Eden Energy (EDEYF) 10QSB 2007 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

[   ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to __________

Commission file number  000-31503

EDEN ENERGY CORP.

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

Nevada	N/A
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Suite 1680 – 200 Burrard Street, Vancouver, British Columbia Canada V6C 3L6

(Address of principal executive offices)

604.693.0179

(Issuer's telephone number)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.     Yes [ ]     No  [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 42,430,440 common shares issued and outstanding and nil preferred shares issued and outstanding as of November 6, 2007

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

PART I - FINANCIAL INFORMATION

Item1.Financial Statements.

It is the opinion of management that the interim consolidated financial statements for the quarter ended September 30, 2007 include all adjustments necessary in order to ensure that the interim consolidated financial statements are not misleading.

EDEN ENERGY CORP.

(An Exploration Stage Company)

Consolidated Financial Statements

(Expressed in United States dollars)

September 30, 2007

(Unaudited)

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

F-2

Eden Energy Corp.

(An Exploration Stage Company)

Consolidated Balance Sheets

		September 30, 2007		December 31, 2006
Assets		(Unaudited)
Current Assets
Cash and cash equivalents	$	23,424,476	$	23,438,355
Accounts receivable		19,203		208,976
Prepaid expenses		125,506		36,504
Current portion of deferred financing costs		175,075		191,004
Total Current Assets		23,744,260		23,874,839
Oil and gas properties, unproven (Note 4)		13,378,441		11,816,603
Restricted cash (Note 9)		113,411		974,067
Property and equipment, net of depreciation of $18,373 (2006 - $7,984)		51,776		50,762
Deferred financing costs, net of amortization of $397,925 (2006 - $254,672)		-		127,324
Total Assets	$	37,287,888	$	36,843,595
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities	$	236,488	$	262,471
Total Current Liabilities		236,488		262,471
Convertible Notes, less unaccreted discount of $592,276 (2006 - $1,076,866) (Note 7)		8,032,724		7,548,134
Total Liabilities		8,269,212		7,810,605
Stockholders’ Equity
Preferred Stock:
10,000,000 preferred shares authorized, $0.001 par value None issued		—		—
Common Stock: (Note 8)
100,000,000 shares authorized, $0.001 par value
42,430,440 (December 31, 2006 – 42,188,195) shares issued and outstanding		42,430		42,188
Additional paid-in capital		42,487,483		41,612,921
Accumulated other comprehensive (loss) income		46,014		35,084
Deficit accumulated prior to the exploration stage		(555,139)		(555,139)
Deficit accumulated during the exploration stage		(13,002,112)		(12,102,064)
Total Stockholders’ Equity		29,018,676		29,032,990
Total Liabilities and Stockholders’ Equity	$	37,287,888	$	36,843,595

The accompanying notes are an integral part of these interim consolidated statements

F-3

Eden Energy Corp.

(An Exploration Stage Company)

Consolidated Statements of Operations

(Unaudited)

		Three Months Ended September 30, 2007		Three Months Ended September 30, 2006		Nine Months Ended September 30, 2007		Nine Months Ended September 30, 2006		January 1, 2004 (Date of Inception of Exploration Stage) To September 30, 2007
Revenue
Oil and gas (Note 3)	$	1,802	$	—	$	42,060	$	—	$	42,060
Expenses
Consulting
- cash	$	—	$	21,000	$	—	$	63,000	$	635,030
- stock-based compensation		36,955		204,344		110,865		476,803		736,216
Depletion and depreciation		46,673		50,302		154,993		147,247		417,650
General and administrative
- cash		100,095		142,679		380,244		486,277		1,427,166
- stock-based compensation		6,058		—		18,174		—		20,193
Impairment loss on oil and gas properties		—		—		—		—		2,272,162
Interest expense (Note 7)		48,895		528,855		186,482		1,254,366		5,958,716
Management fees (Note 5)
- cash		115,500		105,000		346,500		266,000		912,500
- stock-based compensation		170,559		450,144		484,139		1,000,662		1,948,963
Oil and gas operating expenses		1,970		—		23,563		—		23,563
Professional fees		62,341		56,327		141,965		178,730		633,238
Operating expenses		589,046		1,558,651		1,846,925		3,873,085		14,985,397
Loss before other items		(587,244)		(1,558,651)		(1,804,865)		(3,873,085)		(14,943,337)
Other items
Gain on foreign exchange		22,807		4,606		105,692		31,061		22,804
Loss on disposal of equipment		(1,544)		—		(1,544)		—		(1,544)
Interest income		301,270		312,540		800,669		596,323		1,919,965
Net loss		(264,711)		(1,241,505)		(900,048)		(3,245,701)		(13,002,112)
Other comprehensive (loss) income
Foreign currency translation adjustment		39,880		(50)		10,932		49,905		46,014
Comprehensive loss	$	(224,831)	$	(1,241,555)	$	(889,116)	$	(3,195,796)	$	(12,956,098)
Basic and diluted loss per share	$	(0.01)	$	(0.03)	$	(0.02)	$	(0.08)
Weighted average number of common shares outstanding		42,430,000		41,983,000		42,296,000		40,521,000

The accompanying notes are an integral part of these interim consolidated statements

F-4

Eden Energy Corp.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)

		Nine Months Ended September 30, 2007		Nine Months Ended September 30, 2006		January 1, 2004 (Date of Inception of Exploration Stage) To September 30, 2007
Cash provided by (used in):
Operating Activities:
Net loss from operations	$	(900,048)	$	(3,245,701)	$	(13,002,112)
Non-cash items:
Impairment of oil and gas properties		—		—		2,272,162
Interest expense relating to accretion of convertible debt		—		484,590		4,608,317
Interest expense paid by issue of common stock		261,625		634,611		1,340,510
Depletion and depreciation		154,993		147,247		417,650
Loss on disposal of equipment		1,544		—		1,544
Stock-based compensation		613,178		1,477,465		2,941,653
Changes in non-cash operating assets and liabilities:
Accounts receivable		(10,227)		(7,752)		(19,203)
Prepaid expenses and other		(89,002)		(72,304)		(125,506)
Accounts payable and accrued liabilities		(230,541)		(75,203)		(107,665)
		(198,478)		(657,047)		(1,672,650)
Investing Activities:
Net assets acquired of Frontier Explorations Ltd.		—		—		(475)
Restricted cash		860,656		—		(113,411)
Proceeds from sale of oil and gas interest		200,000		—		200,000
Purchase of property and equipment		(14,298)		(52,538)		(73,044)
Oil and gas property acquisition and exploration, net		(872,690)		(6,045,485)		(13,268,830)
		173,668		(6,098,023)		(13,255,760)
Financing Activities:
Issuance of common stock, net of issuance costs		—		15,874,636		29,804,870
Proceeds from convertible notes		—		—		8,502,000
		—		15,874,636		38,306,870
Effect of exchange rate changes on cash		10,931		49,903		46,016
Increase (decrease) in cash and cash equivalents		(13,879)		9,169,469		23,424,476
Cash and cash equivalents, beginning		23,438,355		18,082,596		—
Cash and cash equivalents, ending	$	23,424,476	$	27,252,065	$	23,424,476
Non-cash financing and investing activities:
Interest capitalized to oil and gas properties	$	689,148	$	—	$	964,959
Issue of common stock for interest expense	$	261,625	$	634,611	$	1,340,510
Issue of common shares for oil and gas properties	$	—	$	—	$	450,000
Issue of convertible debenture, net of discount	$	—	$	—	$	400,000
Debt assumed by previous management	$	—	$	—	$	19,846
Supplementary disclosure:
Interest paid	$	322	$	—	$	1,505
Income taxes paid	$	—	$	—	$	—

The accompanying notes are an integral part of these interim consolidated statements

F-5

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

1. Basis of Presentation

The unaudited interim consolidated financial statements have been prepared by Eden Energy Corp. (the “Company”) in accordance with generally accepted accounting principles in the United States for interim financial information and conforms with instructions to Form 10-QSB of Regulation S-B and reflects all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for fair presentation of the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2007. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These unaudited interim consolidated financial statements and notes included herein should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended December 31, 2006, included in the Company’s Annual Report on Form 10-KSB. The accounting principles applied in the preparation of these interim consolidated financial statements are consistent with those applied for the year ended December 31, 2006 with the addition of the accounting policy disclosed in Note 3.

2. Nature and Continuance of Operations

The Company is primarily involved in oil and gas exploration activities in Alberta, Canada, and Colorado and Nevada, USA. Under the terms of its Participation Agreements, the Company has committed to fund ongoing leasehold and applicable exploration expenses required to take the prospects to drillable stages, currently estimated at net $324,000 over the next 12 months.

Combined, the Company has budgeted an approximate $18,800,000 over the next 12 month period for exploration and drilling programs on the Company’s projects; however, approximately $12,500,000 of the budgeted amount is success based, subject to management review of field results and other criteria, and to be expended only with positive election to proceed by the Company. As it relates to the Colorado development-drilling program, the Company’s planned expenditures are expected to be linked to securing industry reserve based financing.

The Company’s interim consolidated financial statements are prepared on a going concern basis in accordance with generally accepted accounting principles in the United States which contemplates the realization of assets and discharge of liabilities and commitments in the normal course of business. The Company is in the exploration stage of its resource business and has experienced negative cash flows from operations to date and has accumulated losses of $13,002,112 since inception of the exploration stage. To date the Company has funded operations through the issuance of capital stock and debt. Management’s plan is to continue raising additional funds through future equity or debt financings as needed until it achieves profitable operations from its oil and gas activities. The ability of the Company to continue its operations as a going concern is dependent on continuing to raise sufficient new capital to fund its exploration and development commitments and to fund ongoing losses if, as and when needed, and ultimately on generating profitable operations.

3. Significant Accounting Policy

Revenue Recognition

Oil and natural gas revenues are recorded using the sales method whereby the Company recognizes oil and natural gas revenue based on the amount of oil and gas sold to purchasers when title passes, the amount is determinable and collection is reasonably assured. Actual sales of gas are based on sales, net of the associated volume charges for processing fees and for costs associated with delivery, transportation, marketing, and royalties in accordance with industry standards. Operating costs and taxes are recognized in the same period of which revenue is earned.

F-6

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

4. Oil and Gas Properties

The following of the Company’s oil and gas properties are located in the United States and Canada and are unproven. These costs incurred are excluded from depletion and amortization as follows:

		September 30, 2007		December 31, 2006
Acquisition costs
Canada	$	-	$	-
United States		4,386,622		4,274,485
Less: cumulative impairment		(726,428)		(726,428)
		3,660,194		3,548,057
Exploration costs
Canada		2,090,160		1,462,241
Less: cumulative impairment		(1,462,241)		(1,462,241)
United States		9,173,821		8,352,039
Less: cumulative impairment		(83,493)		(83,493)
		9,718,247		8,268,546
Total	$	13,378,441	$	11,816,603

Noah Project - Nevada

The Company entered into an Assignment Agreement with Fort Scott Energy Corp (“Fort Scott”) dated August 5, 2004, in which the Company acquired Fort Scott’s interest in a Participation Agreement dated April 26, 2004 with Cedar Strat Corporation (“Cedar Strat”). The Participation Agreement provided for the acquisition and development of certain petroleum and natural gas rights and leases in an area of mutual interest in eastern Nevada, consisting of approximately 211,000 gross acres, known as the Noah Project.

