UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.   20549





FORM
10-Q





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


For the quarterly period ended June
30, 2008





/  /
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT


For the transition period from _____
to _____





BONANZA OIL AND GAS,
INC.


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





Nevada
            000-52411
            76-0720654(State
      or other jurisdiction
              of
      incorporation or
              organization)
            (Commission
      File No.)
            (I.R.S.
      Employer
              Identification
      No.)





3000
      Richmond Avenue
              Suite
      400
              Houston,
      TX 77098
              (Address
      of principal executive offices)
            
            (713)
      333-5808
              (Issuer’s
      telephone number)





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 month (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.                Yes   /X/                             No/  /





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





Large
      accelerated filer o
            Accelerated
      filer o
            Non-accelerated
      filer oNon
      accelerated filer o  (Do not
      check if a smaller reporting company)
            Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in section
12b-2 of the Exchange
Act)Yes   /  /                             No/X
/





State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date.





Common Stock, par value $0.001
              (Class)
            
            35,458,651
              (Outstanding
      at August 13, 2008)





Transitional
Small Business Disclosure Format (check one): Yes o No x




1


BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES





TABLE
OF CONTENTS
 PagePART
      I – FINANCIAL INFORMATIONItem
      1.Financial Statements (unaudited)Consolidated
      Balance Sheets; June 30, 2008 and December 31, 2007
                  
                  3Consolidated
      Statement of Operations; Three and Six Months ended June 30,
      2008
                  
                  4Consolidated
      Statement of Cash Flows; Six Months ended June 30, 2008
                  
                  5Notes
      to Consolidated Financial Statements
                  
                  6Item 2. Management’s Discussion
      and Analysis or Plan of Operations
                  
                  13Item 3. Quantitative and
      Qualitative Disclosures About Market Risks
                  
                  17Item 4. Controls and
      Procedures
                  
                  18Item 4T. Controls and
      Procedures
                  
                  18
  PART II –
OTHER INFORMATION
  Item
      1.Legal Proceedings
                  
                  18Item 1A.Risk
      Factors
                  
                  18Item
      2.Unregistered Sales of Equity Securities and Use of
      Proceeds
                  
                  18Item 3Default
      upon Senior Securities
                  
                  20Item 4Submission of Matters to a Vote of Security Holders
                  
                  20Item
      5Other Information
                  
                  20Item
      6Exhibits
                  
                  20Signatures
                  
                  20


2


PART
I. FINANCIAL INFORMATION





Item 1.
Financial Statements





BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES


BALANCE
SHEETS





June
      30, 2008
            
            
            December
      31,(Unaudited)
            
            
            2007ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            306,949
            
            
            $
            154,357Accounts
      Receivable
            
            
            445
            
            
            
            5,488Deferred
      Financing Costs
            
            
            84,693
            
            
            
            12,021Total
      Current Assets
            
            
            392,087
            
            
            
            171,866Property
      and Equipment, at cost (Note 2):Oil
      and gas properties and equipment
            
            
            3,266,581
            
            
            
            1,696,011Other
      property and equipment
            
            
            2,433
            
            
            
            -Total
      property and equipment
            
            
            3,269,014
            
            
            
            1,696,011Less:
      accumulated depletion, depreciationand
      amortization
            
            
            (10,558
            )
            
            
            (5,627
            )3,258,456
            
            
            
            1,690,384Total
      Assets
            
            $
            3,650,543
            
            
            $
            1,862,250LIABILITIES AND
      STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
            
            $
            179,535
            
            
            $
            33,642Accrued
      expenses
            
            
            -
            
            
            
            1,342Debt,
      net of $636,325 and $10,303 of unamortized discount at June 30,
      2008and
      December 31, 2007, respectively  (Note 3)
            
            
            1,163,675
            
            
            
            239,697Total
      Current Liabilities
            
            
            1,343,210
            
            
            
            274,681Liability
      for Asset Retirement Obligations (Note 6)Commitments
      and Contingencies (Note 4)Stockholders'
      Equity:Common
      stock, $0.001 par value, 60,000,000 shares authorized;28,781,320
      and 25,649,645 shares issued and outstanding at
            
            
            28,781
            
            
            
            25,650June
      30, 2008 and December 31, 2007, respectivelyPreferred
      Stock Series A, $0.001 par value, 5,000,000 shares
    authorized
            
            
            -
            
            
            
            -0
      shares issued and outstanding at June 30, 2008 andDecember
      31, 2007, respectivelyPreferred
      Stock Series B, $0.001 par value, 5,000,000 shares
    authorized
            
            
            -
            
            
            
            -0
      shares issued and outstanding at June 30, 2008 andDecember
      31, 2007, respectivelyPreferred
      Stock Series C, $0.001 par value, 5,000,000 shares
    authorized
            
            
            -
            
            
            
            -0
      shares issued and outstanding at June 30, 2008 andDecember
      31, 2007, respectivelyAdditional-Paid-in-Capital
            
            
            3,653,717
            
            
            
            1,759,164Accumulated
      Deficit
            
            
            (1,375,165
            )
            
            
            (197,245
            )2,307,333
            
            
            
            1,587,569Total
      Liabilities and Stockholders' Equity
            
            $
            3,650,543
            
            
            $
            1,862,250




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


3


BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES


STATEMENT
OF OPERATIONS


For the
three months and six months ended June 30, 2008 (Unaudited)
  Three
      Months
              
              
              Six
      MonthsJune
      30, 2008
              
              
              June
      30, 2008Operating
      RevenuesOil
      & Gas Sales
              
              $
              (2,908
              )
              
              $
              9,267Total
      Operating Revenues
              
              
              (2,908
              )
              
              
              9,267Operating
      Costs and ExpensesOperating
      ExpensesDepreciation,
      Depletion and Accretion
              
              
              1,548
              
              
              
              4,931Stock
      Based Compensation
              
              
              516,000
              
              
              
              516,000General
      and Administrative
              
              
              200,397
              
              
              
              438,020Total
      Operating Costs and Expenses
              
              
              717,945
              
              
              
              958,951Operating
      Loss
              
              
              (720,853
              )
              
              
              (949,684
              )Other
      Income (Expenses):Interest
      Income
              
              
              13
              
              
              
              14Interest
      Expense
              
              
              (176,156
              )
              
              
              (228,250
              )Loss
      before Income Taxes
              
              
              (896,996
              )
              
              
              (1,177,920
              )Provision
      for Income Taxes
              
              
              -
              
              
              
              -Net
      Loss
              
              $
              (896,996
              )
              
              $
              (1,177,920
              )Basic
      and Diluted Loss per Share
              
              $
              (0.03
              )
              
              $
              (0.05
              )Weighted
      average number of common sharesoutstanding
      - basic and dilluted
              
              
              26,746,742
              
              
              
              26,031,705
  The
accompanying notes are an integral part of these unaudited consolidated
financial statements.


