Filed pursuant to Rule 424(b)(3)
Registration No. 333-136180

PROSPECTUS

JED OIL INC.

6,866,011 COMMON SHARES

We are registering 6,866,011 common shares of JED Oil Inc. for resale by the selling shareholders which are issuable upon conversion or exercise of or pursuant to, Senior Subordinated Convertible Notes, the Amended and Restated Senior Subordinated Convertible Note, Series B Convertible Preferred Shares and the common stock purchase warrants.

The selling shareholders may offer the common shares from time-to-time at market prices prevailing at the time of the sales or at negotiated prices. See Plan of Distribution beginning on page 29. We will not receive any proceeds from the sale of these common shares.

Our common shares are listed on the American Stock Exchange under the symbol JDO. On November 6, 2006, the closing price of the common shares was $ 3.50.

Investing in our common shares involves a high degree of risk. You should purchase common shares only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page 9.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offence.

The date of this prospectus is November 9, 2006.

TABLE OF CONTENTS

PROSPECTUS SUMMARY	3
ABOUT JED OIL INC.	3
THE OFFERING	4
ABOUT THIS PROSPECTUS	6
INFORMATION ON OUTSTANDING SHARES	7
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS	8
RISK FACTORS	9
SELLING SHAREHOLDERS	17
PLAN OF DISTRIBUTION	31
ENFORCEABILITY OF CIVIL LIABILITIES	32
CONSOLIDATED CAPITALIZATION AND INDEBTEDNESS	33
DESCRIPTION OF SECURITIES	33
MARKETS	36
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS	38
USE OF PROCEEDS	47
EXPENSES	47
LEGAL MATTERS	47
EXPERTS	47
WHERE YOU CAN GET MORE INFORMATION	48
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE	48
INDEMNIFICATION	50
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	F-1

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the more detailed information and consolidated financial statements appearing elsewhere or incorporated by reference in this prospectus.

The terms “JED”, “our company”, “the company”, “we”, “us” and “our” as used in this prospectus on Form F-3 refer to JED Oil Inc. and its subsidiaries as a combined entity, except where the context requires otherwise.

ABOUT JED OIL INC.

JED is engaged in the development and operation of crude oil and natural gas in Western Canada and under its wholly-owned subsidiary JED Oil (USA) Inc. in the Rocky Mountain states of the United States. We develop the oil and natural gas properties of others under arrangements in which we will finance the cost of development drilling in exchange for interests in the oil and natural gas revenue generated by the properties. Occasionally JED may purchase specific properties with drilling upside. Our production averaged 1,250 boe/d during the first quarter of 2006 including 587 bbls/d of medium and heavy oil and 3,978 mcf/d of natural gas. Our proved reserves are approximately 3,390.2 mboe in the aggregate as of December 31, 2005. Our development programs will be financed in part by cash flow, and in part with debt or equity financing.

JED’s business strategy is to grow its reserves and cash flow by funding the development of oil and gas properties in exchange for an interest in the property. JED is focused on per share growth. We will finance acquisitions with debt and cash flow, and minimize shareholders’ dilution while maintaining a strong balance sheet. JED’s ability to replace and grow its reserves over time is the key success factor in our business strategy.

JED, Enterra Energy Trust (“Enterra”), and JMG Exploration, Inc. (“JMG”) are parties to a 2^nd Amended and Restated Agreement of Business Principles pursuant to which each oil and gas property which is owned by Enterra is as a general matter to be developed or explored under arrangements pursuant to which JED and JMG, respectively, bear the cost thereof in exchange for a percentage (usually 70 percent) of such property and Enterra retains the balance of such property. Enterra has a first right to purchase oil and gas properties owned by JED prior to the sale thereof to others, and Enterra has the right to purchase 80 percent of any oil and gas property that is owned by JMG when drilling has established the existence of commercially viable quantities of oil or gas at a value that is based upon an independent engineering report. JED and Enterra Energy Trust have entered into a definitive agreement with Enterra Energy Trust regarding a property swap and termination fo the Agreement of Business Principles. Pursuant to the agreement, JED will acquire 100% of Enterra’s working interest in the North Ferrier area and approximately 57.5% of Enterra’s interest in the East Ferrier area in exchange for JED’s interests in common with Enterra in East Central Alberta, the Desan area of North East British Columbia, the Ricinus area of Alberta and settlement of amounts owing to JED by Enterra. The swap was based on independent third party engineering evaluations and will not result in any material changes to the aggregate production and reserves held by each. The value of the additional interests JED is acquiring in Ferrier was determined to be approximately $44 million on a 10% net present value (NPV) basis. The transaction closed on September 28, 2006, effective as of July 1, 2006, and the 2^nd Amended and Restated Agreement of Business Principles is now terminated.

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On October 30, 2006, JED announced that it had signed a Letter of Intent to sell its working interests in the East Ferrier area of Alberta to an arms length party for CDN $27,500,000 (approximately $24,700,000). Production from the East Ferrier properties is approximately 480 boe/d. JED obtained its interest in the East Ferrier properties through the larger property swap and debt repayment that was recently completed with Enterra Energy Trust on September 28, 2006, as discussed above. JED is retaining its working interest in North Ferrier which was also part of the aforementioned property swap and is where JED has been actively drilling.

JED’s revenue is principally from the sale of oil and natural gas liquids and natural gas. For the year ended December 31, 2005, approximately 29% of the revenue from our properties was derived from natural gas and approximately 65% was derived from crude oil and natural gas liquids. JED has also earned interest revenue from the investment of excess cash in interest-earning investments. The summary of revenues by revenue type for the six months ended June 30, 2006 and for the years ended December 31, 2005 and 2004 and for the 120-day period starting from the Company’s incorporation on September 3, 2003 and ended December 31, 2003 is as follows:

							120-Day Period
	Six months						Ended
	ended June 30,		Year Ended December 31,				December 31,
	2006 (1)		2005		2004		2003
Revenue
Oil and natural gas liquids	$	6,605,205	$	6,705,384	$	1,413,044
Natural gas	$	6,671,647	$	2,953,406	$	106,045
Interest	$	64,933	$	604,592	$	484,137	$	49,485
Total Revenue	$	13,341,785	$	10,263,382	$	2,003,226	$	49,485

(1) Does not reflect the swap with Enterra or the proposed sale of East Ferrier assets.

At July 30, 2006, we had approximately 30 employees and consultants working both in our head office and in field locations.

JED’s principal executive office is located at 2200, 500 — 4th Avenue S.W. Calgary, Alberta, Canada T2P 2V6 and our telephone number is (403) 537-3250.

THE OFFERING

This prospectus covers up to 6,866,011 common shares to be sold by the selling shareholders identified in this prospectus.

Shares offered by the selling shareholders	6,866,011 shares of common stock(1)
Offering price	Determined at the time of sale by the selling shareholders.
Common shares outstanding prior to this offering as of September 30, 2006	14,964,903 shares
Common shares outstanding following this offering if all Senior Subordinated Convertible Notes issued to a group of selling shareholders herein, the Amended	19,406,650 shares(2)

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and Restated Senior Subordinated Convertible Note, Series B Convertible Preferred Shares and common stock purchase warrants are converted or exercised
Common shares owned by the selling shareholders following this offering if all common shares issued by the conversion of Senior Subordinated Convertible Notes issued to a group of selling shareholders herein, the Amended and Restated Senior Subordinated Convertible Note and Series B Convertible Preferred Shares are sold	None(2)
Use of proceeds	All proceeds of this offering will be received by the selling shareholders for their own account. Our outstanding debt will be reduced to the extent the Senior Subordinated Convertible Notes issued to a group of selling shareholders herein and the Amended and Restated Senior Subordinated Convertible Note issued to the partners of JED Funding notes are converted. Such notes and Series B Convertible Preferred Shares are not required to be converted.
Risk factors	You should read the “Risk Factors” section beginning on page 9, as well as other cautionary statements throughout this prospectus, before investing in our common shares.
American Stock Exchange	JDO

(1)

On June 2, 2006, a group of selling shareholders acquired the Senior Subordinated Convertible Notes (the “Convertible Notes”) with a conversion price of $16.00. On June 9, 2006, the other group of the selling shareholders acquired 979,663 shares of Series B Convertible Preferred Shares (the “Series B Preferred Shares”) at a price of $ 16.00 per share. The issuance price represented a premium to the then market price of $14.52 on June 1, 2006. We have agreed to register for resale by the holders of such securities the common shares issuable upon conversion of the Convertible Notes and the Series B Preferred Shares. JED agreed to register at least that number of common shares equal to 200% of $34,475,000 divided by the conversion price of the Convertible Notes. JED agreed to register at least that number of common shares equal to 125% of number of shares into which the Series B Preferred Shares can be converted. The Series B Preferred Shares will receive dividends at the rate of 10% per annum, payable quarterly, and be redeemed by the Company on February 1, 2008. Each quarter, holders may elect to receive their dividends in common shares of JED, valued at the trailing fifteen day volume weighted average trading price for the common shares prior to the record date for the dividend.

JED issued a Senior Subordinated Convertible Note in the aggregate principal amount of $20,000,000 with a conversion price of $30.00 to JED Funding, Ltd. (“JED Funding”) on August 3, 2005. Following the 3 for 2 stock split on October 13, 2005, the conversion price of such note was adjusted to $20.00. In May

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2006, the note was amended and restated into the 10% Amended and Restated Senior Subordinated Convertible Note to adjust the conversion price to $16.00 and permit conversion into Series B Convertible Preferred Shares (the “New JED Funding Note”) . In May 2006, at the time of the issuance of the New JED Funding Note, $13,235,000 of the New JED Funding Note was converted into Series B Convertible Preferred Shares. Each share of Series B Convertible Preferred Shares can be converted at any time at the holders’ option into one common share. The New JED Funding Note is convertible into 1,187,500 common shares at $16.00. JED registered 244,643 common shares with the SEC to cover the partial conversion of the New JED Funding Note on Form F-3 filed on July 31, 2006. Now, JED is registering an additional 942,857 shares in this registration statement to cover the common shares issuable upon the conversion of the Series B Convertible Preferred Shares and the New JED Funding Note. Axiom Capital Management acted as placement agent on the placement of the Convertible Notes and Series B Preferred Shares. A compensation, JED issued common stock purchase warrants (the “Warrants”) to purchase 156,250 common shares with an exercise price of $16.00 per share, subject to adjustment.

(2)

This figure is based on the number of common shares outstanding as of September 30, 2006 and assumes full conversion of the Convertible Notes, the New JED Funding Note, the Series B Preferred Shares and Warrants at the conversion or exercise price of $16.00 and sale of all of the resulting common shares during the effectiveness of the registration statement that includes this prospectus. The selling shareholders are not required to convert their securities or sell their shares. See “Plan of Distribution.”

ABOUT THIS PROSPECTUS

We are registering 6,866,011 common shares of JED Oil Inc. for resale by the selling shareholders.

On May 31, 2006, we entered into a $34,475,000 Senior Subordinated Convertible Subordinated Note Purchase Agreement with qualified investors. The Convertible Notes bear interest at a rate of 10% per annum payable in quarterly payments and have a term through February 1, 2008. The Convertible Notes are convertible at the holders’ option into 2,154,688 common shares of JED at a value of $16 per share. We undertook to file a registration statement with the Securities and Exchange Commission (the “SEC”) by July 31, 2006, to have the SEC declare such registration statement effective no later than September 29, 2006 and, subject to certain exceptions, to keep such registration statement effective at all times until all shares registered thereby or have been sold thereunder or may be resold pursuant to Rule 144(k) under the Securities Act of 1933, as amended. JED is obligated to pay certain liquidated damages in the event it fails to satisfy these registration obligations.

On June 9, 2006, JED closed a private placement of 970,313 Series B Preferred Shares for gross proceeds of $15,525,000. The Series B Preferred Shares will receive dividends at the rate of 10% per annum, payable quarterly, and be redeemed by the Company on February 1, 2008. Each quarter, holders may elect to receive their dividends in common shares of JED, valued at the trailing fifteen day volume weighted average trading price for the common shares prior to the record date for the dividend. Series B Preferred Shares outstanding on February 1, 2008 will be mandatorily redeemed by JED. In the event of certain new equity issues by JED, holders of the Series B Preferred Shares shall have a right of first refusal to participate, on a pro rata basis, in such new issues. In connection with the private placement, JED also entered into a Registration Rights Agreement with the purchasers of the preferred shares. Pursuant to the terms of the Registration Rights Agreement, JED has agreed to prepare and file with the SEC a registration statement for the purpose of registering for resale all of the common shares of JED issuable upon conversion of the Series B Preferred Shares. JED is obligated to file such registration statement no later than August 9, 2006, to have the SEC declare such registration statement effective no later than October 6, 2006 and, subject to certain exceptions, to keep such registration statement effective at all times until the all shares registered

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thereby have been sold thereunder or may be resold pursuant to rule 144(k) under the Securities Act of 1933, as amended. JED is obligated to pay certain liquidated damages in the event it fails to satisfy these registration obligations.

JED issued a Senior Subordinated Convertible Note (the “Old JED Funding Note”) in the aggregate principal amount of $20,000,000 with a conversion price of $30.00 to JED Funding, Ltd. on August 3, 2005. Following the 3 for 2 stock split on October 13, 2005, the conversion price of the Old JED Funding Note was adjusted to $20.00. In May 2006 $1,000,000 of the Old JED Funding Note was converted to 57,143 common shares at $17.50 per share. In May 2006, the Old JED Funding Note was amended and restated into the 10% Amended and Restated Senior Subordinated Convertible Note to adjust the conversion price to $16.00 and permit conversion into Series B Convertible Preferred Shares (the “New JED Funding Note”). In May 2006, at the time of the issuance of the New JED Funding Note, $13,235,000 of the New JED Funding Note was converted into Series B Convertible Preferred Shares which were registered in the names of the limited partners named herein as selling shareholders. Each share of Series B Convertible Preferred Shares can be converted at any time at the holders’ option into one common share. The principal amount of $5,765,000 remaining outstanding under the New JED Funding Note is convertible into 360,313 common shares at $16.00.

Axiom Capital Management acted as placement agent on the placement of the Convertible Notes and Series B Preferred Shares. A compensation, JED issued common stock purchase warrants (the “Warrants”) to purchase 156,250 common shares with an exercise price of $16.00 per share, subject to adjustment.

This prospectus may only be used where it is legal to offer and sell the common shares covered by this prospectus. We have not taken any action to register or obtain permission for this offering or the distribution of this prospectus in any country other than the United States.

INFORMATION ON OUTSTANDING SHARES

The number of common shares outstanding before and after this offering are set forth below:

• Common shares outstanding before the offering                 14,964,903
as of September 30, 2006

• Common shares to be outstanding after the offering           19,406,650

assuming the conversion or exercise of the Convertible Notes, the New JED Funding Note, the Series B Preferred Shares and Warrants at the current conversion or exercise price.

The number set forth above for the common shares outstanding before this offering is the number of shares outstanding as of September 30, 2006. The numbers set forth above before this offering do not include: (i) common shares issuable upon conversion of the Convertible Notes, the New JED Funding Note and the Series B Preferred Shares, (ii) 837,500 common shares that, as of September 30, 2006, are issuable upon the exercise of outstanding options, and (iii) 274,750 common shares that, as of September 30, 2006, are issuable upon the exercise of outstanding

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warrants. The options are exercisable at prices ranging from $3.67 to $16.00, with a weighted average exercise price of $10.14 per share and the warrants are exercisable at a price of $11.00 per share.

The number set forth above for the common shares to be outstanding after this offering assuming all shares are sold includes common shares issuable upon the conversion or exercise of the Convertible Notes, the New JED Funding Note, the Series B Preferred Shares and the Warrants at the conversion or exercise price.

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference include forward-looking statements. All statements other than statements of historical facts contained in this prospectus and the documents incorporated by reference, including statements regarding our future financial position, estimated amounts and timing of capital expenditures, royalty rates and exchange rates, plans for drilling, exploration and development, 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 described in “Risk Factors” below and in our annual report on Form 20-F under the heading “Risk Factors”.

Statements concerning oil and gas reserves contained in the documents incorporated by reference may be deemed to be forward-looking statements as they involve the implied assessment that the resources described can be profitably produced in the future, based on certain estimates and assumptions.

These risks and uncertainties include:

• the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil, natural gas and natural gas liquids;

• market demand;

• risks and uncertainties involving geology of oil and gas deposits;

• the uncertainty of reserves estimates and reserves life;

• the uncertainty of estimates and projections relating to production, costs and expenses;

• potential delays or changes in plans with respect to exploration or development projects or capital expenditures;

• fluctuations in oil and gas prices, foreign currency exchange rates and interest rates;

• health, safety and environmental risks;

• uncertainties as to the availability and cost of financing; and

• the possibility that government policies or laws may change or governmental approvals may be delayed or withheld.

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Other sections of this prospectus may include additional factors, which 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.

We undertake no obligation to update publicly or revise any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

RISK FACTORS

Please consider carefully the following risk factors and uncertainties which we face in our business, and other information contained in this prospectus, before investing in our common shares.

We are subject to financial penalties due to the fact that this registration statement was not declared effective by September 29, 2006.

In connection with the private placement of the notes completed in June 2006, we have undertaken to file a registration statement with the Securities and Exchange Commission by July 31, 2006, to have the SEC declare such registration statement effective no later than September 29, 2006 and, subject to certain exceptions, to keep such registration statement effective at all times until all shares registered thereby or have been sold thereunder or may be resold pursuant to Rule 144(k) under the Securities Act of 1933, as amended. The Company is obligated to pay certain liquidated damages in the event it fails to satisfy these registration obligations. If the registration statement is not effective by November 13, 2006, the noteholders may require the notes to be redeemed at 120% of the outstanding principal and interest. In connection with the private placement of the Series B Preferred Shares in June 2006, we also entered into a registration rights agreement with the purchasers of the preferred shares under which we agreed to prepare and file with the SEC a registration statement for the purpose of registering for resale all of the common shares of the Company issuable upon conversion of the preferred shares. The Company is obligated to file such registration statement no later than August 9, 2006, to have the SEC declare such registration statement effective no later than October 6, 2006 and, subject to certain exceptions, to keep such registration statement effective at all times until the all shares registered thereby have been sold thereunder or may be resold pursuant to rule 144(k) under the Securities Act of 1933, as amended. The Company is obligated to pay certain liquidated damages in the event in fails to satisfy these registration obligations.

Our results of operations and financial condition are dependent on the prices received for our oil and natural gas production.

Oil and natural gas prices have fluctuated widely during recent years and are subject to fluctuations in response to relatively minor changes in supply, demand, market uncertainty and other factors that are beyond our control. These factors include, but are not limited to, worldwide political instability, foreign supply of oil and natural gas, the level of consumer product demand, government regulations and taxes, the price and availability of alternative fuels and the overall economic environment. Any decline in crude oil or natural gas prices may have a material adverse effect on our operations, financial condition, borrowing ability, reserves and the level of expenditures for the development of oil and natural gas reserves.

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We may use financial derivative instruments and other hedging mechanisms to try to limit a portion of the adverse effects resulting from changes in natural gas and oil commodity prices. To the extent we hedge our commodity price exposure, we forego the benefits we would otherwise experience if commodity prices were to increase. In addition, our commodity hedging activities could expose us to losses. Such losses could occur under various circumstances, including where the other party to a hedge does not perform its obligations under the hedge agreement, the hedge is imperfect or our hedging policies and procedures are not followed. Furthermore, we cannot guarantee that such hedging transactions will fully offset the risks of changes in commodities prices.

In addition, we regularly assess the carrying value of our assets in accordance with U.S. generally accepted accounting principles under the full cost method. If oil and natural gas prices become depressed or decline, the carrying value of our assets could be subject to downward revision.

An increase in operating costs or a decline in our production level could have a material adverse effect on our results of operations and financial condition and, therefore, could affect the market price of the Common Shares.

Higher operating costs for our underlying properties will directly decrease the amount of cash flow received by JED. Electricity, chemicals, supplies, reclamation and abandonment and labour costs are a few of the operating costs that are susceptible to material fluctuation. The level of production from our existing properties may decline at rates greater than anticipated due to unforeseen circumstances, many of which are beyond our control. A significant decline in our production could result in materially lower revenues and cash flow.

