United StatesSecurities and Exchange CommissionWashington, D.C. 20549Form 10-Q




(Mark One)




X
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2008__
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from __________ to __________Commission file number:        000-32669




Heartland Oil and Gas Corp.(Name of small business issuer as specified in its charter)




Nevada

91-1918326(State or other jurisdiction of

(I.R.S. Employerincorporation or organization)

Identification No.)




PO Box 277Jacksboro, TX 76458(Address of principal executive offices)




Issuer’s Telephone Number:       214-888-0300


Securities registered under Section 12(b) of the Exchange Act: NoneSecurities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.001 per share.Indicate by 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 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject 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 smaller reporting company.  See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer  _
Accelerated filer  _Non-accelerated filer  __
Smaller reporting company X


Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes __   No  XAs of August 14, 2008, the number of shares of common stock, $0.001 par value, outstanding was 889,407,720.Transitional Small Business Disclosure Format (check one): Yes ___  	No X






HEARTLAND OIL AND GAS CORP.Form 10-QFor the Quarterly Period Ended June 30, 2008




Table of Contents




PagePART I

Financial Information

2Item 1.

Financial Statements

2Unaudited Consolidated Balance Sheets

2Unaudited Consolidated Statements of Operations

3Unaudited Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

4Unaudited Consolidated Statements of Cash Flows

5Notes to Consolidated Financial Statements (Unaudited)

6Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

26Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29Item 4.

Controls and Procedures

29PART II

Other Information

30Item 1.

Legal Proceedings

30Item 1A.

Risk Factors

30Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30Item 3.

Defaults Upon Senior Securities

30Item 4.

Submission of Matters to a Vote of Security Holders

30Item 5.

Other Information

30Item 6.

Exhibits

31Signatures

32









PART I - Financial Information




Item 1.
Financial Statements




Heartland Oil and Gas Corp.Balance Sheet




June 30, 2008

December 31, 2007Assets
Unaudited

AuditedCurrent assets:Cash
$         4,384

$        1,319Gas sales receivable
462,694

294,087Oil inventory
113,166

84,091Prepaid expense and other current assets
83,896

115,040Total current assets
664,140

494,537Oil and gas property-full cost methodUnproved, undeveloped (Note 3)
104,775

535,686Proved, developed properties, full cost method, net of accumulateddepletion of $765,435 and $387,136, respectively
4,189,129

4,355,646Pipeline and facilities, net of accumulated depreciation of$455,427 and $354,450, respectively
3,731,554

3,399,1778,025,458

8,290,509Other property and equipment, net of accumulateddepreciation of $41,783 and $138,871, respectively
25,008

38,761Other assetsDue from UPDA, parent entity
164,489

175,399Notes receivable from Catlin Oil and Gas, Inc., a wholly-owned (Note 4)subsidiary of  parent entity, including accrued interest receivableof $18,301 and $8,329, respectively
418,301

408,329582,790

583,728Total Assets
$   9,297,396

$   9,407,535Liabilities and Stockholders’ (Deficit) EquityCurrent liabilities:Cash overdraft
2,733

$        60,411Accounts payable and accrued liabilities
935,718

735,408Due to Aztec, Inc a wholly-owned subsidiary of UPDA
702,031

926,930Due to Geer Tank Truck, Inc., which bcame a wholly-owned
-subsidiary of the Continental Fuels, Inc. subsidiary of UPDA
100,053

-Notes and loans payable:
-Short-term promissory note payable to Parent entity- UPDA, including accrued interest payable of $136,313 and $45,438, respectively
3,771,313

3,680,438Convertible debt due to  Parent entity/company officer/shareholder, including accrued interest payable of $16,663 and $5,793, respectively
-

220,793Other advances received from Parent entity/Company officer/shareholder, including accrued interest payable of $1,606
443,805Other related party relationships
53,364

51,370Other
53,364

51,370-

-Total current liabilities
6,062,381

5,726,720Long-term asset retirement obligation
786,096

732,416Long-term promissory note payable to Parent entity-UPDA, including interest payable of $118,490 and $39,496, respectively
3,278,213

3,199,219Total Liabilities
10,126,690

9,658,355Stockholders’ deficit:B Series convertible Preferred Stock - $0.001 par value, 5,000,000 sharesauthorized, 4,756,000 shares issued and outstanding
4,756

4,756Common stock - $0.001 par value, 100,000,000 shares authorized,639,907,720 and 29,707,720* shares issued, and outstanding atJune 30, 2008 and December 31, 2007, respectively
639,908

29,708Common stock - $0.001 par value to be issued of 239,000,000 and 24,200,000shares, respectively
239,000

24,200Additional paid-in capital
87,208,359

59,983,359Accumulated deficit
(88,921,317)

(60,292,843)Total stockholders’ deficit
(829,294)

(250,820)Total liabilities and stockholders’ deficit
$      9,297,396
#
$       9,407,535




See accompanying notes.




2






Heartland Oil and Gas Corp.Statement of Operations(Unaudited)




Three Months

Three Months
Six Months

Six MonthsEnded

Ended
Ended

EndedJune 30, 2008

June 30, 2007
June 30, 2008

June 30, 2007Oil & natural gas sales
$   707,177

$   119,190
$   1,229,159

$   229,710Compression & transportation revenue
14,660

6,023
39,952

11,847Total revenue
721,837

125,213
1,269,111

241,557Operating expenseLease operating expenses and production tax
273,239

113,430
592,908

187,953Exploration expense, expired leases
1,105

15,895
430,911

39,054Depreciation, depletion & accretion
174,040

94,270
341,150

192,193Share based compensation
-

10,701
-

19,138Salaries and related benefits
34,309

-
207,652

-General and administrative
121,486

278,460
358,877

474,635Total operating expense
604,179

512,756
1,931,498

912,973Loss from operation
117,658

(387,543)
(662,387)

(671,416)Interest expense resulting from discount on notes arising from theexchange of preferred stock for convertible debt
(93,971)

-
(186,548)

-Interest income
4,986

2,370
9,972

2,373Interest expense
-

(1,820)
-

(6,298,266)Stock based facilitation fees incurred to former convertible debtholders coincident to change in Company control
-

-
-

-Gain on sale of fixed assets
8,442

-
1,626

-Gain on sale of leases
-

-
27,200

-Stock based compensation to Five Star
(27,818,337)

-
(27,818,337)

-Net loss
$    (27,781,222)

$    (386,993)
$    (28,628,474)

$    (6,967,309)Basic & diluted net loss per common share
$    (0.32)

$    (0.01)
$    (0.33)

$    (0.12)Basic & diluted weighted average
$    (0.32)

$    (0.01)
$    (0.33)

$    (0.12)Weighted-average number of common shares outstanding
85,576,676

60,231,450
85,576,676

60,231,450




See accompanying notes.




3






Heartland Oil and Gas Corp.Stockholders’ (Deficit) Equity Statement




Common


Common

AdditionalCommon
Shares
Preferred
Common
Stock
Preferred
Paid-In
AccumulatedShares
To Be Issued
Shares
Stock
To Be Issued
Stock
Capital
Deficit
TotalBalance, December 31, 2006
4,673,701
-
-
$   4,674
$   -
$   -
$   51,257,921
$ (46,415,936)
$    4,846,659Acquisition of Company common stock by UPDA:Shares issued to UPDA at par value
5,063,176
-
-
5,063
-
-
(5,063)
-
-Cash consideration paid by UPDA for shares issued
-
-
-
-
-
-
1,000,000
-
1,000,000Offering costs paid in cash related to Companycommon stock issued to UPDA
-
-
-
-
-
-
(50,000)
-
(50,000)Common stock issued to pay additional offering costsrelated to Company common stock issued to UPDA
33,333
-
-
33
-
-
29,967
-
30,000Offering costs paid in stock related toCompany common stock issued to UPDA
-
-
-
-
-
-
(30,000)
-
(30,000)Stock based facilitation fees incurred to former debt holderSDS Capital & Baystar in conjunction with UPDA’s acquisitionof convertible promissory notes payable of the Company-see Note 8
542,800
-
-
543
-
-
895,077
-
895,620Conversion of convertible promissory note payable acquired byFive Star coincident to UPDA acquisition of the Company converted& to be converted into Company common stock by FiveStar-see Note 8
19,025,000
24,200,000
4,756,000
19,025
24,200
4,756
6,437,019
-
6,485,000Company Common Stock issued to finance UPDA’s60%-owned Catlin Oil and Gas, Inc., subsidiary’sPalo Pinto acquisition (See Note 8)
369,710
-
-
370
-
-
399,630
-
400,000Issuance of stock options as compensation
-
-
-
-
-
-
48,808
-
48,808Net loss
-
-
-
-
-
-
-
(13,876,907)
(13,876,907)Balance, December 31, 2007
29,707,720
24,200,000
4,756,000
$   29,708
$   24,200
$   4,756
$   59,983,359
$ (60,292,843)
$   (250,820)Additional conversion of convertible promissory note payable acquired byFive Star coincident to UPDA acquisition of the Company converted& to be converted into Company common stock by FiveStar-see Note 8
24,200,000
(24,200,000)
-
24,200
(24,200)
-
-
-
-Stock based compensation resulting from stock converted by Five Star from Notes payable from Promissory notes payable of the Company held by Kamal Abdallah assigned to Five Star - See Note 8
586,000,000
239,000,000
-
586,000
239,000
-
27,225,000
-
28,050,000Net loss
-
-
-
-
-
-
-
(28,628,474)
(28,628,474)Balance, June 30, 2008
639,907,720
239,000,000
4,756,000
$   639,908
$   239,000
$   4,756
$   87,208,359
$ (88,921,317)
$    (829,294)




See accompanying notes.




