180 South Lake Ave.

Seventh Floor

Pasadena, CA 91101
(Address of principal executive offices)

Registrant’s telephone number: (626) 792-3842

Securities registered pursuant to Section 12(b) of the Act:

Not applicable

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value
(Title of Class)

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o                                                                            Accelerated filer o     

Non-accelerated filer o(Do not check if a smaller reporting company)    Smaller reporting company þ

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

The aggregate worldwide market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2009 was approximately $1,196,928 based on the closing price of $ 0.30 per share on that date.

The number of shares of the registrant’s Common Stock outstanding as of June 30, 2009 was 5,188,409.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table of Contents

PART I

Business

Overview

JMG Exploration, Inc. was incorporated under the laws of the State of Nevada on July 16, 2004 for the purpose of exploring for oil and natural gas in the United States and Canada. In August 2004, two private placements totaling $8.8 million were completed and exploration activities commenced. As discussed below, all of the properties under development, with the exception of the Pinedale natural gas wells and adjacent undeveloped land, have not met with developmental objectives and have been sold as of January 2008.

As of December 31, 2009, JMG has an accumulated deficit of $25,894,482 and has insufficient working capital to fund development and exploratory drilling opportunities. Following the collection of our loan receivable in May 2010, JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2011. Raising additional capital is not considered a viable strategy JMG is presently exploring a range of strategic alternatives, including the possible sale or merger with another party.

To date JMG has been involved in the following oil and gas projects:

·

A joint venture on the Pinedale anticline in the Jonah field (Green River Basin) of western Wyoming targeting gas in the Upper Cretaceous Lance sandstone. Development commenced in 2006 and two wells were drilled in the North East quarter of the section. Both wells were completed and placed on production. Production operations were suspended in January of 2008 due to operational difficulties associated with high water production. Both wells were reactivated in May of 2008 as a result of increased gas prices. In conjunction with the reactivation, alternate arrangements for water disposal were negotiated and the dehydration facilities were optimized.

On July 16, 2009, Jonah/Pinedale Partners LLC and JMG filed a Statement of Claim in the Court of Queen's Bench Of Alberta in the Judicial District Of Calgary Regarding NEO Exploration Inc. and  Ptarmigan Lands. In March 2005, JMG agreed to farm-in on the interests of the co-plaintiff, Jonah/Pinedale Partners. NEO, an Alberta, Canada corporation, through its wholly owned U.S. (Montana) partnership Ptarmigan Lands, became the operators of the Pinedale natural gas property effective January 1, 2009. To date, NEO has failed to report to JMG an accounting of Pinedale production or to remit to JMG their royalty interest in such  production. We have accrued production revenues based on historical production data but have fully reserved accounts receivable from NEO pending the outcome of the litigation. Management believes that NEO’s failure to remit JMG’s share of the production revenue is ungrounded, that JMG will prevail in the litigation and that no further impairment of the Pinedale natural gas property is warranted.   

·

A large farm-in agreement and direct purchase of acreage for several Williston Basin prospects in Divide and Burke Counties, northern North Dakota. In 2005 JMG participated in four Upper Devonian Bakken sandstone horizontal oil wells and four Mississippian Midale carbonate oil wells. For 2006 eight horizontal oil wells were drilled in the Midale. These prospect areas are referred to as Candak (approx. 35,000 gross acres), Myrtle (approx. 5,000 gross acres), Bluffton (approx. 5,000 gross acres), and Crosby (approx. 60,000 gross acres).

In January 2007 JMG sold its working interests in its lands in North Dakota where it had been targeting the Bakken zone for approximately $5,078,500. This agreement excluded the North Dakota lands where JMG had been developing its Midale play.

The remaining North Dakota lands (Midale play) were sold to JED Oil Inc. in September 2007 in conjunction with the settlement of JMG’s outstanding balance due to JED Oil of approximately $2.1 million by remitting the properties, assigning accounts receivable and a cash payment to fund the difference.

·

Acreage in the Fellows Prospects in Weston County in eastern Wyoming on the eastern edge of the Powder River Basin. Targets were the Lower Cretaceous Dakota channel sands and the Permian/Pennsylvanian Minnelusa sands. Approximately 20,000 acres were acquired. Also included in the Fellows Prospects was over 5,000 acres in the Gordon Creek project in Carbon County, Utah.

The Fellows project was sold effective January 31, 2008 at approximately book value for $385,000.

Newco Loan

On September 5, 2007 JMG signed a Share Exchange Agreement  with the shareholders of Newco Group Limited, a limited liability company organized under the laws of the British Virgin Islands (“Newco”). In conjunction with the Share Exchange Agreement, in September 2007 JMG provided Newco a $3,000,000 loan to enable Newco to purchase a 39% equity interest in Iris Computers Ltd., one of the leading distributors of IT products in India (“Iris”).  As security for the loan, JMG received a security interest in the ordinary shares of Iris purchased by Newco with the proceeds of the JMG loan. As further security for the loan, JMG received an irrevocable proxy from ESAPI Ltd., a company organized under the laws of the Commonwealth of the Bahamas (“ESAPI”), granting to JMG the right to vote the 14.5% equity interest in Iris currently owned by Newco that have been pledged to ESAPI by Newco as security for a loan by ESAPI to Newco. This proxy expired December 31, 2008.

On January 4, 2008, JMG elected to exercise its right under the Share Exchange Agreement to terminate such agreement. After a series of extensions, on July 22, 2008 JMG issued a formal notice of default to Newco and started the process of transferring into the name of JMG shares of Iris which JMG held as security for the loan and which were registered in the name of Newco. Due to concerns regarding the underlying value of Iris, JMG recorded a valuation allowance of $1,850,000 as of December 31, 2007 and reduced the value of the Newco Note receivable and underlying Iris shares to $1,150,000.

On November 11, 2009 JMG entered into a Settlement Agreement between Newco, and Iris. The Settlement Agreement provided that all rights, claims and demands of all parties are settled in full upon JMG’s surrender of 1,427,665 shares of Iris held as collateral for the loan and JMG’s receipt of $1,900,000. Payment to JMG and the transfer of the shares occurred in May 2010. JMG reduced its valuation allowance by $750,000 in the 4th quarter 2009.

Company History

JMG Exploration, Inc. was incorporated under the laws of the State of Nevada on July 16, 2004 for the purpose of exploring for oil and natural gas in the United States and Canada. In August 2004, JMG completed two private placements totaling $8.8 million, issuing 250,000 shares of common stock and 1,950,000 shares of convertible preferred stock, and commenced exploration activities.

JMG’s initial public offering closed on August 3, 2005. JMG issued 2,185,000 shares of common stock at a price of $5.00 and 2,185,000 warrants at a price of $0.10 for gross proceeds of $11,143,500. Simultaneously with the initial public offering, 1,950,000 preferred shares were converted to 1,950,000 shares of common stock.

Strategy

JMG’s business strategy is no longer based on drilling oil and natural gas exploratory projects. JMG seeks to maintain the value of its existing natural gas property in Pinedale, collect its note receivable from Newco Group Limited and continue to explore a possible sale or merger with another party.

JMG’s current business plan is to locate and combine with an existing, privately-held company which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged.  However, JMG does not intend to combine with a private company which may be deemed to be an investment company subject to the Investment Company Act of 1940. A combination may be structured as a merger, consolidation, exchange of the JMG common stock for stock or assets or any other form which will result in the combined enterprise's becoming a publicly-held corporation.

Private companies wishing to become publicly trading may wish to merge with JMG (a reverse merger or reverse acquisition) whereby the shareholders of the private company become the majority of the shareholders of the

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combined company.  Typically, the Board and officers of the private company become the new Board and officers of the combined Company and often the name of the private company becomes the name of the combined entity.

JMG does not propose to restrict its search for investment opportunities to any particular geographical area or industry, and may, therefore, engage in essentially any business, to the extent of its limited resources. This includes industries such as service, finance, natural resources, manufacturing, high technology, product development, medical, communications and others.  JMG’s discretion in the selection of business opportunities is unrestricted, subject to the availability of such opportunities, economic conditions, and other factors.

Certain types of business acquisition transactions may be completed without any requirement that JMG first submit the transaction to the stockholders for their approval.  In the event the proposed transaction is structured in such a fashion that stockholder approval is not required, holders of JMG’s securities should not anticipate that they will be provided with financial statements or any other documentation prior to the completion of the transaction.  Other types of transactions require prior approval of the stockholders.