A decline in our ability to market our oil and natural gas production could have a material adverse effect on production levels or on the price that we received for our production which, in turn, could affect the market price of our Common Shares.

Our business depends in part upon the availability, proximity and capacity of gas gathering systems, pipelines and processing facilities. Canadian federal and provincial, as well as United States federal and state, regulation of oil and gas production, processing and transportation, tax and energy policies, general economic conditions, and changes in supply and demand could adversely affect our ability to produce and market oil and natural gas. If market factors change and inhibit the marketing of our production, overall production or realized prices may decline.

Fluctuations in foreign currency exchange rates could adversely affect our business, and could affect the market price of our Common Shares.

The price that we receive for a majority of our oil and natural gas is based on United States dollar denominated benchmarks, and therefore the price that we receive in Canadian dollars is affected by the exchange rate between the two currencies. A material increase in the value of the Canadian dollar relative to the United States dollar may negatively impact net production revenue by decreasing the Canadian dollars received for a given United States dollar price. We could be subject to unfavourable price changes to the extent that we have engaged, or in the future engage, in risk management activities related to foreign exchange rates, through entry into forward foreign exchange contracts or otherwise.

Actual reserves will vary from reserve estimates, and those variations could be material, and affect the market price of our Common Shares.

The reserve and recovery information contained in the independent engineering report prepared by McDaniel & Associates (“McDaniel”) relating to our reserves is only an estimate and the actual

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production and ultimate reserves from our properties may be greater or less than the estimates prepared by McDaniel.

The value of our Common Shares depends upon, among other things, the reserves attributable to our properties. Estimating reserves is inherently uncertain. Ultimately, actual reserves attributable to our properties will vary from estimates, and those variations may be material. The reserve figures contained herein are only estimates. A number of factors are considered and a number of assumptions are made when estimating reserves. These factors and assumptions include, among others:

• historical production in the area compared with production rates from similar producing areas;

• future commodity prices, production and development costs, royalties and capital expenditures;

• initial production rates;

• production decline rates;

• ultimate recovery of reserves;

• success of future development activities;

• marketability of production;

• effects of government regulation; and

• other government levies that may be imposed over the producing life of reserves.

Reserve estimates are based on the relevant factors, assumptions and prices on the date the relevant evaluations were prepared. Many of these factors are subject to change and are beyond our control. If these factors, assumptions and prices prove to be inaccurate, actual results may vary materially from reserve estimates.

If we expand our operations beyond oil and natural gas production in western Canada and the western United States we may face new challenges and risks.

If we were unsuccessful in managing these challenges and risks, our results of operations and financial condition could be adversely affected, which could affect the market price of our Common Shares.

Our operations and expertise are currently focused on conventional oil and gas production and development in the Western Canadian Sedimentary Basin and the Rocky Mountain states of the U.S. In the future, we may acquire oil and gas properties outside of this geographic area. In addition, JED could acquire other energy related assets, such as oil and natural gas processing plants or pipelines. Expansion of our activities into new areas may present challenges and risks that we have not faced in the past. If we do not manage these challenges and risks successfully, our results of operations and financial condition could be adversely affected.

In determining the purchase price of acquisitions, we rely on both internal and external assessments relating to estimates of reserves that may prove to be materially inaccurate. Such reliance could adversely affect the market price of our Common Shares.

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The price we are willing to pay for reserve acquisitions is based largely on estimates of the reserves to be acquired. Actual reserves could vary materially from these estimates. Consequently, the reserves we acquire may be less than expected, which could adversely impact cash flows. An initial assessment of an acquisition may be based on a report by engineers or firms of engineers that have different evaluation methods and approaches than those of our engineers, and these initial assessments may differ significantly from our subsequent assessments.

Some of our properties are not operated by us and, therefore, results of operations may be adversely affected by the failure of third-party operators, which could affect the market price of our Common Shares.

The continuing production from a property, and to some extent the marketing of that production, is dependent upon the ability of the operators of those properties. At December 31, 2005, approximately 89% of our daily production was from properties operated by third parties. To the extent a third-party operator fails to perform its functions efficiently or becomes insolvent, our revenue may be reduced. Third party operators also make estimates of future capital expenditures more difficult.

Further, the operating agreements which govern the properties not operated by us typically require the operator to conduct operations in a good and “workmanlike” manner. These operating agreements generally provide, however, that the operator has no liability to the other non-operating working interest owners for losses sustained or liabilities incurred, except for liabilities that may result from gross negligence or wilful misconduct.

Delays in business operations could adversely affect the market price of our Common Shares.

In addition to the usual delays in payment by purchasers of oil and natural gas to the operators of our properties, and the delays of those operators in remitting payment to us, payments between any of these parties may also be delayed by:

• restrictions imposed by lenders;

• accounting delays;

• delays in the sale or delivery of products;

• delays in the connection of wells to a gathering system;

• blowouts or other accidents;

• adjustments for prior periods;

• recovery by the operator of expenses incurred in the operation of the properties; or

• the establishment by the operator of reserves for these expenses.

Any of these delays could expose us to additional third party credit risks.

We may, from time to time, finance a significant portion of our operations through debt. Our indebtedness could affect the market price of our Common Shares.

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Variations in interest rates and scheduled principal repayments could result in significant changes to the amount of the cash flow required to be applied to debt. The agreements governing our credit facility provide that if we are in default under the credit facility, exceed certain borrowing thresholds or fail to comply with certain covenants, we must repay the indebtedness at an accelerated rate.

Our lenders have been provided with a security interest in substantially all of our assets. If we are unable to pay the debt service charges or otherwise commit an event of default, such as bankruptcy, our lenders may foreclose on and sell the properties. The proceeds of any sale would be applied to satisfy amounts owed to the creditors. Only after the proceeds of that sale were applied towards the debt would the remainder, if any, be available for distribution to Shareholders.

Our current credit facility and any replacement credit facility may not provide sufficient liquidity.

The amounts available under our existing credit facility may not be sufficient for future operations, or we may not be able to obtain additional financing on economic terms attractive to us, if at all.

The oil and natural gas industry is highly competitive.

We compete for capital, acquisitions of reserves, undeveloped lands, skilled personnel, access to drilling rigs, service rigs and other equipment, access to processing facilities, pipeline and refining capacity and in many other respects with a substantial number of other organizations, many of which may have greater technical and financial resources than we do. Some of these organizations not only explore for, develop and produce oil and natural gas but also carry on refining operations and market oil and other products on a worldwide basis. As a result of these complementary activities, some of our competitors may have greater and more diverse competitive resources to draw on than we do. Given the highly competitive nature of the oil and natural gas industry, this could adversely affect the market price of our Common Shares.

The industry in which we operate exposes us to potential liabilities that may not be covered by insurance.

Our operations are subject to all of the risks associated with the operation and development of oil and natural gas properties, including the drilling of oil and natural gas wells, and the production and transportation of oil and natural gas. These risks include encountering unexpected formations or pressures, premature declines of reservoirs, blow-outs, equipment failures and other accidents, cratering, sour gas releases, uncontrollable flows of oil, natural gas or well fluids, adverse weather conditions, pollution, other environmental risks, fires and spills. A number of these risks could result in personal injury, loss of life, or environmental and other damage to our property or the property of others. We cannot fully protect against all of these risks, nor are all of these risks insurable. We may become liable for damages arising from these events against which we cannot insure or against which we may elect not to insure because of high premium costs or other reasons. Any costs incurred to repair these damages or pay these liabilities would reduce funds available for distribution to Shareholders.

The operation of oil and natural gas wells could subject us to environmental claims and liability.

The oil and natural gas industry is subject to extensive environmental regulation pursuant to local, provincial and federal legislation. A breach of that legislation may result in the imposition of fines or the issuance of “clean up” orders. Legislation regulating the oil and natural gas industry may be changed to impose higher standards and potentially more costly obligations. For example, the 1997 Kyoto Protocol to the United Nation’s Framework Convention on Climate Change, known as the Kyoto Protocol, was ratified by the Canadian government in December, 2002 and will require, among other things,

13

significant reductions in greenhouse gases. The impact of the Kyoto Protocol on us is uncertain and may result in significant future additional costs for our operations. Although we record a provision in our financial statements relating to our estimated future environmental and reclamation obligations, we cannot guarantee that we will be able to satisfy our actual future environmental and reclamation obligations.

We are not fully insured against certain environmental risks, either because such insurance is not available or because of high premium costs. In particular, insurance against risks from environmental pollution occurring over time (as opposed to sudden and catastrophic damages) is not available on economically reasonable terms.

Accordingly, our properties may be subject to liability due to hazards that cannot be insured against, or that have not been insured against due to prohibitive premium costs or for other reasons. Any site reclamation or abandonment costs actually incurred in the ordinary course of business in a specific period will be funded out of cash flow and, therefore, will reduce the amounts available for distribution to Shareholders. Should we be unable to fully fund the cost of remedying an environmental problem, we might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy.

Lower crude oil and natural gas prices increase the risk of ceiling limitation write-downs. Any write-downs could materially affect the value of your investment.

We use the “full cost” method of accounting for petroleum and natural gas properties. All costs related to the exploration for and the development of oil and gas reserves are capitalized into two geographic cost centres representing JED’s activity which are undertaken in Canada and the U.S. Costs capitalized include land acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling productive and non-productive wells. Proceeds from the disposal of properties are applied as a reduction of cost without recognition of a gain or loss except where such disposals would result in a major change in the depletion rate.

Capitalized costs are depleted and depreciated using the unit-of-production method based on the estimated gross proven oil and natural gas reserves before royalties as determined by independent engineers. Units of natural gas are converted into barrels of oil equivalent on a relative energy content basis. Capitalized costs, net of accumulated depletion and depreciation, are limited to estimated future net revenues from proven reserves, based on year-end prices. The amounts recorded for depletion and depreciation and asset retirement obligations are based on estimates of proven reserves and future costs. The recoverable value of capital assets is based on a number of factors including the estimated proven reserves and future costs. By their nature, these estimates are subject to measurement uncertainty and the impact on financial statements of future periods could be material.

We perform a cost recovery ceiling test which limits net capitalized costs to the estimated future net revenue from proven oil and gas reserves plus the cost of unproven properties less impairment, using year-end prices. Under U.S. GAAP, companies using the “full cost” method of accounting for oil and gas producing activities perform a ceiling test using discounted estimated future net revenue from proven oil and gas reserves with a discount factor of 10%. Prices used in the U.S. GAAP ceiling tests performed for this reconciliation were those in effect at the applicable year-end. Financing and administration costs are excluded from the calculation under U.S. GAAP. At December 31, 2004 JED realized a U.S. GAAP ceiling test write-down of $4.2 million. There were no such write-downs required at December 31, 2005.

14

The risk that we will be required to write down the carrying value of crude oil and natural gas properties increases when crude oil and natural gas prices are low or volatile. We may experience additional ceiling test write-downs in the future.

Unforeseen title defects may result in a loss of entitlement to production and reserves.

Although we conduct title reviews in accordance with industry practice prior to any purchase of resource assets, such reviews do not guarantee that an unforeseen defect in the chain of title will not arise and defeat our title to the purchased assets. If such a defect were to occur, our entitlement to the production from such purchased assets could be jeopardized.

Aboriginal Land Claims

The economic impact on us of claims of aboriginal title is unknown. Aboriginal people have claimed aboriginal title and rights to a substantial portion of western Canada. We are unable to assess the effect, if any, that any such claim would have on our business and operations.

Changes in tax and other laws may adversely affect Shareholders.

Income tax laws, other laws or government incentive programs relating to the oil and gas industry may in the future be changed or interpreted in a manner that adversely affects JED and our Shareholders. Tax authorities having jurisdiction over JED or the Shareholders may disagree with the manner in which we calculate our income for tax purposes or could change their administrative practices to our detriment or the detriment of Shareholders.

Income Tax Matters

On October 31, 2003, the Department of Finance (Canada) released, for public comment, proposed amendments to the Tax Act that relate to the deductibility of interest and other expenses for income tax purposes for taxation years commencing after 2004. In general, the proposed amendments were intended to deny the realization of losses in respect of a business if there is no reasonable expectation that the business will produce a cumulative profit over the period that the business can reasonably be expected to be carried on. Although the 2005 Canadian federal budget stated that the October 31, 2003 amendments will not be enacted, it stated that a “more modest legislative initiative” would be developed to address losses realized where there is no reasonable expectation of profit from the relevant activity. Accordingly, there is a possibility that legislation may be enacted which could restrict or deny losses in a manner which could adversely affect JED. However, JED believes that it is reasonable to expect JED and each subsidiary entity to produce a cumulative profit over the expected period that the business will be carried on.

Expenses incurred by JED are only deductible to the extent they are reasonable. Although JED is of the view that all expenses to be claimed by JED and its subsidiary entities should be reasonable and deductible, there can be no assurance that the Canadian Revenue Agency (“CRA”) will agree. If the CRA were to successfully challenge the deductibility of such expenses, the net revenue to JED may be adversely affected.

Changes in market-based factors may adversely affect the trading price of our Common Shares.

The market price of our Common Shares is primarily a function of the value of our properties. The market price of our Common Shares is therefore sensitive to a variety of market based factors, including,

15

but not limited to, interest rates and the comparability of our Common Shares to other securities. Any changes in these market-based factors may adversely affect the trading price of the Common Shares.

Our operations are entirely independent from the Shareholders and loss of key management and other personnel could impact our business.

Shareholders are entirely dependent on the management of JED with respect to the acquisition of oil and gas properties and assets, the development and acquisition of additional reserves and the management and administration of all matters relating to our oil and natural gas properties. The loss of the services of key individuals who currently comprise the management team could have a detrimental effect on JED. Investors should carefully consider whether they are willing to rely on the existing management before investing in the Common Shares.

There may be future dilution.

One of our objectives is to continually add to our reserves through acquisitions and through development. Our success is, in part, dependent on our ability to raise capital from time to time by selling additional Common Shares. Shareholders will suffer dilution as a result of these offerings if, for example, the cash flow, production or reserves from the acquired assets do not reflect the additional number of Common Shares issued to acquire those assets. Shareholders may also suffer dilution in connection with future issuances of Common Shares to effect acquisitions.

There may not always be an active trading market for the Common Shares.

While there is currently an active trading market for our Common Shares in the United States and Canada, we cannot guarantee that an active trading market will be sustained.

We may undertake acquisitions that could limit our ability to manage and maintain our business, result in adverse accounting treatment and are difficult to integrate into our business. Any of these events could result in a material change in our liquidity, impair our ability to pay dividends and could adversely affect the value of your investment.

A component of future growth will depend on the ability to identify, negotiate, and acquire additional companies and assets that complement or expand existing operations. However we may be unable to complete any acquisitions, or any acquisitions we may complete may not enhance our business. Any acquisitions could subject us to a number of risks, including:

• diversion of management’s attention;

• inability to retain the management, key personnel and other employees of the acquired business;

• inability to establish uniform standards, controls, procedures and policies;

• inability to retain the acquired company’s customers;

• exposure to legal claims for activities of the acquired business prior to acquisition; and

• inability to integrate the acquired company and its employees into our organization effectively.

16

We are incorporated in Alberta, Canada, some of our directors and officers live in Canada, and most of our assets are in Canada, and investors may have difficulty initiating legal claims and enforcing judgments against us and our directors and officers.

JED is a corporation existing under the laws of the Province of Alberta and the majority of its assets and operations are located, and the majority of its revenues are derived, outside the United States. JED has appointed an agent to receive service of process in the United States. However, it may not be possible for holders to enforce outside the United States judgments against JED obtained in the United States in any such actions, including actions predicated upon the civil liability provisions of the United States federal securities laws. In addition, certain of the directors and officers of JED are residents of Canada, and all or a substantial portion of the assets of those directors and officers are or may be located outside the United States. As a result, it may not be possible for holders to effect service of process within the United States upon those persons, or to enforce against them judgments obtained in the United States courts, including judgments predicated upon the civil liability provisions of the United States federal and state securities laws. We believe that there is uncertainty as to whether Canadian courts would enforce (i) judgments of United States courts obtained against JED or such persons predicated upon the civil liability provisions of the United States federal and state securities laws or (ii) in original actions brought in Canada, liabilities against JED or such persons predicated upon the United States federal and state securities laws.

SELLING SHAREHOLDERS

The table below lists the selling shareholders who may resell common shares pursuant to this prospectus and, in addition, sets forth the following:

• the number of common shares outstanding beneficially owned by the selling shareholders prior to the offering;

• the number of shares registered for sale in the offering and issuable upon exercise or conversion of, or pursuant to, the Convertible Notes, the New JED Funding Note, Series B Preferred Shares or the Warrants;

• the number of common shares owned by each selling shareholder after the offering, assuming it sells all of the common shares registered for its benefit.

The term “beneficial ownership” includes shares over which the indicated beneficial owner exercises voting and/or investment power. The rules also deem common shares subject to convertible securities currently exercisable, or exercisable within 60 days, to be outstanding for purposes of computing the percentage ownership of the person holding the options or warrants, but they do not deem these common shares to be outstanding for purposes of computing the percentage ownership of any other person. The applicable percentage of ownership is based on 14,964,903 common shares outstanding as of September 30, 2006, together with any applicable convertible securities for that shareholder. Except as otherwise indicated, we believe the beneficial owner of the common shares listed below, based on information furnished by it, has sole voting and investment power over the number of shares listed opposite its name.

Except as indicated below, to our knowledge, none of the selling shareholders is a director, officer or consultant of ours or holder of 10% or more of our shares, or a broker-dealer or an affiliate of a broker-dealer. We believe that the selling shareholders have sole voting and investment powers over their ordinarily shares, except as indicated below. The information provided below with respect to each selling shareholder has been obtained from such selling shareholder.

17

All conversions pursuant to the Convertible Notes are subject to the restriction that such conversion does not result in the holder and its affiliates beneficially owning more than 4.99% of our common shares. By written notice to us, any holder may from time to time increase or decrease the 4.99% limitation to any other percentage not in excess of 9.99% specified in such notice, provided, however, that (i) any such increase will not be effective until the date which is 61 days after such notice is delivered to us and (ii) any such increase or decrease will apply only to the holder who has so notified us and not to any other holder of the Convertible Notes.