4






Heartland Oil & Gas Corp.Statement of Cash Flows(Unaudited)




Six Months Ended

Six Months EndedJune 30, 2008

June 30, 2007Cash flow used in operating activityNet loss
$    (28,628,474)

$    (6,967,309)Adjustments to reconcile net loss to net cashused in operating activity:Accretion of asset retirement obligation
27,714

9,923Gain on sale of leases
(27,200)

-Gain on sale of fixed assets
(1,626)

-Interest expense resulting from discount on notes arising from theexchange of preferred stock for convertible debt
-

6,416,446Share-based compensation
-

19,138Depreciation,depletion and amortization
313,436

182,270Exploration expense, expired Leases
430,911

39,054Interest income added to note receivable balances due from:Catlin Oil and Gas, Inc.
(9,972)

-Stock based compensation to Five Star
27,818,337

-Interest expense added to notes and loans payable balances due to:Promissory note payable to Parent entity- UPDA
90,875

-Long-term promissory note payable to Parent entity-UPDA
78,994

-Parent entity/company officer/shareholder
12,475

-Other related party relationships
1,994

-Other
1,994

-Changes in operating asset and liabilitiesIncrease in gas sales receivable
(168,607)

-Increase in other current assets
-

(54,147)Increase in oil inventory
(29,075)

-Decrease (increase) in prepaid expense
31,144

(76,029)Increase in accounts payable and accrued liabilities
200,310

177,478Decrease in due to Aztec, Inc a wholly-owned subsidiary of UPDA
(224,899)

-Increase in due to Geer Tank Trucks, Inc., which became a wholly-ownedsubsidiary of the Continental Fuels, Inc. subsidiary of UPDA
100,053

-Net cash provided by (used in) operating activity
18,384

(253,176)Cash flow used in investing activityPurchase of pipeline and facilities
(227,795)

(10,929)Acquisition and exploration of oil and gas property
(211,782)

(263,733)Repayment of amount due from parent entity-UPDA-O subsidiary
10,910

-Proceeds from sale of equipmemt
1,626

17,405Proceeds from sale of oil and gas leases
27,200

-Net cash used in investing activity
(399,841)

(257,257)Cash flow from financing activityDecrease in due to related parties
-

(495,322)Decrease in cash overdraft
(57,678)

-Other advances received from Parent entity/Company officer/shareholder
442,200

-Additional paid-in capital
-

1,000,000Share issue costs
-

(50,000)Net cash provided by financing activity
384,522

454,678Net (decrease) in cash
3,065

(55,755)Cash
beginning of period
1,319

75,724Cash
end of period
$     4,384

$      19,969




See accompanying notes.




5






Heartland Oil & Gas Corp.Financial Statement Notes


Note 1-Organization, Operations and Significant Accounting PoliciesOrganizationHeartland Oil and Gas Corp. (the "Company") was incorporated in Nevada on July 9, 1998. Our principal business is exploration and development of oil and gas property in the United States. Through December 31, 2005, we were in the exploration stage and had not generated significant revenue from operations. We first sold natural gas in February 2006; therefore we are no longer an exploration stage company.On April 19, 2007 there was a sale of a 52% interest in the Company’s common stock to Universal Property Development and Acquisition Corporation ("UPDV"). After adjusting the previous quarter’s issuance to UPDV for the July 25, 2007 1-for-10 reverse stock split and through subsequent transactions, UPDV’s interest has decreased to 16% as of June 30, 2008.We have incurred recurring losses from operations and have accumulated a deficit of $88,921,317 since inception. At June 30, 2008, we had negative working capital. Since inception, we have funded operations through the issuance of capital stock and debt. We plan to continue raising additional funds through future equity or debt financing until we achieve profitable operations.Significant Accounting PoliciesPrinciples of ConsolidationThe consolidated financial statements include the financial position and operating activities of Heartland Oil and Gas Corp. (HOCG) and its 100% owned subsidiaries Heartland Oil and Gas, Inc., Heartland Gas Gathering, LLC and Heartland International. All inter-company balances have been eliminated in consolidation.Foreign Currency TranslationOur functional currency is the U.S. dollar. In those instances where we have foreign currency transactions, we translate the financial statements to U.S. dollars in accordance with Statement 52 of the Financial Accounting Standards Board (FASB),Foreign Currency Translation. We translate monetary assets and liabilities denominated in foreign currencies using the exchange rate prevailing at the balance sheet date. We include gains and losses arising on translation or settlement of foreign-currency-denominated transactions or balances in the determination of income. Our primary foreign currency transactions are in Canadian dollars. We have not entered into derivative instruments to offset the impact of foreign currency fluctuations.Basic and Diluted Net Income (Loss) Per ShareBasic and diluted net loss per share information for all periods is presented under the requirements of SFAS No. 128, Earnings Per Share. Basic loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding. The dilutive effect of preferred stock, warrants and options convertible into an aggregate of approximately 118,900,000 and 0 of common shares as of June 30, 2008 and 2007 respectively, are not included because the inclusion of such would be anti-dilutive for all periods presented.Oil and Gas PropertyWe utilize the full cost method to account for our oil and gas property. Accordingly, we capitalize all cost associated with acquisition, exploration and development of oil and gas reserves, including such cost as leasehold acquisition cost, capitalized interest cost relating to unproved property, geological expenditures, tangible and intangible development cost including direct internal cost to the full cost pool.

6




Heartland Oil & Gas Corp.Financial Statement Notes


Note 1-Organization, Operations and Significant Accounting Policies (cont.)Oil and Gas Property (cont.)We have depleted the capitalized cost, including estimated future cost to develop the reserves and estimated abandonment cost, net of salvage, on the units-of-production method using estimates of proved reserves. We do not amortize cost of unproved property and major development projects including capitalized interest, if any, until the property begins to produce. If we determine the future exploration of unproved property to be uneconomical, we add the amount of such property to the capitalized cost to be amortized.We apply a ceiling test to the capitalized cost in the full cost pool, in accordance with the provisions of SEC Regulation S-X, Rule 4-10 (c) (4),Limitation on capitalized costs. The ceiling test limits such cost to the estimated present value, using a ten percent discount rate, of the future net revenue from proved reserves, based on current economic and operating conditions. Specifically, we compute the ceiling test so that capitalized cost, less accumulated depletion and related deferred income tax, do not exceed an amount (the ceiling) equal to the sum of: (A) The present value of estimated future net revenue computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current cost) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus (B) the cost of property not being amortized; plus (C) the lower of cost or estimated fair value of unproved properties included in the costs being amortized; less (D) income tax effects related to differences between the book and tax basis of the property.For unproved property, we exclude from capitalized cost subject to depletion all cost directly associated with the acquisition and evaluation of unproved property until we determine whether or not proved reserves can be assigned to the property. Until we make such a determination, we assess the property at least annually to ascertain whether impairment has occurred, in accordance with FASB Statement 144,Accounting for Impairment of Long-Lived Assets. In assessing impairment we consider factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, geographic and geologic data, and market values of comparable unproved property being bought and sold by other parties. We recognize an impairment loss only if the carrying amount of an unproved property is not recoverable from its undiscounted cash flow. We measure an impairment loss as the difference between the carrying amount and the fair value of the asset. We add the amount of impairment assessed to the cost to be amortized subject to the ceiling test.We account for sales of proved and unproved property as adjustments of capitalized cost with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized cost and proved reserves of oil and gas, in which case we record the gain or loss in the operations statement.Property and EquipmentProperty and equipment includes office furniture & equipment and gathering and surface facilities. We record property and equipment at cost. We provide depreciation for office furniture & equipment on a straight line basis at annual rates ranging from 20 percent to 50 percent per annum, and for gathering and surface facilities on a straight-line basis over 20 years.Long-Lived AssetsIn accordance with FASB Statement 144,Accounting for the Impairment or Disposal of Long-Lived Assets, we review the carrying value of intangible assets and other long-lived assets, such as other properties and equipment, on a regular basis for the existence of facts or circumstances that may suggest impairment. We recognize impairment when the sum of the expected undiscounted future cash flow is less than the carrying amount of the asset. We measure impairment losses, if any, as the excess of the carrying amount of the asset over its estimated fair value. No provision for impairment is required at June 30, 2008 and December 31, 2007.

7




Heartland Oil & Gas Corp.Financial Statement Notes


Note 1-Organization, Operations and Significant Accounting Policies (cont.)Income TaxWe account for income tax in accordance with FASB Statement 109,Accounting for Income Taxes. Under the asset and liability method of Statement 109, we record deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.Effective January 1, 2007, the Company adopted Financial Accounting Standard Board Interpretation No. 48 Accounting for Uncertainty in Income Taxes ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS Statement No. 109 Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting interim period, disclosure and transition. There were no adjustments required upon adoption of FIN 48.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We believe that the estimates we utilize in preparing the financial statements are prudent and reasonable. Actual results may differ from these estimates.Financial Instruments and Concentration of Credit RiskWe carry substantially all of our assets and liabilities at fair value or contracted amounts that approximate fair value. We make estimates of fair value at a specific point in time, based on relative market information and information about the financial instrument, specifically, the value of the underlying financial instrument. Assets that we record at fair value are primarily cash and other assets, which we carry at contracted amounts that approximate fair value. Our liabilities consist of short term liabilities we record at contracted amounts that approximate fair value. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash in excess of the federally insured amount of $100,000. To date, we have not incurred a loss relating to this concentration of credit risk.Stock-Based PaymentEffective January 1, 2006, we account for stock-based compensation based on the fair value of the options at the grant date as provided by FASB Statement 123(R), Stock-Based Compensation. We record compensation expense for all share-based awards granted, and for awards modified, repurchased or cancelled. We will recognize compensation expense for outstanding awards for which the requisite service had not been rendered as of January 1, 2006, over the remaining service period using the compensation cost calculated for pro forma disclosure purposes under FASB Statement 123, adjusted for expected forfeitures. We have adopted Statement 123(R) using a modified prospective application. Prior to January 1, 2006 we recognized employee compensation expense for our stock options plan using the intrinsic value method of accounting. Under the terms of the intrinsic value method, compensation expense was the excess, if any, of the quoted market price of the stock at the grant date, over the amount an employee must pay to acquire the stock. Under our Amended 2005 Stock Option Plan, we may grant up to a maximum of 4,000,000 shares of common stock to key employees and consultants. The options granted under the plan vest over four years except as stated otherwise in the individual grants, and are for a term not exceeding 10 years.For the six months ended June 30, 2008 and 2007, we expensed the fair value of options granted to non-employees, employees, officers and directors.

8




Heartland Oil & Gas Corp.Financial Statement Notes


Note 1-Organization, Operations and Significant Accounting Policies (cont.)Stock-Based Payment (cont.)Assumptions used to determine compensation expense are determined as follows:

·
Expected term is determined using a weighted average of the contractual term of the award;




·
Expected volatility of award grants is measured using the weighted average of historical daily changes in the market price of the Company’s common stock over the expected term of the award;




·
Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and




·
Forfeitures are based on the history of cancellations of awards granted and management’s analysis of potential forfeitures.


