As of JuneSeptember 30, 2008, we had $3,344,577$837,388 in available cash, $276,567$312,810 in prepaid expenses, $479,581 in accrued expenses and accounts payables and $27,598$26,432 in capitalized oil and gas properties as expenses incurred towards exploration activities since inception.properties. As of JuneSeptember 30, 2008 we had $17,947,000 in prospecting licenses which consists of the nine licenses in Botswana acquired from Swansi Holdings for consideration of $3,000,000 in cash and 15,000,000 common stock warrants, recorded at the fair value of $14,947,700. As of JuneSeptember 30, 2008 we had $4,371,875$5,955,239 in capitalized exploratory drilling costs which include the fair value of stock options granted totalling $3,360,200 givengranted to Paul Stroud, Keith Reeves and Dave Weisgerber as theirformer employees whose employment supportssupported our exploratory drilling operations.

Investment in fixed assets during the sixnine months ended JuneSeptember 30, 2008 was $7,541$112,885 compared to $0$298 during the sixnine months ended JuneSeptember 30, 2007.

We intend to seek joint ventures and/or to obtain equity and/or debt financing to support our current and proposed operations and capital expenditures. We cannot assure that any such funding will be available. The included financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

We ownThe Company had acquired nine Prospecting Licenses or leases in unproved oil and gas properties located in the Republic of Botswana. Under the terms of the lease agreements we arethe Company is required to pay aits share of royalties and other obligations. WeThe Company paid $7,579 and $7,996 for the lease years ended September 30, 2007 and 2006, respectively to the Government of Botswana under such lease agreements. OurSuch leases expire in September 30, 2008 and there is no assurance that the leases will be extended by the government.2008.

Pursuant to such contracts, the terms of the leases, as of June 30, 2008 we wereCompany was obligated to pay the government of Botswana $5,684 on September 30, 2008 to maintain the leases. This amount does not contemplate funds required for exploration.

UnderPursuant to the leases we werelease agreements the Company was required to expend the following amounts per lease during the respective lease period reflected below:period:

As of JuneSeptember 30, 2008 we hadthe Company has not expended the full amounts required during the lease periods. AmountsUnder Botswana law, amounts that were to be spent on exploration are due to the government by Botswana law.if not spent on exploration. As of Juneat September 30, 2008, and based on Botswana law, management is of the opinion that we willCompany was not be able to renew 50% of the lease acreage and, accordingly, the financial statements reflect a liability of $4,256,415$4,076,528 (P 27,675,000 converted at $.1538)$.1473) to the government of Botswana representing the aggregate minimum required prospecting expenditures over the three year lease term. We planterm for the 50% acreage that was not renewed.

Subsequent to accelerateSeptember 30, 2008 the exploration activity on the properties and management isCompany was granted an extension for 50% of the opinion that such activity will be sufficient to enable the renewallease acreage consisting of six of the remaining 50%. original leases for an additional two year period. Pursuant to such contracts, the Company paid $3,239 subsequent to September 30, 2008 for the first year of the leases extension. This amount does not contemplate funds required for exploration.

On May 7, 2008, we sold 8,000,000 shares of our common stock, together with warrants to purchase up to 8,000,000 shares of common stock, to certain investors in a private placement, also referred to as the Offering. We received $8,000,000 in aggregate gross proceeds in the Offering. The warrants have an exercise price of $1.50 per share and are exercisable for 3 years. The warrants are not exercisable until such time as our shareholders approve an amendment to our articles of incorporation to increase our authorized shares of common stock. Pursuant to an Agency Agreement between the Company and First Capital Invest Corp. (the “Agent”), the Agent received a cash commission of $800,000 and an expense reimbursement of $250,000 along with agent’s warrants to purchase up to 800,000 shares of common stock. The warrants have an exercise price of $1.50 per share and are exercisable for 3 years. The warrants are not exercisable until such time as our shareholders approve an amendment to our articles of incorporation to increase our authorized shares of common stock.