	Shares Owned Before							Shares Owned After
Holders of Convertible Notes and Warrants	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered2		Number		Percent
SILVER OAK CAPITAL, L.L.C. 3, 53 c/o Angelo, Gordon & Co., L.P. 245 Park Avenue New York, New York 10167		625,000		4.00	%		1,250,000		0		0
PORTSIDE GROWTH AND 4, 53 OPPORTUNITY FUND c/o Ramius Capital Group, LLC 666 Third Avenue, 26th Floor New York, NY 10017		187,500		1.23	%		375,000		0		0
SOLOMON STRATEGIC HOLDINGS, INC. 5 c/o Andrew P. Mackeller Director Greenlands The Red Gap Castletown IM9 1HB, UK		6,250		0.04	%		12,500		0		0
THE TAIL WIND FUND LTD. 6 c/o Tail Wind Advisory and Management Ltd. Attention: David Crook 77 Long Acre London WC2E 9LB UK		93,750		0.62	%		187,500		0		0
CAPITAL VENTURES INTERNATIONAL 7, 53 c/o Heights Capital Management, Inc. 101 California Street, Suite 3250 San Francisco, CA 94111		62,500		0.41	%		125,000		0		0
KAMUNTING STREET MASTER FUND, LTD. 8 Attention: Chris Falsetta Kamunting Street Capital 140 E. 45th Street New York, NY 10017 Kings Road Investments Ltd.		360,938		2.35	%		721,876		0		0
KINGS ROAD INVESTMENTS LTD 9 c/o Polygon Investments Partners, LP 598 Madison Avenue 14th Floor New York, NY 10022		312,500		2.04	%		625,000		0		0
ALPHA CAPITAL AG 10 Attention: Konrad Ackerman Alpha Capital Aktiengesellschaft 160 Central Park South Suite 2701 New York, NY 10019		31,250		0.20	%		62,500		0		0

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	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered2		Number		Percent
CORSAIR CAPITAL PARTNERS, L.P. 11, 53 Corsair Capital 350 Madison Avenue Ninth Floor New York, NY 10017		107,625		0.71	%		215,250		0		0
CORSAIR CAPITAL INVESTORS, LTD. 11, 53 Corsair Capital 350 Madison Avenue Ninth Floor New York, NY 10017		12,250		0.08	%		24,500		0		0
CORSAIR CAPITAL PARTNERS 100, L.P. 11, 53 Corsair Capital 350 Madison Avenue Ninth Floor New York, NY 10017		5,125		0.03	%		10,250		0		0
BARRY ZELIN 12, 54,55 300 East 56th Street New York, NY 10022		13,125		0.09	%		25,625		0		0
MADILYN JORDON 13, 54,55 40 Cushman Road Scarsdale, NY 10583		98,437		0.65	%		192,187		0		0
MARK MITZNER P.O. Box 886 W. Hampton Beach, NY 11978		15,625		0.10	%		31,250		0		0
ARTHUR SCHREIBMAN 15 Salem Drive Scarsdale, NY 10583		6,250		0.04	%		12,500		0		0
KNOLL CAPITAL FUND II MASTER FUND, LTD 14 Knoll Capital 666 Fifth Avenue Suite 3702 New York, NY 10103		93,750		0.62	%		187,500		0		0
EUROPA INTERNATIONAL, INC. 14 Knoll Capital 666 Fifth Avenue Suite 3702 New York, NY 10103		93,750		0.62	%		187,500		0		0
GUS BLASS II IRA		25,000		0.16	%		50,000		0		0
UBS FINANCIAL SERVICES INC. AS IRA CUSTODIAN FOR BARRY J. GOLDSTEIN 1100 Town & Country Road Suite 1000, Orange, CA 92868		9,375		0.06	%		18,750		0		0

Holders of Series B Convertible Preferred Shares

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	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered2		Number		Percent
VINCENT MANNGARD ERIC MANNGARD PARTNERSHIP 15 196 E. Main Street Huntington, NY 11743 631-549-5338		12,500		0.08	%		15,625		0		0
SAMMY WILDER 420 E. 61st Street New York, NY 10021		9,375		0.06	%		11,719		0		0
BERNARD D. NOBLE AND LISA F. NOBLE 1075 Park Avenue, #7C New York, NY 10128		12,500		0.08	%		15,625		0		0
DAVID VOZICK 579 Bedford Road Mount Kisco, NY 0549		6,250		0.04	%		7,813		0		0
HOWARD TANNER & JANICE TANNER JTWROS 17 Hewitt Avenue White Plains, NY 10605		10,937		0.07	%		13,671		0		0
ALAN JAY STEINBERG 215 E. 68th Street, #21H New York, NY 10021		15,625		0.10	%		19,531		0		0
RCB SECURITIES PROFIT SHARING PLAN 16 900 Palisade Avenue, #2203 Fort Lee, NY 07024		6,250		0.04	%		7,813		0		0
GUS BLASS II 16 W. Palisades Drive Little Rock, AR 72207		17,500		0.11	%		21,875		0		0
CAPITAL PROPERTIES LLC 17, 53 212 Center Street, Suite 800 Little Rock, AR 72201		31,250		0.20	%		39,063		0		0
BLASS GRANDCHILDREN’S TRUST 18 16 W. Palisades Drive Little Rock, AR 72207		15,000		0.10	%		18,750		0		0
CONSTANCE BLASS O’NEILL TRUST #3 18 16 W. Palisades Drive Little Rock, AR 72207		30,000		0.20	%		37,500		0		0
ABBOT A./SELMA C. HARMAN FOUNDATION 19 146 Central Park West New York, NY 10023		625		0.004	%		781		0		0
RICHARD S. HARMAN IRA 146 Central Park West New York, NY 10023		1,562		0.01	%		1,953		0		0
TRACY LAZAR MALMAN 657 Long Cove Court Riverwoods, IL 60015		9,375		0.06	%		11,719		0		0
STACY & PRESLEY REED TENANTS IN COMMON 10155 Westmoor Drive, #20 Westminster, CO 80021		3,125		0.02	%		3,906		0		0
MAXWELL A. SHUSTER- JUDITH B. SHUSTER CO- TTEES THE SHUSTER FAMILY 20, 55 TRUST DATED 4-4-80 928 Emerald Bay Laguna Beach, CA 92651		3,750		0.02	%		4,688		0		0

20

	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered2		Number		Percent
LINCOLN PARTNERS GROUP LLC 21 1 Leroy Street, #2B NY, NY 10014		12,500		0.08	%		15,625		0		0
JUDITH & STEVEN COMBS 9337 Saulsbury Circle Westminster, CO 80021		3,125		0.02	%		3,906		0		0
GERALD ZEITZ 360 E. 65th Street NY, NY 10021		3,125		0.02	%		3,906		0		0
RALPH WORTHINGTON 22, 55 251 E. 51st Street NY, NY 10021		15,625		0.10	%		19,531		0		0
GOLDSTEIN FAMILY ASSOCIATES 23 950 S. Cherry Street, #320 Denver, CO 80246		9,375		0.06	%		11,719		0		0
WELLS GRAY RESORT & RESOURCES LTD. 24 Box 176 Dinsbury, Alberta		62,500		0.41	%		78,125		0		0
WILLIAM J. GORDICA 135 Eagle Ridge Drive SW Calgary, Alberta		34,375		0.22	%		42,969		0		0
LINDA G. SEXTON 4 Richland Place Pasadena, CA 91103		1,250		0.008	%		1,563		0		0
JAMES T. GALVIN 1205 Wabash Street Pasadena, CA 91103		3,125		0.02	%		3,906		0		0
JOHN F. GUILTINAN JR. 5000 Birch Street, Ste 9200 Newport, CA 92660		21,875		0.14	%		27,344		0		0
JMW FUND LLC 25 4 Richard Place Pasadena, CA 91103		70,781		0.47	%		88,476		0		0
JOHN P. MCGRAIN 4 Richard Place Pasadena, CA 91103		31,250		0.20	%		39,063		0		0
ROBERT RICHMAN NORMA RICHMAN JTWROS 26, 55 3867 Skycrest Drive Pasadena, CA 91107		1,562		0.01	%		1,953		0		0
SAN GABRIEL FUND LLC 27 4 Richard Place Pasadena, CA 91103		82,968		0.55	%		103,710		0		0
GLICKENHAUS & CO. 28, 55 546 5th Avenue NY, NY 10036		281,250		1.84	%		351,563		0		0
DEVORA CHASANOFF 7 Candy Lane Rye Brook, NY 10573		1,562		0.01	%		1,953		0		0

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	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered2		Number		Percent
ANN V. CLEMENTE 5 The High Road Bronxville, NY 10708		3,125		0.02	%		3,906		0		0
MARSHALL J. DONAT & MARY JEAN DONAT 142 Lincoln Ave. Purchase, NY 10577		1,562		0.01	%		1,953		0		0
MARC ENGELBERT 1165 Park Ave. New York, NY 10128		3,125		0.02	%		3,906		0		0
JOHN S. GROSS 16 Holly Lane Rye Brook, NY 10573		1,562		0.01	%		1,953		0		0
RANDALL HIGHT 50 Birch Drive Roslyn, NY 11576 1,562		3,125		0.02	%		3,906		0		0
SCOTT KAIDEN AND CHARLOTTE KAIDEN 14602 S Presario Trail Phoenix AZ 85048		1,562		0.01	%		1,953		0		0
ELAINE N. KELLY P.O Box 2045 210 Moon Ridge Rd, Killington, VT 05751		1,562		0.01	%		1,953		0		0
ANITA LAZARUS 1603 Abaco Dr. #E-1 Coconut Creek, FL 33066		1,562		0.01	%		1,953		0		0
MARK IRREV. TRUST FBO, FELICIA, JAQUELINE, ERIK MARK 29 1025 Westchester Ave. White Plains, NY 10604		1,562		0.01	%		1,953		0		0
KEVIN J. MCCARTHY AND DEIDRE MCCARTHY 245 Glen Eagles A. Atlantis, FL 334762		1,562		0.01	%		1,953		0		0
WOLFE MODEL 525 West End Ave New York, NY 10024		1,562		0.01	%		1,953		0		0
JOHN N. POST AND MARY H. POST 1557 Coles Ave. Mountainside, NJ 07092		1,562		0.01	%		1,953		0		0
STEVE ROMAN 96 Dove Hill Dr. Manhasset, NY 11030		1,562		0.01	%		1,953		0		0
LESLIE ROSENBERG AND SYBIL ROSENBERG 3 Brassie Rd Eastchester NY 10709		1,562		0.01	%		1,953		0		0
ELIAS SAYOUR FOUNDATION, INC. 30 8 Egan Place Englewood Cliffs, NJ 07632		3,125		0.02	%		3,906		0		0
SANDRA AND ROBERT SHAPIRO 6 Winthrop Dr, Rye Brook NY 10573		1,562		0.01	%		1,953		0		0

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	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered2		Number		Percent
GARY J. STADTMAUER 565 W. End Ave #9E New York NY 10024		3,125		0.02	%		3,906		0		0
DAVID S. TARICA 145 Golf View Dr. Jericho, NY 11753		1,562		0.01	%		1,953		0		0
TAVOR S. WHITE 49 West 70 St. #2 NY, NY 10023		3,125		0.02	%		3,906		0		0
DOMACO VENTURE CAPITAL FUND 31 195 Beech St. Eastchester, NY 10709		3,125		0.02	%		3,906		0		0
EDWARD MOSS AND ADENA MOSS 422 Westminster Rd Rockville Centre, NY 11570,		1,562		0.01	%		1,953		0		0
EMILY POLAK 90 Edgewater Drive Apt # 622 Coral Gables, FL. 33133		1,562		0.01	%		1,953		0		0
FREDERICK B. POLAK 81 Barchester Way Westfield, NJ 07090		1,562		0.01	%		1,953		0		0
MARGRIT POLAK 1411 Carroll Ave, Los Angeles CA 90026		1,562		0.01	%		1,953		0		0
RALPH A. DARIENZO 869 Highway 33 East Freehold, NJ 07728		1,562		0.01	%		1,953		0		0
FLORENCE E. LUVERA 300 Slocum Way Fort Lee, NJ 07024		1,562		0.01	%		1,953		0		0
ARTERIO INC. EMPLOYEE PROFIT SHARING PLAN 32 1061-B Shary Circle Concord, CA94518		1,562		0.01	%		1,953		0		0
GRACE M. CAPORINO 213 California Road Yorktown Heights, NY 10598		1,562		0.01	%		1,953		0		0
VINCENT & TERESA FERRARO JTWROS 5 East Broadway Greenwich, CT 06831		1,562		0.01	%		1,953		0		0
GREEN ACRES DENTAL SALARY SAVINGS PLAN 33 225 W. 35th Street, 2nd Fl. NY, NY 10001		1,562		0.01	%		1,953		0		0
LORI GROSSMAN 47 Bonuit Road Rye, NY 10573		1,562		0.01	%		1,953		0		0
CATHERINE HICKS c/o MSI Inc. 235 W. 35th Street, 4th Fl. NY, NY 10001		1,562		0.01	%		1,953		0		0

23

	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered2		Number		Percent
CATHERINE HICKS INC. DEFINED BENEFIT PENSION PLAN 34 c/o MSI Inc. 235 W. 35th Street, 4th Fl. NY, NY 10001		3,125		0.02	%		3,906		0		0
NORTON HIGHT AND JOAN HIGHT 118 E. 60th St., #23C NY, NY 10022		1,562		0.01	%		1,953		0		0
MRC COMPUTER CORP PSP 35 3010 Westchester Avenue Purchase, NY 10577		1,562		0.01	%		1,953		0		0
CARIN S. NETTER 7 Stone Falls Ct. Rye Brook, NY 10573		1,562		0.01	%		1,953		0		0
JAMIE POLAK 5 East 22nd Street, Apt. 6G New York, NY 10010		1,562		0.01	%		1,953		0		0
JONATHAN ROTHSCHILD c/o 1061B Shary Circle Concord, CA 94518		1,562		0.01	%		1,953		0		0
BARBARA SCHARF 8 Candy Lane Rye Brook, NY 10573		1,562		0.01	%		1,953		0		0
34TH STREET DENTAL PROFIT SHARING PLAN 36 225 West 35th Street, 2nd Floor New York, NY 10001 Attn: David Tarica		1,562		0.01	%		1,953		0		0
34TH STREET DENTAL FLOOR OFFSET PLAN TRUST 36 225 West 35th Street, 2nd Floor New York, NY 10001 Attn: David Tarica		1,562		0.01	%		1,953		0		0
SUELLYN P. TORNAY 10 Glenlake Parkway Atlanta, GA 30328		1,562		0.01	%		1,953		0		0
ALLIED DIESEL SERVICE INC. EMPLOYEE PSP 37 869 Highway 33 East Freehold, NJ 07728-8436		3,125		0.02	%		3,906		0		0
WILLIAM H. PETERSON REVOC. LIVING TRUST 38 2403 Beach Road Walled Lake, MI 48390		1,562		0.01	%		1,953		0		0
ARTHUR COHEN AND ALICE COHEN 3 Paddock Rd. Rye Brook, NY 10573		1,562		0.01	%		1,953		0		0
RONALD FATOULLAH 44 North Drive Great Neck, NY 11021		1,562		0.01	%		1,953		0		0
MAURA KELLY c/o James Kelley Global Payments 10 Glenlake Parkway North Tower Atlanta, GA 30328		3,125		0.02	%		3,906		0		0

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	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered2		Number		Percent
CLAIRE LAZARUS TRUST 39 7847 Exeter Blvd. Tamarac, FL 33321		1,562		0.01	%		1,953		0		0
MCCARTHY AND KELLY LLC 40 52 Duane Street, 7th Floor New York, NY 10007		1,562		0.01	%		1,953		0		0
MURRAY STADTMAUER AND CLARE STADTMAUER 217-15 39th Ave. Bayside, NY 11361		3,125		0.02	%		3,906		0		0
RHEA STADTMAUER AND JANICE MALMAN 27 Waterbury Road Montclair, NJ 07043		1,562		0.01	%		1,953		0		0
ROCHELLE VICTOR TRUST 41 4690 RT. 209 Accoro, NY 12404 Attn: Rochelle Victor		1,562		0.01	%		1,953		0		0
RL CAPITAL PARTNERSHIP, L.P. 42, 53 c/o Maxim Group 405 Lexington Ave., 2nd Floor New York, NY 10174		15,625		0.10	%		19,531		0		0
JONATHAN LAZAR 200 Winston Drive #2614 Cliffside Park, NJ 07010		1,562		0.01	%		1,953		0		0
MARGARET L. CAMERON c/o Glickenhaus & Co. 546 5th Avenue NY, NY 10036		31,250		0.20	%		39,063		0		0
MSI RETIREMENT PLAN 43 237 W. 35th Street NY, NY 10001		1,562		0.01	%		1,953		0		0

Holders of Series B Convertible Preferred Shares received upon conversion of the New JED Funding Note

	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address 44	Number		Percent			Shares Being Offered		Number		Percent
BATTERSEA CAPITAL, INC 45		13,125		0.09	%		13,125		0		0
RALPH L. BRADEN		6,250		0.04	%		6,250		0		0
MERTA IRIS DERMIT		7,812		0.05	%		7,812		0		0
M. WILLIAMS EAGLETON		1,312		0.008	%		1,312		0		0
ELEVATION FUND, LLC 46		12,500		0.08	%		12,500		0		0
JAMES T. GALVIN 1205 Wabash Street Pasadena, CA 91103		4,375		0.03	%		4,375		0		0

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	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address 44	Number		Percent			Shares Being Offered		Number		Percent
BARRY J. GOLDSTEIN 950 S. Cherry Street, # 320 Denver, CO 80246		12,500		0.08	%		12,500		0		0
WILLIAM J. GORDICA 135 Eagle Ridge Drive SW Calgary, Alberta		28,125		0.19	%		28,125		0		0
JOSEPH V. GORMAN, IRA		3,125		0.02	%		3,125		0		0
JOSEPH V. & MARGIE ANNE GORMAN, JT TEN		3,125		0.02	%		3,125		0		0
GROWTH VENTURES INC., PENSION PLAN & TRUST 47		12,500		0.08	%		12,500		0		0
AARON A. GRUNFELD		7,500		0.05	%		7,500		0		0
JMW FUND LLC 25 4 Richard Place Pasadena, CA 91103		93,750		0.62	%		93,750		0		0
DAVID L. JORDON		62,500		0.41	%		62,500		0		0
KEARNEY HOLDINGS LLC 48		39,625		0.26	%		39,625		0		0
KIRBY ENTERPRISE FUND, LLC 49		37,500		0.25	%		37,500		0		0
KUHNE FAMILY TRUST 50		46,875		0.31	%		46,875		0		0
VINCENT MANNGARD 196 E. Main Street Huntington, NY 11743		6,250		0.04	%		6,250		0		0
FRANK A. MASON		6,250		0.04	%		6,250		0		0
JOHN P, MCGRAIN 4 Richard Place Pasadena, CA 91103		125,000		0.83	%		125,000		0		0
DAVID MUCKENHIRN		12,500		0.08	%		12,500		0		0
JAYLENE PARK		6,250		0.04	%		6,250		0		0
JOHN PAULSON		23,438		0.15	%		23,438		0		0
MARY LAVINA RUSK		625		0.004	%		625		0		0
FRED M. RUSK, III		1,250		0.008	%		1,250		0		0
JESSICA ANNE RUSK		1,250		0.008	%		1,250		0		0
MARY MORGAN RUSK		1,250		0.008	%		1,250		0		0
RUSK LIVING TRUST		625		0.004	%		625		0		0
REUBEN SANDLER		25,000		0.16	%		25,000		0		0
PSFI FBO MICHAEL A. SCHNEIDER		25,000		0.16	%		25,000		0		0

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	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address 44	Number		Percent			Shares Being Offered		Number		Percent
LINDA G. SEXTON 4 Richland Place Pasadena, CA 91103		938		0.006	%		938		0		0
RONALD SHEAR & DEBORAH SHEAR, JT TEN		28,125		0.18	%		28,125		0		0
SHUSTER FAMILY TRUST, MAXWELL A. SHUSTER & JUDITH B. SHUSTER,55 CO-TRUSTEES 928 Emerald Bay Laguna Beach, CA 92651		15,000		0.10&			15,000		0		0
FCC AS CUSTODIAN FBO KAREN A. STANLEY		3,125		0.02	%		3,125		0		0
FCC AS CUSTODIAN FBO FRANK J. STANLEY III		7,813		0.05	%		7,813		0		0
BEAR STEARNS SECURITY CORP. FBO DAVID VOZICK IRA		6,250		0.04	%		6,250		0		0
BUDDY WALKER		53,125		0.35	%		53,125		0		0
WEST HAMPTON SPECIAL SITUATIONS FUND, LLC 51		37,500		0.25	%		37,500		0		0
JACK WRIGHT		25,000		0.16	%		25,000		0		0
SAMUEL D. WYMAN JR.		3,125		0.02	%		3,125		0		0
SAMUEL WYMAN JR. TRUSTEE, GERALDINE N. WYMAN FAMILY TRUST		3,125		0.02	%		3,125		0		0
GERALD ZEITZ 360 E. 65th Street NY, NY 10021		16,875		0.11	%		16,875		0		0

Holders of New JED Funding Note and Warrants

	Shares Owned Before							Shares Owned After
	the Offering1							the Offering
Name and Address	Number		Percent			Shares Being Offered		Number		Percent
JED FUNDING, LTD52		360,312		2.4	%		360,312		0		0
AXIOM CAPITAL MANAGEMENT, INC.54, 56		150,938		0.99	%		150,938		0		0