The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions, are fully transferable, and are not subject to trading restrictions or blackout periods. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, it is our opinion that the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options.Major CustomersFor the six months ended June 30, 2008, one customer, Enbridge Marketing (U.S.) LP, was responsible for purchasing 100% of our natural gas sales.Asset Retirement ObligationsWe account for asset retirement obligations in accordance with the provisions of Statement 143 "Accounting for Asset Retirement Obligations". Statement 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. We recognize asset retirement obligations related to our oil and gas property.ReclassificationsWe have reclassified certain data in the financial statements of the prior periods to conform to the current period presentation.Recent Accounting PronouncementsIn December 2007, the FASB issued SFAS No.160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51".  SFAS No.160 requires that the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, in the amount of consolidated net income attributable to the parent and to the noncontrolling interest on the face of the consolidated statement of income, and that Entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.  SFAS No.160 is effective for fiscal years, beginning on or after December 15, 2008 and cannot be applied earlier.In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(revised 2007), "Business Combinations," ("FASB 141R").  This standard requires that entities recognize the assets acquired, liabilities assumed, contractual contingencies and contingent consideration measured at their fair value at the acquisition date for any business combination consummated after the effective date.  It further requires that acquisition-related costs are to be recognized separately from the acquisition and expensed as incurred.  FASB 141R is effective for fiscal years beginning after December 15, 2008.

9




Heartland Oil & Gas Corp.Financial Statement Notes


Note 1-Organization, Operations and Significant Accounting Policies (cont.)Recent Accounting Pronouncements (cont.)The Company does not anticipate that the adoption of SFAS No. 141R and No. 160 will have an impact on the Company’s overall results of operations or financial position, unless the Company makes a business acquisition in which there is a noncontrolling interest.In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110, "Use of a Simplified Method in Developing Expected Term of Share Options" ("SAB 110").  SAB 110 expresses the current view of the staff that it will accept a company’s election to use the simplified method discussed in Staff Accounting Bulletin 107, Share Based Payment, ("SAB 107"), for estimating the expected term of "plain vanilla" share options regardless of whether the company has sufficient information to make more refined estimates.  SAB 110 became effective for the Company on January 1, 2008.  The adoption of SAB 110 is not expected to have a material impact on the Company’s financial position.In February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No.159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No.115". SFAS No.159 permits entities to choose to measure eligible financial instruments and other items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may be applied instrument by instrument but only upon the entire instrument - not portions of the instrument. Unless a new election date occurs, the fair value option is irrevocable. SFAS No.159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company does not expect that the adoption of SFAS No. 159 will have a material effect on the Company’s consolidated financial statements.In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133." Constituents have expressed concerns that the existing disclosure requirements in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, do not provide adequate information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The adoption of FASB 161 is not expected to have a material impact on the Company’s financial position.In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles." The current GAAP hierarchy, as set forth in the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles, has been criticized because (1) it is directed to the auditor rather than the entity, (2) it is complex, and (3) it ranks FASB Statements of Financial Accounting Concepts. The FASB believes that the GAAP hierarchy should be directed to entities because it is the entity (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. Accordingly, the FASB concluded that the GAAP hierarchy should reside in the accounting literature established by the FASB and is issuing this Statement to achieve that result. This Statement is 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 adoption of FASB 162 is not expected to have a material impact on the Company’s financial position.In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60." Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. This results in inconsistencies in the recognition and measurement of claim liabilities. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. The adoption of FASB 163 is not expected to have a material impact on the Company’s financial position.

10




Heartland Oil & Gas Corp.Financial Statement Notes


Note 2- Basis of PresentationInterim Financial StatementsIn the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of June 30, 2008 and the results of its operations, changes in stockholders’ deficit, and cash flows for the six months periods ended June 30, 2008 and 2007, respectively. Although management believes that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities Exchange Commission.The results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2008. The accompanying consolidated financial statements should be read in conjunction with the more detailed consolidated financial statements, and the related footnotes thereto, filed with the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007 filed on April 15, 2008.Going-Concern StatusWe have incurred significant losses since inception. As of June 30, 2008, we have an accumulated deficit of $88,921,317 and a net loss for the current six month period of $28,628,474. At June 30, 2008, we had limited financial resources.  Our continuation is dependent upon our ability to raise additional capital, to exploit our mineral holdings, and to generate sufficient revenue from our planned operations to enable us to attain and maintain profitable operations.  We sold natural gas for the first time in February 2006.The issuance of additional equity securities by us could result in significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, if those loans would be available, would increase our liabilities and future cash commitments.We cannot assure that we will be able to obtain further funds required for our continued operations, that additional financing will be available to us when needed or, if available, that we can obtain it on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we may be unable to conduct our operations as planned, and we may not be able to meet our other obligations as they become due. In such event, we would be forced to scale down or perhaps even cease our operations.Note 3-Oil and Gas PropertiesUndeveloped PropertiesWe own and operate nearly 645,000 acres in two areas in eastern Kansas: the south block, located on the Cherokee basin, where we have established reserves and production; and the north block, located in the Forest City basin, where we hold significant leases which expire between 2008 and 2012.

Undeveloped Acreage
June 30, 2008

December 31, 2007Beginning Balance
$
535,686

$
1,688,889Acquisition of undeveloped acreage
-

7,554Less expired leases (A)
(430,911)

(1,160,757)Total undeveloped properties
$
104,775

$
535,686(A) 45 Leases located in Kansas in 2008


Developed Properties, Cherokee basinOur developed properties are located on an approximately 29,000 acre leasehold position located in the Cherokee basin, primarily in Linn and Miami counties, Kansas. We have 45 wells in four batteries producing gas across a 12 mile area of the Cherokee basin. From east to west, these areas are named Jake (12 well), Lancaster (26 wells), Osawatomie (4 wells), and

11




Heartland Oil & Gas Corp.Financial Statement Notes


Note 3-Oil and Gas Properties (cont.)Beagle (3 wells). In June 2007 we commenced a drilling program to further develop the Lancaster and Jake pilots. Ten wells were drilled in the Lancaster area during the second half of 2007 and 7 of them were completed in the fourth quarter and are connected and producing at this time.  An additional 11 wells were drilled in Jake area in the second half of 2007, all of these wells remain shut-in awaiting pipeline connection. We have a significant acreage position in the Cherokee basin and are negotiating pipeline rights-of-way in and between these producing areas.

Developed Properties
June 30, 2008

December 31, 2007Beginning Balance
$
4,355,646

$
792,504Additions related to wells transferred from Catlin Oil and GasSubsidiary of UPDV

-


5,780,910Acquisition, exploration, drilling and lease and well equipment

211,782

2,228,714Less accumulated depletion
(378,299)

(387,136)Less plugging and abandonment costs
-

-Less impairment costs
-

(4,059,346)Total developed properties
$
4,189,129

$
4,355,646


Pipeline and MarketingIn July 2005 we signed contracts with a subsidiary of Enbridge Energy Partners, L.P. to initiate gas sales from our Lancaster coalbed methane battery located near Paola, Kansas. While the gas price is variable, we expect to realize a wellhead price approximating 75 percent of NYMEX price or mid-continent gas posting. We have competed construction of the pipeline. We began selling methane from our Lancaster battery in February, 2006.  Cost associated with our pipeline and facilities:



Pipeline and facilities
June 30, 2008

December 31, 2007Beginning Balance
$
3,399,177

$
2,521,670Additions related to wells transferred from Catlin Oil and Gassubsidiary of UPDV

-


989,631Acquisition of equipment
383,213

41,629Less depreciation
(50,836)

(153,753)Total pipeline and facilities
$
3,731,554

$
3,399,177


Note 4- Related Party Notes Receivable and Matters Related to ThemRelationship with AztecThe Company incurred approximately $2,500,000 of costs that have been capitalized into Proved, Developed Oil and Gas Property Assets at June 30, 2008. During the six months ended June 30, 2008, the Company paid $0 in cash towards those costs.As ofJune 30, 2008, Heartland has recorded $702,031, in accounts payable and accrued liabilities net of a $19,000 credit between the Company and Aztec. During six months ended June 30, 2008 and the year ended December 31, 2007, the Company was Aztec’s sole customer.On March 1, 2008, Aztec Well Services, Inc ("Aztec") and the Company entered into a Master Service Agreement in which Aztec shall furnish all personnel and equipment to operate all compressor stations, dehydration systems and amine plants at a cost of $250 per month for each. Heartland will pay all dues and fees related to the operation of these plants such as fuel, electricity, etc. This agreement shall run from March 1, 2008 through February 28, 2009.On March 1, 2008, Aztec Well Services, Inc ("Aztec") and the Company entered into a Lease Operating Agreement Contract in which Aztec shall furnish all personnel and equipment to operate all wells for total cost of $360 per well per month. This includes daily inspections of each well with meter reading and all incident documentation. This contract shall run from March 1, 2008 through February 28, 2009.

12




Heartland Oil & Gas Corp.Financial Statement Notes


Note 4- Related Party Notes Receivable and Matters Related to Them (Continued)Note Receivable CatlinNote Receivable Catlin consists of a promissory note, dated August 1, 2007, received by the Company from Catlin Oil & Gas, Inc. ("Catlin"), a subsidiary of UPDV, in exchange for the Company issuing shares of its common stock in connection with the acquisition by UPDV of certain assets. The value of the shares of common stock so issued by us was valued at $400,000. This unsecured Note Receivable Catlin bears interest at 5% per annum, with principal and interest receivable in full by or before August 1, 2010. The notes receivable balance of $418,301 at June 30, 2008 includes accrued interest income earned of $18,301 to that date.As further discussed in Note 5, in October 2007, Catlin transferred certain of its oil and gas property assets to the Company. Underlying assets that remain in the Catlin subsidiary of UPDV consists principally of idle drilling rigs, a small storage facility and building located in Jacksboro, Texas.Note 5- Transfer of the Oil & Gas Assets of Catlin Oil & Gas, Inc. (a subsidiary of UPDV)On March 6, 2008 (the "Closing Date"), the Company closed an asset purchase transaction pursuant to the terms and conditions of the Asset Purchase Agreement (the "APA") by and between Universal Property Development and Acquisition Corporation ("UPDV") and its subsidiary Catlin Oil & Gas, Inc. ("Catlin") (the "Sellers"), whereby the Company acquired certain oil and gas related assets (the "Assets") of the Sellers that were transferred to the Company at their then historical cost basis of Catlin for financial statement purposes on the Effective Date of $6,794,723 (the "Purchase Price"). The APA was dated as of August 15, 2007 and the assets were effectively transferred as of October 1, 2007 (the "Effective Date").As of October 1, 2007, under the terms and conditions of the APA, the Company purchased and the Sellers sold all of the rights, title and interest of the Sellers in certain assets that consisted of right, title and interest in the oil and gas leases located in Palo Pinto County, Texas, wells, the permits that relate to the wells and the properties, equipment and contracts as they relate to the leases and equipment (the "Palo Pinto Assets").Below is a summary of the Palo Pinto Asset transferred to the Company by Catlin:

Developed Properties including within Oil and Gas Properties
$5,780,910Pipeline and Facilities
989,631Other
24,182$6,794,723


In consideration for the Palo Pinto Assets transferred by Catlin the Company issued two promissory notes to UPDV in the aggregate amount of $6,794,723 (See Note 6).