The Assignment Agreement provides for Fort Scott to retain a 2% over-riding royalty in the area of mutual interest and for each 10 million barrels of proven reserves on the lands underlying the leases, the Company is committed to issue 1,000,000 shares of common stock to Fort Scott, up to a maximum of 10,000,000 shares of common stock.

Upon the fulfillment of the obligations set out in the Participation Agreement, the Company will earn an 80.5% net revenue interest in the lands underlying the leases, and Cedar Strat will be vested with a 5% over-riding royalty interest. Cedar Strat also retains a 5% back in working interest which may be adjusted upwards to as much as a 12.5% back in working interest should the Company elect not to proceed with the drilling election pursuant to the terms of the Participation Agreement.

On March 1, 2007, the Company entered into a Letter Agreement with Cedar Strat whereby the future development plan of the Noah project was confirmed and approximately 21,000 acres of peripheral leases were transferred to Cedar Strat.

Effective March 29, 2007, the Company entered into an Amendment to the Participation Agreement with Cedar Strat for this prospect. Under the terms of the Amendment, the acreage block at Noah has been divided into four Prospect Areas with each Prospect Area encompassing approximately 50,000 acres of leases. The Prospect Areas are designated Prospect Area 1 to 4 sequentially from north to south. The Amendment calls for the prospect areas to be worked sequentially from North to South by the Company either by; 1) electing to drill an initial test well within the designated Prospect Area, 2) electing to drill a subsequent well or wells within the designated Prospect Area or, 3) electing to shoot a seismic program of no less than twenty-five linear miles in the next sequential untested Prospect Area. As agreed to, the Company will initiate the sequential work by drilling an Initial Test Well in Prospect Area 1 to a depth of approximately 7,000 to 9,000 feet by no later than November 30, 2008.

F-7

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

4. Oil and Gas Properties (continued)

Under the terms of the Amendment, drilling or seismic operations shall begin within each specified Prospect Area no later than 12 months following the required election date (as follows) unless extended by both parties acting reasonably. The Company shall have ninety (90) days from release of either the drilling rig or completion rig, whichever is later, of the Initial Test Well in the designated Prospect Area, to elect to either drill a Subsequent Well(s) in the Prospect Area or shoot a Seismic Program in the next untested Prospect Area. The Company shall have 180 days from the release of the seismic crew to elect to drill an Initial Test Well in the newly designated Prospect Area or elect to shoot a Seismic Program in the next untested Prospect Area.

Under the terms of the Amendment, if the Company drills an Initial Test Well or Subsequent Well(s) to the base of the sub-thrust Devonian Formation or 17,000 feet, whichever is shallower, the Company will retain all rights, title and interest in all leases and lands within that particular Prospect Area. In each Prospect Area that the Company drills an Initial Test Well or Subsequent Well(s) to a depth shallower than the base of the sub-thrust Devonian or 17,000 feet, ,the Company shall retain all rights, title and interest in all leases and lands within the Prospect Area, to a depth of 1,000 feet below the base of the deepest Formation penetrated If in this case, the Company elects not to drill a Subsequent Well, then the Company will offer all deeper rights in the leases within the Prospect Area to Cedar Strat and Cedar Strat shall have 90 days from receipt of such notice in which to exercise this option. Failure of Cedar Strat to exercise its option within such 90 day period shall be deemed as a waiver of its option right.

Should the Company elect not to drill an Initial Test Well in Prospect Areas 2, 3, or 4, then the Company shall, at Cedar Strat’s option, relinquish and assign to Cedar Strat, all right, title and interest in all leases and lands subject to the Participation Agreement lying within the specific Prospect Area, within 90 days after receiving written notice from Cedar Strat of its intent to exercise its option. Cedar Strat’s right to exercise its option shall also be for a 90 day period after receiving written notice from the Company of its election not to drill the Prospect Area. Failure of Cedar Strat to exercise its option within such 90 day period shall be deemed as a waiver of its option right.

Rental payments on the initial acreage and any subsequently acquired acreage will be maintained by the Company during this development period, except on any acreage which Cedar Strat may elect to acquire pursuant to the exercise of its options.

Effective March 29, 2007, the Company entered into a Farm Out Agreement with Midland Texas based Fasken Nevada - 1, LLC and Fasken Oil and Ranch LP, privately held companies (the “Partner”) for the drilling of the Noah prospect as defined in the Amendment to the Participation Agreement with Cedar Strat. The Partner will pay 2/3rd’s of the cost to drill, test and complete the first well in the first Prospect Block and the Company will pay 1/3rd. The Partner will act as operator. Upon drilling and completing the first well in Prospect Area 1 the Partner will be assigned a 50% interest in the Company’s leases in Prospect Area 1 as provided for in the Amendment to the Participation Agreement with Cedar Strat.

Provided the Partner has met its obligations in Prospect Area 1, it shall have the option to proceed to develop Prospect Area 2. If it elects to proceed with developing Prospect Area 2, the Partner shall pay a prospect recovery fee of $2,000,000 to the Company for costs incurred on Prospect Area 1 and shall have the right to earn a 50% interest in the Prospect Area by paying 2/3rd’s of any seismic programs and the drilling and completing to casing point of a second well. Thereafter, the Partner shall continue to have the right to earn in subsequent Prospect Areas under the same terms but with no further prospect recovery fees.

The first well has been staked and is expected to be drilled to a total depth of between 7,000 and 9,000 feet, for an estimated net cost to the Company of $1,340,000. The Partner has commenced field work required for well permitting and expects to drill the well before December 31, 2007. On July 9, 2007 the Partner received approval on the required Federal and State permits to drill the well. On July 10, 2007 the Company was advised by the Partner that they received approval from the BLM for commencement of road and location construction. The spudding of the Noah Federal No. 1 well was rescheduled to Spring 2008 and construction of the lease access road and drill site was essentially completed and the area would be secured until drilling commencement in 2008.

F-8

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

4. Oil and Gas Properties (continued)

Cherry Creek Project - Nevada

On October 21, 2005, the Company entered into a separate Letter Agreement with Cedar Strat for the exploration and development of petroleum and natural gas rights and leases in an area of mutual interest (AMI) in northeastern Nevada, known as the Cherry Creek project. The Company paid Cedar Strat $216,000 for exploration expenses, which included gravity and field mapping.

Effective January 24, 2006, the Company entered into a formal Joint Participation Agreement with Cedar Strat for the Cherry Creek project. Pursuant to the Joint Participation Agreement, the Company agreed to participate in Cedar Strat’s Cherry Creek project and pay Cedar Strat a $750,000 prospect fee. The Company also agreed to accept responsibility for acquiring and funding BLM leases and private fee leases, if applicable, in order to facilitate the exploration efforts. The Company assumed the obligation to pay the annual rental on such leases.

On March 14, 2006, the Company acquired approximately 76,459 gross acres of oil and gas lease lands at auction in northeastern Nevada, which were subsequently reduced to approximately 69,982 gross acres. On September 30, 2006, the Company gave notice to surrender the low priority leases to Cedar Strat and retained approximately 18,500 gross acres of premium prospective leases. On December 12, 2006, the Company acquired approximately 2,500 additional gross acres of oil and gas leases at auction. Subsequent to December 12, 2006 the Company acquired additional leases from the BLM, some of which were not completed on by a buyer at a previous land sale, On March 1, 2007 the Company entered into a Letter Agreement with Cedar Strat whereby approximately 2,500 acres of peripheral Cherry Creek acreage were transferred to Cedar Strat leaving the Company with approximately 26,000 gross acres of oil and gas leases at Cherry Creek, At the present time, further evaluation of the geological and other data is required prior to making additional exploration decisions in this area.

Big Sand Spring Valley Project – Nevada - (Divested November 16, 2006)

On June 14, 2005, the Company entered into a separate agreement with Cedar Strat which was formalized into a final Participation Agreement on November 1, 2005. The Participation Agreement entitled the Company to acquire and develop petroleum and natural gas rights and leases in an area of mutual interest. On November 1, 2005, the Company entered into a Participation Agreement with Merganser Limited (subsequently Eternal Energy Corp.) (“Eternal”) for the joint development of this project, and on November 8, 2005, received Eternal’s portion of project costs of US$667,000.

Pursuant to a Letter Agreement dated November 1, 2006, between Cedar Strat, Eternal and the Company, and formalized by an agreement dated November 16, 2006, Eternal acquired 100% of the Company��s interest in the Big Sand Spring Valley Project in consideration for a final payment of $200,000 (received on January 9, 2007) and a release from any further obligations under the November 1, 2005 Participation Agreement.

Chinchaga Project - Alberta

On March 13, 2006, the Company entered into a farm-in arrangement with Suncor Energy Inc. (“Suncor”) of Calgary, Alberta. The arrangement provided for the Company to participate, with a 50% working interest and with other minor partners, in the cost to drill an exploratory well on approximately 18,000 gross acres of leases owned by Suncor, while retaining options to drill a second well to earn additional acreage. Suncor retains a 12.5% gross overriding royalty on the lands which are known as the Chinchaga area.

By drilling the first well which was plugged and abandoned on January 22, 2007, the Company earned a 50% working interest in approximately 7,000 gross acres. The Company and its partners elected not to drill the Option Well or acquire the Block 1 – Option Lands, nor purchase the additional Block 2 Option Lands that were available. The joint venture partners acquired an additional 1,279 gross acres at a February 8, 2007 land sale of which the Company holds a 55.56% working interest, due to one partner declining to participate in the land acquisition. Currently, the Company and its partners are evaluating the Farmout Lands earned from the first well and the recently acquired lands in Chinchaga before making any further exploration decisions.

F-9

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

4. Oil and Gas Properties (continued)

On February 14, 2007, the Company entered into a separate farm-in arrangement with Suncor. Under the terms of this arrangement, the Company participated with a 10% working interest, in the drilling of an exploratory well and earned a 10% working interest in approximately 9,600 gross acres. Suncor retains a 12.5% gross overriding royalty on these lands. The Company acquired a 10% interest in an additional 5,120 gross acres of offsetting lands at an approximate gross cost of $600,000 to the joint venture partnership. These lands are subject to a 7.5% overriding royalty to Suncor. The Company also earned a first right of refusal to equalize to its proportionate share in another 5,760 gross acres held by Suncor. The well spud on February 10, 2007 and reached final depth of 8,415 feet. On March 19, 2007, the Company and its partners reported the well was dry and was to be abandoned.

On October 4, 2007 the Company reported its plan to conduct additional seismic operations this winter and if warranted drill one new well at Chinchaga the following winter drilling season. On November 2, 2007 the Operator recommended and the Company agreed, in light of the soft natural gas market and changes to Alberta royalty rates, to continue evaluating the area and consider delaying seismic operations until next year.