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1.	Includes all shares beneficially owned by the selling shareholders as of the date hereof as determined according to the paragraph above.
2.	JED agreed to register at least that number of common shares equal to 200% of $34,475,000 divided by the conversion price of the notes. JED agreed to register at least that number of common shares equal to 125% of $15,525,000 divided by the conversion price of the Series B Preferred Shares.
3.	Silver Oak Capital, L.L.C. (“Silver Oak”) holds the shares as nominee for private investment funds and specially managed accounts managed by Angelo, Gordon & Co., L.P. Jon Angelo, the Chief Executive Officer of Silver Oak, and Michael Gordon, the Chief Operating Officer of Silver Oak, have voting control and investment discretion over securities held by Silver Oak. Mr. Angelo and Mr. Gordon disclaim beneficial ownership of the shares held Silver Oak. Silver Oak is under common control with AG BD LLC, a NASD member.
4.	Ramius Capital Group, L.L.C. (“Ramius Capital”) is the investment adviser of Portside Growth and Opportunity Fund (“Portside”) and consequently has voting control and investment discretion over securities held by Portside. Ramius Capital disclaims beneficial ownership of the shares held by Portside. Peter A. Cohen, Morgan B. Start, Thomas W. Strauss and Jeffrey M. Solomon are the managing members of C4S & Co, L.L.C., the sole managing member of Ramius Capital. As a result, Messrs. Cohen, Start, Strauss and Solomon may be considered beneficial owners of any shares deemed to be owned by Ramius Capital. Messrs. Cohen, Start, Strauss and Solomon disclaim beneficial ownership of these shares. An affiliate of Ramius Capital is a NASD member. However, this affiliate will not sell any shares purchased in this offering by Portside and will receive no compensation whatsoever in connection with sales of shares purchased in this transaction.
5.	Andrew P. Mackellar is authorized by the Board of Directors of Solomon Strategic Holdings, Inc. (“Solomon”) to have voting control and investment discretion over securities held by Solomon. However, he disclaims any equitable or beneficial ownership of shares held by Solomon.
6.	David Crook is the Chief Executive Officer and controlling shareholder of Tail Wind Advisory & Management, Ltd. (“TWAM”), which is the investment manager for The Tail Wind Fund Ltd. (“Tail Wind”). Mr. Crooks has the voting control and investment discretion over securities held by Tail Wind. TWAM and Mr. Crook disclaim any equitable or beneficial ownership of shares held by Tail Wind.
7.	Heights Capital Management, Inc., the authorized agent of Capital Ventures International (“CVI”), has discretionary authority to vote and dispose of the shares held by CVI and may be deemed to be the beneficial owner of these shares. Martin Kobinger, in his capacity as an investment manager of Heights Capital Management, Inc., may also be deemed to have investment discretion and voting power over the shares held by CVI. Mr. Kobinger disclaims any such beneficial ownership of the shares held by CVI. CVI is affiliated with one or more registered broker-dealers.
8.	Allan Teh, a managing member of Kamunting Street Management, LLC, has voting control and investment discretion over securities held by Kamunting Street Master Fund, Ltd. (“Kamunting Fund”). Kamunting Street Management, LLC is the general partner of Kamunting Street Capital Management, LP which is the investment manager of Kamunting Fund. Allen Teh disclaims any equitable or beneficial ownership of shares held by Kamunting Fund.
9.	Kings Road Investments Ltd. (“Kings Road”) is a wholly-owned subsidiary of Polygon Global Opportunities Master Fund (“Master Fund”). Polygon Investment Partners LLP and Polygon Investment Partners LP (the “Investment Managers”), Polygon Investments Ltd. (the “Manager”), the Master Fund, Alexander Jackson, Reade Griffith and Paddy Dear share voting and dispositive power of the securities held by Kings Road. The

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	Investment Managers, the Manager, Alexander Jackson, Reade Griffith and Paddy Dear disclaim beneficial ownership of the securities held by Kings Road.
10.	Konrad Ackermann, a director of Alpha Capital Aktiengesellschaft, has voting control and investment discretion over securities held by Alpha Capital AG.
11.	Jay Petschek, a managing member of Corsair Capital Partners, L.P., Corsair Capital Investors, Ltd. and Corsair Capital Partners 100, L.P. (collectively, “Corsair”), has voting control and investment discretion over securities held by Corsair. Certain managing members of Corsair are employees of C.E. Unterberg, Towbin, a NASD member. The managing members disclaim beneficial ownership of the securities held by Corsair.
12.	Includes 625 shares issuable upon exercise of the Warrants received as compensation. See footnote 54 with respect to the Warrants. Mr. Zellin works for Axiom Capital Management, a NASD member.
13.	Includes 4,687 shares issuable upon exercise of Warrants received as compensation. See footnote 54 with respect to the Warrants. Ms. Jordan’s spouse works for Axiom Capital Management, a NASD member.
14.	Fred Knoll, a portfolio manager of Knoll Capital Fund II Master Fund, Ltd. and Europa International Inc. (collectively, “Knoll Capital”), has voting control and investment discretion over securities held by Knoll Capital. Fred Know disclaims beneficial ownership of the securities held by Knoll Capital.
15.	Eric Manngard and Vincent Manngard, the general partners of Vincent Manngard Eric Manngard Partnership (“Partnership”), have voting control and investment discretion over securities held by Partnership.
16.	Robert C. Bedford has voting control and investment discretion over securities held by RCB Securities Profit Sharing Plan.
17.	Gus Blass II and Gus Blass III, the general partners and managers of Capital Properties LLC (“Capital Properties”), have voting control and investment discretion over securities held by Capital Properties. A managing member of Capital Properties is a NASD member.
18.	Patricia B. Blass, the trustee of Blass Grandchildren’s Trust and Constance Blass O’Neil Trust #3 (collectively, “Trusts”), has voting control and investment discretion over securities held by Trusts.
19.	Richard S. Harman, the trustee of Abbot A/Selma C. Harman Foundation (“Foundation”), has voting control and investment discretion over securities held by Foundation.
20.	Maxwell A. Shuster and Judith B. Shuster, the trustees of The Shuster Family Trust (“Trust”), have voting control and investment discretion over securities held by Trust. Trust is affiliated with AXA Advisors LLC, a NASD member.
21.	Stephen J. Temes, a managing member of Lincoln Partners Group LLC (“Lincoln Partners”), has voting control and investment discretion over securities held by Lincoln Partners.
22.	Ralph Worthington is affiliated with Gilford Securities, a NASD member.
23.	Barry Goldstein, the manager of Goldstein Family Associates, has voting control and investment discretion over securities held by Goldstein Family Associates.
24.	Thomas Jacobsen, as president of Wells Gray Resort & Resources Ltd., has sole voting and investment discretion over securities held by Wells Gray Resort & Resources Ltd. Mr. Jacobsen also serves as our Chief Executive Officer.
25.	John P. McGrain, the manager of JMW Fund LLC, has voting control and investment discretion over securities held by JMW Fund LLC. John McGrain has acted as a consultant for us for the past two years with respect to investor relations.
26.	Robert Richman has voting control and investment discretion over securities held by Robert Richman Norma Richman JTWROS and is a NASD member working for Smith Barney.
27.	John McGrain, a managing member of San Gabriel Fund LLC (“Fund”), has voting control and investment discretion over securities held by Fund. John McGrain has acted as a consultant for us for the past two years with respect to investor relations.
28.	Seth Glickenhaus, the general partner of Glickenhaus & Co., has voting control and investment discretion over securities held by Glickenhaus &Co. Glickenhaus & Co. is a NASD member.
29.	Jared Scharf, the trustee for Mark Irrevocable Trust (“Trust”), has voting control and investment discretion over securities held by Trust.
30.	Tony Polack has voting control and investment discretion over securities held by Elias Sayour Foundation, Inc. (“Foundation”) as the owner of the Foundation.

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31.	Jack Polak, the general partner of Domaco Venture Capital Fund (“Fund”), has voting control and investment discretion over securities held by Fund.
32.	Jonathan Rothschild, the trustee for Arterio Inc. Employee Profit Sharing Plan (“Arterio Inc.”), has voting control and investment discretion over securities held by Arterio Inc.
33.	David Tarica, the trustee for Green Acres Dental Salary Savings Plan (“Plan”), has voting control and investment discretion over securities held by Plan.
34.	Catherine Hicks, the trustee for Catherine Hicks Inc. Defined Benefit Pension Plan (“Plan”), has voting control and investment discretion over securities held by Plan.
35.	Morton Crandall, the trustee for MRC Computer Corp PSP (“MRC”), has voting control and investment discretion over securities held by MRC.
36.	David Tarica, the trustee for 34th Street Dental Profit Sharing Plan and 34th Street Dental Floor Offset Plan Trust (“34th Street Plans”), has voting control and investment discretion over securities held by 34th Street Plans.
37.	Ralph Darienzo has voting control and investment discretion over securities held by Allied Diesel Services Inc. Employee PSP.
38.	William H. Peterson, the trustee of William H. Peterson Revoc. Living Trust (“Trust”), has voting control and investment discretion over securities held by Trust.
39.	Sidney Lazarus, the trustee of Claire Lazarus Trust (“Trust”), has voting control and investment discretion over securities held by Trust.
40.	Gerald McCarthy and Willam Kelly have voting control and investment discretion over securities held by McCarthy and Kelly LLC.
41.	Rochelle Victor, the trustee for Rochelle Victor Trust (“Trust”), has voting control and investment discretion over securities held by Trust.
42.	Ronal M. Lazar has voting control and investment discretion over securities held by RL Capital Partnership, L.P. (“Partnership”). Ronald M. Lazar and Anthony G. Polak, the managing members of RL Capital Management LLC, are registered representatives of Maxim Group, a NASD member. RL Capital Management LLC is the general partner of Partnership.
43.	Joel Goldstein, the trustee of MSI Retirement Plan (“Plan”), has voting control and investment discretion over securities held by Plan.
44.	The partners of JED Funding, Ltd. listed below are current beneficial holders of the Series B Preferred Shares.
45.	J. Matt Lepo, as managing director, has voting control and investment discretion over securities held by the company.
46.	Lance J. Baller, as manager, has voting control and investment discretion over securities held by the company.
47.	Gary J. McAdam, as trustee, has voting control and investment discretion over securities held by the trust.
48.	Charles Kirby has voting control and investment discretion over securities held by the Fund.
49.	Jeff Ploen, as fund manager, has voting control and investment discretion over securities held by Fund.
50.	Jay Kuhne, as trustee, has voting control and investment discretion over securities held by Trust.
51.	L. Michael Underwood, as manager, has voting control and investment discretion over securities held by the Fund.
52.	The sole general partner of JED Funding, Ltd. is John McGrain. Mr. McGrain exercises voting and investment authority over the shares held by the selling shareholder. The selling shareholder has not held a position as a director or executive officer nor has had a material employment relationship with us or any of our affiliates, or our or their predecessors, within the past 2 years. The general partner and one of the limited partners of the selling shareholders, John McGrain, has acted as a consultant for us for the past two years with respect to investor relations.
53.	This selling securityholder is an affiliate of a broker-dealer. This selling securityholder has represented to us that it purchased the securities for investment purposes.
54.	This selling shareholder is a registered broker-dealer that acquired the securities as compensation for underwriting activities.
55.	This selling shareholder is a registered broker-dealer that acquired the securities for investment purposes and not as compensation for underwriting activities, and therefore is an underwriter with respect to the shares being sold by this selling shareholder.
56.	Mark Martino, the President of Axiom Capital Management Inc., has voting and investment discretion over securities held by Axiom Capital Management Inc.

The selling shareholders acquired the common shares in the ordinary course of business and at the time of the offering did not have any arrangements or understandings with any person to distribute the common shares.

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Except as otherwise disclosed, the selling shareholders have not held a position as a director or executive officer nor has had a material employment relationship with us or any of our affiliates, or our or their predecessors, within the past 3 years.

PLAN OF DISTRIBUTION

We are registering common shares on behalf of the selling shareholders. “Selling Shareholder” includes donees, pledgees, transferees or successors-in-interest selling securities received from the named selling shareholder as a gift, pledge, partnership distribution or other non-sale related transfer after the date of this prospectus. All costs, expenses and fees in connection with the registration of the common shares offered hereby will be borne by us. Brokerage commissions and similar selling expenses, if any, attributable to the sale of common shares will be borne by the selling shareholders. Sales of the common shares may be affected by selling shareholders from time to time in one or more types of transactions, including block transactions,

• on the American Stock Exchange;

• in the over-the-counter market;

• in negotiated transactions;

• through put or call options transactions relating to the common shares; and

• to cover short sales and other hedging transactions made after the date that the registration statement of which this prospectus is a part is declared effective by the SEC;

or a combination of these methods of sale or through any lawful manner, at market prices prevailing at the time of sale, or at negotiated prices. These transactions may or may not involve brokers or dealers. The selling shareholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of shares by the selling shareholders.

The selling shareholders may sell shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. The broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the selling shareholder and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both. This compensation as to a particular broker-dealer might be in excess of customary commissions.

The selling shareholders and any broker-dealers that act in connection with the sale of securities might be deemed to be, and certain of the selling shareholders so identified by footnote 55 in the selling shareholder table are, “underwriters” within the meaning of Section 2(11) of the Securities Act, and any commissions received by these broker-dealers and any profit on the resale of the common shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. We have agreed to indemnify each selling shareholder against specified liabilities, including liabilities arising under the Securities Act. The selling shareholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act.

31

Because selling shareholders may be deemed to be, and in certain cases are, “underwriters” within the meaning of Section 2(11) of the Securities Act, the selling shareholders will be subject to the prospectus delivery requirements of the Securities Act. We have informed the selling shareholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sales in the market.

The selling shareholders also may resell all or a portion of the securities in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of that rule.

If we are notified by a selling shareholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, under Rule 424(b) under the Act, disclosing:

• the name of the participating broker-dealer(s);

• the number of shares involved;

• the price at which such shares were sold;

• the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable;

• that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and

• other facts material to the transaction.

In addition, if we are notified by the selling shareholders that a donee, pledgee, transferee or other successor-in-interest intends to sell more than 500 shares, a supplement to this prospectus will be filed.

ENFORCEABILITY OF CIVIL LIABILITIES

JED is a corporation existing under the laws of the Province of Alberta and the majority of its assets and operations are located, and the majority of its revenues are derived, outside the United States. It may not be possible for holders to enforce outside the United States judgments against JED obtained in the United States in any such actions, including actions predicated upon the civil liability provisions of the United States federal securities laws. In addition, certain of the directors and officers of JED are residents of Canada, and all or a substantial portion of the assets of those directors and officers are or may be located outside the United States. As a result, it may not be possible for holders to effect service of process within the United States upon those persons, or to enforce against them judgments obtained in the United States courts, including judgments predicated upon the civil liability provisions of the United States federal and state securities laws. We believe that there is uncertainty as to whether Canadian courts would enforce (i) judgments of United States courts obtained against JED or such persons predicated upon the civil liability provisions of the United States federal and state securities laws or (ii) in original actions brought in Canada, liabilities against JED or such persons predicated upon the United States federal and state securities laws.

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CONSOLIDATED CAPITALIZATION AND INDEBTEDNESS

The following table sets forth our consolidated capitalization and indebtedness as of June 30, 2006. Our capitalization is presented:

• on an actual basis;

• on a pro forma basis to reflect the conversion of the Convertible Notes at $16 per share into 2,154,688 common shares;

• on a pro forma basis to reflect the conversion of the Series B Preferred Shares at $16 per share into 970,313 common shares; and

• on a pro forma basis to reflect the conversion of the Amended and Restated Senior Subordinated Convertible Note and Series B Preferred Shares held by JED Funding, Ltd. at $16 per share into 1,187,500 common shares.

	As at June 30, 2006
	Actual			Pro forma
Liabilities
Current liabilities	$	19,347,736		$	—
Senior subordinated convertible note	$	40,090,000		$	—
Asset retirement obligations	$	1,774,636		$	1,595,326
Total Liabilities	$	61,212,372		$	1,595,326
Convertible preferred shares	$	28,005,165		$	—
Stockholders’ Equity
Share Capital Common Stock	$	33,616,246		$	99,482,736
Additional paid-in capital	$	1,598,414		$	1,327,273
Share purchase warrants	$	27,942		$	27,942
Accumulated deficit	$	(7,317,705	)	$	(7,785,485	)
Accumulated other comprehensive income	$	1,472,065		$	2,447,608
Total Stockholders’ Equity	$	29,396,962		$	95,500,074

DESCRIPTION OF SECURITIES

The authorized share capital of JED consists of an unlimited number of Common Shares, and an unlimited number of Preferred Shares issuable in series, of which 8,000,000 Series A Preferred Shares and 2,200,000 Series B Preferred Shares are authorized. At September 30, 2006 there were 14,964,903 Common Shares issued and outstanding, 837,500 Common Shares reserved for issuance pursuant to outstanding stock options, 274,750 Common Shares reserved for issuance pursuant to share purchase warrants, 6,709,761 Common Shares are reserved for the conversion of the outstanding Senior Subordinated Convertible Notes, the New JED Funding Note and Series B Preferred Shares. At September 30, 2006, 1,797,498 shares of Series B Preferred Shares are issued and outstanding.

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Our stockholders have no rights to share in our profits, are subject to no redemption or sinking fund provisions, have no liability for further capital calls and are not subject to any discrimination due to number of shares owned. By not more than 50 days or less than seven days in advance of a dividend, the Board of Directors may establish a record date for the determination of the persons entitled to such dividend.

The rights of holders of our common stock can be changed at any time in a stockholder meeting where the modifications are approved by 66 2/3% of the shares represented by proxy or in person at a meeting at which a quorum exists.

All holders of our common stock are entitled to vote at annual or special meetings of stockholders, provided that they were stockholders as of the record date. The record date for stockholder meetings may precede the meeting date by no more than 50 days and not less than 21 days, provided that notice by way of advertisement is given to stockholders at least seven days before such record date. Notice of the time and place of meetings of stockholders may not be less than 21 or greater than 50 days prior to the date of the meeting. There are no:

• limitations on share ownership;

• provisions of the Articles or by-laws that would have the effect of delaying, deferring or preventing a change of control of our company;

• by-law provisions that govern the ownership threshold above which stockholder ownership must be disclosed; and

• conditions imposed by the Articles or by-laws governing changes in capital, but Alberta law requires any changes to the terms of share capital be approved by 66 2/3% of the shares represented by proxy or in person at a stockholders’ meeting convened for that purpose at which a quorum exists.

Common Stock

Each holder of record of common stock is entitled to one vote for each share held on all matters properly submitted to the stockholders for their vote, except matters which are required to be voted on as a particular class or series of stock. Cumulative voting for directors is not permitted.

Holders of outstanding shares of common stock are entitled to those dividends declared by the Board of Directors out of legally available funds. In the event of liquidation, dissolution or winding up our affairs, holders of common stock are entitled to receive, pro rata, our net assets available after provision has been made for the preferential rights of the holders of preferred stock. Holders of outstanding common stock have no preemptive, conversion or redemption rights. All of the issued and outstanding shares of common stock are, and all unissued shares of common stock, when offered and sold will be, duly authorized, validly issued, fully paid and non-assessable. To the extent that additional shares of common stock may be issued in the future, the relative interests of the then existing stockholders may be diluted.

On September 28, 2005, the shareholders of the Company approved a 3-for-2 stock split of the Company’s common shares. The record date of the stock split was October 10, 2005 and the shares began trading on the American Stock Exchange on a post split basis on October 12, 2005.

Preferred Stock

34

Our Board is authorized to issue from time to time, without stockholder approval, in one or more designated series, unissued shares of preferred stock with such dividends, redemption, conversion and exchange provisions as may be provided by the Board of Directors with regard to such particular series.

Any series of preferred stock may possess voting, dividend, liquidation and redemption rights superior to those of the common stock.

The rights of the holders of common stock will be subject to and may be adversely affected by the rights of the holders of any preferred stock that we may issue in the future. Our issuance of a new series of preferred stock could make it more difficult for a third party to acquire, or discourage a third party from acquiring, our outstanding shares of common stock and make removal of the Board more difficult.

A total of 7,600,000 shares of Series A Convertible Preferred Stock were issued pursuant to a private placement completed in December 2003. The Series A Convertible Preferred Stock is voting, carries no dividend and was all converted into an equal number of shares of common stock in April 2004. At December 31, 2005 no preferred shares were issued or outstanding.

Series B Preferred Shares consisting of an authorized 2,200,000 shares were created May 25, 2006. The Series B Preferred Stock is non-voting, carries dividends of 10% per annum and is convertible to common stock on a one-for-one basis at any time at the holder’s option. A total of 970,313 shares of Series B Preferred Stock were issued pursuant to a private placement completed in June 2006. 827,188 shares of Series B Preferred Shares were issued to JED Funding, Ltd. in exchange for $13,235,000 Old JED Funding Note.