13


Note 6-Notes and Loans PayableParent entity/company officer/shareholderConvertible DebtAs of June 30, 2008 and December 31, 2007, the amount due consists of the following:

Terms and to Whom Payable
June 30, 2008

December 31, 2007As of December 31, 2007 , the Company borrowed$215,000, respectively on a note bearing 8% interest, payable to Kamal Abdallah, President of UPDV. At December 31, 2007, this note has an outstanding balance payable on demand, including accrued interest of$5,793.  As further discussed below, on May 15, 2008, in consideration for a payment of $215,000 to him by an affiliate of Five Star Partner the notes were assigned to Five Star. On May 26, 2008 the Company agreed to convert this debt into 825,000,000 shares of the Company’s $0.001 split adjusted par value common stock.
$
-

$
220,793


Other advances received from Parent entity/Company officer/shareholderAs of June 30, 2008 and December 31, 2007, notes payable to related parties consist of the following:

Terms and to Whom Payable
June 30, 2008

December 31, 2007On April 1, 2008, the Company entered into a Promissory Note with Kamal Abdallah. The Company promises to pay $108,500 together with 6% interest per annum payable on demand  including accrued interest of$1,605.
$
110,105

$
-These short-term advances received from Kamal Abdallah betweenApril and June of 2008 were converted on July 1, 2008 into two  formal promissory notes payable  to him on demand, bearing interest at 6% per annum
$
333,700

$
-Total
$
443,805

$
-




14




Heartland Oil & Gas Corp.Financial Statement Notes


Note 6-Notes and Loans Payable (cont.)Parent entity -UPDVAs of June 30, 2008 and December 31, 2007, the amount due consists of the following:

Terms and to Whom Payable
June 30, 2008

December 31, 2007A short-term Promissory Note in the original amount of $3,635,000 arising out of the transfer of Catlin Oil and Gas assets described in Note 5. The Note was due and payable on June 30, 2008. The Company shall pay interest on the unpaid principal amount of the Note, until such principal amount shall be paid in full, at the rate of 5% per annum. At June 30, 2008 and December 31, 2007, this loan, which is payable on demand, has an outstanding balance including accrued interest of $136,313 and $45,438, respectively, since the Company did not have the funds available to repay its parent entity on its due date nor has it repaid it subsequently.
3,771,313

3,680,438A long-term Promissory Note in the original amount of $3,159,723 arising out of the same transfer of Catlin Oil and Gas assets described under the short-term promissory note, with the principal amount being due and payable in one lump sum payment on July 16, 2010. The Company shall pay interest on the unpaid principal amount of Note, until such principal amount shall be paid in full, at the rate of 5% per annum. At March 31, 2008 and December 31, 2007, this loan, which is payable on demand, has an outstanding balance including accrued interest of $118,490 and $39,496, respectively.
$
3,278,213

$
3,199,219Total
$
7,049,526

$
6,879,657


The maturities of the UPDV loans at June 30, 2008 are as follows:

Years Ending June 30,
Amounts2009
$
3,771,3132010

-2011

3,278,2132012

-2013 and after

-$
7,049,526


Other related party relationshipsAs of June 30, 2008 and December 31, 2007, the amount due consists of the following:

Terms and to Whom Payable
June 30, 2008

December 31, 2007


A loan payable in the amount of $50,000 to Triple Crown Consulting, a minority owner in the Canyon Creek Oil and Gas, Inc. UPDV subsidiary, with interest accrued at 8% per annum. At June 30, 2008 and December 31, 2007, this loan, which is payable on demand, has an outstanding balance including accrued interest of $3,364 and $1,370, respectively.
$
53,364

$
51,370Total
$
53,364

$
51,370




15




Heartland Oil & Gas Corp.Financial Statement Notes


Note 6-Notes and Loans Payable (cont.)Other notes and loans payableAs of June 30, 2008 and December 31, 2007, notes payable to related parties consist of the following:

Terms and to Whom Payable
June 30, 2008

December 31, 2007A loan payable in the amount of $50,000 to RAKJ Holdings, Inc. with interest accrued at 8% per annum. At June 30, 2008 and December 31, 2007, this loan, which is payable on demand, has an outstanding balance including accrued interest of $3,364 and $1,370, respectively. The shareholders of RAKJ Holdings, Inc. also provide financing for Oil and Gas purchases under an unsecured and uncommitted  line of credit for Continental Fuels, Inc., a subsidiary of UPDV.
$
53,364

$
51,370Total
$
53,364

$
51,370


Conversion of notes to related parties into common stockOn September 29, 2006, we completed (i) a $300,000 (the "Bridge Amount") bridge financing from SDS Capital Group, Ltd. and Baystar Capital II, L.P. (collectively, the "Payees") and (ii) the repurchase of all outstanding Series B Preferred Stock with a principal amount of $6,000,000 (the "Series B Amount" and collectively with the Bridge Amount, the "Note Principal Amount") from the Payees in consideration of the issuance of convertible senior secured promissory notes (the "Notes"). The Notes mature on the earlier of March 28, 2007 or the date of any subsequent financing in which we issue equity securities or other securities that could result in the issuance of equity securities (the "Maturity Date"), have no interest rate and reflect the full Note Principal Amount. The Notes are secured by all of our assets, except that the Payees have agreed to release security interests in assets located in the following Kansas counties in the event of a sale of those assets: Atchison, Brown, Doniphan, Jackson, Jefferson, Leavenworth, Nemaha and Pottawatomie. We may prepay the Note Principal Amount in full and in cash at any time prior to the Maturity Date.On March 28, 2007, we and the Payees extended the due date of the Notes to April 4, 2007. On April 4, 2007 the Notes were again extended to April 16, 2007.   All these Notes were subsequently transferred to UPDV and Five Star Partners LLP as described below.Except in the case of a Qualified Financing, the Notes were convertible into common stock on the Maturity Date. At the Maturity Date, the Payees had the option to convert the Note Principal Amount into common stock at a conversion price of $0.04 per share. In a Qualified Financing, the Payees would convert approximately 81% of the Note Principal Amount into the additional securities issued in the Qualified Financing on the same price and terms as the other investors in the Qualified Financing with the remaining balance of the Note Principle Amount being cancelled; provided, however, that if the Payees did not invest a total of at least $2,000,000 in the Qualified Financing, then the Payees would not have the right to convert the Note Principal Amount into the Qualified Financing. In this event, the Bridge Amount would be converted into the securities issued in the Qualified Financing on the same price and terms as the other investors in the Qualified Financing and the Series B Amount would automatically be converted into a new preferred stock having substantially similar terms as our Series B Preferred Stock, except that the rights contained in Article XIII of our Certificate of Designation, Preferences and Rights relating to the Series B Preferred Stock (the "Certificate") would be deleted. A Qualified Financing is defined in the Notes as our issuance of new securities in an amount of at least $15,000,000.

16




Heartland Oil & Gas Corp.Financial Statement Notes


Note 6-Notes and Loans Payable (cont.)In addition, pursuant to the Notes, the Payees agreed to forbear collection of any liquidated damages or other amounts we owed under the Registration Rights Agreement dated October 1, 2004, if any, and to waive payment of any such amounts if we completed a Qualified Financing, regardless of whether the Payees participated in the Qualified Financing. Also, the Payees waived their right to declare a Redemption Event under the Certificate, if any, through September 29, 2006.Because of the preferred stock, exchanged for the Notes, SDS Capital Group Ltd. and BayStar Capital II L.P. are related parties to us. The Notes contained customary negative covenants, including a covenant that we were not to incur additional indebtedness, and the Notes contain customary events of default.In issuing the Notes and underlying common stock to the Payees, we relied on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.Generally accepted accounting principles (GAAP), as described in Issue 96-19 of the Emerging Issues Task Force (EITF) of the FASB, characterize the above exchange of redeemable preferred stock for the convertible Notes as an extinguishment of the redeemable preferred stock. The Notes are to be recorded at fair value. The fair value of the Notes is to be used to record an extraordinary gain or loss on the extinguishment of the preferred stock. We engaged a qualified valuation firm, which determined that the fair value of the Notes was $4,600,000 on September 29, 2006. This value resulted in a gain of $1,299,958, which we recorded during the year ended December 31, 2006.GAAP, as described in EITF Issue 00-27, paragraph 7, and EITF 98-5, paragraph 6, provides that if the conversion feature of the Notes is beneficial to the holder (has intrinsic value), which it is, the intrinsic value is recorded as a reduction of the carrying amount of the Notes and an addition to paid-in capital. At issuance the Notes were convertible into common stock at a rate of four cents per share. The common stock traded for nine cents per share on September 29, 2006, the closing date of the exchange. Therefore the conversion had an intrinsic value of five cents per share. At issuance the Notes were convertible into 157,500,000 common shares. Therefore the conversion feature had an intrinsic value of $7,875,000, which is in excess of the total proceeds received in exchange for the Notes. The accounting described above is summarized as:

Initial Series B Preferred Stock

$
6,000,0000Classification adjustment prior to 12/31/06


(400,042
)Book value, Series B Preferred, 12/31/06 and 9/28/06


5,599,958September 29, 2006 Bridge Financing


300,000Preliminary book value of notes at 9-29-06 conversion


5,899,958Fair value of notes determined by independent valuation firm, 9-29-06, classified as an addition to additional paid-in capital on the conversion


(4,600,000
)Gain on conversion

$
1,299,958Initial carrying value of the Notes at 9/29/06

$
1Interest accreted @ 9.08728% per day:Through 12-31-06


3,553Balance, 12-31-06


3,554Interest accreted @ 9.088728% per day for the quarter ended 3-31-2007


6,296,446Total interest accretion over 180 day life of the notes

$
6,300,000


Pursuant to the sale of a 52% interest in the Company’s common stock to Universal Property Development and Acquisition Corporation on April 19, 2007, these Notes were transferred to UPDV and Five Star as described below.Acquisition of the Notes by UPDV and Five StarOn April 20, 2007, UPDV closed a note purchase transaction (the "Note Purchase") pursuant to the terms and conditions of a Note Purchase Agreement, dated April 19, 2007, between UPDV as the buyer and SDS Capital Group SPC, Ltd. and Baystar Capital II, L.P. (together the "Sellers") whereby UPDV purchased four million seven hundred fifty-six thousand dollars ($4,756,000) in face amount of the Notes for an aggregate purchase price of $1,500,000 in cash and 26,260,504 restricted shares of the common stock of UPDV. Five Star Partners LLC ("Five Star") purchased one million seven hundred twenty-nine thousand ($1,729,000) in face amount of Notes.

