comprises a United
      Kingdom holding company, which provides management services and United States
      operating subsidiaries, which are engaged in the exploration for, development,
      production and sale of oil and natural gas. Index Ltd. has increased its proved
      reserves and production principally through acquisitions in conjunction with
      an
      active drilling program. Index Ltd. does not currently operate any of its
      properties and sells its oil production to domestic crude oil purchasers.





In
      addition, the Company completed a private placement on January 20, 2006 for
      8,533,333 shares of Common Stock of the Company at a price of $0.60 per share
      for the aggregate sum of $5,120,000, in order to raise capital
      for investment in oil and gas projects developed by the Company and for
      operating and working capital purposes.





**Recent
      Developments**





We
      have
      recently completed the following transactions:





***Gulf
      Coast***





In
      the
      fourth quarter of 2006 fiscal year, the Company entered into the following
      agreements: (1) a Seismic Reprocessing and Exploration Agreement with ADC
      Petroleum, L.P. (“ADC”) covering prospective areas in the US Gulf Coast. The
      Agreement enables Index Inc to participate in the reprocessing of an area of
      up
      to 226 square miles of 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 Agreement"). This seismic
      data covers prospective areas in the Gulf Coast U.S., throughout Texas,
      Louisiana and Mississippi. The ADC Agreement sets forth the rights of the
      parties in their joint participation of generating drilling prospects from
      such
      reprocessed data and allows the parties to jointly exploit the prospects
      generated.










5







Under
      the
      terms of the ADC Agreement, the Agreement provides for Index's participation
      in
      two phases. Index has the right to inform ADC of its election to participate
      in
      a particular project no later then the date of (i) 5 days before the meeting
      date of the Operations Committee composed of the parties to the ADC Agreement
      (the "Committee") at which the Committee reviews the summary report for a
      particular project, or (ii) the date which is 15 days after ADC informs Index
      of
      the Committee's decision to designate a project as final for participation
      purposes.





Phase
      1
      of the Agreement enables Index to participate in the reprocessing of 105 square
      miles of existing data in conjunction with the aforementioned experienced
      industry partners already working with ADC. In addition, the Agreement gives
      Index the right (but not the obligation) to participate in any prospects
      generated from this reprocessing, up to an 18% working interest ("WI"). If
      Index
      elects to participate in a project to an extent less than an undivided 18%
      WI,
      the portion not taken up by Index shall revert to ADC which will then be free
      either to dispose of or participate in such WI for its own account. In return
      for the foregoing, Index agrees to bear its Phase I share of all costs incurred
      with respect to prospects generated during Phase I and with respect to which
      Index agrees to participate in the exploration and exploitation of. In addition,
      with respect to all prospects in which Index elects to participate, Index shall
      bear on behalf of ADC a portion of ADC's costs resulting from ADC's
      participation in the exploration and exploitation of the same prospect (the
      "ADC
      Share"). Such costs shall include lease acquisition costs, drilling and
      completion costs and the cost of any production facilities.





Pursuant
      to Phase 2 of the Agreement, within 90 days of the date of the Agreement Index
      has exercised the option to participate in further 121 square miles of
      reprocessing on the same basis as Phase 1 and is entitled to obtain up to a
      12.5% working interest in any prospects generated. If Index elects to
      participate in a Prospect to an extent less than an undivided 12.5% WI, the
      portion not taken up by Index shall revert to ADC which will then be free either
      to dispose of or participate in such WI for its own account. In return for
      the
      foregoing, Index is obligated to bear its Phase II WI share of all costs
      incurred with respect to prospects generated during Phase II and with respect
      to
      which Index agrees to participate in the exploration and exploitation of. In
      addition, with respect to all prospects of Phase II in which Index elects to
      participate, Index shall bear on behalf of ADC a portion of the ADC Share.
      Such
      costs shall include lease acquisition costs, drilling and completion costs
      and
      the cost of any production facilities.




***Kansas***





(2)
      We
      have acquired a 5% working interest in an exploration project in Barton County,
      Kansas. The
      5%
      working interest in the Barton County project is in an Area of Mutual Interest
      (“AMI”) covering approximately 4879 acres. The operator engaged in the
      exploration and drilling of this project, has recently acquired, through a
      geophysical contractor, approximately 6.6 square miles of new 3 Dimensional
      (“3D”) seismic data. This is currently being processed prior to
      evaluation.





We
      believe the properties present a significant, multi-year development opportunity
      primarily in the Lansing and Arbuckle formations at depths of 3,800 to 4,000
      feet. Successful wells in these fields generally produce for more than 25 years
      and have low operating costs. Our 2006-2007 capital budget of $515,600 related
      to proven but not producing reserves includes approximately $514,500 for
      anticipated capital expenditures related to costs on proved undeveloped
      properties. See the Contractual obligations section of Item 7 *“* Management’s
      Discussion and Analysis of Financial Condition and Results of Operations” for
      more details.





**Business
      Strategy**





The
      Company is currently seeking to expand its activities in North America. Among
      several technical and commercial programs that the Company utilizes to determine
      the attractiveness and feasibility of particular oil and gas opportunities
      is a
      Capital Efficiency Model that compares the net present value of an opportunity
      to the capital expenditure utilized. This model provides the Company’s
      management (“Management”) with a profitability indicator that they utilize to
      determine the economic attractiveness of an opportunity in order to justify
      an
      investment of capital into such opportunity. Management believes that this
      risk
      mitigated approach to opportunity evaluation is supported by detailed technical
      evaluations including the use of 3D seismic data.




***3
      Phases***





The
      Company’s business model currently consists of 3 successive stages. The first
      phase of the business plan, or Phase I, has been completed, has resulted in
      the
      initial startup of Index Ltd.’s business operations in the U.S. and the
      establishment of early stage oil and gas operations and cashflow. The second
      phase of the business plan, or Phase II, commenced in 2005 and is focused on
      establishing a reserve and production base which Management believes is capable
      of supporting expansion into the future. Phase III commenced in 2006 and is
      expected to consist of evaluation and eventual entry into larger opportunities
      with higher equity positions to be held by the Company. Larger opportunities
      will in turn subject the company to higher risks, which Management intends
      to
      attempt to mitigate by appropriate management of its energy portfolio assets.
      In
      order for the Company to complete Phase II of its business model, continue
      with
      its Phase III projects and remain a viable business entity, it will require
      an
      influx of future capital funding anticipated to consist of a mixture of debt
      and
      equity financing.










6





***Phase
      I*** **





The
      Company’s initial project Kansas I (Seward North, Globe and Seward Townsite)
      (“Seward”) was initiated by its subsidiary, Index Ltd., in  July of
 2003  as  a  start  up project aimed at a low risk,
      low cost oil production opportunity. This project was selected by 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 oil and gas leases
      covering approximately 8,500 acres which are located in Stafford County, Kansas.
      Management believes that the acquisition and processing of new 3D seismic data
      enables Seward project partners including the Company to identify undrilled
      structural highs in a proven petroleum province. The Company hopes that the
      Seward project can act as a catalyst to providing it with additional
      opportunities to expand within the area.





***Phase
      II***





The
      Company’s goal in Phase II of its operations is to increase its oil/gas reserves
      and production along with achieving a stream of revenue to cover overhead and
      other company expenses, as well as contributing to the company’s capital
      expenditure (“Capex”) requirements. The Company intends to focus its Phase II
      structured plan on selected gas biased projects in the U.S., with the objective
      of acquiring higher working interests in larger opportunities in the U.S and
      North America. Index currently plans to have its Phase II activities consist
      of
      a portfolio of several contracted well and gas prospects located on the Gulf
      Coast and in Kansas.





The
      Company has signed Exploration and Joint Operating Agreements (the “Operating
      Agreements”) with Crawford Operating Company (“Crawford”) in the Gulf Coast
      area, to participate in 4 wells in Louisiana and South Texas during early 2006.
      Management believes that Crawford’s extensive industry contacts and operations
      in Texas and Louisiana, including its relationship with a 3D seismic data
      reprocessor which has successfully reprocessed 3D seismic data in the Louisiana
      and South Texas region in the past, will enhance its ability to achieve
      increased oil/gas reserves and production. Participation in such Operating
      Agreements gives the Company a right to acquire a working interest in the wells
      when the wells become producing.





The
      Company has also recently acquired a working interest in a new exploration
      prospect in the area to the north of Seward project in Barton County, Kansas
      and
      subject to availability of resources and financing, hopes to participate in
      up
      to 8-10 wells in the Gulf Coast area, as well as seeking additional
      opportunities in Kansas and other selected areas of U.S. and North America.





Pursuant
      to the Operating Agreements, the Company has secured a right to participate
      in
      the following 4 wells: Walker #1, Vieman #1, Taffy #1 and #2. As of the date
      hereof, The Walker #1 well has been successfully drilled and completed, and
      the
      Company’s subsidiary, Index Ltd., has entered into an operating lease pursuant
      to which it holds a 12.5% working interest in such well. Management anticipates
      initial production of the Walker #1 well to commence in the second quarter
      of
      2006, after the construction of a 1.5 mile gas line which would connect to
      the
      existing infrastructure.





Management
      expects the Vieman #1 well to be drilled near Manor Lake in South Texas. The
      area covering the Vieman #1 location is approximately 320 acres. This prospect
      is based on 3D seismic data originally shot for EOG Resources in 1997 and
      reprocessed by Viking.





The
      Taffy
      #1 & #2 wells are located in Matagorda County, South Texas. The area where
      Taffy #1 well is located consists of approximately 370 acres. This prospect
      is
      based on 3D seismic data originally shot by Shell in 1993 and recently
      reprocessed. Management believes that the Taffy #2 well prospect is similar
      to
      Taffy #1 well in all respects, except that it is located on a separate 345-acre
      property and is to be drilled to a lesser depth.





Subject
      to rig availability, the Company expects to have Taffy #1 & #2 wells drilled
      in the near future. The Company further expects that the Vieman #1 well will
      spud in the late second or in the early third quarter of 2006. As of the second
      quarter of fiscal year ending March 31, 2007, the Company has increased its
      working interest in Taffy #2 and Vieman wells to 20% and 15%,
      respectively.





In
      addition to the foregoing, the Company has secured an interest in an operating
      lease of up to 5000 acres (the Barton County project), which is located to
      the
      north of the Seward project. This project includes 4-5 square miles of new
      3D
      seismic data. The Company expects that, subject to the results of the 3D seismic
      shots, this project should enter the drilling phase sometime in late 2006.










7





***Phase
      III*** .





The
      Company hopes that the next stage in its development would progress upon the
      experience and alliances that it hopes to generate from the execution of Phase
      II. It is currently analyzing a number of proposals and projects with existing
      partners and has signed a Memorandum of Understanding with ADC which provides
      the Company an opportunity to negotiate a comprehensive agreement with ADC
      which, if consummated, would give it an opportunity to participate together
      with
      ADC in oil and gas exploration ventures in certain areas covering an aggregate
      of 220 square miles of Texas, Louisiana and Mississippi.





In
      summary, our strategy is to increase stockholder value by profitably increasing
      our reserves, production, cash flow and earnings using a balanced program
      of:





(1) investing
      in near term drilling opportunities on a risked managed basis;


(2) developing
      anomaly supported opportunities through reprocessing 3D seismic data;
      and


(3) developing
      land plays.





The
      following are key elements of our strategy:





Management
      intends to focus its short and medium term efforts on known petroleum basins
      within the U.S. and North America which are close to or adjacent to its current
      ongoing projects. 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, but also to its capital requirements for investing in new
      and additional projects. Management believes that it can achieve its objective
      by utilizing a risk mitigated approach of investing in relatively low cost,
      low
      risk drilling opportunities. Management hopes that by taking an increased equity
      position in the early stages of oil exploration where early risk exposure is
      mitigated by the ability to divest assets and offset risk, Index could
      successfully position its business in oil exploration and production
      projects.





Index’s
      current focus is directed towards:





•
            efficiently
                managing ongoing projects;


•
            identifying
                appropriate additional gas and oil
                opportunities;


•
            seeking
                to successfully enter future projects;
                and


•
            efficiently
                using its business assets to raise additional capital as
                needed.





**Industry
      Overview**





We
      are
      operating at a time where economic conditions have dictated larger oil
      exploration and production companies to focus their resources within the
      industry in order to become more cost and income efficient. Major energy
      companies and large independents continue to focus their attention and resources
      toward the discovery and development of large fields. This has resulted in
      larger energy companies neglecting to focus on smaller fields and divestment
      of
      production and exploration assets worldwide, a trend which Management expects
      to
      continue. In addition, the recent economics of the oil and gas market have
      improved as prices have risen substantially. Management believes that these
      conditions provide ample opportunities for smaller independent companies to
      acquire and exploit oil and gas opportunities in the U.S. We expect that there
      will be an increased competition for such properties in the future.





Smaller
      early stage oil exploration and production companies, such as us, have
      established their focus on the acquisition of the opportunities overlooked
      by
      the larger energy firms and have maintained their focus on the divested oil,
      gas
      fields and exploration opportunities located in North America that no longer
      fit
      the portfolios of larger energy companies. The stable political and economic
      environment of North America coupled with extensive oil and gas distribution
      systems available, has contributed to the industry’s geographic focus. As such,
      we have built up what we believe to be a significant pipeline of potential
      opportunities through Management’s extensive network of industry contacts in
      North America.





Similarly
      situated companies within the industry continue to target potential partner
      candidates in a disciplined manner in order to target gas and oil biased
      plays. These companies use waterflooding, 3D seismic data reprocessing,
      enhanced oil recovery, gas and oil production techniques such as
      Alkaline-Surfactant-Polymer (ASP) technology, chemical floods, infill drilling
      and recompilations of existing wells to engage in production of oil and gas.
      Furthermore, pursuant to industry standards, such oil, gas exploration and
      production companies enter into “expiring” leases along with the operators who
      undertake the exploration and development of a particular project on behalf
      of
      the companies. If the project becomes successful, meaning that it results in
      development of producing wells, then the companies enter into producing leases
      with the operators for as long as the wells are producing.










8





**Business
      Operations**





***Kansas,
      Seward North, Globe and Seward Townsite***





Index’s
      initial project Seward (Seward North, Globe and Seward Townsite) was entered
      in
      July 2003 as a start up project aimed at a low risk, low cost oil exploration
      and production opportunity. This project was selected by Management to act
      upon
      its core business concept and to establish initial operations and business
      relationships.





Index’s
      Seward project consists of a 5% working interest in oil and gas leases covering
      approximately 8,500 acres which are located in Stafford County, Kansas. The
      current retained AMI area is approximately 3871 acres. Management believes
      that
      the acquisition and processing of new 3D seismic data enables the Seward project
      partners including Index to identify undrilled structural highs in a proven
      petroleum province. Index hopes that the Seward project can act as a catalyst
      to
      providing it with additional opportunities to expand within the area.





In
      April
      2005 Seward had 14 producing wells; during the first part of the period Index
      participated in Curtis #1-16, (spud date April 1), RFP #1-32 (spud date April
      13) and in the completion of Marvin Drach # 1-12 (spud date March
      15).





Index
      also recently participated in a continuous 5 well drilling program which
      commenced in mid January 2006. The first 4 wells (Schilling #1-32, Marvin Drach
      #2-2, Neeland #1-32 and Witt #1-14) were drilled successfully. All of these
      wells have been completed as producing wells and commenced production. The
      final
      well in this series (Conner-Jackson #1-29) proved non commercial due to poor
      reservoir development.





Index
      also participated in ongoing and routine workovers on certain properties during
      the period.





***Barton
      County***





Index
      also acquired **** a
      working
      interest in an exploration project to the north of Seward in Barton County,
      Kansas. The 5% working interest in the Barton County project is in an AMI of
      some 4879 acres. The operator has recently acquired, approximately 6.6 square
      miles of new 3 Dimensional (“3D”) seismic data. This is currently being
      processed prior to evaluation.





Index
      believes that the acquisition and processing of new 3D seismic data may enable
      the project partners to identify undrilled structural highs in this proven
      petroleum province.





Both
      the
      Seward producing wells and the Barton County project are located on a structure
      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, Lansing Group through to the Arbuckle
      Group of Cambro-Ordovician age.





***South
      Texas and Louisiana***





During
      the period Index signed Exploration and Joint Operating Agreements (the
“Operating Agreements”) with Crawford Operating Company (“Crawford”) in the Gulf
      Coast area, to participate in 4 wells in Louisiana and Texas. Management
      believes that the Crawford’s extensive industry contacts and operations in Texas
      and Louisiana, including its relationship with a 3D seismic data reprocessor
      which has successfully reprocessed 3D seismic data in the Louisiana and South
      Texas region in the past, will enhance Index’s ability to access drilling
      opportunities and achieve increased oil/gas reserves and production.