The Series B Preferred Shares will be redeemed by the Company on February 1, 2008 if not converted earlier. Each quarter, holders may elect to receive their dividends in common shares of JED, valued at the trailing fifteen day volume weighted average trading price for the common shares prior to the record date for the dividend. The outstanding principal may be converted at any time at the holder’s option into common shares of the Company at a conversion price of $16.00 per share. In the event of certain new equity issues by the Company, holders of the Series B Preferred Shares shall have a right of first refusal to participate, on a pro rata basis, in such new issues.

Convertible Notes

In June 2006, JED closed a private placement of $34,475,000 of Convertible Notes. All documents for the closing are dated May 31, 2006 and funds were released from escrow on June 1, 2006. The Convertible Notes bear interest at the rate of 10% per annum, payable quarterly, and mature on February 1, 2008. The outstanding principle and interest may be converted at any time at the holder’s option into common shares of the Company at a conversion price of $16.00 per share. Convertible Notes outstanding on the maturity date will be redeemed by the Company. There are penalty provisions if the Company does not comply with the terms of the Convertible Notes. In the event of certain new equity issues by the Company, holders of the Convertible Notes have a right of first refusal to participate, on a pro rata basis, in such new issues. The Convertible Notes are unsecured and are subordinated to the credit facility granted by JED’s senior commercial financial institution.

New JED Funding Notes

JED issued the Old JED Funding Note in the aggregate principal amount of $20,000,000 with a conversion price of $30.00 to JED Funding, Ltd. on August 3, 2005. Following the 3 for 2 stock split on October 13, 2005, the conversion price of the Old JED Funding Note was adjusted to $20.00. In May 2006, $1,000,000 of the Old JED Funding Note was converted to 57,143 common shares at $17.50 per share.

35

In May 2006, $13,235,000 of Old JED Funding Note was replaced by Series B Preferred Shares by mutual agreement of JED and JED Funding. The Series B Preferred Shares may be converted at any time at the holders’ option into common shares at a conversion price of $16,00 per share. The partners of JED Funding are current beneficial holders of such Series B Preferred Shares. On May 24, 2006, JED and JED Funding also agreed to replace the remaining $5,765,000 of the Old JED Funding Note with an Amended and Restated Senior Convertible Note, the terms of which are similar to the Convertible Notes, including the reduction of the conversion price into JED common shares to $16.00 per share. The partners of JED Funding have the right to convert such note into preferred shares or common shares.

Shares Eligible for Future Sale

Future sales of substantial amounts of our common stock in the public market or even the perception that such sales may occur, could adversely affect the market price for our common stock and could impair our future ability to raise capital through an offering of our equity securities.

MARKETS

JED’s shares commenced trading on the American Stock Exchange (“Amex”) under the symbol “JDO” on April 6, 2004. The following table sets forth the closing prices, in US dollars, as reported by the Amex and adjusted for the 3:2 stock split on October 10, 2005, for the periods shown.

	American Stock
	Exchange/Amex
	(US$)
	High		Low
Five most recent full fiscal years:
Year ended December 31, 2005		21.50		9.44
Year ended December 31, 2004		14.77		9.46
Quarter ended September 30, 2006		18.96		12.41
Quarter ended June 30, 2006		17.60		12.50
Quarter ended March 31, 2006		16.76		11.00
Year ended December 31, 2005:
Quarter ended December 31, 2005		19.33		11.65
Quarter ended September 30, 2005		21.50		15.93
Quarter ended June 30, 2005		17.13		10.11
Quarter ended March 31, 2005		12.73		9.44
Year ended December 31, 2004:
Quarter ended December 31, 2004		14.77		11.62
Quarter ended September 30, 2004		12.74		10.80

36

	American Stock
	Exchange/Amex
	(US$)
	High		Low
Quarter ended June 30, 2004		13.20		9.46
Quarter ended March 31, 2004	NA		NA
Six most recent months ended:
October 2006		12.65		4.00
September 2006		15.94		12.41
August 2006		18.60		15.43
July 2006		18.96		16.69
June 2006		16.68		12.58
May 2006		17.60		12.50

JED has paid no dividends on its common shares since incorporation and does not anticipate doing so in the foreseeable future.

37

PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma consolidated financial statements give effect to the potential acquisition of JMG Exploration, Inc. (“JMG”) by JED through a share exchange whereby each issued and outstanding JMG common share and JMG share purchase warrant will be exchanged for two-thirds of a JED common share or JED share purchase warrant, respectively , as well as other transactions described in note 2. Should it be completed, the acquisition of JMG will be accounted for as a purchase.

The unaudited pro forma consolidated financial statements have been derived from the unaudited interim consolidated financial statements of JED as at and for the six-month period ended June 30, 2006 and the audited consolidated financial statements of JED as at and for the year ended December 31, 2005, and the unaudited interim consolidated financial statements of JMG as at and for the six-month period ended June 30, 2006 and the audited consolidated financial statements of JMG as at and for the year ended December 31, 2005. The unaudited pro forma consolidated balance sheet gives effect to the transactions as if they had occurred as at June 30, 2006. The unaudited pro forma consolidated statements of loss for the six-month period ended June 30, 2006 and for the year ended December 31, 2005 have been prepared assuming the transactions had occurred on January 1, 2005.

These unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements of JED (incorporated herein by reference to this prospectus) and the historical financial statements of JMG (included in the F-pages of this prospectus) and the related notes thereto. The unaudited pro forma information is not necessarily indicative of the financial position or results of operations that may have actually occurred had the transactions taken place on the dates noted.

38

JED Oil Inc.

PRO FORMA CONSOLIDATED BALANCE SHEET
(In United States Dollars)

As at June 30, 2006 (Unaudited)

				JMG
				Exploration,									Pro Forma
	JED Oil Inc.			Inc.			Adjustments			Notes			Consolidated
	$			$			$						$
ASSETS
Current
Cash and cash equivalents		8,716,683			796,444									9,513,127
Accounts receivable		16,843,680			462,586			(11,664,424	)		2	(f)		30,341,842
								24,700,000			2	(g)
Prepaid expenses and deposits		308,349			239,817									548,166
Due from JED Oil Inc.		—			1,830,123			(1,830,123	)		2	(b)		—
		25,868,712			3,328,970			11,205,453						40,403,135
Drilling advance		4,355,321			—									4,355,321
Deferred financing costs		1,960,727			—									1,960,727
Deferred tax asset		4,975,810			—									4,975,810
Other assets					230,000									230,000
Property and equipment
Oil and gas, on the basis of full cost accounting
Proved properties		90,358,095			14,414,845			11,788,424			2	(f)		91,639,364
								(24,922,000	)		2	(g)
Unproved properties under development, not being depleted		7,520,557			5,974,753			(343,000	)		2	(a)		13,152,310
Other		451,137			227,317									678,454
		98,329,789			20,616,915			(13,476,576	)					105,470,128
Less accumulated depletion and depreciation		(16,875,860	)		(5,139,002	)								(22,014,862	)
		81,453,929			15,477,913			(13,476,576	)					83,455,266
Goodwill		—			—			49,013,181			2	(a)		49,013,181
		118,614,499			19,036,883			46,742,058						184,393,440
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		7,013,732			1,993,525			1,000,000			2	(a)		10,007,257
Accrued capital liabilities		7,068,304			—									7,068,304
Accrued other liabilities		3,435,577			454,791									3,890,368
Promissory note payable		—			1,500,000									1,500,000
Due to JMG Exploration, Inc		1,830,123			—			(1,830,123	)		2	(b)		—
		19,347,736			3,948,316			(830,123	)					22,465,929
Convertible note payable		40,090,000			—									40,090,000
Asset retirement obligation		1,774,636			82,020			124,000			2	(f)		1,758,656
								(222,000	)		2	(g)
		61,212,372			4,030,336			(98,000	)					64,314,585

39

				JMG
				Exploration,									Pro Forma
	JED Oil Inc.			Inc.			Adjustments			Notes			Consolidated
	$			$			$						$
Convertible preferred shares		28,005,165			—									28,005,165
Stockholders’ equity
Share capital		33,616,246			5,099			(5,099	)		2	(a)		78,556,305
								44,940,059			2	(a)
Additional paid-in capital		1,598,414			20,637,577			(20,637,577	)		2	(a)		2,708,034
								1,109,620			2	(a)
Share purchase warrants		27,942			2,086,403			(2,086,403	)		2	(a)		16,654,991
								16,627,049			2	(a)
Accumulated deficit		(7,317,705	)		(7,704,811	)		7,704,811			2	(a)		(7,317,705	)
Accumulated other comprehensive income (loss)		1,472,065			(17,721	)		17,721			2	(a)		1,472,065
		29,396,962			15,006,547			47,670,181						92,073,690
		118,614,499			19,036,883			46,742,058						184,393,440

See accompanying notes to unaudited pro forma consolidated financial statements

40

JED Oil Inc.

PRO FORMA CONSOLIDATED STATEMENT OF LOSS
(In United States Dollars)

Year ended December 31, 2005 (Unaudited)

				JMG
				Exploration,									Pro Forma
	JED Oil Inc.			Inc.			Adjustments			Notes			Consolidated
	$			$			$						$
Revenue
Petroleum and natural gas		9,658,790			854,864			(814,030	)		2	(g)		9,699,624
Royalties		(1,653,880	)		(227,404	)		116,973			2	(g)		(1,764,311	)
		8,004,910			627,460			(697,057	)					7,935,313
Interest		604,592			120,461									725,053
		8,609,502			747,921			(697,057	)					8,660,366
Expenses
Production		1,414,849			189,598			(80,419	)		2	(g)		1,524,028
Depletion, depreciation and accretion		3,502,762			4,268,547			(1,442,608	)		2	(c)		5,665,336
								(389,768	)		2	(e)
								(273,597	)		2	(g)
General and administrative		2,202,632			1,847,301			(78,589	)		2	(d)		3,971,344
Foreign exchange gain		(499,769	)		—									(499,769	)
Interest on cancellable note payable		845,884			—									845,884
Geophysical and geological		—			256,484			(256,484	)		2	(e)		—
		7,466,358			6,561,930			(2,521,465	)					11,506,823
Net income (loss) before income taxes		1,143,144			(5,814,009	)		1,824,408						(2,846,457	)
Less: cumulative preferred dividends		—			(458,342	)								(458,342	)
Net income (loss) for the period		1,143,144			(6,272,351	)		1,824,408						(3,304,799	)
Net income (loss) for the period per share [note 3]
Basic		0.08			(2.97	)								(0.18	)
Diluted		0.07			(2.97	)								(0.18	)

See accompanying notes to unaudited pro forma consolidated financial statements

41

JED Oil Inc.

PRO FORMA CONSOLIDATED STATEMENTS OF LOSS
(In United States Dollars)

For the six-months ended June 30, 2006 (Unaudited)

				JMG
				Exploration,									Pro Forma
	JED Oil Inc.			Inc.			Adjustments			Notes			Consolidated
	$			$			$						$
Revenue
Petroleum and natural gas		13,276,852			1,282,919			(1,397,360	)		2	(g)		13,162,411
Royalties		(2,732,088	)		(354,667	)		176,844			2	(g)		(2,909,911	)
		10,544,764			928,252			(1,220,516	)					10,252,500
Interest		64,933			—									64,933
		10,609,697			928,252			(1,220,516	)					10,317,433
Expenses
Production		2,812,561			191,648			(218,129	)		2	(g)		2,786,080
Depletion, depreciation and accretion		8,504,680			399,046			711,124			2	(c)		8,610,633
								(1,004,217	)		2	(g)
General and administrative		2,293,862			631,857			(50,012	)		2	(d)		2,875,707
Amortization of deferred financing costs		104,169			—									104,169
Foreign exchange gain		(107,975	)		—									(107,975	)
Interest		1,532,525			113,872									1,646,397
		15,139,822			1,336,423			(561,234	)					15,915,011
Net loss before income taxes		(4,530,125	)		(408,171	)		(659,282	)					(5,597,578	)
Income taxes
Deferred tax recovery		4,975,810			—									4,975,810
Net income (loss) for the period		445,685			(408,171	)		(659,282	)					(621,768	)
Net income (loss) for the period per share [note 3]
Basic		0.03			(0.08	)								(0.03	)
Diluted		0.03			(0.08	)								(0.03	)

See accompanying notes to unaudited pro forma consolidated financial statements

42

JED Oil Inc.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(In United States Dollars)

June 30, 2006 (Unaudited)

1.	Basis of presentation
	The accompanying unaudited pro forma consolidated financial statements have been prepared by the management of JED Oil Inc. (“JED”) and in the opinion of management contain all adjustments necessary for fair presentation in accordance with accounting principles generally accepted in the United States.
	The unaudited pro forma consolidated financial statements have been prepared to give effect to the arrangement between JMG and JED whereby each issued and outstanding JMG common share and JMG share purchase warrant will be exchanged for two-thirds of a JED common share or JED share purchase warrant, respectively (the “Arrangement”). The exchange ratio is based on the “market-to-market” recent trading prices of JMG and JED stock. These unaudited pro forma consolidated financial statements assume that all of the common shares, warrants and options of JMG are converted at this exchange ratio.
	The acquisition by JED has been accounted for under the purchase method of accounting. These unaudited pro forma consolidated financial statements should be read in conjunction with the December 31, 2005 audited consolidated financial statements and June 30, 2006 unaudited interim consolidated financial statements of both JED and JMG.
	The unaudited pro forma consolidated financial statements have also been prepared to give effect to significant proposed transactions occuring subsequent to June 30, 2006. Specifically, on July 1, 2006, JED and Enterra Energy Trust (“Enterra”) agreed to swap JED’s working interest in the majority of its non-core assets and $11,664,424 in accounts receivable owed by Enterra for additional working interests in the east and north Ferrier areas. Effective October 1, 2006, a purchaser agreed to purchase JED’s east Ferrier assets for approximately $24,700,000.
	The unaudited pro forma consolidated financial statements have been derived from and should be read in conjunction with the unaudited interim consolidated financial statements of JED as at and for the six-month period ended June 30, 2006 and the audited consolidated financial statements of JED as at and for the year ended December 31, 2005, and the unaudited interim consolidated financial statements of JMG as at and for the six-month period ended June 30, 2006 and the audited consolidated financial statements of JMG as at and for the year ended December 31, 2005. The accounting policies used in these unaudited pro forma consolidated financial statements are consistent with those described in the audited financial statements of JED for the year ended December 31, 2005.
	The unaudited pro forma consolidated financial statements are not necessarily indicative either of the results that actually would have occurred if the events reflected herein had taken place on the dates indicated, or of the results that may be obtained in the future.

43

JED Oil Inc.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(In United States Dollars)

June 30, 2006 (Unaudited)

2.	Pro forma assumptions and adjustments
	The unaudited pro forma consolidated balance sheet gives effect to the Arrangement and proposed transactions as if they had occurred as at June 30, 2006. The unaudited pro forma consolidated statements of loss for the six-month period ended June 30, 2006 and for the year ended December 31, 2005 have been prepared assuming the Arrangement and proposed transactions had occurred on January 1, 2005.
	These unaudited pro forma consolidated financial statements give effect to the following transactions, assumptions and adjustments:
(a)	Acquisition of JMG Exploration, Inc.
	The total cost of acquiring JMG is $63.7 million (including transaction costs of approximately $1.0 million). The purchase price reflects the cost of acquiring 5,099,099 common shares of JMG at an exchange ratio of one JMG common share for two-thirds of a common share of JED at an ascribed value of $13.22 per JED common share, which is the average of the closing stock price of JED two days prior to and after the date the transaction was announced on February 27, 2006, the cost of issuing 2,734,712 share purchase warrants at a price of $7.14 per share purchase warrant in exchange for 4,102,068 JMG warrants and the issuance of 218,000 options in exchange for JMG options. The acquisition of JMG has been accounted for using the purchase method of accounting and a preliminary allocation (subject to later adjustments) of the purchase price to the fair value of the assets and liabilities acquired for the purpose of preparing the unaudited pro forma consolidated balance sheet results in the below adjustments to the unaudited pro forma consolidated balance sheet:

	$
Calculation of purchase price:
Fair value of share capital issued		44,940,059
Value of warrants acquired		16,627,049
Value of options acquired		1,109,620
Estimated transaction costs		1,000,000
		63,676,728
Allocation of purchase price:
Book value of net assets acquired		15,006,547
Adjustments to reflect fair value:
Property, plant and equipment		(343,000	)
Goodwill on acquisition		49,013,181
		63,676,728

Share capital, accumulated deficit, accumulated other comprehensive loss, share purchase warrants, and additional paid-in capital related to JMG will be eliminated as a result of the purchase of JMG as follows:

	$
Share capital		(5,099	)
Accumulated deficit		7,704,811
Accumulated other comprehensive loss		17,721
Share purchase warrants		2,086,403
Additional paid-in capital		20,637,577

44

JED Oil Inc.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(In United States Dollars)

June 30, 2006 (Unaudited)

(b) Intercompany accounts

All related party transaction accounts between JED and JMG have been eliminated as a result of the acquisition.

(c) Depletion, depreciation and accretion and site restoration and reclamation

Depletion, depreciation and accretion expense has been reduced by $1,442,608 and increased by $711,124 for the year ended December 31, 2005 and six months ended June 30, 2006, respectively. These adjustments have been determined using the full cost method of accounting based on combined proved reserves, future development costs and production volumes and incorporation of the cost of the properties acquired pursuant to the JMG acquisition (including associated estimated future development costs of $25,000).

(d) Stock-based compensation

Stock-based compensation expense for the six months ended June 30, 2006 and the year ended December 31, 2005 has been reduced by $50,012 and $78,589, respectively, to reflect the fact that all JMG options will be vested upon change of control.

(e) Full cost accounting method

JMG follows the “successful efforts” method of account for oil and gas activities. Upon consolidation with JED, its financial statements will be adjusted to conform to the “full cost” method followed by JED. For the year ended December 31, 2005, geophysical and geological expense and depletion and depreciation expense have been reduced by $256,484 and $389,768 (dry hole cost), respectively, to reflect the estimated effect of conforming the JMG accounting policy to JED’s in this respect. There were no adjustments to the June 30, 2006 statement of loss due to JMG’s limited capital expenditures during that time period.

(f) SWAP transaction

On September 28, 2006, JED and Enterra Energy Trust (“Enterra”) concluded a swap transaction whereby JED exchanged the majority of its non-core assets for additional working interest in the east and north Ferrier areas owned by Enterra. The asset retirement obligation associated with the non-core producing properties sold to Enterra is assumed to be approximately equal to the asset retirement obligation associated with Ferrier assets acquired from Enterra. In another part of the transaction, JED exchanged $11,664,424 in accounts receivable owed by Enterra for additional working interest in east Ferrier owned by Enterra. There is approximately $124,000 in asset retirement obligation associated with the purchase of east Ferrier assets through the exchange of Enterra receivables.

(g) Disposition of east Ferrier assets

A purchaser has agreed to purchase JED’s east Ferrier assets for approximately $24,700,000 in cash effective October 1, 2006. Estimated asset retirement obligation associated with the disposition is $222,000. No gain or loss is attributable to the disposition. Revenues for the six months ended June 30, 2006 and for the year ended December 31, 2005 have been reduced by $1,397,360 and $814,030, respectively, in relation to the disposed property. Royalties for the six months ended June 30, 2006 and for the year ended December 31, 2005 have been reduced by $176,844 and $116,973 respectively. Operating expenses for the six month months ended June 30, 2006 and for the year ended December 31, 2005 have been reduced by $218,129 and $80,419 respectively. Depletion, depreciation and accretion expense for the six months ended June 30, 2006 and for the year ended December 31, 2005 has been reduced by $1,004,217 and $273,597, respectively.

