U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q


x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934


For the
quarterly period ended June 30, 2010


OR





 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934


For the
transition period from ________ to ________





Commission
File Number:  000-50173





Superior
Oil and Gas Co.


(Exact
name of registrant as specified in its charter)




NEVADA
                (state
      of
                incorporation)
              
              87-0537621
                (IRS
      Employer
                I.D.
      Number)





844 South
Walbaum Road


Calumet,
Ok 73014


405-884-2080








executive
offices and principal place of business)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes  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.


Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈
            Smaller
      reporting company x





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





As of
August 14, 2010, there were 199,700,000 shares of the Registrant's Common Stock,
par value $0.001 per share, outstanding.





TABLE
OF CONTENTS





PagePART
      I - FINANCIAL INFORMATION
                  3Item
      1.
                  Financial
      Statements
                  3Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  11Item
      4.
                  Controls
      and Procedures
                  13PART
      II - OTHER INFORMATION
                  14Item
      1.
                  Legal
      Proceedings
                  14Item
      2.
                  Unregistered
      Sales of Equity Securities
                  15Item
      6.
                  Exhibits
                  16SIGNATURES
                  17




2


PART
I - FINANCIAL INFORMATION





Item
      1.
            Financial
      Statements





PAGEBalance
      Sheets June 30, 2010 and December 31, 2009 (Unaudited)
                4Statements
      of Operations for the Three Months and Six Months Ended June 30, 2010 and
      2009 (Unaudited)
                5Statements
      of Cash Flows for the Six Months Ended June 30, 2010 and 2009
      (Unaudited)
                6Notes
      to Financial Statements
                7




3




Superior
Oil and Gas Co.
 Balance
Sheets
 (unaudited)
 
 June 30,
                                                                  
                                                                  
                                                                  December 31,2010
                                                                  
                                                                  
                                                                  2009ASSETSCurrent
      AssetsCash
                                                                  
                                                                  $
                                                                  32
                                                                  
                                                                  
                                                                  $
                                                                  218Accounts
      receivable
                                                                  
                                                                  
                                                                  27,222
                                                                  
                                                                  
                                                                  
                                                                  1,616Total
      Current Assets
                                                                  
                                                                  
                                                                  27,254
                                                                  
                                                                  
                                                                  
                                                                  1,834Property
      and EquipmentOil
      and gas propertiesPipeline
      Right of Way
                                                                  
                                                                  
                                                                  111,600
                                                                  
                                                                  
                                                                  
                                                                  111,600Unproved
      property
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  189,581111,600
                                                                  
                                                                  
                                                                  
                                                                  301,181Other
      property and equipmentLeasehold
      improvements
                                                                  
                                                                  
                                                                  553,170
                                                                  
                                                                  
                                                                  
                                                                  553,170Furniture
      and fixtures
                                                                  
                                                                  
                                                                  67,714
                                                                  
                                                                  
                                                                  
                                                                  67,714620,884
                                                                  
                                                                  
                                                                  
                                                                  620,884Less
      accumulated depreciation and amortization
                                                                  
                                                                  
                                                                  (133,290
                                                                  )
                                                                  
                                                                  
                                                                  (100,795
                                                                  )487,594
                                                                  
                                                                  
                                                                  
                                                                  520,089Total
      Property and Equipment
                                                                  
                                                                  
                                                                  599,194
                                                                  
                                                                  
                                                                  
                                                                  821,270Total
      Assets
                                                                  
                                                                  $
                                                                  626,448
                                                                  
                                                                  
                                                                  $
                                                                  823,104LIABILITIES
      AND SHAREHOLDERS' DEFICITCurrent
      LiabilitiesAccounts
      payable
                                                                  
                                                                  $
                                                                  1,415,066
                                                                  
                                                                  
                                                                  $
                                                                  1,438,156Accrued
      salaries
                                                                  
                                                                  
                                                                  323,975
                                                                  
                                                                  
                                                                  
                                                                  323,975Accrued
      interest
                                                                  
                                                                  
                                                                  10,068
                                                                  
                                                                  
                                                                  
                                                                  -Notes
      payable
                                                                  
                                                                  
                                                                  73,500
                                                                  
                                                                  
                                                                  
                                                                  -Convertible
      debenture payable, net of discount of $127,127
                                                                  
                                                                  
                                                                  22,873
                                                                  
                                                                  
                                                                  
                                                                  -Debtor
      judgment payable
                                                                  
                                                                  
                                                                  699,472
                                                                  
                                                                  
                                                                  
                                                                  682,588Advances
      from shareholders
                                                                  
                                                                  
                                                                  159,655
                                                                  
                                                                  
                                                                  
                                                                  293,528Derivative
      liability
                                                                  
                                                                  
                                                                  247,447
                                                                  
                                                                  
                                                                  
                                                                  -Total
      Liabilities
                                                                  
                                                                  
                                                                  2,952,056
                                                                  
                                                                  
                                                                  
