Unassociated Document

424B3 1 v135577_424b3.htm Unassociated Document

Filed pursuant to Rule 424(b)(3)

Registration No. 333-156115

PROSPECTUS

1,000,000 Shares of Common Stock

(par value $0.001 per share)

This prospectus relates to 1,000,000 shares of the common stock, par value $0.001 per share, of EnerJex Resources, Inc. These shares may be offered or sold by the selling stockholder identified on page 77 of this prospectus (the “Selling Stockholder”) from time to time in transactions on any stock exchange, market or facility on which our shares are traded, in privately negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to such market prices or at negotiated prices. We have no basis for estimating either the number of shares of our common stock that will ultimately be sold by the Selling Stockholder or the prices at which such shares will be sold. We will not receive any of the proceeds from the sale of these shares by the Selling Stockholder. All proceeds will go to the Selling Stockholder. We will bear all expenses of registration incurred in connection with this offering, including filing fees, printing fees, and expenses of our legal counsel and other experts, but all selling and other expenses incurred by the Selling Stockholder will be borne by the Selling Stockholder.

Our common stock is included for quotation on the over-the-counter bulletin board (“OTC:BB”) under the symbol “ENRJ.OB.” The closing price of our common stock on December 23, 2008 on the OTC:BB was $1.98.

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This investment involves a high degree of risk. We urge you to carefully read the “Risk Factors” section beginning on page 11 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is December 24, 2008

TABLE OF CONTENTS

SUMMARY	1
RISK FACTORS	11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	27
USE OF PROCEEDS	28
DIVIDEND POLICY	28
CAPITALIZATION	29
PRICE RANGE OF COMMON STOCK	30
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
BUSINESS AND PROPERTIES	45
MANAGEMENT	63
NON-EMPLOYEE DIRECTOR COMPENSATION	65
EXECUTIVE COMPENSATION	67
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	71
PRINCIPAL STOCKHOLDERS	72
DESCRIPTION OF CAPITAL STOCK	74
SELLING STOCKHOLDER	77
PLAN OF DISTRIBUTION	77
LEGAL MATTERS	80
EXPERTS	80
INDEPENDENT PETROLEUM ENGINEERS	80
WHERE YOU CAN FIND MORE INFORMATION	80
GLOSSARY	81
INDEX TO FINANCIAL STATEMENTS	F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. We are not making offers to sell or seeking offers to buy these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate as of the date on the front of this prospectus only, regardless of the time of delivery of this prospectus or any sale of our common stock. Our business, financial condition, operating results and prospects may have changed since that date.

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No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe any restrictions as to, this offering and the distribution of this prospectus applicable to those jurisdictions.

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Industry and Market Data

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications, reports by market research firms or other published independent sources. In addition, some data are based on our good faith estimates.

SUMMARY

The items in the following summary are described in more detail later in this prospectus. Because this section is a summary, it does not contain all the information that may be important to you or that you should consider before investing in our common stock. For a more complete understanding, you should carefully read the more detailed information set out in this prospectus, especially the risks of investing in our common stock that we discuss under the “Risk Factors” section, as well as the financial statements and the related notes to those statements included elsewhere in this prospectus.

All references in this prospectus to “we,” “us,” “our,” “company” and “EnerJex” refer to EnerJex Resources, Inc. and our wholly-owned operating subsidiaries, EnerJex Kansas, Inc. and DD Energy, Inc., unless the context requires otherwise. We report our financial information on the basis of a March 31 fiscal year end. We have provided definitions for the oil and natural gas industry terms used in this prospectus in the “Glossary” beginning on page 81 of this prospectus.

All information in this prospectus gives effect to a 1-for-5 reverse stock split of our outstanding shares of common stock effected on July 25, 2008. The reverse stock split did not affect our number of authorized shares or par value per share.

Our Business

EnerJex, formerly known as Millennium Plastics Corporation, is an oil and natural gas acquisition, exploration and development company. In August 2006, Millennium Plastics Corporation, following a reverse merger by and among us, Millennium Acquisition Sub (our wholly-owned subsidiary) and Midwest Energy, Inc., a Nevada corporation, or Midwest Energy, changed the focus of its business plan from the development of biodegradable plastic materials and entered into the oil and natural gas industry. In conjunction with the change, the company was renamed EnerJex Resources, Inc.

Our principal strategy is to focus on the acquisition of oil and natural gas mineral leases that have existing production and cash flow. Once acquired, we implement an accelerated development program utilizing capital resources, a regional operating focus, an experienced management and technical team, and enhanced recovery technologies to attempt to increase production and increase returns for our stockholders. Our oil and natural gas acquisition and development activities are currently focused in Eastern Kansas.

During fiscal 2008 and the first half of fiscal 2009, we deployed approximately $12 million in capital resources to acquire and develop five operating projects and drill 177 new wells (109 producing wells, 65 water injection wells, and 3 dry holes). Our estimated total proved oil reserves increased from zero as of March 31, 2007 to a net 1.4 million barrels of oil equivalent, or BOE, as of March 31, 2008. Of the 1.4 million BOE of total proved reserves, approximately 64% are proved developed and approximately 36% are proved undeveloped. The proved developed reserves consist of 82% proved developed producing reserves and 18% proved developed non-producing reserves. For the month of October 2008, our gross production was approximately 288 barrels of oil equivalent per day, or BOEPD.

The total proved PV10 (present value) before tax of our reserves as of March 31, 2008 was $39.6 million. PV10 is a non-GAAP financial measure and generally differs from the standardized measure of discounted future net cash flows, the most directly comparable GAAP financial measure, because it does not include the effects of income taxes on future net revenues. See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

The following table sets forth a summary of our estimated proved reserves attributable to our properties as of March 31, 2008:

Proved Reserves Category	Gross STB(1)		Net STB(2)		Gross MCF(3)		Net MCF(4)		PV10(5) (before tax)
Proved, Developed Producing		1,034,163		746,169		141,371		114,610	$	22,750,447
Proved, Developed Non-Producing		141,900		115,071		350,000		286,587	$	5,446,999
Proved, Undeveloped		705,750		510,974		-0-		-0-	$	11,413,886

Total Proved		1,881,813		1,372,214		491,371		401,197	$	39,611,332

(1)	STB = one stock-tank barrel.

(2)	Net STB is based upon our net revenue interest.

(3)	MCF = thousand cubic feet of natural gas.

(4)	Net MCF is based upon our net revenue interest.

(5)	See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

The Opportunity in Kansas

According to the Kansas Geological Survey, the State of Kansas has historically been one of the top 10 domestic oil producing regions in the United States. For the year ended December 31, 2007, 36.6 million barrels of oil were produced in Kansas. Of the total barrels produced in Kansas in 2007, 15 companies accounted for approximately 29% of this production, with the remaining 71% produced by over 2,400 independent operators.

In addition to significant historical oil and natural gas production levels in the region, we believe that a confluence of the following factors in Eastern Kansas and the surrounding region make it an attractive area for oil and natural gas development activities:

Traditional Roll-Up Strategy. We are seeking to employ a traditional roll-up strategy utilizing a combination of capital resources, operational and management expertise, technology, and our strategic partnership with Haas Petroleum, which has experience operating in the region for nearly 70 years.

Numerous Acquisition Opportunities. There are over 20,000 producing leases in the State of Kansas, which afford us numerous opportunities to pursue negotiated lease transactions instead of having to competitively bid on fundamentally sound assets.

Fragmented Ownership Structure. There are numerous opportunities to acquire producing properties at attractive prices because of the currently inefficient and fragmented ownership structure.

Our Properties

Black Oaks Project. The Black Oaks Project is currently a 2,400 acre project in Woodson and Greenwood Counties of Kansas where we are aggressively implementing a primary and secondary recovery waterflood program to increase oil production. We originally acquired an option to purchase and participate in the Black Oaks Project from MorMeg, LLC, or MorMeg, which is controlled by Mark Haas, a principal of Haas Petroleum, for $500,000 of cash and stock. In addition, we established a joint operating account with MorMeg and funded it with $4.0 million for the initial development of the project. We have a 95% working interest in the project and MorMeg has a 5% carried working interest in the project, which will convert to a 30% working interest upon payout. Our gross production at Black Oaks for the month of October 2008 was approximately 101 BOEPD.

DD Energy Project. In September 2007, we acquired a 100% working interest in seven oil and natural gas leases stretching across approximately 1,700 acres in Johnson, Anderson and Linn Counties of Kansas for $2.7 million. Our gross production at DD Energy for the month of October 2008 was approximately 77 BOEPD.

Tri-County Project. We hold a nearly 100% working interest in, and are the operator of, approximately 1,300 acres of oil and natural gas leases in Miami, Johnson and Franklin Counties of Kansas that make up the Tri-County Project. We completed this purchase in September 2007 for $800,000 in cash. Our gross production for the month of October 2008 at Tri-County was approximately 59 BOEPD.

Thoren Project. We acquired the Thoren Project from MorMeg in April 2007 for $400,000. The lease currently encompasses approximately 747 acres in Douglas County, Kansas. We hold a 100% working interest in the Thoren Project. Our gross production for the month of October 2008 at Thoren was approximately 39 BOEPD.

Gas City Project. The Gas City Project, currently located on approximately 7,470 acres in Allen County, Kansas, was acquired for $750,000 in February of 2006 and was our first property acquisition. In August 2007, we entered into a Development Agreement with Euramerica Energy, Inc., or Euramerica, whereby Euramerica initially invested $524,000 in capital toward 6,600 acres of the project. Euramerica was granted an option to purchase this 6,600 acre portion of the project for $1.2 million with a requirement to invest an additional $2.0 million for project development. We are the operator of the project at a cost plus 17.5% basis. To date, Euramerica has paid $600,000 of the $1.2 million purchase price and $500,000 of the $2.0 million development funds. Upon payment of the entire purchase price, Euramerica will be assigned a 95% working interest, and we will retain a 5% carried working interest before payout. When a well reaches payout, our 5% carried working interest will increase to a 25% working interest in the well and Euramerica will have a 75% working interest in the well. Payout for each well occurs when proceeds of all revenue received by Euramerica from the production and sale of oil, gas, or other hydrocarbons equals the well’s drilling and completion costs. If Euramerica does not fund the remaining $1.5 million of the development funds before January 15, 2009 or does not pay the remaining $600,000 of the purchase price by January 15, 2009, all of the development agreements will be terminated and Euramerica will lose any interest in this property or the Euramerica wells. The gross production for the month of October 2008 at Gas City was approximately 11 BOEPD. On October 15, 2008, the decision was made to shut in the project and cease all operations until Euramerica provides the funds due by January 15, 2009.

Nickel Town Project. The option granted to us in connection with the Black Oaks Project would allow us to participate in another approximately 2,100 acre development and secondary recovery project with MorMeg, in the same area as the Black Oaks Project. Should we elect to participate in the Nickel Town Project, which requires us to complete development of the Black Oaks Project, we will have the option of negotiating new operating agreements with MorMeg.

Our Business Strategy

Our goal is to increase stockholder value by finding and developing oil and natural gas reserves at costs that provide an attractive rate of return on our investments. The principal elements of our business strategy are:

Develop Our Existing Properties. We intend to create near-term reserve and production growth from over 400 additional drilling locations we have identified on our properties. We have identified an additional 193 drillable producer locations and 213 drillable injector locations. The structure and the continuous oil accumulation in Eastern Kansas, and the expected long-life production and reserves of our properties, are anticipated to enhance our opportunities for long-term profitability. As of March 31, 2008, our Black Oaks, DD Energy, Tri-County and Thoren Projects have projected lives of 47 years, 33 years, 21 years and 26 years, respectively.

Maximize Operational Control. We seek to operate our properties and maintain a substantial working interest. We believe the ability to control our drilling inventory will provide us with the opportunity to more efficiently allocate capital, manage resources, control operating and development costs, and utilize our experience and knowledge of oilfield technologies.

Pursue Selective Acquisitions and Joint Ventures. Due to our local presence in Eastern Kansas and strategic partnership with Haas Petroleum, we believe we are well-positioned to pursue selected acquisitions from the fragmented and capital-constrained owners of mineral rights throughout Eastern Kansas.

Reduce Unit Costs Through Economies of Scale and Efficient Operations. As we continue to increase our oil production and develop our existing properties, we expect that our unit cost structure will benefit from economies of scale. In particular, we anticipate reducing unit costs by greater utilization of our existing infrastructure over a larger number of wells.

Our Competitive Strengths

We have a number of strengths that we believe will help us successfully execute our strategy:

Acquisition and Development Strategy. We have what we believe to be a relatively low-risk, acquisition and development strategy compared to some of our competitors. We generally buy properties that have proven, long-term production, with a projected pay-back within a relatively short period of time, and with potential growth and upside in terms of development, enhancement and efficiency. We also plan to minimize the risk of natural gas and oil price volatility by developing a sales portfolio of pricing for our production as we continue to expand and as market conditions permit.

Significant Production Growth Opportunities. We have acquired an attractive acreage position with favorable lease terms in a region with historical hydrocarbon production. Based on continued drilling success within our acreage position, we expect to increase our reserves, production and cash flow.

Experienced Management Team and Strategic Partner with Strong Technical Capability. Our CEO has over 20 years of experience in the energy industry, primarily related to gas/electric utilities, but including experience related to energy trading and production, and members of our board of directors have considerable industry experience and technical expertise in engineering, horizontal drilling, geoscience and field operations. In addition, our strategic partner, Haas Petroleum, has over 70 years of experience in Eastern Kansas, including completion and secondary recovery techniques and technologies. Our board of directors and Mark Haas of Haas Petroleum work closely with management during the initial phases of any major project to ensure its feasibility and to consider the appropriate recovery techniques to be utilized.

Incentivized Management Ownership. The equity ownership of our directors and executive officers is strongly aligned with that of our stockholders. As of December 23, 2008, our directors and executive officers owned approximately 9.1% of our outstanding common stock, with options that upon exercise would increase their ownership of our outstanding common stock to 15.6%. In addition, the compensation arrangements for our directors and executive officers are weighted toward future performance-based equity awards rather than cash payments.

Company History

Prior to the reverse merger with Midwest Energy in August of 2006, we operated under the name Millennium Plastics Corporation and focused on the development of biodegradable plastic materials. This business plan was ultimately abandoned following its unsuccessful implementation. Following the merger, we assumed the business plan of Midwest Energy and entered into the oil and natural gas industry. Concurrent with the effectiveness of the merger, we changed our name to “EnerJex Resources, Inc.” The result of the merger was that the former stockholders of Midwest Energy controlled approximately 98% of our outstanding shares of common stock. In addition, Midwest Energy was deemed to be the acquiring company for financial reporting purposes and the merger was accounted for as a reverse merger.

Initially, all of our oil and natural gas operations were conducted through Midwest Energy. In November 2007, Midwest Energy changed its name to EnerJex Kansas, Inc., or EnerJex Kansas. In August 2007, we incorporated DD Energy, Inc., or DD Energy, as a wholly-owned operating subsidiary. All of our current operations are conducted through EnerJex Kansas and DD Energy, our wholly-owned subsidiaries.

Risks Associated with Our Business

Our business is subject to numerous risks, as discussed more fully in the section entitled “Risk Factors” beginning on page 11 of this prospectus. Some of these risks include:

Volatility in natural gas and oil prices, which could negatively impact our revenues and our ability to cover our operating or capital expenditures.

The speculative nature of drilling wells, which often involves significant costs that may be more than our estimates, and may not result in any addition to our production or reserves.

The concentration of our properties in Eastern Kansas, which disproportionately exposes us to adverse events occurring in this geographic area.

Our ability to achieve and maintain profitable business operations. Although we recently achieved positive income from operations for the first time in our history, we have a history of losses since our inception and we may never be able to maintain profitability.

Our ability to obtain additional capital in the future to finance our planned growth, which we may not be able to raise or may only be available on terms unfavorable to us or our stockholders.

Our ability to effectively compete with large companies that may have greater resources than us.

Our ability to accurately estimate proven recoverable reserves.

Our ability to successfully complete future acquisitions and to integrate acquired businesses.

Our ability to comply with complex laws and regulations, including environmental regulations, which can adversely affect the cost, manner or feasibility of doing business.

Recent Developments

A number of recent developments have occurred which may significantly impact our business prospects and results. Some of the developments that we believe to be most important to our business are summarized below. However, you are encouraged to read the more thorough description of these and other recent developments in the “Business and Properties” section beginning on page 45 of this prospectus.

As of March 31, 2008, our estimated total proved reserves were 1.4 million BOE with a total proved PV10, before tax, of reserves of $39.6 million. See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

On March 6, 2008, we entered into an agreement with Shell Trading (US) Company, or Shell, whereby we agreed to an 18-month fixed-price swap with Shell for 130 barrels of oil per day, or BOPD beginning on April 1, 2008, at a fixed price per barrel of $96.90, less transportation costs. This represented approximately 60% of our total current oil production on a net revenue basis at that time and locked in approximately $6.8 million in gross revenue before the deduction of transportation costs over the 18 month period. In addition, we agreed to sell all of our remaining oil production at current spot market pricing beginning April 1, 2008 through September 30, 2009 to Shell.

Our in-fill drilling and waterflood enhanced recovery techniques at the Black Oaks Project have increased gross production to approximately 101 BOEPD for the month of October 2008 from a level of an average of approximately 32 BOEPD when the project was originally acquired. On September 30, 2008, the Black Oaks Project had 63 active production wells and 13 active water injection wells, an increase of 28 production wells and 13 water injection wells since the project was originally acquired. Based upon these results, we anticipate commencing Phase II of the development plan, which contemplates drilling over 25 additional water injection wells and completing over 20 additional producer wells.

On July 3, 2008, we entered into a new three-year $50 million senior secured credit facility with Texas Capital Bank, N. A. with an initial borrowing base of $10.75 million based on our current proved oil and natural gas reserves. We used our initial borrowing under this facility of $10.75 million to redeem an aggregate principal amount of $6.3 million of our 10% debentures, assign approximately $2.0 million of our existing indebtedness with another bank to this facility, repay $965,000 of seller-financed notes, pay the transaction costs, fees and expenses of this new facility and expand our current development projects, including the completion of newly drilled wells. We reduced principal of approximately $3.3 million with proceeds from liquidating a costless collar in November 2008.

As of July 3, 2008, we entered into an ISDA master agreement and a costless collar with BP Corporation North America Inc., or BP, for 130 BOPD with a price floor of $132.50 per barrel and a price ceiling of $155.70 per barrel for NYMEX West Texas Intermediate for the period of October 1, 2009 until March 31, 2011. We liquidated this costless collar in November 2008 and received proceeds of approximately $3.9 million from BP. We reduced the debt outstanding under our Credit Facility by approximately $3.3 million and used the remainder for general operating purposes.

On July 7, 2008, we amended the $2.7 million of aggregate principal amount of our 10% debentures that remain outstanding to permit the indebtedness under our new credit facility, subordinate the security interests of the debentures to the new credit facility, provide for the redemption of the remaining debentures with the net proceeds from our next debt or equity offering, and eliminate the covenant to maintain certain production thresholds.

On August 1, 2008, we executed three-year employment agreements with C. Stephen Cochennet, our president and chief executive officer, and Dierdre P. Jones, our chief financial officer.

For the six months ended September 30, 2008, oil and natural gas revenues were $3.47 million. The net loss for the period was approximately $2.87 million. Non-cash expenses such as depreciation and depletion, loan costs and accretions, as well as loan penalty costs were significant factors contributing to the net loss.

Corporate Information

EnerJex Resources, Inc. is a Nevada corporation. Our principal executive office is located at 27 Corporate Woods, Suite 350, 10975 Grandview Drive, Overland Park, Kansas 66210, and our phone number is (913) 754-7754. We also maintain a website at www.enerjexresources.com. The information on our website is not incorporated by reference into this prospectus.

The Offering

Common stock offered by the Selling Stockholder	1,000,000 shares

Use of proceeds	We will not receive any of the proceeds from the sale of shares of our common stock in this offering. See “Use of Proceeds” on page 28 of this prospectus.

Current OTC:BB symbol	ENRJ.OB

Dividend policy	We do not expect to pay dividends in the foreseeable future.

Risk factors	Investing in our common stock involves certain risks. See the risk factors described under the heading “Risk Factors” beginning on page 11 of this prospectus and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

SUMMARY FINANCIAL DATA

The following tables set forth a summary of the historical financial data of EnerJex Resources, Inc. for, and as of the end of, each of the periods indicated. The statements of operations, statements of cash flows and other financial data for the period from (i) inception (December 30, 2005) to March 31, 2006, (ii) the fiscal years ended March 31, 2007 and 2008, and (iii) our balance sheets as of March 31, 2006, March 31, 2007 and March 31, 2008 are derived from our audited financial statements included elsewhere in this prospectus. Our balance sheet as of September 30, 2008 and the statements of operations, statements of cash flows and other financial data for the six months ended September 30, 2008 and 2007 are derived from our unaudited financial statements included elsewhere in this prospectus. We have prepared the unaudited financial statements on the same basis as our audited financial statements and, in our opinion, have included all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of our operations for each of the periods mentioned.

The inception date for the financial statements presented in this prospectus is that of EnerJex Kansas. As a result of a reverse merger between Millennium Plastics Corporation (now EnerJex Resources, Inc.) and EnerJex Kansas (formerly Midwest Energy), EnerJex Kansas was deemed to be the acquiring company for financial reporting purposes and the transaction has been accounted for as a reverse merger.

Our historical results are not necessarily indicative of the results to be expected for any future periods and the results for the six months ended September 30, 2008 should not be considered indicative of results expected for the full fiscal year. You should read the following financial information together with the information under “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and our financial statements and related notes included elsewhere in this prospectus.

													From Inception
													(December 30,
	Six Months Ended						Year Ended			Year Ended			2005) through
	September 30						March 31,			March 31,			March 31,
	2008			2007			2008			2007			2006
	(Unaudited)			(Unaudited)			(Audited)			(Audited)			(Audited)

Statement of Operations:
Revenue
Oil and natural gas activities	$	3,467,742		$	564,793		$	3,602,798		$	90,800		$	2,142
Expenses
Direct costs		1,531,300			347,751			1,795,188			172,417			14,599
Repairs on oil and natural gas equipment		—			—			—			165,603			40,436
Depreciation, depletion and amortization		718,048			145,257			935,330			23,978			825
Professional fees		294,785			1,062,435			1,226,998			302,071			50,490
Salaries		494,426			1,204,062			1,703,099			288,016			—
Administrative expense		585,456			227,781			887,872			182,773			21,700
Impairment of oil and natural gas properties		—			—			—			273,959			468,081
Impairment of goodwill		—			—			—			677,000			—

Total expenses		3,624,015			2,987,286			6,548,487			2,085,817			596,131

Net operating income (loss)		(156,273	)		(2,422,493	)		(2,945,689	)		(1,995,017	)		(593,989	)

Other income (expense):
Interest expense		(532,624	)		(283,190	)		(1,882,246	)		(8,434	)		(38	)
Loan fee expense		(250,974	)		(73,857	)		—			—			—
Loan interest accretion		(2,567,379	)		(462,484	)		—			—			—
Other		—			—			—			348			1,159
Total other income (expense)		(3,350,977	)		(819,531	)		(1,882,246	)		(8,086	)		1,121

Net (loss)	$	(3,507,250	)	$	(3,242,024	)	$	(4,827,935	)	$	(2,003,103	)	$	(592,868	)

Weighted average number of common shares outstanding — basic and fully diluted			4,442,930				4,138,338				4,284,143				2,448,318				1,712,609
Net (loss) per share — basic and fully diluted		$	(0.79	)		$	(0.78	)		$	(1.13	)		$	(0.82	)		$	(0.35	)

													From Inception
													(December 30, 2005)
	Six Months Ended						Year Ended			Year Ended			through
	September 30						March 31,			March 31,			March 31,
	2008			2007			2008			2007			2006
	(Unaudited)			(Unaudited)			(Audited)			(Audited)			(Audited)

Statements of Cash Flows:
Cash provided by (used in) operating activities		(356,550	)		(298,723	)	$	(408,494	)	$	(1,435,559	)	$	(60,786	)
Cash used in investing activities		(2,281,699	)		(6,999,445	)		(9,357,020	)		(151,180	)		(767,550	)
Cash provided by financing activities		1,951,215			10,751,998			10,617,025		$	1,095,800		$	1,418,768
Increase (decrease) in cash and cash equivalents		(687,034	)		3,453,830			851,511			(490,939	)		590,432
Cash and cash equivalents, beginning		951,004			99,493			99,493			590,432			—
Cash and cash equivalents, end	$	263,970		$	3,553,323		$	951,004		$	99,493		$	590,432
Supplemental disclosures:
Interest paid	$	505,617		$	283,190		$	733,972		$	5,407			38
Income tax paid	$	—		$	—		$	—		$	—		$	—
Non-cash transactions:
Share-based payments issued for services	$	79,455		$	2,156,084		$	280,591		$	558,000		$	33,000
Share-based payments issued for oil and gas properties		—			—			—			200,000			—

	At			At		At			At
	September 30,			March 31,		March 31,			March 31,
	2008			2008		2007			2006
	(Unaudited)			(Audited)		(Audited)			(Audited)

Total Assets	$	13,240,738		$	10,867,829	$	492,507		$	922,486
Total Liabilities		15,234,540			9,433,837		537,097			71,586
Stockholders’ Equity (deficit)	$	(1,993,802	)	$	1,433,992	$	(44,590	)	$	850,900

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding whether to invest in shares of our common stock. If any of the following risks actually occur, our business, financial condition, operating results and prospects would suffer. In that case, the trading price of our common stock would likely decline and you might lose all or part of your investment in our common stock. The risks described below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our operations and business results.

Risks Associated with Our Business

Declining economic conditions could negatively impact our business

Our operations are affected by local, national and worldwide economic conditions. Markets in the United States and elsewhere have been experiencing extreme volatility and disruption for more than 12 months, due in part to the financial stresses affecting the liquidity of the banking system and the financial markets generally. In recent weeks, this volatility and disruption has reached unprecedented levels. The consequences of a potential or prolonged recession may include a lower level of economic activity and uncertainty regarding energy prices and the capital and commodity markets. While the ultimate outcome and impact of the current economic conditions cannot be predicted, a lower level of economic activity might result in a decline in energy consumption, which may adversely affect the price of oil, our revenues, liquidity and future growth. Instability in the financial markets, as a result of recession or otherwise, also may affect the cost of capital and our ability to raise capital.

We have sustained losses, which raises doubt as to our ability to successfully develop profitable business operations.

Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing and maintaining a business in the oil and natural gas industries. There is nothing conclusive at this time on which to base an assumption that our business operations will prove to be successful or that we will be able to operate profitably. Our future operating results will depend on many factors, including:

the future prices of natural gas and oil;

our ability to raise adequate working capital;

success of our development and exploration efforts;

demand for natural gas and oil;

the level of our competition;

our ability to attract and maintain key management, employees and operators;

transportation and processing fees on our facilities;

fuel conservation measures;

alternate fuel requirements;

government regulation and taxation;

technical advances in fuel economy and energy generation devices; and

our ability to efficiently explore, develop and produce sufficient quantities of marketable natural gas or oil in a highly competitive and speculative environment while maintaining quality and controlling costs.

To achieve profitable operations, we must, alone or with others, successfully execute on the factors stated above, along with continually developing ways to enhance our production efforts. Despite our best efforts, we may not be successful in our development efforts or obtain required regulatory approvals. There is a possibility that some of our wells may never produce natural gas or oil in sustainable or economic quantities.

We will need additional capital in the future to finance our planned growth, which we may not be able to raise or may only be available on terms unfavorable to us or our stockholders, which may result in our inability to fund our working capital requirements and harm our operational results.

We have and expect to continue to have substantial capital expenditure and working capital needs. We will need to rely on cash flow from operations and borrowings under our Credit Facility or raise additional cash to fund our operations, pay outstanding long-term debt, fund our anticipated reserve replacement needs and implement our growth strategy, or respond to competitive pressures and/or perceived opportunities, such as investment, acquisition, exploration, workover and development activities.

If low natural gas and oil prices, operating difficulties or other factors, many of which are beyond our control, cause our revenues or cash flows from operations to decrease, we may be limited in our ability to spend the capital necessary to complete our development, production exploitation and exploration programs. If our resources or cash flows do not satisfy our operational needs, we will require additional financing, in addition to anticipated cash generated from our operations, to fund our planned growth. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited. In such a capital restricted situation, we may curtail our acquisition, drilling, development, and exploration activities or be forced to sell some of our assets on an untimely or unfavorable basis. Our current plans to address lower crude and natural gas prices are primarily to reduce both capital and operating expenditures to a level equal to or below cash flow from operations. However, our plans may not be successful in improving our results of operations and liquidity.

If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would be reduced, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.

Natural gas and oil prices are volatile. This volatility may occur in the future, causing negative change in cash flows which may result in our inability to cover our operating or capital expenditures.

Our future revenues, profitability, future growth and the carrying value of our properties is anticipated to depend substantially on the prices we may realize for our natural gas and oil production. Our realized prices may also affect the amount of cash flow available for operating or capital expenditures and our ability to borrow and raise additional capital.

Natural gas and oil prices are subject to wide fluctuations in response to relatively minor changes in or perceptions regarding supply and demand. Historically, the markets for natural gas and oil have been volatile, and they are likely to continue to be volatile in the future. Among the factors that can cause this volatility are:

local, national and worldwide economic conditions;

worldwide or regional demand for energy, which is affected by economic conditions;

the domestic and foreign supply of natural gas and oil;

weather conditions;

natural disasters;

acts of terrorism;

domestic and foreign governmental regulations and taxation;

political and economic conditions in oil and natural gas producing countries, including those in the Middle East and South America;

impact of the U.S. dollar exchange rates on oil and natural gas prices;

the availability of refining capacity;

actions of the Organization of Petroleum Exporting Countries, or OPEC, and other state controlled oil companies relating to oil price and production controls; and

the price and availability of other fuels.

It is impossible to predict natural gas and oil price movements with certainty. Lower natural gas and oil prices may not only decrease our future revenues on a per unit basis but also may reduce the amount of natural gas and oil that we can produce economically. A substantial or extended decline in natural gas and oil prices may materially and adversely affect our future business enough to force us to cease our business operations. In addition, our reserves, financial condition, results of operations, liquidity and ability to finance and execute planned capital expenditures will also suffer in such a price decline. Further, natural gas and oil prices do not necessarily move together.

Approximately 54% of our total proved reserves as of March 31, 2008 consist of undeveloped and developed non-producing reserves, and those reserves may not ultimately be developed or produced.