Ant Hill Unit Drilling and Development Project – Colorado

Effective September 1, 2006, the Company entered into a farm-in agreement with Starlight Oil and Gas LLC and Starlight Corporation (“Starlight”) to undertake a development drilling program located in western Colorado. Under the terms of the agreement, the Company has paid Starlight a prospect fee of $900,000. Starlight will participate for a 10% working interest and the Company will have a 75% working interest in the prospective lands. Starlight will retain a 7.5% gross overriding royalty on the lands.

The Ant Hill Unit is a 20,000 acre federal exploratory unit currently operated by EnCana Oil and Gas (USA) (“EnCana”). Under a Drilling and Development Agreement executed between Starlight and EnCana on May 5, 2006, and which the Company became a party to, the Company and Starlight have agreed to drill a minimum of four additional wells in areas outside of the current Participating Areas (PA’s) commencing in the fall of 2006. The wells will be drilled on 160 acre drilling blocks typically encompassing standard governmental quarter sections. By drilling and completing these wells, the existing federal exploratory unit will remain in effect for several more years. The Company and Starlight will carry EnCana for 15% of the total well cost in each new well drilled on 40-acre drill site quarter/quarter section. For each well drilled, the Company and Starlight will also earn a 100% interest in a diagonal 40-acre tract, located in the same 160-acre quarter section. EnCana retains its 100% interest in the two remaining offset locations in each 160 acre drilling block.

After the initial four locations are drilled, the Company and Starlight may elect to develop additional 160-acre drilling blocks on any acreage outside the existing PA’s under the same terms. There are 34 potential 160-acre drilling blocks outside of the existing PA’s that have not been developed, resulting in 68 potential drilling locations on what is effectively 40-acre spacing. There is also the potential to develop the field on 20-acre spacing which would provide for another 68 drilling locations. In December 2006, the first two wells were tied in and completed. The Company is planning to re-enter the first of these two wells, shut off the water and perforate and frac an additional uphole zone. With the second well the Company is planning to re-enter the well and add additional pay with a two-stage fracture treatment.

The Company is also budgeting for two additional wells in the Ant Hill Unit in 2007 estimated at approximately $4,800,000. Subject to positive election to continue to drill in 2008, the Company is budgeting for six additional wells over the drilling season of May 1, 2008 to December 1, 2008. The total estimated cost of development in the Ant Hill Unit over the next 12 month period is approximately $15,000,000 including engineering reports and well permitting costs. To date the Company has received or accrued approximately $42,000 gross from gas and liquid sales from the first two wells for the first nine months of 2007. This amount represents production from the two wells prior to their re-completion.

On August 31, 2007 the Company entered into an agreement with Starlight where Starlight assigned to the Company all of its rights, title, and interests in both the Ant Hill Drilling and Development Agreement with EnCana and the related Participation Agreement with the Company.

F-10

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

5. Related Party Transactions

(a) The Company entered into a management agreement dated September 1, 2004, as amended May 1, 2006, February 1, 2006, and December 21, 2006 (effective January 1, 2007), with a private company wholly-owned by the President of the Company. Under the terms of the amended agreement, the Company agreed to pay a fee of $16,500 per month. During the nine-month period ended September 30, 2007, management fees of $148,500 (2006 - $130,000) were incurred.

(b) The Company entered into a management agreement dated May 1, 2005, as amended February 1, 2006 and December 21, 2006 (effective January 1, 2007) with a director and officer of the Company. Under the terms of the agreement, the Company agreed to pay $11,000 per month. During the nine-month period ended September 30, 2007, management fees of $99,000 (2006 - $86,000) were incurred.

(c) The Company entered into a management agreement dated May 1, 2006, as amended December 21, 2006 (effective January 1, 2007) with a private company wholly-owned by an officer of the Company. Under the terms of the agreement, the Company agreed to pay $11,000 per month. During the nine-month period ended September 30, 2007, management fees of $99,000 (2006 – $50,000) were incurred.

(d) During the nine-month period ended September 30, 2007, the Company recorded $613,178 of stock-based compensation as follows: $484,139 as management fees; $110,865 as consulting fees; and $18,174 as general and administrative expenses.

6. Commitments

The Company entered into a consulting agreement dated February 1, 2006, as amended December 1, 2006, with an individual to provide certain investor relations services. Under the terms of the amended agreement, the Company agreed to pay $2,500 per month until such time as the contract is terminated.

Under the terms of its Participation Agreements with Cedar Strat the Company must pay approximately net $324,000 in lease renewal fees over the next twelve months.

The Company has committed to drill an initial test well as the part of the Noah project no later than November 30, 2008 at an estimated net cost of $1,340,000.

Under a Drilling and Development Agreement executed between Starlight and EnCana on May 5, 2006, which the Company became a party to, the Company and Starlight have agreed to drill a minimum of four additional wells in areas outside of the current PA’s commencing in the fall of 2006. The Company and Starlight will carry EnCana for 15% of the total well cost in each new well drilled on 40 acre drill site quarter/quarter section. The first two wells have been drilled and tied in. On August 31, 2007 the Company acquired Starlight’s interests in the Drilling and Development Agreement and is moving ahead with the second two wells planned for 2007 with an estimated cost per well of $2,000,000.

On July 6, 2007, the Company entered into a lease agreement commencing September 1, 2007 for office premises for a five-year term expiring August 31, 2012. Annual rent is payable at $179,831 (Cdn$178,386) for the first two years payable in equal consecutive monthly instalments of $14,985 (Cdn$14,865), and $189,053 (Cdn$187,534) for the remaining three years payable in equal consecutive monthly instalments of $15,753 (Cdn$15,628). The Company paid a deposit of $50,174 (Cdn$49,771) which will be applied without interest against the last month’s rent due under the lease. This amount is included in prepaid expenses at September 30, 2007.

F-11

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

6. Commitments (continued)

During the nine months ended September 30, 2007, the Company paid rent expense of $21,862 under this lease, and was reimbursed by three sub-lease tenants for $7,547. Future minimum lease payments over the next five fiscal years are as follows:

2007	$	44,955
2008		179,831
2009		182,892
2010		189,053
2011		189,053
2012		126,024
	$	911,808

7. Convertible Notes

On August 25, 2005, the Company issued Convertible Promissory Notes (the “Notes”) to certain institutional investors with a principal amount of $9,075,000, and 907,500 Series “A” detachable share purchase warrants. The Notes bear interest at 6% per annum, mature on August 25, 2008, and may be converted into 1,815,000 shares of common stock on the basis of one share of common stock for every $5 in value of Notes (the “Conversion Price”). Each warrant is exercisable into one share of common stock at an exercise price of $6 per share (the “Exercise Price”) until August 25, 2008. The Company paid cash placement fees of $544,500, offering costs of $28,500 and issued 72,600 Broker Warrants. Each Broker Warrant is exercisable into one share of common stock at an exercise price of $6 per share until August 28, 2008. The securities were issued in a private placement transaction pursuant to Regulation D under the Securities Act of 1933, as amended. The Company filed a Registration Statement with the Securities and Exchange Commission that was declared effective on November 10, 2005, to register the resale of shares of the Company's common stock issuable upon conversion of the Notes and exercise of the warrants.

The Conversion Price and the Exercise Price are subject to adjustments under certain conditions and events occurring, including the issue of common stock and common stock equivalents, by way of private placements, at a price per share less than the Conversion Price or Exercise Price. Accordingly, upon the completion of the financing on February 24, 2006, the Conversion Price was reduced from $5.00 to $4.32, and the Exercise Price was reduced from $6.00 to $5.04.

In accordance with EITF 98-5 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Company recognized the value of the embedded beneficial conversion feature of $3,854,490 as additional paid in capital as the debt was issued with an intrinsic value conversion feature. In addition, in accordance with EITF 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments”, the Company has allocated the proceeds of issuance between the convertible debt and the detachable warrants based on their relative fair values. Accordingly, the Company recognized the fair value of the detachable warrants of $2,039,490 as additional paid in capital. The Company will record further interest expense over the term of the Convertible Debentures of $2,039,490 resulting from the difference between the stated value and carrying value at the date of issuance. During the year ended December 31, 2005, a debenture with a principal amount of $450,000 was converted into 90,000 shares of common stock. The unamortized balance of the related embedded equity elements of $92,704 was charged to interest expense in 2005. The carrying value of the Convertible Debentures is being accreted to the face value of $8,625,000 at maturity. On June 1, 2007, the Company issued 242,245 shares of common stock in lieu of cash interest payments with a value of $261,625. At September 30, 2007, accrued interest of $171,555 is included in accrued liabilities. Interest expense of $484,590 has been accreted during the period increasing the carrying value of the Convertible Debentures to $8,032,724. Interest expense of $689,148 was capitalized to the Ant Hill Unit property during the nine-month period ended September 30, 2007.

F-12

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

8. Capital Stock

During the nine-month period ended September 30, 2007, the Company issued 242,245 shares of common stock in lieu of cash interest payments to convertible note holders.

During the nine-month period ended September 30, 2006, the Company issued the following:

(a)	On February 6, 2006, the Company issued 57,500 shares of common stock upon the exercise of 57,500 share purchase warrants at $2.00 per share for proceeds of $115,000.
(b)	On February 17, 2006, the Company issued 50,000 shares of common stock upon the exercise of 50,000 stock options at $1.00 per share for proceeds of $50,000.
(c)	On February 24, 2006, the Company closed a private placement of 7,366,520 units at $2.25 per unit resulting in gross proceeds of $16,574,670. Each unit consisted of one common share and two share purchase warrants. Each warrant entitles the holder to purchase one additional common share at a price of $3.25 per share and $5.25 per share, respectively, until February 16, 2009. The $5.25 Warrant is only exercisable if the $3.25 Warrant has been exercised. After a registration statement qualifying the resale of the common shares has been filed with the SEC and declared effective, the Company has the right to advance the exercise date of the Warrants if the closing price of its shares averages at or above $4.00 or $6.25 for the corresponding Warrants for a period of twenty consecutive trading days. The Company paid a cash placement fee of up to 6% of the gross proceeds of the offering for agent services in the transaction and issued 4% of the gross proceeds raised from the offering in the form of agent’s warrants which have the same terms and conditions as the investors’ warrants.
(d)	On March 8, 2006, the Company issued 100,000 shares of common stock upon the exercise of 100,000 stock options at $0.50 per share for proceeds of $50,000.
(e)	On March 9, 2006, the Company issued 50,000 shares of common stock upon the exercise of 50,000 stock options at $1.00 per share for proceeds of $50,000.
(f)	On June 1, 2006, the Company issued 113,259 shares of common stock in settlement of accrued interest on convertible debentures of $261,626.
(g)	On July 31, 2006, 165,774 common shares were issued in lieu of cash payment for 2% monthly charges relating to the effective date of registration of shares on Eden’s February 2006 financing. A further 165,774 $3.25 and 165,774 $5.25 warrants were issued relating to the same registration statement.