45

JED Oil Inc.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(In United States Dollars)

June 30, 2006 (Unaudited)

3.	Per share
	The number of shares included in the basic weighted average number outstanding for the six-month period ended June 30, 2006 was based on the weighted average number of shares actually outstanding for the period and the 3,399,399 shares issued under the proposed acquisition.
	The diluted weighted average number of shares for the six-month period ended June 30, 2006 was 21,948,543 which included 2,734,712 share purchase warrants and an estimated number of 218,000 options issued to former employees of JMG.
	The number of shares included in the basic weighted average number outstanding for the year ended December 31, 2005 was based on the weighted average number of shares actually outstanding for the period and the 3,399,399 shares issued under the proposed acquisition.
	The diluted weighted average number of shares for the year ended December 31, 2005 was 21,625,893 which included 2,734,712 share purchase warrants and an estimated number of 218,000 options issued to former employees of JMG.

46

USE OF PROCEEDS

JED will not receive any proceeds as a result of sales of shares by the selling shareholders. If the Convertible Notes and the New JED Funding Note are converted, our outstanding debt will be reduced to the extent of the note conversion. The proceeds received by us upon issuance of the Convertible Notes and the Series B Preferred Shares will be used to reduce JED’s senior credit facility and to finance the previously announced 2006 drilling program. The selling shareholders are under no obligation to convert the Convertible Notes, the New JED Funding Note or Series B Preferred Shares and there can be no assurance that the selling shareholders will do so.

EXPENSES

The expenses in connection with this offering are as follows:

Securities and Exchange Commission Registration Fee	$	10,420
Legal Fees and Expenses	$	476,950.00	*
Blue Sky Fees and Expenses	$	0.00
Stock Exchange Listing Fees	$	45,000.00	*
Accounting Fees	$	22,100.00	*
Total	$	554,470.00	*

*Estimated

LEGAL MATTERS

The validity of the issuance of common shares which are offered in this prospectus have been passed upon by Marcia Johnston, Esq., General Counsel of JED Oil Inc.

EXPERTS

The consolidated financial statements of JED Oil Inc. consisting of the consolidated balance sheets of JED Oil Inc. as at December 31, 2005, 2004 and 2003 and the consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the years ended December 31, 2005, 2004 and the 120 day period from inception on September 3, 2003 to December 31, 2003, incorporated in this prospectus by reference from the Company’s Annual Report on Form 20-F for the year ended December 31, 2005 have been audited by Ernst & Young LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

Certain information relating to our reserves incorporated by reference into this prospectus has been calculated by us and audited and opined on, as at December 31, 2005, by McDaniel & Associates Consultants Ltd., independent petroleum engineering consultants retained by us, and has been so included in reliance on the opinion and report of McDaniel & Associates Consultants Ltd., given upon the authority of said firm as experts in reserve engineering.

47

WHERE YOU CAN GET MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act of 1934 and we file reports, registration statements and other information with the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal stockholders are exempt from reporting short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required to publish financial statements as promptly as U.S. companies.

Our reports, registration statements other information can be inspected and copied at the public reference facilities maintained by the SEC:

100 F Street, N.E.
Washington D.C. 20549

Copies of these materials can also be obtained by mail at prescribed rates from the Public Reference Section of the SEC at the same address, or by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public from the SEC’s Web site at www.sec.gov/ and from our Web site www.jedoil.com.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to “incorporate by reference” the information we file with the SEC. This means that we can disclose important information to you by referring to those documents. The information incorporated by reference is considered to be part of this prospectus, and later information filed with the SEC will update and supersede information previously filed. We incorporate by reference the documents listed below:

The documents listed in (a) through (d) below are incorporated by reference in this Registration Statement.

a)	Our latest annual report on Form 20-F as amended, filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for the fiscal year ended December 31, 2005.
b)	Our Current Reports on Form 6-K filed with the SEC on

(i)	January 5, 2006
(ii)	January 27, 2006
(iii)	February 28, 2006
(iv)	March 8, 2006
(v)	March 23, 2006
(vi)	March 27, 2006
(vii)	April 6, 2006
(viii)	May 4, 2006
(ix)	May 11, 2006
(x)	May 12, 2006

48

(xi)	June 2, 2006
(xii)	June 6, 2006
(xiii)	June 16, 2006
(xiv)	June 21, 2006
(xv)	June 30, 2006
(xvi)	July 18, 2006
(xvii)	August 8, 2006
(xviii)	August 15, 2006
(xix)	August 17, 2006
(xx)	September 1, 2006
(xxi)	September 14, 2006
(xx)	September 19, 2006
(xxi)	October 3, 2006
(xx)	October 12, 2006
(xxi)	October 19, 2006
(xxi)	November 1, 2006

c) All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the annual report incorporated by reference herein pursuant to (a) above.

d) The description of our securities contained in our registration statement under on Form 8-A12B/A filed with the Securities and Exchange Commission on April 5, 2004.

Prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, we also incorporate by reference all of our subsequent annual reports filed with the SEC on Form 20-F and all of our subsequent reports on Form 6-K under the Exchange Act submitted to the SEC that we specifically identify in such form as being incorporated by reference into this prospectus.

We shall undertake to provide without charge to each person to whom a copy of this prospectus has been delivered, upon the written or oral request of any such person to us, a copy of any or all of the documents referred to above that have been or may be incorporated into this prospectus by reference, including exhibits to such documents, unless such exhibits are specifically incorporated by reference to such documents. Requests for such copies should be directed to Corporate Secretary, 2200, 500 — 4th Avenue S.W. Calgary, Alberta, Canada T2P 2V6, phone number (403) 537-3250.

You should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone else to provide you with different information. This prospectus is an offer to sell or to buy only the securities referred to in this prospectus, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or any prospectus supplement is current only as of the date on the front page of those documents. Also, you should not assume that there has been no change in our affairs since the date of this prospectus or any applicable prospectus supplement.

49

INDEMNIFICATION

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling JED pursuant to the applicable provisions, JED has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

50

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

JMG Exploration Inc.
Financial Statements

	Page
Consolidated Financial Statements for the year ended December 31, 2005
Reports of Ernst & Young, LLP., Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2005 and 2004	F-2
Consolidated Statements of Operations for the year ended December 31, 2005, the period from the date of incorporation on July 16, 2004 to December 31, 2004 and to December 31, 2005	F-5
Consolidated Statements of Cash Flows for the year ended December 31, 2005, the period from the date of incorporation on July 16, 2004 to December 31, 2004 and to December 31, 2005	F-6
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2005, the period from the date of incorporation on July 16, 2004 to December 31, 2004 and to December 31, 2005	F-7
Consolidated Statements of Comprehensive Loss for the year ended December 31, 2005, the period from the date of incorporation on July 16, 2004 to December 31, 2004 and to December 31, 2005	F-8
Notes to Consolidated Financial Statements	F-9
Interim Consolidated Financial Statements for the quarter ended June 30, 2006
Consolidate Balance Sheets, as of June 30, 2006 (unaudited)	F-21
Consolidated Statements of Operations and Deficit (unaudited) for the three and six month periods ended June 30, 2006 and 2005, and the period from the date of incorporation July 16, 2004 to June 30, 2006	F-22
Consolidated Statements of Cash Flows (unaudited) for the three and six month periods ended June 30, 2006 and 2005, and the period from the date of incorporation July 16, 2004 to June 30, 2006.	F-23
Statement of Changes in Consolidated Stockholders’ Equity for the three and six month periods ended June 30, 2006 and 2005, and the period from the date of incorporation July 16, 2004 to June 30, 2006	F-24
Consolidated Statements of Comprehensive Loss (unaudited) for the three and six month periods ended June 30, 2006 and 2005, and the period from the date of incorporation July 16, 2004 to June 30, 2006	F-25
Notes to Consolidated Financial Statements (unaudited)	F-26

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of JMG Exploration, Inc.

          We have audited the accompanying consolidated balance sheets of JMG Exploration, Inc., a development stage enterprise (the “Company”), as of December 31, 2005 and 2004 and the related consolidated statements of operations and deficit, comprehensive loss, stockholders’ equity and cash flows for the twelve month period ended December 31, 2005, for the period from the date of incorporation on July 16, 2004 to December 31, 2005 and for the period from the date of incorporation on July 16, 2004 to December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

          We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

          In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of JMG Exploration, Inc. at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for the year ended December 31, 2005, for the period from incorporation on July 16, 2004 to December 31, 2005 and for the period from incorporation on July 16, 2004 to December 31, 2004, in conformity with U.S. generally accepted accounting principles.

Calgary, Canada
March 23, 2006	/s/ “Ernst & Young LLP”

F-2

Consolidated Financial Statements

JMG Exploration, Inc. (a development stage enterprise)

December 31, 2005

F-3

JMG Exploration, Inc.
A Development Stage Enterprise

CONSOLIDATED BALANCE SHEETS
(In United States Dollars)

As at December 31	2005			2004
	$			$
ASSETS
Current
Cash and cash equivalents		1,150,965			5,040,800
Accounts receivable		1,284,474			—
Loan receivable [note 3]		—			1,179,205
Prepaid expenses and deposits		34,701			104,887
		2,470,140			6,324,892
Other assets [note 5]		230,000			50,000
Property and equipment [notes 4 and 8]		15,073,039			2,054,157
		17,773,179			8,429,049
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
Accounts payable		845,507			58,616
Accrued liabilities		1,660,648			20,000
Dividends payable		—			196,603
Due to JED Oil Inc. [note 8]		286,956			376,855
Due to related party		—			4,164
		2,793,111			656,238
Asset retirement obligations [note 9]		78,642			—
		2,871,753			656,238
Stockholders’ equity
Share capital [note 6]
Common stock — $.001 par value; 25,000,000 shares authorized; 4,997,578 shares issued and outstanding at December 31, 2005.		4,997			250
Preferred stock — $.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2005 and 1,950,000 outstanding December 31, 2004.		—			1,950
Additional paid-in capital		20,044,296			8,790,025
Share purchase warrants		2,151,470			4,875
Deficit accumulated during the development stage		(7,296,640	)		(1,024,289	)
Accumulated other comprehensive earnings		(2,697	)		—
		14,901,426			7,772,811
		17,773,179			8,429,049

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

F-4

JMG Exploration, Inc.
A Development Stage Enterprise

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(In United States Dollars)

				Period from the date			Period from the date
	Twelve month			of incorporation on			of incorporation on
	period ended			July 16, 2004 to			July 16, 2004 to
	December 31,			December 31,			December 31,
For the	2005			2004			2005
	$			$			$
Revenue
Petroleum revenue		627,460						627,460
Interest		120,461			64,630			185,091
		747,921			64,630			812,551
Expenses
Production		189,598			—			189,598
General and administrative [note 8]		1,768,712			286,060			2,054,772
Stock-based compensation [note 6]		78,589			—			78,589
Geophysical and Geological		256,484			—			256,484
Depletion, depreciation [note 4]		4,265,162			479,702			4,744,864
Accretion on asset retirement obligation [note 9]		3,385			—			3,385
		6,561,930			765,762			7,327,692
Net loss for the period [note 7]		(5,814,009	)		(701,132	)		(6,515,141	)
Less: cumulative preferred dividends		(458,342	)		(323,157	)		(781,499	)
Net loss applicable to common shareholders		(6,272,351	)		(1,024,289	)		(7,296,640	)
Deficit, beginning of period		(1,024,289	)		—			—
Deficit, end of period		(7,296,640	)		(1,024,289	)		(7,296,640	)
Basic weighted average shares outstanding [note 6]		2,111,351			250,000			1,494,620
Net loss for the period per share, basic and diluted [note 6]		(2.97	)		(4.10	)		(4.88	)

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

F-5

JMG Exploration, Inc.
A Development Stage Enterprise

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In United States Dollars)

				Period from the
				date of			Period from the
	Twelve			incorporation			date of
	month			on July 16,			incorporation on
	period ended			2004 to			July 16, 2004 to
	December 31,			December 31,			December 31,
For the	2005			2004			2005
	$			$			$
OPERATIONS
Net loss for the period		(5,814,009	)		(701,132	)		(6,515,141	)
Adjustments to reconcile net loss to cash flows from operating activities:
Stock-based compensation		78,589			—			78,589
Depletion and depreciation and accretion		4,268,547			479,702			4,748,249
Other changes:
Increase in accounts receivable		(508,601	)		—			(508,601	)
Decrease( Increase) in prepaid expenses and deposits		70,186			(104,887	)		(34,701	)
Increase in accounts payable and accrued liabilities		382,917			82,780			252,166
Decrease (increase) in due to JED Oil Inc.		(89,899	)		170,031			286,956
Decrease in due to related party		(4,164	)		4,164			—
Decrease (increase) in accrued interest on Loan receivable		16,683			(39,205	)		(15,815	)
Cash used in operating activities		(1,599,751	)		(108,547	)		(1,708,298	)
INVESTING
Repayment (advance) of loan receivable		750,000			(1,500,000	)		(750,000	)
Proceeds on disposition of property		391,249			—			391,249
Additions to property and equipment		(15,918,765	)		(1,971,199	)		(17,889,964	)
Increase in other assets		(180,000	)		(50,000	)		(230,000	)
Cash used in investing activities		(14,957,516	)		(3,521,199	)		(18,478,715	)
FINANCING
Issue of common shares, net of issue costs		11,178,479			1,000,000			19,970,704
Issue of preferred shares		—			7,797,100			—
Issue of share purchase warrants		2,146,595						2,151,470
Preferred share dividends		(654,945	)		(126,554	)		(781,499	)
Cash provided by financing activities		12,670,129			8,670,546			21,340,675
Effect of foreign exchange on cash and cash equivalents		(2,697	)		—			(2,697	)
Net (decrease) increase in cash and cash equivalents		(3,889,835	)		5,040,800			1,150,965
Cash and cash equivalents, beginning of period		5,040,800			—			—
Cash and cash equivalents, end of period		1,150,965			5,040,800			1,150,965

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

F-6

JMG Exploration, Inc.
A Development Stage Enterprise

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY
(In United States Dollars)

	Shares			Total
	#			$
Common stock, $.001 par value:
Balance at July 16, 2004 and December 31, 2004		250,000			1,000,000
Preferred shares converted to common stock		1,950,000			7,792,225
Issuance of common stock, stock issued for cash pursuant to initial public offering		2,185,000			11,143,500
Warrants exercised for common stock		612,578			3,042,828
Share issue costs		—			(861,254	)
Portion of proceeds attributed to share purchase warrants		—			(2,146,595	)
Balance at December 31, 2005		4,997,578			19,970,704
Additional paid in capital
Balance, July 16, 2004 (inception) and December 31,2004					—
Stock-based compensation					78,589
Balance at December 31, 2005		—			78,589
Preferred stock, $.001 par value:
Balance at December 31, 2004		1,950,000			7,792,225
Preferred shares converted to common stock		(1,950,000	)		(7,792,225	)
Balance at December 31, 2005		—			—
Share purchase warrants:
Balance at December 31, 2004		487,500			4,875
Share purchase warrants: issued pursuant to initial public offering $5.00		2,185,000			693,866
Share purchase warrants: issued pursuant conversion preferred shares $4.25		1,950,000			1,816,766
Warrants exercised for common stock		(612,578	)		(364,037	)
Balance at December 31, 2005		4,009,922			2,151,470
Deficit:
Balance at beginning of period July 16, 2004		—			—
Net loss for the period to December 31, 2004		—			(701,132	)
Preferred share dividends		—			(323,157	)
Balance at December 31, 2004		—			(1,024,289	)
Net loss for the twelve-month period ended December 31, 2005		—			(5,814,009	)
Preferred share dividends		—			(458,342	)
Balance at December 31, 2005		—			(7,296,640	)
Accumulated other comprehensive income
Balance at beginning of period July 16, 2004.		—			—
Balance December 31, 2004		—			—
Foreign exchange translation adjustment		—			(2,697	)
Balance at December 31, 2004		—			(2,697	)
Total stockholders equity at December 31, 2005		—			(14,901,426	)

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

F-7

JMG Exploration, Inc.
A Development Stage Enterprise

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In United States Dollars)

				For the period			For the period
	For the twelve			from the date of			from the date of
	month period			incorporation on			incorporation on
	ended			July 16, 2004 to			July 16, 2004 to
	December 31,			December 31,			December 31,
	2005			2004			2005
	$			$			$
Net loss for the period		(5,814,009	)		(701,132	)		(6,515,141	)
Other comprehensive income:
Foreign exchange translation adjustment		(2,697	)		—			(2,697	)
Comprehensive loss for the period		(5,816,706	)		(701,132	)		(6,517,838	)

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

F-8

1. INCORPORATION AND NATURE OF OPERATIONS

JMG Exploration, Inc. (“JMG” or the “Company”) is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids in Canada and the United States. Currently, all of the Company’s proved reserves are located in the United States.

The Company’s future financial condition and results of operations will depend upon prices received for its oil and natural gas production and the costs of finding, acquiring, developing and producing reserves. Prices for oil and natural gas are subject to fluctuations in response to change in supply, market uncertainty and a variety of other factors beyond the Company’s control. These factors include worldwide political instability, the foreign supply of oil and natural gas, the price of foreign imports, the level of consumer demand, and the price and availability of alternative fuels.

JMG was incorporated with nominal share capital under the laws of the State of Nevada on July 16, 2004 and commenced operations in August 2004.

2. SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

a) Principles of consolidation

These consolidated financial statements include the accounts of the Company’s wholly owned legal subsidiary, JMG Canada Ltd., incorporated under the laws of Alberta on August 20, 2004. All inter-company accounts and transactions have been eliminated.

b) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances invested in short-term securities with original maturities of less than 90 days. For the period ended December 31, 2005, the average effective interest rate earned on cash equivalent balances was 0.4%. As at December 31, 2005, the Company had $1,043,331 in cash and $107,634 in short-term securities .

c) Foreign currency translation

As the majority of the Company’s operating activities are in the United States, the Company uses the United States dollar as its functional currency. The Company’s Canadian subsidiary is translated for financial statement reporting purposes into United States dollars using the current rate method. Under this method, assets and liabilities are translated at the period-end rate of exchange and all revenue and expense items are translated at the average rate of exchange for the period. Exchange differences arising on translation are classified in a separate component of stockholders equity.

d) Revenue recognition

Oil revenue is recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred, title has transferred and if the collection of the revenue is probable.

F-9

e) Joint operations

Substantially all of the Company’s petroleum and natural gas development activities are conducted jointly with others. These financial statements reflect only the Company’s proportionate interest in such activities.

f) Property and equipment

The Company is engaged in the exploration for and development of oil and natural gas in the United States and Canada. The Company has adopted the successful efforts method of accounting for its oil and natural gas activities.

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. The Company considers 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 oil and gas reserves over the economic life of the reserves, based on the Company’s expectations of future oil and gas prices and costs, 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 asset retirement obligations is based on the unit-of-production method using proved developed reserves on a field basis.

Other property and equipment are recorded at cost. Depreciation is provided using the straight-line method based over the estimated useful lives at a rate of 25 percent per annum.

g) Asset retirement obligations

The Company follows SFAS No 143. “Accounting for Asset Retirement Obligations”, which requires that an asset retirement obligation (ARO) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable, with a corresponding increase in the carrying amount of the associated asset. The cost of the tangible asset, including the initially recognized ARO, is depreciated such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate. The Company’s asset retirement obligations are expected to relate primarily to the plugging and abandonment of petroleum and natural gas properties.

F-10

Inherent in the fair value calculation of ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit-adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the petroleum and natural gas properties balance.

h) Measurement uncertainty

The amount recorded for depletion and depreciation of oil and gas properties, the provision for asset retirement obligations and the impairment calculation are based on estimates of gross proved reserves, production rates, commodity prices, future costs and other relevant assumptions. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future years could be significant.

i) Income taxes

The Company accounts for income taxes using the liability method, whereby deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities measured using enacted income tax rates and laws that are in effect when the differences are expected to reverse. Income tax expense for the period is the tax payable for the period and any change during the period in deferred tax assets and liabilities. A valuation allowance is provided to the extent that it is more likely than not that deferred tax assets will not be realized.

j) Other comprehensive income (loss)

Comprehensive income (loss) includes net loss and other comprehensive income (loss), which includes foreign currency translation gains or losses.

k) Stock-based compensation

The Company has a stock option plan under which employees; directors and consultants are eligible to receive grants. Consideration received on the exercise of stock options under the stock option plan is recorded as capital stock.

