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
September 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 o





Non
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)
            
            36,100,317
              (Outstanding
      at November 14, 2008)





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





BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES





TABLE
OF CONTENTS








PART
      I – FINANCIAL INFORMATION
              PageItem
      1.
              Consolidated
      Financial StatementsConsolidated
      Balance Sheets; September 30, 2008 (unaudited)and
      December 31, 2007(audited)
              1Statements
      of Consolidated Operations; Three and Nine Months endedSeptember
      30, 2008 and 2007 (unaudited)
              2Statements
      of Consolidated Cash Flows; Nine Months endedSeptember
      30, 2008 and 2007 (unaudited)
              3Statements
      of Consolidated Stockholders’ Equity from Inception toSeptember
      30, 2008 (unaudited)
              4Notes
      to Consolidated Financial Statements (unaudited)
              5Item
      2.
              Management’s
      Discussion and Analysis or Plan of Operations
              12Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risks
              17Item
      4.
              Controls
      and Procedures
              17Item
      4T.
              Controls
      and Procedures
              17PART
      II – OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              17Item
      1A.
              Risk
      Factors
              17Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              17Item
      3
              Default
      upon Senior Securities
              19Item
      4
              Submission
      of Matters to a Vote of Security Holders
              19Item
      5
              Other
      Information
              19Item
      6
              Exhibits
              19Signatures
              
              19





PART
I. FINANCIAL INFORMATION





Item 1.
Financial Statements




BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 September
      30,
                                  
                                  
                                  December
      31,2008
                                  
                                  
                                  2007(Unaudited)
                                  
                                  
                                  (Audited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                                  
                                  $
                                  10,930
                                  
                                  
                                  $
                                  154,357Receivables
                                  
                                  
                                  14,912
                                  
                                  
                                  
                                  5,488Drilling
      advances
                                  
                                  
                                  504,177
                                  
                                  
                                  
                                  46,011Prepaid
      expenses and other
                                  
                                  
                                  135,584
                                  
                                  
                                  
                                  12,021665,603
                                  
                                  
                                  
                                  217,877PROPERTY
      AND EQUIPMENT:Oil
      and gas, on the basis of full cost accounting:Proved
      properties
                                  
                                  
                                  2,790,012
                                  
                                  
                                  
                                  750,000Unproved
      properties and properties under development
                                  
                                  
                                  8,560,388
                                  
                                  
                                  
                                  900,000Other
                                  
                                  
                                  11,679
                                  
                                  
                                  
                                  -11,362,079
                                  
                                  
                                  
                                  1,650,000Less:
      Accumulated depreciation, depletion and amortization
                                  
                                  
                                  (31,569
                                  )
                                  
                                  
                                  (5,627
                                  )11,330,510
                                  
                                  
                                  
                                  1,644,373$
                                  11,996,113
                                  
                                  
                                  $
                                  1,862,250LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                                  
                                  $
                                  12,692
                                  
                                  
                                  $
                                  27,781Accrued
      operating expenses
                                  
                                  
                                  5,260
                                  
                                  
                                  
                                  7,203Accrued
      exploration and development expenditures
                                  
                                  
                                  1,631,834
                                  
                                  
                                  
                                  -Notes
      payable, net of $443,090 and $10,303 ofunamortized
      discount, respectively
                                  
                                  
                                  1,856,910
                                  
                                  
                                  
                                  239,6973,506,696
                                  
                                  
                                  
                                  274,681COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITY:Common
      stock, $0.001 par value, 60,000,000 shares authorized;36,100,317
      and 25,649,654 issued and outstanding, respectively
                                  
                                  
                                  36,100
                                  
                                  
                                  
                                  25,650Preferred
      stock - Series A, $0.001 par value, 5,000,000 shares
      authorized;0
      shares issued and outstanding, respectively
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Preferred
      stock - Series B, $0.001 par value, 5,000,000 shares
      authorized;0
      shares issued and outstanding, respectively
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Preferred
      stock - Series C, $0.001 par value, 5,000,000 shares
      authorized;0
      shares issued and outstanding, respectively
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Additional
      paid-in capital
                                  
                                  
                                  10,883,452
                                  
                                  
                                  
                                  1,759,164Accumulated
      deficit
                                  
                                  
                                  (2,430,135
                                  )
                                  
                                  
                                  (197,245
                                  )8,489,417
                                  
                                  
                                  
                                  1,587,569$
                                  11,996,113
                                  
                                  
                                  $
                                  1,862,250
  The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
 1
  BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 STATEMENTS
OF CONSOLIDATED OPERATIONS
 (Unaudited)
 For
      the Quarter Ended
                                                                
                                                                
                                                                For
      the Nine Months EndedSeptember
      30,
                                                                
                                                                
                                                                September
      30,2008
                                                                
                                                                
                                                                2007
                                                                
                                                                
                                                                2008
                                                                
                                                                
                                                                2007REVENUES:Crude
      oil sales
                                                                
                                                                $
                                                                83,031
                                                                
                                                                
                                                                $
                                                                7,990
                                                                
                                                                
                                                                $
                                                                112,497
                                                                
                                                                
                                                                $
                                                                7,99083,031
                                                                
                                                                
                                                                
                                                                7,990
                                                                
                                                                
                                                                
                                                                112,497
                                                                
                                                                
                                                                
                                                                7,990OPERATING
      EXPENSES:Depreciation,
      depletion and amortization
                                                                
                                                                
                                                                21,011
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                25,942
                                                                
                                                                
                                                                
                                                                -Lease
      operating expenses
                                                                
                                                                
                                                                7,138
                                                                
                                                                
                                                                