Pursuant to the Subscription Agreements entered into as part of the Offering, in the event we, in a subsequent financing, sell any of its equity securities and receives gross proceeds of $5,000,000 or more within 120 days following the closing of the Offering, the investors in the Offering have the right for 30 days following notice by us to them of the subsequent financing to participate in and receive the same terms as the investors in the subsequent financing. If an investor in the Offering elects to participate in the subsequent financing, (i) the subscription funds provided to us as part of the Offering will be allocated to the purchase price or purchase consideration, as applicable, for the securities offered in the subsequent financing, (ii) the investor will surrender to us for cancellation the stock certificates representing the shares of common stock and the warrant received in the Offering, and (iii) the investor will enter into the operative documents prepared in conjunction with the subsequent financing.

We will require additional financing in order to complete our stated plan of operations for the next twelve months. We estimate that we will need approximately $20,000,000 to $25,000,000 for working capital and to carry out our intended objectives in Botswana during the next twelve months. There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptablesatisfactory to us andus. There can also be no assurance that itwe will be sufficient to fund our cash requirements until we can reach a level of profitable operationssuccessful in identifying and positive cash flows.reaching agreement with joint venture partners. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. We currently have no firm commitments for any additional capital.

  

The trading price of our shares of common stock and the downturn in the United States stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

For the threenine months ended JuneSeptember 30, 2008, operating expenses of $3,174,125$4,103,504 consisted primarily of stock-based compensation expense of $2,556,605 and general and administrative expenses of $617,128$1,532,013 along with depreciation of $392.$14,886. For the threenine months ended JuneSeptember 30, 2007, operating expenses of $10,506 consisted of general and administrative expenses.

Critical accounting policies are those that management believes are both most important to the portrayal of the Company’s financial condition and results of operations and that require difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that involve uncertainty.

The Company’s financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company’s net loss from operations for the three and sixnine months ended JuneSeptember 30, 2008 totaled $3,174,125$724,588 and $3,367,748,$4,092,336 and the net working capital deficit and total stockholders’ equity through JuneSeptember 30, 2008 totaled $2,685,525$4,909,531 and $19,668,995,$19,118,055, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern will be dependent upon its ability to obtain sufficient financing to pay its existing creditors, cover its operating overhead, and fund oil and gas exploration and production projects. Other market factors such as the price of oil, gas and other natural resources upon extraction being at prices sufficient to generate profitable operations may impact the Company’s ability to continue as a going concern.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company is in the exploration stage. In December 2007, the Company acquired oil and gas licenses and drilling rights located in Botswana.Botswana, Africa. The recoverability of the cost of capitalized oil and gas properties are dependent upon the discovery of recoverable reserves, the Company’s ability to obtain the necessary funding to extract the reserves and the sale of production at profitable market prices.

The Company complies with Financial Accounting Standards Board Statement No.7 and SEC Guide 7 for its characterization of the Company as exploration stage.

On April 4, 2005, the FASB adopted FASB Staff Position FSP FAS 19-1 that amends Statement of Financial Accounting Standards No. 19 (FAS 19), Financial Accounting and Reporting by Oil and Gas Producing Companies, to permit the continued capitalization of exploratory well costs beyond one year if (a) the well found a sufficient quantity of reserves to justify its completion as a producing well and (b) the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project.

The Company accounts for its crude oil development and natural gas development activities utilizing the successful efforts method of accounting. Under this method, costs of productive exploratory wells, development dry holes and productive wells and undeveloped leases are capitalized. Oil and gas lease acquisition costs are also capitalized. Exploration costs, including personnel costs, certain geological and geophysical expenses and daily rentals for oil and gas leases, are charged to expense as incurred. Exploratory drilling costs are initially capitalized, but charged to expense if and when the well is determined not to have found reserves in commercial quantities. The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production amortization rate. A gain or loss is recognized for all other sales of producing properties.