In the event a proposed business combination or business acquisition transaction is structured in such a fashion that prior stockholder approval is necessary, JMG will be required to prepare a Proxy or Information Statement describing the proposed transaction, file it with the Securities and Exchange Commission for review and approval, and mail a copy of it to all JMG stockholders prior to holding a stockholders meeting for purposes of voting on the proposal. Minority shareholders that do not vote in favor of a proposed transaction will then have the right, in the event the transaction is approved by the required number of stockholders, to exercise statutory dissenter’s rights and elect to be paid the fair value of their shares.

JMG has not identified any business opportunity that it plans to pursue, nor has JMG reached any agreement or definitive understanding with any person concerning an acquisition. No assurance can be given that the Company will be successful in finding or acquiring a desirable business opportunity.  Furthermore, no assurance can be given that any acquisition, which does occur, will be on terms that are favorable to JMG or its current stockholders.

Business Relationships with JED Oil Inc.

JMG had a Joint Services Agreement with JED Oil Inc. (“JED”). Under the Agreement, JED provided all required personnel, office space and equipment, at standard industry rates for similar services. The Joint Services Agreement was terminated upon Jed’s reorganization in November 2009. Total expenses incurred under this agreement during the years ended December 31, 2009 and 2008 were $0 and $92,979, respectively. Amounts payable to JED or its successor Steen River Oil & Gas Ltd. as of December 31, 2009 and 2008 were $36,211 and $137,391, respectively.

Interpersonal Relationships with JED

The following officers and directors were affiliated with JED up to its reorganization on November 20, 2009 when it was also renamed Steen River Oil & Gas Ltd.:

·

Thomas J. Jacobsen is a director of JMG and was Chief Executive Officer and a director of JED.

·

Justin W. Yorke is a director of JMG and was Chairman of the JED board of directors.

Oil and natural gas development and exploration.

JMG is no longer engaged in development and exploratory drilling opportunities. JMG seeks to maintain the value of its existing natural gas property in Pinedale, collect its note receivable from Newco Group Limited and continue to explore a possible sale or merger with another party.

Competition

JMG’s interest in the Pinedale gas production is sold to a regional distributor in Wyoming at spot rates prevailing at the time. The property is managed by Neo Exploration who handles all day to day matters and remits JMG its share of revenues and operating costs on a monthly basis. The ongoing Pinedale operations are not labor intensive and there is little competition for services or supplies that would impact operations. Natural gas is a commodity and there is no direct competition in its regional pricing.   

Geographic Segments

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Prior to September 2007, the majority of JMG’s assets and revenues were located in North Dakota. Subsequent to the sale of all North Dakota property in September 2007, holdings in Wyoming now account for a 100% of our assets and revenue.

Employees

As of December 31, 2009, JMG has one employee as its senior officer: our President, Chief Executive Officer and Chief Financial Officer. Unions do not represent our employee.

Government regulation

Oil and gas operations are subject to government controls and regulations in the United States. In the United States, legislation affecting the oil and gas industry has been pervasive and is under constant review for amendment or expansion. Pursuant to such legislation, numerous federal, state and local departments and agencies have issued extensive rules and regulations binding on the oil and gas industry and its individual members, some of which carry substantial penalties for failure to comply. Such laws and regulations have a significant impact on oil and gas drilling, pipelines, gas processing plants and production activities, increase the cost of doing business and, consequently, affect profitability. As new legislation affecting the oil and gas industry is commonplace and existing laws and regulations are frequently amended or reinterpreted, JMG is unable to predict the future cost or impact of complying with such laws and regulations. The cost of environmental protection is considered a necessary and manageable part of JMG’s business. JMG expects to be able to plan for and comply with new environmental initiatives without materially altering operating strategies.

Exploration and production. United States operations are subject to various types of regulation at the federal, state and local levels. Such regulation includes:

·

requiring permits for the drilling of wells;

·

maintaining bonding requirements in order to drill or operate wells;

·

implementing spill prevention plans;

·

submitting notification and receiving permits relating to the presence, use and release of certain materials incidental to oil and gas operations; regulating the location of wells;

·

regulating the method of drilling and casing wells;

·

regulating the use, transportation, storage and disposal of fluids and materials used in connection with drilling and production activities;

·

regulating surface usage and the restoration of properties upon which wells have been drilled;

·

regulating the plugging and abandoning of wells; and

·

regulating the transporting of production.

Operations are also subject to various land conservation regulations, including the regulation of the size of drilling and spacing units or proration units, the number of wells which may be drilled in a unit and the unitization or pooling of oil and gas properties. In this regard, some states allow the forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases, which may make it more difficult to develop oil and gas properties. In addition, state conservation laws establish maximum rates of production from oil and gas wells, generally limit the venting or flaring of gas, and impose certain requirements regarding the ratable purchase of production. The effect of these regulations is to limit the amounts of oil and gas that can be produced from wells and limit the number of wells or the locations at which can be drilled.

Environmental and occupational regulations. JMG is subject to various federal, state and local laws and regulations concerning the discharge of incidental materials into the environment, the generation, storage, transportation and disposal of contaminants or otherwise relating to the protection of public health, natural resources, wildlife and the environment, affect exploration, development, processing, and production operations and the costs attendant thereto. These laws and regulations increase overall operating expenses. Levels of insurance customary in the industry are maintained to limit financial exposure in the event of a substantial environmental claim resulting from sudden, unanticipated and accidental discharges of oil or other substances. However, 100% coverage is not maintained concerning any environmental claim, and no coverage is maintained with respect to any

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penalty or fine required to be paid because of violation of any federal, state or local law. JMG is committed to meeting its responsibilities to protect the environment wherever it operates.

JMG is also subject to laws and regulations concerning occupational safety and health. Due to the continued changes in these laws and regulations JMG is unable to predict the future costs of complying with these laws and regulations. The cost of safety and health compliance are considered a necessary and manageable part of oil and gas operations. JMG expects to be able to plan for and comply with any new initiatives without materially altering its operating strategy. JED is contracted for assistance with environmental and occupational regulations and JMG utilizes their Environmental, Health and Safety Department personnel for this purpose. This department is responsible for instituting and maintaining an environmental and safety compliance program for JMG. The program includes field inspections of properties and internal assessments of compliance procedures.

Properties

Pinedale Anticline

JMG has a joint venture on one section of land with a 77.5% working interest on the Pinedale anticline in the Jonah field of the Green River Basin in west central Wyoming. The drilling target was the Lower Cretaceous Lance sandstone at approximately the 15,000 foot vertical drill depth level and two wells were drilled in 2006. The tight gas in the Lance Formation typically demonstrates poor reservoir connectivity to offsetting wells thereby necessitating down spacing to 40 acres with large multiple fracture stimulations. Extensive gas gathering infrastructure is present in the immediate area.

On July 16, 2009 , Jonah/Pinedale Partners LLC and JMG filed a Statement of Claim in the Court of Queen's Bench Of Alberta in the Judicial District Of Calgary Regarding NEO Exploration Inc. and  Ptarmigan Lands. In March 2005, JMG agreed to farm-in on the interests of the co-plaintiff, Jonah/Pinedale Partners. NEO, an Alberta, Canada corporation, through its wholly owned U.S. (Montana) partnership Ptarmigan Lands, became the operators of the Pinedale natural gas property effective January 1, 2009. To date, NEO has failed to report to JMG an accounting of Pinedale production or to remit to JMG their royalty interest in such  production.  

Divide and Burke Counties, North Dakota

JMG had various working interests ranging from 65% to 98% in approximately 100,000 gross acres in Divide and Burke Counties in northern North Dakota near the border of Canada and the US. In January 2007 JMG sold its working interests in its lands in North Dakota where it had been targeting the Bakken zone for approximately $5,078,500. The remaining North Dakota lands were sold to JED Oil Inc. in September 2007 in conjunction with the settlement of JMG’s outstanding balance due to JED Oil of approximately $2.1 million by remitting the properties, assigning accounts receivable and a cash payment to fund the difference. The properties sold to JED Oil Inc resulted on a loss on sale of $498,260.