                                                                  2,738,247Shareholders'
      DeficitCommon
      stock, $0.001 par value per share200,000,000
      shares authorized, 199,700,000outstanding
      atJune
      30, 2010 and56,234,082
      at December 31, 2009
                                                                  
                                                                  
                                                                  199,700
                                                                  
                                                                  
                                                                  
                                                                  56,235Additional
      paid-in capital
                                                                  
                                                                  
                                                                  15,554,734
                                                                  
                                                                  
                                                                  
                                                                  6,485,226Accumulated
      deficit
                                                                  
                                                                  
                                                                  (18,080,042
                                                                  )
                                                                  
                                                                  
                                                                  (8,456,604
                                                                  )Total
      Shareholders' Deficit
                                                                  
                                                                  
                                                                  (2,325,608
                                                                  )
                                                                  
                                                                  
                                                                  (1,915,143
                                                                  )Total
      Liabilities and Shareholders' Deficit
                                                                  
                                                                  $
                                                                  626,448
                                                                  
                                                                  
                                                                  $
                                                                  823,104
 
 See
accompanying notes to the financial statements.
  4
 
 Superior
Oil and Gas Co.
 Statements
of Operations
 (unaudited)
 
 Three
                                                  
                                                  
                                                  SixMonths Ended
                                                  
                                                  
                                                  Months Ended
                                                  
                                                  
                                                  Months Ended
                                                  
                                                  
                                                  Months EndedJune 30,
                                                  
                                                  
                                                  June 30,
                                                  
                                                  
                                                  June 30,
                                                  
                                                  
                                                  June 30,2010
                                                  
                                                  
                                                  2009
                                                  
                                                  
                                                  2010
                                                  
                                                  
                                                  2009RevenueOil
                                                  
                                                  $
                                                  3,991
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  7,456
                                                  
                                                  
                                                  $
                                                  4,781Gas
                                                  
                                                  
                                                  11,296
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  15,795
                                                  
                                                  
                                                  
                                                  75415,287
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  23,251
                                                  
                                                  
                                                  
                                                  5,535Operating
      ExpensesLease
      operating expenses
                                                  
                                                  
                                                  19,914
                                                  
                                                  
                                                  
                                                  1,912
                                                  
                                                  
                                                  
                                                  39,362
                                                  
                                                  
                                                  
                                                  5,102Impairment
      expense
                                                  
                                                  
                                                  369,371
                                                  
                                                  
                                                  
                                                  189,885
                                                  
                                                  
                                                  
                                                  369,371
                                                  
                                                  
                                                  
                                                  189,885Administrative
                                                  
                                                  
                                                  197,642
                                                  
                                                  
                                                  
                                                  75,307
                                                  
                                                  
                                                  
                                                  9,287,686
                                                  
                                                  
                                                  
                                                  148,032Interest
                                                  
                                                  
                                                  36,487
                                                  
                                                  
                                                  
                                                  8,442
                                                  
                                                  
                                                  
                                                  49,825
                                                  
                                                  
                                                  
                                                  16,884Depreciation
      and amortization
                                                  
                                                  
                                                  16,248
                                                  
                                                  
                                                  
                                                  16,235
                                                  
                                                  
                                                  
                                                  32,495
                                                  
                                                  
                                                  
                                                  32,579639,662
                                                  
                                                  
                                                  
                                                  291,781
                                                  
                                                  
                                                  
                                                  9,778,739
                                                  
                                                  
                                                  
                                                  392,482Loss
      from operations
                                                  
                                                  
                                                  (624,375
                                                  )
                                                  
                                                  
                                                  (291,781
                                                  )
                                                  
                                                  
                                                  (9,755,488
                                                  )
                                                  
                                                  
                                                  (386,947
                                                  )Loss
      on derivative (gain)
                                                  
                                                  
                                                  139,423
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (97,447
                                                  )
                                                  
                                                  
                                                  -Gain
      on settlement of liabilities
                                                  
                                                  
                                                  5,484
                                                  
                                                  
                                                  
                                                  54,928
                                                  
                                                  
                                                  
                                                  229,497
                                                  
                                                  
                                                  
                                                  54,928Loss
      before income taxes
                                                  
                                                  
                                                  (479,468
                                                  )
                                                  
                                                  
                                                  (236,853
                                                  )
                                                  
                                                  
                                                  (9,623,438
                                                  )
                                                  
                                                  
                                                  (332,019
                                                  )Income
      taxes
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Net
      loss
                                                  
                                                  
                                                  (479,468
                                                  )
                                                  
                                                  
                                                  (236,853
                                                  )
                                                  
                                                  
                                                  (9,623,438
                                                  )
                                                  
                                                  
                                                  (332,019
                                                  )Basis
      loss per share:Weighted
      average shares outstanding
                                                  
                                                  
                                                  199,420,628
                                                  
                                                  
                                                  
                                                  27,234,082
                                                  
                                                  
                                                  
                                                  142,145,550
                                                  
                                                  
                                                  