The Company accounts for the stock options granted to employees and qualifying non-employee directors under the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees”, and related interpretations. Under this method, no compensation expense is recorded for stock options granted when the exercise price is equal to or greater than the estimated market value of the common shares at the date of grant, unless the awards are subsequently modified. The Company also provides disclosure of the effect on net loss for the period and net loss per common share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-based Compensation”, as amended, to stock-based

The Company accounts for the stock option granted to consultants who do not qualify as employees using SFAS No. 123. Under these provisions, the cost of options granted to consultants is charged to net loss with a corresponding increase in additional paid-in capital, based on an estimate of the fair value determined using the Black-Scholes option-pricing model. For purposes of these awards, the grant date is the measurement date.

l) Net loss per share

The Company accounts for earnings/loss per share (“EPS”) in accordance with SFAS No. 128, “Earnings per Share.” Under SFAS No. 128, basic EPS is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding without including any potentially dilutive securities. Diluted EPS is computed by dividing net loss by the

F-11

weighted average number of common shares outstanding plus, when their effect is dilutive, common stock equivalents. The treasury stock method is used to determine the dilutive effect of the stock options and warrants. The treasury stock method assumes any proceeds obtained upon exercise of options would be used to purchase common shares at the average market price during the period. The effect of the exercise of warrants and stock options has been excluded since their effect is anti-dilutive.

m) Allowance for doubtful accounts

The Company considers amounts receivable to be fully collectible as recorded as of December 31, 2004 and 2005. Accordingly no allowance for doubtful accounts is required.

3. LOAN RECEIVABLE

On November 8, 2004, the Company entered into a Promissory Note with an unrelated industry partner (the “Borrower”), whereby the Company loaned the Borrower a total of $1,500,000. The terms of the loan agreement called for interest calculated at a rate of 18% per annum, and a fixed and specific charge on all the assets of the Borrower was provided as collateral. The Promissory Note was repayable in two installments; the first for $750,000 plus accrued interest of $81,750 was paid on February 22, 2005 and the second, for the entire remaining balance and all accrued and unpaid interest thereon, was due on April 30, 2005.

Effective May 1, 2005 the outstanding principal amount of the loan plus accrued interest was settled by the Company in exchange for the Borrower’s interest in certain exploration and development lands in Wyoming and Utah. In connection with the settlement agreement, the Company also granted the borrower an option to reacquire an undivided 50% interest in these lands for a payment of $391,249. The option was exercised on June 28, 2005. In conjunction with the settlement agreement, the Company’s previous commitment to spend $2,000,000 on drilling and completion of wells on these lands by November 7, 2005 was eliminated.

4. PROPERTY AND EQUIPMENT

During the twelve month period ended December 31, 2005, the Company recorded a total impairment provisions related to its oil properties of $3,773,062, as described below.

In May 2005, the Company terminated operations in the Fiddler Creek area and abandoned any further plans for development in the area. Accordingly, the Company recorded an impairment charge in the amount of $163,800 in the second quarter of 2005.

In June 2005, the Company sold equipment to a third party. This equipment had been previously written off as an impairment charge. The year-to-date net recovery was $54,413.

In December 31, 2005, the Company recorded an impairment provision of $3,663,675 related to properties located in Wyoming and North Dakota. This impairment is a result of unsuccessful work programs and production evaluation work performed during 2005. The impairment equals the excess of the aggregate carrying value of PP&E over its fair value.

The impairment charges have been included in depletion and depreciation expense in the accompanying statements of operations. Undeveloped land and other assets not related to petroleum and natural gas properties were excluded from the depletion calculation.

F-12

December 31, 2005

			Accumulated
			depletion,
	Cost		depreciation		Net book value
	$		$		$
Petroleum and natural gas properties		13,720,365		4,706,137		9,014,228
Undeveloped Land		5,868,691		—		5,868,691
Other assets		227,317		37,197		190,120
		19,816,373		4,743,334		15,073,039

December 31, 2004

			Accumulated
			depletion,
			depreciation
	Cost		and accretion		Net book value
	$		$		$
Petroleum and natural gas properties		2,053,378		472,172		1,941,206
Other assets		120,481		7,530		112,951
		2,173,859		479,702		2,054,157

OTHER ASSETS

The majority of other assets are bonds for oil and gas bond deposits in the states of North Dakota and Wyoming. These bonds provide coverage for operations conducted by or on behalf of the company. The bonds will be retained until all conditions of the bond have been fulfill or until a satisfactory replacement bond has been accepted.

6. SHARE CAPITAL

a) Authorized

The Company has authorized 25,000,000 common shares, par value $.001, and 10,000,000 preferred shares, par value $.001. As of December 31, 2005 there were 4,997,578 common shares issued and outstanding. Preferred shares were converted into common shares of the Company subsequent to Company’s initial public offering on August 3, 2005. No preferred shares are currently outstanding.

F-13

b) Issued and outstanding

							Additional
				Capital			Paid-in
				Stock			Capital			Total
	#			$			$			$
Common Stock, $.001 par value:
Balance, at July 16, 2004 and December 31, 2004		250,000			250			999,750			1,000,000
Preferred shares converted to common stock		1,950,000			1,950			7,790,275			7,792,225
Issued for cash, pursuant to initial public offering		2,185,000			2,185			11,141,315			11,143,500
Warrants exercised for common stock		612,578			612			3,042,216			3,042,828
Share Issue Costs								(861,254	)		(861,254	)
Portion of proceeds attributed to share purchase warrants								(2,146,595	)		(2,146,595	)
Balance at December 31, 2005		4,997,578			4,997			19,965,707			19,970,704
Preferred Stock
Balance, at July 16, 2004 and December 31, 2004		1,950,000			1,950			7,798,050			7,800,000
Preferred shares converted to common stock		(1,950,000	)		(1,950	)		(7,790,275	)		(7,792,225	)
Share issue costs, net of tax		—			—			(2,900	)		(2,900	)
Portion of proceeds attributed to share purchase warrants		—			—			(4,875	)		(4,875	)
Balance at December 31, 2005		—			—			—			—
Share Purchase Warrants
Balance, at July 16, 2004 and December 31, 2004		487,500			—			—			4,875
Issued pursuant to initial public offering		2,185,000			—			—			693,866
Issued pursuant to conversion of preferred shares		1,950,000			—			—			1,816,766
Warrants exercised for common stock		(612,578	)		—			—			(364,037	)
Balance at December 31, 2005		4,009,922			—			—			2,151,470
Additional paid in capital
Balance, July 16, 2004 (inception) and December 31, 2004								—
Stock-based compensation								78,589
-
Total December 31, 2005					4,997			20,044,296			22,122,174

c) Initial Public Offering

On August 3, 2005, the Company’s registration statement was declared effective by the Securities and Exchange Commission to register 2,185,000 units offered at $5.10 per unit to the stockholders of record of JED Oil Inc. as of February 1, 2005, and thereafter, to the extent not fully subscribed by the shareholders of JED, to the public. Each unit consisted of one share of common stock and one common stock purchase warrant to acquire one share of common stock for $5.00 per share for a period of one year from the date of the prospectus. The units did not trade separately. Accordingly, the Company registered 4,370,000 shares of common stock underlying the 2,185,000 units of common stock, including 570,000 shares of common stock underlying the 285,000 units subject to

F-14

the underwriter’s over allotment. The Company also registered 2,185,000 warrants underlying the units. Upon the closing of the initial public offering on August 3, 2005, the Company 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. The common stock and warrants underlying the units were listed and are trading separately.

The registration statement also registered the resale by the preferred stockholders of 1,950,000 shares of common stock. In August 2005 all holders of preferred stock converted their preferred stock into common stock and warrants to acquire common stock. The Company has also registered these 1,950,000 warrants to acquire common stock at $4.25 per share; and 487,500 warrants to acquire common stock for $6 per share.

d) Stock options

The Company has a stock option plan under which employees; directors and consultants are eligible to receive grants. As of December 31, 2005 479,250 shares were reserved for issuance under the plan. Options granted under the plan generally have a term of five years to expiry and vest immediately when issued to directors and generally vest as to one-third on each of the first, second and third anniversaries of the grant date for employees and consultants. The exercise price of each option equals the market value of the Company’s common stock on the date of grant. The following summarizes information concerning outstanding and exercisable stock options as of December 31, 2005:

F-15

				Weighted
				average exercise
	Number of			price
	options			$
Outstanding as at December 31, 2004		260,000			4.00
Granted — April 5, 2005		387,750			5.00
Granted — July 21, 2005		79,500			5.00
Granted — August 19, 2005		1,500			15.25
Granted — August 29, 2005		5,000			14.74
Granted — November 1, 2005		10,000			12.25
Cancelled		(260,000	)		4.00
Cancelled		(4,500	)		5.00
Options outstanding as at December 31, 2005		479,250
Exercisable as at December 31, 2005		250,000			5.00

Pro forma disclosure

The Company does not record compensation expense when stock options are issued to employees. Had compensation expense been determined based on the fair value of the options granted, net loss and net loss per share would have been increased to the pro forma amounts indicated below:

	Twelve months ended
	As reported			Pro Forma
December 31, 2005	$			$
Net loss		(6,272,351	)		(6,485,985	)
Net loss per share, basic and diluted		(2.97	)		(3.07	)

The weighted average fair value of stock option grants in the period in the amount of $5.00 was estimated using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate (%)		4.3
Expected life (years)		5.0
Expected volatility (%)		10 to 50
Expected dividend yield (%)	Nil
Vesting period (years)		0 to 3

Prior to August 3, 2005 the Company was private. Accordingly the expected volatility of the Company’s stock options granted during the period prior to August 3, 2005 had been set at a rate of 10%. The 13,000 stock options granted after the Company became public were set with an expected volatility of 50%.

d) Loss per share

For the twelve-month period ended December 31, 2005 the weighted average number of common shares outstanding were 2,111,351. (2004 — December 31, 2004 weighted average number of common shares outstanding were 250,000). All of the Company’s outstanding stock options and warrants currently have an anitdilutive effect on per common share amounts. These stock options and warrants could be dilutive in future periods.

F-16

7. INCOME TAXES

The Company provides deferred income taxes for differences between the tax reporting bases and the financial reporting bases of assets and liabilities. The Company follows the accounting procedures established by SFAS No. 109, “Accounting for Income Taxes.” The Company did not pay any income taxes in the period ended December 31, 2004 and December 31, 2005.

(a) Income tax expense (recovery)

The provision for income taxes recorded in the financial statements differs from the amount which would be obtained by applying the statutory income tax rate to the loss before tax as follows:

	2004			2005			Cumulative
	$			$			$
Loss for the period before income taxes		(701,132	)		(5,814,009	)		(6,515,141	)
Effective tax rate		39	%		39	%		39	%
Expected income tax recovery		(273,442	)		(2,267,463	)		(2,540,905	)
Deferred tax asset valuation allowance		273,442			2,267,463			2,540,905
Income tax benefit		—			—			—

(b) Deferred income taxes

The Company does not recognize the deferred income tax asset at this time because the realization of the asset is less likely than not. The components of the Company’s deferred income tax asset are as follows:

Deferred Tax Assets

	2004			2005
	$			$			Cumulative
Non-capital loss carry forward		340,805			1,303,797			1,644,602
Property Impairments		—			963,666			963,666
Total		340,805			2,267,463			2,608,268
Expense of Intangibles		(67,363	)		—			(67,363	)
Impairment		(273,442	)		(2,267,463	)		(2,540,905	)

The Company has non-capital losses for income tax purposes of approximately $4,216,927 which are available for application against future taxable income and which expire in 20 years. The non-capital loss carry forward was generated by intangible drilling costs that are deductible for U.S. income tax purposes creating a temporary difference for financial reporting purposes. The benefit associated with the non-capital loss carry forward will more likely than not go unrealized unless future exploration in the U.S. is successful. The deferred tax assets were generated by asset impairments, which will be realized, when the property is sold of otherwise disposed. Since the success of future exploration is indeterminable, the potential benefits resulting from these non-capital losses have not been recorded in the financial statements.

8. RELATED PARTY TRANSACTIONS

On August 1, 2004 the Company entered into a technical services agreement with JED Oil Inc. (“JED”). Under the Agreement, JED provides all required personnel, office space and equipment, at standard industry rates for similar services. JED is considered an affiliate of ours because of its ownership interest in us and because two of our directors are directors of JED. All transactions are

F-17

recorded at the exchange amount. Transactions during the twelve month period ending December 31, 2005 were as follows:

     JED paid on behalf of the Company a total of $442,667, $139,838 and $582,505 respectively for the twelve month periods ending December 31, 2005, the period from incorporation July 16, 2004 to December 31, 2004 and for the period from incorporation to December 31, 2005, for general and administrative services and capital related expenditures, and

     In consideration for the assignment of JED’s interests in certain oil and gas properties, JED charged the Company for drilling and other costs related to those properties in the amount of $85,085, $1,467,012 and $1,552,097 respectively for the twelve month periods ending December 31, 2005, the period from incorporation July 16, 2004 to December 31, 2004 and for the period from incorporation to December 31, 2005.

All amounts are due and payable on receipt, and do not earn interest. At December 31, 2005, $286,956 (2004 — $376,855) was outstanding. The amount was paid in full in early 2006.

General and administrative expenses for the twelve months ended December 31, 2005 include $46,180 paid to the Chief Financial Officer of the Company for consulting services related to the preparation of the Company’s registration statement.

9. ASSET RETIREMENT OBLIGATIONS

As at December 31, 2005, the estimated present value of the Company’s asset retirement obligation was $78,642 based on estimated future cash requirements of $216,000, 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 $3,385 was recorded for the twelve months ending December 31, 2005.

Asset retirement obligation at December 31, 2004		—
Liabilities incurred	$	75,257
Liabilities settled		—
Accretion expense	$	3,385
Asset retirement obligations at December 31, 2005	$	78,642

10. FINANCIAL INSTRUMENTS

a) Fair value of financial assets and liabilities

The company’s financial instruments consist of cash and cash equivalents, accounts receivable, due from related parties, loan receivable and accounts payable. As at December 31, 2005 and 2004 there were no significant difference between the carrying amounts of these financial instruments and their estimated fair value.

b) Concentration of credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, accounts receivable, and loan receivable. At December 31, 2005, the Company had all of its cash and cash equivalents with three banking institutions. The company mitigates the concentration risk associated with cash deposits by only depositing material amounts of funds with major banking institutions. Concentrations of credit risk with respect to accounts receivables are the result of joint venture operations with industry partners

F-18

and are subject to normal industry credit risks. The Company routinely assesses the credit of joint venture partners to minimize the risk of non-payment.

c) Interest rate risk

At December 31, 2005 and 2004, the Company had no outstanding indebtedness, that bears interest.

d) Foreign currency risk

Foreign currency risk is the risk that a variation in exchange rates between the United States dollar and the foreign currencies will affect the Company’s operating and financial results. The Company is exposed to foreign currency risk as the Company holds cash and cash equivalents on hand that are denominated in Canadian currency.

11. RECENT PRONOUNCEMENTS

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

Statement 123(R) must be adopted by small-business issuers at the beginning of the first interim or annual period beginning after December 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. We expect to adopt Statement 123(R) on January 1, 2006.

Statement 123(R) permits public companies to adopt its requirements using one of two methods:

1. A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement 123 for all awards granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date.

2. A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under Statement 123 for purposes of pro forma disclosures either (a) for all periods presented or (b) prior interim periods of the year of adoption.

The Company plans to adopt Statement 123 using the modified-prospective method.

As permitted by Statement 123, the Company currently accounts for share-based payments to employees using APB Opinion No. 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. However, accordingly, the adoption of Statement 123(R)’s fair value method will have a significant impact on our results of operations

12. SUBSEQUENT EVENTS

JED Oil Inc. (Amex: JDO) (“JED”) and JMG on February 27, 2006 announced they have signed a letter of intent to pursue a possible acquisition of JMG by JED. The proposal would offer two-thirds of a share of common stock of JED for each share of common stock of JMG. This exchange ratio is based on the “market to market” recent trading prices of JED and JMG stock and the transaction is subject to the receipt of independent third party opinions that the transaction is fair to both the

F-19

shareholders of JMG and shareholders of JED. As of March 23, 2006, we had (i) 5,086,832 common shares outstanding with a closing price of $9.75 per share on such date as reported on NYSE Arca Exchange and (ii) 1,805,981 publicly traded warrants outstanding with a closing price of $4.50, for total consideration of $57,723,526.50 . Outstanding options and other warrants will also be assumed at the same exchange ratio of two JED shares for three JMG shares. Completion of the transaction is also subject to receipt of all required regulatory and stock exchange approvals in both the United States and Canada, and to the approval of the shareholders of both JMG and JED. It is anticipated that all of the outstanding common shares, warrants and options of JMG will be converted at the above-mentioned exchange rate. The JMG Board of Directors has extended the JMG warrants that were to expire in August and December of 2006 to January 15, 2007.

13. COMPARATIVE FIGURES

“Certain comparative figures have been reclassified to conform to the current period presentation.”

F-20

JMG Exploration, Inc.
A Development Stage Enterprise

CONSOLIDATED BALANCE SHEETS

(In United States Dollars)
(unaudited)

	June 30			December 31
As at	2006			2005
	$			$
ASSETS
Current
Cash and cash equivalents		796,444			1,150,965
Accounts receivable		462,586			1,284,474
Prepaid expenses and deposits		239,817			34,701
Due from JED Oil Inc. [note 6]		1,830,123			—
		3,328,970			2,470,140
Other assets		230,000			230,000
Property and equipment [note 3]		15,477,913			15,073,039
		19,036,883			17,773,179
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current
Accounts payable		1,993,525			845,507
Accrued liabilities		454,791			1,660,648
Promissory note payable [note 4]		1,500,000			—
Due to JED Oil Inc. [note 6]		—			286,956
		3,948,316			2,793,111
Asset retirement obligation [note 7]		82,020			78,642
		4,030,336			2,871,753
Stockholders’ equity [note 5]
Common stock — $.001 par value; 25,000,000 shares authorized; 5,099,099 shares issued and outstanding at June 30, 2006 and 4,997,578 shares issued and outstanding at December 31, 2005		5,099			4,997
Additional paid-in capital		20,637,577			20,044,296
Share purchase warrants		2,086,403			2,151,470
Deficit accumulated during the development stage		(7,704,811	)		(7,296,640	)
Accumulated other comprehensive income		(17,721	)		(2,697	)
		15,006,547			14,901,426
		19,036,883			17,773,179

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

F-21

JMG Exploration, Inc.
A Development Stage Enterprise

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

(In United States Dollars) (unaudited)

													For the period
													from the date
													of incorporation
	For the three month period						or the six month period						on July 16, 2004
	ended June 30						ended June 30						to June 30
	2006			2005			2006			2005			2006
	$			$			$			$			$
Revenue
Petroleum revenue		475,517			6,639			928,252			6,639			1,555,712
Interest		—			43,681			—			117,004			185,091
		475,517			50,320			928,252			123,643			1,740,803
Expenses
Production		56,186			10,953			191,648			10,953			381,246
General and administrative [note 6]		338,494			251,404			631,857			507,746			2,765,218
Interest on promissory note [note 4]		89,975			—			113,872			—			113,872
Geophysical and geological		—			162,284			—			162,284			256,484
Depletion, depreciation and accretion		191,076			93,140			399,046			127,456			5,147,295
		675,731			517,781			1,336,423			808,439			8,664,115
Net loss for the period		(200,214	)		(467,461	)		(408,171	)		(684,796	)		(6,923,312	)
Less: cumulative preferred dividends		—			(195,000	)		—			(388,397	)		(781,499	)
Net loss applicable to common shareholders		(200,214	)		(662,461	)		(408,171	)		(1,073,193	)		(7,704,811	)
Deficit, beginning of period		(7,504,597	)		(1,435,021	)		(7,296,640	)		(1,024,289	)		—
Deficit, end of period		(7,704,811	)		(2,097,482	)		(7,704,811	)		(2,097,482	)		(7,704,811	)
Basic and diluted weighted average common shares outstanding		5,094,773			250,000			5,090,825			250,000			2,442,166
Net loss for the period per common share [note 5]
basic and diluted		(0.04	)		(2.65	)		(0.08	)		(4.29	)		(3.15	)

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

F-22

JMG Exploration, Inc.
A Development Stage Enterprise

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In United States Dollars)

(unaudited)

													For the period
													from the date
													of incorporation
	For the three month period						For the six month period						on July 16, 2004
	ended June 30,						ended June 30,						to June 30,
	2006			2005			2006			2005			2006
	$			$			$			$			$
OPERATIONS
Net loss for the period		(200,214	)		(467,461	)		(408,171	)		(684,796	)		(6,923,312	)
Adjustments to reconcile net loss to cash flows from operating activities:
Stock-based compensation [note 5]		25,144			—			50,012			—			128,601
Depletion, depreciation and accretion		191,076			93,140			399,046			127,456			5,147,295
Other changes:
Increase in accounts receivable		(1,117,844	)		(162,288	)		(326,755	)		(95,634	)		(835,356	)
Increase in prepaid expenses and deposits		(78,178	)		(108,332	)		(205,116	)		(136,744	)		(239,817	)
Increase (decrease) in accounts payable and accrued liabilities		2,975,813			(4,337	)		1,131,424			3,041			1,383,590
Increase (decrease) in due to JED Oil Inc.		(1,970,730	)		(101,147	)		(2,117,079	)		286,393			(1,830,123	)
Decrease in due to related party		—			(14,856	)		—			(4,164	)		—
Increase (decrease) in accrued interest on loan receivable		—			(15,815	)		—			16,683			(15,815	)
Cash used in operating activities		(174,933	)		(781,096	)		(1,476,639	)		(487,765	)		(3,184,937	)
INVESTING
Repayment (advance) of loan receivable		—			—			—			750,000			(750,000	)
Proceeds on disposition of property		—			391,249			—			391,249			391,249
Purchase of property and equipment		255,844			(586,269	)		(841,162	)		(2,875,155	)		(18,731,126	)
Increase in other assets		—			(7,500	)		—			(82,500	)		(230,000	)
Cash provided by (used in) investing activities		255,844			(202,520	)		(841,162	)		(1,816,406	)		(19,319,877	)
FINANCING
Issue of common shares, net of issue costs		60,431			—			478,304			—			20,506,063
Issue of share purchase warrants		—			—			—			—			2,094,415
Promissory note payable		—			—			1,500,000			—			1,500,000
Preferred share dividends		—			(195,000	)		—			(390,000	)		(781,499	)
Cash provided by (used in) financing activities		60,431			(195,000	)		1,978,304			(390,000	)		23,318,979
Effect of foreign exchange on cash balances		2,966			1,444			(15,024	)		(1,860	)		(17,721	)
Net increase (decrease) in cash		144,308			(1,177,172	)		(354,521	)		(2,696,031	)		796,444
Cash, beginning of period		652,136			3,521,941			1,150,965			5,040,800			—
Cash, end of period		796,444			2,344,769			796,444			2,344,769			796,444

During the three and six month periods ended June 30, 2006 and 2005, the Company paid $25,500 (2005 — $nil) and $71,000 (2005 — $nil) in interest on the promissory note. No income or capital taxes were paid for the three and six month periods ended June 30, 2006 and 2005.