                                                                1,617
                                                                
                                                                
                                                                
                                                                25,911
                                                                
                                                                
                                                                
                                                                1,617Severance
      and other taxes
                                                                
                                                                
                                                                3,759
                                                                
                                                                
                                                                
                                                                368
                                                                
                                                                
                                                                
                                                                5,185
                                                                
                                                                
                                                                
                                                                368General
      and administrative
                                                                
                                                                
                                                                295,618
                                                                
                                                                
                                                                
                                                                33,735
                                                                
                                                                
                                                                
                                                                1,249,638
                                                                
                                                                
                                                                
                                                                33,735Financing
      costs, net
                                                                
                                                                
                                                                810,475
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                1,038,711
                                                                
                                                                
                                                                
                                                                -1,138,001
                                                                
                                                                
                                                                
                                                                35,720
                                                                
                                                                
                                                                
                                                                2,345,387
                                                                
                                                                
                                                                
                                                                35,720OPERATING
      LOSS
                                                                
                                                                
                                                                (1,054,970
                                                                )
                                                                
                                                                
                                                                (27,730
                                                                )
                                                                
                                                                
                                                                (2,232,890
                                                                )
                                                                
                                                                
                                                                (27,730
                                                                )Provision
      for income taxes
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -NET
      LOSS
                                                                
                                                                $
                                                                (1,054,970
                                                                )
                                                                
                                                                $
                                                                (27,730
                                                                )
                                                                
                                                                $
                                                                (2,232,890
                                                                )
                                                                
                                                                $
                                                                (27,730
                                                                )BASIC
      AND DILUTED NET LOSSPER
      COMMON SHARE
                                                                
                                                                $
                                                                (0.03
                                                                )
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                (0.08
                                                                )
                                                                
                                                                $
                                                                -Weighted
      average number of common sharesoutstanding
      - basic and fully diluted
                                                                
                                                                
                                                                34,714,191
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                29,114,754
                                                                
                                                                
                                                                
                                                                -
 The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
  2
 BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 STATEMENTS
OF CONSOLIDATED CASH FLOWS
 (Unaudited)
 For
      the Nine Months EndedSeptember
      30,2008
                                                  
                                                  
                                                  2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                                                  
                                                  $
                                                  (2,232,890
                                                  )
                                                  
                                                  $
                                                  (27,730
                                                  )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation,
      depletion and amortization
                                                  
                                                  
                                                  25,942
                                                  
                                                  
                                                  
                                                  -Fair
      value of shares issued for consulting services
                                                  
                                                  
                                                  568,500
                                                  
                                                  
                                                  
                                                  -Amortization
      of deferred financing costs
                                                  
                                                  
                                                  894,353
                                                  
                                                  
                                                  
                                                  -Changes
      in operating assets and liabilities:(Increase)
      decrease in receivables
                                                  
                                                  
                                                  (9,424
                                                  )
                                                  
                                                  
                                                  (6,005
                                                  )(Increase)
      decrease in drilling advances
                                                  
                                                  
                                                  (458,166
                                                  )
                                                  
                                                  
                                                  -Increase
      (decrease) in accounts payable and accrued expenses
                                                  
                                                  
                                                  (17,030
                                                  )
                                                  
                                                  
                                                  19,109Net
      cash provided by (used in) operating activities
                                                  
                                                  
                                                  (1,228,715
                                                  )
                                                  
                                                  
                                                  (14,626
                                                  )CASH
      FLOWS FROM INVESTING ACTIVITIESAdditions
      to oil and gas properties
                                                  
                                                  
                                                  (2,566,532
                                                  )
                                                  
                                                  
                                                  (750,000
                                                  )Additions
      to other property and equipment
                                                  
                                                  
                                                  (11,679
                                                  )
                                                  
                                                  
                                                  -Black
      Pearl Energy, Inc. note receivable
                                                  
                                                  
                                                  (500,000
                                                  )
                                                  
                                                  
                                                  -Net
      cash provided by (used in) investing activities
                                                  
                                                  
                                                  (3,078,211
                                                  )
                                                  
                                                  
                                                  (750,000
                                                  )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of notes payable
                                                  
                                                  
                                                  2,050,000
                                                  
                                                  
                                                  
                                                  -Debt
      issue costs
                                                  
                                                  
                                                  (90,000
                                                  )Equity
      issuances, net
                                                  
                                                  
                                                  2,203,499
                                                  
                                                  
                                                  
                                                  874,100Net
      cash provided by (used in) financing activities
                                                  
                                                  
                                                  4,163,499
                                                  
                                                  
                                                  
                                                  874,100NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                                  
                                                  
                                                  (143,427
                                                  )
                                                  
                                                  
                                                  109,474CASH
      AND CASH EQUIVALENTS AT BEGINNING OF YEAR
                                                  
                                                  
                                                  154,357
                                                  
                                                  
                                                  
                                                  -CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                                                  
                                                  $
                                                  10,930
                                                  
                                                  
                                                  $
                                                  109,474SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      paid for interest
                                                  
                                                  $
                                                  139,310
                                                  
                                                  
                                                  $
                                                  -NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Acquisition
      of oil and gas property for common shares
                                                  
                                                  $
                                                  5,550,812
                                                  
                                                  
                                                  $
                                                  -Acquisition
      of Black Pearl Energy, Inc. note receivable
                                                  
                                                  $
                                                  500,000
                                                  
                                                  
                                                  $
                                                  -Fair
      value of common shares and warrants to purchase commonshares
      issued with notes payable
                                                  