                                                  27,234,082Loss
      per share
                                                  
                                                  $
                                                  (0.00
                                                  )
                                                  
                                                  $
                                                  (0.01
                                                  )
                                                  
                                                  $
                                                  (0.07
                                                  )
                                                  
                                                  $
                                                  (0.01
                                                  )
 See
Accompanying Notes to Financial Statements
  5
 
 Superior Oil and Gas Co.
 STATEMENTS
OF CASH FLOWS
 (UNAUDITED)
 
 Six Months
                      
                      
                      Six MonthsEnded
                      
                      
                      EndedJune 30, 2010
                      
                      
                      June 30, 2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Income (loss)
                      
                      $
                      (9,623,438
                      )
                      
                      $
                      (332,019
                      )Adjustments
      to reconcile net income (loss) tonet
      cash provided by operating activities:Amortization
      of debt discount
                      
                      
                      22,873Loss
      on derivative liability
                      
                      
                      97,447Gain
      from settlement of accounts payable
                      
                      
                      (229,497
                      )
                      
                      
                      54,928Depreciation
                      
                      
                      32,495
                      
                      
                      
                      32,579Impairment
                      
                      
                      369,371
                      
                      
                      
                      189,885Share
      based compensation
                      
                      
                      9,118,183
                      
                      
                      
                      -Changes
      in operating assets and liabilities:Accounts
      receivable
                      
                      
                      (25,606
                      )
                      
                      
                      64,442Accounts
      payable
                      
                      
                      145,994
                      
                      
                      
                      (179,335
                      )Accrued
      expenses
                      
                      
                      10,068
                      
                      
                      
                      30,175Debtor
      judgment payable
                      
                      
                      16,884
                      
                      
                      
                      16,884Net
      cash provided by operating activities
                      
                      
                      (65,226
                      )
                      
                      
                      (122,461
                      )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of unproved oil & gas properties
                      
                      
                      (150,000
                      )
                      
                      
                      -Net
      cash used in investing activities
                      
                      
                      (150,000
                      )
                      
                      
                      -CASH
      FLOWS FROM FINANCING ACTIVITIES:Loan
      from officers
                      
                      
                      (8,460
                      )
                      
                      
                      121,947Proceeds
      from bank loan
                      
                      
                      223,500
                      
                      
                      
                      -Net
      cash provided by (used in) financing activities
                      
                      
                      215,040
                      
                      
                      
                      121,947NET
      CHANGE IN CASH FOR THE PERIOD
                      
                      
                      (186
                      )
                      
                      
                      (514
                      )CASH
      AT BEGINNING OF PERIOD
                      
                      
                      218
                      
                      
                      
                      712CASH
      AT END OF PERIOD
                      
                      $
                      32
                      
                      
                      $
                      198SUPPLEMENTAL
      CASH FLOW DISCLOSURESCash
      paid for interest
                      
                      $
                      -
                      
                      
                      $
                      -Non
      Cash Investing and Financing ActivitiesStock
      issued for oil & gas properties
                      
                      $
                      94,790
                      
                      
                      $
                      -
 
 See
Accompanying Notes to Financial Statements
  6
  Superior
Oil and Gas Co.
 Notes
to Financial Statements
 (unaudited)
 
 NOTE
1:  BASIS OF PRESENTATION
 
 The
accompanying unaudited interim financial statements of Superior Oil and Gas Co.,
(the Company) have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission, and should be read in conjunction with the
audited financial statements and notes thereto contained in Superior's Annual
Report on Form 10-K filed with the SEC. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the financial statements which substantially duplicate
the disclosure contained in the audited financial statements for fiscal 2009 as
reported in the Form 10-K have been omitted.
 
 Recently
Issued Accounting Pronouncements
 
 In
January 2010, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) No. 2010-06, Improving Disclosures about Fair Value
Measurements (ASU 2010-06). This update provides amendments to Subtopic 820-10
and requires new disclosures for 1) significant transfers in and out of Level 1
and Level 2 and the reasons for such transfers and 2) activity in Level 3 fair
value measurements to show separate information about purchases, sales,
issuances and settlements. In addition, this update amends Subtopic 820-10 to
clarify existing disclosures around the disaggregation level of fair value
measurements and disclosures for the valuation techniques and inputs utilized
(for Level 2 and Level 3 fair value measurements). The provisions in ASU 2010-06
are applicable to interim and annual reporting periods beginning subsequent to
December 15, 2009, with the exception of Level 3 disclosures of purchases,
sales, issuances and settlements, which will be required in reporting periods
beginning after December 15, 2010. The adoption of ASU 2010-06 did not impact
the Company’s operating results, financial position or cash flows, but did
impact the Company’s disclosures on fair value measurements. See Note 6, “Fair
Value Measurements.”
 