Pursuant
      to the Operating Agreements, Index secured a right to participate in the
      following 4 wells: Walker #1, Vieman #1, Taffy #1 and #2. The Walker #1 well
      has
      been successfully drilled and completed, and Index has entered into an operating
      lease pursuant to which it holds a 12.5% working interest in such well.
      Management anticipates initial production of the Walker #1 well to commence
      in
      the second quarter of 2006 after the construction of a 2.5 mile gas line which
      would connect to the existing infrastructure.





Management
      expects the Vieman #1 well to be drilled near Manor Lake in South Texas. The
      area covering the Vieman #1 location is approximately 320 acres. This prospect
      is based on 3D seismic data originally shot for EOG Resources in 1997 and
      reprocessed by Viking.





The
      Taffy
      #1 & #2 wells are located in Matagorda County, South Texas. The area where
      Taffy #1 well is located consists of approximately 370 acres. This prospect
      is
      based on 3D seismic data originally shot by Shell in 1993 and recently
      reprocessed. Management believes that the Taffy #2 well prospect is similar
      to
      Taffy #1 well in all respects, except that it is located on a separate 345-acre
      property and is to be drilled to a lesser depth.





Subject
      to rig availability, Index expects that the Vieman #1, Taffy #1 & #2 wells
      will be drilled in the second quarter of 2006.











9





***Seismic
      Reprocessing***





On
      March
      30, 2006, Index entered into a Seismic Reprocessing and Exploration Agreement
      with ADC. ADC was formed in November 2004 to take advantage of innovative
      technology in the exploration and production of hydrocarbons. In October 2005,
      ADC signed Technology Development and Operating Agreements with two partner
      companies to find and produce hydrocarbons onshore Gulf of Mexico utilizing
      new
      seismic data processing, interpretation and novel well construction techniques.
      This group currently has access to approximately 2500 square miles of existing
      3D seismic data acquired in Texas, Louisiana, Mississippi and
      Alabama.





The
      Agreement enables Index to participate in the reprocessing of an area of up
      to
      226 square miles of existing 3D land seismic data already available to ADC
      as a
      result of its industry partnerships. This seismic data covers prospective areas
      in the Gulf Coast U.S.,


throughout
      Texas, Louisiana and Mississippi. A unique Seismic Reprocessing method is used
      to improve the structural definition of hydrocarbon traps and potential
      reservoir characterization, enabling ADC to better identify drillable prospects
      from existing data.





ADC’s
      unique proprietary data reprocessing techniques are expected to generate
      drillable prospects for Index’s optional participation. ADC is also developing
      leading edge well completion and construction technology to which Index will
      have access to as a result of the Agreement.





The
      Agreement provides for Index participation in two phases:





Phase
      1:
      The Agreement enables Index to participate in the reprocessing of 105 square
      miles of existing data in conjunction with 2 other experienced industry partners
      already working with ADC. The Agreement gives Index the right (but not the
      obligation) to participate in any prospects generated from this reprocessing,
      up
      to an 18% working interest.





Phase
      2:
      As of the first quarter of fiscal year ending March 31, 2007, Index has
      exercised the option to participate in further 121 square miles of reprocessing
      on the same basis and is entitled to obtain up to a 12.5% working interest
      in
      any prospects generated.





The
      Agreement fulfils a fundamental principle of Index’s desired strategy to
      participate in early stage exploration with experienced industry partners.
      This
      is intended to result in more cost effective entry into the projects. Index's
      expectation is that risk will be mitigated by Index’s own risk management
      processes in determining the level of participation in any drillable prospects
      generated as a result of the Agreement. Index’s involvement directly in the
      application of the 3D reprocessing technology is also expected to build an
      intellectual value which can be applied to other petroliferous basins known
      to
      the management.





**Growth**





We
      will
      continue to review opportunities to acquire drilling prospects, undeveloped
      acreage and 3D seismic with potential for reprocessing. Initial targets will
      be
      in and around our producing and activity areas (Kansas and the Gulf Coast).
      We
      will also use our minor producing well ownerships as starting points and
      knowledge to make further investments.





**Maintain
      Risk Managed Approach**





We
      intend
      to maintain the risked managed approach that helped us to achieve a drilling
      success rate of over 80% to date. Index also intends to use advanced geological
      and geophysical technologies, detailed petrophysical analyses, state-of-the-art
      reservoir engineering and sophisticated completion and stimulation techniques
      to
      grow our reserves and production.





**Endeavor
      to be a Low Cost Producer**





We
      intend
      to continue to work to minimize our operating costs by concentrating our assets
      within geographic areas where we can consolidate operating control and capture
      operating efficiencies.





**Competitive
      Conditions in the Business**





Index
      is
      a small independent oil exploration and production company that represents
      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 producing
      properties include available funds, available information about the property
      and
      its standards established for minimum projected return on investment. 
Since Index is focusing on acquiring low risk/low cost opportunities and has
      experience and expertise in exploiting these reserves, it believes that it
      can
      effectively compete in the market. 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.





10








**Competition**





Index
      is
      a small independent oil exploration and production company that represents
      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 producing
      properties include available funds, available information about the property
      and
      its standards established for minimum projected return on investment. 
Since Index is focusing on acquiring low risk/low cost opportunities and has
      experience and expertise in exploiting these reserves, it believes that it
      can
      effectively compete in the market.





**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
      2006,
      we had one independent purchaser that accounted for the purchase of
      approximately 91.4% of our total oil sales. In 2005, we had one independent
      purchaser that accounted for the purchase of 100% of our total oil sales. In
      2003, 100% of the purchase of our total oil sales was to three independent
      purchasers for approximately 35%, 23% and 42%, respectively. We do not believe
      the loss of any one of our purchasers would materially affect our ability to
      sell the oil and gas we produce. We believe other purchasers are available
      in
      our 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 we 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. We are 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, we will not insure fully against all risks associated with our
      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 our financial position and results of operations.
      For further discussion on risks *see* “Item 7
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.”





**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.








11








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 currently focuses 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.




*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.


12








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 partner’s in a particular project.
      The operator for Index’s Seward project site in Kansas has obtained a policy of
      insurance on behalf of Index’s subsidiary, the partner in this project (the
“Seward Insurance Policy”). The Seward Insurance Policy provides for $1,000,000
      general commercial liability coverage. This policy also provides for
      $2,000,000 coverage for general aggregate and products liability. Furthermore,
      the operator has secured “hired and non-owned” commercial automobile liability
      coverage with a limit of $1,000,000 and $1,000,000 coverage for workers
      compensation and employer’s liability insurance.




Crawford,
      the operator for Index’s Walker I and Vieman I wells located in Louisiana and
      South Texas, has obtained a policy of insurance on behalf of Index’s subsidiary,
      the partner in these projects (the “Crawford Policy”). The Crawford Policy
      provides for $1,000,000 general commercial liability coverage. This policy
      also provides for $2,000,000 coverage for general aggregate and 1,000,000
      coverage for products liability. Furthermore, Crawford has secured “hired and
      non-owned” commercial automobile liability coverage with a limit of $1,000,000
      and $1,000,000 coverage for workers compensation and employer’s liability
      insurance. Furthermore, the Crawford Policy provides “umbrella liability”
coverage per occurrence in amount of $10,000,000.




*Occupational
      Safety Regulations*







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.


13




**Employees**





As
      of
      March 31 2006, Index‘s subsidiary, Index Ltd., had full time employment
      agreements with Mr. Andy Boetius and Mr. Lyndon West, its 2 executive directors,
      a part time employment agreement with Mr. Daniel Murphy, its chairman of the
      board, letter agreements with Mr. David Jenkins and Mr. Michael Scrutton, its
      2
      non-executive directors and one part time employee at one of Index Oil’s
      subsidiaries. Pursuant to these contracts, the aforementioned directors provide
      services to Index Oil & Gas Inc. As of June 30, 2006, Mr. Murphy has entered
      into a full time employment agreement with Index Ltd. on substantially the
      same
      terms as the full time employment agreements entered into by and between Index
      and Mr. West and Mr. Boetius.





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





**Item
      1A. Risk Factors**





**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 common stock could decline, and
      you
      may lose all or part of your investment.




**Risks
      related to our financial results**





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





Index’s
      subsidiary, Index Ltd., through which it primarily conducts its operations,
      was
      formed in 2003 operating as a private company formed under the laws of the
      United Kingdom. As such, it 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.





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





As
      of
      March 31, 2006, Index had incurred a financial loss after taxation of
      approximately $2.6 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.





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;





14







·
            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 products and services.***





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 products and services.





***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.




**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.











15





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 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 consulting agreements
      with all of its directors who are: Lyndon West, Daniel Murphy, 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.





As
      Index
      grows, it will 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.


16








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.





Other
      companies that are primarily focused on offering competitive products are
      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, 2006. 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 our 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.





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





Our
      recent growth is due significantly to acquisitions of producing 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
      report on Form 10-K 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.


18





***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.





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.


19








***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.







20





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.





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.








21








**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. For example, approximately more than one-third of the trading
      days
      during May of 2006 saw trading in our stock of less than 20,000 shares per
      day.
      During that same period, the smallest number of shares trade in one day was
      2,305 and the largest number of shares traded in one day was 382,500.
      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
      market price of the Company’s common stock may be adversely affected by several
      factors.***





The
      market price of the Company’s common stock could fluctuate significantly in
      response to various factors and events, including:





· the Company’s ability to execute its business plan;


· operating results below expectations;


· loss of any strategic relationship;


· industry developments;


· economic and other external factors; and


· period-to-period fluctuations in its financial results.





In
      addition, the securities markets have from time to time experienced significant
      price and volume fluctuations that are unrelated to the operating performance
      of
      particular companies. These market fluctuations may also materially and
      adversely affect the market price of the Company’s common stock.




***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.


22







***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 5,670,202 warrants and options to purchase shares of our common
      stock outstanding. 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
“Description of Capital Stock - Warrants” on page 24.




***We
      may need to increase our authorized Common Stock which could lead to dilution
      of
      the ownership interest of investors.***





We
      require substantial working capital to fund our business. We currently have
      authorized 75,000,000 shares of Common Stock. In order to raise additional
      funds
      through the issuance of equity, equity-related or convertible debt securities,
      we may need to increase our authorized common stock, the additional issuances
      of
      which could lead the holders of our common stock to experience additional
      dilution.





***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.





***We
      did not properly comply with Federal securities laws in obtaining stockholders’
consent for the increase of our authorized common
      stock.***





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 doing so, the Company complied with Sections 78.207 and 78.209
      of the Revised Statutes of the State of Nevada; however, the management failed
      to comply with applicable Federal securities laws set forth above. Thus we
      must
      obtain a ratification of the Increase (the “Ratification”) from our current
      stockholders via obtaining the consent of the majority of our current
      stockholders as of a certain record date, by filing a proxy statement on
      Schedule 14(a) and obtaining such Ratification.





**Item
      1B. Unresolved Staff Comments**


None.


23





**Item
      2. Properties**





**Principal
      Executive Offices**





Index
      holds an arrangement to rent its main office comprising of 300 square feet
      which
      is located at 10,000 Memorial Drive, Suite 440, Houston, Texas 77024. For the
      months of November and December of 2005 and January 2006, the cost was $1,500
      per month. Starting February 2006, rental payments increased to $2,000 and
      will
      be 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, 2006 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 8. Consolidated 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 2006, 2005 and 2004, 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 Form 10-K represents only estimates. Reserve
      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, 2006, our estimated total proved oil and gas reserves were
      approximately 59.471 Mboe, consisting of 35.401 thousand barrels of oil (MBbls)
      and 144.421 million cubic feet (Mcf) of natural gas. Approximately 30.518 Mboe
      or 51.3% of our proved reserves were classified as proved developed. 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.





The
      following table presents certain information as of March 31, 2006 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
            
            18.436
            
            
            12.082
            
            
            -
            
            
            30.518Undeveloped
            
            6.459
            
            
            -
            
            
            22.494
            
            
            28.953Total
            
            24.895
            
            
            12.082
            
            
            22.494
            
            
            59.471Gross
                Wells(1)
            
            23.0000
            
            
            1.0000
            
            
            1.0000
            
            
            25.0000Net
                Wells(1)
            
            1.1500
            
            
            0.1250
            
            
            0.1250
            
            
            1.4000







(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.*







24










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, 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 Seward (Kansas), Walker #1 (Louisiana),
      Vieman #1 (Texas).




Future
      gross revenue to Index interest is prior to deducting state production taxes
      and
      ad valorem taxes. Future net revenue is after deducting these taxes, future
      capital costs, and operating expenses but before consideration of federal income
      taxes; future net revenue for those properties, after deducting 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, 2006 oil price received
      of
      $59.64 per barrel. Gas prices used in this report are based on a March 31,
      2006
      NYMEX spot market price of $7.21 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.





***Productive
      Wells and Acreage***





As
      of
      March 31, 2006, we had 25 gross productive wells (1.4 net productive
      wells).  Our oil wells totaled 25 gross productive wells (1.4 net
      productive wells) and our gas wells totaled 0 gross and net productive wells.





*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,
      2006:





**Developed
                Acreage**(1)
            
            **Undeveloped
                Acreage**(1)
            
            **Total
                Acreage**(1)**State**
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**Kansas
            3,550.88
            
            171.58
            
            4878.80
            
            40.75
            
            8,429.68
            
            212.33Louisiana
            350.00
            
            31.99
            
            -
            
            -
            
            350.00
            
            31.99Texas
            -
            
            -
            
            1,035.00
            
            78.51
            
            1,035.00
            
            78.51**Total
                Acreage**
            3,900.88
            
            203.57
            
            5,913.80
            
            119.25
            
            9,814.68
            
            322.83





(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.*






25


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


**2006**
            
            **2007**
            
            **2008**
            
            **Thereafter****Gross**
            
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**Undeveloped
                Acreage
            1,322.00
            
            11.10
            
            4,511.80
            
            107.48
            
            80.00
            
            0.67
            
            -
            
            -




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.





Capitalized
      costs of our evaluated and unevaluated properties at March 31, 2006, 2005 and
      2004 are summarized as follows:




**March
                31,****2006**
            
            
            **2005**
            
            
            **2004**Capitalized
                costs:Evaluated
                properties
            
            $
            722,056
            
            $
            334,080
            
            $
            148,691Unevaluated
                properties
            
            
            356,729
            
            
            76,529
            
            
            189,7771,078,785
            
            
            410,609
            
            
            338,468Less
                accumulated depreciation and depletion
            
            
            127,586
            
            
            62,275
            
            
            26,121$
            951,199
            
            $
            348,334
            
            $
            312,347





***Production***





Our
      oil
      and gas production volumes and average sales price for the twelve
      months ended March 31, 2006, 2005 and 2004, respectively, are
      as
      follows:




**Years
                Ended March 31,****2006**
            
            
            
            **2005**
            
            
            **2004**Gas
                production (Mcf)
            
            
            -
            
            
            
            -
            
            
            -Oil
                production (MBbl)
            
            
            3.42
            
            
            
            2.07
            
            
            1.21Equivalent
                production (Mboe)
            
            
            3.42
            
            
            
            2.07
            
            
            1.21Average
                price per unit:Gas
                (per Mcf)
            
            $
            -
            
            
            $
            -
            
            $
            -Oil
                (per Bbl)
            
            $
            55.89
            
            
            $
            42.64
            
            $
            30.49Equivalent
                (per boe)
            
            $
            55.89
            
            
            $
            42.64
            
            $
            30.49Average
                net realized price
            
            $
            
            
            
            $
            
            
            $





The
      Company has not entered into any derivative contracts for any purpose from
      the
      period of inception through March 31, 2006









26


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





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













**Years
                Ended March 31,****2006**
            
            **2005**
            
            **2004****Gross**
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            **Net**Gross
                Exploratory Wells:Productive(1)
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -Dry
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -Total
                Exploratory
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -Gross
                Development Wells:Productive(1)
            
            19.00
            
            0.75
            
            11.00
            
            0.55
            
            8.00
            
            0.40Dry
            
            1.00
            
            -
            
            -
            
            -
            
            -
            
            -Total
                Development
            
            20.00
            
            0.75
            
            11.00
            
            0.55
            
            8.00
            
            0.40Total
                Gross Wells:Productive(1)
            
            19.00
            
            0.75
            
            11.00
            
            0.55
            
            8.00
            
            0.40Dry
            
            1.00
            
            -
            
            -
            
            -
            
            -
            
            -Total
            
            20.00
            
            0.75
            
            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 term net as used throughout this
                document refers for Gross Wells represents the Operators working
                interest
                and Net Wells represents our working interest share of each well.*






27





***Present
      Activities***





We
      intend
      to implement the capital expenditures program as detailed in “Item 7 -
      Management’s Discussion and Analysis of Plan of Operation”





***Delivery
      Commitments*** **





At
      March
      31, 2006, 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 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**





No
      matters were submitted to a vote of our stockholders during the fourth quarter
      of the fiscal year ended March 31, 2006.