4


BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES


STATEMENT
OF CASH FLOWS


For the
six months ended June 30, 2008 (Unaudited)





Cash
      flows from Operating Activities:Net
      Loss
            
            $
            (1,177,920
            )Adjustments
      to reconcile net loss to net cashused
      in operating activites:Amortization
      of Shares Issued with Promissory Notes
            
            
            54,986Amortization
      of shares issued with Convertible Debnetures
            
            
            12,433Beneficial
      Conversion of Convertible Debentures
            
            
            38,197Amortization
      of Warrants issued with Convertible Debnture
            
            
            29,514Stock
      Based Compensation
            
            
            516,000Amortization
      of Deferred Financing Costs
            
            
            17,328Depreciation,
      depletion and accretion
            
            
            4,931Changes
      in operating assets and liabitlies:Increase
      indeffered financing costs
            
            
            (90,000
            )Decrease
      in accounts receivable
            
            
            5,043Increase
      in accounts payable and accrued expenses
            
            
            144,551Net
      cash used in operating activities
            
            
            (444,937
            )Cash
      flows from Investing Activities:Acquisition
      of Office Equipment
            
            
            (2,433
            )Investment
      in Apclark
            
            
            (1,570,570
            )Net
      cash used in investing activities
            
            
            (1,573,003
            )Cash
      flows from Financing Activities:Proceeds
      from issuance of Secured Promissory Note
            
            
            800,000Proceeds
      from issuance of Convertible Promissory Note
            
            
            750,000Proceeds
      from Unit Offering
            
            
            718,000Commissions
      paid on Unit Offering
            
            
            (97,468
            )Net
      cash provided by financing activities
            
            
            2,170,532Net
      decrease in cash and cash equivalents
            
            
            152,592Cash
      and Cash equivalents beginning of the period
            
            
            154,357Cash
      and Cash equivalents at end of period
            
            $
            306,949SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      Payments for Interest
            
            $
            75,791Cash
      Payment for Taxes
            
            $
            -Non-Cash
      Investing and Financing Transactions:Shares
      issued with Secured Promissory Note
            
            $
            120,000Shares
      issued with Convertible Debenture
            
            $
            99,462Warrants
      issued with Convertible Debenture
            
            $
            236,114




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


5




BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


June 30,
2008 (unaudited)





1. BASIS
OF PRESENTATION





Bonanza
Oil and Gas, Inc. (“Bonanza” or the “Company”) has prepared the accompanying
unaudited consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Item
310(b) of regulation S-K. These financial statements should be read together
with the financial statements and notes in the Company’s 2007 Form 10-KSB filed
with the SEC.  Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. The accompanying financial statements reflect all
adjustments and disclosures, which, in the Company’s opinion, are necessary for
fair presentation. All such adjustments are of a normal recurring nature. The
results of operations for the interim periods are not necessarily indicative of
the results of the entire year.





The
Company has incurred significant losses and had negative cash flow from
operations since inception on August 17, 2007 and has an accumulated deficit of
$1,375,165 (unaudited) at June 30, 2008 and $197,245 at December 31,
2007.  Substantial portions of the losses are attributable to legal
and professional fees as well as interest expense.  The Company's
operating plans require additional funds that may take the form of debt or
equity financings. There can be no assurance that any additional funds will be
available. The Company's ability to continue as a going concern is in
substantial doubt and is dependent upon achieving a profitable level of
operations and obtaining additional financing.





Going
Concern


We have
undertaken steps as part of a plan to improve operations with the goal of
sustaining our operations for the next twelve months and beyond. These steps
include (a) raising additional capital and/or obtaining financing, if available,
(b) increasing our current production in the Plantation property (c) continuing
drilling on Apclark and (d) controlling overhead and expenses.





There can
be no assurance that the Company can successfully accomplish these steps and it
is uncertain that the Company will achieve a profitable level of operations and
obtain additional financing. There can be no assurance that any additional
financings will be available to the Company on satisfactory terms and
conditions, if at all. In the event we are unable to continue as a going
concern, we may elect or be required to seek protection from our creditors by
filing a voluntary petition in bankruptcy or may be subject to an involuntary
petition in bankruptcy. To date, management has not considered this alternative,
nor does management view it as a likely occurrence.





These
consolidated financial statements do not give effect to any adjustments which
would be necessary should the Company be unable to continue as a going concern
and therefore be required to realize its assets and discharge its liabilities in
other than the normal course of business and at amounts different from those
reflected in the accompanying consolidated financial statements.





IMPACT OF
RECENT ACCOUNTING PRONOUNCEMENTS





Recent
Pronouncements





Effective
January 1, 2008, we are required to adopt Statement of Financial Accounting
Standards (“SFAS”) No. 157, “Fair Value
Measurements”(“ SFAS No.
157”)  and
SFAS No. 159,“The
Fair Value Option for Financial Assets and Financial Liabilities - Including an
Amendment of FASB Statement No. 115”  (“SFAS No.
159”).  In February 2008, the Financial Accounting Standards Board
(the “FASB”) issued FASB Staff Position (“FSP”) 157-2,“Effective Date of FASB
Statement No. 157”  (“FSP 157-2),  which delayed
the effective date of SFAS No. 157 for all non-financial assets and liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis, until January 1, 2009.  We have
not yet determined the impact that the implementation of FSP 157-2 will have on
our non-financial assets and liabilities which are not recognized on a recurring
basis; however, we do not anticipate the adoption of this standard will have a
material impact on our consolidated financial position, results of operations or
cash flows.  The partial adoption of SFAS No. 157 and the adoption of
SFAS No. 159 did not have a material impact on our consolidated financial
position, results of operations or cash flows.




6





In
June 2007, the Accounting Standards Executive Committee issued Statement of
Position 07-1, “Clarification
of the Scope of the Audit and Accounting Guide Investment Companies and
Accounting by Parent Companies and Equity Method Investors for Investments in
Investment Companies ” (“SOP 07-1”).  SOP 07-1 provides
guidance for determining whether an entity is within the scope of the AICPA
Audit and Accounting Guide Investment Companies (the “Audit
Guide”).  SOP 07-1 was originally determined to be effective for
fiscal years beginning on or after December 15, 2007, however, on
February 6, 2008, the FASB issued a final Staff Position indefinitely
deferring the effective date and prohibiting early adoption of SOP 07-1 while
addressing implementation issues.





In
December 2007, the FASB issued SFAS No. 141(R), "Business Combinations"
("SFAS No. 141(R)"), which establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in an
acquiree, including the recognition and measurement of goodwill acquired in a
business combination.  SFAS No. 141(R) is effective as of the
beginning of the first fiscal year beginning on or after December 15,
2008.  Earlier adoption is prohibited and we are currently evaluating
the effect, if any that the adoption will have on our consolidated financial
position results of operations or cash flows.





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements Liabilities –an Amendment of ARB No. 51
”.  This statement amends ARB No. 51 to establish accounting and
reporting standards for the Non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary.  SFAS No. 160 will change the
classification and reporting for minority interest and non-controlling interests
of variable interest entities.  Following the effectiveness of SFAS
No. 160, the minority interest and non-controlling interest of variable interest
entities will be carried as a component of stockholders’
equity.  Accordingly, upon the effectiveness of this statement, we
will begin to reflect non-controlling interest in our consolidated variable
interest entities as a component of stockholders’ equity.  This
statement is effective for fiscal years and interim periods within those fiscal
years, beginning on or after December 15, 2008 and earlier adoption is
prohibited.