                                                  $
                                                  1,310,703
                                                  
                                                  
                                                  $
                                                  -
 The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
  3
  BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 STATEMENTS
OF CONSOLIDATED STOCKHOLDERS' EQUITY
 (Unaudited)
 TotalMembers'
                                          
                                          
                                          Common
      Stock
                                          
                                          
                                          Paid-In
                                          
                                          
                                          Accumulated
                                          
                                          
                                          Stockholders'Interest
                                          
                                          
                                          Shares
                                          
                                          
                                          Amount
                                          
                                          
                                          Capital
                                          
                                          
                                          Deficit
                                          
                                          
                                          EquityBALANCE
      AT AUGUST 17, 2007 (Inception)
                                          
                                          $
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -Initial
      contribution
                                          
                                          
                                          100
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          100Issuance
      of LLC interests, net
                                          
                                          
                                          874,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          874,000Reverse
      merger with NFLA
                                          
                                          
                                          (874,100
                                          )
                                          
                                          
                                          19,274,655
                                          
                                          
                                          
                                          19,275
                                          
                                          
                                          
                                          854,825
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Common
      shares issuedin
      asset acquisition
                                          
                                          
                                          -
                                          
                                          
                                          
                                          6,300,000
                                          
                                          
                                          
                                          6,300
                                          
                                          
                                          
                                          893,700
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          900,000Common
      shares issued withDecember
      2007 Note Payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          74,999
                                          
                                          
                                          
                                          75
                                          
                                          
                                          
                                          10,639
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          10,714Net
      loss
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (197,245
                                          )
                                          
                                          
                                          (197,245
                                          )BALANCE
      AT DECEMBER 31, 2007
                                          
                                          $
                                          -
                                          
                                          
                                          
                                          25,649,654
                                          
                                          
                                          $
                                          25,650
                                          
                                          
                                          $
                                          1,759,164
                                          
                                          
                                          $
                                          (197,245
                                          )
                                          
                                          $
                                          1,587,569Common
      shares issued with theJanuary
      2008 Notes
                                          
                                          
                                          -
                                          
                                          
                                          
                                          160,000
                                          
                                          
                                          
                                          160
                                          
                                          
                                          
                                          119,840
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          120,000Common
      shares issued forconsulting
      services - April 9, 2008
                                          
                                          
                                          -
                                          
                                          
                                          
                                          75,000
                                          
                                          
                                          
                                          75
                                          
                                          
                                          
                                          52,425
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          52,500Common
      shares issued forconsulting
      services - May 7, 2008
                                          
                                          
                                          -
                                          
                                          
                                          
                                          600,000
                                          
                                          
                                          
                                          600
                                          
                                          
                                          
                                          155,400
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          156,000Common
      shares issued forconsulting
      services - May 15, 2008
                                          
                                          
                                          -
                                          
                                          
                                          
                                          800,000
                                          
                                          
                                          
                                          800
                                          
                                          
                                          
                                          359,200
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          360,000Common
      shares issued with theMay
      2008 Convertible Note
                                          
                                          
                                          -
                                          
                                          
                                          
                                          375,000
                                          
                                          
                                          
                                          375
                                          
                                          
                                          
                                          99,087
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          99,462Fair
      value of beneficial conversion featureof
      the May 2008 Convertible Note
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          305,576
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          305,576Fair
      value of warrants to acquire common sharesissued
      with the May 2008 Convertible Note
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          278,844
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          278,844Fair
      value of warrants to acquire common sharesissued
      with the August 2008 Notes
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          506,821
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          506,821Common
      shares issued in the acquisition ofBlack
      Pearl Energy, Inc.
                                          
                                          
                                          -
                                          
                                          
                                          
                                          7,024,665
                                          
                                          
                                          
                                          7,024
                                          
                                          
                                          
                                          8,211,834
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          8,218,858Common
      shares retired in the acquisition ofBlack
      Pearl Energy, Inc.
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (2,709,000
                                          )
                                          
                                          
                                          (2,709
                                          )
                                          
                                          
                                          (3,164,113
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (3,166,822
                                          )Equity
      offerings, net
                                          
                                          
                                          -
                                          
                                          
                                          
                                          4,124,998
                                          
                                          
                                          
                                          4,125
                                          
                                          
                                          
                                          2,199,374
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2,203,499Net
      loss
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (2,232,890
                                          )
                                          
                                          
                                          (2,232,890
                                          )BALANCE
      AT SEPTEMBER 30, 2008
                                          
                                          $
                                          -
                                          
                                          
                                          
                                          36,100,317
                                          
                                          
                                          $
                                          36,100
                                          
                                          
                                          $
                                          10,883,452
                                          
                                          
                                          $
                                          (2,430,135
                                          )
                                          
                                          $
                                          8,489,417
 The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
  4


BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
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 $2,430,135 at September 30, 2008.  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





The
Company has undertaken steps as part of a plan to improve operations with the
goal of sustaining its operations for the next twelve months and beyond. These
steps include (a) raising additional capital and/or obtaining financing, if
available, (b) increasing its current production (c) continuing development
drilling on its proved, undeveloped properties 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 the Company is unable to continue
as a going concern, it may elect or be required to seek protection from its
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





Effective
January 1, 2008, the Company was required to adopt Statement of Financial
Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements”and SFAS
No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities - Including an
Amendment of FASB Statement No. 115” .  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.  The
Company has not yet determined the impact that the implementation of FSP 157-2
will have on its non-financial assets and liabilities which are not recognized
on a recurring basis; however, it does not anticipate the adoption of this
standard will have a material impact on its 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 the
Company’s consolidated financial position, results of operations or cash flows
as of, and for the periods ended, September 30, 2008.