As of March 31, 2008, approximately 36% of our total proved reserves were undeveloped and approximately 18% were developed non-producing. We plan to develop and produce all of our proved reserves, but ultimately some of these reserves may not be developed or produced. Furthermore, not all of our undeveloped or developed non-producing reserves may be ultimately produced in the time periods we have planned, at the costs we have budgeted, or at all.

Because we face uncertainties in estimating proven recoverable reserves, you should not place undue reliance on such reserve information.

Our reserve estimates and the future net cash flows attributable to those reserves are prepared by McCune Engineering, our independent petroleum and geological engineer. There are numerous uncertainties inherent in estimating quantities of proved reserves and cash flows from such reserves, including factors beyond our control and the control of McCune Engineering. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that can be economically extracted, which cannot be measured in an exact manner. The accuracy of an estimate of quantities of reserves, or of cash flows attributable to these reserves, is a function of the available data, assumptions regarding future natural gas and oil prices, expenditures for future development and exploitation activities, and engineering and geological interpretation and judgment. Reserves and future cash flows may also be subject to material downward or upward revisions based upon production history, development and exploitation activities and natural gas and oil prices. Actual future production, revenue, taxes, development expenditures, operating expenses, quantities of recoverable reserves and value of cash flows from those reserves may vary significantly from the assumptions and estimates in our reserve reports. Any significant variance from these assumptions to actual figures could greatly affect our estimates of reserves, the economically recoverable quantities of natural gas and oil attributable to any particular group of properties, the classification of reserves based on risk of recovery, and estimates of the future net cash flows. In addition, reserve engineers may make different estimates of reserves and cash flows based on the same available data. The estimated quantities of proved reserves and the discounted present value of future net cash flows attributable to those reserves included in this report were prepared by McCune Engineering in accordance with rules of the Securities and Exchange Commission, or SEC, and are not intended to represent the fair market value of such reserves.

The present value of future net cash flows from our proved reserves is not necessarily the same as the current market value of our estimated reserves. We base the estimated discounted future net cash flows from our proved reserves on prices and costs. However, actual future net cash flows from our natural gas and oil properties also will be affected by factors such as:

Geological conditions;

Assumptions governing future oil and natural gas prices;

Amount and timing of actual production;

Availability of funds;

Future operating and development costs;

Actual prices we receive for natural gas and oil;

Supply and demand for our natural gas and oil;

Changes in government regulations and taxation; and

Capital costs of drilling new wells.

The timing of both our production and our incurrence of expenses in connection with the development and production of our properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% discount factor we use when calculating discounted future net cash flows may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with our business or the natural gas and oil industry in general.

The SEC permits natural gas and oil companies, in their public filings, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The SEC’s guidelines strictly prohibit us from including “probable reserves” and “possible reserves” in such filings. We also caution you that the SEC views such “probable” and “possible” reserve estimates as inherently unreliable and these estimates may be seen as misleading to investors unless the reader is an expert in the natural gas and oil industry. Unless you have such expertise, you should not place undue reliance on these estimates. Potential investors should also be aware that such “probable” and “possible” reserve estimates will not be contained in any “resale” or other registration statement filed by us that offers or sells shares on behalf of purchasers of our common stock and may have an impact on the valuation of the resale of the shares. Except as required by applicable law, we undertake no duty to update this information and do not intend to update this information.

The differential between the New York Mercantile Exchange, or NYMEX, or other benchmark price of oil and natural gas and the wellhead price we receive could have a material adverse effect on our results of operations, financial condition and cash flows.

The prices that we receive for our oil and natural gas production sometimes trade at a discount to the relevant benchmark prices, such as NYMEX, that are used for calculating hedge positions. The difference between the benchmark price and the price we receive is called a differential. We cannot accurately predict oil and natural gas differentials. In recent years for example, production increases from competing Canadian and Rocky Mountain producers, in conjunction with limited refining and pipeline capacity from the Rocky Mountain area, have gradually widened this differential. Increases in the differential between the benchmark price for oil and natural gas and the wellhead price we receive could have a material adverse effect on our results of operations, financial condition and cash flows by decreasing the proceeds we receive for our oil and natural gas production in comparison to what we would receive if not for the differential.

The natural gas and oil business involves numerous uncertainties and operating risks that can prevent us from realizing profits and can cause substantial losses.

Our development, exploitation and exploration activities may be unsuccessful for many reasons, including weather, cost overruns, equipment shortages and mechanical difficulties. Moreover, the successful drilling of a natural gas and oil well does not ensure a profit on investment. A variety of factors, both geological and market-related, can cause a well to become uneconomical or only marginally economical. In addition to their cost, unsuccessful wells can hurt our efforts to replace reserves.

The natural gas and oil business involves a variety of operating risks, including:

unexpected operational events and/or conditions;

unusual or unexpected geological formations;

reductions in natural gas and oil prices;

limitations in the market for oil and natural gas;

adverse weather conditions;

facility or equipment malfunctions;

title problems;

natural gas and oil quality issues;

pipe, casing, cement or pipeline failures;

natural disasters;

fires, explosions, blowouts, surface cratering, pollution and other risks or accidents;

environmental hazards, such as natural gas leaks, oil spills, pipeline ruptures and discharges of toxic gases;

compliance with environmental and other governmental requirements; and

uncontrollable flows of oil, natural gas or well fluids.

If we experience any of these problems, it could affect well bores, gathering systems and processing facilities, which could adversely affect our ability to conduct operations. We could also incur substantial losses as a result of:

injury or loss of life;

severe damage to and destruction of property, natural resources and equipment;

pollution and other environmental damage;

clean-up responsibilities;

regulatory investigation and penalties;

suspension of our operations; and

repairs to resume operations.

Because we use third-party drilling contractors to drill our wells, we may not realize the full benefit of worker compensation laws in dealing with their employees. Our insurance does not protect us against all operational risks. We do not carry business interruption insurance at levels that would provide enough funds for us to continue operating without access to other funds. For some risks, we may not obtain insurance if we believe the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. If a significant accident or other event occurs and is not fully covered by insurance, it could impact our operations enough to force us to cease our operations.

Drilling wells is speculative, often involving significant costs that may be more than our estimates, and may not result in any addition to our production or reserves. Any material inaccuracies in drilling costs, estimates or underlying assumptions will materially affect our business.

Developing and exploring for natural gas and oil involves a high degree of operational and financial risk, which precludes definitive statements as to the time required and costs involved in reaching certain objectives. The budgeted costs of drilling, completing and operating wells are often exceeded and can increase significantly when drilling costs rise due to a tightening in the supply of various types of oilfield equipment and related services. Drilling may be unsuccessful for many reasons, including geological conditions, weather, cost overruns, equipment shortages and mechanical difficulties. Moreover, the successful drilling of a natural gas or oil well does not ensure a profit on investment. Exploratory wells bear a much greater risk of loss than development wells. Substantially all of our wells drilled through September 30, 2008 have been development wells. A variety of factors, both geological and market-related, can cause a well to become uneconomical or only marginally economic. Our initial drilling and development sites, and any potential additional sites that may be developed, require significant additional exploration and development, regulatory approval and commitments of resources prior to commercial development. If our actual drilling and development costs are significantly more than our estimated costs, we may not be able to continue our business operations as proposed and would be forced to modify our plan of operation.

Development of our reserves, when established, may not occur as scheduled and the actual results may not be as anticipated. Drilling activity and access to capital may result in downward adjustments in reserves or higher than anticipated costs. Our estimates will be based on various assumptions, including assumptions over which we have control and assumptions required by the SEC relating to natural gas and oil prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. We have control over our operations that affect, among other things, acquisitions and dispositions of properties, availability of funds, use of applicable technologies, hydrocarbon recovery efficiency, drainage volume and production decline rates that are part of these estimates and assumptions and any variance in our operations that affects these items within our control may have a material effect on reserves. The process of estimating our natural gas and oil reserves is anticipated to be extremely complex, and will require significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Our estimates may not be reliable enough to allow us to be successful in our intended business operations. Our actual production, revenues, taxes, development expenditures and operating expenses will likely vary from those anticipated. These variances may be material.

Unless we replace our oil and natural gas reserves, our reserves and production will decline, which would adversely affect our cash flows and income.

Unless we conduct successful development, exploitation and exploration activities or acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced. Producing oil and natural gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future oil and natural gas reserves and production, and, therefore our cash flow and income, are highly dependent on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves. We may be unable to make such acquisitions because we are:

unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them;

unable to obtain financing for these acquisitions on economically acceptable terms; or

outbid by competitors.

If we are unable to develop, exploit, find or acquire additional reserves to replace our current and future production, our cash flow and income will decline as production declines, until our existing properties would be incapable of sustaining commercial production.

A significant portion of our potential future reserves and our business plan depend upon secondary recovery techniques to establish production. There are significant risks associated with such techniques.

We anticipate that a significant portion of our future reserves and our business plan will be associated with secondary recovery projects that are either in the initial stage of implementation or are scheduled for implementation. We anticipate that secondary recovery will affect our reserves and our business plan, and the exact project initiation dates and, by the very nature of waterflood operations, the exact completion dates of such projects are uncertain. In addition, the reserves and our business plan associated with these secondary recovery projects, as with any reserves, are estimates only, as the success of any development project, including these waterflood projects, cannot be ascertained in advance. If we are not successful in developing a significant portion of our reserves associated with secondary recovery methods, then the project may be uneconomic or generate less cash flow and reserves than we had estimated prior to investing the capital. Risks associated with secondary recovery techniques include, but are not limited to, the following:

higher than projected operating costs;

lower-than-expected production;

longer response times;

higher costs associated with obtaining capital;

unusual or unexpected geological formations;

fluctuations in natural gas and oil prices;

regulatory changes;

shortages of equipment; and

lack of technical expertise.

If any of these risks occur, it could adversely affect our financial condition or results of operations.

Any acquisitions we complete are subject to considerable risk.

Even when we make acquisitions that we believe are good for our business, any acquisition involves potential risks, including, among other things:

the validity of our assumptions about reserves, future production, revenues and costs, including synergies;

an inability to integrate successfully the businesses we acquire;

a decrease in our liquidity by using our available cash or borrowing capacity to finance acquisitions;

a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions;

the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which our indemnity is inadequate;

the diversion of management’s attention from other business concerns;

an inability to hire, train or retain qualified personnel to manage the acquired properties or assets;

the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges;

unforeseen difficulties encountered in operating in new geographic or geological areas; and

customer or key employee losses at the acquired businesses.

Our decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses and seismic and other information, the results of which are often incomplete or inconclusive.

Our reviews of acquired properties can be inherently incomplete because it is not always feasible to perform an in-depth review of the individual properties involved in each acquisition. Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as ground water contamination, plugging or orphaned well liability are not necessarily observable even when an inspection is undertaken.

We must obtain governmental permits and approvals for drilling operations, which can result in delays in our operations, be a costly and time consuming process, and result in restrictions on our operations.

Regulatory authorities exercise considerable discretion in the timing and scope of permit issuances in the region in which we operate. Compliance with the requirements imposed by these authorities can be costly and time consuming and may result in delays in the commencement or continuation of our exploration or production operations and/or fines. Regulatory or legal actions in the future may materially interfere with our operations or otherwise have a material adverse effect on us. In addition, we are often required to prepare and present to federal, state or local authorities data pertaining to the effect or impact that a proposed project may have on the environment, threatened and endangered species, and cultural and archaeological artifacts. Accordingly, the permits we need may not be issued, or if issued, may not be issued in a timely fashion, or may involve requirements that restrict our ability to conduct our operations or to do so profitably.

Due to our lack of geographic diversification, adverse developments in our operating areas would materially affect our business.

We currently only lease and operate oil and natural gas properties located in Eastern Kansas. As a result of this concentration, we may be disproportionately exposed to the impact of delays or interruptions of production from these properties caused by significant governmental regulation, transportation capacity constraints, curtailment of production, natural disasters, adverse weather conditions or other events which impact this area.

We depend on a small number of customers for all, or a substantial amount of our sales. If these customers reduce the volumes of oil and natural gas they purchase from us, our revenue and cash available for distribution will decline to the extent we are not able to find new customers for our production.

We have contracted with Shell for the sale of all of our oil through September 2009 and will likely contract for the sale of our natural gas with one, or a small number, of buyers. It is not likely that there will be a large pool of available purchasers. If a key purchaser were to reduce the volume of oil or natural gas it purchases from us, our revenue and cash available for operations will decline to the extent we are not able to find new customers to purchase our production at equivalent prices.

We are not the operator of some of our properties and we have limited control over the activities on those properties.

We are not the operator on our Black Oaks Project. We have only limited ability to influence or control the operation or future development of the Black Oaks Project or the amount of capital expenditures that we can fund with respect to it. In the case of the Black Oaks Project, our dependence on the operator, Haas Petroleum, limits our ability to influence or control the operation or future development of the project. Such limitations could materially adversely affect the realization of our targeted returns on capital related to exploration, drilling or production activities and lead to unexpected future costs.

We may suffer losses or incur liability for events for which we or the operator of a property have chosen not to obtain insurance.

Our operations are subject to hazards and risks inherent in producing and transporting natural gas and oil, such as fires, natural disasters, explosions, pipeline ruptures, spills, and acts of terrorism, all of which can result in the loss of hydrocarbons, environmental pollution, personal injury claims and other damage to our and others’ properties. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. In addition, pollution and environmental risks generally are not fully insurable. As a result of market conditions, existing insurance policies may not be renewed and other desirable insurance may not be available on commercially reasonable terms, if at all. The occurrence of an event that is not covered, or not fully covered, by insurance could have a material adverse effect on our business, financial condition and results of operations.

Our hedging activities could result in financial losses or could reduce our available funds or income and therefore adversely affect our financial position.

To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in the prices of oil and natural gas, we have entered into derivative arrangements from April 1, 2008 until September 30, 2009, for 130 barrels of oil per day that could result in both realized and unrealized hedging losses. As of September 30, 2008 we had not incurred any such losses. The extent of our commodity price exposure is related largely to the effectiveness and scope of our derivative activities. For example, the derivative instruments we may utilize may be based on posted market prices, which may differ significantly from the actual crude oil, natural gas and NGL prices we realize in our operations.

Our actual future production may be significantly higher or lower than we estimate at the time we enter into derivative transactions for such period. If the actual amount is higher than we estimate, we will have greater commodity price exposure than we intended. If the actual amount is lower than the nominal amount that is subject to our derivative financial instruments, we might be forced to satisfy all or a portion of our derivative transactions without the benefit of the cash flow from our sale or purchase of the underlying physical commodity, resulting in a substantial diminution of our liquidity. As a result of these factors, our derivative activities may not be as effective as we intend in reducing the volatility of our cash flows, and in certain circumstances may actually increase the volatility of our cash flows. In addition, while we believe our existing derivative activities are with a creditworthy counterparty (Shell), continued deterioration in the credit markets may cause a counterparty not to perform its obligation under the applicable derivative instrument or impact their willingness to enter into future transactions with us.

Our business depends in part on gathering and transportation facilities owned by others. Any limitation in the availability of those facilities could interfere with our ability to market our oil and natural gas production and could harm our business.

The marketability of our oil and natural gas production will depend in a very large part on the availability, proximity and capacity of pipelines, oil and natural gas gathering systems and processing facilities. The amount of oil and natural gas that can be produced and sold is subject to curtailment in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage or lack of available capacity on such systems. The curtailments arising from these and similar circumstances may last from a few days to several months. In many cases, we will be provided only with limited, if any, notice as to when these circumstances will arise and their duration. Any significant curtailment in gathering system or pipeline capacity could significantly reduce our ability to market our oil and natural gas production and harm our business.

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

Shortages or an increase in cost of drilling rigs, equipment, supplies or personnel could delay or interrupt our operations, which could impact our financial condition and results of operations. Drilling activity in the geographic areas in which we conduct drilling activities may increase, which would lead to increases in associated costs, including those related to drilling rigs, equipment, supplies and personnel and the services and products of other vendors to the industry. Increased drilling activity in these areas may also decrease the availability of rigs. Although Haas Petroleum has agreed to provide up to two drilling rigs to the Black Oaks Project, we do not have any contracts for drilling rigs and drilling rigs may not be readily available when we need them. Drilling and other costs may increase further and necessary equipment and services may not be available to us at economical prices.

Our exposure to possible leasehold defects and potential title failure could materially adversely impact our ability to conduct drilling operations.

We obtain the right and access to properties for drilling by obtaining oil and natural gas leases either directly from the hydrocarbon owner, or through a third party that owns the lease. The leases may be taken or assigned to us without title insurance. There is a risk of title failure with respect to such leases, and such title failures could materially adversely impact our business by causing us to be unable to access properties to conduct drilling operations.

Our reserves are subject to the risk of depletion because many of our leases are in mature fields that have produced large quantities of oil and natural gas to date.

Our operations are located in established fields in Eastern Kansas. As a result, many of our leases are in, or directly offset, areas that have produced large quantities of oil and natural gas to date. The degree of depletion for each of our projects, as detailed in “Business and Properties-Our Properties” by subject, ranges from approximately 0% to 78%. As such, our reserves may be partially or completely depleted by offsetting wells or previously drilled wells, which could significantly harm our business.

Our lease ownership may be diluted due to financing strategies we may employ in the future due to our lack of capital.

To accelerate our development efforts we plan to take on working interest partners who will contribute to the costs of drilling and completion and then share in revenues derived from production. In addition, we may in the future, due to a lack of capital or other strategic reasons, establish joint venture partnerships or farm out all or part of our development efforts. These economic strategies may have a dilutive effect on our lease ownership and could significantly reduce our operating revenues.

We are subject to complex laws and regulations, including environmental regulations, which can adversely affect the cost, manner or feasibility of doing business.

Development, production and sale of natural gas and oil in the United States are subject to extensive laws and regulations, including environmental laws and regulations. We may be required to make large expenditures to comply with environmental and other governmental regulations. Matters subject to regulation include, but are not limited to:

location and density of wells;

the handling of drilling fluids and obtaining discharge permits for drilling operations;

accounting for and payment of royalties on production from state, federal and Indian lands;

bonds for ownership, development and production of natural gas and oil properties;

transportation of natural gas and oil by pipelines;

operation of wells and reports concerning operations; and

taxation.

Under these laws and regulations, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages. Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws and regulations could change in ways that substantially increase our costs. Accordingly, any of these liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our financial condition and results of operations enough to possibly force us to cease our business operations.

Our operations may expose us to significant costs and liabilities with respect to environmental, operational safety and other matters.

We may incur significant costs and liabilities as a result of environmental and safety requirements applicable to our oil and natural gas exploration and production activities. We may also be exposed to the risk of costs associated with Kansas Corporation Commission requirements to plug orphaned and abandoned wells on our oil and natural gas leases from wells previously drilled by third parties. In addition, we may indemnify sellers or lessors of oil and natural gas properties for environmental liabilities they or their predecessors may have created. These costs and liabilities could arise under a wide range of federal, state and local environmental and safety laws and regulations, including regulations and enforcement policies, which have tended to become increasingly strict over time. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of cleanup and site restoration costs, liens and to a lesser extent, issuance of injunctions to limit or cease operations. In addition, claims for damages to persons or property may result from environmental and other impacts of our operations.

Strict, joint and several liability may be imposed under certain environmental laws, which could cause us to become liable for the conduct of others or for consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. New laws, regulations or enforcement policies could be more stringent and impose unforeseen liabilities or significantly increase compliance costs. If we are not able to recover the resulting costs through insurance or increased revenues, our ability to operate effectively could be adversely affected.

Our facilities and activities could be subject to regulation by the Federal Energy Regulatory Commission or the Department of Transportation, which could take actions that could result in a material adverse effect on our financial condition.

Although it is anticipated that our natural gas gathering systems will be exempt from FERC and DOT regulation, any revisions to this understanding may affect our rights, liabilities, and access to midstream or interstate natural gas transportation, which could have a material adverse effect on our operations and financial condition. In addition, the cost of compliance with any revisions to FERC or DOT rules, regulations or requirements could be substantial and could adversely affect our ability to operate in an economic manner. Additional FERC and DOT rules and legislation pertaining to matters that could affect our operations are considered and adopted from time to time. We cannot predict what effect, if any, such regulatory changes and legislation might have on our operations, but we could be required to incur additional capital expenditures and increased costs.

Although our natural gas sales activities are not currently projected to be subject to rate regulation by FERC, if FERC finds that in connection with making sales in the future, we (i) failed to comply with any applicable FERC administered statutes, rules, regulations or orders, (ii) engaged in certain fraudulent acts, or (iii) engaged in market manipulation, we could be subject to substantial penalties and fines of up to $1.0 million per day per violation.

We operate in a highly competitive environment and our competitors may have greater resources than us.

The natural gas and oil industry is intensely competitive and we compete with other companies, many of which are larger and have greater financial, technological, human and other resources. Many of these companies not only explore for and produce crude oil and natural gas but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis. Such companies may be able to pay more for productive natural gas and oil properties and exploratory prospects or define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, such companies may have a greater ability to continue exploration activities during periods of low oil and natural gas market prices. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. If we are unable to compete, our operating results and financial position may be adversely affected.

We may incur substantial write-downs of the carrying value of our natural gas and oil properties, which would adversely impact our earnings.

We review the carrying value of our natural gas and oil properties under the full-cost accounting rules of the SEC on a quarterly basis. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. In calculating future net revenues, current prices and costs used are those as of the end of the appropriate quarterly period. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts, including the effects of derivatives qualifying as cash flow hedges. Two primary factors impacting this test are reserve levels and current prices, and their associated impact on the present value of estimated future net revenues. Revisions to estimates of natural gas and oil reserves and/or an increase or decrease in prices can have a material impact on the present value of estimated future net revenues. Any excess of the net book value, less deferred income taxes, is generally written off as an expense. Under SEC regulations, the excess above the ceiling is not expensed (or is reduced) if, subsequent to the end of the period, but prior to the release of the financial statements, natural gas and oil prices increase sufficiently such that an excess above the ceiling would have been eliminated (or reduced) if the increased prices were used in the calculations.

We have recorded a total of $742,040 in impairments on our oil and natural gas properties based on the ceiling test under the full-cost method in the years ended March 31, 2007 and 2006. There was no impairment for the fiscal year ended March 31, 2008 or in the six months ended September 30, 2008.

Our success depends on our key management and professional personnel, including C. Stephen Cochennet, the loss of whom would harm our ability to execute our business plan.

Our success depends heavily upon the continued contributions of C. Stephen Cochennet, whose knowledge, leadership and technical expertise would be difficult to replace, and on our ability to retain and attract experienced engineers, geoscientists and other technical and professional staff. We have entered into an employment agreement with Mr. Cochennet, and we maintain $1.0 million in key person insurance on Mr. Cochennet. However, if we were to lose his services, our ability to execute our business plan would be harmed and we may be forced to significantly alter our operations until such time as we could hire a suitable replacement for Mr. Cochennet.

Risks Associated with our Debt Financing

Significant and prolonged declines in commodity prices may negatively impact our borrowing base and our ability to borrow overall.

It is possible that our borrowing base, which is based on our oil and gas reserves and is subject to review and adjustment on a semi-annual basis and other interim adjustments, may be reduced when it is reviewed. A reduction in our base could result in a “loan excess” which would be required to be eliminated through payment of a portion of the loan and/or cash collateralization of Letters of Credit obligations; or adding properties to the borrowing base sufficient to offset the “loan excess”. A reduction in our ability to borrow under our Credit Facility, combined with a reduction in cash flow from operations resulting from a decline in oil prices, may require us to reduce our capital expenditures and our operating activities.

Until we repay the full amount of our outstanding debentures and Credit Facility, we may continue to have substantial indebtedness, which is secured by substantially all of our assets.

On September 30, 2008, $2.7 million in debentures and approximately $11.75 million of bank loans and letters of credit were outstanding. In the event that we default with respect to the debentures or other secured debt, the lenders may enforce their rights as a secured party and we may lose all or a portion of our assets or be forced to materially reduce our business activities.

Our substantial indebtedness could make it more difficult for us to fulfill our obligations under our new Credit Facility and our debentures and, therefore, adversely affect our business.

On July 3, 2008, we entered into a three-year, Senior Secured Credit Facility providing for aggregate borrowings of up to $50 million. As of September 30, 2008, we had total indebtedness of $13.6 million, including $10.75 million of initial borrowings under the Credit Facility and $2.7 million of remaining debentures. In addition, we have outstanding letters of credit under the new facility totaling $1.0 million at September 30, 2008. Our substantial indebtedness, and the related interest expense, could have important consequences to us, including:

limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our business strategy, or other general corporate purposes;

limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service our indebtedness;

increasing our vulnerability to general adverse economic and industry conditions;

placing us at a competitive disadvantage as compared to our competitors that have less leverage;

limiting our ability to capitalize on business opportunities and to react to competitive pressures and changes in government regulation;

limiting our ability to, or increasing the cost of, refinancing our indebtedness; and

limiting our ability to enter into marketing, hedging, optimization and trading transactions by reducing the number of counterparties with whom we can enter into such transactions as well as the volume of those transactions.

The covenants in our new Credit Facility and debentures impose significant operating and financial restrictions on us.

The new Credit Facility and our debentures impose significant operating and financial restrictions on us. These restrictions limit our ability and the ability of our subsidiaries, among other things, to:

incur additional indebtedness and provide additional guarantees;

pay dividends and make other restricted payments;

create or permit certain liens;

use the proceeds from the sales of our oil and natural gas properties;

engage in certain transactions with affiliates; and

consolidate, merge, sell or transfer all or substantially all of our assets or the assets of our subsidiaries.

The new Credit Facility and our debentures also contain various affirmative covenants with which we are required to comply. We were able to obtain a waiver of default from Texas Capital Bank on two technical covenants. We are taking steps in an effort to comply with these same covenants in future quarters, including but not limited to, a recent reduction in principal of approximately $3.3 million with proceeds from liquidating a costless collar we entered into on July 3, 2008 and the reduction of our operating and general expenses. We may be unable to comply with some or all of them in the future as well. If we do not comply with these covenants and are unable to obtain waivers from our lenders, we would be unable to make additional borrowings under these facilities, our indebtedness under these agreements would be in default and could be accelerated by our lenders. In addition, it could cause a cross-default under our other indebtedness, including our debentures. If our indebtedness is accelerated, we may not be able to repay our indebtedness or borrow sufficient funds to refinance it. In addition, if we incur additional indebtedness in the future, we may be subject to additional covenants, which may be more restrictive than those to which we are currently subject.

Risks Associated with our Common Stock and the Offering

Our common stock is traded on an illiquid market, making it difficult for investors to sell their shares.

Our common stock trades on the Over-the-Counter Bulletin Board under the symbol “ENRJ.OB,” but trading has been minimal. Therefore, the market for our common stock is limited. The trading price of our common stock could be subject to wide fluctuations. Investors may not be able to purchase additional shares or sell their shares within the time frame or at a price they desire.

The price of our common stock may be volatile and you may not be able to resell your shares at a favorable price.

Regardless of whether an active trading market for our common stock develops, the market price of our common stock may be volatile and you may not be able to resell your shares at or above the price you paid for such shares. The following factors could affect our stock price:

our operating and financial performance and prospects;

quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;

changes in revenue or earnings estimates or publication of research reports by analysts about us or the exploration and production industry;

potentially limited liquidity;

actual or anticipated variations in our reserve estimates and quarterly operating results;

changes in natural gas and oil prices;

sales of our common stock by significant stockholders and future issuances of our common stock;

increases in our cost of capital;

changes in applicable laws or regulations, court rulings and enforcement and legal actions;

commencement of or involvement in litigation;

changes in market valuations of similar companies;

additions or departures of key management personnel;

general market conditions, including fluctuations in and the occurrence of events or trends affecting the price of natural gas and oil; and

domestic and international economic, legal and regulatory factors unrelated to our performance.

Future sales of our common stock may result in a decrease in the market price of our common stock, even if our business is doing well.

The market price of our common stock could drop due to sales of a large number of shares of our common stock in the market or the perception that such sales could occur. This could make it more difficult to raise funds through future offerings of common stock.

As of December 23, 2008, we have outstanding 4,443,483 shares of our common stock. This includes the 1,000,000 shares being sold by the Selling Stockholder in this offering, all of which may be resold in the public market immediately. The 529,330 shares of our common stock that are subject to outstanding options and warrants as of December 23, 2008 will be eligible for sale in the public market to the extent permitted by the provisions of the various vesting arrangements and applicable securities laws. If these additional shares are sold, or it is perceived they will be sold, the trading price of our common stock could decline. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

Our articles of incorporation, bylaws and Nevada Law contain provisions that could discourage an acquisition or change of control of us.

Our articles of incorporation authorize our board of directors to issue preferred stock and common stock without stockholder approval. If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire control of us. In addition, provisions of the articles of incorporation and bylaws could also make it more difficult for a third party to acquire control of us. In addition, Nevada’s “Combination with Interested Stockholders’ Statute” and its “Control Share Acquisition Statute” may have the effect in the future of delaying or making it more difficult to effect a change in control of us.

These statutory anti-takeover measures may have certain negative consequences, including an effect on the ability of our stockholders or other individuals to (i) change the composition of the incumbent board of directors; (ii) benefit from certain transactions which are opposed by the incumbent board of directors; and (iii) make a tender offer or attempt to gain control of us, even if such attempt were beneficial to us and our stockholders. Since such measures may also discourage the accumulations of large blocks of our common stock by purchasers whose objective is to seek control of us or have such common stock repurchased by us or other persons at a premium, these measures could also depress the market price of our common stock. Accordingly, our stockholders may be deprived of certain opportunities to realize the “control premium” associated with take-over attempts.

We have no plans to pay dividends on our common stock. You may not receive funds without selling your stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations, capital requirements, investment opportunities and restrictions imposed by our debentures and Credit Facility.

We may issue shares of preferred stock with greater rights than our common stock.

Although we have no current plans, arrangements, understandings or agreements to issue any preferred stock, our articles of incorporation authorizes our board of directors to issue one or more series of preferred stock and set the terms of the preferred stock without seeking any further approval from our stockholders. Any preferred stock that is issued may rank ahead of our common stock, with respect to dividends, liquidation rights and voting rights, among other things.

We have derivative securities currently outstanding. Exercise of these derivatives will cause dilution to existing and new stockholders.

As of December 23, 2008, we had options and warrants to purchase approximately 529,330 shares of common stock outstanding in addition to 2,500 shares issuable upon conversion of a convertible note. The exercise of our outstanding options and warrants, and the conversion of the note, will cause additional shares of common stock to be issued, resulting in dilution to our existing common stockholders.

Because our common stock may be deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

Our common stock may be deemed to be a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, which may make it more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock consistently trades above $5.00 per share, if ever, trading in the common stock may be subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:

Deliver to the customer, and obtain a written receipt for, a disclosure document;

Disclose certain price information about the stock;

Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;

Send monthly statements to customers with market and price information about the penny stock; and

In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.

Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission. Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two-year period then we will be ineligible for quotation on the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

FINRA sales practice requirements may 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, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The 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.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact, contained in this prospectus, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this prospectus, which 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. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. The factors impacting these risks and uncertainties include, but are not limited to:

inability to attract and obtain additional development capital;

inability to achieve sufficient future sales levels or other operating results;

inability to efficiently manage our operations;

potential default under our secured obligations or material debt agreements;

estimated quantities and quality of oil and natural gas reserves;

declining local, national and worldwide economic conditions;

fluctuations in the price of oil and natural gas;

fluctuations in production due to weather, equipment failure, normal operating cycles and other unforeseen conditions;

the inability of management to effectively implement our strategies and business plans;

approval of certain parts of our operations by state regulators;

inability to hire or retain sufficient qualified operating field personnel;

increases in interest rates or our cost of borrowing;

deterioration in general or regional (especially Eastern Kansas) economic conditions;

adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

the occurrence of natural disasters, unforeseen weather conditions, or other events or circumstances that could impact our operations or could impact the operations of companies or contractors we depend upon in our operations;

inability to acquire mineral leases at a favorable economic value that will allow us to expand our development efforts;

adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; and

changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate.

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this prospectus. Before you invest in our common stock, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this prospectus could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this prospectus to conform our statements to actual results or changed expectations.

USE OF PROCEEDS

The Selling Stockholder is selling all of the shares of our common stock covered by this prospectus for its own account. Accordingly, we will not receive any proceeds from the sale of the shares. We will bear all expenses of registration incurred in connection with this offering, including filing fees, printing fees, and expenses of our legal counsel and other experts, but all selling and other expenses incurred by the Selling Stockholder will be borne by the Selling Stockholder.

DIVIDEND POLICY

We have never paid or declared any cash dividends on our common stock. We currently intend to retain any future earnings to finance the growth and development of our business and we do not expect to pay any cash dividends on our common stock in the foreseeable future. In addition, we are contractually prohibited by the terms of our outstanding debt from paying cash dividends on our common stock. Payment of future dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current or future financing instruments, including the consent of debt holders, if applicable at such time, and other factors our board of directors deems relevant.

CAPITALIZATION

You should read this capitalization table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

The following table sets forth our capitalization as of September 30, 2008.

	As of September 30, 2008
	Actual
	(Unaudited)

Stockholders’ equity:
Common stock; $0.001 par value, 100,000,000 shares authorized, 4,443,467 issued and outstanding	$	4,443
Additional paid-in capital		8,932,911
Retained (deficit)		(10,931,156	)

Total stockholders’ equity		(1,993,802	)

Total capitalization	$	(1,993,802	)

The information in the table above excludes:

454,330 shares of our common stock issuable upon exercise of outstanding options under our existing 2000/2001 Stock Option Plan and EnerJex Resources, Inc. Stock Incentive Plan, at a weighted average exercise price of $6.30 per share;

2,500 shares issuable upon conversion of an unsecured $25,000 6% convertible note due August 2, 2010, which is convertible into shares of our common stock at $10.00 per share; and

75,000 shares of our common stock issuable upon the exercise of outstanding warrants, at an exercise price of $3.00 per share, that were issued to the placement agent in connection with the private placement of $9.0 million of debentures in April 2007.

PRICE RANGE OF COMMON STOCK

Prior to completion of the reverse merger with Midwest Energy in August 2006, our common stock was sporadically traded in the inter-dealer markets of the OTC:BB, “pink sheets” and “gray sheets” under the symbol “MPCO.” As of March 23, 2007, our common stock commenced trading on the OTC:BB under the symbol “EJXR.OB.” On July 28, 2008, in conjunction with the implementation of the 1-for-5 reverse stock split of all of our common stock, our trading symbol on the OTC:BB changed to ENRJ.OB. Our common stock has traded infrequently on the OTC:BB, which limits our ability to locate accurate high and low bid prices for each quarter within the last two fiscal years. Therefore, the following table lists the quotations for the high and low bid prices as reported by a Quarterly Trade and Quote Summary Report of the OTC Bulletin Board and Yahoo! Finance for fiscal years 2007 and 2008, the first and second quarters of fiscal year 2009 and the relevant portion of the third quarter of fiscal year 2009. The quotations reflect inter-dealer prices without retail mark-up, markdown, or commissions and may not represent actual transactions.

	Low		High

Fiscal 2007
Quarter ended June 30, 2006		$0.50		$6.25
Quarter ended September 30, 2006		$4.50		$7.50
Quarter ended December 31, 2006		$3.75		$6.00
Quarter ended March 31, 2007		$0.50		$0.60
Fiscal 2008
Quarter ended June 30, 2007		$5.00		$6.25
Quarter ended September 30, 2007		$3.75		$6.75
Quarter ended December 31, 2007		$3.50		$6.00
Quarter ended March 31, 2008		$4.05		$6.00
Fiscal 2009
Quarter ended June 30, 2008		$4.80		$5.90
Quarter ended September 30, 2008		$4.00		$5.10
Quarter ending December 31, 2008 (through December 23, 2008)		$0.51		$5.00

The last reported sale price of our common stock on the OTC:BB was $1.98 per share on December 23, 2008. As of December 23, 2008, there were 1,120 holders of record of our common stock.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to our financial statements included elsewhere in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this prospectus.

Overview

During fiscal 2008 and the first half of fiscal 2009, we deployed approximately $12 million in capital resources to acquire and develop five operating projects and drill 177 new wells (109 producing wells, 65 water injection wells, and 3 dry holes). Our estimated total proved oil reserves increased from zero as of March 31, 2007 to a net 1.4 million barrels of oil equivalent, or BOE, as of March 31, 2008. Of the 1.4 million BOE of total proved reserves, approximately 64% are proved developed and approximately 36% are proved undeveloped. The proved developed reserves consist of 82% proved developed producing reserves and 18% proved developed non-producing reserves. For the month of September 2008, our production was approximately 249 gross BOEPD. Production increased during the month of October 2008 and averaged approximately 288 barrels of oil equivlanet per day, or BOEPD.

The total proved PV10 (present value) before tax of our reserves as of March 31, 2008 was $39.6 million. PV10 is a non-GAAP financial measure and generally differs from the standardized measure of discounted future net cash flows, the most directly comparable GAAP financial measure, because it does not include the “Business and Properties – Reserves” on effects of income taxes on future net revenues. See “Glossary” on page 81 for our definition of PV10 and see page 58 for a reconciliation to the comparable GAAP financial measure.

We have several potential projects that are in various stages of discussions, and we are continually evaluating oil and natural gas opportunities in Eastern Kansas. Subject to availability of capital, we plan to continue to bring multiple potential acquisitions to various financial partners for evaluation and funding options. It is our vision to grow the business in a disciplined and well-planned manner.

In addition to raising additional capital, we may take on working interest participants that will contribute to the capital costs of drilling and completion and then share in revenues derived from production. This economic strategy will allow us to utilize our own financial assets toward the growth of our leased acreage holdings, pursue the acquisition of strategic oil and natural gas producing properties or companies and generally expand our existing operations while further diversifying risk.

We began generating revenues from the sale of oil during the fiscal year ended March 31, 2008. Subject to availability of capital, we expect our production to continue to increase, both through development of wells and through our acquisition strategy. Our future financial results will continue to depend on: (i) our ability to source and screen potential projects; (ii) our ability to discover commercial quantities of natural gas and oil; (iii) the market price for oil and natural gas; and (iv) our ability to fully implement our exploration, workover and development program, which is in part dependent on the availability of capital resources. There can be no assurance that we will be successful in any of these respects, that the prices of oil and natural gas prevailing at the time of production will be at a level allowing for profitable production, or that we will be able to obtain additional funding at terms favorable to us to increase our currently limited capital resources. The board of directors has implemented a crude oil and natural gas hedging strategy that will allow management to hedge up to 80% of our net production to mitigate a majority of our exposure to changing oil prices in the intermediate term.

Recent Developments

As of March 31, 2008, our estimated total proved reserves were 1.4 million BOE and the total proved PV10 (present value) of reserves before tax was $39.6 million. See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties – Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

On March 6, 2008, we entered into an agreement with Shell whereby we agreed to an 18-month fixed-price swap with Shell for 130 BOPD beginning on April 1, 2008 at a fixed price per barrel of $96.90, less transportation costs. This represented approximately 60% of our total current oil production on a net revenue basis at that time and locked in approximately $6.8 million in gross revenue before the deduction of transportation costs over the 18 month period. In addition, we agreed to sell all of our remaining oil production at current spot market pricing beginning April 1, 2008 through September 30, 2009 to Shell.

Our in-fill drilling and waterflood enhanced recovery techniques at the Black Oaks Project has increased gross oil production to approximately 106 Barrels on August 26, 2008 from a level of an average of approximately 32 BOEPD when the project was originally acquired. On June 30, 2008, the Black Oaks Project had 63 active production wells and 13 active water injection wells, an increase of 28 production wells and 13 water injection wells since the project was originally acquired. Based upon these results, subject to availability of capital, we anticipate commencing Phase II of the development plan, which contemplates drilling over 25 additional water injection wells and completing over 20 additional producer wells.

On July 7, 2008, we amended the $2.7 million of aggregate principal amount of our 10% debentures that remain outstanding to, among other things, permit the indebtedness under our new credit facility, subordinate the security interests of the debentures to the new credit facility, provide for the redemption of the remaining debentures with the net proceeds from our next debt or equity offering, and eliminate the covenant to maintain certain production thresholds.

On August 1, 2008, we entered into three-year employment agreements with C. Stephen Cochennet, our president and chief executive officer, and Dierdre P. Jones, our chief financial officer.

On August 8, 2008, we entered into a five year lease for corporate office space beginning September 1, 2008.

On October 14, 2008 our stockholders approved a proposal to amend and restate the 2002-2003 Stock Option Plan to, among other things, (i) rename it the EnerJex Resources, Inc. Stock Incentive Plan, (ii) increase the maximum number of shares of our common stock that may be issued under the Stock Incentive Plan from 1,000,000 to 1,250,000, and (iii) add restricted stock as an eligible award that can be granted thereunder.

On November 17, 2008, options to purchase 237,000 shares of our common stock that were previously granted to our non-employee directors as compensation for their service as directors in fiscal 2009 and to our chief executive officer our chief financial officer, were rescinded at the request of the board’s compensation committee and the approval of each option holder. The shares subject to these options are available for future issuance.

Results of Operations for the Fiscal Years Ended March 31, 2008 and 2007 Compared

During the fiscal year ended March 31, 2007, we were in the early stage of developing properties in Kansas and had minimal production or revenues from those properties. Our operations as of March 31, 2007 were limited to technical evaluation of these properties, the design of development plans to exploit the oil and natural gas resources on those properties, as well as seeking financing opportunities to acquire additional oil and natural gas properties. Therefore comparisons between the fiscal year ended March 31, 2008 to the fiscal year ended March 31, 2007 are not indicative of our future results of operations.

Income

	Fiscal Year Ended March 31,
	2008		2007		Increase/(Decrease)
	Amount		Amount		$
	(audited)		(audited)
Oil and natural gas revenues	$	3,602,798	$	90,800	$	3,511,998

Revenues

Oil and natural gas revenues for the fiscal year ended March 31, 2008 were $3,602,798 compared to revenues of $90,800 in the fiscal year ended March 31, 2007. The increase in revenues is primarily the result of the sale of oil from leases acquired beginning in April 2007 and developed during the period. The average price per barrel of oil, net of transportation costs, sold during the twelve months ended March 31, 2008 was $79.71. The average price per Mcf for natural gas sales during the fiscal year ended March 31, 2008 was $6.20, compared to $4.72 during the fiscal year ended March 31, 2007.

Expenses

	Fiscal Year Ended
	March 31,
	2008		2007		Increase/(Decrease)
	Amount		Amount		$
	(audited)		(audited)

Expenses:
Direct operating costs	$	1,795,188	$	172,417	$	1,622,771
Repairs on oil and gas equipment		—		165,603		(165,603	)
Depreciation, depletion and amortization		913,224		11,477		901,747

Total production expenses		2,708,412		349,497		2,358,915

Professional fees		1,226,998		302,071		924,927
Salaries		1,703,099		288,016		1,415,083
Depreciation on other fixed assets		22,106		12,501		9,605
Administrative expense		887,872		182,773		705,099
Impairment of oil and gas properties		—		273,959		(273,959	)
Impairment of goodwill		—		677,000		(677,000	)

Total expenses	$	6,548,487	$	2,085,817	$	$4,462,670

Direct Operating Costs and Repairs on Oil and Gas Equipment

Direct operating and repair costs for the fiscal year ended March 31, 2008 were $1,795,188 compared to $338,020 for the fiscal year ended March 31, 2007. The increase over the prior period reflects the operating costs on the oil leases acquired during the period beginning in April 2007. Direct costs include pumping, gauging, pulling, certain contract labor costs, and other non-capitalized expenses. Repair costs relate to major repair and maintenance projects.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization for the fiscal year ended March 31, 2008 was $913,224, compared to $11,477 for the fiscal year ended March 31, 2007. The increase was primarily a result of the depletion of oil reserves commensurate with our increase in production.

Professional Fees

Professional fees for the fiscal year ended March 31, 2008 were $1,226,998 compared to $302,071 for the fiscal year ended March 31, 2007. The increase in professional fees was largely the result of $773,659 in non-cash equity based payments made by issuing stock options to directors and an outside consultant. Additionally, payments for services rendered in connection with acquisition and financing activities, our audit, legal and consulting fees increased with the increased operations of the business.

Salaries

Salaries for the fiscal year ended March 31, 2008 were $1,703,099 compared to $288,016 for the fiscal year ended March 31, 2007. Of the increase, $1,204,102 was related to non-cash equity based payments made by issuing stock options to our management. In addition, the number of full-time employees increased from 2 at March 31, 2007 to 9 at March 31, 2008.

Depreciation on Other Fixed Assets

Depreciation on other fixed assets for the fiscal year ended March 31, 2008 was $22,106 compared to $12,501 for the fiscal year ended March 31, 2007. The increase was primarily due to depreciation on fixed assets acquired during the period.

Administrative Expense

Administrative expense for the fiscal year ended March 31, 2008 was $887,872 compared to $182,773 in the fiscal year ended March 31, 2007. The administrative expense increased in relation to the addition of employees, office space, and corporate activity related to growth in operations.

Impairment of Oil and Gas Properties

The impairment of oil and natural gas properties in the year ended March 31, 2007 of $273,959 represented all of the cost of our oil and natural gas properties accounted for under the full-cost method that was subject to amortization at March 31, 2007. We took this impairment based on the full-cost method ceiling.

Impairment of Goodwill

In the year ended March 31, 2007 we impaired $677,000 of goodwill resulting from an acquisition because of our impairment test. We have no goodwill recorded in our financial statements at March 31, 2008.

Reserves

Our estimated total proved PV 10 (present value) of reserves as of March 31, 2008 increased to $39.6 million from zero as of March 31, 2007. We increased total proved reserves to 1.4 million barrels of oil equivalent (BOE). Of the 1.4 million BOE, approximately 64% are proved developed and approximately 36% are proved undeveloped. The proved developed reserves consist of proved developed producing (82%) and proved developed non-producing (18%).

The following table presents summary information regarding our estimated net proved reserves as of March 31, 2008. All calculations of estimated net proved reserves have been made in accordance with the rules and regulations of the SEC, and, except as otherwise indicated, give no effect to federal or state income taxes. The estimates of net proved reserves are based on the reserve reports prepared by McCune Engineering P.E., our independent petroleum consultants. For additional information regarding our reserves, please see Note 12 to our audited financial statements as of and for the fiscal year ended March 31, 2008.

					PV10
Proved Reserves Category	Gross		Net		(before tax)(1)

Proved, Developed Producing
Oil (stock-tank barrels)		1,034,163		746,169
Natural Gas (mcf)		141,371		114,610
Total Developed Producing					$	22,750,447
Proved, Developed Non-Producing
Oil (stock-tank barrels)		141,900		115,071
Natural Gas (mcf)		350,000		286,587
Total Developed Non-Producing					$	5,446,999
Proved, Undeveloped
Oil (stock-tank barrels)		705,750		510,974
Natural Gas (mcf)		-0-		-0-
Total Undeveloped					$	11,413,886
Total Proved Reserves
Oil (stock-tank barrels)		1,881,813		1,372,214
Natural Gas (mcf)		491,371		401,197
Total					$	39,611,332

(1)

The following table shows our reconciliation of our PV10 to our standardized measure of discounted future net cash flows (the most direct comparable measure calculated and presented in accordance with GAAP). PV10 is our estimate of the present value of future net revenues from estimated proved natural gas reserves after deducting estimated production and ad valorem taxes, future capital costs and operating expenses, but before deducting any estimates of future income taxes. The estimated future net revenues are discounted at an annual rate of 10% to determine their “present value.” We believe PV10 to be an important measure for evaluating the relative significance of our oil and natural gas properties and that the presentation of the non-GAAP financial measure of PV10 provides useful information to investors because it is widely used by professional analysts and sophisticated investors in evaluating oil and gas companies. Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating our company. We believe that most other companies in the oil and gas industry calculate PV10 on the same basis. PV10 should not be considered as an alternative to the standardized measure of discounted future net cash flows as computed under GAAP.

	As of March 31, 2008
PV10	$	39,611,332
Future income taxes, net of 10% discount		(11,410,779	)
Standardized measure of discounted future net cash flows	$	28,200,553

Results of Operations for the Six Months Ended September 30, 2008 and 2007 compared

During the six months ended September 30, 2007, we were in the early stage of developing properties in Kansas and had minimal production or revenues from our properties. Our operations throughout the six months ended September 30, 2007 included technical evaluation of these properties, the design of development plans to exploit the oil and natural gas resources on those properties, as well as seeking financing opportunities to acquire additional oil and natural gas properties. Therefore comparisons between the six months ended September 30, 2008 to the six months ended September 30, 2007 are not indicative of our future results of operations.

Income

	Six Months Ended September 30,
	2008		2007		Increase/(Decrease)
	Amount		Amount		$
	(unaudited)		(unaudited)
Oil and natural gas revenues	$	3,467,742	$	564,793	$	2,902,949

Revenues

Oil and natural gas revenues for the six months ended September 30, 2008 were $3,467,742 compared to revenues of $564,793 in the six months ended September 30, 2007. The increase in revenues is primarily the result of the sale of oil from leases acquired beginning in April of 2007 and developed thereafter. The average price per barrel of oil, net of transportation costs, sold during the six months ended September 30, 2008 was $98.79 compared to $65.89 during the six months ended September 30, 2007. The average price per Mcf for natural gas sales during the six months ended September 30, 2008 was $7.60, compared to $5.41 during the six months ended September 30, 2007.

Expenses

	Six Months Ended
	September 30,
	2008			2007			Increase/(Decrease)
	Amount			Amount			$
	(unaudited)			(unaudited)

Production Expenses:
Direct operating costs	$	1,531,300		$	347,751		$	1,183,549
Depreciation, depletion and amortization		718,048			145,257			572,791

Total production expenses		2,249,348			493,008			1,756,340
General expenses:
Professional fees		294,785			1,062,435			(767,650	)
Salaries		494,426			1,204,062			(709,636	)
Administrative expense		585,456			227,781			357,675
Total general expenses		1,374,667			2,494,278			(1,119,611	)
Total production and general expenses		3,624,015			2,987,286			636,729

Other income (expense)
Interest Expense		(532,624	)		(283,190	)		249,434
Loan fee expense		(250,974	)		(73,857	)		177,117
Loan interest accretion		(2,567,379	)		(462,484	)		2,104,895
Loan penalty expense		–			–			–
Total other income (expense)		(3,350,977	)		(819,531	)		2,531,446

Net income (loss)	$	(3,507,250	)	$	(3,242,024	)	$	265,226

Direct Operating Costs

Direct operating costs for the six months ended September 30, 2008 were $1,531,300 compared to $347,751 for the six months ended September 30, 2007. The increase over the prior period reflects the operating costs on the oil leases acquired during the period beginning in April 2007. Direct costs include pumping, gauging, pulling, certain contract labor costs, and other non-capitalized expenses.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization for the six months ended September 30, 2008 was $718,048, compared to $145,257 for the six months ended September 30, 2007. The increase was primarily a result of the depletion of oil reserves commensurate with our increase in production.

Professional Fees

Professional fees for the six months ended September 30, 2008 were $294,785 compared to $1,062,435 for the six months ended September 30, 2007. The decrease in professional fees was largely the result of $773,659 in non-cash equity-based payments made by issuing stock options to directors and an outside consultant in the prior year. No such payments were made in the current period.

Salaries

Salaries for the six months ended September 30, 2008 were $494,426 compared to $1,204,062 for the six months ended September 30, 2007. Non-cash equity-based payments made by issuing stock options to our management in the prior six months ended September 30, 2007 were $1,039,714 as compared to $0 in the current six month period ended September 30, 2008, resulting in a decrease.

Administrative Expense

Administrative expense for the six months ended September 30, 2008 was $585,456, compared to $227,781 in the six months ended September 30, 2007. The administrative expense increased as a result of the addition of employees, office space, and corporate activity related to growth in operations.

Interest Expense

Interest expense for the six months ended September 30, 2008 was $532,624, whereas interest expense for the six months ended September 30, 2007 was $283,190. Interest expense was primarily related to our debentures and our Credit Facility. Interest income of $83,919 in the six months period ended September 30, 2007 offset the interest expense in that same period as the income was earned on proceeds from the debentures. We had minimal interest income for the six month period ended September 30, 2008.

Loan Costs

Loan costs for the six months ended September 30, 2008 were $2,818,353, as compared to $536,341 for the six months ended September 30, 2007. During the six months ended September 30, 2007, we reversed $2,126,271 in loan penalty expense which had been recorded in a prior quarter and which was directly attributable to the accretion of the potential expense related to the issuance of threshold shares under our $9.0 million debenture financing. The amount of interest accreted is based on the interest method over the period of issue to maturity or redemption. The loan penalty expense was reversed based on our determination that production levels were sufficient to meet required threshold levels.

Net Loss

Net loss for the six months ended September 30, 2008 was $3,507,250 as compared to net loss of $3,242,024 in the six months ended September 30, 2007. Non-cash expenses such as depreciation and depletion, loan costs and accretions as well as loan penalty costs are significant factors contributing to the net loss in the current period. For the six months ended September 30, 2008, these expenses totaled $3,419,886, an amount which is nearly equal to the entire net loss for the period. These expenses do not affect our cash flows. Upon maturity or redemption of the remaining $2.7 million of debentures which were outstanding at September 30, 2008, all remaining non-cash loan costs will be expensed. We do not expect to incur such costs in future periods.

Liquidity and Capital Resources

Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through debt financing, revenues from operations and the issuance of equity securities. We have been able to provide some of the necessary liquidity we need by the revenues generated from our net interests in our oil and natural gas production, and sales of reserves in our existing properties. If we do not generate sufficient sales revenues we will need to continue to finance our operations through equity and/or debt financings.

We actively manage our exposure to commodity price fluctuations by executing derivative transactions to hedge the change in prices of our production, thereby mitigating our exposure to price declines, but these transactions will also limit our earnings potential in periods of rising commodity prices. There also is a risk that we will be required to post collateral to secure our hedging activities and this could limit our available funds for our business activities.

We entered into a costless collar with BP beginning October 1, 2009 through March 31, 2011 to set minimum and maximum prices on a financially settled collar on a set number of barrels of oil per day. In response to the declining economic conditions which have negatively impacted our business, we liquidated this costless collar with BP. We and BP have executed confirmations of this transaction and BP paid us approximately $3.9 million. We reduced the debt outstanding under our Credit Facility by approximately $3.3 million and used the remainder for general operating purposes. We have also utilized a price swap contract with Shell for a portion of our production, and agreed to sell Shell the remainder of our current oil production at current spot market pricing, beginning April 1, 2008 through September of 2009. The key risks associated with the Shell contract are summarized in the “Risk Factors” section beginning on page 11.

The following table summarizes total current assets, total current liabilities and working capital at September 30, 2008 as compared to March 31, 2008.

	September 30,		March 31,			Increase/(Decrease)
	2008		2008			$
Current Assets	$	2,231,533	$	1,511,595			719,938
Current Liabilities	$	1,765,214	$	2,117,176			(351,962	)
Working Capital (deficit)	$	466,319	$	(605,581	)		1,071,900

Discussion of Material Balance Sheet Changes from Fiscal 2007 to Fiscal 2008

During the year ended March 31, 2008, we have significantly changed the balance sheet of our company. Our business has expanded due to the issuance of stock and debt. We were able to acquire oil and natural gas leases and begin drilling on those leases. Our total assets increased from $492,507 at March 31, 2007 to $10,867,829 at March 31, 2008. Approximately 84% of our total assets at March 31, 2008 were our oil and gas properties using the full-cost accounting method. We incurred debt issue costs with the $9.0 million debenture financing completed in April and June 2007, as well as with issuance of debt with project acquisitions. Our total liabilities increased from $537,097 at March 31, 2007 to $9,433,837 at March 31, 2008 primarily as a result of these debentures.

New Senior Secured Credit Facility

On July 3, 2008, EnerJex, EnerJex Kansas, and DD Energy entered into a three-year $50 million senior secured revolving credit facility, or Credit Facility with Texas Capital Bank, N.A. Borrowings under the Credit Facility will be subject to a borrowing base limitation based on our current proved oil and gas reserves. The initial borrowing base is set at $10.75 million and will be subject to semi-annual redeterminations, with the first redetermination to commence October 1, 2008. The borrowing base is currently under review by Texas Capital Bank. The Credit Facility will be secured by a lien on substantially all our assets. The Credit Facility has a term of three years, and all principal amounts, together with all accrued and unpaid interest, will be due and payable in full on July 3, 2011. The Credit Facility also provides for the issuance of letters-of-credit up to a $750,000 sub-limit under the borrowing base and up to an additional $2.25 million limit not subject to the borrowing base to support the Company’s hedging program. Borrowings under the Credit Facility of $10.75 million were made on July 7, 2008.

Proceeds from the initial extension of credit under the Credit Facility were used: (1) to redeem our 10% debentures in an aggregate principal amount of $6.3 million plus accrued interest, (2) for Texas Capital Bank’s acquisition of our approximately $2.0 million indebtedness to Cornerstone Bank, (3) for complete repayment of promissory notes issued to the sellers in connection with our purchase of the DD Energy project in an aggregate principal amount of $965,000 plus accrued interest, (4) to pay transaction costs, fees and expenses related to the new facility and (5) to expand our current development projects, including completion of newly drilled oil wells. Future borrowings may be used for the acquisition, development and exploration of oil and gas properties, capital expenditures and general corporate purposes.

Advances under the Credit Facility will be in the form of either base rate loans or Eurodollar loans. The interest rate on the base rate loans fluctuates based upon the higher of (1) the lender’s “prime rate” and (2) the Federal Funds rate plus 0.50%, plus, in either case, a margin of between 0.0% and 0.5% depending on the percent of the borrowing base utilized at the time of the credit extension. The interest rate on the Eurodollar loans fluctuates based upon the applicable Libor rate plus a margin of 2.25% to 2.75% depending on the percent of the borrowing base utilized at the time of the credit extension. We may select Eurodollar loans of one, two, three and six months. A commitment fee of 0.375% on the unused portion of the borrowing base will accrue, and be payable quarterly in arrears.

The Credit Facility includes usual and customary affirmative covenants for credit facilities of this type and size, as well as customary negative covenants, including, among others, limitations on liens, mergers, asset sales or dispositions, payments of dividends, incurrence of additional indebtedness, and investments. The Credit Facility also requires that we, at the end of each fiscal quarter beginning with the quarter ending September 30, 2008, maintain a minimum current assets to current liabilities ratio, a minimum ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense, and to maintain a minimum ratio of EBITDA to senior funded debt. At September 30, 2008 the company was substantially in compliance with these covenants, except for the ratios of EBITDA to interest expense and EBITDA to senior funded debt. We were able to obtain a waiver of default from Texas Capital Bank on these two technical covenants. We are taking steps in an effort to comply with these same covenants in future quarters, including but not limited to, a reduction in principal of approximately $3.3 million with proceeds from liquidating a costless collar we entered into on July 3, 2008 and the reduction of our operating and general expenses.

Additionally, Texas Capital Bank, N.A. and the holders of the debentures entered into a Subordination Agreement whereby the debentures issued on June 21, 2007 will be subordinated to the Credit Facility.

Debenture Financing

On April 11, 2007, we completed a $9.0 million private placement of senior secured debentures. In accordance with the terms of the debentures, we received $6.3 million (before expenses and placement fees) at the first closing (the “April Debentures”) and an additional $2.7 million (before closing fees and expenses) at the second closing on June 21, 2007 (the “June Debentures”). In connection with the sale of the debentures, we issued the lenders 1,800,000 shares of common stock. On July 7, 2008, we redeemed the April Debentures.

The debentures mature on March 31, 2010, absent earlier redemption by us, and carry an interest rate of 10%. Interest on the debentures began accruing on April 11, 2007 and is payable quarterly in arrears on the first day of each succeeding quarter during the term of the debentures, beginning on or about May 11, 2007 and ending on the maturity date of March 31, 2010. We may, under certain conditions specified in the debentures, pay interest payments in shares of our registered common stock. Additionally, on the maturity date, we are required to pay the amount equal to the principal, as well as all accrued but unpaid interest.

In connection with the Credit Facility, we entered into an agreement amending the Securities Purchase Agreement, Registration Rights Agreement, the Pledge and Security Agreement and the June Debentures (collectively, the “Debenture Agreements”), with the holders (the “Buyers”) of the June Debentures. Pursuant to this agreement, we, among other things, (i) redeemed the April Debentures, (ii) agreed to use the net proceeds from our next debt or equity offering to redeem the June Debentures, (iii) agreed to update the Buyers’ registration statements to sell our common stock owned by one of the Buyers, (iv) amended certain terms of the Debenture Agreements in recognition of the indebtedness under the new Credit Facility, and (v) amended the Securities Purchase Agreement and Registration Rights Agreement to remove the covenant to issue and register additional shares of common stock in the event that our oil production does not meet certain thresholds over time.

Satisfaction of our cash obligations for the next 12 months

A critical component of our operating plan is the ability to obtain additional capital through additional equity and/or debt financing and working interest participants. While our operations are generating sufficient cash revenues to meet our monthly expenses, we still have negative working capital. In the event we cannot obtain additional capital to pursue our strategic plan, however, this would materially impact our ability to continue our aggressive growth. However, there is no assurance we would be able to obtain such financing on commercially reasonable terms, if at all.