28








**PART
      II**




**Item
      5. Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer
      Purchases Of Equity Securities**





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 June 23, 2006.
      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, 2006
            
            $
            1.65*
            
            $
            1.30**As
              of July 6,
              2006





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
      July 6, 2006, the approximate number of stockholders of record of the Common
      Stock of the Company was 215.




**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 January 20,
      2006.




Plan
                    category
              
              Number
                  of securitiesto be issued upon exercise of outstanding
                  options, warrants and
                  rights
              
              Weighted
                  averageexercise price of outstanding options, warrants
                  and rights
              
              Number
                  of securitiesremaining available for future
                  issuance under equity compensation plans
                (excluding
                  securities reflected
                  in column (a)(a)
              
              (b)
              
              (c)Equity
                  compensation plans approved
                  by
                    security holders
              
              -0-
              
              $
                  -0-
              
              -0-Equity
                    compensation plans not
                    approved
                      by security holders
              
              4,577,526
              
              0.35
              
              647,474Total
              
              4,577,526
              
              0.35
              
              647,474





**Recent
        Sales of Unregistered Securities**
 
 In
        March
        2004, the Company issued a total of 1,000,000 shares of $0.001 par value
        common
        stock as founder's shares to Evon Au, David Knapfel, and Au E-Mun, all of
        whom
        were officers and directors of Thai. Both Evon Au and David Knapfel received
        400,000 shares each, and Au E-Mun received 200,000 shares. The shares were
        issued in exchange for cash in the aggregate amount of $5,000.





29




On
      January 20, 2006 the Company completed a private placement for 8,533,333 shares
      of common stock of the Company at a price of $0.60 per share for an aggregate
      sum of $5,120,000.





In
      addition, on January 20, 2006, the Company issued an aggregate of 22,615,552
      shares of common stock of the Company and 1,092,676 warrants to subscribe for
      Common Stock of the Company as consideration for the acquisition of Index Ltd.’s
      outstanding equity stock and warrants from the Index Ltd.’s Stockholders. As
      part of the Acquisition, an additional 759,448 shares of Common Stock were
      reserved for issuance by the Company.





All
      of
      the above offerings and sales were deemed to be exempt under rule 506 of
      Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.
      No
      advertising or general solicitation was employed in offering the securities.
      The
      offerings and sales were made to a limited number of persons, all of whom were
      accredited investors, business associates of Index Oil and Gas Inc. or executive
      officers of Index Oil and Gas Inc., and transfer was restricted by Index Oil
      and
      Gas Inc. in accordance with the requirements of the Securities Act of 1933.
      In
      addition to representations by the above-referenced persons, we have made
      independent determinations that all of the above-referenced persons were
      accredited or sophisticated investors, and that they were capable of analyzing
      the merits and risks of their investment, and that they understood the
      speculative nature of their investment. Furthermore, all of the above-referenced
      persons were provided with access to our Securities and Exchange Commission
      filings.





**Purchases
      of Equity Securities by the Issuer and Affiliated
      Purchasers**





None.





**ITEM
      6. SELECTED HISTORICAL FINANCIAL DATA**





The
      following table presents selected historical financial data derived from our
      consolidated financial statements. The following data is only a summary and
      should be read with our historical consolidated financial statements and related
      notes contained in this document.







**Year
                ended March 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003****Income
                Statement Data:**Oil
                and gas sales
            
            
            
            
            $
            191,114
            
            $
            88,176
            
            $
            36,989
            
            $
            -Loss
                from operations
            
            
            
            
            $
            (1,618,511
            )
            $
            (416,348
            )
            $
            (440,846
            )
            $
            (2,713
            )Net
                loss
            
            
            
            
            $
            1,690,806
            
            $
            (422,027
            )
            $
            (454,419
            )
            $
            (2,713
            )**Loss
                per share:**Basic
                and assuming dilution**
            
            
            
            
            $
            (0.08
            )
            $
            (0.04
            )
            $
            (0.06
            )
            $
            (0.00
            )**Balance
                sheet data:**Working
                (deficit) capital
            
            
            
            
            $
            4,958,333
            
            $
            (264,979
            )
            $
            (36,905
            )
            $
            101,689Total
                assets
            
            
            
            
            $
            6,516,287
            
            $
            415,562
            
            $
            595,532
            
            $
            320,880Total
                long-term debt
            
            
            
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Stockholders’
                equity
            
            
            
            
            $
            5,885,959
            
            $
            75,240
            
            $
            275,362
            
            $
            101,689

















**ITEM
      7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




The
        information in this report on Form 10-K contains forward-looking statements
        within the meaning of the Private Securities Litigation Reform Act of 1995.
        This
        Act provides a “safe harbor” for forward-looking statements to encourage
        companies to provide prospective information about themselves provided they
        identify these statements as forward looking and provide meaningful cautionary
        statements identifying important factors that could cause actual results
        to
        differ from the projected results. All statements other than statements of
        historical fact made in this report are forward looking. In particular, the
        statements herein regarding industry prospects and future results of operations
        or financial position are forward-looking statements. Forward-looking statements
        reflect management’s current expectations and are inherently uncertain. Our
        actual results may differ significantly from management’s expectations as a
        result of many factors, including, but not limited to, the volatility in
        prices
        for crude oil and natural gas, the timing of acquisitions, product demand,
        market competition, interruption in production, and the success of waterflooding
        and enhanced oil recovery techniques.


30






You
      should read the following discussion and analysis in conjunction with the
      consolidated financial statements of Index Oil & Gas, Inc. and subsidiaries
      and notes thereto, included herewith. This discussion should not be construed
      to
      imply that the results discussed herein will necessarily continue into the
      future, or that any conclusion reached herein will necessarily be indicative
      of
      actual operating results in the future. Such discussion represents only the
      best
      present assessment of management.





**Overview**





Index
      Oil
& Gas, Inc. (“Index” or “the Company”) is an independent oil and gas company
      engaged in the acquisition, development, production and exploration of oil
      and
      gas properties located in North America. 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 (“the Subsidiary”), from an officer and
      director of Thai. The Subsidiary commenced operations as a restaurant operator
      in June 2004, but subsequently ceased operations in the fourth quarter of 2005.
      The Subsidiary 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 the Index
      Ltd.’s equity stock by the Company. Subsequently,
      Thai changed its name from Thai One On Inc. to Index Oil & Gas, Inc. Index
      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. In
      approximately mid January, 2006, Thai retired 10,128,333 shares of stock leaving
      23,091,667 shares outstanding at January 20, 2006. Index’s year end for
      accounting purposes was December 31, 2005.





On
      January 20, 2006, the stockholders of Index Oil & Gas Limited ("Index Ltd.")
      entered into Acquisition
      and Share Exchange Agreements. As a result of the acquisition, there was a
      change in control of the public entity. In
      accordance with Statement of Financial Accounting Standards 141, the Company
      is
      deemed to be the acquiring entity. The transaction will be accounted for as
      a
      recapitalization of the Company (reverse acquisition).





Effective
      with the Agreement, all previously outstanding common stock owned by the
      Company’s stockholders were exchanged for an aggregate of 23,375,000 shares of
      Index common stock, $0.001 par value (“the Common Stock”) of
      which
      759,448 shares of Common Stock were reserved for issuance by the
      Company and
      1,092,676 warrants to purchase shares of Common Stock of Index. The value of
      the
      stock that was issued was the historical cost of Index's net tangible assets
      of
      $1,578 which did not differ materially from their fair value.





Index
      Ltd. was incorporated on February 21, 2003 in the United Kingdom. The Company
      invested in a 5% working interest in oil and gas leases covering approximately
      8,500 acres located in Stafford County, Kansas (“Kansas properties”) in July
      2003. In August 2003, Index Oil & Gas USA, LLC (“Index USA”) was formed and
      the Kansas properties were transferred into this wholly owned subsidiary. The
      Company is participating in an ongoing drilling program on these properties.
      Additionally, Index Investments North America Inc. (“Index Investments”) and
      Index Offshore LLC (“Index Offshore”), a wholly owned subsidiary of Index
      Investments, were both formed in July 2004 for future potential investments
      in
      the United States. The Company comprises a United Kingdom holding company,
      which
      provides management services and United States operating subsidiaries, which
      are
      engaged in the exploration for, development, production and sale of oil and
      natural gas. We have increased our proved reserves and production principally
      through acquisitions in conjunction with an active drilling program. The Company
      does not currently operate any of its properties and sells its oil production
      to
      domestic crude oil purchasers.





On
      January 20, 2006 the entire issued share capital of Index Ltd. was acquired
      by
      Index Oil and Gas Inc. (“Index”), together with the raising of $5,120,000 of new
      equity capital for investment in oil and gas projects developed by the Company
      and for operating and working capital purposes.





At
      March 31, 2006, our estimated total proved oil and gas reserves were
      approximately 59.471 Mboe, consisting of 35.401 thousand barrels of oil (MBbls)
      and 144.421 million cubic feet (Mcf) of natural gas. Approximately 30.518 Mboe
      or 51.3% of our proved reserves were classified as proved developed. 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.




Our
      financial results depend upon many factors, particularly the price of oil and
      gas and our ability to market our production. Commodity prices are affected
      by
      changes in market demands, which are impacted by overall economic activity,
      weather, pipeline capacity constraints, inventory storage levels, basis
      differentials and other factors. As a result, we cannot accurately predict
      future oil and gas prices, and therefore, we cannot determine what effect
      increases or decreases will have on our capital program, production
      volumes and future revenues. In addition to production volumes and commodity
      prices, finding and developing sufficient amounts of oil and gas reserves at
      economical costs are critical to our long-term success.


31








**Recent
      Developments**





We
      have
      recently completed the following transactions:





***Gulf
      Coast***





In
      the
      fourth quarter of 2006 fiscal year, the Company entered into the following
      agreements: (1) a Seismic Reprocessing and Exploration Agreement with ADC
      Petroleum, L.P. (“ADC”) covering prospective areas in the US Gulf Coast. The
      Agreement enables Index Inc to participate in the reprocessing of an area of
      up
      to 226 square miles of existing 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 Agreement"). This seismic data covers
      prospective areas in the Gulf Coast U.S., throughout Texas, Louisiana and
      Mississippi. The ADC Agreement sets forth the rights of the parties in their
      joint participation of generating drilling prospects from such reprocessed
      data
      and allows the parties to jointly exploit the prospects generated.





Under
      the
      terms of the ADC Agreement, the Agreement provides for Index's participation
      in
      two phases. Index has the right to inform ADC of its election to participate
      in
      a particular project no later then the date of (i) 5 days before the meeting
      date of the Operations Committee composed of the parties to the ADC Agreement
      (the "Committee") at which the Committee reviews the summary report for a
      particular project, or (ii) the date which is 15 days after ADC informs Index
      of
      the Committee's decision to designate a project as final for participation
      purposes.





Phase
      1
      of the Agreement enables Index to participate in the reprocessing of 105 square
      miles of existing data in conjunction with the aforementioned experienced
      industry partners already working with ADC. In addition, the Agreement gives
      Index the right (but not the obligation) to participate in any prospects
      generated from this reprocessing, up to an 18% working interest ("WI"). If
      Index
      elects to participate in a project to an extent less than an undivided 18%
      WI,
      the portion not taken up by Index shall revert to ADC which will then be free
      either to dispose of or participate in such WI for its own account. In return
      for the foregoing, Index agrees to bear its Phase I share of all costs incurred
      with respect to prospects generated during Phase I and with respect to which
      Index agrees to participate in the exploration and exploitation of. In addition,
      with respect to all prospects in which Index elects to participate, Index shall
      bear on behalf of ADC a portion of ADC's costs resulting from ADC's
      participation in the exploration of the same prospect ("ADC Share"). Such costs
      shall include lease acquisition costs, drilling and completion costs and the
      cost of any production facilities.





Pursuant
      to Phase 2 of the Agreement, Index has exercised the option to participate
      in
      further 121 square miles of reprocessing on the same basis as Phase 1 and is
      entitled to obtain a 12.5% WI in any prospects generated. If Index elects to
      participate in a Prospect to an extent less than an undivided 12.5% WI, the
      portion not taken up by Index shall revert to ADC which will then be free either
      to dispose of or participate in such WI for its own account. In return for
      the
      foregoing, Index shall bear its Phase II WI share of all costs incurred with
      respect to Prospects generated during Phase II and with respect to which Index
      agrees to participate in the exploration and exploitation. In addition, with
      respect to all prospects of Phase II in which Index elects to participate,
      Index
      shall bear on behalf of ADC a portion of ADC Share. Such costs shall include
      lease acquisition costs, drilling and completion costs and the cost of any
      production facilities.




***Kansas***





(2)
      An
      agreement to acquire a 5% WI in an exploration project in Barton County, Kansas. The
      5%
      working interest in the Barton County project is in an Area of Mutual Interest
      covering approximately 4879 acres. The operator engaged in the exploration
      and
      drilling of this project, has recently acquired, through a geophysical
      contractor, approximately 6.6 square miles of new 3D seismic data. This is
      currently being processed prior to evaluation.





We
      believe the properties present a significant, multi-year development opportunity
      primarily in the Lansing and Arbuckle formations at depths of 3,800 to 4,000
      feet. Successful wells in these fields generally produce for more than 25 years
      and have low operating costs. Our 2006-2007 capital budget of $515,600 related
      to proven but not producing reserves includes approximately $514,500 for
      anticipated capital expenditures related to costs on proved undeveloped
      properties. See the Contractual obligations section of Item 7 *“* Management’s
      Discussion and Analysis of Financial Condition and Results of Operations” for
      more details.




**RESULTS
        OF OPERATIONS**
 
 ***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.


32






**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*(1)*
            
            
            12,295
            
            
            5,679
            
            
            6,616Income
                tax benefit (provision)
            
            
            -
            
            
            -
            
            
            -Net
                (loss) income
            
            $
            (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
            
            
            1.35Average
                price per unit*(2)*: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.


33










General
      and administrative expense 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 $6,616 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.





Interest
      income and other increased $5,140 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 equity fund raising in the fourth quarter of fiscal
      2006.





There
      was
      no provision for income taxes for the fiscal years ended 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.








***Year
      Ended March 31, 2005 Compared to Year Ended March31,
      2004***





We
      had
      revenues of $88,176 for the year ended March 31, 2005 compared to $36,989 for
      2004. The following table summarizes key items of comparison and their related
      increase (decrease) for the year ended March 31 for the periods
      indicated.







**Years
                Ended March 31,**
            
            **Increase****2005**
            
            **2004**
            
            **(Decrease)**Oil
                and gas sales
            
            $
            88,176
            
            $
            36,989
            
            $
            51,187Production
                expenses:Lease
                operating
            
            
            19,897
            
            
            14,613
            
            
            5,284Taxes
                other than income
            
            
            3,687
            
            
            1,588
            
            
            2,099General
                and administrative:General
                and administrative
            
            
            442,645
            
            
            293,487
            
            
            149,158Stock-based
                compensation
            
            
            -
            
            
            53,388
            
            
            (53,388
            )Depletion
                — Full cost
            
            
            36,155
            
            
            26,121
            
            
            10,034Depreciation
                — Other
            
            
            2,140
            
            
            1,090
            
            
            1,050Ceiling
                Test Write-down
            
            
            -
            
            
            87,548
            
            
            (87,548
            )Interest
                expense and other*(1)*
            
            
            5,679
            
            
            13,573
            
            
            (7,894
            )Income
                tax benefit (provision)
            
            
            -
            
            
            -
            
            
            -Net
                (loss) income
            
            $
            (422,027
            )
            $
            (454,419
            )
            $
            32,392Production:Natural
                Gas — Mcf
            
            
            -
            
            
            -
            
            
            -Crude
                Oil — MBbls
            
            
            2.07
            
            
            1.21
            
            
            0.86Equivalent
                — Mboe
            
            
            2.07
            
            
            1.21
            
            
            0.86Average
                price per unit*(2)*:Gas
                price per Mcf
            
            $
            -
            
            $
            -
            
            $
            -Oil
                price per Bbl
            
            $
            42.64
            
            $
            30.49
            
            $
            12.15Equivalent
                per Boe
            
            $
            42.64
            
            $
            30.49
            
            $
            12.15Average
                cost per Boe:Production
                expenses:Lease
                operating
            
            $
            9.61
            
            $
            12.08
            
            $
            (2.46
            )Taxes
                other than income
            
            $
            1.78
            
            $
            1.31
            
            $
            0.47General
                and administrative expense:General
                and administrative
            
            $
            213.84
            
            $
            242.55
            
            $
            (28.71
            )Stock-based
                compensation
            
            $
            -
            
            $
            44.12
            
            $
            (44.12
            )Depletion
                expense
            
            $
            17.47
            
            $
            21.59
            
            $
            (4.12
            )







34








For
      the
      year ended March 31, 2005, oil and gas sales increased $51,187, from the same
      period in 2004, to $88,176. The increase for the year was primarily due to
      the
      increase in volumes of approximately 0.86 MBbls from 1.21 MBbls to 2.07 MBbls
      or
      approximately $26,000. Also, revenue increased approximately $25,000 due to
      higher commodity prices as our average price per barrel increased $12.15 in
      2005
      to $42.64 per Bbl from $30.49 per Bbl in 2004. 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 2005.