17




Heartland Oil & Gas Corp.Financial Statement Notes


Note 6-Notes and Loans Payable (cont.)The Notes did not pay interest but were convertible into shares of our common stock based on a conversion price of $0.04 per share. Under the terms of this conversion provision, the Notes acquired by UPDV were convertible into 118,900,000 shares of our common stock. The Notes acquired by Five Star were convertible into 43,225,000 shares of our common stock. In the event of a full conversion of the Notes to shares of our common stock, UPDV would hold an aggregate of 123,963,176 shares of our common stock.As a condition to the closing of the Note Purchase, and in exchange for UPDV and Five Star’s agreement to extend the maturity date of the Notes from April 16, 2007 to December 31, 2007, we executed consents to the transfer of the Notes to UPDV and Five Star and the assignment by the Sellers of their security interests under an existing security agreement covering the Notes to UPDV and Five Star. UPDV entered into a second loan agreement with Sheridan for $3,250,000 on August 16, 2007, which is discussed in Note 10.On January 31, 2007 we borrowed $185,000 on non-interest bearing notes, of which $127,500 was received from SDS Capital Group, SPC Ltd. and $57,500 was received from Baystar Capital II, L.P. $65,000 of these funds, plus interest of $1,820 was used to pay off the December 7, 2006 note to SDS Capital Group SPC, Ltd. The maturity date of the new notes was March 28, 2007; however on March 27, 2007 both lenders extended the notes to April 4, 2007. On April 4, 2007 the notes were again extended to April 16, 2007.  Pursuant to the sale of a 52% interest in the Company’s common stock to Universal Property Development and Acquisition Corporation on April 19, 2007, these notes were assigned to UPDV and were incorporated into the $4,756,000 notes described above.On September 26, 2007, the Company and UPDV agreed to revise the terms of the Notes held by UPDV. Pursuant to the revised terms, UPDV agreed to convert the entire $4,756,000 face amount of the Notes held by them into 4,756,000 shares of our newly created Series B Convertible Preferred stock.During the third quarter of 2007, Five Star presented $1,729,000 in face amount of Notes to the Company for conversion into 43,225,000 shares of common stock. Pursuant to the terms of the agreement described in Note 10, the Company issued 19,025,000 shares of its common stock to Five Star as of December 31, 2007. During the quarter ended June 30, 2008, the Company issued the remaining 11,700,000 common shares to Five Star.  Pursuant to the terms of the agreement described in Note 6, the Company has issued an aggregate of 43,225,000 shares of its common stock to Five Star as of June 30, 2008.Note 7-Asset Retirement ObligationsWe account for asset retirement obligations in accordance with the provisions of Statement 143 "Accounting for Asset Retirement Obligations". Statement 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets.We recognize asset retirement obligations related to our oil and gas property.

June 30, 2008

December 31, 2007Beginning asset retirement obligations
$
732,416

$
227,040Additions related to wells transferred from Catlin Oil and Gas subsidiary of UPDV (See Note 5)
25,966

469,915Accretion
27,714

35,461Total asset retirement obligations
$
786,096

$
732,416




18




Heartland Oil & Gas Corp.Financial Statement Notes


Note 8-Sale of Common Stock, Stock Options and WarrantsOptionsA summary of the changes in our common share purchase options is below:

June 30, 2008

December 31,2007Weighted


WeightedAverage


AverageNumber
Exercise Price

Number
Exercise PriceBalance, beginning of year
308,500
$
3.80

372,500
$
6.10Granted
-

-

130,000
1.40Exercised
-

-Forfeited / Expired
-

-

(194,000)

(6.50)Balance, end of period
308,500
$
3.80

308,500
$
3.80


Additional information regarding options outstanding at June 30, 2008 is:

Outstanding

ExercisableOutstanding Weighted

Weighted

VestedNumber

average remaining

average

Number of

Exerciseof shares

contractual life (years)

exercise price

shares

prices$0.00-$1.00
285,500

5.72

$2.80

285,500

$2.80$1.01-$2.00
23,000

7.00

$16.00

23,000

$16.00308,500

5.82

$6.10

308,500

$6.10


New Option PlanThe Company adopted the 2008 Stock Option/Stock Issuance Plan (the "Plan") effective May 30, 2008.  The Company has reserved 20,000,000 shares of common stock, par value .001 per share, under the Plan for issuance to employees, consultants and other eligible recipients. As of June 30, 2008, the Company had not issued any options under the Plan.Acquisition of Our Common Stock by UPDVPursuant to the terms of a Stock Purchase Agreement dated April 19, 2007, by and between the Company and UPDV, a Nevada corporation, UPDV agreed to purchase a total of 5,063,176 shares (the "Shares") of our common stock in a private transaction with the Company for an aggregate purchase price of $1,000,000 in cash (the "Stock Sale"). The Stock Sale closed on April 20, 2007 (the "Closing Date"), through the payment by UPDV of the aggregate purchase price and the transfer of the Shares by us to UPDV.As of April 10, 2007, and prior to the closing of the Stock Sale, we had 4,673,701 shares of common stock issued and outstanding. As a result of the closing of the Stock Sale on April 20, 2007, UPDV owned 5,063,176 of the 9,736,878 shares of our common stock that were outstanding after such closing. Therefore, as of April 20, 2007, UPDV owned 52% of our issued and outstanding common stock. The Stock Sale constituted a change of control transaction for us as UPDV owns a majority of our outstanding voting securities. Therefore, UPDV has the voting power to pass actions requiring shareholder approval and has the voting power to control the election of directors to our board of directors.On April 23, 2007, subsequent to the closing of the Stock Sale, 333,333 shares of common stock were issued to Energy Capital Solutions. The company entered into a letter agreement with Energy Capital Solutions (ECS) on May 31, 2006, with a document date of May 30, 2006. The company extended this agreement with a First Amendment dated January 29, 2007. Under the terms of these agreements, ECS was eligible to receive 4% of the transaction proceeds in cash and 3% of the transactions proceeds in equity or Heartland stock according to the terms and timeline of the Potential Investor.The Company was obligated under a series of employment offering letters, issued well prior to UPDV’s acquisition of control of the Company described above, to provide severance pay to certain key employees for a six month period after a change in the control of the Company and a material change in position has occurred. These employment obligations totaled approximately $60,000. As of March 31, 2008 all of the obligations under these employment letters were paid.

19




Heartland Oil & Gas Corp.Financial Statement Notes


Note 8-Sale of Common Stock, Stock Options and Warrants (Continued)Unregistered Sales of Equity SecuritiesPursuant to the terms and conditions of the Note Purchase transaction whereby UPDV and Five Star acquired the Notes, the Registrant approved the issuance of an aggregate of 542,800 shares of its common stock to SDS and Baystar as part of the consideration in that transaction. Therefore, on July 27, 2007, the Registrant issued 373,446 shares of common stock to SDS and 169,354 shares to Baystar. The Company incurred a non-cash charge, based on the trading price of its Common Stock on the date of issuance, for facilitation fees incurred to these former convertible debt holders of $895,620 coincident to the change in control of the Company that resulted from UPDV’s acquisition of 52% of the Company’s common stock.The shares of common stock issued to SDS and Baystar are restricted shares and were issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D there under and the Registrant affixed appropriate legends to the stock certificates so issued. The shares issued to SDS and Baystar are subject to Rule 144 under the Securities Act and therefore generally cannot be resold for a period of twelve months from the date of issuance. No general solicitations were made in connection with the transaction, and prior to making any offer or sale, the Registrant had reasonable grounds to believe and believed that SDS and Baystar were capable of evaluating the merits and risks of the investment and were able to bear the economic risk of the investment.On July 31, 2007, the Company and Five Star, the holder of an aggregate of $1,729,000 of our outstanding Notes, agreed to amend the conversion terms of those Notes. Pursuant to the terms and conditions agreed to by the parties, the Company agreed to allow for the conversion of the Notes into shares of the Company’s common stock at their stated rate of $0.04 per common share. As a condition to this agreement, Five Star agreed that it could not thereafter demand payment of the principal amount of the Notes in cash and agreed to not hold at any time more than 9.9% of the outstanding common stock of the Company. Furthermore, Five Star agreed to invest a minimum of $2,500,000 in the Company through the acquisition of additional shares of the Company’s common stock from the Company at prices equal to the closing price of the Company’s common stock on the day prior to purchase, or $.85 per share, whichever amount is greater. Five Star agreed to forego the repayment of the Notes in cash and to invest the additional $2,500,000 in exchange for the Company’s agreement to maintain the $.04 per share conversion price of the Notes after the effective date of the 1 for 10 July 25, 2007 reverse stock split.As a result, the Notes held by Five Star remained convertible into 43,225,000 of our common stock after the effective date of the 1 for 10 July 25, 2007 reverse stock split. Five Star agreed to make this additional investment in the Company by or before December 31, 2007. Five Star has not as yet invested any of the $2,500,000 it is required to invest per the amended terms of the Notes.On September 26, 2007, the Company and UPDV agreed to revise the terms of the Notes held by UPDV. Pursuant to the revised terms, UPDV agreed to convert the entire $4,756,000 face amount of Notes held by them into 4,756,000 shares of our newly created Series B Convertible Preferred Stock.The above transactions are recordable as conversions of debt instruments into equity instruments in accordance with EITF No. 06-6, entitled"Debtor’s Accounting for a Modification (or Exchange) of Convertible Debt Instruments." The difference in shares received as consideration versus the pre-split share amounts (for Five Star: 43,225,000 shares versus 4,322,500 shares, and for UPDV: 118,900,000 versus 11,890,000 shares of common stock, assuming full conversion of UPDV’s preferred shares) multiplied by the July 25, 2007 post-split value of $1.40 per share amounts to $204,277,500 (Five Star: $54,463,500; and UPDV: $148,814,000). Under EITF 06-6 this amount would normally be required to be recorded in the Company’s Financial Statements as a charge in the Statement of Operations as interest expense, with a corresponding credit to additional paid-in capital. However, EITF No. 98-5, entitled"Accounting for Convertible Securities with Beneficial Conversion Feature or Contingently Adjustable Conversion Rations," further limits the amount to be recorded to the consideration received by the Company. Five Star purchased its $1,729,000 in face amount of Notes directly from SDS and Bay Star. The Company received no fresh cash proceeds from the transfer of these Notes from SDS and Bay Star to Five Star. The Company also received no fresh cash proceeds from the transfer of $4,756,000 in face amount of Notes from SDS and Bay Star to UPDV.