Subject to availability of capital, we intend to implement and execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

Summary of product research and development that we will perform for the term of our plan

We do not anticipate performing any significant product research and development until such time as we can raise adequate working capital to sustain our operations.

Expected purchase or sale of any significant equipment

Subject to availability of capital, we anticipate that we will purchase the necessary production and field service equipment required to produce oil and natural gas during our normal course of operations over the next twelve months.

Significant changes in the number of employees

At September 30, 2008, we had 19 full time employees, an increase from 9 full time employees at our fiscal year ended March 31, 2008. We hired a number of former independent field contractors to help secure a more stable work base. In November 2008, we reduced personnel levels by 4 full time employees and 1 independent contractor in response to declining economic conditions and in an effort to reduce our operating and general expenses. We did not experience a material increase in expenses from this initiative, as most of these individuals were already included in our current operating and capital expenses as independent contractors. As drilling and production activities increase or decrease, we may have to adjust our technical, operational and administrative personnel as appropriate. We are using and will continue to use the services of independent consultants and contractors to perform various professional services, particularly in the area of land services, reservoir engineering, drilling, water hauling, pipeline construction, well design, well-site monitoring and surveillance, permitting and environmental assessment. We believe that this use of third-party service providers may enhance our ability to contain general and administrative expenses.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies and Estimates

Our critical accounting estimates include our oil and gas properties, asset retirement obligations and the value of share-based payments.

Oil and Gas Properties

The accounting for our business is subject to special accounting rules that are unique to the gas and oil industry. There are two allowable methods of accounting for oil and gas business activities: the successful efforts method and the full-cost method. We follow the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We also capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar activities.

Under the full-cost method, capitalized costs are amortized on a composite unit-of-production method based on proved gas and oil reserves. Depreciation, depletion and amortization expense is also based on the amount of estimated reserves. If we maintain the same level of production year over year, the depreciation, depletion and amortization expense may be significantly different if our estimate of remaining reserves changes significantly. Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized. The costs of unproved properties are excluded from amortization until the properties are evaluated. We review all of our unevaluated properties quarterly to determine whether or not and to what extent proved reserves have been assigned to the properties, and otherwise if impairment has occurred. Unevaluated properties are assessed individually when individual costs are significant.

We review the carrying value of our gas and oil properties under the full-cost accounting rules of the SEC on a quarterly basis. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. In calculating future net revenues, current prices and costs used are those as of the end of the appropriate quarterly period. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts, including the effects of derivatives qualifying as cash flow hedges. Two primary factors impacting this test are reserve levels and current prices, and their associated impact on the present value of estimated future net revenues. Revisions to estimates of gas and oil reserves and/or an increase or decrease in prices can have a material impact on the present value of estimated future net revenues. Any excess of the net book value, less deferred income taxes, is generally written off as an expense. Under SEC regulations, the excess above the ceiling is not expensed (or is reduced) if, subsequent to the end of the period, but prior to the release of the financial statements, gas and oil prices increase sufficiently such that an excess above the ceiling would have been eliminated (or reduced) if the increased prices were used in the calculations.

The process of estimating gas and oil reserves is very complex, requiring significant decisions in the evaluation of available geological, geophysical, engineering and economic data. The data for a given property may also change substantially over time as a result of numerous factors, including additional development activity, evolving production history and a continual reassessment of the viability of production under changing economic conditions. As a result, material revisions to existing reserve estimates occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various properties increase the likelihood of significant changes in these estimates.

All of our proved reserves were evaluated by an independent petroleum engineer as of our fiscal year ended March 31, 2008. All reserve estimates are prepared based upon a review of production histories and other geologic, economic, ownership and engineering data.

Asset Retirement Obligations

The asset retirement obligation relates to the plug and abandonment costs when our wells are no longer useful. We determine the value of the liability by obtaining quotes for this service and estimate the increase we will face in the future. We then discount the future value based on an intrinsic interest rate that is appropriate for us. If costs rise more than what we have expected there could be additional charges in the future, however, we monitor the costs of the abandoned wells and we will adjust this liability if necessary.

Share-Based Payments

The value we assign to the options and warrants that we issue is based on the fair market value as calculated by the Black-Scholes pricing model. To perform a calculation of the value of our options and warrants, we determine an estimate of the volatility of our stock. We need to estimate volatility because there has not been enough trading of our stock to determine an appropriate measure of volatility. We believe our estimate of volatility is reasonable, and we review the assumptions used to determine this whenever we issue a new equity instruments. If we have a material error in our estimate of the volatility of our stock, our expenses could be understated or overstated.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board, or FASB, issued Statements of Financial Accounting Standards, or SFAS, No. 157 (“SFAS No. 157”), “Fair Value Measures.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements, however, the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently reviewing the effect, if any, SFAS No. 157 will have on our financial statements.

In February 2007, the FASB issued SFAS No. 159 (“SFAS No. 159”), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” — the fair value option for financial assets and liabilities including in amendment of SFAS 115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is expected to expand the use of fair value measurement objectives for accounting for financial instruments. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007, and interim periods within those fiscal years. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, fair value measurements. We are currently evaluating the impact of SFAS No. 159 on our financial statements.

In December 2007, the FASB issued SFAS No. 141R (revised 2007) (“SFAS No. 141R”), “Business Combinations.” Although this statement amends and replaces SFAS No. 141, it retains the fundamental requirements in SFAS No. 141 that (i) the purchase method of accounting must be used for all business combinations; and (ii) an acquirer be identified for each business combination. SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS No. 141R applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree), including combinations achieved without the transfer of consideration; however, this statement does not apply to a combination between entities or businesses under common control. Significant provisions of SFAS No. 141R concern principles and requirements for how an acquirer (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 with early adoption not permitted. Management is assessing the impact of the adoption of SFAS No. 141R.

In December 2007, the FASB issued SFAS No. 160 (“SFAS No. 160”), “Non-controlling Interests in Consolidated Financial Statements.” SFAS No. 160 amends the Accounting Research Bulletin 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. We have not yet determined the impact, if any, that SFAS No. 160 will have on our financial statements.

In March of 2008, the FASB issued SFAS No. 161 (“FAS 161”), “Disclosures about Derivative Instruments and Hedging Activities.” FAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on the entity’s financial position, financial performance, and cash flows. The provisions of FAS 161 are effective for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact of the provisions of FAS 161.

In May 2008, the FASB issued SFAS No. 162 (“FAS 162”), “The Hierarchy of Generally Accepted Accounting Principles”. FAS 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. FAS 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. FAS 162 has no effect on our financial position, statements of operations, or cash flows at this time.

Effects of Inflation and Pricing

The oil and natural gas industry is very cyclical and the demand for goods and services of oil field companies, suppliers and others associated with the industry puts extreme pressure on the economic stability and pricing structure within the industry. Material changes in prices impact revenue stream, estimates of future reserves, borrowing base calculations of bank loans and value of properties in purchase and sale transactions. Material changes in prices can impact the value of oil and natural gas companies and their ability to raise capital, borrow money and retain personnel. We have recently been impacted by such material reductions in oil prices that we have significantly cut back our drilling and completion activities and have lowered our operating expenses by reducing personnel levels, use of contractors, and eliminating all reasonable and feasible discretionary expenses. We anticipate we will continue to operate in this fashion in the near term.

BUSINESS AND PROPERTIES

Our Business

EnerJex, formerly known as Millennium Plastics Corporation, is an oil and natural gas acquisition, exploration and development company. Midwest Energy, Inc. was incorporated in the State of Nevada on December 30, 2005. In August of 2006, Millennium Plastics Corporation, following a reverse merger by and among us, Millennium Acquisition Sub (our wholly owned subsidiary) and Midwest Energy, changed the focus of its business plan from the development of biodegradable plastic materials and entered into the oil and natural gas industry. In conjunction with the change, the company was renamed EnerJex Resources, Inc.

The total proved PV10 (present value) before tax of our reserves as of March 31, 2008 was $39.6 million. PV10 means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development and abandonment costs, using prices and costs in effect at the determination date, before income taxes, and without giving effect to non-property related expenses, discounted to a present value using an annual discount rate of 10% in accordance with the guidelines of the SEC. PV10 is a non-GAAP financial measure and generally differs from the standardized measure of discounted future net cash flows, the most directly comparable GAAP financial measure, because it does not include the effects of income taxes on future net revenues. See “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

The Opportunity in Kansas

Fragmented Ownership Structure. There are numerous opportunities to acquire producing properties at attractive prices because of the currently inefficient and fragmented ownership structure.

Our Properties

The following table summarizes our acreage by project name as of September 30, 2008.

	Developed Acreage				Undeveloped Acreage				Total Acreage
Project Name	Gross		Net(1)		Gross		Net(1)		Gross		Net(1)

Black Oaks Project(2)		550		522		1,850		1,758		2,400		2,280
DD Energy Project		400		400		1,280		1,280		1,680		1,680
Tri-County Project		610		606		652		651		1,262		1,257
Thoren Project		140		140		607		607		747		747
Gas City Project		680		680		6,790		6,790		7,470		7,470

Total		2,380		2,348		11,179		11,086		13,559		13,434

(1)	Net acreage is based on our net working interest as of September 30, 2008.

(2)	Following completion of the Black Oaks Project, or upon mutual agreement with MorMeg, we will have the option to develop the approximate 2,100 acre “Nickel Town Project.”

Black Oaks and Nickel Town Projects

In September 2006, we acquired an option to purchase the Black Oaks Project from MorMeg for $500,000 in a combination of stock and cash. In addition, we established a joint operating account and funded it with $4.0 million in April 2007 for the Phase I development plan of this project. We have a 95% working interest and MorMeg has a 5% carried working interest in the project. The Black Oaks Project currently encompasses approximately 2,400 acres in Woodson and Greenwood Counties, Kansas. At the time of its acquisition the project had approximately 35 oil wells producing an average of approximately 32 BOEPD.

The Black Oaks Project is a primary and enhanced secondary recovery project between us and MorMeg. Phase I of the Black Oaks Project development plan commenced shortly after closing with the drilling of 44 in-fill wells. During fiscal 2008, we began injecting water into the first five water injection wells at an average rate of approximately 50 barrels of water per day per well. This pilot program was expanded so that by June 30, 2008, we were injecting approximately 200 barrels of water per day per well in the 13 injection wells. In addition, adjacent oil wells have increased production from an average of approximately 5 BOEPD to 25 BOEPD. Gross production from the approximately 63 net wells on the Black Oaks Project was approximately 101 BOEPD for the month of October 2008. Based upon these results, subject to availability of capital, we plan to commence Phase II of the development plan. Phase II currently contemplates drilling over 25 additional water injection wells, and drilling and completing over 20 additional producer wells.

As of March 31, 2008, we had proved oil reserves on Phase I of this project of:

	Gross STB(1)		Net STB(2)		PV10(3) (Before Tax)
Proved, Developed Producing		564,107		355,869	$	6,761,835
Proved, Developed Non-Producing		-0-		-0-	$	-0-
Proved, Undeveloped		255,000		142,292	$	2,357,266
Total Proved		819,107		498,161	$	9,119,101

(1)	STB = one stock-tank barrel

(2)	Net STB is based upon our net revenue interest.

(3)	See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

The degree of depletion for the Black Oak Project as of March 31, 2008 was approximately 78%. As of March 31, 2008, the Black Oaks Project had a projected life of 47 years.

We will maintain our 95% working interest until payout, at which time the MorMeg 5% carried working interest will be converted to a 30% working interest and our working interest becomes 70%. Payout is generally the point in time when the total cumulative revenue from the project equals all of the project’s development expenditures and costs associated with funding.

We have until June 30, 2009 to contribute additional capital toward the Black Oaks Project development. If we elect not to contribute further capital to the Black Oaks Project prior to the project’s full development while it is economically viable to do so, or if there is more than a thirty day delay in project activities due to lack of capital, MorMeg has the option to cease further joint development and we will receive an undivided interest in the Black Oaks Project. The undivided interest will be the proportionate amount equal to the amount that our investment bears to our investment plus $2.0 million, with MorMeg receiving an undivided interest in what remains.

Once the parties agree that the project has been fully developed or it is no longer economically viable to fund further development, we will have earned the right to exercise our option to participate in the Nickel Town Project and will have nine-months from that time to exercise this option. Should we elect to participate in the Nickel Town Project, we will have the option of negotiating new operating and other governing agreements with MorMeg. The Nickel Town Project contains approximately 2,100 acres.

DD Energy Project

Effective September 1, 2007, we acquired a 100% working interest in the DD Energy Project for $2.7 million, which consisted of approximately 1,500 acres in Johnson, Anderson and Linn Counties of Kansas. At the time of acquisition this project was producing an average of approximately 45 BOEPD.

In addition, we have acquired additional leases bringing the total acreage for this project to approximately 1,700 acres. As of September 30, 2008, we had 140 oil wells, 54 water injection wells and two water supply wells on this project. For the month of October 2008 gross production on this project was approximately 77 BOEPD. Through September 2008, we have invested an additional $2.2 million in this project and have drilled and completed 27 water injection wells and 31 producing wells.

As of March 31, 2008, we had proved oil reserves on this project of:

	Gross STB(1)		Net STB(2)		PV10(3) (Before Tax)
Proved, Developed Producing		231,318		195,209	$	7,391,725
Proved, Developed Non-Producing		82,900		69,058	$	2,744,148
Proved, Undeveloped		202,750		169,521	$	4,752,611
Total Proved		516,968		433,788	$	14,888,484

(1)	STB = one stock-tank barrel

(2)	Net STB is based upon our net revenue interest.

(3)	See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

The degree of depletion for the DD Energy Project as of March 31, 2008 was approximately 37%. As of March 31, 2008, the DD Energy Project had a projected life of 33 years. We have identified an additional 88 drillable producer locations and 86 drillable injector locations on this project and we plan to drill approximately 100 additional wells.

Tri-County Project

On September 14, 2007, we acquired nearly a 100% working interest in the Tri-County Project for $800,000, which consisted of approximately 1,100 acres in Miami, Johnson and Franklin Counties of Kansas. At the time of acquisition, this project was producing an average of approximately 25 BOEPD.

Through September 30, 2008, we have invested approximately $220,000 toward the development of this project. Funds have been used to drill four producer wells, make infrastructure upgrades, and perform work-overs on approximately 20 wells in this project. We have also acquired additional leases for approximately $50,000, bringing the total project to approximately 1,300 acres.

As of September 30, 2008, the Tri-County Project consisted of 170 producing wells and 52 water injection wells. Our gross production for the month of October 2008 at Tri-County was approximately 59 BOEPD.

As of March 31, 2008, we had proved oil reserves on this project of:

	Gross STB(1)		Net STB(2)		PV10(3) (Before Tax)
Proved, Developed Producing		126,299		99,959	$	3,225,763
Proved, Developed Non-Producing		59,000		46,013	$	1,627,150
Proved, Undeveloped		210,000		166,950	$	3,705,266
Total Proved		395,299		312,922	$	8,558,179

(1)	STB = one stock-tank barrel

(2)	Net STB is based upon our net revenue interest.

(3)	See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

The degree of depletion for the Tri-County Project as of March 31, 2008 was approximately 60%. As of March 31, 2008, the Tri-County Project had a projected life of 21 years. We plan to develop up to 70 additional injection and production wells. We have identified an additional 83 drillable producer locations and 90 drillable injector locations on this project.

Thoren Project

On April 27, 2007, we acquired a 100% working interest in the Thoren Project for $400,000 from MorMeg. This project originally contained 240 acres in Douglas County, Kansas. At the time of acquisition, this project had 12 oil wells producing an average of approximately 10 BOEPD, four water injection wells, and one water supply well. We have leased an additional 507 acres for $112,500, increasing the total acreage of this project to 747 gross acres.

Through September 30, 2008, we have invested approximately $715,000 for the development of this project and as of September 30, 2008, we had 38 oil wells, 16 water injection wells and one water supply well. Our gross production for the month of October 2008 at Thoren was approximately 39 BOEPD.

As of March 31, 2008, we had proved oil reserves on this project of:

	Gross STB(1)		Net STB(2)		PV10(3) (Before Tax)
Proved, Developed Producing		105,939		89,770	$	4,568,767
Proved, Developed Non-Producing		-0-		-0-	$	-0-
Proved, Undeveloped		38,000		32,211	$	598,743
Total Proved		143,939		121,981	$	5,167,510

(1)	STB = one stock-tank barrel

(2)	Net STB is based upon our net revenue interest.

(3)	See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties-Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

We will maintain our 100% working interest until payout and our working interest will become 75%, at which time the MorMeg working interest will be converted to a 25% working interest. Payout for this project occurs at that point in time when the total cumulative revenue from production equals the total amount of the purchase price, all costs and expenses incurred by us in the development and operation, and loan and interest costs incurred in the finance and funding of the purchase.

The degree of depletion for the Thoren Project as of March 31, 2008 was approximately 26%. As of March 31, 2008, the Thoren Project had a projected life of 26 years. We have identified an additional seven drillable producer locations and eight drillable injector locations on this project.

Gas City Project

Effective February 1, 2006, we acquired the Gas City Project for $750,000, which at that time encompassed approximately 8,800 acres in Allen County, Kansas. When we originally acquired this project, we acquired 10 natural gas wells, a natural gas gathering system, an interstate pipeline tap and a salt water disposal system for the project. Production at the time of acquisition was minimal. Subsequent to acquisition, we invested an additional $650,000 in capital improvement and development of this project. Since the time of the acquisition, we have elected to not renew certain leases in an attempt to centralize the acreage.

In August 2007, we entered into a Development Agreement with Euramerica Energy, Inc., or Euramerica, whereby Euramerica initially invested $524,000 in capital toward 6,600 acres of the project. Euramerica was granted an option to purchase this 6,600 acre portion of the project for $1.2 million with a requirement to invest an additional $2.0 million for project development. We are the operator of the project at a cost plus 17.5% basis. To date, Euramerica has paid $600,000 of the $1.2 million purchase price and $500,000 of the $2.0 million development funds. Upon payment of the entire purchase price, Euramerica will be assigned a 95% working interest, and we will retain a 5% carried working interest before payout. When a well reaches payout, our 5% carried working interest will increase to a 25% working interest in the well and Euramerica will have a 75% working interest in the well. Payout for each well occurs when proceeds of all revenue received by Euramerica from the production and sale of oil, gas, or other hydrocarbons equals the well’s drilling and completion costs. If Euramerica does not fund the remaining $1.5 million of the development funds before January 15, 2009 or does not pay the remaining $600,000 of the purchase price by January 15, 2009, all of the development agreements will be terminated and Euramerica will lose any interest in this property or the Euramerica wells. Our gross production for the month of October 2008 at Gas City was approximately 11 BOEPD. On October 15, 2008, the decision was made to shut in the project and cease all operations until Euramerica provides the funds due by January 15, 2009.

As of September 30, 2008, the project contained approximately 7,470 acres and we had drilled and completed 10 producing wells. Our gross production for the month of October 2008 at Gas City was approximately 11 BOEPD.

The following table sets forth our working interest and net revenue interest levels in the Gas City Project Euramerica Wells.

	Gas City Project
	Euramerica Wells
			Company
	Company		Net
	Working		Revenue
	Interest		Interest(1)

Before Euramerica first Purchase Price Payment on February 29, 2008		100%(2)		10%
After First Purchase Price payment but Before Full Purchase Price Paid		100%(2)		5%
After Full Purchase Price Paid, but Before Payout		5%(2)		5%
After Payout		25%		25%

(1)	For purposes of this table, net revenue interest is our revenue interest of the working interest owners’ proceeds from the sale of production.

(2)	These working interests are carried working interests.

As of March 31, 2008, we had proved oil and natural gas reserves on this project of:

	Gross		Net		Gross		Net		PV10(5)
	STB(1)		STB(2)		MCF(3)		MCF(4)		(before tax)

Proved, Developed Producing		6,500		5,362		141,371		114,610	$	802,357
Proved, Developed Non-Producing		-0-		-0-		350,000		286,587	$	1,075,701
Proved, Undeveloped		-0-		-0-		-0-		-0-	$	-0-
Total Proved		6,500		5,362		491,371		401,197	$	1,878,058

(1)	STB = one stock-tank barrel.

(2)	Net STB is based upon our net revenue interest.

(3)	MCF = thousand cubic feet of natural gas.

(4)	Net MCF is based upon our net revenue interest.

(5)	See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

The degree of depletion for the Gas City Project as of March 31, 2008 was approximately 20% on gas reserves and 0% on oil reserves.

We have drilled 12 new wells since March 31, 2008 on behalf of Euramerica. Development of this project will be dependent on additional capital contributed by Euramerica. On October 15, 2008, the decision was made to shut in the project and cease all operations until Euramerica provides the funds due by January 15, 2009.

Our Business Strategy

Develop Our Existing Properties. We intend to create near-term reserve and production growth from over 400 additional drilling locations identified on our properties. We have identified an additional 193 drillable producer locations and 213 drillable injector locations. The structure and the continuous oil accumulation in Eastern Kansas, and the expected long-life production and reserves of our properties, are anticipated to enhance our opportunities for long-term profitability. As of March 31, 2008, our Black Oaks, DD Energy, Tri-County and Thoren Projects have projected lives of 47 years, 33 years, 21 years and 26 years, respectively.

Our Competitive Strengths

We have a number of strengths that we believe will help us successfully execute our strategy:

Acquisition and Development Strategy. We have what we believe to be a relatively low-risk acquisition and development strategy compared to some of our competitors. We generally buy properties that have proven, long-term production, with a projected pay-back within a relatively short period of time, and with potential growth and upside in terms of development, enhancement and efficiency. We also plan to minimize the risk of natural gas and oil price volatility by developing a sales portfolio of pricing for our production as we continue to expand and as market conditions permit.

Company History

Midwest Energy, Inc. was incorporated in the state of Nevada on December 30, 2005. Prior to the reverse merger with Midwest Energy in August of 2006, we operated under the name Millennium Plastics Corporation and focused on the development of biodegradable plastic materials. This business plan was ultimately abandoned following its unsuccessful implementation. Following the merger, we assumed the business plan of Midwest Energy and entered into the oil and natural gas industry. Concurrent with the effectiveness of the merger, we changed our name to “EnerJex Resources, Inc.” The result of the merger was that the former stockholders of Midwest Energy controlled approximately 98% of our outstanding shares of common stock. In addition, Midwest Energy was deemed to be the acquiring company for financial reporting purposes and the merger was accounted for as a reverse merger. In November 2007 Midwest Energy changed its name to EnerJex Kansas. All of our current operations are conducted through EnerJex Kansas and DD Energy, our wholly-owned subsidiaries.

Significant Developments in Fiscal 2008 and Fiscal 2009 to Date

The following is a brief description of our most significant corporate developments that have occurred in fiscal 2008 and fiscal 2009 to date:

In April and June 2007, we completed a financing in which we issued debentures and 9,000,000 shares of our common stock in return for $6.3 million (before expenses and placement fees) at the first closing and an additional $2.7 million at the second closing.

In April 2007, we acquired the Black Oaks Project for $4.0 million, with the requirement to spend additional funds to fully complete the development of the Black Oaks Project.

In April 2007, Phase I of the Black Oaks Project development plan commenced with the drilling of 44 in-fill wells.

In April 2007, we acquired the 240 acre Thoren Project in Douglas County, Kansas from MorMeg for $400,000.

In August 2007, we entered into the Development Agreement with Euramerica, pursuant to which we granted to Euramerica the right to purchase an interest in the Gas City Project for $1.2 million.

In September 2007, we acquired the DD Energy Project, located in Johnson, Anderson and Linn Counties of Kansas, for $2.7 million.

In September 2007, we acquired the Tri-County Project, located in Miami, Johnson and Franklin Counties, Kansas, for $800,000.

Our estimated total proved oil reserves increased from zero as of March 31, 2007 to 1.4 million BOE as of March 31, 2008.

According to a reserve report prepared by McCune Engineering P.E., our independent reserve engineer, the total proved PV 10 (present value) of reserves before tax as of March 31, 2008 was $39.6 million. See “Glossary” on page 81 for our definition of PV10 and see “Business and Properties — Reserves” on page 58 for a reconciliation to the comparable GAAP financial measure.

In March 2008, we entered into the Shell agreement whereby we agreed to an 18-month fixed-price swap with Shell for 130 BOPD beginning on April 1, 2008 at a fixed price per barrel of $96.90, less transportation costs. This represented approximately 60% of our total current oil production on a net revenue basis at that time and locked in approximately $6.8 million in gross revenue before the deduction of transportation costs over the 18 month period. In addition, we agreed to sell all of our remaining oil production at current spot market pricing beginning April 1, 2008 through September 30, 2009 to Shell.

Our in-fill drilling and waterflood enhanced recovery techniques at the Black Oaks Project have increased gross oil production to approximately 101 BOEPD for the month of October, 2008 from a level of an average of approximately 32 BOEPD per day when the project was originally acquired. As of September 30, 2008, the Black Oaks Project had 63 active production wells and 13 active water injection wells, an increase of 28 production wells and 13 water injection wells since the project was originally acquired. Based upon these results, subject to availability of capital, we anticipate commencing Phase II of the development plan, which contemplates drilling over 25 additional water injection wells and completing over 20 additional producer wells.

On July 7, 2008, we amended the $2.7 million of aggregate principal amount of our 10% debentures that remain outstanding to, among other things, permit the indebtedness under our new credit facility, subordinate the security interests of the debentures to the new credit facility, provide for the redemption of the remaining debentures with the net proceeds from our next debt or equity offering and eliminate the covenant to maintain certain production thresholds.

On August 1, 2008, we entered into three-year employment agreements with C. Stephen Cochennet, our president and chief executive officer, and Dierdre P. Jones, our chief financial officer.

On August 8, 2008, we entered into a five year lease for corporate office space beginning September 1, 2008.

Relationship with Haas Petroleum

In April 2007, we entered into a consulting agreement with Mark Haas, President of Haas Petroleum and managing member of MorMeg. This agreement provides that Mr. Haas will consult with us at an executive level regarding field development, acquisition evaluation, identification of additional acquisition opportunities and overall business strategy. Haas Petroleum has been in the oil exploration and production business for over 70 years and Mr. Haas has been in the business for over 30 years.

We believe that this relationship provides us with a competitive advantage when evaluating and sourcing acquisition opportunities. As a long term producer and oil field service provider, Haas Petroleum has existing relationships with numerous oil and natural gas producers in Eastern Kansas and is generally aware of existing opportunities to enhance many of these properties through the deployment of capital, and application of enhanced drilling and production technologies. We believe that we will be able to leverage the experience and relationships of Mr. Haas to compliment our business strategy. To date, Mr. Haas has helped us identify and evaluate all of our property acquisitions, and has been instrumental in the creation and implementation of our development plans of these properties.

One of our fundamental goals with respect to the consulting arrangement is to align the interests of Mr. Haas with those of ours as much as possible. As a result, the consulting agreement provides that we will pay him five thousand dollars per month. In addition, we have granted Mr. Haas options to purchase 60,000 shares of our common stock at an exercise price of $6.25 per share, expiring on May 3, 2011. Finally, we have utilized our common stock, in part, for the purchase of assets owned by MorMeg, which we believe will further align our business interests with those of Mr. Haas.

Drilling Activity

The following table sets forth the results of our drilling activities during the 2006, 2007 and 2008 fiscal years and the first and second quarters of fiscal 2009.

	Drilling Activity
	Gross Wells						Net Wells(1)
Period	Total		Producing		Dry		Total		Producing		Dry

Fiscal 2006 Exploratory		-0-		-0-		-0-		-0-		-0-		-0-
Fiscal 2007 Exploratory		-0-		-0-		-0-		-0-		-0-		-0-
Fiscal 2008 Exploratory(2)		10		10		-0-		10		10		-0-
First Quarter Fiscal 2009 Exploratory(2)		12		12		-0-		12		12		-0-
Second Quarter Fiscal 2009 Exploratory(2)		-0-		-0-		-0-		-0-		-0-		-0-

Fiscal 2006 Development		-0-		-0-		-0-		-0-		-0-		-0-
Fiscal 2007 Development		-0-		-0-		-0-		-0-		-0-		-0-
Fiscal 2008 Development		59		57		2		58		56		2
First Quarter Fiscal 2009 Development		9		9		-0-		9		9		-0-
Second Quarter Fiscal 2009 Development		22		21		1		22		21		1

(1)	Net wells are based on our net working interest as of September 30, 2008.

(2)	We incurred no exploration costs related to exploratory wells in which we held carried working interest.

Net Production, Average Sales Price and Average Production and Lifting Costs

The following table sets forth our net oil and natural gas production (net of all royalties, overriding royalties and production due to others) for the six months ended September 30, 2008, the fiscal years ended March 31, 2008 and 2007 and the period from inception (December 30, 2005) through March 31, 2006, the average sales prices, average production costs and direct lifting costs per unit of production.

							Period From
							Inception
							(December 30,
	Six Months		Fiscal Year		Fiscal Year		2005)
	Ended		Ended		Ended		through
	September 30,		March 31,		March 31,		March 31,
	2008		2008		2007		2006

Net Production
Oil (Bbl)		36,419		43,697		-0-		-0-
Natural gas (Mcf)		4,132		17,762		19,254		-0-
Average Sales Prices
Oil (per Bbl)	$	98.79	$	79.71	$	-0-	$	-0-
Natural gas (per Mcf)	$	7.60	$	6.20	$	4.72	$	-0-
Average Production Cost(1)
Per Bbl of oil	$	56.00	$	56.65	$	-0-	$	-0-
Per Mcf of natural gas	$	50.81	$	13.12	$	9.55	$	-0-
Average Lifting Costs(2)
Per Bbl of oil	$	36.65	$	37.08	$	-0-	$	-0-
Per Mcf of natural gas	$	47.59	$	9.86	$	8.95	$	-0-

(1)	Production costs include all operating expenses, depreciation, depletion and amortization, lease operating expenses and all associated taxes. Impairment of oil and natural gas properties is not included in production costs.

(2)	Direct lifting costs do not include impairment expense or depreciation, depletion and amortization.

(3)	The average production and lifting costs per net Mcf of natural gas were negatively impacted with the extension granted to Euramerica to complete the acquisition of the Gas City Project. Accordingly, the decision to shut in the project and cease all operations was made on October 15, 2008.

Results of Oil and Natural Gas Producing Activities

The following table shows the results of operations from our oil and natural gas producing activities from inception (December 30, 2005) through September 30, 2008. Results of operations from these activities have been determined using historical revenues, production costs, depreciation, depletion and amortization of the capitalized costs subject to amortization. General and administrative expenses and interest expense have been excluded from this determination..