Lease
      operating expenses increased $5,284 for the year ended March 31, 2005 as
      compared to the same period in 2004. The increase was primarily due to increased
      production on our Kansas properties primarily. However, on a per unit basis,
      lease operating expenses decreased 20% from $12.08 per Bbl in 2004 to $9.61
      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 $2,099 for the year ended March 31, 2005 as compared
      to the same period in 2004 due to higher oil and gas revenues and on a per
      unit
      basis increased $0.47 per Bbl to $1.78 per Bbl. Production taxes are generally
      assessed as a percentage of gross oil and/or natural gas sales.





General
      and administrative expense for the twelve months ended March 31, 2005 increased
      $149,158 to $442,645 compared to the same period in 2004 primarily due to
      consulting and professional fees and increased salaries for employees.





Stock-based
      compensation expense was $53,388 for the year ended March 31, 2004 with no
      stock-based compensation in 2005. During the year ended March 31, 2004, the
      Company granted an aggregate of 297,425 stock options 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,
      2004 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 $0.18 and $0.36, respectively. All options vested
      on the date of the grant. Based on the difference between the fair market value
      and the exercise price of the options at the date of the grant, using a
      conversion rate of $1.795 to ₤1.0, compensation expense of $53,388 was recorded
      for the year ended March 31, 2004. All of the options were exercised in April
      2004.





Depletion
      expense increased $10,034 from the same period in 2005 to $36,155 for the year
      ended March 31, 2005. 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 decreased 19%
      from
      $21.59 to $17.47per Bbl.





Interest
      expense and other decreased $7,894 for the year ended March 31, 2005
      compared to the same period 2004. This decrease is primarily due to the lower
      amortization of debt issue costs in 2005 compared to 2004, in each case offset
      by interest income.





There
      was
      no provision for income taxes for the fiscal years ended 2004 and 2005 due
      to a
      valuation allowance of $305,308 and $151,752 recorded for the years ended March
      31, 2005 and 2004, 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 2006 were from operating activities and financing
      and
      equity transactions. Proceeds from the issuance of convertible short term debt
      and equity issuances and cash received from operations were offset by cash
      used
      in 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,****2006**
            
            **2005**
            
            **2004**Cash
                flows provided by operating activities
            
            $
            (190,961
            )
            $
            (337,040
            )
            $
            (140,961
            )Cash
                flows used in investing activities
            
            
            (649,358
            )
            
            (66,140
            )
            
            (583,218
            )Cash
                flows provided by (used in) financing activities
            
            
            6,351,191
            
            
            161,805
            
            
            487,511Effect
                of exchange rate changes
            
            
            16,461
            
            
            (5,984
            )
            
            5,326Net
                increase in cash and cash equivalents
            
            $
            5,527,333
            
            $
            (247,359
            )
            $
            (54,428
            )






35








**Operating
      Activities**





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. Average equivalent
      prices increased $13.25 from $42.64 per Boe in 2005 to $55.89 per Boe in 2006.
      Production volumes increased 1.3 Mboe from 2.1 Mboe in 2005 to 3.4 Mboe in
      2006.
      We expect 2006/7 production to increase, but we are unable to predict future
      commodity prices. As a result, we cannot provide any assurance about future
      levels of net cash provided by operating activities. This decrease was primarily
      due to a 71% increase in production and an increase of 12.8% on the average
      equivalent price per Boe and offset by a an increase in general and
      administrative costs in the start up of the business.





**Investing
      Activities**





The
      primary driver of cash used in investing activities was capital spending. We
      establish the budget for these amounts based on our estimate of future commodity
      prices. Due to the volatility of commodity prices, our budget may be
      periodically adjusted during any given year. 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, together with capitalized costs
      relating to the reverse acquisition. We have established a capital budget of
      approximately $515,600 for developing proven reserves for fiscal year ending
      March 31, 2007, to be funded primarily from cash flows from operations and
      recently raised equity funding. Cash used in investing activities during the
      fiscal year ended March 31, 2005 decreased $360,175 from $426,315 during the
      fiscal year ended March 31, 2004 to $66,140 in 2005 primarily due to major
      acquisition costs for our Kansas properties in 2004. The acquisition
      transactions were funded with proceeds from convertible notes payable and
      issuance of common stock.





**Financing
      Activities.** Net cash
      provided by financing activities increased $6.2 million during the fiscal year
      ended March 31, 2006 to $6.4 million as compared to $161,805 during the fiscal
      year ended March 31, 2005. At March 31, 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. The
        common
        stock sold in the private placement has not been registered under the Securities
        Act or state securities laws and may not be offered or sold in the United
        States
        absent registration with the Securities and Exchange Commission or an applicable
        exemption from the registration requirements.





As
      of
      March 31, 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, t he
      following table presents certain information as of March 31, 2006 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
            
            
            18.436
            
            
            12.082
            
            
            -
            
            
            30.518Undeveloped
            
            
            6.459
            
            
            -
            
            
            22.494
            
            
            28.953Total
            
            
            24.895
            
            
            12.082
            
            
            22.494
            
            
            59.471Gross
                Wells(1)
            
            
            23.0000
            
            
            1.0000
            
            
            1.0000
            
            
            25.0000Net
                Wells(1)
            
            
            1.1500
            
            
            0.1250
            
            
            0.1250
            
            
            1.4000







(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.*






36








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, 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 Seward (Kansas), Walker #1 (Louisiana),
      Vieman #1 (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 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)*
            
            $
            2,000
            
            $
            2,000
            
            $
            -
            
            $
            -
            
            $
            -Total
                contractual obligations
            
            $
            2,000
            
            $
            2,000
            
            $
            -
            
            $
            -
            
            $
            -











*(1)*
            
            The
                Company holds an arrangement to rent its main office with rentals
                due on a
                month-to-month basis





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, $25,300 and $16,500 are classified as a long-term liability at March
      31, 2006 and 2005, respectively. For each of the years ended March 31, 2006
      and
      2005, the Company recognized no depreciation expense related to its ARO, due
      to
      the assumption of a full offset of salvage values.





**Off-Balance
      Sheet Arrangements**





At
      March 31, 2006 and March 31, 2005, we did not have any off-balance
      sheet arrangements.





**Plan
      of Operation for 2007**





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
      approximately $515,600 in capital expenditures relating to proven
      reserves.


37







**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.





*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 years ended March 31, 2006, 2005 and 2004
      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 8. 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.


38







*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.





*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. 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, $25,300 and $16,500 are classified as a
      long-term liability at March 31, 2006 and 2005, respectively. For each of the
      years ended March 31, 2006 and 2005, 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, 2006, 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.


39








**Recently
      Issued Accounting Standards**





In
      March 2005, the Financial Accounting Standard Board (FASB) issued FASB
      Interpretation (FIN) No. 47 (FIN 47), *Accounting for Conditional Asset Retirement Obligations* .
      This
      Interpretation clarifies the definition and treatment of conditional asset
      retirement obligations as discussed in FASB Statement No. 143, *Accounting for Asset Retirement Obligations* (SFAS
      143). A conditional asset retirement obligation is defined as an asset
      retirement activity in which the timing and/or method of settlement are
      dependent on future events that may be outside our control. FIN 47 states that
      a
      company must record a liability when incurred for conditional asset retirement
      obligations if the fair value of the obligation is reasonably estimable. This
      Interpretation is intended to provide more information about long-lived assets,
      future cash outflows for these obligations and more consistent recognition
      of
      these liabilities. FIN 47 is effective for fiscal years ending after
      December 15, 2005. The
      Company does not expect the adoption of this Interpretation to have a material
      impact 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, 2006.


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.




For
      more recently issued accounting standards, please
      see Note 3 "Summary of Significant Accounting Policies" of the Notes to
      Consolidated Financial Statements.





**Item
      7A. Quantitative And Qualitative Disclosures About Market
      Risk**





**Oil
      and gas prices fluctuate widely, and low prices for an extended period of time
      are likely to have a material adverse impact on our
      business.**





Our
      operating revenues, operating results, financial condition and ability to borrow
      funds or obtain additional capital depend substantially on prevailing prices
      for
      gas and, to a lesser extent, oil. Declines in oil and gas prices may materially
      adversely affect our financial condition, liquidity, ability to obtain financing
      and operating results. Lower oil and gas prices may also reduce the amount
      of
      oil and gas that we can produce economically. Historically, oil and gas prices
      and markets have been volatile, with prices fluctuating widely and they are
      likely to continue to be volatile.





Prices
      for oil and gas are subject to wide fluctuations in response to relatively
      minor
      changes in the supply of and demand for oil and gas, market uncertainty and
      a
      variety of additional factors that are beyond our control. These factors
      include:





**•**
            
            The
                domestic and foreign supply of oil and gas;**•**
            
            The
                level of consumer product demand;**•**
            
            Weather
                conditions;**•**
            
            Political
                conditions in oil producing regions, including the Middle
                East;**•**
            
            The
                ability of the members of the Organization of Petroleum Exporting
                Countries to agree to and maintain oil price and production
                controls;**•**
            
            The
                price of foreign imports;**•**
            
            Actions
                of governmental authorities;**•**
            
            Domestic
                and foreign governmental regulations;**•**
            
            The
                price, availability and acceptance of alternative fuels;
                and**•**
            
            Overall
                economic conditions.





These
      factors make it impossible to predict with any certainty the future prices
      of
      oil and gas.




40








We
      do not
      use hedges at this time to reduce price volatility, help ensure that we have
      adequate cash flow to fund our capital programs and manage price risks and
      returns on some of our acquisitions and drilling programs. This policy could
      change n the future. ****





**Fair
      Market Value of Financial Instruments**





The
      estimated fair values for financial instruments under FASB Statement
      No. 107, *Disclosures about Fair Value of Financial Instruments* ,
      are
      determined at discrete points in time based on relevant market information.
      These estimates involve uncertainties and cannot be determined with precision.
      The estimated fair value of cash, cash equivalents, accounts receivable and
      accounts payable approximates their carrying value due to their short-term
      nature.





**Interest
      Sensitivity**





Since
      we
      do not have long-term debt subject to variable interest rates, the company
      is
      not exposed to interest rate sensitivity at March 31, 2006.














**Item
      8. Consolidated 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, 2006 and 2005
            
            
            F-2Consolidated
                Statements of Losses for the Years Ended March 31, 2006 and
                2005
            
            
            F-3Consolidated
                Statements of Changes in Stockholders’ Equity for the Years Ended
                March 31, 2006 and 2005
            
            
            F-4Consolidated
                Statements of Cash Flows for the Years Ended March 31, 2006 and
                2005
            
            
            F-5Notes
                to the Consolidated Financial Statements
            
            
            F-6
                - F-28Supplemental
                Oil and Gas Information (Unaudited)
            
            
            F-29
















41





**RUSSELL
        BEDFORD STEFANOU MIRCHANDANI 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, 2006 and 2005 and the related
        consolidated statements of losses, stockholders’ equity, and cash flows for each
        of the two years in the period ended March 31, 2006. 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, 2006 and 2005 and the results of its operations and its cash flows for
        each
        of the two years in the period ended March 31, 2006, in conformity with
        accounting principles generally accepted in the United States of
        America.
   New
                York, New York
              
              /s/ RUSSELL
                BEDFORD STEFANOU
                MIRCHANDANI LLPJuly
                10, 2006
              Russell
                Bedford Stefanou Mirchandani LLPCertified
                Public
                Accountants


**F-1**
  **INDEX
        OIL AND GAS, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **MARCH
        31, 2006 AND 2005**
 
 **2006**
              ****
              **2005****ASSETS**Current
                  Assets:Cash
                  and cash equivalents (Note 3)
              
              $
              5,536,006
              
              $
              8,673Trade
                  receivables (Note 4)
              
              
              12,501
              
              
              9,769Other
                  receivables (Note 3)
              
              
              6,254
              
              
              40,401Other
                  current assets
              
              
              8,600
              
              
              -Total
                  Current Assets
              
              
              5,563,361
              
              
              58,843Oil
                  & Gas Properties, full cost, net of accumulated depletion (Notes
                  3, 5,
                  8 and 15)
              
              
              951,199
              
              
              348,334Property
                  and Equipment, net of accumulated depreciation (Note 3 and
                  5)
              
              
              1,727
              
              
              8,385Total
                  Oil & Gas  Properties and Property and Equipment
              
              
              952,926
              
              
              356,719Total
                  Assets
              
              **$**
              **6,516,287**
              
              **$**
              **415,562****LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Accounts
                  payable and accrued expenses (Note 3)
              
              $
              555,452
              
              $
              229,219Bank
                  loan (Note 6)
              
              
              48,569
              
              
              -Notes
                  payable to affiliates (Note 6, 10 and 14 )
              
              
              -
              
              
              94,603Other
                  current liability (Note 14 )
              
              
              1,007
              
              
              -Total
                  Current Liabilities
              
              
              605,028
              
              
              323,822Long-Term
                  Liabilities:Asset
                  Retirement Obligation (Notes 3 and 7)
              
              
              25,300
              
              
              16,500Total
                  Liabilities
              
              
              630,328
              
              
              340,322Commitments
                  and Contingencies (Note 9)
              
              
              -
              
              
              -Stockholders
                  Equity: (Note 6 and 11)Common
                  stock, par value $0.001, 75 million shares authorized , 54,544,345
                  and
                  12,303,674 issued and outstanding at March 31, 2006 and 2005, respectively
                  (see Note 10)
              
              
              54,544
              
              
              12,304Additional
                  paid in capital
              
              
              8,387,306
              
              
              944,140Accumulated
                  deficit
              
              
              (2,575,581
              )
              
              (884,775
              )Other
                  comprehensive income (Note 3)
              
              
              19,690
              
              
              3,571Total
                  Stockholders' Equity
              
              
              5,885,959
              
              
              75,240Total
                  Liabilities and Stockholders' Equity
              
              **$**
              **6,516,287**
              
              **$**
              **415,562**
 
  
 See
        accompanying notes to consolidated financial statements
 
   **F-2**
  **INDEX
        OIL AND GAS, INC.**
 **CONSOLIDATED
        STATEMENT OF LOSSES**
 **FOR
        THE YEARS ENDED MARCH 31, 2006 AND 2005**
 
 **2006**
              ****
              **2005**Revenue:Oil
                  sales
              
              $
              191,114
              
              $
              88,176Operating
                  Expenses:Operating
                  costs
              
              
              41,953
              
              
              23,584Depreciation
                  and amortization (Note 5)
              
              
              71,571
              
              
              38,295Impairment
              
              
              10,000
              
              
              -General
                  and administrative expenses
              
              
              1,746,101
              
              
              442,645Total
                  Operating Expenses
              
              
              1,869,625
              
              
              504,524Loss
                  from Operations
              
              
              (1,678,511
              )
              
              (416,348
              )Other
                  Income (Expenses):
              
              
              (43,234
              )
              
              (6,807
              )Interest
                  income
              
              
              30,939
              
              
              1,128Total
                  Other Income (Expense)
              
              
              (12,295
              )
              
              (5,679
              )Loss
                  before Income Taxes
              
              
              (1,690,806
              )
              
              (422,027
              )Income
                  Taxes Benefit (Note 8)
              
              
              -
              
              
              -Net
                  Loss
              
              $
              (1,690,806
              )
              $
              (422,027
              )Loss
                  per share (Note 12):Basic
                  and assuming dilution
              
              $
              (0.08
              )
              $
              (0.04
              )Weighted
                  average shares outstanding:Basic
                  and assuming dilution
              
              
              22,391,357
              
              
              11,623,413
 
  
 See
        accompanying notes to consolidated financial statements
 
  **F-3**
  **INDEX
        OIL AND GAS, INC.**
 **CONSOLIDATED
        STATEMENT OF STOCKHOLDERS’ EQUITY**
 **FOR
        THE TWO YEARS ENDED MARCH 31, 2006**
 
 
 **Common
                  Stock**
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Shares**
              ****
              **Amount**
              ****
              **Additional
                  Paid in Capital**
              ****
              **(Accumulated
                  Deficit)**
              ****
              **Other
                  Comprehensive Income/(Loss)**
              ****
              **Total
                  Stockholders’ Equity**Balance
                  at March 31, 2003
              