Stock Option Plan

Effective May 1, 2005, the Company amended its stock option plan (the “Amended 2004 Stock Option Plan”) to issue up to 3,000,000 shares of common stock. The plan allows for the granting of share purchase options at a price of not less than fair value of the stock and for a term not to exceed five years. The total number of options granted to any person shall not exceed 5% of the issued and outstanding common stock of the Company.

During the nine-month period ended September 30, 2007:

The Company granted the stock options to a director to acquire up to 100,000 shares of common stock exercisable at $1.13 per share on or before June 11, 2012. One-third of the options vest on October 11, 2007, one-third vest on February 11, 2008 and the final one-third vest on June 11, 2008. The closing market price of the stock on the grant date was $1.09 per share. The fair value for options granted was estimated at the date of grant to be $61,476 using the Black-Scholes option-pricing model assuming an expected life of 2.5 years, a risk-free rate of 4.87% and an expected volatility of 94%. The fair value of these stock options granted was $0.61 per share. During the nine-month period ended September 30, 2007, the Company recorded stock-based compensation of $18,569 as management fees.

F-13

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

8. Capital Stock (continued)

During the nine-month period ended September 30, 2006:

a) The Company granted the stock options to directors and consultants to acquire up to 772,000 shares of common stock exercisable at $2.50 per share on or before February 28, 2011. One-third of the options vest on April 1, 2006, one-third vest on August 1, 2006 and the final one-third vest on December 1, 2006. The closing market price of the stock on the grant date was $2.50 per share. The fair value for options granted was estimated at the date of grant to be $1,739,934 using the Black-Scholes option-pricing model assuming an expected life of 2.5 years, a risk-free rate of 4.55% and an expected volatility of 205.47%. The fair value of these stock options granted was $2.25 per share. During the nine-month period ended September 30, 2006, the Company recorded stock-based compensation of $876,478 as management fees and $476,803 as consulting expense.

b) The Company granted the stock options to directors and consultants to acquire up to 150,000 shares of common stock exercisable at $2.50 per share on or before May 1, 2011. One-third of the options vest on August 1, 2006, one-third vest on November 1, 2006 and the final one-third vest on December 31, 2006. The closing market price of the stock on the grant date was $2.76 per share. The fair value for options granted was estimated at the date of grant to be $198,687 using the Black-Scholes option-pricing model assuming an expected life of 1 year, a risk-free rate of 5.10% and an expected volatility of 116%. The fair value of these stock options granted was $1.32 per share. During the nine-month period ended September 30, 2006, the Company recorded stock-based compensation of $124,184 as management fees.

A summary of the Company’s stock option activity for the nine months ended September 30, 2007 is as follows:

			Weighted Average
	Number of Options	Weighted Average Exercise Price	Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, December 31, 2006	2,424,000	$ 1.98
Granted	100,000	1.13
Cancelled / Forfeited	—	—
Exercised	—	—
Outstanding, September 30, 2007	2,524,000	$ 1.95	3.41	$ 125,000

Exercisable, September 30, 2007 2,160,000 $ 1.97 3.25 $ 125,000

A summary of the status of the Company’s unvested shares as of September 30, 2007, and changes during the nine-month period ended September 30, 2007, is presented below:

Unvested shares	Number of Shares	Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2007	792,000	$ 1.00
Granted	100,000	0.62
Vested	(528,000)	1.00
Unvested at September 30, 2007	364,000	$ 0.89

As at September 30, 2007, there was $175,042 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Amended 2004 Stock Option Plan. That cost is expected to be recognized over a weighted-average period of 0.35 years.

F-14

Eden Energy Corp.

(An Exploration Stage Company)

September 30, 2007

Notes to the Consolidated Financial Statements

(Expressed in United States Dollars)

(Unaudited)

8. Capital Stock (continued)

Share Purchase Warrants

The following table summarizes the continuity of the Company’s warrants:

	Number of Shares	Weighted Average Exercise Price
Balance, December 31, 2006	16,436,176		$ 4.30
Issued	—		—
Exercised	—		—
Balance, September 30, 2007	16,436,176		$ 4.30

At September 30, 2007, the following share purchase warrants were outstanding:

Number of Warrants	Exercise Price	Expiry Date
980,100	$ 5.04	August 28, 2008
7,728,038	$ 3.25	February 16, 2009
7,728,038	$ 5.25	February 16, 2009

9. Restricted Cash

The Company had secured $974,067 towards a Letter of Credit payable as to $91,667 to HSBC Bank Canada as security for corporate credit cards and $882,400 to Starlight Oil & Gas LLC as security for drilling commitments. On September 20, 2007, the portion relating to Starlight Oil & Gas LLC was released. As at September 30, 2007, restricted cash consists of $113,411 (CAD$112,500) for security for corporate credit cards.

F-15

3

Item2.Management's Discussion and Analysis or Plan of Operation.

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report, particularly in the section entitled "Risk Factors" of this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "CDN$" refer to Canadian dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our" and "Eden" mean Eden Energy Corp. and/or our subsidiaries, unless otherwise indicated.

Overview

We are an exploration stage oil and gas company engaged in the exploration for petroleum and natural gas in the State of Nevada, USA and in the Province of Alberta, Canada. As of September 1, 2006 we are also engaged in natural gas development and production drilling in the State of Colorado, USA.

Corporate History

Our company, Eden Energy Corp., was incorporated in the State of Nevada on January 29, 1999, under the name E-Com Technologies Corp. Our common shares were quoted for trading on the OTCBB on December 15, 2000 under the symbol "ECTC". On June 18, 2004 our symbol changed to “ECOM”. On August 6, 2004 we changed our name to Eden Energy Corp. and on August 20, 2004 our symbol changed to “EDNE”.

Our Current Business

Eden Energy Corp. is engaged in various stages of exploration and development on multiple projects in the USA and Canada. Currently, these include the Noah and Cherry Creek Projects in Nevada, the Chinchaga Project in Alberta, and the Ant Hill Unit Drilling and Development Project in Colorado.

Noah Project - Nevada

On August 31, 2004, by way of an Assignment Agreement, we acquired Fort Scott Energy Corp’s (“Fort Scott”) interest in a Participation Agreement dated April 26, 2004 with Cedar Strat Corporation (“Cedar Strat”). The Fort Scott/ Cedar Strat

4

Participation Agreement deals with the acquisition and development of petroleum and natural gas rights and leases in an area of mutual interest in eastern Nevada. We named this area of approximately 211,000 gross acres, the Noah Project.

The Assignment Agreement provides for Fort Scott to retain a 2% over- riding royalty in the area of mutual interest and the following considerations:

(i)	the issuance to Fort Scott of 500,000 shares of our common stock;
(ii)	the issuance to Fort Scott of 7% interest bearing Promissory Note and Convertible Debenture ($0.25 conversion rate) Units in the principal amount of $500,000. Each Unit entitled Fort Scott to the issuance of one common share in our capital stock and one half of one warrant, with each whole warrant entitling Fort Scott to acquire one additional common share at $0.50 per share; and
(iii)	for each 10 million barrels of proven reserves on the lands underlying the leases, we will issue to Fort Scott 1,000,000 shares of common stock, up to a maximum of 10,000,000 shares of common stock.

The debenture was converted and the associated warrants were exercised for cash in fiscal 2005. Fort Scott retains its 2% over-riding royalty interest on the lands underlying the leases, such that upon the fulfillment of the obligations set out in the Participation Agreement, we will earn an 80.5% net revenue interest in the lands underlying the leases, and Cedar Strat will be vested with a 5% over-riding royalty interest. Cedar Strat also retains a 5% back in working interest which may be adjusted upwards to as much as a 12.5% back in working interest should we elect not to proceed with the drilling election pursuant to the terms of the Participation Agreement.

Exploration conducted since acquiring Fort Scott’s interest includes the acquisition of proprietary and licensed gravity and magnetic data, processing and interpreting 39 miles of proprietary and other trade licensed seismic data, and the integration of all sub-surface and surface geology, gravity, magnetic, and seismic data.

On March 1, 2007 we entered into a Letter Agreement with Cedar Strat whereby the future development plan of the Noah project was confirmed and approximately 21,000 acres of peripheral leases were transferred to Cedar Strat.

Effective March 29, 2007, we entered into an Amendment to the Participation Agreement with Cedar Strat for this prospect. Under the terms of the Amendment, our acreage block at Noah has been divided into four Prospect Areas with each Prospect Area encompassing approximately 50,000 acres of leases. The Prospect Areas are designated Prospect Area 1 to 4 sequentially from north to south. The Amendment calls for the prospect areas to be worked sequentially from North to South by us either, 1) electing to drill an initial test well within the designated Prospect Area, 2) electing to drill a subsequent well or wells within the designated Prospect Area or 3) electing to shoot a seismic program of no less than twenty-five (25) linear miles in the next sequential untested Prospect Area. As agreed to we will initiate our sequential work by drilling an Initial Test Well in Prospect Area 1 to a depth of approximately 7,000 to 9,000 feet by no later than November 30, 2008.

Under the terms of the Amendment drilling or seismic operations shall begin within each specified Prospect Area no later than 12 months following the required election date (as follows) unless extended by both parties acting reasonably. We shall have ninety (90) days from release of either the drilling rig or completion rig, whichever is later, of the Initial Test Well in the designated Prospect Area, to elect to either drill a Subsequent Well(s) in the Prospect Area or shoot a Seismic Program in the next untested Prospect Area. We shall have 180 days from the release of the seismic crew to elect to drill an Initial Test Well in the newly designated Prospect Area or elect to shoot a Seismic Program in the next untested Prospect Area.

Under the terms of the Amendment if we drill an Initial Test Well or Subsequent Well(s) to the base of the sub-thrust Devonian Formation or 17,000 feet, whichever is shallower, we will retain all rights, title and interest in all leases and lands within that particular Prospect Area. In each Prospect Area that we drill an Initial Test Well or Subsequent Well(s) to a depth shallower than the base of the sub-thrust Devonian or 17,000 feet, we shall retain all rights, title and interest in all leases and lands within the Prospect Area, to a depth of 1000 feet below the base of the deepest Formation penetrated. If in this case we elect not to drill a Subsequent Well then we will offer all deeper rights in the leases within the Prospect Area to Cedar Strat and Cedar Strat shall have 90 days from receipt of such notice in which to exercise this option. Failure of Cedar Strat to exercise its option within such 90 day period shall be deemed as a waiver of its option right.

5

Should we elect not to drill an Initial Test Well in Prospect Areas 2, 3, or 4 we shall, at Cedar Strat’s option, relinquish and assign to Cedar Strat, all right, title and interest in all leases and lands subject to the Participation Agreement lying within the specific Prospect Area, within 90 days after receiving written notice from Cedar Strat of its intent to exercise its option. Cedar Strat’s right to exercise its option shall also be for a 90 day period after receiving written notice from us of our election not to drill the Prospect Area. Failure of Cedar Strat to exercise its option within such 90 day period shall be deemed as a waiver of its option right.