										From Inception
										(December 30,
	For the Six			For the Fiscal			For the Fiscal			2005)
	Months Ended			Year Ended			Year Ended			through
	September 30,			March 31,			March 31,			March 31,
	2008			2008			2007			2006

Production revenues	$	3,467,742		$	3,602,798		$	90,800		$	2,142
Production costs		(1,531,300	)		(1,795,188	)		(172,417	)		(14,599	)
Depreciation, depletion and amortization		(718,048	)		(913,224	)		(11,477	)		(385	)

Results of operations for producing activities	$	1,218,394		$	894,386		$	(93,094	)	$	(12,842	)

Producing Wells

The following table sets forth the number of productive oil and natural gas wells in which we owned an interest as of September 30, 2008.

	Producing
					Gross		Net
Project	Gross Oil		Net Oil(1)		Natural Gas		Natural Gas(1)

Black Oaks Project(2)		63		60		-0-		-0-
DD Energy Project		140		140		-0-		-0-
Tri-County Project		170		170		-0-		-0-
Thoren Project		38		38		-0-		-0-
Gas City Project		2		2		15		15

Total		413		410		15		15

(1)	Net wells are based on our net working interest as of September 30, 2008.

(2)	Following completion of the Black Oaks Project, or upon mutual agreement with MorMeg, we will have the option to develop the approximate 2,100 acre “Nickel Town Project.”

Reserves

Our estimated total proved PV 10 (present value) of reserves as of March 31, 2008 increased to $39.6 million from zero as of March 31, 2007. We developed total proved reserves to 1.4 million BOE. Of the 1.4 million BOE, approximately 64% are proved developed and approximately 36% are proved undeveloped. The proved developed reserves consist of proved developed producing (82%) and proved developed non-producing (18%). See “Glossary” on page 81 for our definition of PV10.

Based on an assumed oil price of $94.53 per barrel and $7.479 per Mcf for natural gas as of March 31, 2008, and applying an annual discount rate of 10% of the future net cash flow, the estimated PV10 of the 1.4 million BOE, before tax, is calculated as set forth in the following table:

	Gross		Net		Gross		Net		PV10(5)
Proved Reserves Category	STB(1)		STB(2)		MCF(3)		MCF(4)		(before tax)

Proved, Developed Producing		1,034,163		746,169		141,371		114,610	$	22,750,447
Proved, Developed Non-Producing		141,900		115,071		350,000		286,587	$	5,446,999
Proved, Undeveloped		705,750		510,974		-0-		-0-	$	11,413,886

Total Proved		1,881,813		1,372,214		491,371		401,197	$	39,611,332

(1)	STB = one stock-tank barrel.

(2)	Net STB is based upon our net revenue interest.

(3)	MCF = thousand cubic feet of natural gas.

(4)	Net MCF is based upon our net revenue interest.

(5)

	As of March 31, 2008
PV10	$	39,611,332
Future income taxes, discounted at 10%		(11,410,779	)
Standardized measure of discounted future net cash flows	$	28,200,553

Oil and Natural Gas Reserves Reported to Other Agencies

We did not file any estimates of total proved net oil or natural gas reserves with, or include such information in reports to, any federal authority or agency, other than the SEC, since the beginning of the fiscal year ending March 31, 2008.

Title to Properties

Our properties are subject to customary royalty interests, liens under indebtedness, liens incident to operating agreements and liens for current taxes and other burdens, including mineral encumbrances and restrictions. Further, our debt is secured by liens on substantially all of our assets. We do not believe that any of these burdens materially interferes with the use of our properties in the operation of our business.

We believe that we have satisfactory title to or rights in all of our producing properties. As is customary in the natural gas and oil industry, minimal investigation of title is made at the time of acquisition of undeveloped properties. In most cases, we investigate title and obtain title opinions from counsel or have title reviewed by professional landmen only when we acquire producing properties or before we begin drilling operations. However, any acquisition of producing properties without obtaining title opinions are subject to a greater risk of title defects.

Sale of Natural Gas and Oil

We do not intend to refine our natural gas or oil production. We expect to sell all or most of our production to a small number of purchasers in a manner consistent with industry practices at prevailing rates by means of long-term and short-term sales contracts, some of which may have fixed price components. We have a long-term purchase contract with Shell to sell all of our current oil production beginning April 1, 2008 through September 2009. Under current conditions, we should be able to find other purchasers, if needed. All of our produced oil is held in tank batteries and then each respective purchaser transports the oil by truck to the refinery. In addition, our board of directors has implemented a crude oil and natural gas hedging strategy that will allow management to hedge up to 80% of our net production in an effort to mitigate a majority of our exposure to changing oil prices in the intermediate term.

Secondary Recovery and Other Production Enhancement Strategies

When an oil field is first produced, the oil typically is recovered as a result of natural pressure within the producing formation, often assisted by pumps of various types. The only natural force present to move the crude oil to the wellbore is the pressure differential between the higher pressure in the formation and the lower pressure in the wellbore. At the same time, there are many factors that act to impede the flow of crude oil, depending on the nature of the formation and fluid properties, such as pressure, permeability, viscosity and water saturation. This stage of production is referred to as “primary production,” which in Eastern Kansas normally only recovers up to 15% of the crude oil originally in place in a producing formation.

Many, but not all, oil fields are amenable to assistance from a waterflood, a form of “secondary recovery,” which is used to maintain reservoir pressure and to help sweep oil to the wellbore. In a waterflood, certain wells are used to inject water into the reservoir while other wells are used to recover the oil in place. We are employing a waterflood for the Black Oaks Project as well as on our remaining shallow oil leases. We anticipate waterflooding to be our secondary recovery technique for the majority of our oil field projects.

As the waterflood matures, the fluid produced contains increasing amounts of water and decreasing amounts of oil. Surface equipment is used to separate the oil from the water, with the oil going to pipelines or holding tanks for sale and the water being recycled to the injection facilities. In the Black Oaks Project, through October 30, 2008 we have realized increases on producing wells adjacent to injection wells ranging from an average of four barrels a day to 18 barrels a day in oil production as a result of the waterflood.

In addition, we may utilize 3-D seismic analysis, horizontal drilling, and other technologies and production techniques to improve drilling results and ultimately enhance our production and returns. We also believe use of such technologies and production techniques in exploring for, developing and exploiting oil and natural gas properties will help us reduce drilling risks, lower finding costs and provide for more efficient production of oil and natural gas from our properties.

Markets and Marketing

The natural gas and oil industry has experienced rising and volatile prices in recent years. As a commodity, global natural gas and oil prices respond to macro-economic factors affecting supply and demand. In particular, world oil prices have risen in response to political unrest and supply uncertainty in Iraq, Venezuela, Nigeria and Iran, and increasing demand for energy in rapidly growing economies, notably India and China. Due to rising world prices and the consequential impact on supply, North American prospects have become more attractive. Escalating conflicts in the Middle East and the ability of OPEC to control supply and pricing are some of the factors negatively impacting the availability of global supply. In contrast, increased costs of steel and other products used to construct drilling rigs and pipeline infrastructure, as well as higher drilling and well-servicing rig rates, negatively impact domestic supply.

Our market is affected by many factors beyond our control, such as the availability of other domestic production, commodity prices, the proximity and capacity of natural gas and oil pipelines, and general fluctuations of global and domestic supply and demand. Although we have entered into one sales contract with Shell at this time, we do not anticipate difficulty in finding additional sales opportunities, as and when needed.

Natural gas and oil sales prices are negotiated based on factors such as the spot price for natural gas or posted price for oil, price regulations, regional price variations, hydrocarbon quality, distances from wells to pipelines, well pressure, and estimated reserves. Many of these factors are outside our control. Natural gas and oil prices have historically experienced high volatility, related in part to ever-changing perceptions within the industry of future supply and demand.

Competition

The natural gas and oil industry is intensely competitive and, as an early-stage company, we must compete against larger companies that may have greater financial and technical resources than we do and substantially more experience in our industry. These competitive advantages may better enable our competitors to sustain the impact of higher exploration and production costs, natural gas and oil price volatility, productivity variances between properties, overall industry cycles and other factors related to our industry. Their advantage may also negatively impact our ability to acquire prospective properties, develop reserves, attract and retain quality personnel and raise capital.

Research and Development Activities

We have not spent any material amount of time in the last two fiscal years on research and development activities.

Governmental Regulations

Regulation of Oil and Natural Gas Production. Our oil and natural gas exploration, production and related operations, when developed, are subject to extensive rules and regulations promulgated by federal, state, tribal and local authorities and agencies. For example, some states in which we may operate, including Kansas, require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration and production of oil and natural gas. Such states may also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from wells, and the regulation of spacing, plugging and abandonment of such wells. Failure to comply with any such rules and regulations can result in substantial penalties. Moreover, such states may place burdens from previous operations on current lease owners, and the burdens could be significant. The regulatory burden on the oil and natural gas industry will most likely increase our cost of doing business and may affect our profitability. Although we believe we are currently in substantial compliance with all applicable laws and regulations, because such rules and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws. Significant expenditures may be required to comply with governmental laws and regulations and may have a material adverse effect on our financial condition and results of operations.

Federal Regulation of Natural Gas. The Federal Energy Regulatory Commission, or FERC, regulates interstate natural gas transportation rates and service conditions, which may affect the marketing of natural gas produced by us, as well as the revenues that may be received by us for sales of such production. Since the mid-1980’s, FERC has issued a series of orders, culminating in Order Nos. 636, 636-A and 636-B, or Order 636, that have significantly altered the marketing and transportation of natural gas. Order 636 mandated a fundamental restructuring of interstate pipeline sales and transportation service, including the unbundling by interstate pipelines of the sale, transportation, storage and other components of the city-gate sales services such pipelines previously performed. One of FERC’s purposes in issuing the order was to increase competition within all phases of the natural gas industry. The United States Court of Appeals for the District of Columbia Circuit largely upheld Order 636 and the Supreme Court has declined to hear the appeal from that decision. Generally, Order 636 has eliminated or substantially reduced the interstate pipelines’ traditional role as wholesalers of natural gas in favor of providing only storage and transportation service, and has substantially increased competition and volatility in natural gas markets.

The price we may receive from the sale of oil and natural gas liquids will be affected by the cost of transporting products to markets. Effective January 1, 1995, FERC implemented regulations establishing an indexing system for transportation rates for oil pipelines, which, generally, would index such rates to inflation, subject to certain conditions and limitations. We are not able to predict with certainty the effect, if any, of these regulations on our intended operations. However, the regulations may increase transportation costs or reduce well head prices for oil and natural gas liquids.

Environmental Matters

Our operations and properties are subject to extensive and changing federal, state and local laws and regulations relating to environmental protection, including the generation, storage, handling, emission, transportation and discharge of materials into the environment, and relating to safety and health. The recent trend in environmental legislation and regulation generally is toward stricter standards, and this trend will likely continue.

These laws and regulations may:

require the acquisition of a permit or other authorization before construction or drilling commences and for certain other activities;

limit or prohibit construction, drilling and other activities on certain lands lying within wilderness and other protected areas; and

impose substantial liabilities for pollution resulting from its operations, or due to previous operations conducted on any leased lands.

The permits required for our operations may be subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce their regulations, and violations are subject to fines or injunctions, or both. In the opinion of management, we are in substantial compliance with current applicable environmental laws and regulations, and have no material commitments for capital expenditures to comply with existing environmental requirements. Nevertheless, changes in existing environmental laws and regulations or in interpretations thereof could have a significant impact on us, as well as the oil and natural gas industry in general.

The Comprehensive Environmental, Response, Compensation, and Liability Act, as amended, or CERCLA, and comparable state statutes impose strict, joint and several liability on owners and operators of sites and on persons who disposed of or arranged for the disposal of “hazardous substances” found at such sites. It is not uncommon for the neighboring land owners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. The Federal Resource Conservation and Recovery Act, as amended, or RCRA, and comparable state statutes govern the disposal of “solid waste” and “hazardous waste” and authorize the imposition of substantial fines and penalties for noncompliance. Although CERCLA currently excludes petroleum from its definition of “hazardous substance,” state laws affecting our operations may impose clean-up liability relating to petroleum and petroleum related products. In addition, although RCRA classifies certain oil field wastes as “non-hazardous,” such exploration and production wastes could be reclassified as hazardous wastes thereby making such wastes subject to more stringent handling and disposal requirements.

The Federal Water Pollution Control Act of 1972, as amended, or Clean Water Act, and analogous state laws impose restrictions and controls on the discharge of pollutants into federal and state waters. These laws also regulate the discharge of storm water in process areas. Pursuant to these laws and regulations, we are required to obtain and maintain approvals or permits for the discharge of wastewater and storm water and develop and implement spill prevention, control and countermeasure plans, also referred to as “SPCC plans,” in connection with on-site storage of greater than threshold quantities of oil. The EPA issued revised SPCC rules in July 2002 whereby SPCC plans are subject to more rigorous review and certification procedures. We believe that our operations are in substantial compliance with applicable Clean Water Act and analogous state requirements, including those relating to wastewater and storm water discharges and SPCC plans.

The Endangered Species Act, as amended, or ESA, seeks to ensure that activities do not jeopardize endangered or threatened animal, fish and plant species, nor destroy or modify the critical habitat of such species. Under ESA, exploration and production operations, as well as actions by federal agencies, may not significantly impair or jeopardize the species or its habitat. ESA provides for criminal penalties for willful violations of the Act. Other statutes that provide protection to animal and plant species and that may apply to our operations include, but are not necessarily limited to, the Fish and Wildlife Coordination Act, the Fishery Conservation and Management Act, the Migratory Bird Treaty Act and the National Historic Preservation Act. Although we believe that our operations will be in substantial compliance with such statutes, any change in these statutes or any reclassification of a species as endangered could subject us to significant expenses to modify our operations or could force us to discontinue certain operations altogether.

Personnel

Legal Proceedings

We may become involved in various routine legal proceedings incidental to our business. However, to our knowledge as of the date of this prospectus, there are no material pending legal proceedings to which we are a party or to which any of our property is subject.

Facilities

We currently maintain an office at 27 Corporate Woods, Suite 350, 10975 Grandview Drive, Overland Park, Kansas 66210. This space is leased pursuant to a five year lease that expires in August 2013.

MANAGEMENT

The following table sets forth certain information regarding our current directors and executive officers. Our directors and executive officers serve one-year terms.

Name	Age	Position	Board Committees(1)

C. Stephen Cochennet	52	President, Chief Executive Officer and Chairman	None
Dierdre P. Jones	44	Chief Financial Officer	None
Robert G. Wonish	55	Director	GCNC (Chairman) and Audit
Daran G. Dammeyer	47	Director	Audit (Chairman) and GCNC
Darrel G. Palmer	50	Director	GCNC
Dr. James W. Rector	47	Director	None

(1)	“GCNC” means Governance, Compensation and Nominating Committee of the Board of Directors. “Audit” means the Audit Committee of the Board of Directors.

C. Stephen Cochennet has been our president, chief executive officer and chairman since August 15, 2006. From July 2002 to present, Mr. Cochennet has been president of CSC Group, LLC. Mr. Cochennet formed the CSC Group, LLC through which he supports a number of clients that include Fortune 500 corporations, international companies, natural gas/electric utilities, outsource service providers, as well as various start up organizations. The services provided include strategic planning, capital formation, corporate development, executive networking and transaction structuring. Mr. Cochennet currently spends less than 10 hours a month on activities associated with CSC Group, LLC. From 1985 to 2002, he held several executive positions with UtiliCorp United Inc. (Aquila) in Kansas City. His responsibilities included finance, administration, operations, human resources, corporate development, natural gas/energy marketing, and managing several new start up operations. Prior to his experience at UtiliCorp United Inc., Mr. Cochennet served 6 years with the Federal Reserve System. Mr. Cochennet graduated from the University of Nebraska with a B.A. in Finance and Economics.

Dierdre P. Jones has been our chief financial officer since August 1, 2008. From August 2007 through July 2008 Ms. Jones served as our director of finance and accounting. From May 2007 through August 2007, Ms. Jones provided independent consulting services for the company, primarily in the testing and implementation of financial accounting and reporting software. From May 2002 through May 2007, Ms. Jones was sole proprietor of These Faux Walls, a specialty design company. She holds the professional designations of Certified Public Accountant and Certified Internal Auditor. Prior to joining EnerJex, Ms. Jones held management positions with UtiliCorp United Inc. (Aquila), and served three years in public accounting with Arthur Andersen & Co. Ms. Jones graduated with distinction from the University of Kansas with a B.S. in Accounting and Business Administration.

Robert G. Wonish has served as a member of our board of directors since May 2007. Effective April 21, 2008, Mr. Wonish was appointed as president and chief operating officer of Striker Oil & Gas, Inc. (OTC:BB SOIS), which is an oil and natural gas exploration and production company. Mr. Wonish also serves on the board of directors of Striker Oil & Gas, Inc. From December 2004 to June 30, 2007, Mr. Wonish was vice president of Petroleum Engineers Inc., a subsidiary of The CYMRI Corporation, now CYMRI, L.L.C., which is a wholly-owned subsidiary of Stratum Holdings, Inc. On July 1, 2007, Mr. Wonish was appointed president and chief operating officer of Petroleum Engineers Inc. Mr. Wonish was also president of CYMRI, L.L.C. After the sale of Petroleum Engineers Inc. in March of 2008, Mr. Wonish resigned all positions in Petroleum Engineers Inc. and CYMRI, L.L.C. as well as resigning as a member of the Stratum Holdings, Inc. board of directors. He previously achieved positions of increasing responsibility with PANACO, Inc., a public oil and natural gas company, ultimately serving as that company’s president and chief operating officer. He began his engineering career at Amoco in 1975 and joined Panaco’s engineering staff in 1992. Mr. Wonish received his Mechanical Engineering degree from the University of Missouri-Rolla.

Daran G. Dammeyer has served as a member of our board of directors since May 2007. Since July 1999, Mr. Dammeyer has served as president of D-Two Solutions through which he supports clients by primarily providing merger and acquisition support, strategic planning, budgeting and forecasting process development and implementation. From March 1999 through July 1999, Mr. Dammeyer was a Director of International Financial Management for UtiliCorp United Inc. (Aquila), a multinational energy solutions provider in Kansas City, Missouri. From November 1995 through March 1999, Mr. Dammeyer served as the chief financial controller of United Energy Limited in Melbourne, Australia. Mr. Dammeyer also served in numerous management positions at Michigan Energy Resources Company, including director of internal audit. Mr. Dammeyer earned his Bachelor of Business Administration degree, with dual majors in Accounting and Corporate Financial Management from The University of Toledo, Ohio.

Darrel G. Palmer has served as a member of our board of directors since May 2007. Since January 1997, Mr. Palmer has been president of Energy Management Resources, an energy process management firm serving industrial and large commercial companies throughout the U.S. and Canada. Mr. Palmer has 25 years of expertise in the natural gas arena. His experiences encompass a wide area of the natural gas industry and include working for natural gas marketing companies, local distribution companies, and FERC regulated pipelines. Prior to becoming an independent energy consultant in 1997, Mr. Palmer’s last position was vice president/national account sales at UtiliCorp United Inc. (Aquila) of Kansas City, Missouri. Over the years Mr. Palmer has worked in many civic organizations including United Way and has been a president of the local Kiwanis Club. Junior Achievement of Minnesota awarded him the Bronze Leadership Award for his accomplishments which included being an advisor, program manager, holding various board positions, and ultimately being board president.

Dr. James W. Rector has served as a member of our board of directors since March 2008. Dr. Rector is the author of numerous technical papers along with a number of patents on seismic technology. He was a co-founder of two seismic technology startups that were later sold to NYSE-listed companies, and he regularly consults for many of the major oil companies including Chevron and BP. In 1998, he founded Berkeley GeoImaging LLC, which has completed five equity private placements for oil and natural gas exploration and development projects. Dr. Rector is a tenured professor of Geophysics at the University of California at Berkeley and a faculty staff scientist at the Lawrence Berkeley National Laboratory. He has been the Editor-in-Chief of the Journal of Applied Geophysics and has also served on the Society of Exploration Geophysicists Executive Committee. He received his Masters and Ph.D. degrees in Geophysics from Stanford University.

Board of Directors

Our board of directors currently consists of five members. Our directors serve one-year terms. Our board of directors has affirmatively determined that Messrs. Wonish, Dammeyer, Palmer and Dr. Rector are independent directors, as defined by Section 803 of the American Stock Exchange Company Guide.

Committees of the Board of Directors

Our board of directors has two standing committees: an audit committee and a governance, compensation and nominating committee. Each of those committees has the composition and responsibilities set forth below.

Audit Committee

On May 4, 2007, we established and appointed initial members to the audit committee of our board of directors. Mr. Dammeyer is the chairman and Mr. Wonish serves as the other member of the committee. Currently, none of the members of the audit committee are, or have been, our officers or employees, and each member qualifies as an independent director as defined by Section 803 of the American Stock Exchange Company Guide and Section 10A(m) of the Exchange Act, and Rule 10A-3 thereunder. The board of directors has determined that Mr. Dammeyer is an “audit committee financial expert” as that term is used in Item 401(h) of Regulation S-K promulgated under the Exchange Act. The audit committee held ten meetings during fiscal 2008.

The audit committee has the sole authority to appoint and, when deemed appropriate, replace our independent registered public accounting firm, and has established a policy of pre-approving all audit and permissible non-audit services provided by our independent registered public accounting firm. The audit committee has, among other things, the responsibility to evaluate the qualifications and independence of our independent registered public accounting firm; to review and approve the scope and results of the annual audit; to review and discuss with management and the independent registered public accounting firm the content of our financial statements prior to the filing of our quarterly reports and annual reports; to review the content and clarity of our proposed communications with investors regarding our operating results and other financial matters; to review significant changes in our accounting policies; to establish procedures for receiving, retaining, and investigating reports of illegal acts involving us or complaints or concerns regarding questionable accounting or auditing matters, and supervise the investigation of any such reports, complaints or concerns; to establish procedures for the confidential, anonymous submission by our employees of concerns or complaints regarding questionable accounting or auditing matters; and to provide sufficient opportunity for the independent auditors to meet with the committee without management present.

Governance, Compensation and Nominating Committee

The governance, compensation and nominating committee is comprised of Messrs. Wonish, Dammeyer and Palmer. Mr. Wonish serves as the chairman of the governance, compensation and nominating committee. The governance, compensation and nominating committee is responsible for, among other things; identifying, reviewing, and evaluating individuals qualified to become members of the board, setting the compensation of the chief executive officer and performing other compensation oversight, reviewing and recommending the nomination of board members, and administering our equity compensation plans. The governance, compensation and nominating committee held five meetings during fiscal 2008.

NON-EMPLOYEE DIRECTOR COMPENSATION

The following table sets forth summary compensation information for the fiscal year ended March 31, 2008 for each of our non-employee directors:

	Fees
	Earned
	or Paid		Stock			Option			All Other
	in Cash		Awards			Awards			Compensation		Total
Name	$		$			$			$		$

Daran G. Dammeyer	$	42,000	$	12,000	(1)	$	171,924	(2)	$	-0-	$	225,924
Darrel G. Palmer	$	14,500	$	-0-		$	171,924	(2)	$	-0-	$	186,424
Robert G. Wonish	$	12,250	$	-0-		$	171,924	(2)	$	-0-	$	184,174
Dr. James W. Rector(3)	$	357	$	-0-		$	-0-		$	-0-	$	357

(1)	Amount represents the estimated total fair market value of 1,920 shares of common stock issued to Mr. Dammeyer for services as audit committee chairman under SFAS 123(R), as discussed in Note 2 to our audited financial statements for the fiscal year ended March 31, 2008.

(2)

Amount represents the estimated total fair market value of 40,000 stock options granted to each of Messrs. Dammeyer, Palmer and Wonish under SFAS 123(R), as discussed in Note 2 to our financial statements for the fiscal year ended March 31, 2008. The 40,000 options granted to Messrs. Dammeyer, Palmer and Wonish were outstanding at fiscal year end.

(3)	Dr. Rector was appointed to the board of directors on March 19, 2008.

Board compensation was recently increased for fiscal 2009 upon the recommendation of an independent compensation consultant and the governance, compensation and nominating committee of the board of directors. The annual retainer for non-employee directors is now $20,000 with a meeting fee of $1,500 for those in attendance and $750 for those who participate by telephone. The chairman of the audit committee will be paid an annual retainer of $42,000, payable with $2,500 per month in cash and $12,000 worth of common stock, which was issued to the chairman on May 15, 2008. Members of the audit committee will be paid an annual cash retainer of $15,000 and $375 per meeting attended. The chairman of the governance, compensation and nominating committee will be paid an annual cash retainer of $8,000, payable quarterly, while members of that committee will be paid an annual cash retainer of $2,000, payable quarterly, and $375 per meeting attended. In addition, the directors are reimbursed for expenses incurred in connection with board and committee membership.

For joining the board this fiscal year, Dr. Rector was granted options to purchase 10,000 shares of common stock for three years from the date of grant at an exercise price of $6.25 per share. Each non-employee director was also granted options to purchase 28,000 shares of common stock for three years from the date of grant at an exercise price of $6.25 per share as equity-based compensation for fiscal year 2009. These options were rescinded in November 2008 at the request of the board’s compensation committee and the approval of each non-employee director in an effort to reduce compensation expense which, though non-cash, would have had a substantial negative impact on our financial statements and results of operations for the quarter ended September 30, 2008. Shares subject to these options were returned to the plan and are available for future issuance.

EXECUTIVE COMPENSATION

The following table sets forth summary compensation information for the years ended March 31, 2008 and 2007 for our president and chief executive officer. We did not have any other executive officers as of the end of fiscal 2008 whose total compensation exceeded $100,000 and no compensation was paid to Mr. Cochennet in fiscal 2006. We refer to Mr. Cochennet as our named executive officer elsewhere in this prospectus.

Summary Compensation Table

								Option			All Other
	Fiscal		Salary			Bonus		Awards			Compensation			Total
Name and Principal Position	Year		($)			($)		($)			($)			($)

C. Stephen Cochennet		2008	$	156,000			-0-	$	859,622	(2)	$	-0-		$	1,015,622
President and Chief Executive Officer		2007	$	110,500	(1)		-0-		-0-		$	9,500	(3)	$	120,000

(1)

Mr. Cochennet began receiving compensation as of August 1, 2006; therefore the amounts listed for fiscal 2007 represent compensation for only a portion of the year. We agreed to pay Mr. Cochennet a monthly salary of $13,000. Mr. Cochennet received $26,000 as compensation for August 1, 2006 through October 1, 2006. As of October 15, 2006, Mr. Cochennet agreed to defer his salary until financing was secured. As of March 31, 2007, we accrued $84,500 of Mr. Cochennet’s salary. Subsequent to March 31, 2007, Mr. Cochennet’s accrued salary was paid.

(2)	Amount represents the estimated total fair value of stock options granted to Mr. Cochennet under SFAS 123(R).

(3)	Represents automobile maintenance and related costs.

Outstanding Equity Awards at 2008 Fiscal Year-End

The following table lists the outstanding equity incentive awards held by our named executive officer as of March 31, 2008.

Option Awards

Number of

Securities

Underlying

Unexercised

Option

Options

Unearned

Exercise

Option

Fiscal Year

Exercisable

Unexercisable

Options

Price

Expiration Date

C. Stephen Cochennet

2008

200,000

-0-

6.25

05/03/2011

Option Exercises for Fiscal 2008

There were no options exercised by our named executive officer in fiscal 2008.

2000/2001 Stock Option Plan

The board of directors approved the 2000/2001 Stock Option Plan and our stockholders ratified the plan on September 25, 2000. The total number of options that can be granted under the plan is 200,000 shares and all such shares have been granted to Mr. Cochennet. The options are exercisable until May 3, 2011 at a per share price of $6.25.

Stock Incentive Plan

The board of directors approved the EnerJex Resources, Inc. Stock Option Plan on August 1, 2002 (the “2002-2003 Stock Option Plan”). Originally, the total number of options that could be granted under the 2002-2003 Stock Option Plan was not to exceed 400,000 shares. In September 2007 our stockholders approved a proposal to amend and restate the 2002-2003 Stock Option Plan to increase the number of shares issuable to 1,000,000. On October 14, 2008 our stockholders approved a proposal to amend and restate the 2002-2003 Stock Option Plan to (i) rename it the EnerJex Resources, Inc. Stock Incentive Plan (the “Stock Incentive Plan”), (ii) increase the maximum number of shares of our common stock that may be issued under the Stock Incentive Plan from 1,000,000 to 1,250,000, and (iii) add restricted stock as an eligible award that can be granted under the Stock Incentive Plan.

General Terms of Plans

Officers (including officers who are members of the board of directors), directors, and other employees and consultants and our subsidiaries (if established) will be eligible to receive awards under the 2000/2001 Stock Option Plan and the Stock Incentive Plan. A committee of the board of directors will administer the plans and will determine those persons to whom awards will be granted, the number of and type of awards to be granted, the provisions applicable to each grant and the time periods during which the awards may be exercised. No awards may be granted more than ten years after the date of the adoption of the plans.

Non-qualified stock options will be granted by the committee with an option price equal to the fair market value of the shares of common stock to which the non-qualified stock option relates on the date of grant. The committee may, in its discretion, determine to price the non-qualified option at a different price. In no event may the option price with respect to an incentive stock option granted under the plans be less than the fair market value of such common stock to which the incentive stock option relates on the date the incentive stock option is granted. However the price of an incentive stock option will not be less than 110% of the fair market value per share on the date of the grant in the case of an individual then owning more than 10% of the total combined voting power of all classes of stock of the corporation.

Each option granted under the plans will be exercisable for a term of not more than ten years after the date of grant. Certain other restrictions will apply in connection with the plans when some awards may be exercised.

Restricted stock will have full dividend, voting and other ownership rights, unless otherwise indicated in the applicable award agreement pursuant to which it is granted. If any dividends or distributions are paid in shares of common stock during the restricted period, the applicable award agreement may provide that such shares will be subject to the same restrictions as the restricted stock with respect to which they were paid.

These plans are intended to encourage directors, officers, employees and consultants to acquire ownership of common stock. The opportunity so provided is intended to foster in participants a strong incentive to put forth maximum effort for our continued success and growth, to aid in retaining individuals who put forth such effort, and to assist in attracting the best available individuals in the future.

Limitation of Liability of Directors

Pursuant to the Nevada General Corporation Law, our articles of incorporation exclude personal liability for our directors for monetary damages based upon any violation of their fiduciary duties as directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a director receives an improper personal benefit. This exclusion of liability does not limit any right which a director may have to be indemnified and does not affect any director’s liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a director if he acted in good faith and in a manner he believed to be in our best interests.