              
              1,980,780
              
              $
              1,981
              
              $
              108,334
              
              $
              (8,329
              )
              $
              (297
              )
              $
              101,689Issuance
                  of common stock
              
              
              7,894,030
              
              
              7,894
              
              
              566,549
              
              
              -
              
              
              -
              
              
              574,443Stock
                  issue costs
              
              
              -
              
              
              -
              
              
              (6,808
              )
              
              -
              
              
              -
              
              
              (6,808
              )Compensation
                  cost related to stock options
              
              
              -
              
              
              -
              
              
              53,388
              
              
              -
              
              
              -
              
              
              53,388Compensation
                  cost related to warrants
              
              
              -
              
              
              -
              
              
              639
              
              
              -
              
              
              -
              
              
              639Other
                  comprehensive income-foreign currency
                translation
                  adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              6,430
              
              
              6,430Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (454,419
              )
              
              -
              
              
              (454,419
              )Balance
                  at March 31, 2004
              
              
              9,874,810
              
              $
              9,875
              
              $
              722,102
              
              $
              (462,748
              )
              $
              6,133
              
              $
              275,362Issuance
                  of common stock
              
              
              1,579,163
              
              
              1,579
              
              
              167,778
              
              
              -
              
              
              -
              
              
              169,357Issuance
                  of common stock, on exercise of share
                options
              
              
              849,701
              
              
              850
              
              
              54,260
              
              
              -
              
              
              -
              
              
              55,110Other
                  comprehensive income-foreign currency
                translation
                  adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,562
              )
              
              (2,562
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (422,027
              )
              
              -
              
              
              (422,027
              )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
              
              $
              5,885,959
 
 
 
 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, 2006 AND 2005**
 
 **2006**
              ****
              **2005**Cash
                  Flows From Operating Activities:Net
                  loss
              
              $
              (1,690,806
              )
              $
              (422,027
              )Adjustments
                  to reconcile net loss to net cash (used in) operating
                  activities:Organization
                  costs arising from acquisition
              
              
              1,578Non
                  cash stock based compensation cost
              
              
              1,043,823
              
              
              -Amortization
                  of debt issue costs-current year
              
              
              43,234
              
              
              6,807Non-cash
                  interest expense on warrant issuance on loan conversion
              
              
              1,476
              
              
              -Depreciation
                  and amortization
              
              
              71,571
              
              
              38,295Impairment
              
              
              10,000
              
              
              -(Increase)
                  in receivables
              
              
              (14,104
              )
              
              (31,787
              )Increase
                  in accounts payable and accrued expenses
              
              
              342,267
              
              
              71,672Net
                  Cash (Used In) Operating Activities
              
              
              (190,961
              )
              
              (337,040
              )Cash
                  Flows From Investing Activities:Cash
                  received in reverse merger
              
              
              10,018
              
              
              -Payments
                  for oil and gas properties and property and equipments
              
              
              (659,376
              )
              
              (70,540
              )Proceeds
                  from sale of oil and gas properties
              
              
              -
              
              
              4,400Net
                  Cash (Used In) Investing Activities
              
              
              (649,358
              )
              
              (66,140
              )Cash
                  Flows From Financing Activities:Proceeds
                  from issue of shares
              
              
              5,681,229
              
              
              -Proceeds
                  from issue of warrants
              
              
              8,377
              
              
              -Proceeds
                  from issue of shares and options
              
              
              -
              
              
              77,311Proceeds
                  from convertible notes payable
              
              
              676,664
              
              
              91,302Proceeds
                  from bank term debt
              
              
              51,374
              
              
              -Payment
                  for share issue costs
              
              
              (23,219
              )
              
              -Payment
                  for debt issue costs
              
              
              (43,234
              )
              
              (6,807
              )Net
                  Cash Provided by Financing Activities
              
              
              6,351,191
              
              
              161,805Effect of exchange rate
                  changes on cash and cash equivalents
              
              
              16,461
              
              
              (5,984
              )Net
                  Increase/(Decrease) in Cash And Cash Equivalents
              
              
              5,527,333
              
              
              (247,359
              )Cash
                  and cash equivalents at beginning of period
              
              $
              8,673
              
              $
              256,032Cash
                  and cash equivalents at the end of period
              
              $
              5,536,006
              
              $
              8,673Supplemental
                  Disclosures of Cash Flow Information:Cash
                  paid (received) during the year for interest
              
              $
              (32,415
              )
              $
              (1,128
              )Cash
                  paid during the year for taxes
              
              $
              -
              
              $
              -Non-cash
                  Financing and Investing Transactions:Conversion
                  of loan capital into share capital
              
              $
              750,630
              
              $
              147,156Non
                  cash stock based compensation cost
              
              $
              1,043,823
              
              $
              -Non-cash
                  interest expense on warrant issuance on loan conversion
              
              $
              1,476
              
              $
              -Acquisitions
                  :Common
                  stock retained by Index Inc.
              
              $
              23,092
              
              $
              -Assets
                  acquired
              
              $
              (23,500
              )
              $
              -Liabilities
                  acquired
              
              $
              1,986
              
              $
              -Total
                  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, 2006 AND 2005**
 
 **NOTE
        1 - ORGANIZATION AND OPERATIONS OF THE COMPANY**
 
 Index
        Oil
& Gas Limited (“Index Ltd.”) was incorporated on February 21, 2003 in the
        United Kingdom. Index Ltd. invested in a 5% working interest in oil and gas
        leases covering approximately 8,500 acres located in Stafford County, Kansas
        (“Kansas properties”) in July 2003. In August 2003, Index Oil & Gas USA, LLC
        (“Index USA”) was formed and the Kansas properties were transferred into this
        wholly owned subsidiary. Index Ltd. is participating in an ongoing drilling
        program on these properties. Additionally, Index Investments North America
        Inc.
        (“Index Investments”) and Index Offshore LLC (“Index Offshore”), a wholly owned
        subsidiary of Index Investments, were both formed in July 2004 for future
        potential investments in the United States. Index Ltd. comprises a United
        Kingdom holding company, which provides management services and United States
        operating subsidiaries, which are engaged in the exploration for, development,
        production and sale of oil and natural gas. Index Ltd. does not currently
        operate any of its properties and sells its oil production to domestic crude
        oil
        purchasers.
 
 In
        August
        2005, Index Ltd.’s U.S. subsidiaries entered into agreements to participate in
        the drilling of four wells in Texas and Louisiana. The first of these commenced
        drilling in December 2005 and is awaiting completion and pipeline installation.
        A subsidiary of Index Ltd. has been participating in an ongoing drilling
        program
        on the Stafford County, Kansas properties.
 
 On
        January 20, 2006, the entire issued share capital of Index Ltd. was acquired
        by
        Index Oil and Gas Inc. (“the Company”, “Index Inc.”), together with the raising
        of $5,120,000 of new equity capital for investment in oil and gas projects
        developed and for operating and working capital purposes.
 
 Subsequent
        to the acquisition, a subsidiary of Index Ltd. entered into two agreements:
        (1)
        a Seismic Reprocessing and Exploration Agreement covering prospective areas
        in
        the U.S. Gulf Coast; and (2) an agreement to acquire a 5% working interest
        in an
        exploration project in Barton County, Kansas.
 
 **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. 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. 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. (“Index”) 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.
        is
        deemed to be the acquiring entity. While the transaction is accounted for
        using
        the purchase method of accounting, in substance the Merger is 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’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 shares of Common Stock in Index Ltd. were exchanged
        for
        1,092,676 warrants to purchase shares of Common Stock of the Company. 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 (see Note 9).
 
 
 
 
  
 
 **F-6**
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        2 - MERGER AND CORPORATE RESTRUCTURE - (continued)**
 
 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 $0.001 par value common stock of the Company at a price
        of
        $0.60 per share. Furthermore in the fourth quarter, an aggregate amount of
        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.
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 *Principles
        of Consolidation*
 
 The
        consolidated financial statements as of March 31, 2006 and 2005 and for the
        two
        year periods ended March 31, 2006 and 2005 include the accounts of the Company
        and its wholly owned subsidiaries, Index USA, Index Investments, Index Offshore,
        and Thai Pasta (inactive), 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. Results of operations are included from the
        date
        of incorporation and to the extent of differences in dates of incorporation
        as a
        result the results of operations for the years ended March 31, 2006 are not
        comparable with March 31, 2005. 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 and March 31, 2005
        were restated to reflect the exchange of shares using a conversion ration
        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.
 
 
  **F-7**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *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, 2006 and 2005.
 
 *Other
        Current Assets*
 
 Other
        receivables at March 31, 2006 and 2005, of $6,254 and $40,401, respectively
        consist primarily of prepaid expenses and value added tax recoverable in
        the
        United Kingdom by the Company. Other current assets of $8,600 at March 31,
        2006
        consist of accrued interest income from cash in banks.
 
 *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,
        2006
        and 2005. 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, 2006 and 2005
        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 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
    **F-8**
 
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *Oil
        and Gas Properties (continued)*
 
 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, 2006 and 2005. 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. A ceiling test write-down of $87,548 was recorded for the year
        period
        ended March 31, 2004. 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.
 
 *Other
        Current Liabilities*
 
 Other
        current liabilities consist primarily of accruals for lease operating costs,
        capital expenditures and general and administrative expenses. Additionally,
        current liabilities also include a note payable to a bank. Other
        current liabilities at March 31, 2006 and 2005 include compensation expense
        payable to directors. See Note 13.
 
 *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 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, 2006 and 2005, 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 and 2005 were 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.
 
   **F-9**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *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 and 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, 2006 and 2005, the Company had no imbalances.
 
 *Derivative
        and Hedging*
 
 The
        Company has not entered into any derivative contracts for any purpose from
        the
        period of inception through March 31, 2006.
 
 *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 with the corresponding foreign currency transaction
        (losses)/gains included in - other comprehensive loss - foreign currency
        translation in the statement of operations and totaled $16,119 and $(2,562)
        for
        the years ended March 31, 2006 and 2005, respectively.
 
 *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.
 
  
   **F-10**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *Stock
        Based Compensation*
 
 In
        determining our accounting policies, the Company has chosen 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 is recognized when the exercise
        price for options granted equals 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,” permit the continued use of the method prescribed
        by APB No. 25 but require 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 does 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 and 2005 as shown below. See Notes 10 and
        13
        for further discussion of these transactions.
 
 
 For
                  the year ended March 31,2006
              
              2005Net
                  loss, as reported
              
              $
              (1,690,806
              )
              $
              (422,027
              )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
              )
              $
              (422,027
              )Basic
                  and fully diluted loss per share, as reported
              
              $
              (0.08
              )
              $
              (0.04
              )Basic
                  and fully diluted loss per share, pro forma
              
              $
              (0.08
              )
              $
              (0.04
              )
 
 
 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-11**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **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 $25,300 and $16,500
        at
        March 31, 2006 and 2005, respectively, all relating to wells in production
        on
        the Kansas properties as of these dates. It is estimated that salvage values
        of
        well equipment will be equal 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. At
        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,
        2006.
 
 *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, 2006.
 
 *Accounting
        Changes and Error Corrections* .
        In May
        2005 the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a
        replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”)”, which
        changes the requirements for the accounting for and the reporting of a change
        in
        accounting principle. This Statement applies to all voluntary changes in
        accounting principle. It also applies to changes required by an accounting
        pronouncement in the unusual instance that the pronouncement does not include
        specific transition provisions. When a pronouncement includes specific
        transition provisions, those provisions should be followed.
 
  **F-12**
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *New
        Accounting Pronouncements Not Yet Adopted (continued)*
 
 APB
        20
        previously required that most voluntary changes in accounting principle be
        recognized by including in net income of the period of the change the cumulative
        effect of changing to the new accounting principle. SFAS 154 requires
        retrospective application to prior periods’ financial statements of changes in
        accounting principle, unless it is impracticable to determine either the
        period-specific effects or the cumulative effect of the change. When it is
        practicable to determine the period-specific effects of an accounting change
        on
        one or more individual prior periods presented, SFAS 154 requires that the
        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 be 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, this Statement
        requires that the new accounting principle be applied as if it were adopted
        prospectively from the earliest date practicable.
 
 This
        Statement defines retrospective application as the application of a different
        accounting principle to prior accounting periods as if that principle had
        always
        been used or as the adjustment of previously issued financial statements
        to
        reflect a change in the reporting entity. This Statement also redefines
        restatement as the revising of previously issued financial statements to
        reflect
        the correction of an error.
 
 SFAS
        154
        requires that retrospective application of a change in accounting principle
        be
        limited to the direct effects of the change. Indirect effects of a change
        in
        accounting principle, such as a change in nondiscretionary profit-sharing
        payments resulting from an accounting change, should be recognized in the
        period
        of the accounting change. SFAS 154 also requires that a change in depreciation,
        amortization, or depletion method for long-lived, non-financial assets be
        accounted for as a change in accounting estimate affected by a change in
        accounting principle. This Statement carries forward without change the guidance
        contained APB 20 for reporting the correction of an error in previously issued
        financial statements and a change in accounting estimate. SFAS 154 also carries
        forward the guidance in APB 20 requiring justification of a change in accounting
        principle on the basis of preferability.
 
 SFAS
        154
        is effective for accounting changes and corrections of errors made in fiscal
        years beginning after December 15, 2005. Early adoption is permitted for
        accounting changes and corrections of errors made in fiscal years beginning
        after the date SFAS 154 is issued. SFAS 154 does not change the transition
        provisions of any existing accounting pronouncements, including those that
        are
        in a transition phase as of the effective date of SFAS 154. This Statement
        is
        not expected to impact the Company’s consolidated financial position or results
        of operations.
  *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.
  
  **F-13**
  
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
 
 *Accounting
        for Servicing of Financial Assets (continued).*
 
  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.
   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 has not yet determined
        the impact
        the Company’s consolidated financial position or results of
        operations.
 
  **NOTE
        4 - TRADE RECEIVABLES**
  
 Historically,
        through March 31, 2006, all of the Company’s trade receivables related to its
        working interest share of oil sales have been collected. No allowance for
        doubtful accounts has been recorded at March 31, 2006 and 2005.
     **F-14**
   **INDEX
        OIL AND GAS, INC.**
   **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
   **MARCH
        31, 2006 AND 2005**
  
  **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, 2006 and 2005 consist of the following:
 
 **For
                  the year ended March 31,****2006**
              
              **2005**Subject
                  to depletion
              
              $
              722,056
              
              $
              334,080Not
                  subject to depletion:Exploration
                  costs
              
              
              236,806
              
              
              9,529Cost
                  of undeveloped acreage
              
              
              119,923
              
              
              67,000Total
                  not subject to depletion
              
              
              356,729
              
              
              76,529Gross
                  oil and gas properties
              
              
              1,078,785
              
              
              410,609Less:
                  accumulated depletion
              
              
              (127,586
              )
              
              (62,275
              )Net
                  oil and gas properties
              
              $
              951,199
              
              $
              348,334
 
  
 
 Depletion
        expense was $65,311 and $36,154 or $19.10 and $17.48 per barrel of production
        for the years ended March 31, 2006 and 2005, respectively.
  It
        is
        anticipated that the cost of undeveloped acreage of $119,923 and exploration
        costs of $236,806 will be included in depreciation, depletion and amortization
        within one year.
   *Acquisitions
        and Dispositions*
  
 The
        Company paid $375,000 in July 2003 to acquire its’ interest in the oil and gas
        leases comprising the Kansas properties, which included rights to a number
        of
        newly drilled wells that were in the process of being brought on stream at
        that
        time. Initially $100,000 of the overall acquisition cost was allocated to
        proved
        property acquisition costs and $275,000 to unproved property acquisition
        costs.
        It is expected that at least 24 prospects will be drilled in total on these
        properties and for each well that has been drilled on the Kansas properties
        subsequent to the acquisition and through to March 31, 2006, $16,000 per
        well
        (being approximately 1/24 of the original acquisition cost) has been
        reclassified as proved property costs and brought into the calculation of
        amortization against estimated proven reserves. In addition an equivalent
        transfer has been made for future well locations for which proven undeveloped
        reserves have been ascribed at March 31, 2006 and 2005.
 
 Drilling
        and completion of wells on the Kansas properties generally takes no more
        than
        one month in total. No well related costs have been excluded from the
        amortization calculations. During the year ended March 31, 2005, the Company
        disposed of its’ interest in 3 low level producing wells that had been acquired
        as part of the acquisition of the Kansas properties for $4,400, which has
        been
        credited to proved oil and gas leasehold costs.
 