 Weston County, Wyoming

JMG entered into a joint area of interest with Fellows Energy Ltd in November 2004 to evaluate acreage in Weston County (eastern Wyoming) on the eastern edge of the Powder River Basin. The Weston County Fellows project was sold together with the Carbon County Fellows project below effective January 31, 2008 at approximately book value for $385,000.

Carbon County, Utah

JMG entered into a joint area of interest with Fellows Energy Ltd in November 2004 to evaluate the Gordon Creek project in Carbon County, eastern Utah. The Carbon County Fellows project was sold together with the Weston County Fellows project effective January 31, 2008 at approximately book value for $385,000.

Recent SEC Rule-Making Activity

In December 2008, the SEC announced that it had approved revisions designed to modernize the oil and gas company reserves reporting requirements. The most significant amendments to the requirements included the following:

·

Commodity Prices: Economic producibility of reserves and discounted cash flows are now based on a 12-month average commodity price unless contractual arrangements designate the price to be used.

5

·

Disclosure of Unproved Reserves: Probable and possible reserves may be disclosed separately on a voluntary basis.

·

Proved Undeveloped Reserve Guidelines: Reserves may be classified as proved undeveloped if there is a high degree of confidence that the quantities will be recovered and they are scheduled to be drilled within the next five years, unless the specific circumstances justify a longer time.

·

Reserves Estimation Using New Technologies: Reserves may be estimated through the use of reliable technology in addition to flow tests and production history.

·

Reserves Personnel and Estimation Process: Additional disclosure is required regarding the qualifications of the chief technical person who oversees the reserves estimation process. We are also required to provide a general discussion of our internal controls used to assure the objectivity of the reserves estimate.

·

Non-Traditional Resources: The definition of oil and gas producing activities has expanded and focuses on the marketable product rather than the method of extraction.

We adopted the rules effective December 31, 2009.

Effect of Adoption

Application of the new reserve rules resulted in the use of lower prices at December 31, 2009 for gas reserves than would have resulted under the previous rules. Use of new 12-month average pricing rules at December 31, 2009 resulted in a net present value (discounted at 10%) of $141,876. Use of the old year-end prices rules would have resulted in net present value (discounted at 10%) of $226,077. Therefore, the total impact of the new price methodology rules resulted in a decrease in net present valuation of $84,201, but had no impact on depletion costs or impairment reserves.

Proved Undeveloped Reserves (PUD’s)

As of December 31, 2009, we had no proved undeveloped reserves.

Reserve Estimation

The reserve quantity and future net cash flow information as of and for the year ending December 31, 2009 was based on a reserve report prepared by CG Engineering Ltd. for the year ending December 31, 2007, as adjusted for 2008 and 2009 production. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available.

Proved gas reserves are the estimated quantities of natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed gas reserves are those expected to be recovered through existing wells with existing equipment and operating methods. All of the Company’s proved reserves are located in the Continental United States.

As of December 31, 2009 and 2008, the Company’s gas reserves were all proved developed. Presented below is a summary of the changes in estimated  gas reserves of the Company for the year ended December 31, 2009:

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The following tables detail the net reserves of the Company as of December 31, 2009 using average prices and costs, and the aggregate net present value of future net revenue attributable to the reserves estimated using average prices and costs, calculated using a discount rate of 10%.

Net Present Values of Future Net Revenues
Constant Prices and Costs

The following table summarizes the Corporation’s interests in oil and gas wells as of December 31, 2009:

Producing and Non-producing Wells

Capital Expenditures

There were no capital expenditures for the years ended December 31, 2009 and 2008.

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Risk Factors

Risks related to our company and the oil and natural gas industry

Potential conflicts of interest in our past relationship with JED may have resulted in business decisions that were less favorable than we might have obtained from third parties.

The following officers and directors were affiliated with JED up to its reorganization on November 20, 2009 when it was also renamed Steen River Oil & Gas Ltd.:  

·

Thomas J. Jacobsen is a director of JMG and was Chief Executive Officer and a director of JED.

·

Justin W. Yorke is President, Chief Executive and Financial Officer, and a director of JMG and was Chairman of the JED board of directors.

A substantial or extended decline in natural gas prices could reduce our future revenue and earnings.

The price we receive for future natural gas production will heavily influence our revenue and results of operations. Natural gas is a commodity and its price is subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the market for natural gas has been volatile. This market will likely continue to be volatile in the future. The prices we may receive for any future production, and the levels of this production, depend on numerous factors beyond our control. These factors include the following:

·

changes in global supply and demand for natural gas;

·

actions by the Organization of Petroleum Exporting Countries, or OPEC;

·

price and quantities of imports of foreign natural gas in Canada and the U.S.;

·

political conditions, including embargoes, which affect other oil-producing activities;

·

levels of global natural gas exploration and production activity;

·

levels of global natural gas inventories;

·

weather conditions affecting energy consumption;

·

technological advances affecting energy consumption; and

·

prices and availability of alternative fuels.

Lower natural gas prices may not only decrease our future revenues but also may reduce the amount of natural gas that we can produce economically. A substantial or extended decline in natural gas prices may reduce our earnings, cash flow and working capital.

Market conditions or operational impediments may hinder our access to oil and natural gas markets or delay our production.

Market conditions or the unavailability of satisfactory natural gas transportation arrangements may hinder our access to natural gas markets or delay our production. The availability of a ready market for our natural gas production will depend on a number of factors, including the demand for and supply of natural gas and the proximity of reserves to pipelines and terminal facilities. Our ability to market our production will depend in substantial part on the availability and capacity of gathering systems, pipelines and processing facilities owned and operated by third parties. Our failure to obtain such services on acceptable terms could materially harm our business. We may be required to shut-in wells for a lack of a market or because of inadequacy or unavailability of natural gas pipeline or gathering system capacity. If that were to occur, we would be unable to realize revenue from those wells until production arrangements were made to deliver our production to market. We presently have no contracts with operators of gathering systems, pipelines or processing facilities with respect to our exploration prospects.

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We are subject to complex laws that can affect the cost, manner and feasibility of doing business thereby increasing our costs and reducing our profitability.

Production and sale of natural gas is subject to extensive federal, state, provincial, local and international laws and regulations. We may be required to make large expenditures to comply with governmental regulations.

Under these laws, we could be liable for personal injuries, property damage and other damages. Failure to comply with these laws may also result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws could change in ways that substantially increase our costs of doing business. Any such liabilities, penalties, suspensions, terminations or regulatory changes could materially and adversely affect our financial condition and results of operations. See “Business–Government Regulation”.

We may incur substantial liabilities to comply with environmental laws and regulations.

Natural gas operations are subject to stringent federal, state, provincial, local and international laws and regulations relating to the release or disposal of materials into the environment or otherwise relating to environmental protection. These laws and regulations may:

·

restrict the types, quantities and concentration of substances that can be released into the environment in connection with production activities;

·

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

·

impose substantial liabilities for pollution resulting from our operations.

Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, incurrence of investigatory or remedial obligations, or the imposition of injunctive relief. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to maintain compliance, and may otherwise have a material adverse effect on our results of operations, competitive position, or financial condition. Under these environmental laws and regulations, we could be held strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were responsible for the release of such materials or if our operations were standard in the industry at the time they were performed. See “Business–Government Regulation”.

We have material weaknesses in our internal control over financial reporting structure which until remedied, may cause errors in our financial statements that could require a restatement or our filings may not be timely and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price.

We have identified a material weaknesses in our internal control over financial reporting and cannot provide assurance that additional material weaknesses will not be identified in the future. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our financial statements that could require a restatement or our filings may not be timely and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price. See “Item 9A(T) Controls and Procedures.”

There is no current agreement for a business combination and no minimum requirements for a business combination

We have no current arrangement, agreement or understanding with respect to engaging in a business combination with a specific entity.  There can be no assurance that JMG will be successful in identifying and evaluating suitable business opportunities or in concluding a business combination.  No particular industry or specific business within an industry has been selected for a target company.  We have not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which it will require a target company to have achieved, or without which JMG would not consider a business combination with such business entity.  Accordingly, we may enter into a business combination with a business entity having no significant

9

operating history, losses, limited or no potential for immediate earnings, limited assets, negative net worth or other negative characteristics.  There is no assurance that JMG will be able to negotiate a business combination on terms favorable to the Company.

There is no assurance of success or profitability in a future business combination.