In
December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,“Accounting for Collaborative
Arrangements” (EITF 07-1). EITF 07-1 defines collaborative
arrangements and requires collaborators to present the result of activities for
which they act as the principal on a gross basis and report any payments
received from (made to) the other collaborators based on other applicable
authoritative accounting literature, and in the absence of other applicable
authoritative literature, on a reasonable, rational and consistent accounting
policy is to be elected. EITF 07-1 also provides for disclosures regarding
the nature and purpose of the arrangement, the entity’s rights and obligations,
the accounting policy for the arrangement and the income statement
classification and amounts arising from the agreement.  EITF 07-1
will be effective for fiscal years beginning after December 15, 2008, and
will be applied as a change in accounting principle retrospectively for all
collaborative arrangements existing as of the effective date.  We have
not yet evaluated the potential impact of adopting EITF 07-1 on our
consolidated financial position, results of operations or cash
flows.





In March
2008, the FASB” issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment to FASB Statement No.
133”  (“SFAS No. 161”).   SFAS No. 161
is intended to improve financial standards for derivative instruments and
hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity's financial position, financial
performance, and cash flows.  Entities are required to provide
enhanced disclosures about: (a) how and why an entity uses derivative
instruments; (b) how derivative instruments and related hedged items are
accounted for under SFAS No. 133 and its related interpretations; and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows.  It is effective for
financial statements issued for fiscal years beginning after November 15, 2008,
with early adoption encouraged.  We are currently evaluating the
impact of SFAS No. 161, if any, will have on our consolidated financial
position, results of operations or cash flows.




7





In April
2008, the FASB issued FSP No. FAS 142-3,“Determination of the Useful Life
of Intangible Assets”. This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142,“Goodwill and Other Intangible
Assets”.   We are required to adopt FSP 142-3 on
January 1, 2009.  The guidance in FSP 142-3 for determining the
useful life of a recognized intangible asset shall be applied prospectively to
intangible assets acquired after adoption, and the disclosure requirements shall
be applied prospectively to all intangible assets recognized as of, and
subsequent to, adoption.  We are currently evaluating the impact of
FSP 142-3 on our consolidated financial position, results of operations or cash
flows.





In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS No. 162").  SFAS No.
162 identifies the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles (the GAAP hierarchy).  SFAS No.
162 will become effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to
AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles."  We do not expect the
adoption of SFAS No. 162 will have a material effect on our consolidated
financial position, results of operations or cash flows.





In May
2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) " ("FSP APB 14-1").  FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled
in cash (or other assets) on conversion to separately account for the liability
(debt) and equity (conversion option) components of the instrument in a manner
that reflects the issuer's non-convertible debt borrowing rate.  FSP
APB 14-1 is effective for fiscal years beginning after December 15,
2008 on a retroactive basis.  We are currently evaluating the
potential impact, if any, of the adoption of FSP APB 14-1 on our
consolidated financial position, results of operations or cash
flows.





The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, on January 1, 2008.  As a result of the
implementation of FIN 48, the company made a comprehensive review of its
portfolio of tax positions in accordance with recognition standards established
by FIN 48.  As a result of the implementation of Interpretation 48,
the Company recognized no material adjustments to liabilities or stockholders
equity.





When tax
returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained.  The benefit of a tax
position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not
that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any.  Tax positions taken are
not offset or aggregated with other positions.  Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest
amount of tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheets along with any associated interest and penalties
that would be payable to the taxing authorities upon examination.





Interest
associated with unrecognized tax benefits are classified as interest expense and
penalties are classified in selling, general and administrative expenses in the
statements of income.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company’s present or future
consolidated financial statements.





8





2. OIL AND GAS PROPERTIES





Oil and
gas properties consisted of the following as of June 30, 2008 (unaudited) and
December 31, 2007:




June
      30, 2008
              
              
              December
      31, 2007(Unaudited)Properties
      subject to amortization
              
              $
              750,000
              
              
              $
              750,000Properties
      not subject to amortization
              
              
              2,516,581
              
              
              
              946,011Capitalized
      asset retirement costs
              
              
              -
              
              
              
              -Accumulated
      depreciation and depletion
              
              
              (10,221
              )
              
              
              (5,627
              )Oil
      and gas properties, net
              
              $
              3,256,360
              
              
              $
              1,690,384


Depreciation
and depletion expense totaled $1,548 and $4,931 for the three and six months
ended June 30, 2008, respectively, which included depreciation expense on other
property and equipment.





3. NOTES
PAYABLE





Promissory
Note


On
September 19, 2007, Plantation entered into a Promissory Note (the "Promissory
Note”) agreement with Viewpoint Securities, LLC ("Viewpoint") in the principal
amount of $25,000.  The Promissory note was non interest bearing and
principal amount was due on the earlier to occur of (i) September 30, 2007 or
(ii) date on which Plantation would receive $950,000 through the issuance of LLC
membership interests.  The note was repaid in full on September 20,
2007.





Debenture


On
December 27, 2007, Bonanza entered into a Securities Purchase Agreement with
Phoenix Capital Opportunity Fund, L.P. ("Phoenix") for its 14% senior asset
backed secured promissory note in the principal amount of $250,000 (the
"Debenture").  In addition to the Debenture, Phoenix also received
74,999 shares of common stock of the Company.  The Debenture matures
on the first anniversary of the date of issuance (the "Maturity Date") and
interest associated with the Debenture is 14% per annum which is payable on a
quarterly basis commencing March 31, 2008. The Company's obligations under the
Debenture are secured by the Plantation assets which consist of an interest in
oil and gas wells in Gonzales County, Texas.  The shares issued in
conjunction with the Debenture were valued at $10,714 based on the price of the
stock issued at the most recent private placement offering and were recorded as
additional paid in capital.  The discount of $10,714 is being
amortized using the effective interest rate method over the term of the
indebtedness and had a balance of $4,961 and $10,303 as of June 30, 2008
(unaudited) and December 31, 2007, respectively.  The interest rate
will increase to 24% APR plus all enforcement costs as per the term of the
Debenture if default.  We paid $8,822 and $17,548 in interest on the
Debenture for the three and six months ended June 30, 2008,
respectively.





2008
Debentures


In
January 2008, the Company entered into a Securities Purchase Agreement with 3
institutions and accredited investors for its 14% senior asset backed secured
promissory note in the principal amount of $800,000 (the "2008
Debentures").   In addition, the investors received a total of 160,000
shares of common stock of the Company.  The 2008 Debentures mature on
the first anniversary of the date of issuance and interest associated with the
2008 Debentures is 14% per annum, payable on a monthly basis commencing March
31, 2008. The Company's obligations under the 2008 Debentures are secured by the
assets held by Bonanza Exploration, one of its wholly owned subsidiaries and are
subject to a rate increase if default.     The shares
issued in conjunction with the 2008 Debentures were valued at $120,000 based on
the price of the stock issued at the time of issuance and were recorded as
additional paid in capital.  The discount of $120,000 is being
amortized using the effective interest rate method over the term of the
indebtedness and as of June 30, 2008 (unaudited), the discount had a balance of
$70,536.  In addition, if the Company does not repay the 2008
Debentures by July 31, 2008, the Company is obligated to issue an additional
150,000 shares as additional interest payment.  In August 2008, the
Company issued 150,000 shares to the investors.  We paid $27,923 and
$45,777 in interest on the 2008 Debentures for the three and six months ended
June 30, 2008, respectively.