Employment Agreements

On August 1, 2008, we entered into an employment agreement with C. Stephen Cochennet, our president and chief executive officer. Mr. Cochennet’s employment agreement was approved by the governance, compensation and nominating committee of our board of directors.

In general, Mr. Cochennet’s employment agreement contains provisions concerning terms of employment, voluntary and involuntary termination, indemnification, severance payments, and other termination benefits, in addition to a non-compete clause and certain other perquisites, such as long-term disability insurance, director and officer insurance, and an automobile allowance. The original term of Mr. Cochennet’s employment agreement runs from August 1, 2008 until July 31, 2011. The term of the employment agreement is automatically extended for additional one year terms unless otherwise terminated in accordance with its terms.

Mr. Cochennet’s employment agreement provides for an initial annual base salary of $200,000, which may be adjusted by the governance, compensation and nominating committee or our board of directors.

In addition, Mr. Cochennet is eligible to receive an annual bonus of up to 100% of his applicable base salary in cash or shares of restricted stock (if approved by stockholders) subject to our obtaining certain business objectives established by our board of directors. In addition Mr. Cochennet is eligible to receive long-term incentives of up to 135,000 options to purchase shares of our common stock based upon our achievement of specified performance targets. Additional information regarding these options is set forth in the following table.

Maximum #

Option

Fiscal Year

Grant Date

of Options

Strike Price of Options

Expiration Date*

2009

7/01/2009

30,000

Fair market value on grant date

6/30/2012

2010

7/01/2010

45,000

Fair market value on grant date

6/30/2013

2011

7/01/2011

60,000

Fair market value on grant date

6/30/2014

*	The options shall be immediately vested and exercisable from the grant date through the option expiration date.

The number of stock options granted each fiscal year shall be based upon a schedule set forth in Mr. Cochennet’s employment agreement and will be prorated if actual performance does not equal or exceed 100% of the targeted performance conditions. Mr. Cochennet must be employed by us on the grant date to receive the stock options.

The maximum number of options available to be earned by Mr. Cochennet each year is subject to a “catch-up” provision, such that if an element in any year is missed, it may be “caught-up” in a subsequent year, so long as the cumulative goal is met. For example, if the 2009 share price element of $11.00 is not met by March 31, 2009, Mr. Cochennet would still be able to earn the available options for this element if our share price is at least $16.85 on March 31, 2010, or $22.55 on March 31, 2011. Any caught-up options would be granted at the then current stock price. The cumulative goal for Mr. Cochennet’s long-term incentive compensation is comprised of three factors; a 35% year over year net reserve growth (40% of the goal), a 35% year over year net production increase (30% of the goal), and the previously stated share price increases (30% of the goal).

As consideration for his efforts during fiscal 2008 we also agreed to pay Mr. Cochennet a $50,000 cash bonus and grant him 30,000 options to purchase shares of our common stock at $6.25 per share. These options were to have a term of three years and vest immediately upon grant. These options were rescinded in November 2008 at the request of the board’s compensation committee and with the approval of Mr. Cochennet in an effort to reduce compensation expense which, though non-cash, would have had a substantial negative impact on our financial statements and results of operations for the quarter ended September 30, 2008. Shares subject to these options were returned to the plan and are available for future issuance.

We also granted Mr. Cochennet 45,000 options to purchase shares of our common stock at $6.25 per share as a signing bonus under the employment agreement. These options vest, assuming Mr. Cochennet remains employed by us, based on the following schedule: 10,000 on July 1, 2009; 15,000 on July 1, 2010; and 20,000 on July 1, 2011. The options will be exercisable for a three year term following each respective vesting date.

In the event of a termination of employment with us by Mr. Cochennet for “good reason”, which includes by reason of a “change of control”, or by us without “cause” (each as defined in the employment agreement), Mr. Cochennet would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment; (ii) a lump sum payment equal to the annual incentive amount (assuming achievement at 100% of target) that Mr. Cochennet would have earned if he had remained employed through June 30th following the last day of the current fiscal year; (iii) a lump sum payment equal to an amount equal to the lesser of (a) 12-months base salary or (b) the base salary Mr. Cochennet would have received had he remained in employment through the end of the then-existing term of the agreement; and (iv) immediate vesting of all equity awards (including but not limited to stock options and restricted shares).

In the event of a termination of Mr. Cochennet’s employment with us by reason of incapacity, disability or death, Mr. Cochennet, or his estate, would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment or death; (ii) a lump sum payment equal to the annual incentive amount (assuming achievement at 100% of target) that Mr. Cochennet would have earned if he had remained employed through June 30th following the last day of the current fiscal year; and (iii) a lump sum payment equal to an amount equal to six-months base salary.

In the event of a termination of Mr. Cochennet’s employment by us for “cause” (as defined in the employment agreement), Mr. Cochennet would receive all earned but unpaid base salary through the date of termination of employment. However, if a dispute arises between us and Mr. Cochennet that is not resolved within 60 days and neither party initiates arbitration proceedings pursuant to the terms of the employment agreement, we will have the option to pay Mr. Cochennet a lump sum payment equal to six-months base salary in lieu of any and all other amounts or payments to which Mr. Cochennet may be entitled relating to his employment.

On July 23, 2008, Dierdre P. Jones, our former director of finance and accounting, was appointed our chief financial officer. On August 1, 2008, we entered into an employment agreement with Ms. Jones. The employment agreement was approved by the governance, compensation and nominating committee of our board of directors.

In general, Ms. Jones’ employment agreement contains provisions concerning terms of employment, voluntary and involuntary termination, indemnification, severance payments, and other termination benefits, in addition to certain other perquisites. The original term of the employment agreement runs from August 1, 2008 until July 31, 2011.

Ms. Jones’ employment agreement provides for an initial annual base salary of $140,000, which may be adjusted by the governance, compensation and nominating committee or our board of directors.

In addition, Ms. Jones is eligible to receive an annual bonus up to 30% of her applicable base salary and is also eligible to participate in other incentive programs established by us.

We granted Ms. Jones 40,000 options to purchase shares of our common stock at $6.25 per share for a period of three years, which vested immediately upon grant. These options were rescinded in November 2008 at the request of the board’s compensation committee and with the approval of Ms. Jones in an effort to reduce compensation expense which, though non-cash, would have had a substantial negative impact on our financial statements and results of operations for the quarter ended September 30, 2008. Shares subject to these options were returned to the plan and are available for future issuance.

In the event of a termination of employment by Jones for “good reason” prior to a “change of control” or by us without “cause” prior to a “change of control” (each as defined in the employment agreement), Ms. Jones would receive: (i) a lump sum payment equal to 12 months of her salary; plus (ii) a lump sum payment equal to the prorated portion of her bonus through the date of termination; plus (iii) all unvested stock or options held by Jones shall immediately vest and become exercisable for the full term set forth in such stock option or equity award agreements; plus (iv) health insurance premiums for a period of 12 months.

In the event of the termination of Ms. Jones’ employment by us in connection with a “change of control” (as defined in the employment agreement), without cause within 12 months of a “change of control”, or by Ms. Jones for “good reason” within 12 months of a “change of control,” Ms. Jones shall be entitled to: (i) a lump sum payment equal to 12 months of her salary; plus (ii) a lump sum payment equal to 100% of her prior year’s bonus; plus (iii) all unvested stock or options held by Jones shall immediately vest and become exercisable for the full term set forth in such stock option or equity award agreements; plus (iv) health insurance premiums for a period of 12 months.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We describe below transactions and series of similar transactions that have occurred during fiscal 2009 and during the fiscal years ended March 31, 2008, 2007 and 2006 to which we were a party or will be a party in which:

•

The amounts involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years; and

•

A director, executive officer, holder of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

On March 14, 2006 and July 21, 2006, we paid consulting fees totaling $121,000 in connection with financing activities to Goran Blagojevic, a stockholder.

PRINCIPAL STOCKHOLDERS

The following table presents information, to the best of our knowledge, about the ownership of our common stock on December 23, 2008 relating to (i) those persons known to beneficially own more than 5% of our capital stock, (ii) our named executive officer, (iii) each director and (iv) our directors and executive officers as a group. The percentage of beneficial ownership for the following table is based on 4,443,483 shares of our common stock outstanding.

Beneficial ownership is determined in accordance with the rules of the SEC and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes shares of common stock that the stockholder has a right to acquire within 60 days after December 23, 2008 pursuant to options, warrants, conversion privileges or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the SEC, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.

				Percent of Outstanding			Percent of Outstanding
				Shares of Common			Shares of Common
	Number			Stock			Stock
Name of Beneficial Owner, Officer or Director(1)	of Shares			before Offering(2)			after Offering(2)

C. Stephen Cochennet, President & Chief Executive Officer(3)		600,000	(4)		12.9	%		12.9	%
Robert (Bob) G. Wonish, Director(3)		40,000	(5)		*			*
Darrel G. Palmer, Director(3)		40,000	(5)		*			*
Daran G. Dammeyer, Director(3)		44,102	(5)		*			*
Dr. James W. Rector, Director(3)		0			*			*
Directors and Officers as a Group		744,102	(6)		15.6	%		15.6	%
West Coast Opportunity Fund LLC(7)		1,000,000			22.5	%		0.0	%
West Coast Asset Management, Inc. Paul Orfalea, Lance Helfert & R. Atticus Lowe 2151 Alessandro Drive, #215 Ventura, CA 93001
Enable Growth Partners L.P.(8)		385,980			8.7	%		8.7	%
Enable Capital Management, LLC Mitchell S. Levine One Ferry Building, Suite 225 San Francisco, CA 94111

*	Represents beneficial ownership of less than 1%

(1)	As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).

(2)	Figures are rounded to the nearest tenth of a percent. Assumes the sale of 1,000,000 shares by the Selling Stockholder in this offering.

(3)	The address of each person is care of EnerJex: 27 Corporate Woods, Suite 350, 10975 Grandview Drive, Overland Park, Kansas 66210.

(4)	Includes 200,000 currently exercisable options.

(5)	Includes 40,000 currently exercisable options.

(6)	Includes 340,000 currently exercisable options held by our executive officers and directors.

(7)

Based on a Schedule 13G/A filed with the SEC on February 4, 2008. The managing member of West Coast Opportunity Fund, LLC (“WCOF”) is West Coast Asset Management (“WCAM”). WCAM has the authority to take any and all actions on behalf of WCOF, including voting any shares held by WCOF. Atticus Lowe, Lance Helfert and Paul Orfalea constitute the Investment Committee of WCAM. Messrs. Lowe, Helfert and Orfalea disclaim beneficial ownership of these shares.

(8)

Based on a Schedule 13G/A filed with the SEC on February 20, 2008. Enable Capital Management, as general and investment manager of Enable Growth Partners L.P. and other clients, may be deemed to have the power to direct the voting or disposition of shares of common stock held by Enable Growth Partners L.P. (277,040 shares of common stock) and other clients (108,940 shares of common stock). Therefore, Energy Capital Management, LLC, as Enable Growth Partners L.P.’s and those other accounts’ general partner and investment manager, and Mitchell S. Levine, as managing member and majority owner of Enable Capital Management, LLC, may be deemed to beneficially own the shares of common stock owned by Enable Growth Partners L.P. and such other accounts.

DESCRIPTION OF CAPITAL STOCK

Common Stock

Our articles of incorporation authorize the issuance of 100,000,000 shares of common stock, $0.001 par value per share, of which 4,443,483 shares were outstanding as of December 23, 2008. Holders of common stock have no cumulative voting rights. Holders of shares of common stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the board of directors in its discretion, from funds legally available to be distributed. In the event of a liquidation, dissolution or winding up of us, the holders of shares of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Holders of common stock have no preemptive rights to purchase our common stock. There are no conversion rights or redemption or sinking fund provisions with respect to the common stock. All of the outstanding shares of common stock are validly issued, fully paid and non-assessable.

Preferred Stock

Our articles of incorporation authorizes the issuance of 10,000,000 shares of preferred stock, $0.001 par value per share, of which no shares were outstanding as of the date of this prospectus. The preferred stock may be issued from time to time by the board of directors as shares of one or more classes or series. Our board of directors, subject to the provisions of our articles of incorporation and limitations imposed by law, is authorized to:

•

adopt resolutions;

•

issue the shares;

•

fix the number of shares;

•

change the number of shares constituting any series; and

•

provide for or change the following:

•

the voting powers;

•

designations;

•

preferences; and

•

relative, participating, optional or other special rights, qualifications, limitations or restrictions, including the following:

•

dividend rights, including whether dividends are cumulative;

•

dividend rates;

•

terms of redemption, including sinking fund provisions;

•

redemption prices;

•

conversion rights; and

•

liquidation preferences of the shares constituting any class or series of the preferred stock.

In each of the listed cases, we will not need any further action or vote by the stockholders.

One of the effects of undesignated preferred stock may be to enable the board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance of shares of preferred stock pursuant to the board of director’s authority described above may adversely affect the rights of holders of common stock. For example, preferred stock issued by us may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for the common stock at a premium or may otherwise adversely affect the market price of the common stock.

Debenture Financing

On April 11, 2007, we entered into financing agreements for $9.0 million of senior secured debentures. The debentures have a three-year term and bear an interest rate equal to 10% per annum. In accordance with the terms of the debentures, we received $6.3 million (before expenses and placement fees) at the first closing on April 13, 2007 and an additional $2.7 million on June 21, 2007. Net proceeds from the debentures were approximately $8.3 million, after approximately $700,000 in fees and expenses to our placement agent, C. K. Cooper & Company, attorney’s fees and post-closing fees and expenses. On July 7, 2008, we redeemed debentures with an aggregate principal amount of $6.3 million with proceeds from our new senior secured credit facility.

In connection with the sale of the debentures, we agreed to issue the debenture holders 1,800,000 shares of common stock (1,260,000 shares of common stock were issued on April 13, 2007 and 540,000 shares of common stock were issued on June 21, 2007).

Right to Redeem Debenture. So long as a registration statement covering all of the registrable securities is effective, we have the option of prepaying the principal, in whole but not in part by paying the amount equal to 100% of the principal, together with accrued and unpaid interest by giving six (6) business days prior notice of redemption to the lenders. Pursuant to a Consent and Waiver Agreement dated April 9, 2008 all of the debenture holders consented to the redemption of their debentures with the proceeds of this offering without further notice.

Registration Rights. Pursuant to the terms of the Registration Rights Agreement, as amended, we are obligated to register 1,000,000 shares of common stock and 600,000 interest shares issuable under the debentures.

If we fail to obtain and maintain the effectiveness of this registration statement through a date which the lender may sell all of its shares of common stock without restriction under Rule 144 of the Securities Act or the date on which the debenture holders shall have sold all of its shares of common required to be covered by this registration statement, we will be obligated to pay cash to this debenture holders equal to 1.5% of the aggregate purchase price allocable to such lender’s registrable securities included in such registration statement for each 30 day period following such effectiveness failure or maintenance failure. These payments are capped at 10% of the lender’s original purchase price as defined in the registration rights agreement.

Preemptive Rights. So long as any debenture is outstanding, the debenture holders have the right to participate in any subsequent issuance of equity or equity equivalent securities up to each holder’s pro rata portion, based on the holder’s ownership of shares of common stock compared to the then-outstanding shares of common stock. At least five days before the closing of a subsequent issuance, we must give each debenture holder written notice of the issuance and each debenture holder may request specified additional information and may elect to participate in the issuance.

The preemptive rights do not apply to specified issuances, including: (1) options issued pursuant to an employee benefit plan for up to 1,000,000 options on specified terms; (2) securities issued in a bona fide underwritten public offering; and (3) issuances for services performed, at a value not less than $3.00 per share.

Additional Restrictions and Operational Covenants. In addition to standard covenants and conditions such as us maintaining our reporting status with the SEC pursuant to the Exchange Act, the debentures contain certain restrictions regarding our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make specified investments and engage in merger, consolidation or asset sale transactions, among other restrictions.

Nevada Anti-Takeover Law and Charter and By-law Provisions

Depending on the number of residents in the state of Nevada who own our shares, we could be subject to the provisions of Sections 78.378 et seq. of the Nevada Revised Statutes which, unless otherwise provided in a company’s articles of incorporation or by-laws, restricts the ability of an acquiring person to obtain a controlling interest of 20% or more of our voting shares. Our articles of incorporation and by-laws do not contain any provision which would currently keep the change of control restrictions of Section 78.378 from applying to us.

We are subject to the provisions of Sections 78.411 et seq. of the Nevada Revised Statutes. In general, this statute prohibits a publicly held Nevada corporation from engaging in a “combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the combination or the transaction by which the person became an interested stockholder is approved by the corporation’s board of directors before the person becomes an interested stockholder. After the expiration of the three-year period, the corporation may engage in a combination with an interested stockholder under certain circumstances, including if the combination is approved by the board of directors and/or stockholders in a prescribed manner, or if specified requirements are met regarding consideration. The term “combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 10% or more of the corporation’s voting stock. A Nevada corporation may “opt out” from the application of Section 78.411 et seq. through a provision in its articles of incorporation or by-laws. We have not “opted out” from the application of this section.

Apart from Nevada law, however, our articles of incorporation and by-laws do not contain any provisions which are sometimes associated with inhibiting a change of control from occurring (i.e., we do not provide for a staggered board, or for “super-majority” votes on major corporate issues). However, we do have 10,000,000 shares of authorized “blank check” preferred stock, which could be used to inhibit a change in control.

Liability and Indemnification of Officers and Directors

Our articles of incorporation and by-laws provide that our directors and officers shall not be personally liable to us or our stockholders for damages for breach of fiduciary duty as a director or officer, except for liability for (a) acts of omissions which involve intentional or reckless conduct, fraud or a knowing violation of law, or (b) the payment of distributions in violation of Section 78.300 of the Nevada Revised Statutes.

In addition, on October 14, 2008, we entered into identical indemnification agreements with each member of our board of directors and each of our executive officers (the “Indemnification Agreements”). The Indemnification Agreements provide that we will indemnify each such director or executive officer to the fullest extent permitted by Nevada law if he or she becomes a party to or is threatened with any action, suit or proceeding arising out of his or her service as a director or executive officer. The Indemnification Agreements also provide that we will advance, if requested by an indemnified person, any and all expenses incurred in connection with any such proceeding, subject to reimbursement by the indemnified person should a final judicial determination be made that indemnification is not available under applicable law. The Indemnification Agreements further provide that if we maintain directors’ and officers’ liability coverage, each indemnified person shall be included in such coverage to the maximum extent of the coverage available for our directors or executive officers.

Transfer Agent

The transfer agent for our common stock is Standard Registrar & Transfer Company Inc., 12528 South 1840 East, Draper, Utah 84020.

SELLING STOCKHOLDER

All of the shares offered hereby are held of record by West Coast Opportunity Fund, LLC, the Selling Stockholder. The shares covered by this prospectus were originally issued to the Selling Stockholder in a private placement transaction. We are registering the shares covered hereby to permit the Selling Stockholder to offer the shares for resale from time to time. Other than the ownership of our shares of common stock, the Selling Stockholder has not within the past three years held a position or office, had any other material relationship with, or otherwise been affiliated with, us or any of our predecessors or affiliates. Based on information provided to us, the Selling Stockholder is not affiliated, nor has it been affiliated, with any broker-dealer in the United States.

The following table sets forth the number of shares of our common stock beneficially owned and the percentage of ownership by the Selling Stockholder as of the date hereof, the number of shares offered hereby, the number of shares of common stock that will be beneficially owned and the percentage of ownership of the Selling Stockholder after the completion of this offering, assuming the sale of all shares offered and no other changes in beneficial ownership. The Selling Stockholder may sell all, some or none of its shares in this offering. See “Plan of Distribution.” The information set forth below is based on information provided to us by or on behalf of the Selling Stockholder.

	Shares Beneficially Owned Prior To The Offering							Shares Beneficially Owned After The Offering
Name	Number		Percent			Maximum Number Of Shares Being Offered		Number		Percent

West Coast Opportunity Fund, LLC (1)		1,000,000		22.5	%		1,000,000		-0-		0	%

(1)

The managing member of the Selling Stockholder is West Coast Asset Management (“WCAM”). WCAM has the authority to take any and all actions on behalf of the Selling Stockholder, including voting any shares held by the Selling Stockholder. Atticus Lowe, Lance Helfert and Paul Orfalea constitute the Investment Committee of WCAM. Messrs. Lowe, Helfert and Orfalea disclaim beneficial ownership of these shares.

PLAN OF DISTRIBUTION

We are registering these shares of our common stock to permit the resale of these shares by the Selling Stockholder from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the Selling Stockholder of these shares. We will bear all fees and expenses incident to the registration of these shares.

The Selling Stockholder may sell all or a portion of these shares from time to time directly or through one or more underwriters, broker-dealers or agents. If these shares are sold through underwriters or broker-dealers, the Selling Stockholder will be responsible for underwriting discounts and commissions and brokers’ or agents’ commissions or selling commissions. These shares may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,

on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

in the over-the-counter market;

in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

through the writing of options, whether such options are listed on an options exchange or otherwise;

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

an exchange distribution in accordance with the rules of the applicable exchange;

privately negotiated transactions;

short sales entered into after the effective date of the registration statement of which this prospectus is a part;

sales pursuant to Rule 144;

broker-dealers may agree with the Selling Stockholder to sell a specified number of such shares at a stipulated price per share;

a combination of any such methods of sale; and

any other method permitted pursuant to applicable law.

If the Selling Stockholder effects such transactions by selling shares to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the Selling Stockholder or commissions from purchasers of the shares for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). No such broker-dealer will receive compensation in excess of that permitted by FINRA Rule 2440 and IM-2440. In no event will any broker-dealer receive total compensation in excess of 8%. In connection with sales of these shares or otherwise, the Selling Stockholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The Selling Stockholder may also sell shares of our common stock short and deliver the shares covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The Selling Stockholder may also loan or pledge shares of our common stock to broker-dealers that in turn may sell such shares.

The Selling Stockholder may pledge or grant a security interest in some or all of the shares of our common stock owned by the Selling Stockholder, and, if the Selling Stockholder defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell such shares of our common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the identity of the Selling Stockholder to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The Selling Stockholder also may transfer and donate the shares of our common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The Selling Stockholder and any broker-dealer participating in the distribution of these shares may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of these shares is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Stockholder and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

Under the securities laws of some states, the shares of our common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of our common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

There can be no assurance that the Selling Stockholder will sell any or all of the shares of our common stock registered pursuant to the registration statement of which this prospectus forms a part.

The Selling Stockholder and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of our common stock by the Selling Stockholder and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of our common stock to engage in market-making activities with respect to such shares. All of the foregoing may affect the marketability of the shares of our common stock and the ability of any person or entity to engage in market-making activities with respect to our common stock.

We will pay all expenses of the registration of these shares, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that the Selling Stockholder will pay all underwriting discounts, commissions and concessions and brokers’ or agents’ commissions and concessions or selling commissions and concessions, if any. We will indemnify the Selling Stockholder against liabilities, including some liabilities under the Securities Act, in accordance with a registration rights agreement we have with the Selling Stockholder, or the Selling Stockholder will be entitled to contribution. We may be indemnified by the Selling Stockholder against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the Selling Stockholder specifically for use in this prospectus, in accordance with a registration rights agreement we have with the Selling Stockholder, or we may be entitled to contribution.

Once sold under the registration statement, of which this prospectus forms a part, these shares will be freely tradable in the hands of persons other than our affiliates.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered hereby will be passed upon for us by Husch Blackwell Sanders LLP, Kansas City, Missouri.

EXPERTS

Weaver & Martin, LLC, independent registered public accounting firm, has audited our financial statements at March 31, 2007 and March 31, 2008, and for the periods from inception (December 30, 2005) to March 31, 2006, the fiscal year ended March 31, 2007 and the fiscal year ended March 31, 2008, as set forth in their reports. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Weaver & Martin, LLC’s report, given on their authority as experts in accounting and auditing.

INDEPENDENT PETROLEUM ENGINEERS

Certain information incorporated herein regarding estimated quantities of oil and natural gas reserves and their present value is based on estimates of the reserves and present values prepared by or derived from estimates prepared by McCune Engineering P.E., independent reserve engineer. The reserve information is incorporated herein in reliance upon the authority of said firm as an expert with respect to such report.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 under the Securities Act with the SEC with respect to the common stock offered by this prospectus. This prospectus does not include all of the information contained in the registration statement or the exhibits and schedules filed therewith. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document.

We file annual, quarterly and special reports and other information with the SEC. You can read these SEC filings and reports, including the registration statement, over the Internet at the SEC’s website at www.sec.gov or on our website at www.enerjexresources.com. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt of your written request to us at EnerJex Resources, Inc., 27 Corporate Woods, Suite 350, 10975 Grandview Drive, Overland Park, Kansas 66210.

GLOSSARY

Term		Definition

Barrel (bbl)		The standard unit of measurement of liquids in the petroleum industry, it contains 42 U.S. standard gallons. Abbreviated to “bbl”.

Basin		A depression in the crust of the Earth, caused by plate tectonic activity and subsidence, in which sediments accumulate. Sedimentary basins vary from bowl-shaped to elongated troughs. Basins can be bounded by faults. Rift basins are commonly symmetrical; basins along continental margins tend to be asymmetrical. If rich hydrocarbon source rocks occur in combination with appropriate depth and duration of burial, then a petroleum system can develop within the basin.

BOE		One barrel of oil equivalent, determined using a ratio of six Mcf of natural gas to one barrel of crude oil.

BOEPD		BOE per day.

BOPD		Abbreviation for barrels of oil per day, a common unit of measurement for volume of crude oil. The volume of a barrel is equivalent to 42 U.S. standard gallons.

Carried Working Interest		The owner of this type of working interest in the drilling of a well incurs no capital contribution requirement for drilling or completion costs associated with a well and, if specified in the particular contract, may not incur capital contribution requirements beyond the completion of the well.

Completion / Completing		A well made ready to produce oil or natural gas.

Costless Collar		When viewed against an appropriate index, the parties agree to a maximum price (call option) and a minimum price (put option), through a financially-settled collar. If the average monthly prices are within the collar range there will be no monthly settlement. However, if average monthly prices fluctuate outside the collar, the parties settle the difference in cash.

Development		The phase in which a proven oil or natural gas field is brought into production by drilling development wells.

Development Drilling		Wells drilled during the Development phase.

Division order		A directive signed by the royalty owners verifying to the purchaser or operator of a well the decimal interest of production owned by the royalty owner. The Division Order generally includes the decimal interest, a legal description of the property, the operator’s name, and several legal agreements associated with the process. Completion of this step generally precedes placing the royalty owner on pay status to begin receiving revenue payments.

Drilling		Act of boring a hole through which oil and/or natural gas may be produced.

Dry Wells		A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Exploration		The phase of operations which covers the search for oil or natural gas generally in unproven or semi-proven territory.

Exploratory Drilling		Drilling of a relatively high percentage of properties which are unproven.

Farm out		An arrangement whereby the owner of a lease assigns all or some portion of the lease or licenses to another company for undertaking exploration or development activity.

Field		An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

Term		Definition

Fixed price swap		A derivative instrument that exchanges or “swaps” the “floating” or daily price of a specified volume of natural gas, oil or NGL, over a specified period, for a fixed price for the specified volume over the same period (typically three months or longer).

Gathering line / system		Pipelines and other facilities that transport oil or natural gas from wells and bring it by separate and individual lines to a central delivery point for delivery into a transmission line or mainline.

Gross acre		The number of acres in which the Company owns any working interest.

Gross Producing Well		A well in which a working interest is owned and is producing oil or natural gas or other liquids or hydrocarbons. The number of gross producing wells is the total number of wells producing oil or natural gas or other liquids or hydrocarbons in which a working interest is owned.

Gross well		A well in which a working interest is owned. The number of gross wells is the total number of wells in which a working interest is owned.

Held-By-Production (HBP)		Refers to an oil and natural gas property under lease, in which the lease continues to be in force, because of production from the property.

Horizontal drilling		A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then turned and drilled horizontally. Horizontal drilling allows the wellbore to follow the desired formation.

In-fill wells		In-fill wells refers to wells drilled between established producing wells; a drilling program to reduce the spacing between wells in order to increase production and recovery of in-place hydrocarbons.

Oil and Natural Gas Lease		A legal instrument executed by a mineral owner granting the right to another to explore, drill, and produce subsurface oil and natural gas. An oil and natural gas lease embodies the legal rights, privileges and duties pertaining to the lessor and lessee.

Lifting Costs		The expenses of producing oil from a well. Lifting costs are the operating costs of the wells including the gathering and separating equipment. Lifting costs do not include the costs of drilling and completing the wells or transporting the oil.

Mcf		Thousand cubic feet.

Mmcf		Million cubic feet.

Net acres		Determined by multiplying gross acres by the working interest that the Company owns in such acres.

Net Producing Wells		The number of producing wells multiplied by the working interest in such wells.

Net Revenue Interest		A share of production revenues after all royalties, overriding royalties and other nonoperating interests have been taken out of production for a well(s).

Operator		A person, acting for itself, or as an agent for others, designated to conduct the operations on its or the joint interest owners’ behalf.

Overriding Royalty		Ownership in a percentage of production or production revenues, free of the cost of production, created by the lessee, company and/or working interest owner and paid by the lessee, company and/or working interest owner out of revenue from the well.

Pooled Unit		A term frequently used interchangeably with “Unitization” but more properly used to denominate the bringing together of small tracts sufficient for the granting of a well permit under applicable spacing rules.

Proved Developed Reserves		Proved reserves that can be expected to be recovered from existing wells with existing equipment and operating methods. This definition of proved developed reserves has been abbreviated from the applicable definitions contained in Rule 4-10(a)(2-4) of Regulation S-X.

Proved Developed Non-Producing		Proved developed reserves expected to be recovered from zones behind casings in existing wells.

Term		Definition

Proved Undeveloped Reserves		Proved undeveloped reserves are the portion of proved reserves which can be expected to be recovered from new wells on undrilled proved acreage, or from existing wells where a relatively major expenditure is required for completion. This definition of proved undeveloped reserves has been abbreviated from the applicable definitions contained in Rule 4-10(a)(2-4) of Regulation S-X.

PV10		PV10 means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development and abandonment costs, using prices and costs in effect at the determination date, before income taxes, and without giving effect to non-property related expenses, discounted to a present value using an annual discount rate of 10% in accordance with the guidelines of the SEC. PV10 is a non-GAAP financial measure. See “Business and Properties — Reserves” on page 53 for a reconciliation to the comparable GAAP financial measure.

Re-completion		Completion of an existing well for production from one formation or reservoir to another formation or reservoir that exists behind casing of the same well.

Reservoir		The underground rock formation where oil and natural gas has accumulated. It consists of a porous rock to hold the oil or natural gas, and a cap rock that prevents its escape.