There is no assurance that JMG will acquire a favorable business opportunity.  Even if JMG should become involved in a business opportunity, there is no assurance that it will generate revenues or profits, or that the market price of JMG’s outstanding shares will be increased thereby.

A business combination may be consummated without shareholder approval.

Certain types of business acquisition transactions may be completed without any requirement that JMG first submit the transaction to the stockholders for their approval.  In the event the proposed transaction is structured in such a fashion that stockholder approval is not required, holders of the JMG’s securities should not anticipate that they will be provided with financial statements or any other documentation prior to the completion of the transaction.  

Legal Proceedings

On July 16, 2009 , Jonah/Pinedale Partners LLC and JMG filed a Statement of Claim in the Court of Queen's Bench Of Alberta in the Judicial District Of Calgary Regarding NEO Exploration Inc. and  Ptarmigan Lands. In March 2005, JMG agreed to farm-in on the interests of the co-plaintiff, Jonah/Pinedale Partners. NEO, an Alberta, Canada corporation, through its wholly owned U.S. (Montana) partnership Ptarmigan Lands, became the operators of the Pinedale natural gas property effective January 1, 2009. To date, NEO has failed to report to JMG an accounting of Pinedale production or to remit to JMG their royalty interest in such  production.  

Submission of Matters to a Vote of Security Holders

None.

Unresolved Staff Comments

As of the date of this filing, we have no unresolved comments from the staff of the SEC.

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PART II

Market For Our Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities

Price Range of Common Stock

Our common stock was quoted on the NYSE Arca Exchange under the symbol “JMG” since our initial public offering on August 5, 2005 through March 2008. In March 2008 the Company was delisted by the NYSE Arca Exchange and was subsequently traded on the OTC Pink Sheets. Prior to our initial public offering, there was no public market for our common stock. The following table shows the high and low closing sale prices for our common stock as reported on the Arca Exchange and the high and low bid prices for the OTC Pink Sheets for the periods indicated:

We have never paid cash dividends on the Common Stock and do not intend to pay cash dividends on the Common Stock in the foreseeable future. Our board of directors intends to retain any earnings to provide funds for the operation and expansion of our business.

Recent Sales of Unregistered Securities

None.

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Management’s Discussion and Analysis of Financial Conditions and Results of Operations

The following Management’s Discussion and Analysis of financial results as provided by the management of JMG Exploration, Inc. (“JMG”) should be read in conjunction with the audited consolidated financial statements and notes for the years ended December 31, 2009 and 2008. This commentary is based upon information available to July 20, 2010.

Forward-Looking Statements

This report includes forward-looking statements. All statements other than statements of historical facts contained herein, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions as described in “Risk Factors.”

Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Statements relating to “reserves” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this Form 10-K are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. The forward-looking statements contained in this Form 10-K are expressly qualified by this cautionary statement.

Finally, in the presentation of the Form 10-K, JMG uses terms that are universally applied in analyzing corporate performance within the oil and gas industry for which regulators require that we provide disclaimers.

Barrel of Oil Equivalent (BOE) – The oil and gas industry commonly expresses production volumes and reserves on a “barrel of oil equivalent” basis (“BOE”) whereby natural gas volumes are converted at the ratio of six thousand cubic feet to one barrel of oil. The intention is to sum oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. Throughout this Form 10-K, JMG has used the 6:1 BOE measure which is the approximate energy equivalency of the two commodities at the burner tip. BOE does not represent a value equivalency at the plant gate, which is where JMG sells its production volumes, and therefore may be a misleading measure if used in isolation.

Overview  

In August 2004, we completed two private placements totaling $8.8 million and commenced exploration activities. Upon the closing of a subsequent initial public offering on August 3, 2005, the Company realized additional proceeds of $11,143,500.  The Company traded on the Archipelago Exchange through March 2008 when it was delisted and currently trades on the OTC Pink Sheets.  

During 2005 and 2006 we made direct property acquisitions and commenced developing the oil and natural gas properties of others under arrangements in which we financed the cost of exploration drilling in exchange for interests in the oil or natural gas revenue generated by the properties. All of the properties under development, with the exception of the Pinedale natural gas wells and adjacent undeveloped land, have not met with developmental objectives and have been sold as of January 2008.

As of December 31, 2009, JMG has an accumulated deficit of $25,894,482. We have operating and liquidity concerns due to our significant net losses and negative cash flows from operations. Raising additional capital is not considered a viable strategy and  JMG is exploring a possible sale or merger with another party.

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On September 5, 2007 JMG signed a Share Exchange Agreement with the shareholders of Newco Group Limited, a limited liability company organized under the laws of the British Virgin Islands (“Newco”). In conjunction with the Share Exchange Agreement, in September 2007 JMG provided Newco a $3,000,000 loan to enable Newco to purchase an equity interest in Iris Computers Ltd., one of the leading distributors of IT products in India (“Iris”).

On January 4, 2008, JMG elected to exercise its right under the Share Exchange Agreement to terminate such agreement. After a series of extensions, on July 22, 2008 JMG issued a formal notice of default to Newco and started the process of transferring into the name of JMG shares of Iris which JMG held as security for the loan and which were registered in the name of Newco. Due to concerns regarding the underlying value of Iris, JMG recorded a valuation allowance of $1,850,000 as of December 31, 2007 and reduced the value of the Newco Note receivable and underlying Iris shares to $1,150,000.

On November 11, 2009 JMG entered into a Settlement Agreement between Newco and Iris. The Settlement Agreement provided that all rights, claims and demands of all parties are settled in full upon JMG’s surrender of 1,427,665 shares of Iris held as collateral for the loan and JMG’s receipt of $1,900,000. Payment to JMG and the transfer of the shares occurred in May 2010. JMG reduced its valuation allowance by $750,000 in the 4th quarter 2009.

Results of operations

Revenue. Our revenue is dependent upon success in finding and developing oil and natural gas reserves. Our ownership interest in the production from these properties is measured in BOE per day, a term that encompasses both oil and natural gas production. Revenues were $82,800 and $81,507 for the years ended December 31, 2009 and 2008.

 Critical to our revenue stream is the market price for natural gas. Commodity benchmark prices for natural gas are as follows:

On July 16, 2009 , Jonah/Pinedale Partners LLC and JMG filed a Statement of Claim in the Court of Queen's Bench Of Alberta in the Judicial District Of Calgary Regarding NEO Exploration Inc. and  Ptarmigan Lands. In March 2005, JMG agreed to farm-in on the interests of the co-plaintiff, Jonah/Pinedale Partners. NEO, an Alberta, Canada corporation, through its wholly owned U.S. (Montana) partnership Ptarmigan Lands, became the operators of the Pinedale natural gas property effective January 1, 2009. To date, NEO has failed to report to JMG an accounting of Pinedale production or to remit to JMG their royalty interest in such  production. We have accrued production revenues based on historical production data but have fully reserved accounts receivable from NEO pending the outcome of the litigation. Management believes that NEO’s failure to remit JMG’s share of the production revenue is ungrounded, that JMG will prevail in the litigation and that no further impairment of the Pinedale natural gas property is warranted.  

We may use derivative financial instruments when we deem them appropriate to hedge exposure to changes in the price of natural gas, fluctuations in interest rates and foreign currency exchange rates. JMG currently does not have any financial derivative contracts or fixed price contracts in place.

General and administrative expense. General and administrative expense relates to compensation and overhead for executive officers and fees for general operational and administrative services. We have contracted out all field personnel and equipment necessary for exploration activities, and for related administrative functions. For the years ending December 31, 2009 and 2008, general and administrative expenses were $(322,012) and $364,550, respectively. Expenses consist principally of salaries, consulting fees and office costs which normally fluctuate according to development activity. The credit balance in 2009 is principally due to the Settlement Agreement between Newco Group Ltd. and Iris Computers Ltd., whereby JMG reduced its valuation allowance by $750,000 in the 4th quarter 2009.

The Company has a stock option plan under which employees; directors and consultants are eligible to receive grants. Effective January 1, 2006, the Company adopted the fair value recognition provisions of ASC 718, Share-Based Payment, using the modified-prospective-transition method.  Under that transition method,

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compensation cost recognized effective January 1, 2006 includes:  (a) compensation cost for share-based options granted to employees and directors prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of Statement 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of  Statement 123(R).  Results for prior periods have not been restated.