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

F-23

JMG Exploration, Inc.
A Development Stage Enterprise

STATEMENT OF CHANGES IN CONSOLIDATED

STOCKHOLDERS’ EQUITY

(In United States Dollars)

(unaudited)

Period from the date of incorporation on July 16, 2004 to June 30, 2006.

	Shares			Total
	#			$
Common stock, $.001 par value:
Balance at July 16, 2004 and December 31, 2004		250,000			1,000,000
Preferred shares converted to common stock		1,950,000			7,792,225
Issuance of common stock, stock issued for cash pursuant to initial public offering		2,185,000			11,143,500
Warrants exercised for common stock		612,578			3,042,828
Share issue costs		—			(861,254	)
Portion of proceeds attributed to share purchase warrants		—			(2,146,595	)
Balance at December 31, 2005		4,997,578			19,970,704
Warrants exercised for common stock		97,854			462,866
Issued under stock option plan		3,667			18,335
Share issue costs		—			(2,897	)
Portion of proceeds attributed to share purchase warrants		—			65,067
Balance at June 30, 2006		5,099,099			20,514,075
Additional paid in capital:
Balance, July 16, 2004 (inception) and December 31, 2004		—			—
Stock-based compensation		—			78,589
Balance at December 31, 2005		—			78,589
Stock-based compensation		—			50,012
Balance at June 30, 2006		—			128,601
Preferred stock, $.001 par value:
Balance at December 31, 2004		1,950,000			7,792,225
Preferred shares converted to common stock		(1,950,000	)		(7,792,225	)
Balance at December 31, 2005 and June 30, 2006		—			—
Share purchase warrants:
Balance at December 31, 2004		487,500			4,875
Share purchase warrants: issued pursuant to initial public offering $5.00		2,185,000			693,866
Share purchase warrants: issued pursuant conversion preferred shares $4.25		1,950,000			1,816,766
Warrants exercised for common stock		(612,578	)		(364,037	)
Balance at December 31, 2005		4,009,922			2,151,470
Warrants exercised for common stock		(97,854	)		(65,067	)
Balance at June 30, 2006		3,906,130			2,086,403
Deficit:
Balance at beginning of period July 16, 2004		—			—
Net loss for the period to December 31, 2004		—			(701,132	)
Preferred share dividends		—			(323,157	)
Balance at December 31, 2004		—			(1,024,289	)
Net loss for the twelve-month period ended December 31, 2005		—			(5,814,009	)
Preferred share dividends		—			(458,342	)
Balance at December 31, 2005		—			(7,296,640	)
Net loss for the six month period ended June 30, 2006					(408,171	)
Balance at June 30, 2006		—			(7,704,811	)
Accumulated other comprehensive income
Balance at beginning of period July 16, 2004		—			—
Balance December 31, 2004		—			—
Foreign exchange translation adjustment		—			(2,697	)
Balance at December 31, 2005		—			(2,697	)
Foreign exchange translation adjustment					(15,024	)
Balance at June 30, 2006		—			(17,721	)
Total stockholders equity at June 30, 2006		—			(15,006,547	)

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

F-24

JMG Exploration, Inc.
A Development Stage Enterprise

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In United States Dollars) (unaudited)

													For the period
													from the date
													of incorporation
	For the three month period						For the six month period						on July 16, 2004
	ended June 30,						ended June 30,						to June 30,
	2006			2005			2006			2005			2006
	$			$			$			$			$
Net loss for the period		(200,214	)		(467,461	)		(408,171	)		(684,796	)		(6,923,312	)
Other comprehensive income (loss):
Foreign exchange translation adjustment		2,966			98			(15,024	)		98			(17,071	)
Comprehensive loss for the period		(197,248	)		(467,363	)		(423,195	)		(684,698	)		(6,940,383	)
Comprehensive loss for the period per common share [note 5]		(0.04	)		(1.87	)		(0.08	)		(2.74	)		(2.84	)

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

F -25

2. INCORPORATION AND NATURE OF OPERATIONS

JMG Exploration, Inc. (“JMG” or the “Company”) is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids in Canada and the United States. Currently, all of the Company’s proved reserves are located in the United States.

The Company’s future financial condition and results of operations will depend upon prices received for its oil and natural gas production and the costs of finding, acquiring, developing and producing reserves. Prices for oil and natural gas are subject to fluctuations in response to change in supply, market uncertainty and a variety of other factors beyond the Company’s control. These factors include worldwide political instability, the foreign supply of oil and natural gas, the price of foreign imports, the level of consumer demand, and the price and availability of alternative fuels.

JMG was incorporated with nominal share capital under the laws of the State of Nevada on July 16, 2004 and commenced operations in August 2004.

JED Oil Inc. (Amex: JDO) (“JED”) and JMG on February 27, 2006 announced they have signed a letter of intent to pursue a possible acquisition of JMG by JED. The proposal would offer two-thirds of a share of common stock of JED for each share of common stock of JMG. This exchange ratio is based on the “market to market” recent trading prices of JED and JMG stock and the transaction is subject to the receipt of independent third party opinions that the transaction is fair to both the shareholders of JMG and shareholders of JED. Completion of the transaction is also subject to receipt of all required regulatory and stock exchange approvals in both the United States and Canada, and to the approval of the shareholders of both JMG and JED. It is anticipated that all of the outstanding common shares, warrants and options of JMG will be converted at the above-mentioned exchange rate. The JMG Board of Directors has extended the JMG warrants that were to expire in August and December of 2006 to January 15, 2007.

As with many development stage enterprises, JMG has not realized a profit from operations since its incorporation on July 16, 2004. The recovery of the Company’s assets and its ability to continue operations is dependent on successful production of economic quantities of hydrocarbons, obtaining additional financing to fund its exploration activity or the successful completion of the merger with JED discussed in the preceding paragraph.

2. SIGNIFICANT ACCOUNTING POLICIES

These interim consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods, on a basis that is consistent with the annual audited consolidated financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited consolidated financial statements and the summary of significant accounting policies and notes thereto included in the Company’s audited consolidated financial statements for the period from the date of incorporation on July 16, 2004 to December 31, 2005.

F -26

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

Change in Accounting Principle

At December 31, 2005, the Company has a stock-based employee compensation plan, which is described more fully in Note 5. Prior to January 1, 2006, the Company accounted for the stock options granted to employees and directors under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation and for the stock options granted to consultants under the recognition and measurement provisions of FASB Statement No. 123. No stock-based employee and directors compensation cost was recognized in the Statement of Operations and Deficit for the year ended December 31, 2005 nor for the period from the date of incorporation on July 16, 2004 to December 31, 2004, as all options granted to employees and directors under that plan had an exercise price equal to the market value of the company’s common stock on the date of grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment, 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 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.

As a result of adopting Statement 123(R) on January 1, 2006, the Company’s net loss for the six month period ended June 30, 2006, is the same as if it had continued to account for share-based compensation under Opinion 25. Basic and diluted loss per common share for the six month period ended June 30, 2006 would have been $0.08 and $0.08, respectively, if the Company had not adopted Statement 123(R), compared to reported basic and diluted loss per share of $0.08 and $0.08, respectively.

The following table illustrates the effect on net loss for the period from the date of incorporation on July 16, 2004 to June 30, 2006, and for the three and six month periods ended June 30, 2006 and loss per common share if the Company had applied the fair value recognition provisions of Statement 123 to options granted to employees and directors under the Company’s stock option plan in all periods presented. For purposes of this pro forma disclosure, the value of the options is estimated using the Black-Scholes option-pricing model and amortized to expense over the options’ vesting period on a straight-line basis.

F -27

							Period from the
							date of
	Three month period			Six month period			incorporation on
	ended			ended			July 16, 2004 to
	June 30, 2006			June 30, 2006			June 30, 2006
Net loss, as reported	$	200,214		$	408,171		$	6,923,312
Deduct: Stock-based employees and directors compensation expenses included in reported net loss, net of related tax effects	($	2,346	)	($	4,718	)	($	4,718	)
Add: Total stock-based employees and directors compensation expenses determined under fair value based method for all awards, net of related tax effects	$	2,346		$	4,718		$	218,352
Pro forma net loss	$	200,214		$	408,171		$	7,136,946
Net loss per common share:
Basic and diluted – as reported	$	0.04		$	0.08		$	2.83
Basic and diluted – pro forma	$	0.04		$	0.08		$	2.92

3. PROPERTY AND EQUIPMENT

During the three and six month periods ended June 30, 2006, the Company recorded a depletion provision related to its oil properties of $189,369 and $395,668, respectively (2005 — $92,374, 126,690). The Company recorded depletion and depreciation from the period from the date of incorporation July 16, 2004 to June 30, 2006 of $5,140,532, of this amount $4,243,703 related to impairment and $834,000 to depletion and $61,299 to depreciation. At June 30, 2006, undeveloped land and other assets were $5,974,753 (2005 — $2,216,294). These amounts were excluded from the depletion calculation for the three and six month periods ended June 30, 2006. There was no production or depletion for the same period in 2005. During the three and six month periods ended June 30, 2006 (2005 — $nil) and the period from incorporation July 16, 2004 to June 30, 2006 the Company did not capitalize any direct general and administration expenses.

F -28

	June 30, 2006				December 31, 2005
			Accumulated
			depletion,
			depreciation and
	Cost		accretion,		Net book value		Net book value
	$		$		$		$
Petroleum and natural gas properties		14,414,845		5,077,703		9,337,142		9,014,228
Undeveloped Land		5,974,753		—		5,974,753		5,868,691
Other assets		227,317		61,299		166,018		190,120
		20,616,915		5,139,002		15,477,913		15,073,039

4. PROMISSORY NOTE

On February 8, 2006 a promissory note was issued to an unrelated third party, for a total of $1,500,000. The terms of the agreement call for interest calculated at 12% per annum calculated and paid on a monthly basis. The promissory note was repayable on March 30, 2006, but repayment has now been extended indefinitely. All other terms of the original agreement remain the same.

5. SHARE CAPITAL

a) Authorized

The Company has authorized 25,000,000 common shares, par value $.001, and 10,000,000 preferred shares, par value $.001. As of June 30, 2006 there were 5,099,099 common shares issued and outstanding. Preferred shares were converted into common shares of the Company subsequent to Company’s initial public offering on August 3, 2005. No preferred shares are currently outstanding.

F -29

b) Issued and outstanding

							Additional
				Capital			Paid-in
				Stock			Capital			Total
	#			$			$			$
Common Stock, $.001 par value:
Balance, at July 16, 2004 and December 31, 2004		250,000			250			999,750			1,000,000
Preferred shares converted to common stock		1,950,000			1,950			7,790,275			7,792,225
Issued for cash, pursuant to initial public offering		2,185,000			2,185			11,141,315			11,143,500
Warrants exercised for common stock		612,578			612			3,042,216			3,042,828
Share issue costs		—			—			(861,254	)		(861,254	)
Portion of proceeds attributed to share purchase warrants		—			—			(2,146,595	)		(2,146,595	)
Stock-based compensation		—			—			78,589			78,589
Balance at December 31, 2005		4,997,578			4,997			20,044,296			20,049,293
Warrants exercised for common stock		97,854			98			462,768			462,866
Issued under stock option plan		3,667			4			18,331			18,335
Share issue costs		—			—			(2,897	)		(2,897	)
Portion of proceeds attributed to share purchase warrants		—			—			65,067			65,067
Stock-based compensation		—			—			50,012			50,012
Balance at June 30, 2006		5,099,099			5,099			20,637,577			20,642,676
Preferred Stock:
Balance, at July 16, 2004 and December 31, 2004		1,950,000			1,950			7,798,050			7,800,000
Preferred shares converted to common stock		(1,950,000	)		(1,950	)		(7,790,275	)		(7,792,225	)
Share issue costs, net of tax		—			—			(2,900	)		(2,900	)
Portion of proceeds attributed to share purchase warrants		—			—			(4,875	)		(4,875	)
Balance at December 31, 2005 and June 30, 2006		—			—			—			—

F -30

Share Purchase Warrants:
Balance, at July 16, 2004 and December 31, 2004	487,500		—	—	4,875
Issued pursuant to initial public offering	2,185,000		—	—	693,866
Issued pursuant to conversion of preferred shares	1,950,000		—	—	1,816,766
Warrants exercised for common stock	(612,578	)	—	—	(364,037	)
Balance at December 31, 2005	4,009,922		—	—	2,151,470
Warrants exercised for common stock	(97,854	)			(65,067	)
Balance at June 30, 2006	3,912,068		—	—	2,086,403
Total			5,099	20,637,577	22,729,079

c) Stock options

The Company has a stock option plan under which employees; directors and consultants are eligible to receive grants. As of June 30, 2006, 427,000 shares were reserved for issuance under the plan. Options granted under the plan generally have a term of five years to expiry and vest immediately when issued to directors and generally vest as to one-third on each of the first, second and third anniversaries of the grant date for employees and consultants. The exercise price of each option equals the market value of the Company’s common stock on the date of grant. The following summarizes information concerning outstanding and exercisable stock options as of June 30, 2006:

				Weighted
				average
				exercise
				price
	Number of options			$
Outstanding as at December 31, 2004		260,000			4.00
Granted — April 5, 2005		387,750			5.00
Granted – July 21, 2005		79,500			5.00
Granted – August 19, 2005		1,500			15.25
Granted – August 29, 2005		5,000			14.74
Granted – November 1, 2005		10,000			12.25
Cancelled		(260,000	)		4.00
Cancelled		(4,500	)		5.00
Options outstanding as at December 31, 2005		479,250
Cancelled		(148,583	)		5.00
Exercised		(3,667	)		5.00
Options outstanding as at June 30, 2006		327,000
Exercisable as at June 30, 2006		264,005			5.00

F -31

d) Stock–based compensation

Prior to August 3, 2005 the Company was private. Accordingly the expected volatility of the Company’s stock options granted during the period prior to August 3, 2005 had been set at a rate of 10%. The 13,000 stock options granted after the Company became public were set with an expected volatility of 50%. There were no stock options granted in the six month period ended June 30, 2006. The estimated fair value of the options is amortized over the options’ vesting period on a straight-line basis. For the three and six month periods ended June 30, 2006 the stock option expense was $25,144 (2005 — $nil) and $50,012 (2005 — $nil) respectively. The stock option expense from the period of incorporation July 16, 2004 to June 30, 2006 was $128,601.

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.

Statement 123(R) must be adopted by small-business issuers at the beginning of the first interim or annual period beginning after December 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. We have adopted Statement 123(R) on January 1, 2006.

Statement 123(R) permits public companies to adopt its requirements using a “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement 123 for all awards granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date. The Company has adopted Statement 123(R) using the modified-prospective method.

e) Loss per share

For the three and six month periods ended June 30, 2006 the basic and diluted weighted average number of common shares outstanding were 5,094,773 (2005 – 250,000) and 5,090,825 (2005 – 250,000) respectively. For both the period from the date of incorporation to June 30, 2006 the basic and diluted weighted average number of common shares outstanding were 2,442,166. All of the Company’s outstanding stock options and warrants currently have an antidilutive effect on per common share amounts.

6. RELATED PARTY TRANSACTIONS

On August 1, 2004 the Company entered into a technical services agreement with JED Oil Inc. (“JED”). Under the Agreement, JED provides all required personnel, office space and equipment, at standard industry rates for similar services. JED is considered an affiliate of ours because of its ownership interest in us and because two of our directors are directors of JED. This agreement was terminated on January 1, 2006; it was replaced by a joint services agreement, which operates to provide the above services on an as needed basis.

F -32

JED paid on behalf of the Company for the six month period ended June 30, 2006 total of $nil (2005 - $342,270) and $582,505 for the period from incorporation, for general and administrative services and capital related expenditures.

In consideration for the assignment of JED’s interests in certain oil and gas properties, JED charged the Company for drilling and other costs related to those properties for the period ended June 30, 2006, in the amount of $1,249,917 (2005 — $85,085) and $2,802,014 for the period from incorporation. This amount for the period ended June 30, 2006 is offset from joint venture receivables from unrelated third parties. Amounts payable, relating to the JED farm in, are due and payable on receipt of funds from the unrelated third party.

As at June 30, 2006, JED owes the Company $1,830,123 for the reimbursement of intangible drilling costs.

7. ASSET RETIREMENT OBLIGATION

As at June 30, 2006, the estimated present value of the Company’s asset retirement obligation was $82,020 based on estimated future cash requirements of $216,000, 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.

	$
Asset retirement obligation, December 31, 2005		78,642
Accretion expense		3,378
Asset retirement obligation, June 30, 2006		82,020

8. SUBSEQUENT EVENTS

On February 27, 2006, JED and JMG announced they have signed a letter of intent to pursue a possible acquisition of JMG by JED. The proposal would offer two-thirds of a share of common stock of JED for each share of common stock of JMG. This exchange ratio is based on the “market to market” recent trading prices of JED and JMG stock and the transaction is subject to the receipt of independent third party opinions that the transaction is fair to both the shareholders of JMG and shareholders of JED. Completion of the transaction is also subject to receipt of all required regulatory and stock exchange approvals in both the United States and Canada, and to the approval of the shareholders of both JMG and JED. It is anticipated that all of the outstanding common shares, warrants and options of JMG will be converted at the above-mentioned exchange rate. The JMG Board of Directors has extended the JMG warrants that were to expire in August and December of 2006 to January 15, 2007.

F -33