 In
February 2010, FASB issued ASU No. 2010-09, Amendments to Certain
Recognition and Disclosure Requirements (ASU 2010-09). This update amends
Subtopic 855-10 and gives a definition to SEC filer, and requires SEC filers to
assess for subsequent events through the issuance date of the financial
statements. This amendment states that an SEC filer is not required to disclose
the date through which subsequent events have been evaluated for a reporting
period. ASU 2010-09 becomes effective upon issuance of the final update. The
Company adopted the provisions of ASU 2010-09 for the period ended
March 31, 2010.
 
 In April
2010, the FASB issued ASU No. 2010-12, Accounting for Certain Tax Effects
of the 2010 Health Care Reform Acts (ASU 2010-12). This update clarifies
questions surrounding the accounting implications of the different signing dates
of the Health Care and Education Reconciliation Act (signed March 30, 2010)
and the Patient Protection and Affordable Care Act (signed March 23, 2010).
ASU 2010-12 states that the FASB and the Office of the Chief Accountant at the
SEC would not be opposed to view the two Acts together for accounting purposes.
The Company is currently assessing the impact, if any, the adoption of ASU
2010-12 will have on the Company’s disclosures, operating results, financial
position and cash flows.
  7
  Superior
Oil and Gas Co.
 Notes
to Financial Statements
 (unaudited)
 
 NOTE
2:  GOING CONCERN CONSIDERATIONS
 
 The
Company neither has sufficient cash on hand nor is it generating sufficient
revenues to cover its operating overhead.  These facts raise
substantial doubts as to the Company’s ability to continue as a going
concern.  The Company has been operating over the past year based on
loans, stock sales, sales of oil and gas properties and increases in its
accounts payable.  There is no guarantee that such sources of
financing will continue to be available for operations to the
Company.  In order to be able to complete the wells it is in the
process of drilling and completing and to produce those wells, the Company will
be required to obtain significant funding.  Management’s plans include
attempting to find partners for its drilling prospects.  Management
intends to make every effort to identify and develop sources of
funds.  There is no assurance that Management’s plans will be
successful.
 
 NOTE
3:  STOCK TRANSACTIONS
 
 On March
13, 2010, the Company issued 140 million common shares to two shareholders for
compensation for past investment and for a partial interest in an oil and gas
leases and three marginally producing oil and gas wells. The value was $0.065
per share or a total of $9,100,000.
 
 All but
$94,000 was for compensation of the two shareholders for their past investment
in the Company. $94,000 was the fair value of the properties purchased based on
replacement costs.
 
 In order
to maintain control of the Company in its present controlling shareholders, the
Company is to amend its articles of incorporation (i) to increase the number of
authorized shares of common stock and (ii) to authorize a new class of stock - a
Preferred Stock - with a 10 million-share Series A Voting Convertible Preferred
Stock, each share of which can cast 14 votes and also be convertible into 14
shares of Common Stock. The Company is expected to issue these 10 million shares
to affiliates of the present management of the Company and thereby achieve a
balancing of the voting power of  the two shareholders mentioned
above, on the one hand, and Superior's present management (and the controlling
shareholder), on the other hand.
 
 In order
to maintain a balance in the voting power of the controlling shareholders and
the two shareholders, in consideration of the Company’s agreeing to order the
issuance of the 140 million shares of common stock to the two shareholders, the
two shareholders agree that, until after the 10 million shares of Series A
Preferred Stock have been authorized and issued and delivered to the owners of
those shares, the two shareholders will only exercise the voting power of its
shares consistent with the written instructions of the Company’s management
(controlling shareholders).  As a result, the issuance of the 140
million shares of common stock to the two shareholders did not result in change
of control of the Company.
  8
  Superior
Oil and Gas Co.
 Notes
to Financial Statements
 (unaudited)
 
 On April
14, 2010, the Company issued 3,765,918 shares of common stock to five persons
for services.  The value was $0.03 per share or a total of $112,977
based on the quoted market price of the common stock on the date of
grant.
 
 NOTE
4:  NOTE PAYABLE
 
 The note
payable is a promissory note to an unrelated individual due March 31, 2011 with
interest at 8% per annum.
 
 NOTE
5:  CONVERTIBLE DEBENTURE PAYABLE AND DERIVATIVE
LIABILITY
 
 On March
13, 2010 the company entered into a convertible, 15% debenture to an unrelated
individual.  The debenture is due with interest on October 9, 2010 and
is convertible into 15 million shares of the Company’s common
stock.  At the date of issuance, we did not have 15 million authorized
but unissued shares available and thus we could not assert that we had
sufficient authorized shares to settle this share-settleable instrument if
called upon by the holder.  As a result of this, under ASC 815-25, the
embedded conversion option should be classified as a derivative liability at its
fair value.
 
 As at the
six months ended June 30, 2010, we noted the following issued and outstanding
shares and share-settleable instruments:
 
 Common
      shares issued and outstanding
                    
                    
                    199,700,000Common
      shares convertible from debenture
                    
                    
                    15,000,000Total
                    
                    
                    214,700,000
 
 Accordingly,
at June 30, 2010 we still could not assert that we had sufficient authorized
shares to share-settle any conversion of the convertible
debenture.  As a result, the embedded conversion option should
continue to be classified as a derivative liability and measured at fair
value.
 