5




BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
30, 2008 (unaudited)





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.  The Company has not yet determined the impact that the
implementation of SFAS No. 141(R) will have on its 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.  This
statement is effective for fiscal years and interim periods within those fiscal
years, beginning on or after December 15, 2008.  The Company has not yet
determined the impact that the implementation of SFAS No. 160 will have on
its 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 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.  The Company has not yet determined
the impact that the implementation of SFAS No. 161 will have on
its consolidated financial position, results of operations or cash
flows.





In April
2008, the FASB issued FSP No. 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”.   The Company is 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.  The Company has not yet determined the
impact that the implementation of FSP 142-3 will have on its 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 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."  The
Company does not expect the adoption of SFAS No. 162 will have a material
effect on its consolidated financial position, results of operations or cash
flows.





In May
2008, the FASB issued FSP 14-1 "Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) ".  FSP 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 14-1 is effective for fiscal
years beginning after December 15, 2008, on a retroactive
basis.  The Company has not yet determined the impact that the
implementation of FSP 14-1 will have on its consolidated financial
position, results of operations or cash flows.






6






BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
30, 2008 (unaudited)


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
consolidated statements of operations.





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.





2.  ACQUISITION





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”). The Company's consolidated statement of operations
includes the operating activity of Black Pearl since July 18, 2008, the closing
date of the Merger Agreement.  In consideration for the Merger, the
Company issued an aggregate of 7,024,665 (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.





Black
Pearl was an exploration and development company located in Midland,
Texas.  On July 14, 2008, Black Pearl acquired options to purchase
an undivided 75% working interest in two drilling projects for total
consideration of $500,000.  Concurrently with executing these options,
Black Pearl entered into a note agreement with the Company for
$500,000.  The note bore interest at 8% per year with a maturity date
of November 14, 2008, or the date at which a letter of intent to merge the
Company expired.  The note was cancelled in conjunction with the
Merger.





The
Company allocated the total consideration of $8,218,858, based on the closing
price per share of the Company’s common stock on July 18, 2008, of $1.17, as
follows:





Unproved
      oil and gas property
                  
                  $
                  5,552,036Bonanza
      Oil and Gas, Inc. common shares
                  
                  
                  3,166,822Note
      payable to Bonanza Oil and Gas, Inc.
                  
                  
                  (500,000
                  )$
                  8,218,858






7






BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
30, 2008 (unaudited)


Subsequent
to acquisition closing, the Company made additional payments totaling $900,000
toward the acquisition  of two projects under option.  As of
September 30, 2008, the Company had $1,100,000 of additional payments, accrued
as part of the Company’s accrued exploration and development expenditures,
required to fully exercise the option for the two projects.





The
Company believes that the pre-acquisition results of operations for Black Pearl
would be immaterial, as adjusted on a pro-forma basis.





3.  NOTES
PAYABLE





The
Company’s notes payable at September 30, 2008 and December 31, 2007, consisted
of the following:





Balance
      as ofSeptember
      30, 2008
              
              
              December
      31, 2007December
      2007 secured promissory note
              
              $
              250,000
              
              
              $
              250,000January
      2008 secured promissory notes
              
              
              800,000
              
              
              
              -May
      2008 convertible note
              
              
              750,000
              
              
              
              -August
      2008 unsecured promissory notes
              
              
              500,000
              
              
              
              -Total
              
              
              2,300,000
              
              
              
              250,000Unamortized
      discount
              
              
              (443,090
              )
              
              
              (10,303
              )Balance,
      net of discount
              
              $
              1,856,910
              
              
              $
              239,697


December 2007 Secured
Promissory Note:





In
December 2007, the Company entered into a 14% Senior Asset Backed Secured
Promissory Note and Security Agreement, and a Securities Purchase Agreement,
with Phoenix Capital Opportunity Fund, L.P. ("Phoenix") in principal amount of
$250,000 (the "December 2007 Note) and the issuance of 74,999 shares (on a
post-split basis) of common stock of the Company.  The December 2007
Note matures on December 17, 2008, and interest is payable on a quarterly
basis.  The Company's obligations under the December 2007 Note are
secured by the Company’s interest in eight oil and gas wells located in Gonzales
County, Texas.  The shares issued in conjunction with the December
2007 Note were valued at $10,714, based on the price of the Company’s common
stock issued in its then most recent private placement offering, and was
recorded as a discount to the December 2007 Note and additional paid-in
capital.  The Company also incurred $12,500 in issue costs which it
has recorded as deferred financing costs as a component of prepaid and other
current expenses.  The discount and deferred financing costs are being
amortized using the effective interest rate method over the term of the
indebtedness.  The Company had a discount on December 2007 Note
balance of $2,260 and $10,303 as of September 30, 2008, and
December 31, 2007, respectively, and deferred financing costs of
$2,673 and $12,021 at September 30, 2008, and December 31, 2007,
respectively.  Under the terms of the December 2007 Note, the interest
rate will increase to an annual rate of 24%, plus all enforcement costs, if in
default.  The Company paid $8,822 and $26,370 in interest on the
December 2007 Note for the three and nine months ended September 30, 2008,
respectively.