Rental payments on the initial acreage and any subsequently acquired acreage will be maintained by us during this development period, except on any acreage which Cedar Strat may elect to acquire pursuant to the exercise of its options.

Effective March 29, 2007 we entered into a Farm Out Agreement with Midland Texas based Fasken Nevada - 1, LLC and Fasken Oil and Ranch LP, privately held companies (the “Partner”) for the drilling of the Noah prospect as defined in the Amendment to the Participation Agreement with Cedar Strat. The Partner will pay 2/3rds of the cost to drill, test and complete the first well in the first Prospect Block and Eden will pay 1/3rd. The Partner will act as operator. Upon drilling and completing the first well in Prospect Area 1 the Partner will be assigned a 50% interest in Eden’s leases in Prospect Area 1 as provided for in the Amendment to the Participation Agreement with Cedar Strat.

Provided the Partner has met its obligations in Prospect Area 1, it shall have the option to proceed to develop Prospect Area 2. If it elects to proceed with developing Prospect Area 2, the Partner shall pay a prospect recovery fee of $2,000,000 to Eden for costs incurred on Prospect Area 1 and shall have the right to earn a 50% interest in the Prospect Area by paying 2/3rds of any seismic programs and the drilling and completing to casing point of a second well. Thereafter, the Partner shall continue to have the right to earn in subsequent Prospect Areas under the same terms but with no further prospect recovery fees.

The first well has been staked and is expected to be drilled to a total depth of between 7,000 and 9,000 feet, for an estimated cost of $4,000,000 of which we will pay 1/3rd. On July 9, 2007 we reported the Partner received approval on the required Federal and State permits to drill the well. On July 10, 2007 the Partner advised us that they received approval from the BLM in Ely for the gravel pit(s) for commencement of road and location construction.

On October 4, 2007 we reported that on the advice of our Partner/operator due to the onset of winter conditions, the spudding of the Noah Federal No. 1 well was rescheduled to Spring 2008. Our Partner also advised that construction of the lease access road and drill site was essentially completed and the area would be secured until drilling commencement in 2008.

Cherry Creek Project - Nevada

On October 21, 2005 we entered into a separate Letter Agreement with Cedar Strat Corporation for the exploration and development of a new project called Cherry Creek. This agreement entitles our company or our Nevada subsidiary, Southern Frontier Explorations Ltd. to acquire petroleum and natural gas rights and leases in an area of mutual interest (AMI) in northeastern Nevada.

Under the terms and conditions of this Letter Agreement, Cedar Strat will manage certain exploration programs within the AMI designed to bring the prospect to a drillable status. Cedar Strat has provided us with copies of the exploration data to which Eden has paid Cedar Strat $216,000. Cedar Strat’s fieldwork has been completed.

Subject to election to drill, we must commence drilling within the AMI within 24 months of receipt by us of all of the exploration data from Cedar Strat, and thereafter must drill at least one development well per year during the term of the agreement.

Effective January 24, 2006, we entered into a formal Joint Participation Agreement with Cedar Strat Corporation. Cedar Strat Corporation provided their acceptance to the formal Joint Participation Agreement on February 16, 2006. Pursuant to the Joint Participation Agreement we agreed to participate in Cedar Strat’s play included within the geographical boundaries of a confidential area, and pay Cedar Strat $750,000 as a prospect fee. We also agreed to accept responsibility for acquiring and funding BLM leases and private fee leases, if applicable, in order to facilitate the exploration efforts. We assumed the obligation to pay the annual rental on such leases.

6

On March 14, 2006, we acquired at auction approximately 76,459 gross acres of oil and gas lease lands in northeastern Nevada for this project. Subsequent to March 14, 2006, adjustments reduced the number of acres to approximately 69,982 gross acres. On September 30, 2006, we gave notice to surrender the low priority leases to Cedar Strat and retain approximately 18,500 gross acres of premium prospective leases. On December 12, 2006 we acquired approximately 2,500 additional gross acres of oil and gas leases at auction. Subsequent to December 12, 2006 we acquired additional leases from the BLM, some of which were not completed on by a buyer at a previous land sale. On March 1, 2007 we entered into a Letter Agreement with Cedar Strat whereby approximately 2,500 acres of peripheral Cherry Creek acreage were transferred to Cedar Strat leaving us with approximately 26,000 gross acres of oil and gas leases at Cherry Creek. At the present time, further evaluation of the geological and other data is required prior to making additional exploration decisions in this area.

Big Sand Spring Valley Project – Nevada - (Divested of November 16, 2006)

On June 13, 2005, we entered into a separate Agreement with Cedar Strat Corporation, which was formalized into a final Participation Agreement on November 1, 2005. The Participation Agreement entitled Eden Energy Corp. or its Nevada subsidiary, Southern Frontier Explorations Ltd. to acquire and develop petroleum and natural gas rights and leases in an area of mutual interest.

On November 1, 2005, we entered into a Participation Agreement with Merganser Limited (subsequently Eternal Energy Corp.) for the joint development of this project. As set out in the Participation Agreement, on November 8, 2005, we received Eternal’s portion of project costs of US$667,000.

Pursuant to a Letter Agreement between Cedar Strat, Eternal Energy Corp. and Eden Energy Corp. dated November 1, 2006, Eternal Energy Corp. proposed and Eden accepted an offer to purchase 100% of Eden’s interest in the Big Sand Spring Valley Project in consideration for a final payment of $200,000 and a release from any further obligations under the November 1, 2005 Participation Agreement. Formal agreement was entered into November 16, 2006 with described consideration received by Eden, January 9, 2007. Due to the conclusion of this agreement, Eden no longer has any interests or funding obligations in respect to this project.

Chinchaga Project - Alberta

On March 13, 2006, through our wholly owned subsidiary, Eden Energy (North) Ltd., we entered into a farm-in arrangement with Suncor Energy Inc. of Calgary, Alberta. The arrangement provided for Eden to participate, with a 50% working interest and with other minor partners, in the cost to drill an exploratory well on approximately 18,000 gross acres of leases owned by Suncor while retaining options to drill a second well to earn additional acreage. The exploration target was a dolomitized Slave Point reef at a depth of approximately 8,900 feet in Northwestern Alberta. Suncor retains a 12.5% gross overriding royalty on the lands, which are known as the Chinchaga area.

By drilling the first well, which was plugged and abandoned on January 22, 2007, Eden earned a 50% working interest in approximately 7,000 gross acres. Our partners and we elected not to drill the Option Well or acquire the Block 1 – Option Lands nor purchase the additional Block 2 Option Lands that were available. The joint venture partners acquired an additional 1,279 gross acres at a February 8, 2007 land sale of which Eden holds a 55.56% working interest in due to one partner declining to participate in the land acquisition. Currently, Eden and its partners are evaluating the Farmout Lands earned from the first well and the recently acquired lands in Chinchaga before making any further exploration decisions.

On February 14, 2007, Eden entered into a separate farm-in arrangement with Suncor Energy Inc. of Calgary, Alberta. Under the terms of this arrangement Eden participated with a 10% working interest, in the drilling of an exploratory well and earned a 10% working interest in approximately 9,600 gross acres. The exploration target was a dolomitized Slave Point reef at a depth of approximately 8,400 feet in northwestern Alberta, also known as Chinchaga. Suncor retains a 12.5% gross overriding royalty on these lands. Eden acquired a 10% interest in an additional 5,120 gross acres of offsetting lands at an approximate gross cost of $600,000 to the joint venture partnership. These lands are subject to a 7.5% overriding royalty to Suncor. Eden also earned a first right of refusal to equalize to its proportionate share in another 5,760 gross acres held by Suncor.

The well spud on February 10, 2007 and reached final depth of 8,415 feet. On March 19, 2007, our partners and we reported the well was dry and was to be abandoned.

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On October 4, 2007, we reported we plan to conduct additional seismic operations this winter and if warranted drill one new well at Chinchaga the following winter drilling season. On November 2, 2007 the Operator advised us and we agreed to continue to evaluate the area, but in light of the soft natural gas market and changes in the Alberta royalty rates, we may delay seismic operations until next year.

Ant Hill Unit Drilling and Development Project – Colorado

The Ant Hill Project is a development drilling program located in the Piceance Basin of western Colorado. Effective September 1, 2006, through our wholly owned subsidiary Eden Energy Colorado LLC, we entered into a farm-in agreement with Starlight Oil and Gas LLC and Starlight Corporation under which Eden and Starlight will undertake development drilling on the eastern flank of the White River Dome field located in T2N-R96&97W, Rio Blanco County, Colorado. Under the terms of the agreement, Eden has paid Starlight a prospect fee of $900,000. Starlight will participate for a 10% working interest and Eden will have a 75% working interest in the prospective lands. Starlight will retain a 7.5% gross overriding royalty on the lands.

The Ant Hill Unit is a 20,000 acre federal exploratory unit currently operated by EnCana Oil and Gas (USA). Under a Drilling and Development Agreement executed between Starlight (a private Colorado company) and EnCana on May 5, 2006, and which Eden became a party to, Eden and Starlight have agreed to drill a minimum of four additional wells in areas outside of the current Participating Areas (PA’s) commencing in the fall of 2006. The wells will be drilled on 160 acre drilling blocks typically encompassing standard governmental quarter sections. By drilling and completing these wells, the existing federal exploratory unit will remain in effect for several more years. Eden and Starlight will carry EnCana for 15% of the total well cost in each new well drilled on 40-acre drill site quarter/quarter section. For each well drilled, Eden and Starlight will also earn a 100% interest in a diagonal 40-acre tract, located in the same 160-acre quarter section. EnCana retains its 100% interest in the two remaining offset locations in each 160 acre drilling block.

After the initial four locations are drilled, Eden and Starlight may elect to develop additional 160-acre drilling blocks on any acreage outside the existing PA’s under the same terms. There are 34 potential 160-acre drilling blocks outside of the existing PA’s that have not been developed, resulting in 68 potential drilling locations on what is effectively 40-acre spacing. There is also the potential to develop the field on 20-acre spacing, which would provide for another 68 drilling locations.

The primary targets are the Cameo Coal and Williams Fork Sandstones of the Cretaceous Mesaverde Group, found at an average depth of 8,100 feet. Cumulative production from the field is in excess of 65 BCF from 157 wells, with current production averaging 11 MMCF/D from 100 active wells. Typical well life in the field is 17 years. Eden estimates ultimate reserves per well to be approximately 1.07 BCF per well, with an initial production rate of approximately 710mcfd. Gas from the Ant Hill unit typically contains about 25% carbon dioxide, which is removed at a local natural gas treatment plant. Drilling and completion costs are estimated to be in the $2,000,000 range per well throughout the field. Operations in the White River Dome Field are largely prohibited in the winter months.

The first well (Love Federal 17-42) under the agreement spud on September 21, 2006 and took 13 days to drill and set production casing. The second well (Love Federal 17 -21) spud on October 8, 2006 and took 12 days to drill and set production casing. Once both wells were cased the rig was released for the winter. Fracture stimulation commenced on Well 1 October 28, 2006 and Well 2 November 4, 2006.