Stock-based compensation expense for the years ended December 31, 2009 and 2008 was $0 and $6,829. The decrease in stock-based compensation expense for 2009 was due to the final amortization of prior year options issuance in 2008 and no issuance of stock options in 2009.

Production expense. Production costs include operating costs associated with field activities and geophysical and geological expense. Under the successful-efforts method, costs such as geological and geophysical, exploratory dry holes and delay rentals are expensed as incurred. Production expenses for the years ended December 31, 2009 and 2008 were $58,306 and $99,777.

Accretion expense. As at December 31, 2009, the estimated present value of the Company’s asset retirement obligation was $28,695 based on estimated future cash requirements of $20,443, determined using a credit adjusted risk free interest rate of 8.5% over the economic life of the properties, an inflation rate of 2.0%, and an estimated life until repayment of 5-10 years. Accretion of $1,124 and $1,124 was recorded for the years ended December 31, 2009 and 2008.

Gain (loss) on sale of oil and gas properties. In January 2008, the company sold its interest in the Fellows project for $364,987 due to the project no longer being a strategic asset for JMG. As a result of the sale, JMG incurred a loss of $42,297.

Interest expense. Interest expense for the years ended December 31, 2009 and 2008 was $260 and $974.

Interest income. Interest for the years ending December 31, 2009 and 2008 was $798 and $51,378. Interest income is from temporary investment of operating cash. The decrease in 2009 is due to lower cash balances.

Other income. Other income principally represents accounts payable and accrued expenses from 2007 that were determined to no longer represent liabilities.

  Income taxes. The Company files income tax returns in the U.S. federal jurisdiction and various states. There are currently no income tax examinations underway for these jurisdictions, although the tax years ended December 31, 2008, 2007 and 2006 are all still open for examination.  

The Company provides for income taxes in accordance with ASC 740 “Income Taxes”  (ASC 740). ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities.  Where it is more likely than not that a tax benefit will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its realizable value.

A valuation allowance has been provided against the Company’s net deferred tax assets as the Company believes that it is more likely than not that the net deferred tax assets will not be realized.  As a result of this valuation allowance, the effective tax rate for the years ended December 31, 2009 and 2008 is zero percent.

Deemed dividend on warrant extension. On January 4, 2008 the Company extended the expiration dates of its outstanding warrants to January 15, 2009. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2008. A deemed dividend of $280,852 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model.

On December 17, 2008 the Company extended the expiration dates of its outstanding warrants to January 15, 2010. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2009. A deemed dividend of $111,361 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model. No warrants were extended in 2009.

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Liquidity and capital resources

Cash flows and capital expenditures

At December 31, 2009, we had $22,813 in cash and cash equivalents. Since our incorporation, we have financed our operating cash flow needs through private and public offerings of equity securities.  As of December 31, 2009, JMG has an accumulated deficit of $25,894,482 and has insufficient working capital to fund development and exploratory drilling opportunities. Following the collection of our loan receivable in May 2010, JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2011. Raising additional capital is not considered a viable strategy JMG is presently exploring a range of strategic alternatives, including the possible sale or merger with another party.

JMG has the following warrants outstanding as of December 31, 2009:

On January 8, 2010 the Company extended the expiration dates of all warrants, except those issued to our underwriters, to January 15, 2011. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2010. A deemed dividend of $638,804 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model.

Cash flow used in operations.

Cash utilized by operating activities was $(262,352) for the year ended December 31, 2009. The use of cash was principally attributable to the net income for the year of $161,415, decreased by a $750,000 reduction in the bad debt reserve on our note receivable and increased by a decrease in accounts payable and accrued liabilities of $74,622 and due to JED Oil Inc of $101,179 which did not utilize cash. The reductions in cash flow were offset by items that did not use cash: a decrease in accounts receivable of $90,248, a decrease in prepaid expenses of $14,552, a loss on disposition of property and equipment of $6,316, a decrease in other assets of $30,000 and depletion, depreciation, impairment and accretion expense of $347,118.

Cash utilized by operating activities was $(242,928) for the year ended December 31, 2008. The use of cash was principally attributable to the net loss for the year of $(689,056). The cash flow was further reduced by a decrease in accounts payable and accrued liabilities of $101,730.  The reductions in cash flow were offset by an increase in accounts receivable of $72,794, an increase in prepaid expenses of $5,184, the loss on sale of property and equipment of $42,297, the increase in due to JED Oil Inc. of $25,345, the decrease in other assets of $1,541 and expenses that do not use cash: depletion, depreciation, impairment and accretion expense of $393,868 and stock-based compensation expense of $6,829.

Cash flow provided in investing activities.

Cash provided in investing activities for the year ended December 31, 2008 was $364,986 and was attributable to proceeds received on disposition of property of $364,986.

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Cash flow used in (provided by) financing activities.

There was no cash flow used in (provided by) financing activities for the years ended December 31, 2009 and 2008.

Critical accounting estimates

In the preparation of the financial statements, it was necessary to make certain estimates that were critical to determining our assets, liabilities and net income. None of these estimates affect the determination of cash flow but do have a significant impact in the determination of net income. The most critical of these estimates is the reserves estimations for oil and gas properties and the valuation allowance for the securities held as collateral for our loan receivable.

JMG engaged an independent engineering firm to evaluate 100% of our oil and gas reserves as of and for the year ended December 31, 2007 and prepare a report thereon. Their report was utilized in the calculations of depletion, depreciation and impairment expense for the year ended December 31, 2007. For the year ended December 31, 2009 and 2008, JMG adjusted the 2007 reserve information per this report based on 2009 and 2008 production, current prices for natural gas and a review of other assumptions utilized in the 2007 reserve report. JMG’s only reserves as of December 31, 2009 consists of the Pinedale Anticline natural gas reserves. There has been no significant change in the Pinedale Anticline operations since its evaluation in 2007. There have been no additions or deletions in drilling operations and operating costs have not changed significantly. The estimation of the reserve volumes and future net revenues set out in the report is complex and subject to uncertainties and interpretations. Judgments are based upon engineering data, projected future rates of production, current and forecast commodity prices, and the timing of future expenditures. Inevitably the estimates of reserve volumes and future net revenues will vary over time as new data becomes available and estimates of future net revenues do not represent fair market value.

JMG engaged a financial consultant with international expertise to evaluate the valuation of the securities held as collateral for our loan receivable.

The following significant accounting policies outline the major policies involving critical estimates.

Successful-efforts method of accounting

Our business is subject to special accounting rules that are unique to the oil and gas industry. There are two allowable methods of accounting for oil and gas business activities: the successful-efforts method and the full-cost method. Under the successful-efforts method, costs such as geological and geophysical, exploratory dry holes and delay rentals are expensed as incurred whereas under the full-cost method these types of charges are capitalized.

Under the successful-efforts method of accounting, all costs of property acquisitions and drilling of exploratory wells are initially capitalized. If a well is unsuccessful, the capitalized costs of drilling the well, net of any salvage value, are charged to expense. If a well finds oil and natural gas reserves that cannot be classified as proved within a year after discovery, the well is assumed to be impaired and the capitalized costs of drilling the well, net of any salvage value, are charged to expense. The capitalized costs of unproven properties are periodically assessed to determine whether their value has been impaired below the capitalized cost, and if such impairment is indicated, a loss is recognized. We consider such factors as exploratory results, future drilling plans and lease expiration terms when assessing unproved properties for impairment. For each field, an impairment provision is recorded whenever events or circumstances indicate that the carrying value of those properties may not be recoverable from estimated future net revenues. The impairment provision is measured as the excess of carrying value over the fair value. Fair value is defined as the present value of the estimated future net revenue from total proved and risked-adjusted probable reserves over the economic life of the reserves, based on year end oil and gas prices, consistent with price and cost assumptions used for acquisition evaluations.

Geological and geophysical costs and costs of retaining undeveloped properties are expensed as incurred. Expenditures for maintenance and repairs are charged to expense, and renewals and betterments are capitalized. Upon disposal, the asset and related accumulated depreciation and depletion are removed from the accounts, and any resulting gain or loss is reflected currently in income or loss.

Costs of development dry holes and proved leaseholds are depleted on the unit-of-production method using proved developed reserves on a field basis. The depreciation of capitalized production equipment, drilling costs and

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asset retirement obligations is based on the unit-of-production method using proved developed reserves on a field basis.