 The
valuation of our embedded derivative is determined using the Black-Scholes
option pricing model. To determine the fair value of our derivatives, management
evaluates assumptions regarding the probability of certain future events.
Certain factors used to determine fair value include our period end stock price
$0.02, historical stock volatility 338%, risk free interest rate 0.18% and
derivative term 0.2 year.
 
 NOTE
6:  FAIR VALUE MEASUREMENT
 
 FASB ASC
820, Fair Value Measurements and Disclosures defines fair value as the exchange
price that would be received for an  asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date. FASB ASC 820 also establishes a fair value hierarchy which
requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. FASB ASC 820 describes three
levels of inputs that may be used to measure fair value:
  9
  Superior
Oil and Gas Co.
 Notes
to Financial Statements
 (unaudited)
 
 Level 1– Quoted prices in
active markets for identical assets or liabilities.
 Level 2– Observable inputs
other than Level 1 prices, such as quoted prices for similar assets or
liabilities; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or
liabilities. Our derivative liabilities are classified as Level 2.
 Level 3– Unobservable inputs
that are supported by little or no market activity and that are financial
instruments whose values are determined using pricing models, discounted cash
flow methodologies, or similar techniques, as well as instruments for which the
determination of fair value requires significant judgment or
estimation.
 
 If the
inputs used to measure the financial assets and liabilities fall within more
than one level described above, the categorization is based on the lowest level
input that is significant to the fair value measurement of the
instrument.
 
 The
following table provides a summary of the fair value of our derivative
liabilities measured on a recurring basis:
  Fair
      value measurements on a
                    recurring
      basis March 31, 2010Level
      1
                  
                  
                  Level
      2
                  
                  
                  Level
      3LiabilitiesEmbedded
      derivatives related to Convertible debentures
                  
                  $
                  -
                  
                  
                  $
                  247,447
                  
                  
                  $
                  -
 
 NOTE
7:  IMPAIRMENT OF UNPROVED PROPERTIES
 
 In
accordance with ASC 360-10, Accounting for the Impairment or
Disposal of Long-Lived Assets,long-lived assets such as oil and gas
properties and equipment are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be separately presented
in the balance sheet and reported at the lower of the carrying amount of the
fair value less costs to sell, and are no longer depreciated. The assets and
liabilities of a disposed group classified as held for sale would be presented
separately in the appropriate asset and liability sections of the balance
sheet.
 
 Impairment
of unproved oil and gas properties is determined by ASC 932, “Extractive Activities – Oil and
Gas” Impairment charges on oil and gas properties in 2010 and 2009
amounted to $369,371 and $189,885, respectively.
  10




Item
      2.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations





The following discussion and analysis
should be read in conjunction with the financial statements and the accompanying
notes thereto for the period ended June 30, 2010 and is qualified in its
entirety by the foregoing and by more detailed financial information appearing
elsewhere.  See "Item 1.  Financial
Statements."  The discussion includes management’s expectations for
the future.





Such expressions of expectation are not
historical in nature and are considered forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of
1995.  Forward-looking statements are subject to risks and
uncertainties that may cause actual future results to differ materially from
those expressed in any forward-looking statement.  Such risks and
uncertainties are discussed in the Risk Factors section of our Annual Report on
Form 10-K.  Copies of that filing may be obtained by contacting Gayla
McCoy of our company at 844 South Walbaum Road, Calumet, OK 73014, telephone
(405) 884-2080.





Results of Operations –
First Three and Six Months Ended June 30, 2010 Compared to the Three and Six
Months Ended June 30, 2009





We had oil and gas revenue of $15,287
and $23,251 respectively  for our interest in three oil and gas wells
for the three and six months ended June 30, 2010 compared to $0 and $5,535
revenue for our interest in five oil and gas wells for the same periods in
2009.  All of our wells were shut-in late in 2008 due to working
capital problems resulting in the much lower revenues in the 2009 periods than
in the 2010 periods.





Late in 2006 we drilled two oil and gas
wells which were initially completed in 2007.  The neutron log on the
Windy Vista #1 well in Garfield County, Oklahoma indicated numerous formations
which may contain oil or natural gas.  Initial completion attempts on
the Wilcox Formation were not commercially successful, we believe, due to a poor
cement job.  We have now completed the well in the Mississippi zone.
That well was lost due to a legal judgment in the third quarter of
2009.  The company was able to get 25% of this well back in a
settlement with the owners.





Initial completion attempts in the
Wilcox Formation on the Lonesome River #1 well in Blaine County, Oklahoma
indicated substantial amounts of water.  The well has now been
completed in the Viola zone.  The company also fractured the Hunton
and Mississippi zones to enhance production on this well.  We have
only been able to get minimal production from this well and it has been shut in
and the lease lost due to non-production.





