PLACEMENT AGENCY AGREEMENT

PLACEMENT AGENCY AGREEMENT

THIS AGENCY AGREEMENT (the “Agreement”), entered into this 3rd day of July 2007, sets forth the arrangement between Basic Investors Inc., (the “AGENT”) a New York corporation, with its principal place of business at 510 Broadhollow Rd., Suite 306, Melville, NY 11747 and Arkanova Energy Corporation with its principal place of business located at 21 Waterway Avenue, Suite 300, The Woodlands, Texas hereinafter referred to as (the “Company”), with respect to compensation to which the AGENT may become entitled under the terms and conditions set forth in this Agreement.

1.              Purpose .               The AGENT will undertake to contact and present information regarding the Company to persons or entities (each, along with its clients and investor or affiliate network, a “Funding Source”), where the Funding Source may provide, each in its own discretion, funding and/or financing to the Company or who may purchase securities (either Company securities or securities of other companies owned by Company) from the Company (the “Offering”).

2.               Non-Circumvention . Neither the Company nor any representative of the Company shall contact a Funding Source without the prior written approval of the AGENT for the duration of this Agreement and for an 18 month period following the termination of this Agreement. Furthermore, the Company hereby irrevocably agrees not to circumvent, avoid, bypass, or obviate, directly or indirectly, the intent of this Agreement, or to avoid payment of fees in any transaction with any Funding Source in the future.

3.               AGENT’s Compensation . The Company hereby offers to pay the AGENT in cash, an amount equal to 8% of any proceeds provided to the Company by any Funding Source referred by the AGENT, upon receipt of funds. For example: if $100,000 USD is referred to the Company by the AGENT, then the compensation will be $8,000 USD. In addition, the AGENT will be issued a total of 10% warrant coverage, each warrant of which will be exercisable at the closing price of the Company’s common stock on the closing date of the Offering for a period of two years from the date of issuance. For example: for every $80,000 USD that is raised by any referrals of the AGENT, the AGENT will receive 10,000 warrants to purchase Arkanova Energy Corporation’s common stock at $1.00 USD. The warrants will be granted piggy-back registration (subject to a twelve month hold period) and, in the event that the common stock underlying the warrants is not registered at the time of exercise, the warrants may be exercised on a cashless basis.

(a)             Form of Compensation . The AGENT’s compensation shall be paid to the AGENT, according to the AGENT’s preference, either in the form of a certified or cashier’s check, or wire transfer of immediately available funds.

(b)            Guarantee of Payment . It is understood and agreed that the individual signing this Agreement on behalf of the Company has the authority to direct Company’s compliance or non-compliance with this Agreement.

4.              Registered Broker – Dealer. Agent warrants and represents to the Company that it is registered as a broker – dealer pursuant to the Securities Exchange Act of 1934, as amended, and in accordance with the securities laws of all states or other jurisdictions within which it carries out, and intends to carry out, the services as described in Section 1.

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Initials of Company

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5.              Consummation Required . In no event will the Company have any liability for compensation to the AGENT pursuant to this Agreement, unless a funding and/or financing transaction with any Funding Source is actually consummated.

The Company shall have the right to select or reject any offer of funding and/or financing from a Funding Source, for any reason, or for no reason.

6.              Agreement Not Exclusive . Nothing in this Agreement shall be deemed to prevent Company from authorizing other parties to locate sources of funding and/or financing for it, and the Company may negotiate for and carry out fundings and/or financings independently of any Funding Sources contacted by the AGENT, either with or without the assistance of other intermediaries. Nothing in this Agreement shall be deemed to prevent the AGENT from seeking funding and/or financing on behalf of other parties.

7.              Independent Contractor Relationship . This Agreement is intended to create an independent contractor relationship between the AGENT and the Company, which is described in Section 3508 of the Internal Revenue Service Code, and shall be interpreted to effectuate such intent between the parties.