20




Heartland Oil & Gas Corp.Financial Statement Notes


Note 8-Sale of Common Stock, Stock Options and Warrants (cont.)Unregistered Sales of Equity Securities (cont.)Accordingly, since the Company received no fresh proceeds from either Five Star or UPDV from the transfer of the Notes to these entities, the Company has no amounts to be recorded for interest expense and a corresponding credit to additional paid-in capital related to these transactions.During the third quarter of 2007, Five Star presented $1,729,000 in face amount of Notes to the Company for conversion into 43,225,000 shares of common stock. Pursuant to the terms of the agreement described above, the Company issued 19,025,000 shares of its common stock to Five Star in 2007.  During the six months ended June 30, 2008, the Company issued Five Star an additional 24,200,000 shares of common stock. The shares of common stock issued to Five Star are restricted shares and were issued in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and Rule 506 of Regulation D there under. The shares issued to Five Star are subject to Rule 144 under the Securities Act and therefore generally cannot be resold for a period of twelve months from the date of issuance. However, the outstanding Notes of the Registrant converted by Five Star have been fully paid and outstanding for a period in excess of two years from the date of their issuance by the Registrant. No additional consideration is payable upon the conversion of the Notes to shares of our common stock. While the shares of common stock to be issued upon conversion of the Notes are restricted shares, the holders of the shares issued upon conversion may request the removal of any restrictive legends that would be attached thereto in accordance with the provisions of Rule 144(k) under the Securities Act of 1933, as amended. The removal of any restrictive legends from the shares of common stock issued on conversion of the Notes will be dictated by the provisions of Rule 144(k).As of December 31, 2007 , the Company borrowed$215,000, respectively on a note bearing 8% interest, payable to Kamal Abdallah, President of UPDV. At December 31, 2007, this note has an outstanding balance payable on demand, including accrued interest of$5,793.  As further discussed below, on May 15, 2008, in consideration for a payment of $215,000 to him by an affiliate of Five Star Partners the notes were assigned to Five Star. On May 26, 2008 the Company agreed to convert this debt into 825,000,000 shares of the Company’s $0.001 split adjusted par value common stock.  As of June 30, 2008, the Company had issued 586,000,000 shares to Five Star pursuant to this conversion agreement.Designation and issuance of our Series B Convertible Preferred SharesOn September 26, 2007, the Company and UPDV agreed to revise the terms of the Notes held by UPDV. Pursuant to the revised terms, UPDV agreed to convert the entire $4,756,000 face amount of the Notes held by them into 4,756,000 shares of our newly created Series B Convertible Preferred stock. Therefore, the conversion rate of the Notes converted by UPDV was one share of Series B preferred stock for each one dollar of Notes converted. The 4,756,000 shares of Series B Convertible Preferred Stock were issued to UPDV on September 30, 2007 and all of the Notes held by UPDV were surrendered to the Company for cancellation. The shares of Series B Convertible Preferred Stock held by UPDV are convertible in to 118,900,000 shares of the Company’s common stock and UPDV has the right to vote the shares of Series B Preferred stock on an "as converted" basis in any matters for which the holders of our common stock are entitled to vote.Pursuant to the Certificate of Designations, Preferences and Rights for Series B Convertible Preferred Stock filed by the Company, the Company authorized 5,000,000 shares of Series B Convertible Preferred Stock, par value $0.001 per share, for issuance. Each share of the Series B Convertible Preferred Stock is convertible into twenty-five (25) shares of the Company’s common stock. Each share of the Series B Convertible Preferred Stock has a liquidation preference over our common stock up to a maximum of one (1) dollar per preferred share. The shares of Series B Convertible Preferred Stock have the right to vote on an "as converted" basis in any matters for which the holders of our common stock are entitled to vote.Company common shares issued to accommodate Catlin asset purchase from third partiesOn July 1, 2007, Catlin Oil and Gas Inc. entered a Purchase and Sale Agreement with Jilpetco Inc., Petro Pro, PKC Energy and Jed Miesner for the acquisition of the Palo Pinto Assets. The purchase price was $3,600,000 together with 12,500,000 shares of UPDV restricted common stock and 4,000,000 restricted shares of the Company’s common stock. The number of shares of UPDV common ctock and the number of shares of the Company’s common stock issued was adjusted as of the date of closing to reflect a total payment of $800,000 in UPDV common stock and $400,000 in the Company’s common stock. The Company’s shares were issued on September 14, 2007 in exchange for a long-term promissory note receivable from Catlin for $400,000. See "Note 4-Related Party Notes Receivable" above for a description of the Catlin note receivable.The Palo Pinto Assets were subsequently transferred from Catlin to the Company as described in Note 5 above.

21




Heartland Oil & Gas Corp.Financial Statement Notes


Note 8-Sale of Common Stock, Stock Options and Warrants (cont.)Changes to Our Board of DirectorsOn January 28, 2008, the Company and the Company’s CEO Steven A. Fall mutually agreed to his resignation from all the positions held by Mr. Fall in the Company. On the same day, Mr. Fall also entered into an Agreement and General Release ("Agreement") with the Company whereas the Company accepted the resignation of Mr. Fall as Chief Executive Officer, President and a director of the Company on February 1, 2008, the termination date. In the Agreement the Company agreed that for a period up to and including March 31, 2008, it shall continue to pay Mr. Fall’s salary, and his medical and dental insurance premiums. The Company also agreed to pay $16,000 to Mr. Fall, subject to his giving his best effort to continue to assist the Company as necessary in the completion of any and all reports as required by the SEC and /or other governmental entities or regulatory bodies.

22




Heartland Oil & Gas Corp.Financial Statement Notes


Note 9-Income TaxAt June 30, 2008, we had approximately $75,525,222 in pretax US federal and state net operating loss carryforwards, expiring through 2028. We incurred portions of such net operating loss carryforwards prior to September 17, 2002, our reverse acquisition date. As such, we anticipate limitations to the use of these carryforwards under Internal Revenue Code Section 382. We provide for deferred tax arising from temporary differences in the book and tax carrying amounts of assets and liabilities. Temporary differences arise primarily from differences in reporting stock-based compensation, intangible drilling and completion cost and oil and gas impairment expense. We have fully reserved the deferred tax assets that arise from such operating loss carryforwards and temporary differences of approximately $29,077,200 at June 30, 2008, in the accompanying financial statements as follows.

June 30, 2008Net operating loss deduction

$
29,077,200Valuation Allowance

(29,077,200)Net Deferred Tax Asset

$
-


Reconciliation of the differences between the statutory tax rate and the effective tax rate is:




June 30, 2008Federal statutory tax rate


34.00%State Tax Rate


4.50%Effective Tax Rate


38.50%Valuation Allowance


-38.50%Net Effective Tax Rate


-


Note 10-Other Related Party TransactionsUPDV Relationship to Former and Current Convertible Debt Holders of the CompanyOn April 6, 2007 UPDV entered into a Loan Agreement with Sheridan Asset Management ("Sheridan") in which Sheridan agreed to lend the Company $3,635,000 with an original issue discount of $908,750 based upon a 29.12% yield to maturity ("the Note"). The Company’s use of the $2,726,250 net proceeds from the subscription amount was (a) $1,000,000 to acquire 52% of Heartland Oil and Gas’s ("Heartland") outstanding common stock (the "Stock Sale"), (b) $1,500,000 for the note purchase transaction (the "Note Purchase"), $100,000 was used to pay the originator fee to the lender and closing costs, and the remainder was used by Heartland for working capital. This note is pursuant to the loan agreement dated April 6, 2007. The $3,635,000 note was to mature on April 6, 2008, but as discussed further below in this footnote it was not repaid by UPDV at its maturity date. As discussed below under "Secured Sheridan Borrowing By UPDV And Its Subsidiaries Under Second Loan Agreement With Restrictive Covenant," on May 1, 2008, UPDV entered into a Forbearance Agreement with Sheridan, pursuant to which Sheridan agreed not to exercise its rights under the Loan Documents that would have arisen as a result of that Registrant’s non-payment of the principal amount on April 6, 2008. Sheridan also agreed to extend the due date of the Term Loan to November 1, 2008, as long as UPDV continues to satisfy the terms and conditions of that agreement.On April 6, 2007, UPDV issued Sheridan a warrant to purchase 2,234,382 fully paid and non-assessable shares of its common stock for an exercise price of $.5483, pursuant to the Loan Agreement dated April 6, 2007. The warrant expires on April 6, 2012.On April 6, 2007, in connection with UPDV’s agreement with Sheridan, the Company and its subsidiaries have pledged all their assets to secure the amounts due to Sheridan. In addition, Kamal Abdallah, Chairman and CEO and Christopher McCauley, Secretary and a board member, have provided the lender with personal guarantees. The 5,063,176 shares of Heartland common stock that are now owned by UPDV have also been pledged as collateral for the amounts due to Sheridan.On April 20, 2007, UPDV closed the Note Purchase with SDS Capital Group and Bay Star Capital (together the "Sellers") in which UPDV purchased $4,756,000 in outstanding promissory notes of Heartland for an aggregate purchase price of $1,500,000 and 26,260,504 restricted shares of common stock of UPDV. During April 2007, UPDV issued the 26,260,504 shares of its common stock to SDS Capital and Bay Star Capital.