We drilled the Chickie #1 and Gayla #1
wells in Logan County, Oklahoma in late 2007 and early 2008.  In
addition we did a recompletion on the Lindsey on the same lease during that time
frame.  Due to completion problems on the wells we have only been able
to get minimal production on the wells.





The revenue of $5,535 in the six months
in 2009 was from our working interest from sporadic production in these
wells.  They were shut in most of the time due to lack of funds for
operations.  The revenue for oil production for the periods in 2010
was for oil produced in the Logan County wells.  These wells were shut
in most of the time in the first quarter of 2010 due to lack of funds necessary
to pay for cost of production.




11


Lease operating expensesfor
the three and six months ended June 30, 2010 were $19,914 and $39,362
respectively compared to $1,912 and $5,102 respectively for the same periods in
2009.  Most of the expenditures in 2010 were for workover costs in
trying to get the wells producing again.





Impairment expensein the
three and six months periods ended June 30, 2010 was $369,371 and for the three
and six months period ended June 30, 2009 the expense was $189,885 relating to
three leases which expired in the second quarter of 2009.  The acreage
contained 316 total acres of which the Company owned a 50% interest or 158 net
acres.





General and administrative
expenses were $197,642 and $9,287,686 respectively for the three and six months
ended June 30, 2010 compared to $75,307 and $148,032 respectively for the same
periods in 2009, an increase of $122,335 and $9,139,654 from the same three and
six month periods in 2009.  The increases were mostly due to increases
in share based compensation of $9,005,213 and increased legal and accounting
fees in 2010 compared to the same periods in 2009.





Interest expensewas $36,487
and $49,825 respectively for in the three and six months ended June 30, 2010
compared to $8,442 and $16,584 in the same periods in 2009.  The
increases were for interest on the $206,000 debentures the company entered into
in 2010 and to the amortization of debt discount related to the
debentures.





Depreciation and amortization expensewas $16,248 and $32,495 respectively for the three and six month periods
ended June 30, 2010 compared to $16,235 and $32,579 respectively for the same
periods in 2009.  The increase was for depreciation on equipment and
amortization of leasehold improvements.





Loss on derivativein 2010 is
in relation to $150,000 debentures that the company obtained in
2010.  The debenture has a conversion feature in which the holder has
the right to convert the debenture at $0.01 conversion price. This would result
in a $97,447 loss for the six months ended June 30, 2010 and a gain of $139,423
for the three months ended June 30, 2010.





Gain on settlement of liabilitiesin 2010 is for the forgiveness of debt by a large shareholder during the
period.  In 2009 the company negotiated with three of its creditors
who had liens on property to settle the amount owed for $54,928 less than the
total amount due which reflects this income.  The company plans to
negotiate the remainder of its accounts payable if funds can be raised for the
settlements.




12


Net
Income (Loss)





We
suffered a net loss of $479,468 and $9,623,438 respectively for the three and
six months ended June 30, 2010 as compared to $236,853 and $332,019 respectively
for the same three and six month periods in ended in 2009, an increase in losses
of $242,615 and $9,291,419 respectively for the three and six months ended June
30, 2010 as compared to the same periods in 2009.  The increase in net
loss in the three months ended June 30, 2010 as compared to the same period in
2009 was primarily attributable to a decrease in oil and gas sales net of
operating expenses of $2,715; increase in general and administrative costs,
$9,139,654; increase in interest expense, $28,045; increase in depreciation,
$13; a decrease in settlement of liabilities of $49,444; gain from derivatives
of $139,423; and increase in impairment expense of $179,486.  The
decrease in net loss in the six months ended June 30, 2010 as compared to the
same period in 2009 was primarily attributable to a decrease in oil and gas
sales net of operating expenses of $16,544; increase in general and
administrative costs, $9,139,654; increase in interest expense, $32,941;
increase in loss on derivative, $97,447; and an increase in impairment expense
of $179,486.  All of this was offset by a decrease in depreciation
expense of $84 and a decrease in settlement of liabilities of
$174,569.





We
financed our loss of $9,623,438 for the six months ended June 30, 2010 primarily
with a decrease in cash, $186; depreciation and amortization expense, $32,495;
stock based compensation  expense, $9,118,183; increase in impairment
of $369,371; increase in accounts payable, $41,910; increase in accrued
expenses, $10,068; notes payable, $73,500; and an increase in debtor judgment
payable, $16,884.  These sources of funds were offset by increase in
the gain in settlement from accounts payable of $125,413, decrease in accounts
receivable, $25,606; and a decrease in loans from officers, $8,460.





There
were no material changes in financial condition during the six months ended June
30, 2010.





Material changes in results of
operations.  The results of operations obtained during the
first six  months of 2010 differ markedly from those of the first six
months of 2009.  The 2010 results reflect share based compensation
expense of $9,005,206, a loss on impairment of $369,371, a gain on settlement
issue of $229,497, and loss on derivative of $97,447.





Item
      4.
            Controls
      and Procedures





Evaluation of disclosure
controls and procedures.