In December 2006 we announced the tie-in of these first two wells and that they had good sand and coal thicknesses in the order of other proven wells in the field. These first two wells were completed using modern frac techniques designed to increase fracture half lengths from less than 100 feet traditionally to greater than 300 feet. The Love Federal 17-21 has experienced high water production rates, which has restricted the flow of gas naturally. The Love Federal 17- 42 was completed in the Cameo coal section only and despite our subsequent scaling treatment procedure is currently not producing. Both wells will be recompleted which our company believes will bring production more in line with anticipated levels.

On August 31, 2007, we entered into an agreement with Starlight Oil & Gas LLC and Starlight Operating Company, Inc. (Starlight) whereby Starlight shall assign to Eden all of its rights, title, and interests in both the Ant Hill Drilling and Development Agreement with EnCana and the related Participation Agreement with Eden.

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(i) The terms of the agreement are as follows:

(ii) Our company shall withdraw its demand for arbitration with prejudice;

(iii) Our company agrees to make no claims against Starlight Operating Company, Inc. or Starlight Oil & Gas LLC for any obligations with regard to the completion of the existing wells and drilling of any future wells per the terms of the EnCana Drilling & Development Agreement and Starlight/Eden Participation Agreement;

(iv) Starlight Oil & Gas LLC shall assign to Eden Energy Colorado LLC all of its right, title and interest in and to the Drilling and Development Agreement with EnCana Oil & Gas (U.S.A.), Inc., dated May 1, 2006, as amended;

(v) Starlight Oil & Gas LLC shall assign to Eden Energy Colorado all of its right, title and interest in and to the Participation Agreement with our company dated September 1, 2006;

(vi) Starlight Oil & Gas LLC will assign to Eden Energy Colorado all of its right, title and interest in and to its working interests in the Love Federal 17-21 and 17-42 wells and lands earned thereby;

(vii) The overriding royalty interests created pursuant to the Participation Agreement shall be conveyed as follows:

a.	Melange International, LLC	0.5% of 8/8ths
b.	Durango Petroleum Corp.	0.5% of 8/8ths
c.	Monarch Royalty LLC	0.5% of 8/8ths
d.	Timothy E. Macke	0.5% of 8/8ths
e.	H.J. Kagie	0.5% of 8/8ths
f.	Joseph R. Pope	0.5% of 8/8ths
g.	Brian S. Bentley	0.5% of 8/8ths
h.	Eden Energy Colorado LLC	any remaining override

In the event that the Existing Burdens on any tract are such that when taken together an 80% net revenue interest cannot be retained by our company then the portion of the override being delivered to Timothy E. Macke, H.J. Kagie, Joseph R. Pope and Brian S. Bentley shall be proportionately reduced in order to deliver the 80% net revenue lease. Our company shall continue to make such additional conveyances to the owners of those overriding royalties as may be necessary or convenient to insure the same are accounted for and paid in a timely manner. Royalties will continue to be disbursed directly by EnCana or by the subsequent operator of record for the Ant Hill Unit.

On October 10, 2007 we reported spudding well AHU #18 - 23 with an expected 12 days drilling to reach approximately 8000 feet. Upon completion the rig will immediately move to the AHU #8-12 location. After drilling to total depth of approximately 8000 feet, the wells will be logged and the rig will be released. If justified by well logs, a completion rig will be moved on to fracture stimulate the wells and put them into production. Our company expects to have both these wells drilled and completed by year end.

We also reported that workover operations on the LF 17-21 well began on October 9, 2007. The plan calls for the lowermost perforations of the well to be tested for water production and isolated from the remainder of the Cameo and Williams Fork section, following which the well will be placed back on production and the completion rig moved to the LF 17-42. The recompletion program for the LF 17-42 consists of new perforations and fracture treatments over previously

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bypassed zones in the Williams Fork as well as re-perforations over zones in the Cameo that our company believes have additional potential. After recompleting the LF 17-42 well the completion rig will move back to the LF 17-21 well to perform a similar recompletion program if necessary or on to the AHU 18-23 for completion operations. Both recompletions are expected to be finished by year end.

PLAN OF OPERATIONS AND CASH REQUIREMENTS

For the next 12 months we plan to continue to explore, drill, and evaluate our leases in eastern Nevada. We expect to continue to participate in our Alberta projects as our 50% and 10% joint venture exploration agreements provide for. We plan also to continue with our development drilling program in Colorado.

Currently in Nevada we hold approximately 190,000 gross acres pursuant to lease agreements on the Noah Project and approximately 26,000 gross acres pursuant to lease agreements on the Cherry Creek Project. The expiration dates for the leases are in 2014, 2015, and 2016 respectively. The leases may be extended upon production from the leases. In Colorado, we hold 160 gross acres in our White River Dome development drilling project. In Alberta we hold approximately 5,120 gross acres in our 50% working interest joint exploration agreement and an additional 1,280 gross acres with a 55.56% interest due to one partner not participating in a February 2007 lease sale. We hold an approximate 14,080 gross acres and the right of first refusal on another 5,760 gross acres in our 10% working interest joint venture exploration agreement.

Our portfolio of exploration projects includes the Noah and Cherry Creek projects in the USA, and the Chinchaga Project in Alberta. Based on our current interpretation of the Noah Project, we estimate a cost to drill our first exploratory well to approximately 9,000 feet in Prospect Area 1 to be in the $4,000,000 range, plus contingency. Subject to the results from this first well, we plan to work with the Partner and continue with exploration on the Noah. With an election by our Partner to proceed on Prospect Area 2 we will receive a $2,000,000 project recovery fee from the Partner, and expect to commence with a new seismic program currently estimated at $3,000,000 of which we will pay one third (1/3) of the costs.

Due to seasonal access limitations and other considerations in the Ant Hill Unit we are revising the development well drilling schedule over the next 12 month period to align with the commitment obligations in the area. We are budgeting for two additional wells in the Ant Hill Unit in 2007 as well as the re-completion of the existing two wells, in total estimated at approximately $4,800,000. Subject to positive election to continue to drill in 2008, we are budgeting for six additional wells over the drilling season of May 1, 2008 to December 1, 2008 of which the cost of five of these six wells is included in the table of estimated expenditures for the next 12 month period, which follows. The total estimated cost of development in the Ant Hill Unit over the next 12 month period is approximately $15,000,000 including engineering reports and well permitting costs. We estimate based on original well projections that these new wells combined with production from the two recompleted wells will provide approximately $2,000,000 in net cash for the period and approximately 7Bcf of gross reserves. To date we have received or accrued approximately $42,000 gross (approximately $32,000 net after gas processing fees deducted) from gas and liquid sales from the first two wells, which represents production from the two wells prior to their recompletion.

We are budgeting for our first exploratory well in Nevada with a net cost estimated at approximately $1,333,334, plus a further seismic exploration estimate of $1,000,000. These budgeted amounts do not reflect the Partner $2,000,000 project recovery fee which would be payable to us upon their election to proceed. We are budgeting an estimated net $1,500,000 for seismic exploration work in Chinchaga Alberta.

Combined, we have budgeted an approximate $18,800,000 over the next 12 month period for exploration and drilling programs on our projects, however, approximately $12,500,000 of the budgeted amount is success based, subject to management review of field results and other criteria, and to be expended only with positive election to proceed by our company. As it relates to our Colorado development-drilling program, our planned expenditures are expected to be linked to securing industry reserve based financing.

Our net cash provided by financing activities during the nine months ended September 30, 2007 was $nil. Our total net cash provided by financing since January 1, 2004, the date of inception of the exploration stage to September 30, 2007 was $38,306,870.

We will require additional funds to implement our growth strategy in our oil and gas exploration and development operations. These funds may be raised through equity financing, debt financing, or other sources, which may result in

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further dilution in the equity ownership of our shares. There is still no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock. Further, we may continue to be unprofitable.

In order to proceed with our plans we have raised funds by way of a private placement of equity and debt securities in our company. Our initial offering consisted of 6,190,000 shares at a price of $0.50 per share for gross proceeds of $3,095,000. We closed the private placement on November 12, 2004 and issued certificates on November 17, 2004. The net proceeds received have been used as working capital to allow us to finance our commitments under the assignment agreement previously discussed. On November 24, 2004, we issued a further 20,000 shares at a price of $0.50 per share for gross proceeds of $10,000.

On April 5, 2005, we issued 3,840,067 shares and 1,920,035 share purchase warrants at a price of $1.50 per share for gross proceeds of $5,760,100. Each warrant entitles the holder to purchase an additional share of common stock of our company at a price of $2.00 per share until April 4, 2006. On April 27, 2005, we issued 200,000 shares and 100,000 share purchase warrants at a price of $1.50 per share for gross proceeds of $300,000. Each warrant entitles the holder to purchase an additional share of common stock of our company at a price of $2.00 per share until April 27, 2006. During the fiscal year ended December 31, 2005, 1,962,535 shares were issued on the exercise of 1,962,535 warrants, and on February 6, 2006 we issued the final 57,500 shares on the exercise of the final 57,500 warrants.

On August 25, 2005 we issued convertible promissory notes with a principal amount of $9,075,000, and 907,500 Series “A” detachable share purchase warrants. The notes bear interest at 6% per annum, mature on August 25, 2008, and may be converted into 1,815,000 shares of common stock on the basis of one share of common stock for every $5 in value of Notes. Each warrant is exercisable into one share of common stock at an exercise price of $6 per share until August 25, 2008. The investors also have the option to make an additional investment of up to 30% of their original investment for 180 days after the closing date, on the same terms as the original investment. No further investments were made under this option. On November 28, 2005, we issued 90,000 shares of common stock upon the conversion of a portion of our convertible promissory notes. On December 1, 2005 we issued 59,291 shares of common stock in lieu of a cash interest payment on the convertible promissory notes. The Conversion Price and the Exercise Price are subject to adjustments under certain conditions and events occurring, including the issue of common stock and common stock equivalents at a price per share less than the Conversion Price or Exercise Price. Upon the completion of the financing on February 24, 2006 the Conversion Price was reduced from $5.00 to $4.32, and the Exercise Price was reduced from $6.00 to $5.04. On June 1, 2006 we issued 113,258 shares of common stock in lieu of a cash interest payment on the convertible promissory notes. On December 1, 2006 we issued 149,466 shares of common stock in lieu of a cash interest payment on the convertible promissory notes. On June 1, 2007 we issued 242,245 shares of common stock in lieu of a cash interest payment on the convertible promissory notes.

On September 27, 2005, we issued 1,065,972 shares of common stock upon the exercise of 1,065,972 share purchase warrants at $0.50 per share for proceeds of $532,986. On November 8, 2005, we received a portion of an initial project acquisition cost in the amount of US$667,000. On January 9, 2007 we received final payment relating to the same project divesture in the amount of US$200,000.