9





May 2008
Note


On May
14, 2008, Bonanza Oil & Gas, Inc. (the "Company"), entered into a Securities
Purchase Agreement (the "May 2008 Purchase Agreement") with an accredited
investor (the “May 2008 Investor”) providing for the sale by the Company to the
May 2008 Investor of its 8% convertible notes in the principal amount of
$750,000 (the "May 2008 Note").  In addition to the May 2008 Note, the
May 2008 Investor also received 375,000 shares of common stock of the Company, a
Series A Common Stock Purchase Warrant to purchase 750,000 shares of common
stock and a Series B Common Stock Purchase Warrant to purchase 750,000 shares of
common stock.  The closing occurred on May 14, 2008.  The
May 2008 Note matures on May 14, 2009 (the "Maturity Date") and interest
associated with the May 2008 Note is 8% per annum, which is payable on a
quarterly basis commencing June 30, 2008. In the event that the Company grants a
secured interest in its assets in connection with any future financing, then the
May 2008 Investor will be entitled to a pari passu interest in such secured
interest.  The May 2008 Note is convertible into our common stock, at
the May 2008 Investor’s option, at a conversion price of $0.50 subject to
adjustment.  The Company may require that the May 2008 Investor
convert all or a portion of the May 2008 Note in the event that the Company’s
closing market price for any 10 consecutive trading days exceeds 300% of the
then conversion price subject to the 4.9% limitation.





The
Series A Warrants are exercisable for a period of two years at an exercise price
of $0.75 per share and the Series B Warrants are exercisable for a period of two
years at an exercise price of $1.00 per share.  In the event that the
Company issues securities at a per share price less than the conversion price,
then the exercise price associated with the Series A Warrants and Series B
Warrants and the conversion price for the May 2008 Notes shall be adjusted to
equal such price.  However, no adjustment will be made for issuances
relating to shares of common stock or options to employees, officers,
consultants or directors of the Company, securities outstanding as of the date
of the closing, securities issued in connection with acquisitions or strategic
transactions or securities issued as equity enhancements in connection with
standard non convertible debt transactions





Pursuant
to EITF 98-5, "Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios" and EITF 00-27,
“Application of Issue No. 98-5 in Certain Convertible Instruments,” based on
relative fair values of the warrant and the debt, the proceeds from the debt
were allocated to the shares issued, the warrants issued and the debt on a
relative fair value basis.  We recorded $305,576 upon the issuance of
the Convertible Debentures attributable to the beneficial conversion feature as
additional paid in capital.  Using the Black Scholes pricing model,
with volatility of 140.69%, risk-free rate of 3.88% and a 0% dividend yield, the
warrants were determined to have a fair value of $236,114 and were recorded as
additional paid in capital.  The value of the shares was determined to
have a value of $99,462 and were recorded as additional paid in
capital.  The discount attributable to the shares, the warrants and
the beneficial conversion feature are being amortized using the effective
interest rate method over the term of the indebtedness.  During the
three months ended June 30, 2008, interest expense included an amortization of
$38,197, $29,514 and $12,433 for the beneficial conversion feature, the value of
the warrants and the value of the shares, respectively.





4.  COMMITMENTS
AND CONTINGENCIES





Bonanza
leases approximately 5,100 square feet of office space in Houston,
Texas from United Production & Exploration, Inc., a company
majority-owned by Mr. Wiseman and Mr. Teague that serves as its corporate
office. The lease is at market rates and is on a month to month basis for $3,315
per month.  Total rent expense was $9,945 and $19,890 for the three months
and six months ended June 30, 2008 (unaudited),
respectively.





We are
responsible for any contamination of land we own or lease. However, we carry
pollution liability insurance policies, which may limit some potential
contamination liabilities as well as claims for reimbursement from third
parties.




10





5.
ENVIRONMENT





Bonanza,
as owner and operator of oil and gas properties, is subject to various federal,
state, and local laws and regulations relating to discharge of materials into,
and protection of, the environment. These laws and regulations may, among other
things, impose liability on the owner of real property and the lessee under oil
and gas leases for the cost of pollution clean-up resulting from operations,
subject the owner/lessee to liability for pollution damages and impose
restrictions on the injection of liquids into subsurface strata.





Although
Company environmental policies and practices are designed to ensure compliance
with these laws and regulations, future developments and increasing stringent
regulations could require the Company to make additional unforeseen
environmental expenditures





The
Company maintains insurance coverage that it believes is customary in the
industry, although it is not fully insured against all environmental
risks.





The
Company is not aware of any environmental claims existing as of December 31,
2007, that would have a material impact on its consolidated financial position
or results of operations. There can be no assurance, however, that current
regulatory requirements will not change, or past non-compliance with
environmental laws will not be discovered on the Company's
property.





6. LEGAL
PROCEEDINGS





The
Company is not a party to any litigation that has arisen in the normal course of
its business and that of its subsidiaries.





7. MAJOR
CUSTOMERS





During
the three months and six months ended June 30, 2008, (unaudited), one customer,
Gulfmark Energy, Inc., accounted for 100.0% of our total oil and gas
sales.





8. ASSET
RETIREMENT OBLIGATIONS





In
accordance with SFAS 143, “Accounting for Asset Retirement Obligations” Bonanza
records the fair value of a liability for asset retirement obligations (“ARO”)
in the period in which it is incurred and a corresponding increase in the
carrying amount of the related long-lived asset. The present value of the
estimated asset retirement cost is capitalized as part of the carrying amount of
the long-lived asset and is depreciated over the useful life of the asset.
Bonanza accrues an abandonment liability associated with its oil and gas wells
when those assets are placed in service. The ARO is recorded at its estimated
fair value and accretion is recognized over time as the discounted liability is
accreted to its expected settlement value. Fair value is determined by using the
expected future cash outflows discounted at Bonanza's credit-adjusted risk-free
interest rate. No market risk premium has been included in Bonanza's calculation
of the ARO balance.  As of June 30, 2008 and December 31, 2007, the
Company’s only producing property is Plantation where the operator, and not
Bonanza, is responsible for costs associated with the abandonment of the
property.  As such, the Company has not recognized an ARO balance at
June 30, 2008 (unaudited) or December 31, 2007.





9. EQUITY
TRANSACTIONS





Commencing
June 30, 2008 through July 7, 2008, the Company, entered into and closed a
Securities Purchase Agreement (the "June 2008 Purchase Agreement") with several
accredited investors (the “June 2008 Investors”) providing for the sale by the
Company to the June 2008 Investors of units with each unit consisting of one
share of common stock and one common stock purchase warrant half of which are
exercisable at $1.00 (the “A June 2008 Warrant”) and half are exercisable at
$2.00 (the “B June 2008 Warrant”).  The per unit purchase price for
the units was $0.60 resulting in proceeds of approximately $718,000 to the
Company and the issuance of 1,196,666 shares of common stock, A June 2008
Warrants issuable to purchase 598,333 shares of common stock and B June 2008
Warrants issuable to purchase 598,333 shares of common stock.




11





The A
June 2008 Warrants are exercisable for a period of two years at an exercise
price of $1.00 per share and the B June 2008 Warrants are exercisable for a
period of two years at an exercise price of $2.00 per share.  In the
event that the Company issues securities at a per share price less than the
exercise price, then the exercise price associated with the A June 2008 Warrants
and B June 2008 Warrants shall be adjusted to equal such
price.  Further, if the Company issues securities at a price less than
$0.60, then the June 2008 Investors will be entitled to receive additional
shares of common stock to reflect the issuance of the additional
shares.