As of
June 30, 2010, under the direction of our Chief Executive Officer who is also
our Chief Financial Officer, we evaluated our disclosure controls and procedures
as of June 30, 2010 and concluded that our disclosure controls and procedures
were ineffective as of June 30, 2010 due to a material weakness because of the
lack of segregation of duties. The lack of segregation of duties results from
lack of accounting staff with accounting technical expertise necessary for an
effective system of internal control. At any time, if it appears that any
control can be implemented to continue to mitigate such weaknesses, it is
immediately implemented. As soon as our finances allow, we will hire sufficient
accounting staff and implement appropriate procedures for monitoring and review
of work performed by our Chief Executive Officer.




13


Changes in
Internal Control Over Financial Reporting.





There
were no changes in our internal control over financial reporting during the
fiscal quarter ended June 30, 2010, that have materially affected, or are likely
to materially affect, our internal control over financial
reporting.





PART
II - OTHER INFORMATION





ITEM
      3.
            LEGAL
      PROCEEDINGS.





Following is a synopsis of lawsuits
that have a potential impact on Superior Oil and Gas Company.





We are a judgment debtor in the case
of  Gotz
Werner & Roman Werner v. Daniel Lloyd, McCoy Energy Co., Superior Oil and
Gas Co., and Big Daddy’s BBQ Sauce & Spices Co., Superior Court of
Arizona, Maricopa County, No. CV 99-11813.  The principal amount of
the judgment is $337,686 with ten percent interest accruing from and after
October 14, 1999.  As of June 30, 2010, the amount of the judgment
including interest was $691,030.





Daniel Lloyd, McCoy Energy Co. and Big
Daddy’s BBQ Sauce & Spices Co. are also judgment debtors in this litigation,
each to the same extent and in the same amount as our company.  Daniel
Lloyd was the chief executive officer, chief financial officer and a director of
our company until his death in July 2008.  McCoy Energy Co. is under
the control of Gayla McCoy, the secretary and treasurer of our
company.  Big Daddy’s BBQ Sauce & Spices Co. is under the control
of Mr. Dan Lloyd, Jr. and Ms. McCoy.





Brooks Investments, LLC, et
al. v. Blue Quail Resources, Inc., et al., Case No. CJ-2006-595, District
Court of Canadian County, State of Oklahomawherein Superior Oil
and Gas Company, Daniel H. Lloyd and Gayla McCoy are named as
co-defendants.  Plaintiffs have alleged that Blue Quail Resources,
Inc. committed securities fraud when it sold interests in the Lonesome River #1
oil and gas project and are seeking rescission of their contract and actual and
punitive damages against Blue Quail and the other co-defendants.  The
primary plaintiff, an attorney, has testified that no one from Superior or Dan
Lloyd or Gayla McCoy ever made any representations to him regarding the Lonesome
River #1 oil and gas project.  Furthermore, it has been admitted by
the plaintiffs that neither Superior Oil and Gas Company, Daniel Lloyd or Gayla
McCoy have ever had a contractual relationship with any of the plaintiffs and
that the only reason they have been named as defendants was on the basis of
their attorney’s advice.  That attorney has now been terminated from
further representation and a Motion for Summary Judgment is now pending before
the Court which Superior’s attorneys anticipate will result in a dismissal as to
Superior Oil and Gas Company, Daniel H. Lloyd and Gayla McCoy.





HOCO Drilling, LLC v.
Superior Oil and Gas Company, et al., Case No. CJ-2007-59-01, District
Court of Garfield County, State of Oklahoma wherein Superior Oil and Gas Company
is being sued for breach of contract by HOCO Drilling, LLC for $179,263.23, plus
costs and attorneys fees.  Superior filed an answer and counterclaim
against HOCO for breach of contract and negligence in an amount in excess of
that claimed by HOCO, plus costs and attorney’s fees.  Subsequent to
December 31, 2008, this lawsuit was settled with the agreement that the Company
will pay to the plaintiff $100,000 within one year from May 1,
2009.  The $100,000 amount is included in the accounts payable at June
30, 2010.




14


Midwest Mortgage Brokers and
Paul Gee v. Hershey S. Baum, et al., Case No. CJ-2004-7796, District
Court of Tulsa County, State of Oklahoma  wherein Superior Oil and Gas
Company is a named co-defendant involves a loan that was made by Paul Gee and
Midwest Mortgage Brokers and Paul Gee to Hershey S. Baum and others for which
Superior Oil and Gas purportedly agreed to repurchase 100,000 shares of stock
from plaintiffs as part of the consideration for making the loan.  The
court granted summary judgment against Superior Oil and Gas Company in the
amount of $286,448.39 on April 23, 2008 and Superior has filed an appeal from
this judgment with the Oklahoma Supreme Court.  The attorneys for
Superior believe they will be successful in overturning the summary judgment and
ultimately prevailing in the lawsuit.