Reservoir Pressure		The pressure at the face of the producing formation when the well is shut-in. It equals the shut-in pressure at the wellhead plus the weight of the column of oil and natural gas in the well.

Roll-Up Strategy		A “roll-up strategy” is a common business term used to describe a business plan whereby a company accumulates multiple small operators in a particular business sector with a goal to generate synergies, stimulate growth and optimize the value of the individual pieces.

Secondary Recovery		The stage of hydrocarbon production during which an external fluid such as water or natural gas is injected into the reservoir through injection wells located in rock that has fluid communication with production wells. The purpose of secondary recovery is to maintain reservoir pressure and to displace hydrocarbons toward the wellbore.

		The most common secondary recovery techniques are natural gas injection and waterflooding. Normally, natural gas is injected into the natural gas cap and water is injected into the production zone to sweep oil from the reservoir. A pressure-maintenance program can begin during the primary recovery stage, but it is a form of enhanced recovery.

Shut-in well		A well which is capable of producing but is not presently producing. Reasons for a well being shut-in may be lack of equipment, market or other.

Stock Tank Barrel or STB		A stock tank barrel of oil is the equivalent of 42 U.S. gallons at 60 degrees fahrenheit.

Undeveloped acreage		Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.

Unitize, Unitization		When owners of oil and/or natural gas reservoir pool their individual interests in return for an interest in the overall unit.

Waterflood		The injection of water into an oil reservoir to “push” additional oil out of the reservoir rock and into the wellbores of producing wells. Typically a secondary recovery process.

Water Injection Wells		A well in which fluids are injected rather than produced, the primary objective typically being to maintain or increase reservoir pressure, often pursuant to a waterflood.

Term		Definition

Water Supply Wells		A well in which fluids are being produced for use in a Water Injection Well.

Wellbore		A borehole; the hole drilled by the bit. A wellbore may have casing in it or it may be open (uncased); or part of it may be cased, and part of it may be open. Also called a borehole or hole.

Working Interest		An interest in an oil and natural gas lease entitling the owner to receive a specified percentage of the proceeds of the sale of oil and natural gas production or a percentage of the production, but requiring the owner of the working interest to bear the cost to explore for, develop and produce such oil and natural gas.

INDEX TO FINANCIAL STATEMENTS

Reverse Stock Split

Effective on July 25, 2008, we implemented a one-for-five reverse split of our issued and outstanding common stock. All share and per share data in these consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock split for all periods presented. The reverse split did not affect the authorized shares and par value per share.

		Page

Index to Financial Statements		F-1

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets at March 31, 2008 and 2007		F-3

Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2008 and 2007		F-4

Consolidated Statement of Stockholders’ Equity (Deficit) for the Fiscal Years Ended March 31, 2008 and 2007		F-5

Consolidated Statement of Cash Flows for the Fiscal Years Ended March 31, 2008 and 2007		F-6

Notes to Consolidated Financial Statements		F-7

Condensed Consolidated Balance Sheets at September 30, 2008 (unaudited) and March 31, 2008 (audited)		G-1

Condensed Consolidated Statements of Operations for the Six Months Ended September 30, 2008 and 2007 (unaudited)		G-2

Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2008 and 2007 (unaudited)		G-3

Notes to Consolidated Financial Statements		G-4

F-1

Report of Independent Registered Public Accounting Firm

Stockholders and Directors

EnerJex Resources, Inc.

Overland Park, Kansas

We have audited the accompanying consolidated balance sheet of EnerJex Resources, Inc. and its subsidiaries as of March 31, 2008 and 2007 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of EnerJex Resources, Inc. and subsidiaries as of March 31, 2008 and 2007 and the consolidated results of its operations, stockholders’ equity and cash flows for each of the years in the two — year period ended March 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

/s/ Weaver & Martin, LLC

Weaver & Martin, LLC

Kansas City, Missouri

June 23, 2008

F-2

EnerJex Resources, Inc. and Subsidiaries

Consolidated Balance Sheets

	March 31,
	2008			2007

ASSETS
Current assets:
Cash	$	951,004		$	99,493
Accounts receivable		227,055			4,138
Notes and interest receivable		—			10,300
Prepaid debt issue costs		157,191			—
Deposits and prepaid expenses		176,345			6,673
Total current assets		1,511,595			120,604
Fixed assets		185,299			35,500
Less: Accumulated depreciation		30,982			8,875
Total fixed assets		154,317			26,625
Other assets:
Notes receivable-officer		—			23,100
Prepaid debt issue costs		157,191			—
Oil and gas properties using full-cost accounting:
Properties not subject to amortization		62,216			322,178
Properties subject to amortization		8,982,510			—
Total other assets		9,201,917			345,278
Total assets	$	10,867,829		$	492,507

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	416,834		$	42,299
Accrued liabilities		70,461			95,890
Notes payable		965,000			350,000
Deferred payments from Euramerica development		251,951			—
Long-term debt, current		412,930			—
Total current liabilities		2,117,176			488,189
Asset retirement obligation		459,689			23,908
Convertible note payable		25,000			25,000
Long-term debt, net of discount of $3,410,202		6,831,972			—
Total liabilities		9,433,837			537,097
Contingencies and commitments
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized; shares issued and outstanding — 4,440,652 at March 31, 2008 and 2,635,732 at March 31, 2007		4,441			2,636
Common stock owed but not issued-3,000 shares		—			3
Paid in capital		8,853,457			2,548,742
Retained (deficit)		(7,423,906	)		(2,595,971	)
Total stockholders’ equity (deficit)		1,433,992			(44,590	)
Total liabilities and stockholders’ equity (deficit)	$	10,867,829		$	492,507

See notes to consolidated financial statements.

F-3

EnerJex Resources, Inc. and Subsidiaries

Consolidated Statements of Operations

	For the Fiscal Years Ended
	March 31,
	2008			2007

Oil and natural gas revenues	$	3,602,798		$	90,800

Expenses:
Direct operating costs		1,795,188			172,417
Repairs on oil & gas equipment		—			165,603
Depreciation, depletion and amortization		935,330			23,978
Professional fees		1,226,998			302,071
Salaries		1,703,099			288,016
Administrative expense		887,872			182,773
Impairment of oil & gas properties		—			273,959
Impairment of goodwill		—			677,000

Total expenses		6,548,487			2,085,817

Loss from operations		(2,945,689	)		(1,995,017	)

Other income (expense):
Interest expense		(1,882,246	)		(8,434	)
Other		—			348

Total other income (expense)		(1,882,246	)	$	(8,086	)

Net (loss)	$	(4,827,935	)	$	(2,003,103	)

Net (loss) per share of common stock-basic and fully diluted	$	(1.13	)	$	(0.82	)

Weighted average shares outstanding		4,284,143			2,448,318

See notes to consolidated financial statements.

F-4

EnerJex Resources, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity (Deficit)

														Total
	Common Stock													Stockholders’
			Par		Owed But			Paid In			Retained			Equity
	Shares		Value		Not Issued			Capital			Deficit			(Deficit)

Balance, April 1, 2006		2,210,000		2,210	$	—		$	1,441,558		$	(592,868	)	$	850,900
Stock sold		153,600		154		—			414,646			—			414,800
Stock issued for services		148,000		148		3			454,849			—			455,000
Stock issued in reverse merger		60,132		60		—			(60	)		—			—
Stock issued for contract extension with joint venture partner		64,000		64		—			199,936			—			200,000
Stock options issued for services		—		—		—			37,813			—			37,813
Net (loss) for the year		—		—		—			—			(2,003,103	)		(2,003,103	)
Balance, March 31, 2007		2,635,732		2,636		3			2,548,742			(2,595,971	)		(44,590	)
Stock sold		1,800,000		1,800		—			4,311,956			—			4,313,756
Stock issued for services		1,920		2		—			14,998			—			15,000
Previously authorized but unissued stock		3,000		3		(3	)		—			—			—
Options issued for services		—		—		—			1,977,761			—			1,977,761
Net (loss) for the year		—		—		—			—			(4,827,935	)		(4,827,935	)
Balance, March 31, 2008		4,440,652	$	4,441	$	—		$	8,853,457		$	(7,423,906	)	$	1,433,992

See notes to consolidated financial statements.

F-5

EnerJex Resources, Inc.

Consolidated Statements of Cash Flows

	For the Fiscal Years Ended
	March 31,
	2008			2007

Cash flows from operating activities
Net (loss)	$	(4,827,935	)	$	(2,003,103	)
Depreciation and depletion		935,330			22,108
Debt issue cost amortization		152,453			—
Stock and options issued for services		1,992,761			186,813
Accretion of interest on long-term debt discount		1,089,798			—
Accretion of asset retirement obligation		30,331			1,870
Impairment of oil & gas properties		—			273,959
Impairment of goodwill					677,000
Loss on sale of vehicle		—			3,854
Adjustments to reconcile net (loss) to cash used in operating activities:
Accounts receivable		(222,917	)		(1,589	)
Notes and interest receivable		10,300			(10,300	)
Deposits and prepaid expenses		(169,672	)		2,188
Accounts payable		374,535			(683,746	)
Accrued liabilities		(25,429	)		95,387
Deferred payment from Euramerica for development		251,951			—
Cash used in operating activities		(408,494	)		(1,435,559	)
Cash flows from investing activities
Purchase of fixed assets		(149,799	)		(35,500	)
Additions to oil & gas properties		(9,530,321	)		(104,080	)
Sale of oil & gas properties		300,000			—
Note and interest receivable from officer		23,100			(23,100	)
Proceeds from sale of vehicle		—			11,500
Cash used in investing activities		(9,357,020	)		(151,180	)
Cash flows from financing activities
Proceeds from note payable, net		615,000			350,000
Proceeds from sales of common stock		4,313,756			414,800
Debt issue costs		(466,835	)		—
Borrowings on long-term debt		6,344,816			—
Payments on long-term debt		(189,712	)		—
Stock issued for payables		—			306,000
Proceeds from convertible note		—			25,000
Cash provided from financing activities		10,617,025			1,095,800
Increase (decrease) in cash and cash equivalents		851,511			(490,939	)
Cash and cash equivalents, beginning		99,493			590,432
Cash and cash equivalents, end	$	951,004		$	99,493
Supplemental disclosures:
Interest paid	$	733,972		$	5,407
Income taxes paid	$	—		$	—
Non-cash transactions:
Share-based payments issued for services	$	280,591		$	558,000
Share-based payments issued for oil & gas properties	$	—		$	200,000

See notes to consolidated financial statements.

F-6

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements

Reverse Stock Split

Note 1 — Summary of Accounting Policies

Nature of Business

We are an independent energy company engaged in the business of producing and selling crude oil and natural gas. This crude oil and natural gas is obtained primarily by the acquisition and subsequent exploration and development of mineral leases. Development and exploration may include drilling new exploratory or development wells on these leases. These operations are conducted primarily in Eastern Kansas.

Principles of Consolidation

Our consolidated financial statements include the accounts of our wholly-owned subsidiaries, EnerJex Kansas, Inc., DD Energy, Inc and EnerJex Development, LLC (currently inactive).

Use of Estimates

The preparation of these financial statements requires the use of estimates by management in determining our assets, liabilities, revenues, expenses and related disclosures. Actual amounts could differ from those estimates.

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear any interest. We regularly review receivables to insure that the amounts will be collected and establish or adjust an allowance for uncollectible amounts as necessary using the specific identification method. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. There were no reserves for uncollectible amounts in the periods presented.

Share-Based Payments

Common stock, warrants and options issued for services are accounted for based on the fair market value at the date the services are performed. If the awards are based on a vesting period, the fair market value of the awards is determined as vesting is earned. If the services are to be performed over a period of time, the value is amortized over the life of the period that services are performed.

Income Taxes

We account for income taxes under the Statement of Financial Accounting Standards “SFAS” Statement 109, “Accounting for Income Taxes”. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The provision for income taxes differs from the amount currently payable because of temporary differences in the recognition of certain income and expense items for financial reporting and tax reporting purposes.

F-7

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

We adopted the Financial Accounting Standards Board “FASB” Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”) as of April 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in companies’ financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. As a result, we apply a more-likely-than-not recognition threshold for all tax uncertainties. FIN 48 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As a result of implementing FIN 48, we have reviewed our tax positions and determined there were no outstanding or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore the implementation of this standard has not had a material effect on the Company.

We classify tax-related penalties and net interest on income taxes as income tax expense. As of March 31, 2008 and 2007, no income tax expense had been incurred.

Fair Value of Financial Instruments

Our financial instruments consist of accounts receivable and notes payable. Interest rates currently available to us for debt with similar terms and remaining maturities are used to estimate fair value of such financial instruments. Accordingly the carrying amounts are a reasonable estimate of fair value.

Earnings Per Share

SFAS No. 128, “Earnings Per Share”, requires dual presentation of basic and diluted earnings per share on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the diluted income or loss per share computation.

For the year ended March 31, 2008 and 2007, there were 533,500 and 60,000, respectively, of potentially issuable shares of common stock pursuant to outstanding stock options and warrants. These have been excluded from the denominator of the diluted earnings per share computation, as their effect would be anti-dilutive.

Cash and Cash Equivalents

We consider all highly liquid investment instruments purchased with original maturities of three months or less to be cash equivalents for purposes of the consolidated statements of cash flows and other statements. We maintain cash on deposit, which, at times, exceed federally insured limits. We have not experienced any losses on such accounts and believe we are not exposed to any significant credit risk on cash and equivalents.

Revenue Recognition and Imbalances

Oil and gas revenues are recognized net of royalties when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collection of the revenue is probable. Cash received relating to future revenues is deferred and recognized when all revenue recognition criteria are met.

We use the sales method of accounting for gas production imbalances. The volumes of gas sold may differ from the volumes to which we are entitled based on our interests in the properties. These differences create imbalances that are recognized as a liability only when the properties’ estimated remaining reserves net to us will not be sufficient to enable the under-produced owner to recoup its entitled share through production. No receivables are recorded for those wells where we have taken less than our share of production. Gas imbalances are reflected as adjustments to estimates of proved gas reserves and future cash flows in the supplemental oil and gas disclosures. There was no imbalance at March 31, 2008 and 2007.

F-8

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Goodwill

Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. We assess the carrying amount of goodwill by testing the goodwill for impairment annually and when impairment indicators arise. The impairment test requires allocating goodwill and all other assets and liabilities to assigned reporting units. The fair value of each unit is determined and compared to the book value of the reporting unit. If the fair value of the reporting unit is less than the book value, including goodwill, then the goodwill is written down to the implied fair value of the goodwill through a charge to expense.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is on a straight-line method using the estimated lives of the assets (3-15 years). Expenditures for maintenance and repairs are charged to expense.

Debt Issue Costs

Debt issuance costs incurred are capitalized and subsequently amortized over the term of the related debt on the straight-line method of amortization over the estimated life of the debt.

Oil and Gas Properties

We follow the full-cost method of accounting for oil and natural gas properties. Accordingly, all costs associated with acquisition, exploration, and developments are capitalized.

All costs included in properties subject to amortization, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized. Abandonment of oil and natural gas properties are charged to the full-cost pool and amortized.

Under the full-cost method, the net book value of oil and natural gas properties are subject to a “ceiling” amount. The ceiling is the estimated after-tax future net cash flows from proved oil and natural gas properties, discounted at 10% per annum plus the lower of cost or fair market value of unevaluated properties. In calculating future net revenues, prices and costs in effect at the time of the calculation are held constant for the lives of the oil and natural gas reserves, except for changes that are fixed and determinable by existing contracts. The excess, if any, of the net book value above this ceiling is charged to expense.

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 as income or expense.

Long-Lived Assets

Impairment of long-lived assets is recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying value. The carrying value of the assets is then reduced to their estimated fair value that is usually measured based on an estimate of future discounted cash flows.

Asset Retirement Obligations

We accrue for the future plugging and abandonment of oil and natural gas assets in the period in which the obligation is incurred. We accrue costs at estimated fair value. When the related liability is initially recorded, we capitalize the cost by increasing the carrying amount of properties subject to amortization. Over time, the liability is accreted to its settlement value and the capitalized cost is depleted over the life of the related asset. Upon settlement of the liability, we recognize a gain or loss for any difference between the settlement amount and the liability recorded.

F-9

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Major Purchasers

For the years ended March 31, 2008 and 2007 we sold all of our natural gas production to one purchaser and all of our oil production to one purchaser.

Recent Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements, however the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently reviewing the effect, if any, SFAS 157 will have on our financial statements.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Liabilities including in amendment of SFAS 115”. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November15, 2007, and interim periods within those fiscal years. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, “Fair Value Measurements”. We are currently evaluating the impact of SFAS No. 159 on our financial statements.

In December 2007, the FASB issued SFAS No. 141R (revised 2007), “Business Combinations”. Although this statement amends and replaces SFAS No. 141, it retains the fundamental requirements in SFAS No. 141 that (i) the purchase method of accounting must be used for all business combinations; and (ii) an acquirer be identified for each business combination. SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This Statement applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree), including combinations achieved without the transfer of consideration; however, this Statement does not apply to a combination between entities or businesses under common control. Significant provisions of SFAS No. 141R concern principles and requirements for how an acquirer (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 with early adoption not permitted. Management is assessing the impact of the adoption of SFAS No. 141R.

In December 2007, the FASB issued SFAS No. 160, “Non-Controlling Interests in Consolidated Financial Statements”. This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. We have not yet determined the impact, if any, that SFAS No. 160 will have on our financial statements.

Reclassifications

Certain reclassifications have been made to prior periods to conform to current presentation.

F-10

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Note 2 — Stock Transactions

Stock transactions in fiscal 2007

Pursuant to the merger with Millennium Plastics Corporation the shareholders of Millennium Plastics Corporation retained 60,131 shares of our stock.

We sold 153,600 shares of our common stock at $3.00 per share. We paid a fee of $46,000 to an individual who assisted us in obtaining capital resulting in net proceeds of $414,800. The fee was offset against the paid in capital recorded in this transaction.

We agreed to issue 151,000 shares of our common stock for services provided to us and liabilities assumed in the merger with Millennium. The shares were valued at a price of $3.00 and $5.00 per share. We used the price per share based on the price of our common stock at the date of the agreement to issue shares. In the year ended March 31, 2007, we expensed $138,000 related to these transactions. At March 31, 2007, there was $4,000 that was not expensed relating to these transactions, and we expensed this in fiscal 2008. At March 31, 2007, 3,000 of these shares were owed but unissued, and we recorded $3.00 as the par value of the unissued shares. The shares were issued in fiscal 2008.

We amended a joint exploration agreement with an entity that holds leases on properties and issued 64,000 of our shares in lieu of cash. The shares were valued at $200,000. We used the price per share based on recently sold shares. We recorded this as oil and gas properties not subject to amortization.

Stock transactions in fiscal 2008

We issued 1,920 shares of common stock to a director and chairman of our audit committee for services over the next year. For the year ended March 31, 2008, we recorded $11,000 in expense for this agreement and $4,000 in expense for an agreement entered into in fiscal 2007.

We issued 1,800,000 shares of our common stock pursuant to our “Securities Purchase Agreements.” We allocated $4,500,000 of the $9,000,000 received for the stock and loan to the equity portion of the transaction (See Note 4). The transaction costs of the equity sale were $466,835, however, $280,591 of the cost was the value of warrants issued in connection with the agreement.

Option and Warrant transactions

Officers (including officers who are members of the board of directors), directors, employees and consultants are eligible to receive options under our stock option plans. We administer the stock option plans and we determine those persons to whom options will be granted, the number of options to be granted, the provisions applicable to each grant and the time periods during which the options may be exercised. No options may be granted more than ten years after the date of the adoption of the stock option plans.

Each option granted under the stock option plans will be exercisable for a term of not more than ten years after the date of grant. Certain other restrictions will apply in connection with the plans when some awards may be exercised. In the event of a change of control (as defined in the stock option plans), the vesting date on which all options outstanding under the stock option plans may first be exercised will be accelerated. Generally, all options terminate 90 days after a change of control.

2000/2001 Stock Option Plan

The board of directors approved a stock option plan and our stockholders ratified the plan on September 25, 2000. The total number of options that can be granted under the plan is 200,000 shares. At March 31, 2008, we had granted 200,000 non-qualified options under this plan.

F-11

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Stock Option Plan

On May 4, 2007, we amended and restated the EnerJex Resources, Inc. Stock Option Plan to rename the plan and to increase the number of shares issuable under the plan to 1,000,000. Our stockholders approved this plan in September of 2007. At March 31, 2008 we had granted 258,500 non-qualified options under this plan.

Option transactions in fiscal 2007

We granted 60,000 stock options in the year ended March 31, 2007. These options vested at 20,000 per year. The options had an exercise price of $5.00 per share and were to expire on August 15, 2011. The value of the options was based on the Black-Scholes pricing model and totaled $99,000 based on the following assumptions: stock price-$3.00; exercise price-$5.00; life- 5 years; volatility-76%; yield-4.81%. For the year ended March 31, 2007, we recorded $37,813 as compensation expense and the remaining amount of expense on these options was $61,187.

The weighted average grant date fair value of the options granted in the year ended March 31, 2007 was $1.65.

The 60,000 options were cancelled in the year ended March 31, 2008.

Option transactions in fiscal 2008

The unvested option issued in the year ended March 31, 2007, was unexercised and cancelled in accordance with a separation agreement. We recognized the remaining expense ($61,187) relating to the options in the year ended March 31, 2008.

We granted 458,500 options in the year ended March 31, 2008. 30,000 of the options were for services earned over a one-year period. We measured the compensation cost of the options based on the vesting and the market value as determined by the Black-Scholes pricing model.

For the year ended March 31, 2008, we included as expense $1,977,761 relating to the value of vested options. At March 31, 2008, we have $81,778 in charges to future expense relating to the unamortized cost of options that were issued in accordance with contracts that covered a period of one year, which will be expensed in fiscal 2009.

The fair value of each option award is estimated on the date of grant using the assumptions noted in the following table. Volatility is based on the historical volatility of stock trading, expected term was the estimated exercise period, risk free rate was the rate of a U.S. Treasury instrument of the time period in which the options would be outstanding, and dividend rate was estimated to be zero as we cannot assume that there will be any future dividends.

Weighted average expected volatility	101	%
Weighted average expected term (in years)	3.95
Weighted average expected dividends	0	%
Weighted average risk free rate	4.42	%

The weighted average grant date fair value of the options granted in the year ended March 31, 2008 was $4.35.

In the year ended March 31, 2008, we granted warrants to purchase 75,000 shares of our common stock as partial payment for services rendered in connection with our financing activities. The warrants have an exercise price of $3.00 and expire on April 11, 2010. The fair value of the warrants based on the Black-Scholes pricing model totaled $280,591 (approximately $3.75 per warrant). The following assumptions were used in the valuation: stock price-$5.00; exercise price-$3.00; life- 3 years; volatility- 106%; yield-4.66%. We have included the value of the warrants with the loan and equity transaction costs (See Note 4).

F-12

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

A summary of stock options and warrants is as follows:

				Weighted Ave.					Weighted Ave.
	Options			Exercise Price			Warrants		Exercise Price

Outstanding April 1, 2006		—			—			—		—
Granted		60,000			5.00			—		—
Cancelled		—			—			—		—
Exercised		—			—			—		—
Outstanding March 31, 2007		60,000		$	5.00			—		—

Outstanding April 1, 2007		60,000		$	5.00			—		—
Granted		458,500		$	6.30			75,000	$	3.00
Cancelled		(60,000	)	$	(5.00	)		—		—
Exercised		—			—			—		—
Outstanding March 31, 2008		458,500		$	6.30			75,000	$	3.00

Note 3 — Asset Retirement Obligation

Our asset retirement obligations relate to the abandonment of oil and natural gas wells. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit adjusted risk-free interest rates. The following shows the changes in asset retirement obligations:

Asset retirement obligation at April 1, 2006	$	22,038
Liabilities incurred during the period		—
Liabilities settled during the period		—
Accretion		1,870
Asset retirement obligations, March 31, 2007		23,908
Liabilities incurred during the period		405,450
Liabilities settled during the period		—
Accretion		30,331
Asset retirement obligations, March 31, 2008	$	459,689

Note 4 — Long-Term Debt and Convertible Debt

On April 11, 2007, we entered into a Securities Purchase Agreement, Registration Rights Agreements, Senior Secured Debentures, a Pledge and Security Agreement, a Secured Guaranty, and other related agreements (the “Financing Agreements”) with the “Buyers”. Pursuant to the Financing Agreements, we authorized a new series of senior secured debentures (the “Debentures”). Under the terms of the Financing Agreements, we agreed to sell Debentures for a total purchase price of $9.0 million. In connection with the purchase, we agreed to issue to each of the Buyers one share of our common stock for each dollar purchased for a total issuance of 1,800,000 shares. The first closing occurred on April 12, 2007 with a total of $6.3 million in Debentures being sold and the remaining $2.7 million closing on June 21, 2007.

The Debentures have a three-year term, maturing on March 31, 2010, and bear interest at a rate equal to 10% per annum. Interest is payable quarterly in arrears on the first day of each succeeding quarter. We may pay interest in either cash or registered shares of our common stock. The Debenture has no prepayment penalty so long as we maintain an effective registration statement with the Securities Exchange Commission and provided we give six (6) business days prior notice of redemption to the Buyers. The Debentures are guaranteed, pursuant to the “Secured Guaranty” and “Pledge and Security Agreement” by us and secured by a security interest in all of our assets and assignments of production, other than our Gas City Project.

F-13

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Pursuant to the agreements, during the term of the Debentures, we are required to produce a minimum average daily quantity of oil and natural gas. The production thresholds will be measured at six-month intervals beginning December 31, 2007 and ending on September 30, 2009. In the event that for any Measurement Date specified above, we do not meet the production thresholds applicable to such Measurement Date, then we shall issue to the Buyers an aggregate 600,000 shares of common stock for each threshold date (up to 2,400,000 shares total). Each Buyer may elect to receive common stock purchase warrants in lieu of its allocation of shares of common stock. Such warrants shall have an exercise price of $0.05 per share and be exercisable for a four-year term. As of March 31, 2008, we have met our initial production threshold and we believe our future production levels will be sufficient to meet the subsequent required threshold levels.

Pursuant to the terms of the Registration Rights Agreement between us and the Buyers, we are obligated to file a minimum of three registration statements registering the 1,800,000 shares of common stock or shares of common stock underlying the common stock purchase warrants, 600,000 interest shares potentially due under the Debentures, and up to 2,400,000 production threshold shares. If we fail to obtain and maintain effectiveness of a registration statement, we will be obligated to pay cash to each Buyer equal to: (i) 0.5% of the aggregate purchase price allocable to such Buyer’s securities included in such registration statement for the first 30 day period following such effectiveness failure or maintenance failure, (ii) 0.75% of the aggregate Purchase price allocable to such Buyer’s securities in such registration statement for the following thirty day period; and (iii) 1% of the aggregate purchase price allocable to such Buyer’s securities included in the registration statement for every thirty day period thereafter. These payments are capped at 10% of the Buyer’s original purchase price under the Debentures. The first registration statement, registering 600,000 shares of common stock, became effective on August 14, 2007 and the second became effective January 11, 2008.

The proceeds from the Debentures were allocated to the long-term debt and the stock issued based on the fair market value of each item that we calculated to be $9.0 million for each item. Since each of the instruments had a value equal to 50% of the total, we allocated $4.5 million to stock and $4.5 million to the note. The loan discount costs of $4.5 million will accrete as interest based on the interest method over the period of issue to maturity. The amount of interest accreted for the period ended March 31, 2008 was $1,089,798. The remaining amount of interest to accrete in future periods is $3,410,202 as of March 31, 2008.

We incurred debt issue costs totaling $466,835. The debt issue costs are initially recorded as assets and are amortized to expense on a straight-line basis over the life of the loan. The amount expensed in the year ended March 31, 2008 was $152,453. The remaining debt issue costs will be expensed in the following fiscal years: March 31, 2009 -$157,191 and March 31, 2010 -$157,191.

We obtained a note payable to a bank of $1,735,000 maturing in October 2011 with an interest rate of 8.5% that is collateralized by some of our oil and gas leases and assets.

We financed the purchase of vehicles through a bank. The notes are for seven years and the weighted average interest is 6.99% per annum. Vehicles collateralize these notes.

Long-term debt consists of the following at March 31, 2008:

Long-term debentures	$	9,000,000
Unaccreted discount		(3,410,202	)
Total		5,589,798
Note payable to bank		1,549,029
Vehicle notes payable		106,075
Total long-term debt		7,244,902
Less current portion		412,930
Long-term debt	$	6,831,972

F-14

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

On August 3, 2006, we sold a $25,000 convertible note that has an interest rate of 6% and matures August 2, 2010. The note is convertible at any time at the option of the note holder into shares of our common stock at a conversion rate of $10.00 per share.

Principal amounts are due on long-term and convertible debt as follows: Year ended March 31, 2009 -$412,930, March 31, 2010 -$9,475,406, March 31, 2011 -$490,404, March 31, 2012 -$271,232, March 31, 2013 -$11,027 and thereafter-$19,105.

Note 5 — Oil and Gas Properties

On April 9, 2007, we entered into a “Joint Exploration Agreement” with a shareholder, MorMeg, LLC, whereby we agreed to advance $4.0 million to a joint operating account for further development of MorMeg’s Black Oaks leaseholds in exchange for a 95% working interest in the Black Oaks Project. We will maintain our 95% working interest until payout, at which time the MorMeg 5% carried working interest will be converted to a 30% working interest and our working interest becomes 70%. Payout is generally the point in time when the total cumulative revenue from the project equals all of the project’s development expenditures and costs associated with funding. We have until November 30, 2008 to contribute additional capital toward the Black Oaks Project development. If we elect not to contribute further capital to the Black Oaks Project prior to the project’s full development while it is economically viable to do so, or if there is more than a thirty day delay in project activities due to lack of capital, MorMeg has the option to cease further joint development and we will receive an undivided interest in the Black Oaks Project. The undivided interest will be the proportionate amount equal to the amount that our investment bears to our investment plus $2.0 million, with MorMeg receiving an undivided interest in what remains.

On April 18, 2007, we entered into a “Purchase and Sale Agreement” with MorMeg, LLC, a shareholder, to acquire the lease interests of certain producing properties for cash in the amount of $400,000.