10.
SUBSEQUENT EVENTS





Subsequent
to June 30, 2008 and pursuant to the June 2008 Purchase Agreement described in
footnote 9, the Company received additional gross proceeds of $1,282,000 and
issued 2,136,667 shares of common stock, A June 2008 Warrants issuable to
purchase 1,068,333 shares of common stock and B June 2008 Warrants issuable to
purchase 1,068,333 shares of common stock.





On July
18, 2008, the Company, Borland Good North Inc., a wholly-owned subsidiary of the
Company (“Borland”), Black Pearl Energy, Inc. (“Black Pearl”), and the
shareholders holding a majority of the issued and outstanding shares of Black
Pearl, (collectively the “Black Pearl Majority Shareholders), entered into an
Agreement and Plan of Merger (the “Merger Agreement”), which closed on July 18,
2008.  Pursuant to the terms of the Merger Agreement, Black Pearl
merged with and into Borland, which became a wholly-owned subsidiary of the
Company (the “Merger”).  In consideration for the Merger, the Company
issued an aggregate of 7,024,667 (the “Black Pearl Acquisition Shares”) shares
of common stock to the Black Pearl Majority Shareholders and the other
shareholders of Black Pearl at the closing of the merger. Prior to the Merger
Agreement, Black Pearl owned 2,709,000 shares of the Company, which were
cancelled in conjunction with the Merger.





On July
14, 2008, Black Pearl entered into a note agreement with Bonanza for $500,000.
The note bears interest at 8% with a maturity date of November 14, 2008 or the
date at which a letter of intent to merge the Company expires. The proceeds for
this note were used to buy the options to purchase the leasehold interests of
the Good North Prospect and Bourland Prospect. The note was cancelled in
conjunction with the Merger.





On July
31, 2008, the Company issued 75,000 shares of common stock, valued at $1.14 per
share representing the closing stock price at the date of issuance, to the Law
Offices of Stephen Fleming, PLLC, the Company’s attorney.





On August
11, 2008, the Company issued 150,000 shares as additional interest on the 2008
Debentures.




12




Item
2.  Management’s Discussion and Analysis or Plan of Operation.




This
report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 that include, among others, statements of: expectations, anticipations,
beliefs, estimations, projections, and other similar matters that are not
historical facts, including such matters as: future capital requirements,
development and exploration expenditures (including the amount and nature
thereof), drilling of wells, reserve estimates (including estimates of future
net revenues associated with such reserves and the present value of such future
net revenues), future production of oil and gas, repayment of debt, business
strategies, and expansion and growth of business operations. These statements
are based on certain assumptions and analyses made by our management in light of
past experience and perception of: historical trends, current conditions,
expected future developments, and other factors that our management believes are
appropriate under the circumstances. We caution the reader that these
forward-looking statements are subject to risks and uncertainties, including
those associated with the financial environment, the regulatory environment, and
trend projections, that could cause actual events or results to differ
materially from those expressed or implied by the statements. Such risks and
uncertainties include those risks and uncertainties identified
below.





Significant
factors that could prevent us from achieving our stated goals include: declines
in the market prices for oil and gas, adverse changes in the regulatory
environment affecting us, the inherent risks involved in the evaluation of
properties targeted for acquisition, our dependence on key personnel, the
availability of capital resources at terms acceptable to us, the uncertainty of
estimates of proved reserves and future net cash flows, the risk and related
cost of replacing produced reserves, the high risk in exploratory drilling and
competition. You should consider the cautionary statements contained or referred
to in this report in connection with any subsequent written or oral
forward-looking statements that may be issued. We undertake no obligation to
release publicly any revisions to any forward-looking statement to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.





Bonanza
Oil & Gas, Inc. ("Bonanza" or "the Company") is an independent energy
company engaged primarily in the acquisition, development, production and the
sale of oil, gas and natural gas liquids. The Company's production activities
are located in the United States of America. The principal executive offices of
the Company are located at 3000 Richmond Avenue, Suite 400, Houston, TX
77046.   Bonanza was originally incorporated as Plantation
Working Interests, LLC (“Plantation”) in the State of Texas on August 17, 2007
to acquire a working interest (22.5% pre-payout, 15% post-payout) in 8 oil and
gas wells in Gonzales County, TX.





On
October 23, 2007, Plantation merged with National Filing Agents, Inc., which was
the entity that survived the merger, by entering into an Acquisition Agreement
and Plan of Merger (the "Acquisition Agreement"), pursuant to which the Company
acquired, through an exchange transaction, all of the issued and outstanding
capital stock of privately held, Plantation, a 25% interest in a lease on
Cadillac Prospect in Mercedes field in Hidalgo County, TX and 25% interest in a
lease on Point Bar Prospect in the Damon Mound Field in Brazoria County, TX and
other properties and assets from its members in exchange for 10,766,667 shares
of Common Stock.  In addition, on October 23, 2007 in conjunction with
the Acquisition Agreement, the Company entered into an Asset Purchase Agreement
(the “Asset Purchase Agreement”) with Lucas Energy, Inc. to acquire a 25% stake
in ApClark, an oil, gas and mineral leasehold working interest in Borden County,
Texas through the issuance of 6,300,000 shares of Common
Stock.   Immediately after the merger and further to the
Acquisition Agreement, two affiliated shareholders of National Filing Agents,
Inc cancelled 6,180,000 shares of common stock. The merger has been accounted
for as a recapitalization of Bonanza rather than a business
combination.  Accordingly, no pro forma disclosure is
made.  The historical financial statements are those of
Bonanza.




13





National
Filing Agents, Inc. was incorporated under the laws of the State of Nevada on
December 24, 2002, under the name National Filing Agents, Inc.  In
conjunction with the transaction, National Filing Agents, Inc. amended its
Articles of Incorporation to change the Company's name to Bonanza Oil & Gas,
Inc., forward split its common stock on a 2.1 to 1 ratio, and changed its
trading symbol on the Over-the-Counter Bulletin Board to "BGOI".  All
share amounts reflect the 2.1:1 forward stock split.





We have
undertaken steps as part of a plan to improve operations with the goal of
sustaining our operations for the next twelve months and beyond. These steps
include (a) raising additional capital and/or obtaining financing, if available,
(b) increasing our current production in the Plantation property (c) continuing
drilling on Apclark and (d) controlling overhead and expenses.





There can
be no assurance that we will successfully accomplish these steps and it is
uncertain we will achieve a profitable level of operations and/or obtain
additional financing. There can be no assurance that any additional financings
will be available to us on satisfactory terms and conditions, if at all. In the
event we are unable to continue as a going concern, we may elect or be required
to seek protection from our creditors by filing a voluntary petition in
bankruptcy or may be subject to an involuntary petition in bankruptcy. To date,
management has not considered this alternative, nor does management view it as a
likely occurrence.