23




Heartland Oil & Gas Corp.Financial Statement Notes


Note 10-Other Related Party Transactions (cont.)UPDV Relationship to Former and Current Convertible Debt Holders of the Company (cont.)Five Star currently holds 165 shares of UPDV’s Class B Convertible Preferred Stock convertible into 3,300,000 shares of Common Stock of UPDV.Readers of the Company’s current consolidated financial statements herein should consult the most recent Form 10QSB and 10KSB on file with the SEC for a better understanding of the Company’s current financial status.Secured Sheridan Borrowing By UPDV And Its Subsidiaries Under Second Loan Agreement With Restrictive Covenant.On August 16, 2007, UPDV and its UPDV-O, Heartland, Catlin, Canyon Creek, and Aztec subsidiaries entered into a second Loan Agreement with Sheridan (the "Holder") for $3,250,000. The proceeds of the loan were used by UPDV’s wholly owned subsidiary, Catlin Oil & Gas, Inc., to complete the Palo Pinto acquisition. UPDV was the primary borrower under the terms and conditions of this Loan Agreement. The Company executed a Subsidiary Guarantee and Security Agreement in connection with this loan.The outstanding Principal Amount under the Loan shall be due and payable by UPDV, in thirty-six (36) consecutive equal installments in the amount of $90,278, due on each Settlement Date. UPDV shall pay interest on the unpaid Principal Amount of the Loan, from August 15, 2007 until such principal amount shall be paid in full, at the rate of 15% per annum. In addition to the 15% per annum interest payable by UPDV to the Holder, UPDV shall pay to the Holder interest at the rate of 5% per annum, on the principal amount outstanding from time to time hereunder ("PIK Amount") on the Maturity Date. Kamal Abdallah, Chairman and CEO and Christopher McCauley, a Director and Secretary have provided the lender with personal guarantees.The Senior Secured Promissory Note dated August 16, 2007 under this second loan agreement contains certain negative covenants to be met by UPDV and the Company, which include: limitations on dividends and distribution and repurchase of Company common stock other than distribution to the Company by its wholly owned subsidiary; limits on sale, transfer and disposal of Company assets except for sale by UPDV of the Palo Pinto and other Catlin assets to the Company pursuant to the terms of a purchase agreement; issuance of more than $250,000 in fair value at any time in common stock or securities exchangeable for, convertible into or exercisable for common stock of the Company; incur any capital expense in excess of $500,000; consummate any merger or acquisition except on terms satisfactory to Sheridan; maintenance by the Company of a cash flow coverage ratio (See Note 5) . The promissory note imposes certain negative covenants on the Company related to and requiring lender approval: merger or acquisition activities or management changes. Other covenants to be met by the Company include minimum net worth and earnings before interest, taxes and depreciation ("EBITDA"). The promissory note also contains provisions relating to change in Company control as well as minimum net worth.At June 30, 2008, UPDV and its subsidiaries had aggregate debt due Sheridan under acquisition related term and revolving notes payable of $5,982,224  excluding acquisition related notes payable that are owed at that date by UPDV’s Continental Fuels Inc. subsidiary of $4,833,303 to Sheridan that require separate loan compliances by Continental. The secured Sheridan borrowings by Continental are subject to certain significant loan compliance provisions, one of which that entity is currently in default of.  Accordingly, readers of the Company’s  Financial Statements are highly advised to refer to financial statements of UPDV and Continental separately filed in their Annual Report on Form 10-K for the year ended December 31, 2007or more recent subsequent quarterly filings on Form 10-Q.Pursuant to the above, on May 1, 2008, UPDV entered into a Forbearance Agreement with Sheridan, pursuant to which Sheridan agreed not to exercise its rights under the Loan Documents, for the $3,635,000 note payable discussed above, that would have arisen as a result of that Registrant’s non-payment of the principal amount on April 6, 2008.  Pursuant to the Forbearance Agreement, Sheridan agreed to extend the due date of the Term Loan to November 1, 2008, as long as UPDV continues to satisfy the terms and conditions of that agreement. Among other things, the Forbearance Agreement required the borrower, UPDV, to pay Sheridan accrued interest of $50,347 outstanding at April 30, 2008, and to pay accrued and unpaid interest outstanding on the note on the first day of each calendar month during the Forbearance Term commencing on June 1, 2008. The agreement also requires the borrower to pay $100,000 a month towards principals on the first day of each calendar month during the Forbearance Term commencing on June 1, 2008. In addition the borrower is required to pay a Forbearance fee of $500,000 on November 1, 2008. Interest accruable under the Forbearance Agreement is chargeable at a rate of 20% per annum. Finally, the borrower required to demonstrate to the lender timely fulfillment of oil and gas production milestone established in a schedule made part of the agreements.

24




Heartland Oil & Gas Corp.Financial Statement Notes


Note 11 - Commitments and ContingenciesLease AgreementsOn December 14, 2007, UPDV entered into a Lease Termination Agreement (the "Agreement") with R. M. Crowe Property Management, LP (the "Landlord") to terminate of the lease on the office space located in Suite 285 of 12603 Southwest Freeway Building, Stafford, Texas 77477. On that same day, we entered into an Office Lease (the "Lease") with the same Landlord on new office space in the same building. The new Lease is for space in the building consisting of approximately 4,744 rentable square feet, commonly referred to as Suite 420. The Lease has a term of fifty-eight months, beginning on January 1, 2008.Lease Agreements (cont.)Under the above lease agreement, at June 30, 2008 the Company’s future commitments are as follows:

Years Ending June 30,

Amounts2009
$
85,3922010

85,3922011

85,3922012

85,3922013 and after

28,464$
370,032


Note 12 -Litigation - Dispute concerning location of Company compressorOn September 6, 2007, the Company’s Motion for Conversion to Chapter 60 and for Trial Continuance came on for hearing in the District Court of Miami County, Kansas and was granted. The trial scheduled for September 6, 2007 was rescheduled. This is an action file by plaintiffs seeking to evict Heartland from the land on which its compressor is located in Kansas. In consideration of this on-going case in Kansas, the Company has already located a new site to which the Company can move these facilities at nominal expenses should that becomes necessary.On March 27, 2008, a former employee filed a petition against Heartland Oil & Gas Corporation, a wholly owned subsidiary of the Company, alleging that it had breached its employment contract with him.  In addition to attorneys’ fees, the former employee is seeking $99,650, which is derived from the remainder of his base salary, his annual cash bonus and his out of pocket expenses.  Heartland believes the suit is without merit and intends to vigorously defend itself.  Toward that end, the Company filed an answer denying the allegations asserted in the suit. As of August 14, 2008, there have been no material developments in this case.Beginning March 31, 2008, a three day court trial was conducted relative to the Kansas litigation regarding the action filed by plaintiffs seeking to evict the Company from the land on which its compressor is located in Kansas. During the trial, the Court reviewed evidence and heard testimony from various witnesses and made rulings on several legal issues. At the conclusion of the trial, the Court directed counsel for each of the parties to submit proposed findings of fact and conclusions of law by or before April 23, 2008, after which time the Court will render its final decision on the case.  On July 24, 2008, the Court rendered its Judgment in favor of Heartland on all issues.Note 13- Sale of Royalty Interest/LeasesOn January 10, 2008, the Company entered into a sale of certain interest in leases in Nemaha County, Kansas with Noble Petroleum, Inc. for total of $27,200 based on $10 per acre for the leases. The Company also retains and expects a one thirty second (1/32) over-riding royalty interest of oil, gas and mineral revenues which the Company leases to Noble Petroleum, Inc. The Company’s cost of these leases had been written off in a prior year.  Noble Petroleum subsequently drilled its initial well on this property and has reported that this well is producing approximately 65 barrels of crude oil per day.

25






Heartland Oil & Gas Corp.Financial Statement Notes


Note 14-Subsequent EventsOn July 8, 2008, the Company issued 5,000,000 shares of common stock to Bradley Steere in satisfaction of $50,000 in fees due for services rendered as a consultant to the Company.On August 5, 2008, the Company issued 10,000,000 shares of common stock to Wesley Ramjeet in satisfaction of $80,000 in fees due for services rendered as a consultant by Profit Planners, Inc. to the Company.In July and August 2008, the Company issued 234,500,000 shares of the 825,000,000 shares of common stock that was converted from debt to Five Star.

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


This discussion reports material changes from December 31, 2007 through June 30, 2008, as well as other information. We encourage the reader to also read Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-KSB for the period ended December 31, 2007. Factors that could cause or contribute to such difference include, but are not limited to; those discussed below and elsewhere in this quarterly report, particularly in the section entitled "Risks Related To Our Business".Forward Looking StatementsThis quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or to our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks enumerated in the section entitled "Risk Factors", that may cause our actual results or the actual results in our industry, of our levels of activity, performance or achievement to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.Except as required by applicable law, including the securities laws of the United States, we do not intend to UPDVte any of the forward-looking statements to conform these statements to actual results.Overview and OutlookHeartland Oil and Gas Corp. is engaged in the exploration, development, production and sales of coal bed methane from its approximately 645,000 acre eastern Kansas leasehold position. The acreage is located in two areas in northeast Kansas, primarily in Linn and Miami Counties, located on the northern edge of the Cherokee basin, and the Forest City basin.Capital ExpendituresSubject to obtaining financing, we plan to spend approximately $15 million in capital expenditures in the next twelve months. See Liquidity and Capital Resources, below. These expenditures will be directed toward developing existing proved and probable reserves on the Cherokee basin, constructing additional pipelines, and evaluating new project areas. Approximately 90% of the capital budget is focused on attempting to convert probable and possible reserves into proved reserves.We project that our capital program for the this year will allow us to create value by drilling 100 wells and installing 14.5 miles of transportation lines and associated facilities necessary to support the drilling program and to hook up currently stranded gas, compared to the 2007 program in which we drilled 21 wells. We have currently secured the necessary pipeline rights of way to achieve this program. Successes may also encourage the initiation of additional discretionary projects.We are trying to obtain adequate financing so we can develop our Cherokee basin project into a nucleus for future growth. We cannot assure that we will be able to obtain such financing. Without it, we will have to cease operations.Appraisal, Evaluation and Exploitation ActivitySince 2003, we have been active in assembling significant acreage positions which we believe are prospective for finding and developing commercial quantities of hydrocarbons.