January 2008 Secured
Promissory Notes:





In
January 2008, the Company entered into three 14% Senior Secured Promissory Note
and Security Agreements, and Securities Purchase Agreements, with accredited
investors for an aggregate principal amount of $800,000 (the "January 2008
Notes") and the issuance of 160,000 shares of the Company’s common
stock.  The January 2008 Notes mature on January 31, 2009, with
interest payable on a monthly basis.  The Company's obligations under
the January 2008 Notes are secured by the Company’s interest in three prospect
areas located in Borden County, Texas, Hidalgo County, Texas and Brazoria
County, Texas.  The shares issued in conjunction with the January 2008
Notes were valued at $120,000, based on the market price of the Company’s common
stock at the time of issuance, and was recorded as a discount to the January
2008 Notes and additional paid-in capital.  This discount is being
amortized using the effective interest rate method over the term of the
indebtedness and as of September 30, 2008, the discount had a balance of
$40,109.  Under the terms of the January 2008 Notes, the interest rate
will increase to an annual rate of 24%, plus all enforcement costs, if in
default.  In addition, if the Company does not repay the January 2008
Notes by July 31, 2009, the Company is obligated to issue an additional 150,000
shares of its common stock as an additional interest payment.  The
Company paid $28,230 and $74,008 in interest on the January 2008 Notes for the
three and nine months ended September 30, 2008, respectively.






8




BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
30, 2008 (unaudited)


May 2008 Convertible
Note:





In May
2008, the Company entered into a Securities Purchase Agreement with an
accredited investor providing for the sale by the Company of its 8% convertible
note in the principal amount of $750,000 (the "May 2008 Convertible Note") and
the issuance of 375,000 shares of common stock of the Company, a Series A Common
Stock Purchase Warrant to purchase 750,000 shares of the Company’s common stock
(the “Series A May Warrant”) and a Series B Common Stock Purchase Warrant to
purchase 750,000 shares of the Company’s common stock (the “Series B May
Warrant”).   The May 2008 Convertible Note matures on May 14, 2009,
and interest is payable on a quarterly basis.  The May 2008
Convertible Note is unsecured, however, in the event that the Company grants a
secured interest in its assets in connection with any future financing, then the
holder of the May 2008 Convertible Note will be entitled to a pari passu
interest in such secured interest.  The May 2008 Convertible Note is
convertible into the Company’s common stock, at a conversion price of $0.3742
per common share, as adjusted, and is subject to normal and customary
anti-dilution provisions.  The Company may require that the holder of
the May 2008 Convertible Note convert all or a portion of the May 2008
Convertible Note in the event that the Company’s closing market price for any 10
consecutive trading days exceeds 300% of the then conversion
price.  However, in no event can the holder of the May 2007
Convertible Note convert the May 2007 Convertible Note into such shares which
would provide for the holder to own more than 4.9% of the then outstanding
shares of the Company’s common stock, including the shares for which the holder
is entitled upon exercise of the Series A May Warrant and Series B May
Warrant.





The
Series A May Warrant is exercisable for a period of two years at an exercise
price of $0.75 per share and the Series B May Warrant is 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 May
Warrant and Series B May Warrant and the conversion price for the May 2008
Convertible Note 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 common shares issued, the warrants issued and the debt on
a relative fair value basis.





The
Company calculate the value of the beneficial conversion feature as $305,576,
and recoded such value as a discount to the May 2008 Convertible Note and to
additional paid-in capital.  Using the Black Scholes pricing model,
with volatility of 140.69%, a risk-free interest rate of 3.88% and a 0% dividend
yield, the Series A May Warrant and Series B May Warrant were determined to have
a fair value of $236,114, with such value also recorded as a  discount
to the May 2008 Convertible Note and to additional paid-in
capital.  The value of the 375,000 common shares was determined to be
$99,462, based on the market price of the Company’s common stock at the time of
issuance, and was also recorded as a discount to the May 2008 Convertible Note
and as additional paid-in capital.  The aggregate discount of $641,152
attributable to the shares, the warrants and the beneficial conversion feature
is being amortized using the effective interest rate method over the term of the
indebtedness and as of September 30, 2008, had an unamortized balance of
$400,721.  The Company also incurred issue costs of $90,000 associated
with the May 2008 Convertible Note which it has recorded as deferred financing
costs as a component of prepaid and other current expenses.  The
Company also issued 75,000 Series A May Warrants and 75,000 Series B May
Warrants to its investment banking firm as additional
compensation.  The deferred financing costs are being amortized using
the effective interest rate method over the term of the
indebtedness.  At September 30, 2008, the Company had unamortized
deferred financing costs of $56,219.






9






BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
30, 2008 (unaudited)


The
Company paid $26,466 and $38,932 in interest on the May 2008 Convertible Note
for the three and nine months ended September 30, 2008,
respectively.





August 2008 Unsecured
Promissory Notes:





In August
2008, the Company entered into four 12% Unsecured Promissory Notes, and
Securities Purchase Agreements, with accredited investors for an aggregate
principal amount of $500,000 (the "August 2008 Notes") and the issuance of
250,000 shares of the Company’s common stock.  The August 2008 Notes
matured on the earlier of September 28, 2008, or the closing of private
placement of securities by the Company.  In the event that the August
2008 Notes were not repaid by September 28, 2008, the Company became required to
issue 125,000 every thirty days that any amounts remain outstanding under the
August 2008 Notes (the “Additional Shares”).  An entity controlled by
the Company’s Chief Financial Officer purchased $50,000 of the August 2008
Notes.