James B. Jackson v. Superior
Oil & Gas Co., District Court, Canadian County, Case No. CJ-2008-87.
The plaintiff’s claims relate to geological service provided to Superior for
which he has not been paid.  A default judgment was entered against
Superior in the amount of $14,578.29 plus costs and attorney’s
fees.  Sufficient amounts have been recorded in accounts payable at
the balance sheet date to cover the cost of this judgment.





Eagle Well Services, Inc. v.
Superior Oil and Gas Co., District Court, Oklahoma County, Case No.
CJ-2009-773 involves a claim by Eagle Well Services d/b/a Bronco Energy Services
for $94,649.69 for services performed by it for the company.  The
amount of the claim is in accounts payable at June 30, 2010.





Superior Oil and Gas Co. v.
Vince Freechea, District Court, Oklahoma County, Case No. CJ-2009-1793
involves a claim by Superior against an individual who operated a company known
as High Plains
Tubular.  The claim arises out of that individual’s procurement
of casing and tubing on behalf of Superior.  Mr. Freechea subsequently
wrongfully sold this casing and tubing to a third party and refused to remit the
proceeds of the sale to Superior.  Superior paid Mr. Freechea in
excess of $220,000 for the product and is seeking to recover its cost plus the
profit for a total of $350,000.





Item
      2.
            Unregistered
      Sales of Equity Securities





In our last report of sales of
unregistered equity securities (Form 10-Q for period ended March 31, 2010), we
reported the sale, in transactions exempt from registration pursuant to
Regulation D, Rule 506, of the following securities to the following
persons.  However, the per share value was incorrectly reported for
all sales.  The correct per share value for all such sales is set
forth below.


15




Date
                              
                              Purchaser
                              
                              No.
      of shares
                              
                              
                              Value
                              
                              Consideration
      Paid for Shares3-29-10
                              
                              Sam
      Guttman
                              
                              
                              39,000,000
                              
                              
                              $
                              0.065
                              
                              Asset
      purchase3-29-10
                              
                              Weiss
      Family Trust
                              
                              
                              101,000,000
                              
                              
                              $
                              0.065
                              
                              Asset
      purchase4-14-10
                              
                              Marilyn
      C. Kenan, Trustee
                              
                              
                              816,480
                              
                              
                              $
                              0.03
                              
                              Legal
      Services4-14-10
                              
                              Daniel
      Lloyd, Jr.
                              
                              
                              816,480
                              
                              
                              $
                              0.03
                              
                              Payroll4-14-10
                              
                              Douglas
      A. Newman
                              
                              
                              816,479
                              
                              
                              $
                              0.03
                              
                              Accounting
      Services4-14-10
                              
                              Gayla
      McCoy
                              
                              
                              816,479
                              
                              
                              $
                              0.03
                              
                              Payroll4-14-10
                              
                              Masterline
      Group
                              
                              
                              500,000
                              
                              
                              $
                              0.03
                              
                              Financial
      consulting





Item
      6.
            Exhibits





The following exhibits are filed, by
incorporation by reference, as part of this Form 10-Q:





3(i)
              Articles
      of Incorporation
              *3(ii)
              Bylaws
              *10.5
              Purchase
      and Sale Agreement entered into December 13, 2005 between Superior Oil and
      Gas Co. and William H. Foster.
              **10.6
              Purchase
      and Sale Agreement entered into April 24, 2006 between Enerhance Energy,
      Inc. and Superior Oil and Gas Co.
              **10.7
              Assignment
      of Oil and Gas Leases executed May 23, 2006 from Hudson Resources Corp to
      Superior Oil and Gas Co. covering lands in Kingfisher County,
      Oklahoma
              ***10.8
              Assignment
      of Oil and Gas Leases executed May 23, 2006 from Hudson Resources Corp to
      Superior Oil and Gas Co. covering lands in Canadian County,
      Oklahoma
              ***10.9
              Assignment
      of Oil and Gas Leases executed May 23, 2006 from Hudson Resources Corp to
      Superior Oil and Gas Co. covering lands in Pushmataha County,
      Oklahoma
              ***14
              Code
      of Ethics for the Chief Executive Officer and Senior Financial
      Officers.
              +++16
              Letter
      on Change in Certifying Accountant
              *31.1
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




16




*
              Previously
      filed with Form 10-SB on January 31, 2003, EDGAR Accession
      #0001060830-03-000019; incorporated herein.+++
              Previously
      filed with Form 10-KSB, SEC #000-50173, on April 19, 2005; incorporated
      herein.**
              Previously
      filed with Form 10-QSB 03-31-06 on May 22, 2006, EDGAR Accession
      #0001010549-06-000326; incorporated herein.***
              Previously
      filed with Form 8-K Current Report 05-23-06 on May 30, 2006, EDGAR
      Accession #0001010549-06-000348; incorporated
  herein.





SIGNATURES





Pursuant to the requirements of the
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.





Date:  August
      20, 2010
                  
                  Superior
      Oil and Gas Co./s/
      B.J. SparksByB.J.
      Sparks, President




17