Results
of Operations





Three
and Six Months ended June 30, 2008 (unaudited)




Three
      Months Ended
              
              
              Six
      Months EndedJune
      30, 2008
              
              
              June
      30, 2008Amount
              
              
              Percentage
              
              
              Amount
              
              
              PercentageOil
      & Gas Sales
              
              $
              (2,908
              )
              
              
              100.0
              %
              
              $
              9,267
              
              
              
              100.0
              %Operating
      ExpensesDepreciation,
      Depletion and Accretion
              
              
              1,548
              
              
              
              -53.2
              %
              
              
              4,931
              
              
              
              53.2
              %Stock
      Based Compensation Expense
              
              
              516,000
              
              
              
              -17744.2
              %
              
              
              516,000
              
              
              
              5568.1
              %General
      and Administrative Expenses
              
              
              200,397
              
              
              
              -6891.2
              %
              
              
              438,020
              
              
              
              4726.7
              %Total
      Operating Expenses
              
              
              717,945
              
              
              
              -24688.6
              %
              
              
              958,951
              
              
              
              10348.0
              %Operating
      Loss
              
              
              (720,853
              )
              
              
              24788.6
              %
              
              
              (949,684
              )
              
              
              -10248.0
              %Other
      Expenses
              
              
              (176,143
              )
              
              
              6057.2
              %
              
              
              (228,236
              )
              
              
              -2462.9
              %Net
      Loss
              
              
              (896,996
              )
              
              
              30845.8
              %
              
              
              (1,177,920
              )
              
              
              -12710.9
              %




We were
incorporated on August 17, 2007 and thus no prior year comparisons are
provided.  All of our current revenues are derived from oil sales from
our Plantation property.  During the quarter ended June 30, 2008, we
generated net revenues of $(2,908) (unaudited).  During the quarter
ended June 30, 2008, the Plantation property produced a total of 493 barrels of
oil ("BOE"), of which our 15.75% share was78 BOE that were sold at an average
price of $124.50 per BOE, while total operating expenses were $102,302 (or
approximately $207.40 per BOE) of which our 22.5% share was
$23,018.  During the quarter ended June 30, 2008, the production on
Plantation was shut-down for repairs on the pump jack and other associated
production equipment which resulted in expenses higher than revenues, or
negative net revenues, during the quarter.  In addition, we did not
generate any revenues during April 2008.  During the six months ended
June 30, 2008, we generated net revenues of $9,267
(unaudited).  During the six months ended June 30, 2008, the
Plantation property produced a total of 1,660 BOE, of which our 15.75% share was
262 BOE that were sold at an average price of $104.51 per BOE, while total
operating expenses were $142,610 (or approximately $85.89 per BOE) of which our
22.5% share was $32,087.





For the
quarter and six months ended June 30, 2008 (unaudited), respectively, general
and administrative expenses totaled $200,397 and $438,020,
respectively.  Professional fees and salaries made up the largest
component of general and administrative expenses.





Stock
based compensation was $516,000 for the quarter and six months ended June 30,
2008 (unaudited), respectively and consisted of 1,400,000 shares that were
issued to several consultants in various transactions.  All of the
shares were fully vested upon issuance and the value was based on the closing
stock price on the date of grant.





Depreciation,
depletion and accretion were $1,548 and $4,931 for the quarter and six months
ended June 30, 2008 (unaudited), respectively, most of which is attributable to
depletion on our Plantation property.





Loss from
operations was $720,853 and $949,684 for the quarter and six months ended June
30, 2008 (unaudited), respectively.





Interest
expense for the quarter and six months ended June 30, 2008 (unaudited) was
$176,156 and $228,250, respectively and consisted of interest on our $800,000
2008 Debentures, our $750,000 May 2008 Note and interest on the $250,000
Debenture.





Net loss
was $896,996 and $1,177,920 for the quarter and six months ended June 30, 2008
(unaudited), respectively.




14





Liquidity
and Capital Resources





At June
30, 2008 (unaudited), we had working capital deficit of $951,123 consisting
primarily of $1,163,675 of debt, representing $1,800,000 face value of all of
our debt outstanding less $636,325 of unamortized discount, offset by $306,949
of cash.





We have
raised in excess of $4,000,000 in gross proceeds through various debt and equity
financings since date of inception (August 17, 2007), including over $2,000,000
since January 1, 2008, and have used the majority of the net proceeds to acquire
the Plantation Property and investments in the Apclark property, as well as for
working capital purposes and professional fees.





Net cash
used in operating activities for the six months ended June 30, 2008 (unaudited)
totaled $444,937 and consisted primarily of the net loss of $1,177,920, offset
by $516,000 of stock based compensation and $144,551 increase in accounts
payable and accrued expenses.





Net cash
used in investing activities for the six months ended June 30, 2008 (unaudited)
totaled $1,573,003 and consisted primarily of $1,570,570 investment in the
Apclark property.





Net cash
provided by financing activities for the six months ended June 30, 2008
(unaudited) totaled $2,170,532 and consisted primarily of the $800,000 gross
proceeds from our 2008 Debentures, $750,000 from the May 2008 Note and $718,000
proceeds from the equity offering, offset by commissions of
$97,468.





Net
operating revenues from our oil production are very sensitive to changes in the
price of oil, which is making it very difficult for management to predict
whether or not we will be profitable in the future.





We
conduct no product research and development.





Any
expected purchase of significant equipment is directly related to drilling
operations and the completion of successful wells.  We will not
undertake to drill wells for which we do not already possess the funds needed to
complete and to equip the wells.  Should we not have all the funds
needed to drill and complete a well before we commence drilling the well, we
will sell an interest in the well to another oil company or to investors that
buy interests in oil prospects.





We are
responsible for any contamination of land we own or lease. However, we carry
pollution liability insurance policies, which may limit some potential
contamination liabilities as well as claims for reimbursement from third
parties.





We
currently sell all of our oil production to Gulfmark Energy,
Inc.  However, in the event this customer discontinued oil purchases,
we believe we can replace this customer with other customers who would purchase
the oil at terms standard in the industry.





Quantitative
and Qualitative Disclosures about Market Risk





We have
no material exposure to interest rate changes.  We are subject to
changes in the price of oil, which are out of our control.  Since our
formation, in August 2007, we have sold oil at various prices ranging from
$76.19 to $124.50 per barrel.





Effect
of Changes in Prices





Changes
in prices during the past few years have been a significant factor in the oil
and gas industry. The price received for the oil produced by us fluctuated
significantly during the last year. Changes in the price that we receive for our
oil and gas is set by market forces beyond our control as well as governmental
intervention. Average price received by us for a BOE was $124.50, $96.07 and
$92.80 for the quarter ended June 30, 2008, for the six months ended June 30,
2008 and from August 17, 2007 (date of inception) to June 30, 2008,
respectively.  The volatility and uncertainty in oil and gas prices
have made it more difficult for a company like us to increase our oil and gas
asset base and become a significant participant in the oil and gas
industry.




15





Critical
Accounting Policies and Estimates





Management's
Discussion and Analysis of Financial Condition and Results of Operations
discusses our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates our estimates and judgments, including those related to
revenue recognition, recovery of oil and gas reserves, financing operations, and
contingencies and litigation.





Oil
and Gas Properties





We follow
the full cost method of accounting for oil and gas producing activities. Costs
to acquire mineral interests in oil and gas properties, to drill and equip
exploratory wells used to find proved reserves, and to drill and equip
development wells including directly related overhead costs and related asset
retirement costs are capitalized.