In
October 2008, and prior to the issuance of the either the 250,000 shares of the
Company’s common stock or the Additional Shares, the Company and the holders of
the August 2008 Notes elected to amend the terms of the August 2008
Notes.  In connection therewith, in exchange for the holders of the
August 2008 Notes election to forego their right to receive the 250,000 shares
of the Company’s common stock and the Additional Shares, the Company agreed to
issue the holders of the August 2008 Notes common stock purchase warrants to
purchase an aggregate of 500,000 common shares of the Company’s common stock
(the “August 2008 Warrants”).  The August 2008 Warrants are
exercisable for a period of three years at a price of $1.00 per
share.  In addition, as the August 2008 Notes were not repaid by
September 28, 2008,the Company is required to issue the holders of the August
2008 Notes an aggregate of 125,000 warrants to purchase shares of the Company’s
common stock every thirty days that any amounts remain outstanding under the
August 2008 Notes (the “Additional Warrants”).  The Additional
Warrants shall be exercisable for a period of three years at a price equal to
the greater of $1.00 or the market price as of the date of the
issuance.





Using the
Black Scholes pricing model, with volatility of 146.59% and 147.83%,
respectively, a risk-free interest rate of 4.50% and a 0% dividend yield, the
August 2008 Warrants and the Additional Warrants were determined to have an
aggregate fair value of $506,821, with such value recorded as
a  discount to the August 2008 Notes and to additional paid-in
capital.  This discount was amortized using the effective interest
rate method over the initial term of the indebtedness.  The Company
had accrued and unpaid interest totaling $5,260 associated with the August 2008
Notes during the three and nine months ended September 30, 2008,
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 the Company’s President and its Chief Operating Officer, which
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 $13,741 and
$33,631 for the three months and nine months ended September 30, 2008,
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




BONANZA
OIL AND GAS, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
30, 2008 (unaudited)





5.  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.





6.  EQUITY
TRANSACTIONS





Commencing
June 30, 2008 through August 8, 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 4,124,998 units with each unit consisting
of one share of common stock, a warrant to purchase one-half of one share of the
Company’s common stock at an exercise price of $1.00 per common share (the
“Series A June Warrant”) and a warrant to purchase one-half of one share of the
Company’s common stock at an exercise price of $2.00 per common share (the
“Series B June Warrant”).  The per unit purchase price for the units
was $0.60 resulting in gross proceeds of $2,474,999 to the Company and the
issuance of 4,124,998 shares of common stock, Series A June Warrants to purchase
2,062,499 shares of the Company’s common stock and Series B June Warrants to
purchase 2,062,499 shares of the Company’s common stock.  The Company
incurred transaction costs totaling $275,625 in the issuance of the units,
thereby realizing $2,203,499 in net proceeds.  The Company also issued
206,249 Series A June Warrants and 206,249 Series B June Warrants to its
investment banking firm as additional compensation.





The
Series A June Warrants are exercisable for a period of two years at an exercise
price of $1.00 per share and the Series B June 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 Series A June
Warrants and Series B June 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.





During
2008, the Company issued an aggregate of 1.5 million common shares for
consulting and legal services.  The Company recognized expenses
totaling $567,025 based on the fair value of the Company’s common stock at date
of issuance.





As of
September 30, 2008, the Company had the following dilutive securities
outstanding:




Number
              
              
              Exercise
              
              
              ExpirationCommon
      Shares issuable:
              
              of
      Shares
              
              
              Price
              
              
              DateIn
      connection with the May 2008 Convertible Note:Upon
      conversion of May 2008 Convertible Note
              
              
              2,004,276
              
              
              
              -
              
              
              
              -Upon
      exercise of the Series A May Warrants
              
              
              825,000
              
              
              $
              0.75
              
              
              May
      14, 2010Upon
      exercise of the Series B May Warrants
              
              
              825,000
              
              
              $
              1.00
              
              
              May
      14, 2010In
      connection with the June 2008 Unit Offering:Upon
      exercise of the Series A June Warrants
              
              
              2,268,748
              
              
              $
              1.00
              
              
              June
      30, 2010Upon
      exercise of the Series B June Warrants
              
              
              2,268,748
              
              
              $
              2.00
              
              
              June
      30, 2010In
      connection with the August 2008 Notes:Upon
      exercise of the August 2008 Warrants
              
              
              500,000
              
              
              $
              1.00
              
              
              August
      28, 2011Upon
      exercise of the Additional Warrants
              
              
              125,000
              
              
              $
              1.00
              
              
              September
      30, 2011Total
      dilutive securities at September 30, 2008
              
              
              8,816,772


11







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", "the Company", “we” or “us”) is an independent
energy company engaged primarily in the acquisition, development, production and
the sale of crude oil, natural 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.  The operations
of Bonanza were originally conducted through Plantation Working Interests, LLC
(“Plantation”), which was incorporated in the State of Texas on August 17,
2007, to acquire a working interest (22.5% pre-payout, 15% post-payout) in
eight oil and gas wells in Gonzales County, TX.





On
October 23, 2007, Plantation merged with National Filing Agents, Inc. (“NFLA”),
which was the entity that survived the merger, by entering into an Acquisition
Agreement and Plan of Merger (the "Acquisition Agreement"), pursuant to which
NFLA 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 a 25%
interest in a lease on the 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% working interest in the ApClark field located in Borden
County, TX through the issuance of 6,300,000 shares of Common
Stock.  In conjunction with the transaction, NFLA 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 herein reflect the 2.1:1 forward stock split.





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 7,024,665 (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.





Black
Pearl was an exploration and development company located in Midland,
Texas.  On July 14, 2008, Black Pearl acquired options to purchase an
undivided 75% working interest in two drilling projects for total consideration
of $500,000.  Concurrently with executing these options, Black Pearl
entered into a note agreement with the Company for $500,000.  The note
bore interest at 8% per year with a maturity date of November 14, 2008, or the
date at which a letter of intent to merge the Company expired.  The
note was cancelled in conjunction with the Merger.   At the
closing of the acquisition, a total of $2,000,000 additional consideration was
due to fully exercise the option to purchase the 75% working interest in the two
projects noted above.