   **F-15**
   
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
  **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, 2006 and 2005 were as
        follows:
 
 **For
                  the year ended March 31,****2006**
              
              **2005**Computer
                  Costs, including foreign translation adjustment of $418 and $816
                  at March
                  31, 2006 and 2005, respectively
              
              $
              11,217
              
              $
              11,615Less:
                  accumulated depreciation
              
              
              (9,490
              )
              
              (3,230
              )Total
                  other property and equipment
              
              $
              1,727
              
              $
              8,385
 
 Depreciation
        expenses from continuing operations amounted to $6,260 and $2,140 for the
        years
        ended March 31, 2006 and 2005, respectively.
 
 *Capitalized
        Interest*
 
 There
        was
        no interest capitalized in property, plant and equipment at March 31, 2006
        and
        2005.
 
   **F-16**
   **INDEX
        OIL AND GAS, INC.**
   **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
   **MARCH
        31, 2006 AND 2005**
  
 **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. 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, 2004**
                $
                507,448
                
                $
                92,640
                
                $
                60,344
                
                $
                354,464
                
                $
                (421,459
                )
                $
                361,977
                
                $
                59,482Share
                  option exercise
                
                55,110
                
                
                55,110Round
                    3 conversion
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                (147,156
                )
                
                89,111
                
                
                58,045Individual
                  subscription
                
                
                22,201
                
                
                11,100
                
                
                11,101Stockholder
                    loan
                
                
                91,302
                
                
                -
                
                
                -
                
                
                91,302
                
                
                -
                
                
                -
                
                
                -Foreign
                    currency translation
                
                
                (2,529
                )
                
                -
                
                
                -
                
                
                3,301
                
                
                (5,830
                )
                
                -
                
                
                -**Year
                    ended March 31, 2005**
                
                $
                166,084
                
                $
                66,210
                
                $
                11,101
                
                $
                94,603
                
                $
                (152,986
                )
                $
                89,111
                
                $
                58,045**Totals
                    through 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 was convertible at various prices for each round of financing. The price
        per share for Round 3 financing averaged $0.30 per share and Round 4 financing
        averaged $0.36 per share and conversion of 2005 stockholder loan averaged
        $0.35
        per share.
 
 
 **F-17**
  
 
 
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **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 in current liabilities as “Bank Loan”. It is the Company’s plan to repay
        the total amount of the loan and accrued interest in the first quarter of
        fiscal
        year 2007. As at March 31, 2006 and 2005 Bank Loans of $48,569 and $0 were
        outstanding respectively, at the closing exchange rate.
 
 The
        bank
        held the following security: 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 several guarantee given by Lyndon
        West and Michael Scrutton.
 
 After
        all
        conversion of stock, note payable at March 31, 2006 and 2005 are as follows:
 
 **Year
                  ended March 31,****2006**
              
              **2005**Convertible
                  notes payable to affiliates, non interest bearing
              
              $
              -
              
              $
              -Notes
                  payable to affiliates, non interest bearing
              
              
              -
              
              
              94,603-
              
              
              94,603Less:
                  current portion
              
              
              -
              
              
              (94,603
              )Total
                  notes payable-long term
              
              $
              -
              
              $
              -
  
 
 The
        fund
        raising activities of Index Ltd during the years ended March 31, 2006 and
        2005
        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 and 2005 totaled $676,664 and $94,603
        ($91,302 at the original transaction date foreign currency rate of $1.889
        to
₤1.0), respectively of which $676,664 ($663,872 at the transaction date foreign
        currency rate of $1.8088 to ₤1.0) in loans were 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. Convertible notes
        payable at March 31, 2005, bore no interest, were unsecured and represent
        amounts loaned to the Company by certain stockholders.
 
 There
        was
        no debt issue cost incurred during the year ended March 31, 2005 and $43,234
        in
        debt issue costs incurred during the year ended March 31, 2006. Total
        amortization expense in these same periods was $6,807 and $43,234, respectively.
        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 and March 31, 2005, respectively.
 
 **NOTE
        7** **-** **ASSET
        RETIREMENT OBLIGATION**
 
 Activity
        related to the Company’s ARO during the years ended March 31, 2006 and 2005
        is as follows:
 
 **For
                  the year ended March 31,****2006**
              
              **2005**ARO
                  as of beginning of period
              
              $
              16,500
              
              $
              10,500Liabilities
                  incurred during period
              
              
              8,800
              
              
              6,000Liabilities
                  settled during period
              
              
              -
              
              
              -Accretion
                  expense
              
              
              -
              
              
              -Balance
                  of ARO as of end of period
              
              $
              25,300
              
              $
              16,500
 
 Of
        the
        total ARO, $25,300 and $16,500 are classified as a long-term liability at
        March 31, 2006 and 2005, respectively. For each of the years ended
        March 31, 2006 and 2005, the Company recognized depreciation expense
        related to its ARO of $0, due to the assumption of a full offset of salvage
        values.
   **F-18**
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **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, 2006 and 2005, the Company generated for federal income tax purposes
        a net
        operating loss carry forward of approximately $2,576,000 and $885,000,
        respectively, and expiring in the years 2025 and 2024, respectively, that
        could
        have been used to offset future taxable income. However, a valuation allowance of $912,038 and $305,308 was recorded for the years ended
        March 31, 2006 and 2005, 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”) net operating loss of $700,579 and $415,127 for the years ended March 31,
        2006 and 2005, 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:
 
 
 **For
                  the year ended March 31,****2006**
              
              **2005**CurrentUK
              
              $
              -
              
              $
              -US
              
              
              -
              
              
              -State
              
              
              -
              
              
              -Total
                  current tax expense (benefit)
              
              
              -
              
              
              -DeferredUK
              
              
              (210,174
              )
              
              (124,538
              )US
              
              
              (610,317
              )
              
              (157,191
              )State
              
              
              (91,548
              )
              
              (23,579
              )Total
                  deferred tax expense (benefit)
              
              
              (912,038
              )
              
              (305,308
              )Less
                  valuation allowance
              
              
              912,038
              
              
              305,308Total
                  deferred tax expense (benefit)
              
              $
              -
              
              $
              -Total
                  tax provision-continuing operations
              
              $
              -
              
              $
              -
 
   **F-19**
  **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        8** **-** **INCOME
        TAXES (continued)**
 
 The
        differences between income taxes computed using the statutory federal income
        tax
        rate and that shown in the statement of operations from continuing operations
        are summarized as follows:
  **For
                  the year ended March 31,****2006**
              
              **2005**Computed
                  at US statutory rate
              
              $
              (610,317
              )
              
              (23.70)%
              
              $
              (157,191
              )
              
              (17.77)%State
                  income/franchise tax net of federal benefit
              
              
              (91,548
              )
              
              (3.55)%
              
              
              (23,579
              )
              
              (2.66)%United
                  Kingdom tax
              
              
              (210,174
              )
              
              (8.16)%
              
              
              (124,538
              )
              
              (14.08)%Less
                  valuation allowance
              
              
              912,038
              
              
              35.41%
              
              
              305,308
              
              
              34.51%Total
                  tax provision-continuing operations
              
              $
              -
              
              
              -%
              
              $
              -
              
              
              -%
 
 
 Components
        of deferred tax assets are as follows:
 
 **Deferred
                  Tax Components**
              
              **For
                  the year ended March 31,****2006**
              
              
              **2005**Deferred
                  tax assetsRestricted
                  stock compensation accrual
              
              $
              -
              
              $
              -Share
                  issue basis difference
              
              
              -
              
              
              -Foreign
                  currency translation
              
              
              -
              
              
              -Oil
                  & Gas basis differences
              
              
              66,791
              
              
              23,035Depreciation
              
              
              -
              
              
              -Net
                  operating loss carryforward
              
              
              857,049
              
              
              286,567Total
                  gross deferred tax assets
              
              
              923,840
              
              
              309,602Deferred
                  tax liabilitiesAmortization
                  of share issue costs
              
              
              -
              
              
              -Other
              
              
              -
              
              
              -Foreign
                  currency translation
              
              
              0
              
              
              -Depreciation
              
              
              11,802
              
              
              4,294State
                  taxes
              
              
              -
              
              
              -Total
                  gross deferred tax liabilities
              
              
              11,802
              
              
              4,294Less
                  valuation allowance
              
              
              (912,038
              )
              
              (305,308
              )Net
                  deferred tax assets
              
              $
              -
              
              $
              -
 
  
 
   **F-20**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        9** **-** **COMMITMENTS
        AND CONTINGENCIES**
 
 The
        Company has no commitments to oil and gas exploration and production capital
        expenditure other than ongoing planned expenditures on the Kansas properties,
        and the commitments relating to four new wells in Texas and Louisiana. During
        the year ended March 31, 2006 a subsidiary of the Company has entered into
        1) a
        Seismic Reprocessing and Exploration Agreement covering prospective areas
        in the
        US Gulf Coast; 2) an
        agreement to acquire a 5% working
        interest in an exploration project in Barton County, Kansas. Having made
        initial
        payments on signing these agreements, there are no commitments under these
        agreements at the date of this report.
 
 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.
 
 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.
        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 doing so, the Company complied with Sections 78.207 and 78.209
        of the Revised Statutes of the State of Nevada; however, the management failed
        to comply with applicable Federal securities laws set forth above. Thus,
        we must
        obtain a ratification of the increase (the “Ratification”) from our current
        stockholders via obtaining the consent of the majority of our current
        stockholders as of a certain record date, by filing a proxy statement on
        Schedule 14(a) and obtaining such Ratification. This proxy statement is
        scheduled to be filed within thirty days.
   At
        the
        transaction date of the reverse merger an agreement was signed a stockholder
        of
        record of the Company’s stock to grant a majority of the current directors of
        the Company, for one year from the date of the transaction or to January
        20,
        2007, the authority to direct the exercise of their voting rights attaching
        to
        5,047,130 shares of common stock in the Company. Based on this agreement,
        the
        current directors and former stockholders of Index Ltd., combined, hold greater
        than 50% voting rights of the shares of common stock currently in issue.
        Consequently, it is management’s expectation that the Ratification is expected
        to occur.
  
 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.
 
 **NOTE
        10 - CAPITAL STOCK**
 
 During
        the fiscal year ended March 31, 2005:
 
 Index
        Ltd. issued 490,262 shares of common stock (converted into 1,400,609 shares
        of
        the Company’s common stock on the conversion of convertible stockholder loans
        outstanding at March 31, 2004.
 
 Index
        Ltd. raised capital of $22,201 in a private individual subscription and issued
        62,500 common shares (converted into 178,554 shares of the Company’s common
        stock). There were no fundraising costs.
 
 The
        total
        of these two transactions totaled 552,762 in share issuances for the fiscal
        year
        ended March 31, 2005. These shares were later exchanged in the recapitalization
        (reverse merger) transaction into 1,579,163 shares using an exchange rate
        of
        approximately 2.857 shares of the Company’s stock for 1 share of Index
        Ltd.
    **F-21**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        10 - CAPITAL STOCK (continued)**
 
 During
        the fiscal year ended March 31, 2005, 297,425
        stock options for Index Ltd. common stock, in aggregate, were exercised by
        the
        following directors and/or stockholders:
  A
                    Boetius
                
                
                62,475L
                    West
                
                
                62,475D
                    Jenkins:
                
                
                62,475D
                    Wordsworth:
                
                
                60,000M.
                    Page:
                
                
                40,000R.Salter:
                
                
                10,000297,425Total
  These
        shares totaling 297,425 were later
        exchanged in the recapitalization (reverse merger) transaction into 849,701
        shares using an exchange rate of approximately 2.857 shares of the Company’s
        stock for 1 share of Index Ltd.
 
 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 IndexLtd.
                  Shares
              
              #
                  of IndexShares
              
              #
                  of Index Ltd.
                Warrants
              
              #
                  of IndexWarrantsConversion
                  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
                  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-22**
  
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **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.
 
 **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, 2004
                (48,535
                  of Index Ltd.)
              
              
              138,655
              
              $
              0.07Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Canceled
                  or expired
              
              
              -
              
              
              -Outstanding
                  and Exercisable at March 31, 2005
              
              
              138,655
              
              $
              0.07Granted
                  (333,923 of Index Ltd)
              
              
              954,021
              
              
              0.14Exchanged
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Canceled
                  or expired
              
              
              -
              
              
              -Outstanding
                  and Exercisable at March 31, 2006
              
              
              1,092,676
              
              $
              0.13
 
 
 
 **F-23**
  
 
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
        (continued)**
 
 Warrants
                  Outstanding
              
              Warrants
                  ExercisableWeighted
                  Average
              
              Weighted
                  Average
              
              
              
              Weighted
                  Average Exercise PriceExercise
                  Prices
              Number
                  Outstanding
              Remaining
                  Contractual Life (Years)
              Exercise
                  Price
              Number
                  Exercisable
              Exercise
                  Price$0.07
              
              138,655
              
              4.5
              
              $0.07
              
              138,655
              
              $0.07$0.14
              
              143,037
              
              4.5
              
              $0.14
              
              143,037
              
              $0.14$0.14
              
              392,839
              
              4.5
              
              $0.14
              
              392,839
              
              $0.14$0.14
              
              391,410
              
              4.5
              
              $0.14
              
              391,410
              
              $0.14$0.14
              
              26,735
              
              4.5
              
              $0.14
              
              26,735
              
              $0.141,092,676
              
              4.5
              
              $0.13
              
              1,092,676
              
              $0.13
 
  
 In
        February 2003 and July 2003, 45,882 warrants (converted into 131,078 of Company
        warrants) (“Tranche 1”) and 2,653 warrants (converted into 7,577 of Company
        warrants) (“Tranche 2”), respectively to acquire Index Ltd.’s common stock were
        issued to a third party advisor for services incurred at an exercise price
        of
        $0.16 per share (at exercise prices upon exchange of $0.07). The ability
        to
        exercise each set of warrants was contingent upon Index Ltd. raising a minimum
        quantity of capital from a 2 private offerings undertaken in each of these
        months, such conditions being met by March 31, 2003 and July 31, 2003
        respectively.
 
 The
        latest date of the exercise of both sets of warrants is the earlier of (1)
        the
        date upon which any of the equity share capital of the Index Ltd. is admitted
        to
        the Official List of the UK Listing Authority and to trading on the London
        Stock
        Exchange or trading on OFFEX or the Alternative Investment Market or permission
        for any of the common stock of Index Ltd. to be dealt in on a share dealing
        market of any recognized investment exchange becomes effective; or (2) the
        date
        upon which a successful offer to purchase 90% or more of the issued common
        stock
        of Index Ltd. is completed.
 
 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). 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.
   
 **F-24**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **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, 2006 and 2005 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, 2004 (297,425 of Index Ltd. options)
              
              
              849,701
              
              $
              0.14Granted
              
              
              -
              
              
              -Exercised
                  (Note 14)
              
              
              (849,701
              )
              
              0.14Canceled
                  or expired
              
              
              -
              
              
              -Outstanding
                  at March 31, 2005
              
              
              -
              
              $
              -Granted
              
              
              4,577,526
              
              
              0.35Exercised
                  (Note 14)
              
              
              -
              
              
              -Canceled
                  or expired
              
              
              -
              
              
              -Outstanding
                  at March 31, 2006
              
              
              4,577,526
              
              $
              0.35
 
 Options
                  Outstanding
              
              Options
                  ExercisableExercise
                  Price
              
              Number
                Outstanding
              
              Weighted
                  Average Remaining ContractualLife (Years)
              
              Weighed
                  AverageExercise Price
              
              Number
                Exercisable
              
              Weighted
                  AverageExercise Price$
                  0.35
              
              4,577,526
              
              4.81
              
              $
                  0.35
              
              2,288,763
              
              $
                  0.35
 
 
 Prior
        to
        the reverse merger with Index Inc., Index Ltd. adopted a Stock Option Plan
        to
        grant options to various officers and directors. 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 of fiscal 2006 was $1,043,823.
 
   **F-25**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **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 January 20, 2006; (2) 25% on January 20, 2007; and (3) 25% on January
        20,
        2008. The 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 equity raising at the date of acquisition of $0.60
        was used
        as
        the share market price and 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.
 