Under
this method, all costs, including internal costs directly related to
acquisition, exploration and development activities are capitalizable as oil and
gas property costs.  Properties not subject to amortization consist of
exploration and development costs which are evaluated on a property-by-property
basis. Amortization of these unproved property costs begins when the properties
become proved or their values become impaired. Bonanza assesses the
realizability of unproved properties, if any, on at least an annual basis or
when there has been an indication that impairment in value may have occurred.
 Impairment of unproved properties is assessed based on management's
intention with regard to future exploration and development of individually
significant properties and the ability of Bonanza to obtain funds to finance
such exploration and development. If the results of an assessment indicate that
the properties are impaired, the amount of the impairment is added to the
capitalized costs to be amortized.





The
provision for depreciation and depletion of oil and gas properties is computed
on the unit-of-production method. Under this method, we compute the provision by
multiplying the total unamortized costs of oil and gas properties including
future development, site restoration, and dismantlement abandonment costs, but
excluding costs of unproved properties by an overall rate determined by dividing
the physical units of oil and gas produced during the period by the total
estimated units of proved oil and gas reserves. This calculation is done on a
country-by-country basis. As of June 30, 2008, all of our oil production
operations are conducted in the United States of America. The cost of
unevaluated properties not being amortized, to the extent there is such a cost,
is assessed quarterly to determine whether the value has been impaired below the
capitalized cost. The cost of any impaired property is transferred to the
balance of oil and gas properties being depleted. The costs associated with
unevaluated properties relate to projects which were undergoing exploration or
development activities or in which we intend to commence such activities in the
future. We will begin to amortize these costs when proved reserves are
established or impairment is determined.





In
accordance with SFAS No. 143, "Accounting for Asset Retirement Obligations," we
report a liability for any legal retirement obligations on our oil and gas
properties. The asset retirement obligations represent the estimated present
value of the amounts expected to be incurred to plug, abandon, and remediate the
producing properties at the end of their productive lives, in accordance with
state laws, as well as the estimated costs associated with the reclamation of
the property surrounding. The Company determines the asset retirement
obligations by calculating the present value of estimated cash flows related to
the liability. The asset retirement obligations are recorded as a liability at
the estimated present value as of the asset's inception, with an offsetting
increase to producing properties. Periodic accretion of the discount related to
the estimated liability is recorded as an expense in the statement of
operations.




16





The
estimated liability is determined using significant assumptions, including
current estimates of plugging and abandonment costs, annual inflation of these
costs, the productive lives of wells, and a risk-adjusted interest rate. Changes
in any of these assumptions can result in significant revisions to the estimated
asset retirement obligations. Revisions to the asset retirement obligations are
recorded with an offsetting change to producing properties, resulting in
prospective changes to depletion and depreciation expense and accretion of the
discount. Because of the subjectivity of assumptions and the relatively long
lives of most of the wells, the costs to ultimately retire the Company's wells
may vary significantly from prior estimates.





Revenue
Recognition




Bonanza
recognizes oil and natural gas revenue under the sales method of accounting for
its interests in producing wells as oil and natural gas is produced and sold
from those wells. Oil and natural gas sold by Bonanza is not significantly
different from Bonanza’s share of production.  We recognize revenue upon
transfer of ownership of the product to the customer which occurs when (i) the
product is physically received by the customer, (ii) an invoice is generated
which evidences an arrangement between the customer and us, (iii) a fixed sales
price has been included in such invoice and (iv) collection from such customer
is probable.





Off-Balance
Sheet Arrangements


Our
company has not entered into any transaction, agreement or other contractual
arrangement with an entity unconsolidated with us under which we
have





·
            an
      obligation under a guarantee
contract,


·
            a
      retained or contingent interest in assets transferred to the
      unconsolidated entity or similar arrangement that serves as credit,
      liquidity or market risk support to such entity for such
      assets,


·
            any
      obligation, including a contingent obligation, under a contract that would
      be accounted for as a derivative instrument,
or


·
            any
      obligation, including a contingent obligation, arising out of a variable
      interest in an unconsolidated entity that is held by us and material to us
      where such entity provides financing, liquidity, market risk or credit
      risk support to, or engages in leasing, hedging or research  and
      development services with us.





Plan of
Operations





We have
undertaken steps as part of a plan to improve operations with the goal of
sustaining our operations for the next twelve months and beyond. These steps
include (a) raising additional capital and/or obtaining financing, if available,
(b) increasing our current production in the Plantation property (c) continuing
drilling on Apclark and (d) controlling overhead and expenses.





Going
Concern





We
anticipate that we will need to raise a minimum of $10,000,000 to provide the
cash requirements for the next twelve months to continue our investment in
Apclark, Damon and our other leases.  There can be no assurance the
Company can successfully accomplish these steps and it is uncertain the Company
will achieve a profitable level of operations and obtain additional financing.
There can be no assurance that any additional financings will be available to
the Company on satisfactory terms and conditions, if at all. In the event we are
unable to continue as a going concern, we may elect or be required to seek
protection from our creditors by filing a voluntary petition in bankruptcy or
may be subject to an involuntary petition in bankruptcy.  To date,
management has not considered this alternative, nor does management view it as a
likely occurrence.





These
consolidated financial statements do not give effect to any adjustments which
would be necessary should the Company be unable to continue as a going concern
and therefore be required to realize its assets and discharge its liabilities in
other than the normal course of business and at amounts different from those
reflected in the accompanying consolidated financial statements.








Item
3. Quantitative and Qualitative Disclosures About Market Risks





Not
applicable




17





Item
4. Controls and Procedures





As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, the Company
is not required to provide information required by this Item.





Item
4T. Controls and Procedures





We
maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended the "Exchange
Act) that are designed to ensure that information required to be disclosed in
our reports filed under the Exchange Act, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.





We
carried out an evaluation under the supervision and with the participation of
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures as of June 30, 2008, the end of the period covered by this report.
Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were
effective.





There
have been no changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
quarter ended June 30, 2008 that materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.





PART
II – OTHER INFORMATION





Item
1.  Legal Proceedings





We are
not a party to, or the subject of, any material pending legal proceedings other
than ordinary, routine litigation incidental to our business.





Item
1A.  Risk Factors.





As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, the Company
is not required to provide information required by this Item.








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





May 2008
Note


On May
14, 2008, the Company entered into a Securities Purchase Agreement (the "May
2008 Purchase Agreement") with an accredited investor (the “May 2008 Investor”)
providing for the sale by the Company to the May 2008 Investor of its 8%
convertible notes in the principal amount of $750,000 (the "May 2008
Note").  In addition to the May 2008 Note, the May 2008 Investor also
received 375,000 shares of common stock of the Company, a Series A Common Stock
Purchase Warrant to purchase 750,000 shares of common stock and a Series B
Common Stock Purchase Warrant to purchase 750,000 shares of common
stock.  The closing occurred on May 14, 2008.  The May 2008
Note matures on May 14, 2009 (the "Maturity Date") and interest associated with
the May 2008 Note is 8% per annum, which is payable on a quarterly basis
commencing June 30, 2008. In the event that the Company grants a secured
interest in its assets in connection with any future financing, then the May
2008 Investor will be entitled to a pari passu interest in such secured
interest.  The May 2008 Note is convertible into our common stock, at
the May 2008 Investor’s option, at a conversion price of $0.50 subject to
adjustment.  The Company may require that the May 2008 Investor
convert all or a portion of the May 2008 Note in the event that the Company’s
closing market price for any 10 consecutive trading days exceeds 300% of the
then conversion price subject to the 4.9% limitation.