12





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 $2,430,135 at September 30, 2008.  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.





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 (c) continuing development drilling on our
proved, undeveloped properties 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 Nine Months ended September 30, 2008 (unaudited)





For
      the Quarter Ended
                September
      30,
              
              
              For
      the Nine Months Ended
                September
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007REVENUES:Crude
      oil sales
              
              $
              83,031
              
              
              $
              7,990
              
              
              $
              112,497
              
              
              $
              7,99083,031
              
              
              
              7,990
              
              
              
              112,497
              
              
              
              7,990OPERATING
      EXPENSES:Depreciation,
      depletion and amortization
              
              
              21,011
              
              
              
              -
              
              
              
              25,942
              
              
              
              -Lease
      operating expenses
              
              
              7,138
              
              
              
              1,617
              
              
              
              25,911
              
              
              
              1,617Severance
      and other taxes
              
              
              3,759
              
              
              
              368
              
              
              
              5,185
              
              
              
              368General
      and administrative
              
              
              295,618
              
              
              
              33,735
              
              
              
              1,249,638
              
              
              
              33,735Financing
      costs, net
              
              
              810,475
              
              
              
              -
              
              
              
              1,038,711
              
              
              
              -1,138,001
              
              
              
              35,720
              
              
              
              2,345,387
              
              
              
              35,720OPERATING
      LOSS
              
              
              (1,054,970
              )
              
              
              (27,730
              )
              
              
              (2,232,890
              )
              
              
              (27,730
              )Provision
      for income taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
      LOSS
              
              $
              (1,054,970
              )
              
              $
              (27,730
              )
              
              $
              (2,232,890
              )
              
              $
              (27,730
              )




We were
incorporated on August 17, 2007, and therefore had minimal activity during the
three and nine months ended September 30, 2007.





During
the three and nine months ended September 30, 2008, the Company realized gross
revenue from its first two development wells drilled in the exploitation of the
Apclark field and from three of its eight wells in the  Plantation
field.  During the three months and nine months ended September 30,
2008, the Company had total sales, net to its interest, of 766 and 1,055 barrels
of crude oil, respectively, and realized average prices of $108.40 and $106.63
per barrel, respectively.    During these same periods,
lease operating expenses and severance taxes have totaled $14.22 and $29.47 per
barrel, respectively, resulting in netbacks to the Company of $94.18 and $77.16
for the three and nine months, respectively.






13





Depreciation,
depletion and amortization expense totaled $21,011 and $25,942 for the three and
nine months ended September 30, 2008, respectively, most of which is
attributable to depletion on our Apclark and Plantation producing
properties.





For the
three and nine months ended September 30, 2008, general and administrative
expenses totaled $295,618 and $1,249,638, respectively.  For the three
months ended September 30, 2008, these expenses were comprised primarily of
payroll and other personnel expenses ($111,673) and legal expenses
($74,500).  For the nine months ended September 30, 2008,
these expenses were comprised primarily of non-cash charges resulting from the
issuance of 1.4 million shares of the Company’s common stock to consultants for
services provided ($516,000), payroll and other personnel expenses ($293,673),
legal expenses ($153,204) and audit and accounting services
($52,685).





Financing
costs, net for the three and nine months ended September 30, 2008, totaled
$810,475 and $1,038,711, respectively.  These charges consisted of
cash interest of $68,778 and $144,570, for the three and nine months,
respectively, with the balance attributable to the amortization of deferred
financing fees and discounts associated with the outstanding debt.





Liquidity
and Capital Resources





At
September 30, 2008, we had cash on hand of $10,930 and a working capital deficit
of $2,841,093 consisting primarily of $1,856,910 of short-term debt,
representing $2,300,000 face value of all of our debt outstanding less $443,090
of unamortized discount, $1,631,834 of accrued exploration and development
expenses, all offset by $665,603 of current assets.





We have
raised net proceeds of $5,300,100 in various debt and equity financings since
our inception (August 17, 2007), including $4,163,500 since January 1, 2008, and
have used the majority of the net proceeds to successfully begin the
exploitation of our interest in the Apclark field with the completion of the
first two wells to be drilled, the acquisition of our interest in the Plantation
field, initial payments toward the exercise of the option on the two drilling
projects acquired in the merger with Black Pearl Energy, Inc., as well as for
general and administrative expenses and working capital purposes.





Net cash
used in operating activities for the nine months ended September 30, 2008,
totaled $1,228,716 and consisted primarily of the net loss of $2,232,890, net of
non-cash charges totaling $516,000 related to the fair value of common shares
issued for consulting services, $894,353 related to the amortization of deferred
financing fees and discount on outstanding debt and $25,942 of depreciation,
depletion and amortization expense.  The Company also had $484,622 of
other working capital changes, primarily consisting of drilling costs
advanced.





Net cash
used in investing activities for the nine months ended September 30, 2008,
totaled $3,078,211 and consisted primarily of the Company’s drilling activity in
its Apclark field and the initial payments toward the exercise of the option on
the two drilling projects acquired in the merger with Black Pearl Energy,
Inc.





Net cash
provided by financing activities for the nine months ended September 30, 2008,
totaled $4,163,500 and consisted primarily of the $800,000 in gross proceeds
from our January 2008 Notes, $750,000 from the May 2008 Convertible Note and
$500,000 from the August 2008 Notes, in addition to $2,203,500 in net proceeds
from the Company’s equity offering.





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 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.





14





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.