 **NOTE
        12** **-** **EARNINGS
        PER SHARE**
 
 In
        February 2003, Index Ltd. was capitalized with 100 million shares of common
        stock authorized. On January 20, 2006, in a reverse merger between the Company
        and Index Ltd., 22,615,552 of Index Inc. stock were exchanged for 7,916,232
        shares of Index Ltd. and 8,533,333 shares were issued to private investors
        as
        part of the transaction. In addition, the Company had 23,091,667 outstanding
        shares. The Company also issued 303,793 shares of common stock to management
        as
        compensation expense, which had been reserved for issue as part of the share
        exchange transaction. 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, 2006 and
        2005,
        excluded from diluted earnings per share are 5,670,202 and 138,658, respectively
        of warrants to acquire common stock. As of March 31, 2006, there are also
        4,577,526 of options to acquire the Company’s common stock that were 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,****2006**
              
              **2005**Shares—basic
              
              22,391,357
              
              11,623,413Dilution
                  effect of stock option and awards at end of period
              
              
              -
              
              
              -Shares—diluted
              
              
              22,391,357
              
              
              11,623,413Stock
                  awards and shares excluded from diluted earnings per share due
                  to
                  anti-dilutive effect
              
              
              5,670,202
              
              
              138,658
 
 **NOTE
        13 - MAJOR CUSTOMERS**
  Revenues
        from the Company’s share of production on the Kansas properties are sold to
        independent crude oil purchasers. Up to June 2004, the Company’s oil production
        was marketed by the operator of the Kansas properties and this arrangement
        covered 100% of oil sales.
   After
        July 2004, oil production was marketed by the Company directly to third party
        crude oil purchasers. In the period to March 31, 2005, approximately 78%
        of oil
        sales were received from two third party crude oil purchasers. In the period
        to
        March 31, 2006, approximately 91% of oil sales were received from a single
        crude
        oil purchaser.
   **F-26**
  
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
  **NOTE
        14 - RELATED PARTY TRANSACTIONS**
  As
        discussed in Note 6, total stockholder loans to Index Ltd. during the year
        ended
        March 31, 2006 and 2005 totaled $676,664 and $94,603, respectively 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. Convertible notes
        payable at March 31, 2005, bore no interest, were unsecured and represent
        amounts loaned to Index Ltd. by certain stockholders.
 
 During
        fiscal 2006, 687,500 shares of common stock (converted to 1,964,090 shares
        of
        Company stock) were issued for cash in the amount of $238,591. These shares
        also
        included warrants of 137,500 (converted to 392,818 of Company warrants) to
        purchase shares of common stock. Of these totals 126,000 shares (converted
        to
        359,964 shares of Company stock) and 25,200 warrants (converted to 71,993
        of
        Company warrants) were issued to directors of Index Ltd.
  Management
        received compensation with a fair value of $274,517 for 783,500 (converted
        to
        2,238,348 shares of Company stock) shares of common stock which also included
        warrants of 137,000 to purchase shares of Index Ltd.’s common stock (converted
        to 391,390 of Company warrants). Of these totals 753,500 shares (converted
        to
        2,152,643 shares of Company stock and 127,000 warrants (converted to 362,821
        of
        Company warrants) were issued to directors of Index Ltd. Professional fees
        paid
        to a 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 26,734 of Company
        warrants). In addition, 25,000 shares (converted to 71,421 shares of Company
        stock were issued for professional fees to the same stockholder with a fair
        value of $9,021. All transactions were valued at fair market value in accordance
        with SFAS 123-R.
 
 As
        described above the total of 382,458 warrants of Index Ltd. were exchanged
        for
        warrants of Index, Inc. There was no compensation expense recorded for the
        exchange of these warrants since there was no modification of terms upon
        exchange.
 
 The
        Company also issued 303,793 shares of common stock to management as compensation
        expense which was valued at $37,578.
 
 Prior
        to
        the reverse merger with Index Inc., Index Ltd. adopted a Stock Option Plan
        to
        grant options to various officers and directors. As contemplated by the
        Acquisition Agreements, following the completion of the acquisition, the
        Board
        of Directors of Index Inc. agreed to the adoption of this 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 of fiscal 2006 was $1,043,823.
 
 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.
 
 
   **F-27**
  
 
 **INDEX
        OIL AND GAS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 AND 2005**
 
 **NOTE
        15 - SUBSEQUENT EVENTS**
 
 The
        Company entered into an agreement with ICP (International Capital Partners
        SA)
        to raise additional funds through a private placement of 11,000,000 shares
        at
        $1.00 per share. The private placement became open to selected existing and
        new
        investors in June 2006 and is expected to close in July 2006.
 
 The
        Company agreed with operator Crawford Energy to increase its WI (working
        interest) in wells Vieman #1 from 12.5% to 15% and Taffy #2 from 7.5% to
        20%.
 
 The
        Company agreed to enter Phase II of the seismic reprocessing and exploration
        agreement, referred to in Note 1.
 
 Index
        Ltd
        has repaid its Bank Loan.
 
  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 doing so, the Company complied with Sections 78.207 and 78.209
        of the Revised Statutes of the State of Nevada; however, the management failed
        to comply with applicable Federal securities laws set forth above. Thus,
        we must
        obtain a ratification of the increase (the “Ratification”) from our current
        stockholders via obtaining the consent of the majority of our current
        stockholders as of a certain record date, by filing a proxy statement on
        Schedule 14(a) and obtaining such Ratification. This proxy statement is
        scheduled to be filed within thirty days.
   At
        the
        transaction date of the reverse merger, an agreement was signed a stockholder
        of
        record of the Company’s stock to grant a majority of the current directors of
        the Company, for one year from the date of the transaction or to January
        20,
        2007, the authority to direct the exercise of their voting rights attaching
        to
        5,047,130 shares of common stock in the Company. Based on this agreement,
        the
        current directors and former stockholders of Index Ltd., combined, hold greater
        than 50% voting rights of the shares of common stock currently in issue.
        Consequently, it is management’s expectation that the Ratification is expected
        to occur.
    **F-28**
  
 **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 **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, 2006,
        2005 and 2004 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 Chairman 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 and
                documents
                  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 chief executive officer of the independent reservoir engineers’
                  reserves reports for
                completion
                  and accuracy.
 
 
 
  **F-29**
  
 
 **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 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, 2006, 2005 and
        2004:
   ,
  **For
                    the year ended**
                ****
                ****
                **For
                    the year ended**
                ****
                ****
                **For
                    the year ended**
                ********
                ****
                ****
                **March
                    31,**
                ****
                ****
                **March
                    31,**
                ****
                ****
                **March
                    31,**
                ********
                ****
                ****
                **2006**
                ****
                ****
                **2005**
                ****
                ****
                **2004**Evaluated
                    properties
                
                $
                722,056
                
                $
                334,080
                
                $
                148,691Unevaluated
                    properties
                
                
                356,729
                
                
                76,529
                
                
                189,777Total
                
                
                1,078,785
                
                
                410,609
                
                
                338,468Less:
                    accumulated depreciation, depletion, amortization
                
                
                127,586
                
                
                62,275
                
                
                26,121Net
                    capitalized costs
                
                $
                951,199
                
                $
                348,334
                
                $
                312,347
   **F-30**
  **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 ***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, 2006, 2005 and
        2004:
 
 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.
   **Year
                  Ended March 31, 2004**
              
              
              **Continuing**
                **Operations**
              
              
              **Discontinued**
                **Operations**Acquisition
                  costs of propertiesProved
              
              $
              196,000
              
              $
              -Unproved
              
              
              179,000
              
              
              -Subtotal
              
              
              375,000
              
              
              -Exploration
                  and development costs
              
              
              40,516
              
              
              -Total
              
              $
              415,516
              
              $
              -**Year
                  Ended March 31, 2005:**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
              
              $
              -
 
  
  **F-31**
  **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 ***Results
        of Operations for Oil and Natural Gas Producing
        Activities***
  **Year
                      Ended**
                  **March 31,**
                **2006**
              
              
              **Year
                        Ended****March 31,****2005**
              ****
              ****
              **Year
                      Ended****March 31,****2004**Oil
                and natural gas production revenuesThird-party
              
              $
              191,114
              
              $
              88,176
              
              $
              36,989Affiliate
              
              
              -
              
              
              -
              
              
              -Total
                  revenues
              
              
              191,114
              
              
              88,176
              
              
              36,989Exploration
                  expenses, including dry hole
              
              
              -
              
              
              -
              
              
              -Production
                  costs
              
              
              (41,953
              )
              
              (23,584
              )
              
              (16,201
              )Impairment
              
              
              -
              
              
              -
              
              
              (87,548
              )Depreciation,
                  depletion and amortization
              
              
              (65,311
              )
              
              (36,154
              )
              
              (26,121
              )Income
                  (loss) before income taxes
              
              
              83,850
              
              
              28,438
              
              
              (92,881
              )Income
                  tax provision (benefit)
              
              
              -
              
              
              -
              
              
              -Results
                  of continuing operations
              
              $
              83,850
              
              $
              28,438
              
              $
              (92,881
              )Results
                  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-32**
  **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 ***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, 2006, 2005 and 2004,
        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 April 1, 2003
              
              
              -
              
              
              -Revisions
                  of previous estimates
              
              
              -
              
              
              -Purchases
                  in place
              
              
              -
              
              
              -Extensions,
                  discoveries and other additions
              
              
              -
              
              
              -Sales
                  in place
              
              
              -
              
              
              -Production
              
              
              -
              
              
              -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
              
              
              -
 
  
 
   **F-33**
  
 
 **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 **Natural
                  gas liquids and crude oil (MBbls)(2)(3):**Net
                  proved reserves at March 31, 2003
              
              
              -
              
              
              -Revisions
                  of previous estimates
              
              
              -
              
              
              -Purchases
                  in place
              
              
              12.282
              
              
              -Extensions,
                  discoveries and other additions
              
              
              -
              
              
              -Sales
                  in place
              
              
              -
              
              
              -Production
              
              
              (1.213
              )
              
              -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
              
              
              -
 
 
 
  
   **F-34**
  
 **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 
 **(MBO)(2)
                  equivalents(4):**Net
                  proved reserves at March 31, 2003
              
              
              -
              
              
              -Revisions
                  of previous estimates
              
              
              -
              
              
              -Purchases
                  in place
              
              
              12.282
              
              
              -Extensions,
                  discoveries and other additions
              
              
              -
              
              
              -Sales
                  in place
              
              
              -
              
              
              -Production
              
              
              (1.213
              )
              
              -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
              
              
              -
 
 
   **F-35**
  
 
 **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 **Net
                  proved developed reserves:****Natural
                  gas (Bcf)(1)**March
                  31, 2004
              
              
              -
              
              
              -March
                  31, 2005
              
              
              -
              
              
              -March
                  31, 2006
              
              
              0.09
              
              
              -**Natural
                  gas liquids and crude oil (MBbls)(2)(3)**March
                  31, 2004
              
              
              5.225
              
              
              -March
                  31, 2005
              
              
              12.354
              
              
              -March
                  31, 2006
              
              
              28.942
              
              
              -**MBO(1)
                  equivalents(4)**March
                  31, 2004
              
              
              5.225
              
              
              -March
                  31, 2005
              
              
              12.354
              
              
              -March
                  31, 2006
              
              
              30.518
              
              
              -
 
 _______________
 
 
 (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 and crude
                  oil.
 
  **F-36**
  **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 ***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, 2006, 2005 and 2004:
 
 **Continuing**
                **Operations**
              
              **Discontinued
                  Operations**(in
                  $’000)**March
                  31, 2004:**Future
                  cash inflows
              
              $
              388.191
              
              $
              -Future
                  production costs
              
              
              (175.306
              )
              
              -Future
                  development costs
              
              
              (64.365
              )
              
              -Future
                  net cash flows before income taxes
              
              
              148.520
              
              
              -Future
                  income taxes
              
              
              -
              
              
              -Future
                  net cash flows
              
              
              148.520
              
              
              -Discount
                  to present value at 10% annual rate
              
              
              35.202
              
              
              -Standardized
                  measure of discounted future net cash flows relating to proved
                  natural
                  gas, natural gas liquids and crude oil reserves
              
              $
              113.318
              
              $
              -
 
 
 
   **F-37**
  **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 **Continuing**
              
              **Discontinued****Operations**
              
              **Operations****March 31,
                  2005:**Future
                  cash inflows
              
              $
              1,088.787
              
              $
              -Future
                  production costs
              
              
              (474.193
              )
              
              -Future
                  development costs
              
              
              (131.248
              )
              
              -Future
                  net cash flows before income taxes
              
              
              483.346
              
              
              -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
              
              $
              -
 
 
 **Continuing**
              
              **Discontinued****Operations**
              
              **Operations****March 31,
                  2006:**Future
                  cash inflows
              
              $
              3,080.376
              
              $
              -Future
                  production costs
              
              
              (855.120
              )
              
              -Future
                  development costs
              
              
              (515.632
              )
              
              -Future
                  net cash flows before income taxes
              
              
              1,709.624
              
              
              -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
              
              $
              -
 
  
 
   **F-38**
  
 **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 
 ***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, 2006, 2005 and 2004:
 
 **Continuing**
              
              **Discontinued****Operations**
              
              **Operations**(in
                  $’000)**Balance,
                April 1, 2003**
              
              $
              -
              
              $
              -Sales
                  and transfers of natural gas, natural gas liquids and crude oil
                  produced,
                  net of production costs
              
              
              (20.788
              )
              
              -Net
                  changes in prices and production costs
              
              
              -
              
              
              -Extensions,
                  discoveries, additions and improved recovery, net of related
                  costs
              
              
              -
              
              
              -Development
                  costs incurred
              
              
              40.516
              
              
              -Revisions
                  of previous quantity estimates and development costs
              
              
              -
              
              
              -Accretion
                  of discount
              
              
              -
              
              
              -Net
                  change in income taxes
              
              
              -
              
              
              -Purchases
                  of reserves in place
              
              
              93.590
              
              
              -Sales
                  of reserves in place
              
              
              -
              
              
              -Changes
                  in timing and other
              
              
              -
              
              
              -**Balance,
                  March 31, 2004**
              
              $
              113.318
              
              $
              -
 
  
   **F-39**
  
 **INDEX
        OIL** **AND
        GAS, INC.**
 **SUPPLEMENTAL
        INFORMATION (UNAUDITED)**
 **FOR
        THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004**
 
 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
              
              $
              -
 
 
 
 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
              
              $
              -
 
 
 
 
   **F-40**











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





None.





**Item
      9A. Controls And Procedures.**





*Management’s
      Evaluation of Disclosure Controls and Procedures*





In
      accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an
      evaluation, under the supervision and with the participation of management,
      including our Chief Executive Officer and our Chief Financial Officer, of the
      effectiveness of our disclosure controls and procedures as of the end of the
      period covered by this report. Based on that evaluation, our Chief Executive
      Officer and Chief Financial Officer concluded that our disclosure controls
      and
      procedures were effective as of March31, 2006 to provide reasonable assurance
      that information required to be disclosed in our reports filed or submitted
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in the Securities and Exchange Commission’s rules and
      forms. There
      was no change in our internal controls or in other factors that could affect
      these controls during our last fiscal quarter that has materially affected,
      or
      is reasonably likely to materially affect, our internal control over financial
      reporting.





**Item
      9B. Other Information.**





None.








**PART
      III**




**Item
      10. Directors and Executive Officers of the Registrant.**




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, 2006.




Name
              Age
              PositionMichael
                Scrutton
                (1)
              60
              DirectorDaniel
                Murphy
                (1)
              63
              Director, Chairman of the CompanyLyndon
                West
                (1)
              46
              Director, Chief Executive
                OfficerAndrew
                Boetius
                (1)
              42
              Director, Chief Financial
                OfficerDavid
                Jenkins
                (1)
              56
              Director










(1)
      Each
      of the directors and officers of the Company was appointed to his position
      effective as of January 20, 2006.


(2)
      In
      connection with the acquisition transaction of Index Oil & Gas Ltd. by
      Index, Mr. John Briner resigned as a director and officer of the Company,
      effective as of February 7, 2006.


(3)
      Au E
      Mon, Evon Au and David F. Knapfel resigned as directors and/or officers of
      the
      Company, effective as of November 23, 2005.





**Background
      of Executive Officers and Directors**





**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.
      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.









42









**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.





**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.. As
      result of his industry contacts, Index Ltd. had acquired an interest in two
      assets in Stafford County, Kansas and in South Texas. 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. There are no family relationships
      among any of our directors and executive officers.






**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.





**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, 2006:


43











*Name
                and Relationship*
            *Number*
              *of
                late reports*
            Transactions
                not timely reported
            Known
                failures to file a required formAu
                E Mon (1)
            2
            2
            0Evon
                Au (1)
            2
            2
            0David
                F. Knapfel (1)
            1
            1
            0John
                Briner (1)
            1
            1
            0Lyndon
                West
            1
            1
            0Andrew
                Boetius
            1
            1
            0Daniel
                Murphy
            1
            1
            0Michael
                Scrutton
            1
            1
            0David
                Jenkins
            1
            1
            0





(1)
      Au E
      Mon, Evon Au and David F. Knapfel resigned as directors and/or officers of
      the
      Company, effective as of November 23, 2005.


(2)
      John
      Briner resigned as director and/or officer of the Company, effective as of
      February 7, 2006.