To economically evaluate our future proved oil and natural gas reserves, if any, independent engineers must make a number of assumptions, estimates and judgments that they believe to be reasonable based upon their expertise and professional guidelines. Were the independent engineers to use differing assumptions, estimates and judgments, then our financial condition and results of operations could be affected. We would have lower revenues in the event revised assumptions, estimates and judgments resulted in lower reserve estimates, since the depletion and depreciation rate would then be higher. A write-down of excess carrying value also might be required. Similarly, we would have higher revenues and net profits in the event the revised assumptions, estimates and judgments resulted in higher reserve estimates, since the depletion and depreciation rate would then be lower.

Proved Oil and Gas Reserves

Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. The estimated quantities of proved crude oil, natural gas liquids and natural gas are derived from geological and engineering data that demonstrate with reasonable certainty the amounts that can be recovered in future years from known reservoirs under existing economic and operating conditions. Reserves are considered proved if they can be produced economically as demonstrated by either actual production or conclusive formation tests. The oil and gas reserve estimates are made using all available geological and reservoir data as well as historical production data. Estimates are reviewed and revised as appropriate. Revisions occur as a result of changes in prices, costs, fiscal regimes, reservoir performance or a change in the Company’s plans.

Long-lived assets

When assets are placed into service, we make estimates with respect to their useful lives that we believe are reasonable. However, factors such as competition, regulation or environmental matters could cause us to change our estimates, thus impacting the future calculation of depreciation and depletion. We evaluate long-lived assets for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value. Estimates of future discounted cash flows and fair value of assets require subjective assumptions with regard to future operating results and actual results could differ from those estimates.

Asset Retirement Obligations

We have adopted ASC 410 “ Asset Retirement and Environmental Obligations” from inception. The net estimated costs are discounted to present values using a credit-adjusted, risk-free rate over the estimated economic life of the properties. These costs are capitalized as part of the cost of the related asset and amortized. The associated liability is classified as a long-term liability and is adjusted when circumstances change and for the accretion of expense which is recorded as a component of depreciation and depletion.

Stock-based compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of ASC 718 “ Compensation—Stock Compensation”, using the modified-prospective-transition method.  Under that transition method, compensation cost recognized effective January 1, 2006 includes:  (a) compensation cost for share-based options granted to employees and directors prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of ASC 718, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of  ASC 718.  Results for prior periods have not been restated.

Contingencies

In the future, we may be subject to adverse proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We will be required to assess the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to developments in each matter or changes in approach such as a change in settlement strategy in dealing with these potential matters

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Contractual obligations and commitments

None.

Related Party Transactions

JMG had a Joint Services Agreement with JED Oil Inc. (“JED”). Under the Agreement, JED provided all required personnel, office space and equipment, at standard industry rates for similar services. The Joint Services Agreement was terminated upon Jed’s reorganization in November 2009. Payments to JED under this agreement were as follows:

·

JED paid on behalf of the Company a total of $0 and $92,979 for the years ended December 31, 2009 and 2008 for general and administrative services and capital related expenditures.

·

 As of December 31, 2009, $36,211 (2008 - $137,390) was due and payable.

Joseph Skeehan, the Chief Executive Officer, President and a director of JMG is also the owner of Skeehan & Company, a professional service corporation that engages in accounting, finance and consulting services to small to mid-sized companies and organizations primarily in Southern California since 1980. In conjunction with the maintenance of accounting records and the preparation of financial statements and regulatory filings, Skeehan & Company was paid a total of $38,049 and $71,748 respectively for the years ended December 31, 2009 and 2008.

Outlook

As of December 31, 2009, we had an accumulated deficit of $25,894,482 and insufficient working capital to fund development and exploratory drilling opportunities. Following the collection of our loan receivable in May 2010, JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2011. Raising additional capital is not considered a viable strategy JMG is presently exploring a range of strategic alternatives, including the possible sale or merger with another party.

Subsequent events

On January 8, 2010 JMG extended the expiration dates of all warrants, except those issued to our underwriters, to January 15, 2011. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2010. A deemed dividend of $638,804 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model.

On January 26, 2010 JMG cancelled 473,333 common stock options outstanding at an average exercise price of $3.00 per share and issued 455,000 new options at an exercise price of $0.22 per share and which expire in five years. With respect to the issuance of the new stock options, JMG incurred stock based compensation expense of $73,673 for the quarter.

On November 11, 2009 JMG entered into a Settlement Agreement between Newco and Iris. The Settlement Agreement provided that all rights, claims and demands of all parties are settled in full upon JMG’s surrender of 1,427,665 shares of Iris held as collateral for the loan and JMG’s receipt of $1,900,000. Payment to JMG and the transfer of the shares was received in May 2010. JMG reduced its valuation allowance by $750,000 in the 4th quarter 2009.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to all of the normal market risks inherent within the natural gas industry, including commodity price risk, and credit risk. We plan to manage our operations in a manner intended to minimize our exposure to such market risks.

Credit Risk. Credit risk is the risk of loss resulting from non-performance of contractual obligations by a customer or joint venture partner. Our accounts receivable are from the operator of our Pinedale natural gas interest and is subject to normal industry credit risk. Our loan receivable is due to an advance related to a now terminated merger agreement. We retained a financial consultant with international expertise to evaluate the valuation of the securities held as collateral for our loan receivable and recorded a recorded a valuation allowance of $1,850,000 as

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of December 31, 2007. In May 2010 JMG received $1.9 million in payment in full of the loan pursuant to a November 2009 settlement agreement and reduced its valuation allowance by $750,000 in the 4th quarter 2009.

Market Risk. We are exposed to market risk from fluctuations in the market price of natural gas. Natural gas is a commodity and its price is subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the market for natural gas has been volatile. This market will likely continue to be volatile in the future. The prices we may receive for any future production, and the levels of this production, depend on numerous factors beyond our control.

Interest Rate Risk. Interest rate risk will exist principally with respect to any future indebtedness that bears interest at floating rates. At December 31, 2009, we had no long-term indebtedness and do not contemplate utilizing indebtedness as a means of financing operations.

Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

JMG Exploration Inc.
Financial Statements

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

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Controls And Procedures

Evaluation of Disclosure Controls and Procedures

As of December 31, 2009, the Company carried out an assessment under the supervision and with the participation of our Chief Executive and Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(1) and I 5d-15(1)). Our Chief Executive and Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of December 31,2009.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company maintains internal controls over financial reporting to include those policies and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission's ("SEC's") rules and forms, and that such information is accumulated and communicated to the Company's management, including its Principal Executive and Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the internal controls over financial reporting, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of management, including the Company's Principal Executive and Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included an assessment of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on this evaluation, our Chief Executive and Financial Officer concluded as of December 31, 2009 that our internal controls over financial reporting were not effective at the reasonable assurance level due to the material weaknesses discussed below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure that our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Report.

Our Chief Executive and Financial Officer concluded that as of December 31, 2009 the following material weaknesses existed:

(1)

We did not maintain a sufficient level of resources within our accounting department, and

(2)

We did not effectively implement comprehensive entity-level internal controls.

Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. FUl1her. the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control

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system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be

detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Material Weaknesses and Related Remediation Initiatives

Set forth below is a summary of the various significant deficiencies which caused management to conclude that we had the material weaknesses identified above.  Through the efforts of management, external consultants and our Audit Committee, we have developed a specific action plan to remediate the material weaknesses. We expect to implement these various action plans during 2010.  If we are able to complete these action in a timely manner, we anticipate that all control deficiencies and material weaknesses will be remediated by December 31, 2010.

 We did not effectively implement comprehensive entity-level internal controls and did not maintain a sufficient level of resources within our accounting department, as discussed below: 

·

Financial Close Process.  JMG lacks personnel with sufficient competence in US generally accepted accounting principles and SEC reporting requirements to ensure proper and timely evaluation of the Company’s activities and transactions.

·

Financial Close Process.  JMG only prepares financial statements on a quarterly basis which increases the potential that any unusual activities or transactions will not be detected on a timely basis.

·

Cash Disbursement Process.  Our accounting personnel performed all bookkeeping activities including cash disbursements, cash receipts, and monthly bank reconciliation. The lack of segregation of duties in this area increased the potential that any fraud would not be detected on a timely basis.