In August of 2007, we entered into a development agreement with Euramerica to further the development and expansion of the Gas City Project, which included 6,600 acres, whereby Euramerica contributed $524,000 in capital toward the project. Euramerica was granted an option to purchase this project for $1.2 million with a requirement to invest an additional $2.0 million for project development by August 31, 2008. We are the operator of the project at a cost plus 17.5% basis. We received $300,000 in the year ended March 31, 2008 (and an additional $300,000 subsequent to year end) of the $1.2 million purchase price. We also received $250,000 of the $2.0 million development funds in the year ended March 31, 2008 (and an additional $250,000 subsequent to year end). We recorded a reduction of $300,000 to our oil & gas properties using full-cost accounting subject to amortization in the year ended March 31, 2008 and will further reduce this account when we receive the remaining $600,000 in proceeds in fiscal 2009. Upon payment of the entire purchase price, Euramerica will be assigned a 95% working interest, and we will retain a 5% carried working interest before payout. When the project reaches payout, our 5% carried working interest will increase to a 25% working interest, and Euramerica will have a 75% working interest. At March 31, 2008 we have recorded $251,951 in deferred payments from Euramerica development.

On September 14, 2007, we entered into a purchase agreement for the acquisition of nearly a 100% working interest in leaseholds located in three counties in eastern Kansas for a cash purchase price of $800,000.

On September 27, 2007, we entered into a purchase and sale agreement with shareholders to acquire oil leases in eastern Kansas for a purchase price of $2.7 million.

In the fiscal year ended March 31, 2007, we incurred impairment charges on our oil and natural gas properties of $273,959. The impairment represented all of our oil and gas cost accounted for under the full-cost method that was subject to amortization. We took this impairment based on the full-cost method ceiling test.

F-15

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Note 6 — Related Party Transactions

In the year ended March 31, 2007, we entered into an agreement with a shareholder to sell the patent we received in the Millennium merger for $10,000.

In the year ended March 31, 2008, we entered into a “Separation Agreement” with our former chief financial officer. Pursuant to the agreement, we agreed to pay a total of $56,000 as severance subject to payment in full of an outstanding promissory note in the amount of $22,000 and accrued interest.

Note 7 — Commitments and Contingencies

We have a lease agreement that expires in July, 2008. Future minimum payments are $20,500 for the year ending March 31, 2009.

F-16

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Note 8 — Income Taxes

Deferred income taxes are determined based on the tax effect of items subject to different treatment between book and tax bases. At March 31, 2008, there is approximately $7,147,000 of net operating loss carry-forwards expiring in 2021-2023. The net deferred tax is as follows:

	March 31,			March 31,
	2008			2007

Non-current deferred tax asset:
Impaired oil & gas costs and long-lived assets	$	312,800		$	—
Net operating loss carry-forward		2,429,900			908,000
Valuation allowance		(2,742,700	)		(908,000	)
Total deferred tax net	$	—		$	—

A reconciliation of the provision for income taxes to the statutory federal rate for continuing operations is as follows:

	March 31,			March 31,
	2008			2007

Statutory tax rate		34	%		34	%
Equity based compensation		(15	)%		—
Oil & gas costs and long-lived assets		1	%		—
Change in valuation allowance		(20	)%		(34	)%
Effective tax rate		0	%		0	%

Note 9 — Notes Payable

We have promissory notes payable relating to the acquisition of leases totaling $965,000. Each promissory note bears interest at a rate of 5% per annum and matures September 1, 2008. Collateral for these notes are DD Energy oil and gas leases.

At March 31, 2007 we had a note payable to a bank totaling $350,000. The note had an interest rate of 9% and was secured by substantially all of our assets. The principal and interest was paid on April 18, 2007.

Note 10 — Impairment of Goodwill

In the year ended March 31, 2007 we impaired goodwill and recorded an expense of $677,000. The goodwill resulted from the Millennium merger and we performed a goodwill impairment test. This test required the allocation of goodwill and all other assets and liabilities to an assigned reporting unit. The fair value of the unit was determined in the year ended March 31, 2007 and compared to the book value of the unit. The fair value of the reporting unit was determined to be zero as there were no revenues or assets therefore we were required to impair the goodwill as expense.

Note 11 — Subsequent Events

On March 6, 2008, we entered into an agreement with Shell whereby we agreed to an 18-month fixed-price delivery contract with Shell for 130 BOPD at a fixed price per barrel of $96.90, less transportation costs. This contract is for the physical delivery of oil under our normal sales. This represented approximately 60% of our total current oil production on a net revenue basis at that time and represents approximately $6.8 million in gross revenue before the deductions of transportation costs over the 18-month period. In addition, we agreed to sell all of our remaining oil production at current spot market pricing beginning April 1, 2008 through September 30, 2009 to Shell.

F-17

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

On April 9, 2008, we borrowed $500,000 from a bank at 8% interest due August 27, 2009.

On May 15, 2008, we issued 2,182 shares to a Director for serving as the chairman of our audit committee.

We received $300,000 from Euramerica towards the purchase of the properties and $250,000 for development after March 31, 2008.

On July 3, 2008, we entered a new three-year $50 million senior secured credit facility with Texas Capital Bank, N. A. with an initial borrowing base of $10.75 million based on our current proved oil and natural gas reserves. We used our initial borrowing under this facility of $10.75 million to redeem an aggregate principal amount of $6.3 million of our 10% debentures, assign approximately $2.0 million of our existing indebtedness with another bank to this facility, repay $965,000 of seller-financed notes, pay the transaction costs, fees and expenses of this new facility and expand our current development projects, including the completion of 31 new oil wells that have been drilled since May of 2008.

As of July 3, 2008, we entered into an ISDA master agreement and a costless collar with BP Corporation North American Inc., or BP, for 130 barrels of oil per day with a price floor of $132.50 per barrel and a price ceiling of $155.70 per barrel for NYMEX West Texas Intermediate for the period of October 1, 2009 until March 31, 2011.

Note 12 — Supplemental Oil and Natural Gas Reserve Information (Unaudited)

Results of Operations from Oil and Natural Gas Producing Activities

The following table shows the results of operations from the Company’s oil and gas producing activities. Results of operations from these activities are determined using historical revenues, production costs and depreciation, depletion and amortization of the capitalized costs subject to amortization. General and administrative expenses, professional, investor relations and interest expense is excluded from this determination.

	March 31,			March 31,
	2008			2007

Production revenues	$	3,602,798		$	90,800
Production costs		(1,795,188	)		(172,417	)
Depletion and depreciation		(913,224	)		(11,477	)
Results of operations for producing activities	$	894,386		$	(93,094	)

F-18

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Capitalized Costs of Oil and Natural Gas Producing Properties

The Company’s aggregate capitalized costs related to oil and natural gas producing activities are as follows:

	March 31,			March 31,
	2008			2007

Proved	$	10,207,596			11,862
Unevaluated and unproved		62,216			322,178
Accumulated depreciation and depletion		(925,086	)		(11,862	)
Sale of properties		(300,000	)		—
Net capitalized costs	$	9,044,726		$	322,178

For the year ended March 31, 2007, we have impaired all of our capitalized costs subject to depletion because of the ceiling test of the full-cost method.

Unproved and unevaluated properties are not included in the full-cost pool and are therefore not subject to depletion or depreciation. These assets consist primarily of leases that have not been evaluated. We will continue to evaluate our unproved and unevaluated properties; however, the timing of such evaluation has not been determined.

Capitalized Costs Incurred for Oil and Natural Gas Producing Activities

Costs incurred in oil and natural gas property acquisition, exploration and development activities that have been capitalized are summarized below:

	March 31,		March 31,
	2008		2007

Acquisition of proved and unproved properties	$	4,352,040	$	304,080
Development costs		5,178,281		—
Exploration costs		—		—
Total	$	9,530,321	$	304,080

Gas and Oil Reserve Quantities

Our ownership interests in estimated quantities of proved oil and gas reserves and changes in net proved reserves all of which are located in the United States are summarized below. Proved reserves are estimated quantities of natural gas and oil that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those that are expected to be recovered through existing wells with existing equipment and operating methods. Reserves are stated in thousand cubic feet (mcf) of natural gas and barrels (stb) of oil. Geological and engineering estimates of proved natural gas and oil reserves at one point in time are highly interpretive, inherently imprecise and subject to ongoing revisions that may be substantial in amount. Although every reasonable effort is made to ensure that the reserve estimates are accurate, by their nature reserve estimates are generally less precise than other estimates presented in connection with financial statement disclosures.

	March 31,						March 31,
	2008						2008
	Gas-mcf			Oil-stb			Gas-mcf			Oil-stb

Proved reserves:		—			—			229,517			—
Revisions of previous estimates		—			—			(212,077	)		—
Purchase of minerals in place		418,959			347,228			—			—
Extensions and discoveries		—			1,068,683			—			—
Production		(17,762	)		(43,697	)		(17,440	)		—
Total		401,197			1,372,214			—			—

F-19

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Proved developed reserves at the end of the period:

Gas-mcf		Oil-stb
March 31,		March 31,
2008		2008
	401,197		861,240

Gas-mcf		Oil-stb
March 31,		March 31,
2007		2007

	—		—

Standardized Measure of Discounted Future Net Cash Flows

The standardized measure of discounted future net cash flows from our proved reserves for the periods presented in the financial statements is summarized below. There were no proved reserves at March 31, 2007. The standardized measure of future cash flows as of March 31, 2008 is calculated using a price per Mcf of gas of $7.479 and a price for oil of $94.53 each of which was the price received from our production at March 31, 2008. The resulting estimated future cash inflows are reduced by estimated future costs to develop and produce the estimated proved reserves. These costs are based on year-end cost levels. Future income taxes are based on year-end statutory rates. The future net cash flows are reduced to present value by applying a 10% discount rate. The standardized measure of discounted future cash flows is not intended to represent the replacement cost or fair market value of the Company’s oil and gas properties.

	March 31,			March 31,
	2008			2007

Future production revenue	$	132,457,459		$	240,000
Future production costs		(39,629,625	)		(240,000	)
Future development costs		(18,827,013	)		—
Future cash flows before income taxes		74,000,821			—
Future income taxes		(19,241,954	)		—
Future net cash flows		54,758,867			—
10% annual discount for estimating of future cash flows		(26,558,364	)		—
Standardized measure of discounted net cash flows	$	28,200,503		$	—

F-20

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements – (Continued)

Changes in Standardized Measure of Discounted Future Net Cash Flows

	March 31,			March 31,
	2008			2007

Balance beginning of year	$	—		$	244,000
Sales, net of production costs		(1,777,278	)		(18,000	)
Net change in pricing and production costs		—			(60,000	)
Net change in future estimated development costs		—			(90,000	)
Purchase of minerals in place		8,124,394			—
Extensions and discoveries		21,853,387			—
Revisions		—			(77,000	)
Accretion of discount		—			1,000
Change in income tax		—			—
Balance end of year	$	28,200,503		$	—

F-21

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	September 30,			March 31,
	2008			2008
	(Unaudited)			(Audited)
Assets
Current assets:
Cash	$	263,970		$	951,004
Accounts receivable		828,732			227,055
Prepaid debt issue costs		45,928			157,191
Deferred and prepaid expenses		1,092,903			176,345
Total current assets		2,231,533			1,511,595

Fixed assets		331,405			185,299
Less: Accumulated depreciation		34,084			30,982
Total fixed assets		297,321			154,317

Other assets:
Prepaid debt issue costs		22,902			157,191
Oil and gas properties using full-cost accounting:
Properties not subject to amortization		3,200			62,216
Properties subject to amortization		10,685,782			8,982,510
Total other assets		10,711,884			9,201,917
Total assets	$	13,240,738		$	10,867,829

Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	1,726,477		$	416,834
Accrued liabilities		16,266			70,461
Notes payable		-			965,000
Deferred payments from Euramerica development		-			251,951
Long-term debt, current		22,471			412,930
Total current liabilities		1,765,214			2,117,176

Asset retirement obligation		738,301			459,689
Convertible note payable		25,000			25,000
Long-term debt, net of discount of $842,823 and $3,410,202		12,706,025			6,831,972
Total liabilities		15,234,540			9,433,837
Contingencies and commitments
Stockholders’ Equity:
Preferred stock, $0.001 par value, 10,000,000shares authorized, no shares issued and outstanding		-			-
Common stock, $0.001 par value, 100,000,000 shares authorized;shares issued and outstanding – 4,443,467 at September 30, 2008 and 4,440,651 at March 31, 2008		4,443			4,441
Paid in capital		8,932,911			8,853,457
Retained (deficit)		(10,931,156	)		(7,423,906	)
Total stockholders’ equity (deficit)		(1,993,802	)		1,433,992

Total liabilities and stockholders’ equity (deficit)	$	13,240,738		$	10,867,829

See Notes to Condensed Consolidated Financial Statements.

G-1

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

	For the Six Months Ended
	September 30,
	2008			2007

Revenue
Oil and natural gas revenues	$	3,467,742		$	564,793

Expenses:
Direct operating costs		1,531,300			347,751
Depreciation, depletion and amortization		718,048			145,257
Professional fees		294,785			1,062,435
Salaries		494,426			1,204,062
Administrative expense		585,456			227,781
Total expenses		3,624,015			2,987,286

Loss from operations		(156,273	)		(2,422,493	)

Other income (expense):
Interest expense		(532,624	)		(283,190	)
Loan fee expense		(250,974	)		(73,857	)
Loan interest accretion		(2,567,379	)		(462,484	)
Reversal of loan penalty expense		-			-
Total other income (expense)		(3,350,977	)		(819,531	)


Net income (loss)	$	(3,507,250	)	$	(3,242,024	)

Net income (loss) per share - basic and fully diluted	$	(0.79	)	$	(0.78	)

Weighted average shares outstanding		4,442,930			4,138,338

See Notes to Condensed Consolidated Financial Statements.

G-2

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

	For the Six Months Ended
	September 30,
	2008			2007
Cash flows from operating activities

Net (loss)	$	(3,507,250	)	$	(3,242,024	)
Depreciation and depletion		741,311			145,257
Amortization of stock and options for services		79,455			1,822,373

Loan costs and accretion of interest		2,567,379			536,341
Accretion of asset retirement obligation		31,741			7,152
Adjustments to reconcile net (loss) to cash provided by (used in) operating activities:
Accounts receivable		(601,677	)		(110,293	)
Deferred and prepaid expenses		(671,006	)		(5,924	)
Accounts payable		1,309,643			93,657
Accrued liabilities		(54,195	)		(69,262	)
Deferred payment from Euramerica for development		(251,951	)		524,000
Cash provided by (used in) operating activities		(356,550	)		(298,723	)

Cash flows from investing activities
Purchase of fixed assets		(167,184	)		(55,641	)
Additions to oil & gas properties		(2,114,515	)		(6,943,804	)
Sale of oil & gas properties		-			-
Cash used in investing activities		(2,281,699	)		(6,999,445	)

Cash flows from financing activities
Proceeds from sales of common stock		-			4,313,757
Notes payable, net		(965,000	)		-
Borrowings from long-term debt		11,273,442			6,765,141
Payments on long-term debt		(8,357,227	)		(350,000	)
Payments received on notes receivable		-			23,100
Cash provided by financing activities		1,951,215			10,751,998

Increase (decrease) in cash and cash equivalents		(687,034	)		3,453,830
Cash and cash equivalents, beginning		951,004			99,493
Cash and cash equivalents, end	$	263,970		$	3,553,323

Supplemental disclosures:
Interest paid	$	505,617		$	283,190
Income taxes paid	$	-		$	-

Non-cash transactions:
Share-based payments issued for services	$	79,455		$	2,156,084
Asset retirement obligation	$	246,871		$	347,000

See Notes to Condensed Consolidated Financial Statements.

G-3

EnerJex Resources, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Note 1 – Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year. Certain amounts in the prior year statements have been reclassified to conform to the current year presentations. The statements should be read in conjunction with the financial statements and footnotes thereto included in our Form 10-K for the fiscal year ended March 31, 2008.

Our consolidated financial statements include the accounts of our wholly-owned subsidiaries, EnerJex Kansas, Inc. and DD Energy, Inc. All intercompany transactions and accounts have been eliminated in consolidation.

Note 2 – Common Stock

Effective July 25, 2008, we implemented a one-for-five reverse stock split of our issued and outstanding common stock. The number of authorized shares of common stock and preferred stock was not affected and remains at 100,000,000 and 10,000,000, respectively, but the number of shares of common stock outstanding was reduced from 22,214,166 to 4,443,467. An additional 634 shares were issued in lieu of issuing fractional shares. The aggregate par value of the issued common stock was reduced by reclassifying a portion of the par value amount of the outstanding common shares from common stock to additional paid-in capital for all periods presented. In addition, all per share and share amounts, including stock options and warrants have been retroactively restated in the accompanying consolidated financial statements and notes to consolidated financial statements for all periods presented to reflect the reverse stock split.

Stock transactions in fiscal 2009:

On May 15, 2008, we issued 2,182 shares of common stock to a Director and chairman of our Audit Committee for services. We recorded director compensation in the amount of $13,000.

On July 2, 2008, we granted 122,000 options to purchase shares of our common stock to our non-employee directors as compensation for their service as directors in fiscal 2009. On August 1, 2008, we granted C. Stephen Cochennet, our chief executive officer, an option to purchase 75,000 shares of our common stock at 6.25 per share and we granted Dierdre P. Jones, our chief financial officer, an option to purchase 40,000 shares of our common stock at $6.25 per share. These options were rescinded in November 2008 at the request of the board’s compensation committee and the approval of each option holder. Shares subject to these options were returned to the plan and are available for future issuance. See Note 7.

G-4

EnerJex Resources, Inc.

Notes to Condensed Consolidated Financial Statements

A summary of stock options and warrants is as follows:

	Options			Weighted Ave. Exercise Price			Warrants		Weighted Ave. Exercise Price
Outstanding March 31, 2008		458,500		$	6.30			75,000	$	3.00
Cancelled		(4,170	)	$	(6.25	)		-		-
Exercised		-			-			-		-
Outstanding September 30, 2008		454,330		$	6.30			75,000	$	3.00

Note 3 - Asset Retirement Obligation

Asset retirement obligation, April 1, 2008	$	459,689
Liabilities incurred during the period		246,871
Liabilities settled during the period		-
Accretion		31,741
Asset retirement obligations, September 30, 2008	$	738,301

Note 4 - Long-Term Debt and Convertible Debt

On April 11, 2007, we entered into a Securities Purchase Agreement, Registration Rights Agreements, Senior Secured Debentures, a Pledge and Security Agreement, a Secured Guaranty, and other related agreements (the “Financing Agreements”) with the “Buyers” of a new series of senior secured debentures (the “Debentures”). Under the terms of the Financing Agreements, we agreed to sell Debentures for a total purchase price of $9.0 million. In connection with the purchase, we agreed to issue to the Buyers a total of 1,800,000 shares. The first closing occurred on April 12, 2007 with a total of $6.3 million in Debentures being sold and the remaining $2.7 million closing on June 21, 2007.

The proceeds from the Debentures were allocated to the long-term debt and the stock issued based on the fair market value of each item that we calculated to be $9.0 million for each item. Since each of the instruments had a value equal to 50% of the total, we allocated $4.5 million to stock and $4.5 million to the note. The loan discount costs of $4.5 million will accrete as interest based on the interest method over the period of issue to maturity or redemption. The amount of interest accreted for the six month period ended September 30, 2008 was $2,224,554 and for the six month period ended September 30, 2007 was $286,718. Of the $2,224,554 interest accreted during the period ended September 30, 2008 $2,112,267 relates to the redemption of $6.3 million of the Debentures. The remaining amount of interest to accrete in future periods is $842,823 as of September 30, 2008.

G-5

EnerJex Resources, Inc.

Notes to Condensed Consolidated Financial Statements

We incurred debt issue costs totaling $466,835. The debt issue costs are initially recorded as assets and are amortized to expense on a straight-line basis over the life of the loan. The amount expensed in the six month period ended September 30, 2008 was $211,676. Of this amount, $195,559 was expensed upon the redemption of $6.3 million of the Debentures. The remaining debt issue costs will be expensed in the following fiscal years: March 31, 2009 - $45,928 and March 31, 2010 - $22,902.

Effective July 7, 2008, we redeemed an aggregate principal amount of $6.3 million of the Debentures and amended the $2.7 million of aggregate principal amount of the remaining Debentures to, among other things, permit the indebtedness under our new Credit Facility, subordinate the security interests of the debentures to the new Credit Facility, provide for the redemption of the remaining Debentures with the net proceeds from our next debt or equity offering and eliminate the covenant to maintain certain production thresholds.

Pursuant to the terms of the Registration Rights Agreement, as amended, between us and one of the Buyers, we are obligated to maintain an effective registration statement for 1,000,000 of the shares issued under the Financing Agreements. If we fail to obtain and maintain effectiveness of the registration statement before October 22, 2008, we will be obligated to pay cash to the Buyer equal to 1.5% of the aggregate purchase price allocable to such Buyer’s securities ($2,500,000) included in the registration statement for each 30 day period following the date of any existing effectiveness failure or maintenance failure. These payments are capped at 10% of the Buyer’s original purchase price under the Debentures.

Senior Secured Credit Facility

On July 3, 2008, EnerJex, EnerJex Kansas, and DD Energy entered into a three-year $50 million Senior Secured Credit Facility (the “Credit Facility”) with Texas Capital Bank, N.A. Borrowings under the Credit Facility will be subject to a borrowing base limitation based on our current proved oil and gas reserves. The initial borrowing base is set at $10.75 million and will be subject to semi-annual redeterminations, with the first redetermination to commence October 1, 2008. The borrowing base is currently under review by Texas Capital Bank. The Credit Facility is secured by a lien on substantially all assets of the Company and its subsidiaries. The Credit Facility has a term of three years, and all principal amounts, together with all accrued and unpaid interest, will be due and payable in full on July 3, 2011. The Credit Facility also provides for the issuance of letters-of-credit up to a $750,000 sub-limit under the borrowing base and up to an additional $2.25 million limit not subject to the borrowing base to support our hedging program. Borrowings under the Credit Facility of $10.75 million were made on July 7, 2008.

Proceeds from the initial extension of credit under the Credit Facility were used: (1) to redeem our 10% debentures in an aggregate principal amount of $6.3 million plus accrued interest (the “April Debentures”), (2) for Texas Capital Bank’s acquisition of our approximately $2.0 million indebtedness to Cornerstone Bank, (3) for complete repayment of promissory notes issued to the sellers in connection with our purchase of the DD Energy project in an aggregate principal amount of $965,000 plus accrued interest, (4) to pay transaction costs, fees and expenses related to the new Credit Facility, and (5) to expand our current development projects. Future borrowings may be used for the acquisition, development and exploration of oil and gas properties, capital expenditures and general corporate purposes.

Advances under the Credit Facility will be in the form of either base rate loans or Eurodollar loans. The interest rate on the base rate loans fluctuates based upon the higher of (1) the lender’s “prime rate” and (2) the Federal Funds rate plus 0.50%, plus, in either case, a margin of between 0.0% and 0.5% depending on the percent of the borrowing base utilized at the time of the credit extension. The interest rate on the Eurodollar loans fluctuates based upon the applicable Libor rate, plus a margin of 2.25% to 2.75% depending on the percent of the borrowing base utilized at the time of the credit extensionon. We may select Eurodollar loans of one, two, three and six months. A commitment fee of 0.375% on the unused portion of the borrowing base will accrue, and be payable quarterly in arrears. There was no commitment fee due at September 30, 2008.

G-6

EnerJex Resources, Inc.

Notes to Condensed Consolidated Financial Statements

The Credit Facility includes usual and customary affirmative covenants for credit facilities of this type and size, as well as customary negative covenants, including, among others, limitations on liens, mergers, asset sales or dispositions, payments of dividends, incurrence of additional indebtedness, and investments. The Credit Facility also requires that we, at the end of each fiscal quarter beginning with the quarter ending September 30, 2008, maintain a minimum current assets to current liabilities ratio and a minimum ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense and at the end of each fiscal quarter beginning with the quarter ended September 30, 2008 to maintain a minimum ratio of EBITDA to senior funded debt. We were able to obtain a waiver of default from Texas Capital Bank on these two technical covenants. We are taking steps in an effort to comply with these same covenants in future quarters, including but not limited to, a reduction in principal of approximately $3.5 million with proceeds from liquidating a costless collar we entered into on July 3, 2008 and the reduction of our operating and general expenses. See Note 6.

We financed the purchase of vehicles through a bank. The notes are for seven years and the weighted average interest is 6.99% per annum. Vehicles collateralize these notes.

Long-term debt consists of the following at September 30, 2008:

Long-term debentures	$	2,700,000
Unaccreted discount		(842,823	)
Net long-term debentures		1,857,177
Credit Facility		10,750,000
Vehicle notes payable		121,319
Total long-term debt		12,728,496
Less current portion		22,471
Long-term debt	$	12,706,025

Note 5 - Oil and Gas Properties

On April 9, 2007, we entered into a “Joint Exploration Agreement” with a shareholder, MorMeg, LLC, whereby we agreed to advance $4.0 million to a joint operating account for further development of MorMeg’s Black Oaks leaseholds in exchange for a 95% working interest in the Black Oaks Project. We will maintain our 95% working interest until payout, at which time the MorMeg 5% carried working interest will be converted to a 30% working interest and our working interest becomes 70%. Payout is generally the point in time when the total cumulative revenue from the project equals all of the project’s development expenditures and costs associated with funding. We have until June 1, 2009 to contribute additional capital toward the Black Oaks Project development. If we elect not to contribute further capital to the Black Oaks Project prior to the project’s full development while it is economically viable to do so, or if there is more than a thirty day delay in project activities due to lack of capital, MorMeg has the option to cease further joint development and we will receive an undivided interest in the Black Oaks Project. The undivided interest will be the proportionate amount equal to the amount that our investment bears to our investment plus $2.0 million, with MorMeg receiving an undivided interest in what remains.

In August of 2007, we entered into a development agreement with Euramerica, Inc. to further the development and expansion of the Gas City Project, which included 6,600 acres, whereby Euramerica contributed $524,000 in capital toward the project. Euramerica was granted an option to purchase this project for $1.2 million with a requirement to invest an additional $2.0 million for project development by August 31, 2008. We are the operator of the project at a cost plus 17.5% basis. We have received $600,000 of the $1.2 million purchase price and $500,000 of the $2.0 million development funds.

G-7

EnerJex Resources, Inc.

Notes to Condensed Consolidated Financial Statements

On October 15, 2008, we again amended the agreement with Euramerica for the purchase of the Gas City Project to include the following material changes to the Euramerica agreement, as amended, extended and supplemented:

Euramerica was granted an extension until January 15, 2009 (with no further grace periods) to pay the remaining $600,000 of the purchase price for its option to purchase an approximately 6,600 acre portion of the Gas City Project and $1.5 million in previously due development funds for the Gas City Project;

If Euramerica fails to fully fund both the purchase price and these development funds by January 15, 2009, Euramerica will lose all rights to the Gas City Project and assets and there will be no payout from the revenue of the wells on this project;

The oil zones and production from such oil zones in two oil wells (which approximated 13 barrels of oil per day of gross production for the month of September 2008) are now 100% owned by EnerJex;

We may deduct from the development funds all amounts owed to us prior to applying the funds to any actual development;

Euramerica specifically recognized that we can shut in or stop the development of the project if the project is not producing in paying quantities or if the project is operating at a loss. The decision to shut in the project and cease all operations was made on October 15, 2008; and

If Euramerica funds the remaining portion of the purchase price for its option and the development funds in the Gas City Project on or before January 15, 2009, “Payout” as used in the Assignment and other documents is now based on “drilling and completion costs on a well-by-well basis.”

Note 6 - Commitments and Contingencies

On March 6, 2008, we entered into an agreement with Shell Trading US Company (Shell) whereby we agreed to an 18-month fixed-price delivery contract with Shell for 130 BOPD at a fixed price per barrel of $96.90, less transportation costs. This contract is for the physical delivery of oil under our normal sales. This represented approximately 60% of our total oil production on a net revenue basis at that time. In addition, we agreed to sell all of our remaining oil production at current spot market pricing beginning April 1, 2008 through September 30, 2009 to Shell.

As of July 3, 2008, we entered into an ISDA master agreement and a costless collar with BP Corporation North America Inc. (BP) for 130 barrels of oil per day with a price floor of $132.50 per barrel and a price ceiling of $155.70 per barrel for NYMEX West Texas Intermediate for the period of October 1, 2009 until March 31, 2011. We liquidated this costless collar in November 2008 and received proceeds of approximately $3.9 million from BP. We plan to reduce the debt outstanding under our Credit Facility by approximately $3.5 million and use the remainder for general operating purposes. See Note 7.

On August 1, 2008, we entered into three year employment agreements with C. Stephen Cochennet, our chief executive officer, and Dierdre P. Jones, our chief financial officer. Our future commitments under these agreements are as follows:

Base Salary

Year	Cochennet		Jones*
2009	$	200,000	$	140,000
2010		200,000		140,000
2011		200,000		140,000
Total	$	600,000	$	420,000

* Jones’ base salary to adjust annually by not less than the year-over-year increase in the U.S. Consumer Price Index.

G-8

EnerJex Resources, Inc.

Notes to Condensed Consolidated Financial Statements

On August 8, 2008, we entered into a five year lease for corporate office space beginning September 1, 2008 at a monthly base rent of $5,858.

Note 7 - Subsequent Events

On October 15, 2008 we amended the agreement with Euramerica for the purchase of the Gas City Project to include certain material changes. See Note 5.

On November 6, 2008 we entered into a third amendment to the “Joint Exploration Agreement” with MorMeg, LLC, to further extend the “Additional Capital Deadline” for development of the Black Oaks Project. We have until June 1, 2009 to contribute additional capital towards the development of Black Oaks, and within a reasonable length of time thereafter, secure and contribute additional funding so as not to cause more than thirty (30) days delay of project activities due to lack of funding to complete the project. In the event we are not successful in obtaining additional funding, or all funding, to complete the Black Oaks development, MorMeg may cancel and declare the JEA of no force and effect from the point of cancellation forward.

On November 17, 2008, options to purchase 237,000 shares of our common stock, which were granted to our non-employee directors as compensation for their service as directors in fiscal 2009 and to our chief executive officer our chief financial officer, were rescinded at the request of the board’s compensation committee and the approval of each option holder. Both the chief executive officer the chief financial officer have agreed to amend their employment agreements to reflect this rescission. The shares subject to these options were returned to the plan and are available for future issuance. This action was taken in an effort to reduce compensation and professional fees expenses which, though non-cash, would have had a substantial negative impact on our financial statements and results of operations for the quarter ended September 30, 2008.

On November 18, 2008, in response to the declining economic conditions which have negatively impacted our business, we liquidated a costless collar with BP. Both EnerJex and BP have executed confirmations of this transaction and BP will pay us approximately $3.9 million. We plan to reduce the debt outstanding under our Credit Facility by approximately $3.5 million and use the remainder for general operating purposes.

See Notes to Consolidated Financial Statements.

G-9

1,000,000 Shares

Common Stock

PROSPECTUS

December 24, 2008