The application of the successful efforts method of accounting requires managerial judgment to determine that proper classification of wells designated as developmental or exploratory which will ultimately determine the proper accounting treatment of the costs incurred. The results from a drilling operation can take considerable time to analyze and the determination that commercial reserves have been discovered requires both judgment and industry experience. Wells may be completed that are assumed to be productive and actually deliver oil and gas in quantities insufficient to be economic, which may result in the abandonment of the wells at a later date. Wells are drilled that have targeted geologic structures that are both developmental and exploratory in nature and an allocation of costs is required to properly account for the results. Delineation seismic incurred to select development locations within an oil and gas field is typically considered a development cost and capitalized, but often these seismic programs extend beyond the reserve area considered proved and management must estimate the portion of the seismic costs to expense. The evaluation of oil and gas leasehold acquisition costs requires managerial judgment to estimate the fair value of these costs with reference to drilling activity in a given area. Drilling activities in an area by other companies may also effectively condemn leasehold positions.

The CompanyCorporation recognizes the value of a liability for an asset retirement obligation in the year in which a reasonable estimate of value can be made.

Changes in the liability for an asset retirement obligation due to the passage of time will be measured by applying an interest method of allocation. The amount will be recognized as an increase in the liability and an accretion expense in the statement of operations. Changes resulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows are recognized as an increase or a decrease in the carrying amount of the liability for an asset retirement obligation and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset. As at JuneSeptember 30, 2008 the value of the oil and gas property’s site restoration costs is insignificant.

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to plan of action based on the then known facts.

The Company has adopted the provisions of the FAS No. 142, “Goodwill and Intangible Assets”. Under FAS No. 142, goodwill and intangible assets with indefinite lives are not amortized but are annually tested for impairment. The determination of any impairment includes a comparison of the estimated future operating cash flows anticipated during the remaining life for the net carrying value of the asset as well as a comparison of the fair value to the book value of the Company or the reporting unit to which the goodwill can be attributed.

In December 2004, the Financial Accounting Standards Board issued FAS 123R “Share-Based Payment”, a revision to FAS 123. FAS 123R replaces existing requirements under FAS 123 and APB 25, and requires public companies to recognize the cost of employee services received in exchange for equity instruments, based on the grant-date fair value of those instruments, with limited exceptions. FAS 123R also affects the pattern in which compensation cost is recognized, the accounting for employee share purchase plans, and the accounting for income tax effects of share-based payment transactions. The Company adopted FAS 123R on November 1, 2006.

The accounts of the Company are translated in accordance with Statement of Financial Accounting Standard No. 52, which requires that foreign currency assets and liabilities be translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using the average rates prevailing throughout the period. The effects of unrealized exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are accumulated as the accumulated other comprehensive adjustment in shareholders’ equity.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make assumptions and estimates that effect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”). This interpretation clarifies the application of SFAS 109 by defining the criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements and also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. FIN 48 is effective for our fiscal year commencing November 1, 2007. The adoption of FIN 48 is not expected to have an impact on our results of operations or financial condition.

In November 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combination (FAS 141(R)) and SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (FAS 160). FAS 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. FAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as non-controlling interests and classified as a component of equity. FAS 141(R) and FAS 160 are effective for both public and private companies for fiscal years beginning on or after December 15, 2008 (fiscal 2010 for the Company). FAS 141(R) will be applied prospectively. FAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of FAS 160 will be applied prospectively. Early adoption is prohibited for both standards. Management is currently evaluating the requirements of FAS 141(R) and FAS 160 and has not yet determined the impact on its financial statements.

In December 2007, the FASB issued FSAS No.157, Fair Value Measurements. This Statement does not require any new fair value measurements, but rather, it provides enhanced guidance to other pronouncements that require or permit assets or liabilities to be measured at fair value. However, the application of this Statement may change how fair value is determined. The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. As of December 1, 2007 the FASB has proposed a one-year deferral for the implementation of the Statement for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. Management is currently evaluating the requirements of FAS 157 and has not yet determined the impact on its financial statements.

In December 2007, the FASB issued FSAS No.159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115 . This Statement provides all entities with an option to report selected financial assets and liabilities at fair value. The Statement is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007, with early adoption available in certain circumstances. Management is currently evaluating the requirements of FAS 159 and has not yet determined the impact on its financial statements.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) and pursuant to Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of Juneat September 30, 2008. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and were fully effective as of JuneSeptember 30, 2008 in providing reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal controls over financial reporting (as such term is defined under Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.