·

Cash Disbursement Process.   Payments to related parties were not subject to review and approval by independent parties which increased the potential that any improper distributions would not be detected on a timely basis.

·

Reporting Deficiencies.  We did not perform timely and sufficient internal or external reporting of our progress and evaluation of prior year material weaknesses or the current fiscal year internal control deficiencies. 

Remediation of Internal Control Deficiencies and Expenditures

It is reasonably possible that, if not remediated, one or more of the material weaknesses described above could result in a material misstatement in our reported financial statements that might result in a material misstatement in a future annual or interim period. We are developing specific action plans for each of the above material weaknesses. In addition, our audit committee has authorized the hiring of additional temporary staff and/or the use of financial consultants, as necessary, to ensure that we have the depth and experience to remediate the above listed material weaknesses. We are uncertain at this time of the costs to remediate all of the above listed material weaknesses, however, we anticipate the cost to be in the range of $20,000 to $300,000, most of which costs we expect to incur ratably during the year. We cannot guarantee that the actual costs to remediate these deficiencies will not exceed this amount.

Through these steps, we believe that we are addressing the deficiencies that affected our internal control over financial reporting as of December 31,2009. Because the remedial actions may require hiring of additional personnel, and relying extensively on manual review and approval, the successful operation of these controls for at

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least several quarters may be required before management may be able to conclude that the material weaknesses have been remediated. We intend to continue to evaluate and strengthen our internal control over financial reporting systems. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting systems, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our Commission reporting obligations.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

None.

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PART III

Directors, Executive Officers and Corporate Governance

Our directors and executive officers are:

Joseph W. Skeehan. Mr. Skeehan has served as a director since August 2004, as Chairman since December 15, 2009, as Chief Executive Officer and President from July 1, 2006 to December 15, 2009, and as our Chief Financial Officer from September 7, 2007 to December 15, 2009. He has been the owner of Skeehan & Company, a professional service corporation that engages in accounting, finance and consulting services to small to mid-sized companies and organizations primarily in Southern California since 1980. He has been a Certified Public Accountant since 1978 and received a Bachelor of Science degree from California Polytechnic State University, San Luis Obispo in 1976.

Thomas J. Jacobsen. Mr. Jacobsen has been a Director since August 2004. He also served as Chairman from August 2004 to September 2005. He became the Chief Executive Officer and Chairman of Coban Petroleum Ltd. on January 21, 2010. He was the President and Chief Operating Officer of JED Oil Inc. (“JED”) from September 2003 to November 2004 when he resigned as President and Chief Operating Officer and assumed the position of Chief Executive Officer. He was has been a Director of JED from since September 2003 through its reorganization in November 2009, caused by its seeking creditor protection in August, 2008 under the Companies’ Creditors Arrangement Act (Canada). Mr. Jacobsen joined Westlinks Resources Ltd., a predecessor of Enterra, as a director in February 1999, and was appointed Executive Vice President, Operations in October 1999. In October 2000, he resigned from this position and was appointed Vice Chairman of the Board of Directors. Mr. Jacobsen became Enterra’s Chief Operating Officer in February 2002 and served in that position until November 2003. Mr. Jacobsen has more than 40 years experience in the oil and gas industry in Alberta and Saskatchewan including serving as President, Chief Operating Officer and a director of Empire Petroleum Corporation from June 2001 to April 2002, President and Chief Executive Officer of Niaski Environmental Inc. from November 1996 to February, 1999, President and Chief Executive Officer of International Pedco Energy Corporation from September 1993 to February 1996, and President of International Colin Energy Corporation from October 1987 to June 1993. Mr. Jacobsen served as a director of Rimron Resources Inc., formerly Niaski Environmental Inc. from February 1, 1997 to April 1, 2003. Niaski’s proposal to its creditors under the Bankruptcy and Insolvency Act (Canada) was accepted in April 2000 and Niaski was discharged in May 2001.

Reuben Sandler, Ph.D. Dr. Sandler has been a director since August 2004. He is the CEO  of Intelligent Optical Systems, Inc. He was President and Chief Information Officer for MediVox, Inc., a medical software development company, from 1997 to 1999. He was a director of PASW, Inc. from 1999 to 2000 and a director of Alliance Medical Corporation from 1999 to 2002. From 1989 to 1996, he was the Executive Vice President for Makoff R&D Laboratories, Inc. Dr. Sandler received a Ph.D. from the University of Chicago and is the author of four books on mathematics.  At the present, time, he is on the Visiting Committee of the Division of Physical Sciences at the University of Chicago, a position he has held since 2006.  

Justin W. Yorke.  Mr. Yorke was appointed to our Board of Directors in January 2007. Mr. Yorke became our Chief Executive Officer, Chief Financial Officer and President effective December 15, 2009. Mr. Yorke currently is the managing member of two hedge funds that invests primarily in publicly listed companies. Until December 2001, Mr. Yorke was a partner at Asiatic Investment Management, which specialized in public and private investments in South Korea. From May 1998 to June 2000, Mr. Yorke was a Fund Manager and Senior Financial Analyst, based in Hong Kong, for Darier Henstch, S.A., a private Swiss bank, where he managed their

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$400 million Asian investment portfolio. From July 1996 to March 1998, Mr. Yorke was an Assistant Director and Senior Financial Analyst with Peregrine Asset Management, which was a unit of Peregrine Securities, a regional Asian investment bank. From August 1992 to March 1995, Mr. Yorke was a Vice President and Senior Financial Analyst with Unifund Global Ltd., a private Swiss Bank, as a manager of its $150 million Asian investment portfolio.  

Board of Directors

Our board of directors is comprised of four directors. Our directors serve one year terms, or until an earlier resignation, death or removal, or their successors are elected. There are no family relationships among any of our directors or officers.

Committees of the Board of Directors

The charters of each of the following committees are available in print, free of charge, to any investor who requests it by writing to: 180 South Lake Ave., Seventh Floor, Pasadena, CA 91101.

Audit committee

Our audit committee consists of Mr. Yorke, committee chairman and designated financial expert, and Dr. Sandler. All members of our audit committee meet the independence standards for directors as set forth in the NYSE Arca Equities Rules. The audit committee reviews in detail and recommends approval by the full board of directors of our annual and quarterly financial statements, recommends approval of the remuneration of our auditors to the full board, reviews the scope of the audit procedures and the final audit report with the auditors, and reviews our overall accounting practices and procedures and internal controls with the auditors.

Compensation committee

Our compensation committee consists of Dr. Sandler, committee chairman and Mr. Skeehan, all of whom are independent directors. The compensation committee recommends approval to the full board of directors of the compensation of the Chief Executive Officer, the annual compensation budget for all other employees, bonuses, grants of stock options and any changes to our benefit plans.

Corporate Governance Committee

Our corporate governance committee consists of Dr. Sandler, the committee chairman, and Mr. Skeehan, and Mr. Yorke. The corporate governance committee determines the scope and frequency of periodic reports to the board of directors concerning issues relating to overall financial reporting, disclosure and other communications with all stockholders. Further, the corporate governance committee recommends to the board of directors (i) criteria for the composition of the board including total size and the number or minimum number of unrelated directors, (ii) candidates to fill vacancies on the board which occur between annual meetings which result from either departures of directors or increases in the number of directors and (iii) a slate of directors for election at each annual meeting.

Code of Ethics

We have adopted a Code of Conduct effective January 1, 2005, which applies to all of our employees, consultants, officers and directors. It establishes standards of conduct for individuals and also individual standards of business conduct and ethics. In addition it sets out our policies in relation to our employees on such issues as discrimination, harassment, privacy, drugs, alcohol, tobacco and weapons. We will provide such Code of Conduct in print, free of charge, to any investor who requests it by writing to: 180 South Lake Ave., Seventh Floor, Pasadena, CA 91101.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who own more than 10 percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission (the "SEC") initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and

24

written representations that no other reports were required, during the year ended December 31, 2009, all officers, directors and greater than ten percent beneficial owners complied with the Section 16(a) filing requirements, except as noted below:

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Executive Compensation

Compensation Discussion and Analysis

The Compensation Committee has responsibility for reviewing and making recommendations to the Board of Directors with respect to the Company’s overall executive compensation policy, including such items as (i) the annual base salary, annual bonus, and annual and long-term equity-based or other incentives of each corporate officer, including the CEO; (ii) corporate goals and objectives relevant to each executive officer’s compensation, evaluate each executive officer's performance in light of those goals and objectives, and recommend each executive officer's compensation level based on this evaluation, which recommendation will be subject to approval by the full Board; and (iii) any other matter, such as severance agreements, change in control agreements, or special or supplemental executive benefits, within the Committee's authority.