On February 17 and 23, 2006, we issued a combined total of 7,366,520 shares and 14,733,040 share purchase warrants at a price of $2.25 per share for gross proceeds of $16,574,670. The warrant entitles the holders to purchase an additional 7,366,520 shares of common stock of our company at a price of $3.25 per share and an additional 7,366,520 shares of common stock at a price of $5.25 per share until February 16, 2009. On July 31, 2006 we issued 165,774 shares of common stock pursuant to the financing’s registration requirements.

Over the next twelve months we intend to use our available funds to expand on the exploration and development of our leases and continue with development drilling in Colorado as follows:

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Estimated Net Expenditures During the Next Twelve Months

	$
General, Administrative and Corporate Expenses	1,350,000
Projects Land Rental Expense – Nevada, Colorado, Alberta	332,000
Exploration Programs Expense – Noah, Chinchaga projects	2,500,000
Drilling Programs – Noah, Chinchaga, Ant Hill projects	16,300,000
Working Capital	4,000,000
Total	24,482,000

As at September 30, 2007 we had $236,488 in current liabilities. Our net cash used in operating activities for the nine months ended September 30, 2007 was $198,478 compared to $657,047 used in the nine months ended September 30, 2006. Our accumulated losses increased to $13,557,251 as of September 30, 2007 of which $13,002,112 related to our current business of oil and gas exploration, and $555,139 related to the early technology business prior to business change. Our financial statements report a net loss of $900,048 for the nine month period ended September 30, 2007 compared to a net loss of $3,245,701 for the nine month period ended September 30, 2006. Our losses have decreased primarily as a result of capitalizing interest costs on convertible notes to oil and gas properties in 2007 of $689,158 as well as a reduction in stock-based compensation of $864,287. Interest income increased to $800,669 for the nine months ended September 30, 2007 as compared to $596,323 for the nine months ended September 30, 2006, as a result of higher average interest rates during the 2007 fiscal period of approximately 4.3% as compared to 2.3% for the 2006 fiscal period. Average cash balances for the nine months ended September 30, 2007 was approximately $23,000,000 as compared to $24,500,000 for the nine months ended September 30, 2006.

Our total liabilities as of September 30, 2007 were $8,269,212 as compared to total liabilities of $7,810,605 as of December 31, 2006. The slight increase was due to the accretion of the discount on our Convertible Notes, which increased the carrying value for our Convertible Notes from $7,548,134 as at December 31, 2006 to $8,032,724 as at September 30, 2007, as well as a decrease in accounts payable (from $262,471 as at December 31, 2006 to $236,488 as at September 30, 2007).

During the nine month period ended September 30, 2007 we incurred $1,561,838 on exploration and acquisition of our oil and gas properties (of which $689,148 is capitalized interest) as compared to $6,045,485 incurred during the nine month period ended September 30, 2006. Of this amount $112,136 was attributable to acquisition costs (2006 - $2,012,990), and $1,449,702 (2006 - $4,032,490) was attributable to exploration costs.

We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard we have raised additional capital through the equity offerings noted above.

The continuation of our business is dependent upon obtaining further financing, a successful program of exploration, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. As noted herein, we are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

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Product Research and Development

Our business plan is focused on a strategy for maximizing the long-term exploration and development of our oil and gas leases in Nevada and Alberta as well as expanding our development drilling program in Colorado. To date, execution of our business plan has largely focused on acquiring prospective oil and gas leases and with early stage exploration and evaluation of acquired data. With this stage completed we intend to use the results obtained from this dedicated research to move forward with an exploratory drilling and development plan. Effective September 1, 2006, we are engaged in natural gas development drilling in Colorado.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment (excluding oil and gas activities) over the twelve months ending September 30, 2008 other than office computers, furnishings, and communication equipment as required.

Corporate Offices

Our corporate offices are located at Suite 1680, 200 Burrard Street, Vancouver, BC, V6C 3L6. On July 6, 2007 we agreed to enter into a five-year office lease commencing September 1, 2007 for approximately 4,574 square feet of rentable area at a gross cost of approximately $24,000 per month. Within this space we are permitted to sublease to multiple tenants and currently have 3 sublease tenants secured with gross rent of approximately $8000 per month. Once completely subleased our total rentable area and associated costs should be reduced by up to approximately 60%.

Employees

Currently our only employees are our directors, officers, corporate manager, and investor relation’s consultant. We do not expect any material changes in the number of employees over the next 12 month period. We do and will continue to outsource contract employment as needed. However, with project advancement and if we are successful in our initial and any subsequent drilling programs we may retain additional employees.

Effective May 1, 2006 Larry Kellison was appointed Chief Operating Officer and will provide these management services through Freestone Energy LLC, a company wholly-owned and controlled by him. Effective January 1, 2007 a past contracted consultant for our company will be remunerated for services on an as needed basis. Effective June 11, 2007 Ralph Stensaker, CGA, MBA was appointed to our Board of Directors and Audit Committee.

Going Concern

We have suffered recurring losses from operations. The continuation of our company as a going concern is dependent upon our company attaining and maintaining profitable operations and raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our company discontinue operations.

Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended December 31, 2006, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Recently Issued Accounting Standards

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109”. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be

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recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on derecognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement did not have a material effect on our company's reported financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on our company's future reported financial position or results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement is not expected to have a material effect on our company's future reported financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact of SFAS No. 159 on its financial position and results of operations.

Application of Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.

Oil and Gas Properties

We utilize the full cost method to account for our investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, capitalized interest costs relating to unproved properties, geological expenditures, and tangible and intangible development costs including direct internal costs are capitalized to the full cost pool. As of September 30, 2007, we have no properties with proven reserves. When we obtain proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects including capitalized interest, if any, are not depleted until proved reserves associated with the projects can be determined. If the future exploration of unproved properties are determined uneconomical the amount of such properties are added to the capitalized cost to be depleted. As of September 30, 2007, all of our oil and gas properties were unproved and were excluded from depletion. At September 30, 2007, management believes none of our unproved oil and gas properties were considered impaired other than as previously reported.

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The capitalized costs included in the full cost pool are subject to a "ceiling test", which limits such costs to the aggregate of the estimated present value, using a ten percent discount rate, of the future net revenues from proved reserves, based on current economic and operating conditions plus the lower of cost and estimated net realizable value of unproven properties.

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

Long-Lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets", the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. We recognize impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

Revenue Recognition

Oil and natural gas revenues are recorded using the sales method whereby our company recognizes oil and natural gas revenue based on the amount of oil and gas sold to purchasers when title passes, the amount is determinable and collection is reasonably assured. Actual sales of gas are based on sales, net of the associated volume charges for processing fees and for costs associated with delivery, transportation, marketing, and royalties in accordance with industry standards. Operating costs and taxes are recognized in the same period of which revenue is earned.

RISK FACTORS

Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".

Prospective investors should consider carefully the risk factors set out below.

We have had negative cash flows from operations.

To date we have had negative cash flows from operations and we have been dependent on sales of our equity securities and debt financing to meet our cash requirements and have incurred losses totalling approximately $900,048 for the nine month period ending September 30, 2007, and cumulative losses since the inception of the exploration stage of $13,002,112 to September 30, 2007. As of September 30, 2007 we had working capital of $23,507,772 as a result of recent financing activities. We do not expect positive cash flow from operations in the near term. There is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:

- drilling and completion costs for further wells increase beyond our expectations; or

- we encounter greater costs associated with general and administrative expenses or offering costs.

The occurrence of any of the aforementioned events could adversely affect our ability to meet our business plans.

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We will depend almost exclusively on outside capital to pay for the continued exploration and development of our properties. Such outside capital may include the sale of additional stock and/or commercial borrowing. Capital may not continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment.

A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.

We have a history of losses and fluctuating operating results.

From inception through to September 30, 2007, we have incurred aggregate losses of approximately $13,002,112. Our loss from operations for the nine month period ended September 30, 2007 was $1,804,865. There is no assurance that we will operate profitably or will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the unpredictability of when customers will purchase our services, the size of customers’ purchases, the demand for our services, and the level of competition and general economic conditions. If we cannot generate positive cash flows in the future, or raise sufficient financing to continue our normal operations, then we may be forced to scale down or even close our operations. Until such time as we generate revenues, we expect an increase in development costs and operating costs. Consequently, we expect to incur operating losses and negative cash flow until our properties enter commercial production.

We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.

We have no history of revenues from operations and have no significant tangible assets. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our company has a limited operating history and must be considered in the development stage. The success of our company is significantly dependent on a successful acquisition, drilling, completion and production program. Our company’s operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate recoverable reserves or operate on a profitable basis. We are in the development stage and potential investors should be aware of the difficulties normally encountered by enterprises in the development stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

Trading of our stock may be restricted by the SEC's "Penny Stock" regulations, which may limit a stockholder's ability to buy and sell our stock.

The U.S. Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors." The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny

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stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of, our common stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder's ability to buy and sell our stock.

In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Trading in our common shares on the OTC Bulletin Board is limited and sporadic making it difficult for our shareholders to sell their shares or liquidate their investments.

Our common shares are currently listed for public trading on the OTC Bulletin Board. The trading price of our common shares has been subject to wide fluctuations. Trading prices of our common shares may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common shares will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common shares, regardless of our operating performance.

In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of its development. We are largely engaged in the business of exploring and, if warranted, developing commercial reserves of oil and gas. Our properties are in the exploration stage only and are without known reserves of oil and gas. Accordingly, we have not generated any revenues nor have we realized a profit from our operations to date and there is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon locating and developing economic reserves of oil and gas, which itself is subject to numerous risk factors as set forth herein. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to continue our business operations.

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As our properties are in the exploration and development stage there can be no assurance that we will establish commercial discoveries on our properties.

Exploration for economic reserves of oil and gas is subject to a number of risk factors. Few properties that are explored are ultimately developed into producing oil and/or gas wells. Our properties are in the exploration stage only and are without proven reserves of oil and gas. We may not establish commercial discoveries on any of our properties.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company.

The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas, which may be acquired or discovered, will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. These factors cannot be accurately predicted and the combination of these factors may result in our company not receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful inacquiring the leases.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staff. Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will be completed. Our budget anticipates the potential acquisition of additional acreage in Nevada, Colorado and/or Alberta. This acreage may not become available or if it is available for leasing, that we may not be successful in acquiring the leases. There are other competitors that have operations in these areas and the presence of these competitors could adversely affect our ability to acquire additional leases.

The marketability of natural resources will be affected by numerous factors beyond our control, which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketability of natural resources, which may be acquired or discovered by us, will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

Oil and gas operations are subject to comprehensive regulation, which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal, state, and local laws and regulations, which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may

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have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages, which it may elect not to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.

Exploration and production activities are subject to certain environmental regulations, which may prevent or delay the commencement or continuance of our operations.

In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry.

We believe that our operations comply, in all material respects, with all applicable environmental regulations.

Our operating partners maintain insurance coverage customary to the industry; however, we are not fully insured against all possible environmental risks.

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities, which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States, Canada, or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.

The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably.

Our By-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.

Our By-laws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officers.

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Investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

Our constating documents authorize the issuance of 100,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in our control.