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.  The average sales price
received by us for sales of crude oil production was $108.40 and $106.63 for the
quarter ended September 30, 2008, and for the nine months ended September 30,
2008, respectively.  The volatility and uncertainty in oil and gas
prices have made it more difficult for a company like ours to increase our oil
and gas asset base and become a significant participant in the oil and gas
industry.





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 the
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.  The Company
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 the Company 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 September
30, 2008, all of our 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.








15





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




The
Company 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 the
Company is not significantly different from the Company’s share of
production.







Off-Balance
Sheet Arrangements





The
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 (c) continuing development drilling on our
proved, undeveloped properties 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 our
drilling projects.  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.






16







Item
3. Quantitative and Qualitative Disclosures About Market Risks





Not
applicable





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 September 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 September 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





From time
to time, the Company may become a party to litigation or other legal proceedings
that it considers to be a part of the ordinary course of its
business.  The Company is not involved currently in legal proceedings
that could reasonably be expected to have a material adverse affect on its
business, prospects, financial condition or results of
operations.  The Company may become involved in material legal
proceedings in the future.





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





Unit
Offering





Commencing
June 30, 2008, through August 8, 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 4,124,998 units with each unit consisting
of one share of common stock, a warrant to purchase one-half of one share of the
Company’s common stock at an exercise price of $1.00 per common share (the
“Series A June Warrant”) and a warrant to purchase one-half of one share of the
Company’s common stock at an exercise price of $2.00 per common share (the
“Series B June Warrant”).  The per unit purchase price for the units
was $0.60 resulting in gross proceeds of $2,474,999 to the Company and the
issuance of 4,124,998 shares of common stock, Series A June Warrants to purchase
2,062,499 shares of the Company’s common stock and Series B June Warrants to
purchase 2,062,499 shares of the Company’s common stock.  The Company
incurred transaction costs totaling $275,625 in the issuance of the units,
thereby realizing $2,203,499 in net proceeds.  The Company also issued
206,249 Series A June Warrants and 206,249 Series B June Warrants to its
investment banking firm as additional compensation.






17





The
Series A June Warrants are exercisable for a period of two years at an exercise
price of $1.00 per share and the Series B June 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 Series A June
Warrants and Series B June 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 September 30, 2008, the Company, pursuant to an arrangement
entered into in April 2008, issued
75,000 shares of common stock, to the Law Offices of Stephen Fleming, PLLC, the
Company’s attorney.





Acquisition





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 7,024,665 shares of common stock to the Black Pearl
Majority Shareholders and the other shareholders of Black Pearl at the closing
of the merger.





Unsecured Promissory
Notes





In August
2008, the Company entered into four 12% Unsecured Promissory Notes, and
Securities Purchase Agreements, with accredited investors for an aggregate
principal amount of $500,000 (the "August 2008 Notes") and the issuance of
250,000 shares of the Company’s common stock.  The August 2008 Notes
matured on the earlier of September 28, 2008, or the closing of private
placement of securities by the Company.  In the event that the August
2008 Notes were not repaid by September 28, 2008, the Company became required to
issue 125,000 every thirty days that any amounts remain outstanding under the
August 2008 Notes (the “Additional Shares”).  An entity controlled by
the Company’s Chief Financial Officer purchased $50,000 of the August 2008
Notes.





In
October 2008, and prior to the issuance of the either the 250,000 shares of the
Company’s common stock or the Additional Shares, the Company and the holders of
the August 2008 Notes elected to amend the terms of the August 2008
Notes.  In connection therewith, in exchange for the holders of the
August 2008 Notes election to forego their right to receive the 250,000 shares
of the Company’s common stock and the Additional Shares, the Company agreed to
issue the holders of the August 2008 Notes common stock purchase warrants to
purchase an aggregate of 500,000 common shares of the Company’s common stock
(the “August 2008 Warrants”).  The August 2008 Warrants are
exercisable for a period of three years at a price of $1.00 per
share.  In addition, as the August 2008 Notes were not repaid by
September 28, 2008,the Company is required to issue the holders of the August
2008 Notes an aggregate of 125,000 warrants to purchase shares of the Company’s
common stock every thirty days that any amounts remain outstanding under the
August 2008 Notes (the “Additional Warrants”).  The Additional
Warrants shall be exercisable for a period of three years at a price equal to
the greater of $1.00 or the market price as of the date of the
issuance.





All of
the above securities were offered and sold to the investors in private placement
transactions 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.





18





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: 
      November 14, 2008
            By:
            /s/ William
      WisemanWilliam
      WisemanPresident
      and Chief Executive Officer




Date: 
      November 14, 2008
            By:
            /s/ G.
      Wade StubblefieldG.
      Wade Stubblefield
              Principal
      Financial Officer





19





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)4.8
            
            Form
      of Securities Purchase Agreement dated August 28, 2008 (5)4.9
            
            Form
      of 12% Promissory Note dated August 28, 2008 (5)4.10
            
            Amendment
      No. 1 to the Securities Purchase Agreement dated August 28, 2008
    (6)4.11
            
            Form
      of Common Stock Purchase Warrant (6)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 (7)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 William 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 G. Wade Stubblefield, 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 William Wiseman, President and
      Chief Executive Officer (Principal Executive Officer) and G. Wade
      Stubblefield (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 8K Current Report filed with the Securities and
      Exchange Commission on September 3,
2008.


(6)
            Incorporated
      by reference to the Form 8K Current Report filed with the Securities and
      Exchange Commission on October 10,
2008.


(7)
            Incorporated
      by reference to the Form 8-K Current Report filed with the Securities and
      Exchange Commission on July 18,
2008.





*  Filed
herewith