The overall compensation policy, which is applicable to JMG executive officers, is to position the aggregate of the compensation components at a level commensurate with the Company’s size and performance relative to similar companies. The Compensation Committee seeks to make compensation decisions consistent with the long-term growth and performance objectives of the Company. The Compensation Committee implements its compensation policy in a manner designed to maximize shareholder benefit by aligning the interests of employees with the interests of shareholders through the award of stock options.

The Company’s executive compensation program currently consists primarily of salary and incentive awards in the form of stock options. The Compensation Committee believes that stock options awarded under the JMG equity compensation plan provide the most useful incentive to encourage executive officers to maximize productivity and efficiency because the value of such options relates to the Company’s stock price. Awards under the equity compensation plan have the effect of more closely aligning the interests of the Company’s employees with its shareholders, while at the same time offering an attractive vehicle for the recruitment, retention, and compensation of employees.

Summary Compensation and Grants

The following table provides a summary of annual compensation for our executive officers for the years ended December 31, 2009 and 2008. We do not have an employment agreement with our executive officer.

Stock options granted during the most recently completed financial year

There were no grants of options to executive officers in 2009 and 2008. No options were exercised by our executive officers during the years ended December 31, 2009 and 2008.

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Outstanding Equity Awards at December 31, 2009

The following table sets forth the number and value of securities underlying options held as of December 31, 2009 by each named executive officer.

Compensation of Directors

Directors do not receive compensation for service on the board of directors. We reimburse our directors for their out-of-pocket costs, including travel and accommodations, relating to their attendance at any board of directors meeting. Directors are entitled to participate in our equity compensation plan.

Director compensation in 2009

Equity compensation plan

Our board of directors and stockholders approved our equity compensation plan in August 2004. We have authorized a total of 10% of the number of shares outstanding for issuance under this plan. For the purposes of this calculation, the number of shares outstanding includes securities such as warrants. A total of  924,096 shares of common stock are authorized for grant of which 473,333 options have been granted under the plan to officers, directors, employees and consultants. Options issued to directors are fully vested upon date of grant and expire five years from the date of issuance.

Under the equity compensation plan, employees, non-employee members of the board of directors and consultants may be awarded stock options to purchase shares of common stock. Options may be incentive stock options designed to satisfy the requirements of Section 422 of the U.S. Internal Revenue Code, or non-statutory stock options which do not meet those requirements. If options expire or are terminated, then the underlying shares will again become available for awards under the equity compensation plan.

The equity compensation plan is administered by the compensation committee of the board of directors. This committee has complete discretion to:

·

determine who should receive an award;

·

determine the type, number, vesting requirements and other features and conditions of an award;

·

interpret the equity compensation plan; and

·

make all other decisions relating to the operation of the equity compensation plan.     

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The exercise price for non-statutory and incentive stock options granted under the equity compensation plan may not be less than 100% of the fair market value of the common stock on the option grant date. The compensation committee may also accept the cancellation of outstanding options in return for a grant of new options for the same or a different number of shares at the same or a different exercise price.

If there is a change in our control, an unvested award will immediately become fully exercisable as to all shares subject to an award. A change in control includes:

·

a merger or consolidation after which our then current stockholders own less than 50% of the surviving corporation;

·

a sale of all or substantially all of our assets; or

·

an acquisition of 50% or more of our outstanding stock by a person other than a corporation owned by our stockholders in substantially the same proportions as their stock ownership in us.       

In the event of a merger or other reorganization, outstanding stock options will be subject to the agreement of merger or reorganization, which may provide for:

·

the assumption of outstanding awards by the surviving corporation or its parent;

·

their continuation by us if we are the surviving corporation;

·

accelerated vesting; or

·

settlement in cash followed by cancellation of outstanding awards.  

The board of directors may amend or terminate the equity compensation plan at any time. Amendments are subject to stockholder approval to the extent required by applicable laws and regulations. The equity compensation plan will continue in effect unless otherwise terminated by the board of directors.

As of January 26, 2010 all 473,333 were terminated or expired and 455,000 new options were granted at an exercise price of $0.22 per share.

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Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

          The following table sets forth information regarding beneficial ownership of our common stock as of December 31, 2009 by:

·

each of our executive officers and directors;

·

all executive officers and directors as a group; and

·

each person who is known by us to beneficially own more than 5% of our outstanding common stock.          

As of December 31, 2009, there were 5,188,409 shares of common stock issued and outstanding. Shares of common stock not outstanding but deemed beneficially owned because an individual has the right to acquire the shares of common stock within 60 days, are treated as outstanding when determining the amount and percentage of common stock owned by that individual and by all directors and executive officers as a group. The address of each executive officer and director is 180 South Lake Ave., Seventh Floor, Pasadena, CA 91101. The address of other beneficial owners is set forth below.

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Certain Relationships and Related Transactions, and Director Independence

This section describes the transactions we have engaged in with persons who were our directors or officers at the time of the transaction, and persons or entities known by us to be the beneficial owners of 5% or more of our common stock since our incorporation on July 16, 2004.

Business Relationships with JED

JMG had a Joint Services Agreement with JED Oil Inc. (“JED”). Under the Agreement, JED provided all required personnel, office space and equipment, at standard industry rates for similar services. The Joint Services Agreement was terminated upon Jed’s reorganization in November 2009. Payments to JED under this agreement were as follows:

·

JED paid on behalf of the Company a total of $0 and $92,979 for the years ended December 31, 2009 and 2008 for general and administrative services and capital related expenditures.

·

Amounts payable to JED or its successor Steen River Oil & Gas Ltd. as of December 31, 2009 and 2008 were $36,211 and $137,391, respectively.

Interpersonal Relationships with JED

The following officers and directors were affiliated with JED up to its reorganization on November 20, 2009:

·

Thomas J. Jacobsen is a director of JMG and was Chief Executive Officer and a director of JED.

·

Justin W. Yorke is President, Chief Executive and Financial Officer, and a Director of JMG and was Chairman of the JED board of directors.

Skeehan & Company

Joseph Skeehan, a director of JMG is also the owner of Skeehan & Company, a professional service corporation that engages in accounting, finance and consulting services to small to mid-sized companies and organizations primarily in Southern California since 1980. In conjunction with the maintenance of accounting records and the preparation of financial statements and regulatory filings, Skeehan & Company was paid a total of $1,902 and $71,748, respectively, for the years ended December 31, 2009 and 2008.

Conflicts of Interest Policies

All transactions between us and any of our officers, directors, or 5% stockholders must be on terms no less favorable than could be obtained from independent third parties. Our bylaws require that a majority of disinterested directors is required to approve any proposal in which any of our officers or directors have a principal or other interest.

Other than as described in this section, there are no material relationships between us and any of our directors, executive officers or known holders of more than 5% of our common stock.

Principal Accounting Fees and Services

It is the policy of the Company for the Audit Committee to pre-approve all audit, tax and financial advisory services. All services rendered by Hein & Associates LLP were pre-approved by the audit committee in the years ended December 31, 2009 and 2008. The aggregate fees billed by Hein & Associates LLP for professional services rendered for the audit of the Company’s financial statements and other services were as follows:

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PART IV

Exhibits and Financial Statement Schedules

Financial Statements

          The following financial statements of the registrant and the Reports of our Independent Registered Public Accounting Firm thereon are included herewith in Item 8 above.

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SIGNATURES

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

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on July 23, 2010.

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Exhibit Index

 July 23, 2010

To the Shareholders and Board of Directors

JMG Exploration, Inc.

Pasadena, California

We have audited the accompanying consolidated balance sheets of JMG Exploration, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, cash flows, stockholders’ equity, and comprehensive loss for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JMG Exploration, Inc. as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assessment of the effectiveness of JMG Exploration, Inc.’s internal control over financial reporting as of December 31, 2009 included in the accompanying Management’s report on Internal Control over Financial Reporting and, accordingly, we do not express an opinion thereon.

/s/ HEIN & ASSOCIATES LLP

Irvine, California

  JMG Exploration, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these audited consolidated financial statements.