Our By-laws do not contain anti-takeover provisions, which could result in a change of our management and directors if there is a take-over of our company.

We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.

As a result of a majority of our directors and officers are residents of other countries other than the United States, investors may find it difficult to enforce, within the United States, any judgments obtained against our company or our directors and officers.

Other than our satellite operations office in Denver, Colorado, we do not currently maintain a permanent place of business within the United States. In addition, a majority of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our company or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

Item3.Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our 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, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2007, the end of the third quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer) concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2007 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

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Audit Committee Financial Expert

Our board of directors has determined that it does have a member of its audit committee who qualifies as an “audit committee financial expert” as defined in Item 401(e) of Regulation S-B, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.

PART II-OTHER INFORMATION

Item1.Legal Proceedings.

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5.Other Information

None.

Item6.Exhibits.

Exhibit Number	Description
(3)	(i) Articles of Incorporation; and (ii) Bylaws
3.1	Articles of Incorporation (incorporated by reference from our Registration Statement on Form 10-SB, filed on September 11, 2000).
3.2	Bylaws (incorporated by reference from our Registration Statement on Form 10-SB, filed on September 11, 2000).
3.3	Certificate of Amendment filed with the Secretary of State of Nevada on June 16, 2004 (incorporated by reference from our Quarterly Report on Form 10-QSB filed on November 22, 2004).
3.4	Certificate of Amendment filed with the Secretary of State of Nevada on August 6, 2004 (incorporated by reference from our Quarterly Report on Form 10-QSB filed on November 22, 2004).
(4)	Instruments defining rights of security holders, including indentures
4.1	2004 Stock Option Plan (incorporated by reference from our Form S-8, filed on October 8, 2004).
(10)	Material Contracts
10.1	Form of Subscription Agreement (incorporated by reference from our Form SB-2 filed on May 2, 2005).

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10.2	Form of Subscription Agreement with RAB Special Situations LP and Paul Masters (incorporated by reference from our Form SB-2 filed on May 2, 2005).
10.3	Management Consulting Agreement dated May 1, 2005 with Drew Bonnell (incorporated by reference from our Current Report on Form 8-K filed on May 24, 2005).
10.4	Amended Management Consulting Agreement dated May 1, 2005 with D. Sharpe Management Inc. (incorporated by reference from our Current Report on Form 8-K filed on May 24, 2005).
10.5	Amended Management Consulting Agreement dated May 1, 2005 with Neil Maedel (incorporated by reference from our Current Report on Form 8-K filed on May 24, 2005).
10.6	Form of Stock Option Agreement entered into with the following individuals (incorporated by reference from our Quarterly Report on Form 10-QSB filed on August 12, 2005): Donald Sharpe John Martin Neil Maedel Drew Bonnell
10.7	Form of Note and Warrant Purchase Agreement dated August 18, 2005 entered into with the following persons (incorporated by reference from our Current Report on Form 8-K filed on August 31, 2005): RAB Special Situations (Master) Fund Ltd. Cranshire Capital LP Douglas Campbell Jr. SDS Capital Group SPC, Ltd. Nite Capital LP Omicron Master Trust Capital Ventures International Crestview Capital Master, LLC Double U Master Fund LP Iroquois Master Fund Ltd. JGB Capital LP Enable Growth Partners LP Enable Opportunity Partners LP
10.8	Form of Registration Rights Agreement dated August 18, 2005 entered into with the following persons (incorporated by reference from our Current Report on Form 8-K filed on August 31, 2005): RAB Special Situations (Master) Fund Ltd. Cranshire Capital LP Douglas Campbell Jr. SDS Capital Group SPC, Ltd. Nite Capital LP Omicron Master Trust Capital Ventures International Crestview Capital Master, LLC Double U Master Fund LP Iroquois Master Fund Ltd. JGB Capital LP Enable Growth Partners LP Enable Opportunity Partners LP

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10.9	Form of Convertible Promissory Note entered into with the following persons (incorporated by reference from our Current Report on Form 8-K filed on August 31, 2005): Cranshire Capital LP Douglas Campbell Jr. SDS Capital Group SPC, Ltd. Nite Capital LP Omicron Master Trust Capital Ventures International Crestview Capital Master, LLC Double U Master Fund LP Iroquois Master Fund Ltd. JGB Capital LP Enable Growth Partners LP Enable Opportunity Partners LP
10.10	Form of Series A Share Purchase Warrant entered into with the following persons (incorporated by reference form our Current Report on Form 8-K filed on August 31, 2005): Cranshire Capital LP Douglas Campbell Jr. SDS Capital Group SPC, Ltd. Nite Capital LP Omicron Master Trust Capital Ventures International Crestview Capital Master, LLC Double U Master Fund LP Iroquois Master Fund Ltd. JGB Capital L.P. Enable Growth Partners LP Enable Opportunity Partners LP
10.11	Form of Convertible Promissory Note entered into with RAB Special Situations (Master) Fund Ltd. (incorporated by reference from our Registration Statement on Form SB-2 filed on September 28, 2005).
10.12	Form of Series A Share Purchase Warrant entered into with RAB Special Situations (Master) Fund Ltd. (incorporated by reference from our Registration Statement on Form SB-2 filed on September 28, 2005).
10.13	Form of Broker Warrant entered into with the following (incorporated by reference from our Registration Statement on Form SB-2 filed on September 28, 2005): H.C. Wainwright & Co., Inc. John R. Clarke Scott F. Koch Energy Equities, Inc. Ocean Equities Ltd.
10.14	Participation Agreement with Merganser Limited (incorporated by reference from our Current Report on Form 8-K filed on November 10, 2005).
10.15	Joint Participating Agreement with Chamberlain Exploration Development and Research Stratigraphic Corporation dba Cedar Strat Corporation (incorporated by reference from our Current Report on Form 8-K filed on February 21, 2006).**

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10.16	Form of Subscription Agreement entered into with the following individuals (incorporated by reference from our Current Report on Form 8-K filed on February 24, 2006):
	Keith Reid John Pevedoros Stephen Hanson Paul King Jason McCarroll Arbutus Gardens Apartments Corp. Epsilon Management Ltd. Conrad Weiss Yingchun Ye Maria Pedrosa Sara Relling Bantry Bay Properties Inc. Barb Turner C-Quest Holdings Ltd. Avtar Dhillon Hao Tang Neil Maedel Donald Rippon Peter Ross John Martin Gregg Layton Dolwar Invest & Trade Corp. Barry Maedel John Tognetti Clarion Finanz AG	Keats Investments Ltd. Absolute East West Fund Alpine Atlantic Asset Mgt., Ltd. La Roche & Co. Banquiers Norene Brown Credit Suisse Securities (USA) LLC Stanley Case Chartwell Investment Services S.A. Donna Chudnow Clearwaters Management Ltd. Cranshire Capital, LP Swell Capital Limited Crescent International Ltd. Double U Master Fund Ltd. Andrea Egger Epson Investment Services NV Evergreen Investment Corporation GLG European Opportunity Fund General Research GmbH Ralph Hogg HSBC Guyerzeller Bank AG Kaupthing Bank Luxembourg Lombard Odier Darier Hentsch Moen Holdings Inc. Luce Lapointe	Nite Capital LP George S. Palfi Parker Communication Corp. Carolyn Townshend 862002 Alberta Ltd. Olivier Turrettini Veronique Rochette RMB International (Dublin) Ltd. SDS Capital Group SPC, Ltd. Shalimar Business Synergy Resource Fund UBS Zurich UBS AG Rupert Edward Williams Christian Weyer Winsome Capital Inc. Banque Vontobel Geneve, SA Iroquois Master Fund Ltd. Wilma E. Bonnell Pierce Diversified Strategy Master Fund LLC Enable Opportunity Partners LP Enable Growth Partners LP Kimberly Lloyd Paul Mitchell
10.17	Amended Management Consulting Agreement dated February 28, 2006 and made effective February 1, 2006 with Drew Bonnell (incorporated by reference from our Current Report on Form 8-K filed on March 10, 2006).
10.18	Amended Management Consulting Agreement dated February 28, 2006 and made effective February 1, 2006 with Donald Sharpe (incorporated by reference from our Current Report on Form 8-K filed on March 10, 2006).
10.19	Farmout and Option Agreement with Suncor dated March 7, 2006 (incorporated by reference from our Current Report on Form 8-K filed on March 17, 2006).**
10.20	Management Agreement with Freestone Energy LLC dated May 1, 2006 (incorporated by reference from our Current Report on Form 8-K filed on May 2, 2006).
10.21	Stock Option Agreement with Larry Kellison dated May 1, 2006 (incorporated by reference from our Current Report on Form 8-K filed on May 2, 2006).
10.22	Amended Management Consulting Agreement dated December 21, 2006 and made effective January 1, 2007 with Drew Bonnell (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2006).
10.23	Amended Management Consulting Agreement dated December 21, 2006 and made effective January 1, 2007 with D. Sharpe Management Inc. (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2006).

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10.24	Form of Stock Option Agreement with Donald Sharpe, Drew Bonnell, John Martin and Larry Kellison (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2006).
10.25	Form of Stock Option Agreement with Paul Mitchell, Kim Lloyd and Olga Bespalaja (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2006).
10.26	Participation Agreement dated February 14, 2007 with Suncor Energy Inc., Grand Banks Energy Corporation and Dejour Energy (Alberta) Ltd. (incorporated by reference from our Current Report on Form 8-K filed on February 23, 2007).
10.27	Amended Management Consulting Agreement dated December 21, 2006 and made effective January 1, 2007 with Freestone Energy LLC (incorporated by reference from our Current Report on Form 8-K filed on February 23, 2007).
10.28	Form of Stock Option Agreement with Ralph Stensaker (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2006).
10.29	Agreement Starlight Oil & Gas LLC and Starlight Operating Company, Inc. effective August 31, 2007 (incorporated by reference from our Current Report on Form 8-K filed on September 11, 2007).
(14)	Code of Ethics
14.1	Code of Business Conduct and Ethics (incorporated by reference from our Annual Report on Form 10-KSB filed on April 14, 2004).
(21)	Subsidiaries
21.1	List of Subsidiaries
(31)	Rule 13a-14(a)/15d-14(a) Certifications
31.1*	Section 302 Certification under Sarbanes-Oxley Act of 2002 of Donald Sharpe
31.2*	Section 302 Certification under Sarbanes-Oxley Act of 2002 of Drew Bonnell
(32)	Section 1350 Certifications
32.1*	Section 906 Certification under Sarbanes-Oxley Act of 2002

* Filed herewith.

**Certain parts of this document have not been disclosed and have been filed separately with the Secretary, Securities and Exchange Commission, and is subject to a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.

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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.

EDEN ENERGY CORP.

By: /s/ Donald Sharpe

Donald Sharpe, President

(Principal Executive Officer)

November 14, 2007

By: /s/ Drew Bonnell

Drew Bonnell, Secretary, Treasurer and CFO

(Principal Financial Officer and Principal Accounting Officer)

November 14, 2007

CW1501983.1