18





The
Series A Warrants are exercisable for a period of two years at an exercise price
of $0.75 per share and the Series B Warrants are exercisable for a period of two
years at an exercise price of $1.00 per share.  In the event that the
Company issues securities at a per share price less than the conversion price,
then the exercise price associated with the Series A Warrants and Series B
Warrants and the conversion price for the May 2008 Notes shall be adjusted to
equal such price.  However, no adjustment will be made for issuances
relating to shares of common stock or options to employees, officers,
consultants or directors of the Company, securities outstanding as of the date
of the closing, securities issued in connection with acquisitions or strategic
transactions or securities issued as equity enhancements in connection with
standard non convertible debt transactions





Unit
Offering


Commencing
June 30, 2008 through July 7, 2008, the Company entered into and closed a
Securities Purchase Agreement (the "June 2008 Purchase Agreement") with several
accredited investors (the “June 2008 Investors”) providing for the sale by the
Company to the June 2008 Investors of units with each unit consisting of one
share of common stock and one common stock purchase warrant half of which are
exercisable at $1.00 (the “A June 2008 Warrant”) and half are exercisable at
$2.00 (the “B June 2008 Warrant”).  The per unit purchase price for
the units was $0.60 resulting in proceeds of approximately $2,000,000 to the
Company and the issuance of 3,333,333 shares of common stock, A June 2008
Warrants issuable to purchase 1,666,667 shares of common stock and B June 2008
Warrants issuable to purchase 1,666,667 shares of common stock.





The A
June 2008 Warrants are exercisable for a period of two years at an exercise
price of $1.00 per share and the B June 2008 Warrants are exercisable for a
period of two years at an exercise price of $2.00 per share.  In the
event that the Company issues securities at a per share price less than the
exercise price, then the exercise price associated with the A June 2008 Warrants
and B June 2008 Warrants shall be adjusted to equal such
price.  Further, if the Company issues securities at a price less than
$0.60, then the June 2008 Investors will be entitled to receive additional
shares of common stock to reflect the issuance of the additional
shares.





Shares issued for
Service


During
the quarter ended June 30, 2008, the Company entered into several consulting
agreements with the following individuals and entities whereby the Company
issued an aggregate of 1,400,000 shares of the Company’s common stock with a
total value of $516,000, which was based on the closing stock price of the
Company’s common stock on the date of the agreements:




WB
      Advisors, LLC
            300,000
      sharesSamuel
      Gutman
            300,000
      sharesMarjorie
      Group
            200,000
      sharesUpstate
      Holding Group, LLC
            300,000
      sharesMarena,
      Inc.
            300,000
      shares




On July
31, 2008, the Company issued 75,000 shares of common stock, valued at $1.14 per
share representing the closing stock price at the date of issuance, to the Law
Offices of Stephen Fleming, PLLC, the Company’s attorney.





On July
18, 2008, the Company, Borland Good North Inc., a wholly-owned subsidiary of the
Company (“Borland”), Black Pearl Energy, Inc. (“Black Pearl”), and the
shareholders holding a majority of the issued and outstanding shares of Black
Pearl, (collectively the “Black Pearl Majority Shareholders), entered into an
Agreement and Plan of Merger (the “Merger Agreement”), which closed on July 18,
2008.  Pursuant to the terms of the Merger Agreement, Black Pearl
merged with and into Borland, which became a wholly-owned subsidiary of the
Company (the “Merger”).  In consideration for the Merger, the Company
issued an aggregate of 7,024,667 (the “Black Pearl Acquisition Shares”) shares
of common stock to the Black Pearl Majority Shareholders and the other
shareholders of Black Pearl at the closing of the merger.




19





All of
the above securities were offered and sold to the investors in a private
placement transaction made in reliance upon exemptions from registration
pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506
promulgated thereunder. Each of the investors are accredited investors as
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933.





On August
11, 2008, the Company issued 150,000 shares as additional interest on the 2008
Debentures.





Item
3  Default upon Senior Securities





None





Item
4  Submission of Matters to a Vote of Security Holders





None





Item
5  Other Information





None





Item
6  Exhibits





See
Exhibit Index attached hereto.








SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf of the undersigned thereunto
duly authorized.




BONANZA
      OIL AND GAS, INC.(Registrant)Date: August
      14, 2008
              By:
              /s/ William
      WisemanWilliam
      WisemanPresident
      and Chief Executive Officer


Date: August
      14, 2008
              By:
              /s/ Ran
      FurmanRan
      FurmanPrincipal
      Financial Officer


20







EXHIBIT
INDEX





The
following is a list of Exhibits required by Item 601 of Regulation
S-K.  Except for these exhibits indicated by an asterisk which are
filed herewith, the remaining exhibits below are incorporated by reference to
the exhibit previously filed by us as indicated.








Exhibit No.
            
            Description3.1
            
            Articles
      of Incorporation of Bonanza Oil and Gas, Inc. (1)3.2
            
            Bylaws
      of Bonanza Oil and Gas, Inc. (2)4.1
            
            Securities
      Purchase Agreement dated May 14, 2008 (3)4.2
            
            8%
      convertible note issued May 14,
  2008   (3)4.3
            
            Series
      A Common Stock Purchase Warrants issued May 14, 2008
(3)4.4
            
            Series
      B Common Stock Purchase Warrants issued May 14, 2008
(3)4.5
            
            Form
      of Securities Purchase Agreement (4)4.6
            
            Form
      of  A June 2008 Warrants issued in June
  2008(4)4.7
            
            Form
      of  B June 2008 Warrants issued in June 2008
  (4)10.1
            
            Agreement
      and Plan of Merger by and between Bonanza Oil & Gas, Inc., Borland
      Good North Inc., Black Pearl Energy, Inc. and the shareholders holding a
      majority of the issued and outstanding shares of Black Pearl Energy Inc.
      dated July 18, 2008 (5)31.1
      (*)
            
            Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002, signed by Bill Wiseman, President and
      Chief Executive Officer (Principal Executive Officer)31.2
      (*)
            
            Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002, signed by Ran Furman, Chief Financial
      Officer (Principal Financial Officer).32.1
      (*)
            
            Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002, signed by Bill Wiseman, President and
      Chief Executive Officer (Principal Executive Officer) and Ran Furman
      (Principal Financial Officer).




(1)
            Incorporated
      herein by reference to Exhibit 3.1 to the Bonanza Oil and Gas, Inc. Form
      SB-2 filed December 18, 2006.


(2)
            Incorporated
      herein by reference to Exhibit 3.2 to the Bonanza Oil and Gas, Inc. Form
      SB-2 filed December 18, 2006.(3)
            Incorporated
      by reference to the Form 8K Current Report filed with the Securities and
      Exchange Commission on May 19, 2008.(4)
            Incorporated
      by reference to the Form 8K Current Report filed with the Securities and
      Exchange Commission on July 7, 2008.(5)
            Incorporated
      by reference to the Form 8-K Current Report filed with the Securities and
      Exchange Commission on July 18, 2008.







21