**Item
      11. 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 executive officers with annual compensation exceeding $100,000
      during the years ended March 31, 2006 and December 31, 2005 and
      2004:





**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
            
            
            2005
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --2004
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Andrew
                Boetius (2)
            
            
            2006
            
            
            90,909
            
            
            --
            
            $
            12,526
            
            
            --
            
            
            741,292
            
            
            0
            
            
            0Chief
                Financial
            
            
            2005
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Officer,
                Secretary
            
            
            2004
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Evon
                Au (3)
            
            
            2006
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Interim
                President &
            
            
            2005
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            --
            
            
            --Chief
                Exec. Officer
            
            
            2004
            
            
            390
            
            
            --
            
            
            --
            
            
            --
            
            
            --





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


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


(3)
            Evon
                Au resigned as the Company’s CEO effective as of November 23,
                2005.





**Compensation
      of Directors**





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.




On
      March
      14, 2006, the directors ratified a prior approval of the Company’s Stock Option
      Plan, the terms of which are described under *“Securities
      Authorized for Issuance Under Equity Compensation Plans”* .
      To
      date, we have granted an aggregate amount of 4,577,526 options to all of our
      Directors under the Stock Option Plan. Each of these options has an exercise
      price of $0.35 per share. 50% of the options vested on January 20, 2006. The
      options expire pursuant to the terms of the Stock Option Plan which are described
      under the aforementioned Stock Option Plan section
      below.


44










**Employment
      Agreements**





On
      January 20, 2006, Index Oil & Gas Ltd., a subsidiary of Index Oil, which was
      acquired pursuant to the Acquisition Transaction by and between Index Oil &
Gas Ltd. and Index Oil & Gas Inc. entered into employment and consulting
      agreements, with the following five directors of Index Ltd. that provide for
      total aggregate minimum annual salaries of $284,694, which became effective
      as
      of January 1, 2006. In connection with these agreements, the aforementioned
      directors of Index Ltd. will serve as directors of Index Oil and will be
      compensated for the provision of consulting services to the Company pursuant
      to
      the agreements entered into with Index Oil & Gas Ltd.:





·
            Mr.
                West and Mr. Boetius. The agreements provide for Mr. West and Mr.
                Boetius
                to receive each an annual salary of $90,909 per year. 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;





·
            A
                full time Employment Agreement with Mr. Murphy. The agreement provides
                for
                Mr. Murphy to receive an annual salary of $75,000 per year. 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. Jenkins and Mr.
                Scrutton. The Agreements provide for Mr. Jenkins to receive a salary
                of
                $1,050 per month, and Mr. Scrutton to receive a salary of $1,091
                per
                month. Mr. Jenkins’ and Mr. Scrutton’s employment is terminated
                immediately upon their death or permanent disability. Index Ltd.
                may also
                terminate Mr. Jenkins’ or Mr. Scrutton’s employment upon three months
                written notice. Mr. Jenkins and Mr. Scrutton may terminate their
                employment upon 3 months written notice to Index Ltd. Pursuant to
                their
                employment agreements Index Ltd. will provide Mr. Jenkins and Mr.
                Scrutton
                with Directors Liability Insurance and will contribute to their Private
                pension plans. Furthermore, the employment agreement provides 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.





*
      Compensation amounts are based on salaries that are to be paid in British
      Pounds. All executive compensation amounts were translated into U.S. dollars
      at
      the average exchange rate prevailing during the applicable periods
      presented.





**Item
      12. 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
                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 July 6, 2006 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 July 6, 2006.
      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.


45




Name
                and address of owner
            Title
                of Class
            Capacity
                withCompany
            Number
                of SharesBeneficially
                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
            5,060,379
                (4)
            9.14%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
            1,999,261
                (5)
            3.62%Daniel
                Murphy
              c/o
                Index Oil & Gas Ltd.,
              Lawrence
                House, Lower Bristol Road,
              Bath
                BA2 9ET, United Kingdom.
            Common
                Stock
            Director
                and Chairman of the Board
            993,488
                (3)
            1.81%Michael
                Scrutton
              c/o
                Index Oil & Gas Ltd.,
              Lawrence
                House, Lower Bristol Road,
              Bath
                BA2 9ET, United Kingdom.
            Common
                Stock
            Director
            2,636,417
                (7)
            4.84%David
                Jenkins
              c/o
                Index Oil & Gas Ltd.,
              Lawrence
                House, Lower Bristol Road,
              Bath
                BA2 9ET, United Kingdom.
            Common
                Stock
            Director
            1,203,172
                (6)
            2.21%Douglas
                Wordsworth
              44
                Heath Lane,
              Little
                Sutton, Ellesmere Port, Cheshire, UK CH66 NT.
            Common
                Stock
            
            3,829,433
                (8)
            7.05%All
                Officers and
              Directors
                As a Group
              (5
                persons)
            
            
            11,892,711
            21.62%





(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 54,544,345 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 July 6, 2006 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 July 6, 2006 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 555,435 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, (ii) options to purchase 741,292 shares of
      Common Stock of the Company exercisable at $0.35 per share, which are presently
      exercisable or exercisable within 60 days, and (iii) 101,265 shares of Common
      Stock granted as executive bonus compensation.


(5)
      Includes (i) warrants to purchase 124,488 shares of Common Stock of the Company
      exercisable at $0.14 per share, (ii) options to purchase 741,292 shares of
      Common Stock of the Company exercisable at $0.35 per share, which are presently
      exercisable or exercisable within 60 days, and (iii) 101,264 shares of Common
      Stock granted as executive bonus compensation.


(6)
      Includes (i) warrants to purchase 12,539 shares of Common Stock of the Company
      exercisable at $0.14 per share, (ii) options to purchase 100,056 shares of
      Common Stock of the Company exercisable at $0.35 per share, which are presently
      exercisable or exercisable within 60 days, and (iii) 101,264 shares of Common
      Stock granted as executive bonus compensation.


(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 150,688 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.





46









**Options/SARs
      Grants During Last Fiscal Year**




The
      following table sets forth the individual grants of stock options for each
      of
      the below named executive officers, as of March 31, 2006. No stock options
      were
      exercised during the period ending March 31, 2006.






Individual
                  GrantsName
              Number
                  of Total Securities Underlying
                  Options
              %
                  of Total Options Granted to Employees
                  in  Fiscal Year
              Exercise
                  Price per Share
              Expiration
                DateLyndon
                  West
              1,482,584
              36.37%
              $0.35
              1/20/2011Andrew
                  Boetius
              1,482,584
              36.37%
              $0.35
              1/20/2011Daniel
                  Murphy
              1,110,871
              27.25%
              $0.35
              1/20/2011David
                  Jenkins
              200,112
              -
              $0.35
              1/20/2011Michael
                  Scrutton
              301,375
              -
              $0.35
              1/20/2011







**Aggregate
      Option Exercises In Last Fiscal Year and Fiscal Year End Option Values**





The
      following table sets forth, for each of the named executive officers and
      directors, information concerning the number of shares received during fiscal
      year ended March 31, 2006 upon exercise of options and the aggregate dollar
      amount received from such exercise, as well as the number and value of
      securities underlying unexercised options held on March 31, 2006.


**Shares
                    Acquired**
              ****
              **Value**
              ****
              **Number
                    of Securities Underlying****Options at Year End
                  (#)**
              ****
              **Value
                    of In The Money****Options at Year End
                  ($)(2)**
              ******Name**
              ****
              ****
              **on
                  Exercise (#)**
              ****
              ****
              **Realized
                  ($)(1)**
              ****
              ****
              **Exercisable**
              ****
              ****
              **Unexercisable**
              ****
              ****
              **Exercisable**
              ****
              ****
              **Unexercisable**Lyndon
                  West
              
              
              -
              
              
              -
              
              
              741,292
              
              
              741,292
              
              $
              852,486
              
              $
              852,486Andrew
                  Boetius
              
              
              -
              
              
              -
              
              
              741,292
              
              
              741,292
              
              $
              852,486
              
              $
              852,486Daniel
                  Murphy
              
              
              -
              
              
              -
              
              
              555,435
              
              
              555,435
              
              $
              638,750
              
              $
              638,750David
                  Jenkins
              
              
              -
              
              
              -
              
              
              150,688
              
              
              150,688
              
              $
              173,291
              
              $
              173,291Michael
                  Scrutton
              
              
              -
              
              
              -
              
              
              100,055
              
              
              100,055
              
              $
              115,063
              
              $
              115,063




(1)
      Based
      on the difference between the option exercise price and the fair market value
      of
      our common stock on the exercise date.





(2)
      Based
      on the difference between the option exercise price of $0.35 and the closing
      sale price of $1.50 of our common stock as reported on the OTC Bulletin Board
      on
      March 31, 2006, the last trading day of our 2006 fiscal year.





**2006
      Incentive Stock Option Plan**




As
      contemplated by the Acquisition Agreement, following the completion of the
      Acquisition on January 20, 2006, the Company’s Board of Directors agreed to the
      adoption of the 2006 Incentive 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 the Company to the officers, directors,
      employees and consultants of the Company and/or its subsidiaries. Pursuant
      to
      the 2006 Incentive Stock Option Plan, the Company granted options to purchase
      an
      aggregate of 4,577,526 shares of Common Stock 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.





The
      principal terms and conditions of the stock options granted under the 2006
      Incentive Stock Option Plan are that vesting of the options granted to Directors
      of the Company occurs in three stages: (1) 50% on January 20, 2006; (2) 25%
      on
      January 20, 2007; and (3) 25% on January 20, 2008. The options granted are
      exercisable at $0.35 per share. Furthermore, the stock options granted under
      the
      2006 Incentive Stock 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
      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 4,577,526 shares of Common Stock that were
      granted, the following stock options have been granted to directors of the
      Company:






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





47





**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.





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





The
      following related party transactions occurred from January 1, 2004 to January
      20, 2006.





In
      March
      of 2004, a total of 1,000,000 shares were issued to the Company’s officers and
      directors in consideration of $.005 per share, or a total of $5,000 in cash.
      In
      addition, Au E-Mun, Evon Au and Evelyn Au, former officers, directors and
      founders of Chinadoll, Inc. Sdn. Bhd., a privately held Malaysian corporation,
      assigned all of their right, title and interest in and to the Malaysian
      corporation to the Company at no cost to the Company.





On
      April
      28, 2004, David Knapfel, a former officer and director of the Company, loaned
      the Company a total of $40,000 pursuant to the Promissory Note Agreement entered
      into with the Company, for the purpose of securing the lease and opening of
      Thai
      Pasta Sdn. Bdh.’s first restaurant. The loan was repaid in full from the
      proceeds of the Company’s initial public offering, registered with the U.S.
      Securities and Exchange Commission on Form SB-2 and completed in November
      2004.





Total
      stockholder loans to Index Ltd. during the fiscal years ended March 31, 2006
      and
      2005 totaled $676,664 and $94,603, respectively, 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 fiscal 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 in November 2005, together with the issue of 50,065 warrants.
      Of
      these totals 119,585 shares and 23,917 warrants were issued to directors of
      Index Ltd. Convertible notes payable at March 31, 2005, bore no interest, were
      unsecured and represent amounts loaned to Index Ltd. by certain stockholders.
      For more information please see Item 12 “ *Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters”* and
      Notes
      6 and 14 of the Notes to the Consolidated Financial Statements. **





During
      fiscal year ended March 31, 2006, 687,500 shares of common stock were issued
      for
      cash in the amount of $238,591. These shares also included warrants of 137,500
      to purchase shares of common stock. Of these totals 126,000 shares and 25,200
      warrants were issued to directors of Index Ltd. For more information please
      see
      Item 12 “ *Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters”* and
      Notes
      6 and 14 of the Notes to the Consolidated Financial Statements.





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




**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-K, and for other services normally
      provided in connection with statutory filings: approximately $52,500 and $37,000
      for the fiscal years ended March 31, 2006 and March 31, 2005, respectively.





**Audit-Related
      Fees**





We
      incurred no fees for the period from March 31, 2005 to March 31,
      2006 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 December 31, 2005
      for professional services rendered by our principal
      accountants for tax compliance, tax advice, and tax planning. We did not incur
      any tax fees for the fiscal period ended March 31, 2006 for professional
      services rendered by our principal accountants for tax compliance, tax advice,
      and tax planning as Index has not yet filed their current tax
      return.


48







**All
      Other Fees**





We
      did
      not incur any fees for other professional services rendered by our principal
      accountants during the fiscal years ended March 31, 2006 and March 31,
      2005.





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





As
      of the
      fiscal year ended March 31, 2006 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 2007. Prior to the initial meeting of the Audit
      Committee, the fees for
      audit services were approved by our board of directors and the full board met
      to
      discuss 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 will
      be
      provided for these services for the next four months. 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.  We believe that Russell Bedford Stefanou Mirchandani
      LLP’s services and Esther Yap & Co.’s services under the category “All Other
      Fees” were compatible with Russell Bedford Stefanou Mirchandani LLP and Esther
      Yap & Co. maintaining its independence.





**PART
      IV**








**ITEM
      15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES**




(a)       
              1.
            The
                following financial statements for Index Oil and Gas, Inc. are filed
                as a
                part of this report:  Consolidated Balance Sheets-- March
              31, 2006
              and March 31, 2005  Consolidated Statements of Losses--Years
              ended
              March 31, 2006 and 2005  Consolidated
              Statements of Stockholders'  Equity-- Years ended March 31, 2006 and
              2005  Consolidated
              Statements of Cash Flows-- Years ended March 31, 2006 and
              2005  2.
            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.  3.
            The following documents
              are
              included as exhibits to this report.






ExhibitNumber
              
              Description3(i)1*
              
              Amendment
                  to the Articles of Incorporation of Index Oil & Gas Inc. (the
                  "Company"), dated 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..3(i)(2)
              
              Articles
                  of Incorporation of Index Oil & Gas Inc. (3)3(ii)
              
              By-laws
                of Index Oil
                & Gas Inc. (3)10.1*
              
              Acquisition
                  Agreement between Index Oil and Gas Inc., certain Stockholders
                  of Index
                  Oil & Gas Ltd., and Briner Group Inc. dated January 20,
                  2006.10.2*
              
              Form
                  of Share Exchange Agreement entered into by and between Index Oil
&
                  Gas Inc. and certain Index Oil & Gas Ltd.
                  stockholders.10.3*+
              
              Employment
                  Agreement entered into by and between Index Oil & Gas Ltd. and Lyndon
                  West, dated January 20, 2006.10.4*+
              
              Employment
                  Agreement entered into by and between Index Oil & Gas Ltd. Ltd. and
                  Andrew Boetius, dated January 20, 2006.10.5*+
              
              Employment
                  Agreement entered into by and between Index Oil & Gas Ltd. Ltd. and
                  Daniel Murphy, dated January 20, 2006.10.6*+
              
              Non
                  Executive Director Service Agreement entered into by and between
                  Index Oil
                  & Gas Ltd. and David Jenkins, dated January 20,
                  2006.10.7*+
              
              Non
                  Executive Director Service Agreement entered into by and between
                  Index Oil
                  & Gas Ltd. and Michael Scrutton, dated January20,
                  2006.10.8*
              
              Form
                  of Subscription Agreement dated as of January 20, 2006.14.1
              
              Code
                  of Ethics and Business Conduct for officers, directors and employees
                  of
                  Index Oil & Gas Inc. adopted by the Company’s Board of Directors on
                  March 31, 2006. (2)21.1
              
              List
                  of subsidiaries of the Company. (1)23.1
              
              Consent
                  of Ancell Energy Consulting, Inc. (Filed herewith) (1).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.*
                  Incorporated by reference to the Amended Current Report filed on
                  Form
                  8-K/A with the SEC on March 15, 2006.+
                Compensatory plan or arrangement required to be identified pursuant
                to
                Item 15(a)(3) of this Annual Report on Form 10-K(1)
                  Filed Herewith(2)
                  Incorporated by reference to the Annual Report filed on Form 10-KSB
                  with
                  the SEC on March April 10, 2006.(3)
                  Incorporated by reference to the Registration Statement filed on
                  Form SB-2
                  with the SEC on May 24, 2004.





49


**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 & GAS, INC.**Date: July
              14, 2006
            By:
            /s/ Lyndon
              WestLyndon
                WestPresident
                and Chief Executive Officer






**INDEX
                OIL & GAS, INC.**Date: July
              14, 2006
            By:
            /s/ Andrew
              BoetiusAndrew
                BoetiusChief
                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
            
            
            
            July
                14, 2006Daniel Murphy
            
            Chairman
                of the Board/s/
                Lyndon West
            
            Chief
                Executive Officer and Director
            
            July
                14, 2006Lyndon West/s/
                Andrew Boetius
            
            Chief
                Financial Officer and Director
            
            July
                14, 2006Andrew Boetius/s/
            
            Director
            
            July
                14, 2006Michael Scrutton/s/
            
            Director
            
            July
                14, 2006David Jenkins





48





















50