26


Development ActivityCherokee basinLancaster battery The Lancaster battery includes 25 producing wells, one shut in well awaiting connection, one disposal well, and associated production and water disposal facilities. The wells are drilled on 40 and 80 acre spacing. With the completion of the 5.5 mile gas gathering and processing plant in late 2006, we established production, proved reserves, and cash flow from our Lancaster battery. Lancaster is currently producing 500 Mcfgpd. Currently sales is approximately 380 Mcfgpd net of fuel gas, shrinkage, and carbon dioxide extraction.Beagle, Jake and Osawatomie batteries We are currently venting approximately 17 gross Mcfgpd from three other multi-well production batteries on the Cherokee basin. Including Lancaster, each battery is separated by approximately three miles, and thus defines a potential project covering at least 12 miles along the Cherokee basin. In August 2005 we drilled and completed two wells at Beagle and one well at Jake. In the second half of 2007 we have drilled 11 more wells in the Jake battery. We intend to put these fourteen wells, along with five wells originally drilled and completed by Evergreen Resources (one at Beagle and four at Osawatomie) into production if we are able to access financing necessary to do so.We plan to invest approximately $15 million on the Cherokee basin. Of the $15 million, we expect $13 million will be directed toward a 100 well, 160 acre development drilling program targeting shallow (600 to 800 foot drill depth) Pennsylvanian reservoirs of the Cherokee and Marmaton Groups and $2 million will be invested in pipelines and infrastructure necessary to support development drilling and to hook up stranded gas from Jake, Beagle, and Osawatomie batteries.Results of Operations for the Three and Six Months Ended June 30, 2008 and 2007.Revenue and operating expenseDuring the three and six months ended June 30, 2008 and 2007, we sold $707,177, $1,229,159, $119,190 and $229,710 of natural gas, earned $14,660, $39,952, $6,023 and $11,847 in compression and transportation revenue, respectively. The increase in revenues was the result of the acquisition of Jack and Palo Pinto leases and increased production from our leases.  The total volume for the three and six months ended June 30, 2008 and 2007 was 56,599, 110,269, 17,711 and 34,872 Mcf at an average price of $11.41, $10.35, $6.73 and $6.59, respectively. During the three and six months ended June 30, 2008 and 2007, lease operating expenses and production tax were $273,239, $592,908, $113,430 and $187,953 respectively.Exploration expense, expired leases for the three and six months ended June 30, 2008 and 2007 was $1,105, $430,911, $15,895 and $39,054, respectively, a decrease of $14,790 for the three months and an increase of $391,857 for the six months. Depreciation, depletion and accretion expensefor the three and six months ended June 30, 2008 and 2007 was $174,040, $341,150, $94,270 and $192,193, respectively, an increase of $79,770 and $148,957. The increase in depreciation, depletion and accretion was a result of the acquisition of Jack and Palo Pinto leases and increased production from our leases.Share based compensation was none, none, $10,701 and $19,138 for the three and six months ended June 30, 2008 and 2007, respectively. There were no shares were issued for compensation in 2008.Salaries and related benefits was $34,309, $207,652, none and none for the three and six months ended June 30, 2008 and 2007, respectively.Other general and administrative expense for the three and six months ended June 30, 2008 and 2007 was $121,486, $358,877, $278,460 and $474,635, respectively, a decrease of $156,974 and $115,758. This change was due in part to an increase in our legal and accounting fees. Legal and accounting fees were $191,945 and $95,347 for the three and six months ended June 30, 2008.Interest expense for the three months ended June 30, 2008 and 2007 was $93,971 and $1,820, respectively, an increase of $92,151. Interest expense for the six months ended June 30, 2008 and 2007 was $186,548 and $6,298,266. This change was due to the effect of the conversion of $6,300,000 of Preferred stock to convertible debt in the first quarter of 2007.Interest income for the three months ended June 30, 2008 and 2007 was $4,987 and $2,370, respectively.  The increase of $2,616 was due to interest on notes receivable outstanding in 2008 that were not outstanding in 2007. Interest income for the six months ended June 30, 2008 and 2007 was $9,972 and $2,373.Gain on sale of leases for the three months ended June 30, 2008 and 2007 was $none and none, respectively.  Gain on sale of leases for the six months ended June 30, 2008 and 2007 was $27,200 and none, respectively. The increase was due to the sale of interest in leases to Noble Petroleum, Inc in 2008.Gain on sale of fixed assets for the three months ended June 30, 2008 and 2007 was $8,442 and $1,626, respectively.  Gain on sale of fixed assets for the six months ended June 30, 2008 and 2007 was none and none, respectively.Stock based compensation to Five Star for the three months ended June 30, 2008 and 2007 was $27,818,337 and none, respectively.  Stock based compensation to Five Star for the six months ended June 30, 2008 and 2007 was $27,818,337 and none, respectively. The increase was from the conversion of the $215,000 promissory note into 825,000,000 shares of common stock during the second quarter of 2008Net loss for the three months ended June 30, 2008 and 2007 was $27,781,222 and $386,993 and respectively.  Net loss for the six months ended June 30, 2008 and 2007 was $28,628,474 and $6,967,309, respectively The decrease for the six month period of $21,661,165 was mainly due to  loss that resulted from the  conversion of the $215,000 promissory note into 825,000,000 shares of common stock during the second quarter of 2008.

27


Operation PlanAssuming additional financing and the repayment or restructuring of our debt, for the next 12 months, we plan to sell gas from Lancaster, and seek financing necessary to initiate drilling operations and hook up currently venting wells at Jake, Beagle, and Osawatomie. Based on geological mapping, pipelines, and leasehold position, we have defined a 100 well drilling program on our acreage and have obtained substantially all of the pipeline right of ways required to build the gathering system to tie in both the 100 well programs and the currently venting gas to existing sales lines and processing facilities.We have no drilling obligations or commitments, and, except for regulatory requirements, all activity is discretionary.Liquidity and Capital ResourcesCash RequirementsThe Company has incurred recurring operating losses since its inception, and as of June 30, 2008 had an accumulated deficit of approximately $88,921,317 and had insufficient capital to fund all of its obligations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effect of the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.Six months ended June 30, 2008 compared to the six months ended June 30, 2007.Operating ActivitiesAs shown in the consolidated financial statements, at June 30, 2008, the Company had cash on hand of $4,384, compared to $19,969 at June 30, 2007. Net cash provided by operating activities was $18,384 for the six months ended June 30, 2008. We had a net loss of $28,628,474. We had non-cash charges that included $27,714 due to accretion of the asset retirement obligation,  $430,911 of exploration expense for expired leases, $313,436 of depreciation, depletion or amortization, $9,972 of interest income related to the note receivable from Catlin, $186,332 of interest expense resulting from various notes and loans payable and $27,818,337 of stock based compensation to Five Star. In addition, changes in operating assets and liabilities totaled $91,074 for the six months ended June 30, 2008.Net cash used in operating activities was $253,176 for the six months ended June 30, 2007. We had a net loss of $6,967,309. We had non-cash charges that included $6,416,446 of interest expense resulting from discount on notes arising from the exchange of preferred stock for convertible debt, $182,270 of depreciation, depletion and amortization, $19,138 related to share based compensation, $39,054 of exploration expense for expired leases and $9,923 of accretion of asset retirement obligation. In addition, changes in operating assets and liabilities totaled $47,302 for the six months ended June 30, 2007. It included $54,147 increase in other current assets, $76,029 increase in prepaid expense, and $177,478 increase in accounts payable and accrued liabilities.Investing ActivitiesCash flows provided by investing activities was $399,841 during the six months ended June 30, 2008. It primarily consisted of $227,795 for purchase of pipeline and facilities, $211,782 of acquisition and exploration of oil and gas property, and $27,200 from proceeds from sale of oil and gas leases, $1,626 from proceeds from sale of equipment and $10,910 advances from the parent entity and its UPDV-O subsidiary.Cash flows used in investing activities was $257,257 during the six months ended June 30, 2007. It primarily consisted of $263,733 of cash proceeds from the acquisition and exploration of oil and gas property, $10,929 for purchase of pipeline and facilities and $17,405 of cash proceeds from sale of equipment.Financing ActivitiesThe cash flows provided by financing activities of $384,522 during the six months ended June 30, 2008, consisted of $57,678 decrease in cash overdraft, $442,200 from proceeds of loans from parent entity/company officer/shareholder.The cash flows provided by financing activities of $454,678 during the six months ended June 30, 2007, consisted of $495,322 decrease in due to related parties, $1,000,000 of additional paid-in capital, $50,000 of share issue costs.We had losses of $28,628,474 for the six months ended June 30, 2008.While we expect to raise the additional financing in the future, there can be no guarantee that we will be successful.We have no significant off-balance sheet arrangements.

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Item 3.
Quantitative and Qualitative Disclosures About Market Risk


We conduct no hedging activity. We have no derivative contracts.

Item 4.
Controls and Procedures


Evaluation of Disclosure Controls and ProceduresThe Company’s Chief Executive Officer and acting Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ending June 30, 2008 covered by this quarterly report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and acting Chief Financial Officer has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion by the Company’s Chief Executive Officer and acting Chief Financial Officer does not relate to reporting periods after June 30, 2008.Management’s Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Management, under the supervision of the Company’s Chief Executive Officer and acting Chief Financial Officer, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework inInternal Control-Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2008 under the criteria set forth in the inInternal Control-Integrated Framework.A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that material weaknesses exist due to a lack of segregation of duties, resulting from the Company’s limited resources.This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Quarterly Report on Form 10-Q.Changes in Internal Control Over Financial ReportingNo change in the Company’s internal control over financial reporting occurred during the quarter ended June 30, 2008, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II-Other Information

Item 1.
Legal Proceedings


On September 6, 2007, the Company’s Motion for Conversion to Chapter 60 and for Trial Continuance came on for hearing in the District Court of Miami County, Kansas and was granted. The trial scheduled for September 6, 2007 was rescheduled. This is an action file by plaintiffs seeking to evict Heartland from the land on which its compressor is located in Kansas. In consideration of this on-going case in Kansas, the Company has already located a new site to which the Company can move these facilities at nominal expenses should that becomes necessary.Beginning March 31, 2008, a three day court trial was conducted relative to the Kansas litigation regarding the action filed by plaintiffs seeking to evict the Company from the land on which its compressor is located in Kansas. During the trial, the Court reviewed evidence and heard testimony from various witnesses and made rulings on several legal issues. At the conclusion of the trial, the Court directed counsel for each of the parties to submit proposed findings of fact and conclusions of law by or before April 23, 2008, after which time the Court will enter its final decision on the case.  On July 24, 2008, the Court rendered its Judgment in favor of Heartland on all issues.On March 27, 2008, a former employee filed a petition against Heartland Oil & Gas Corporation, a wholly owned subsidiary of the Company, alleging that it had breached its employment contract with him.  In addition to attorneys’ fees, the former employee is seeking $99,650, which is derived from the remainder of his base salary, his annual cash bonus and his out of pocket expenses.  Heartland believes the suit is without merit and intends to vigorously defend itself.  Toward that end, the Company filed an answer denying the allegations asserted in the suit.  As of August 14, 2008, there have been no material developments in this case.

Item 1A.
Risk Factors


Item 1A. "Risk Factors" of our Annual Report on Form 10-KSB for the year ended December 31, 2007 includes a detailed discussion of our risk factors. There have been no significant changes to our risk factors as set forth in our 2007 Form 10-KSB.

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


On July 31, 2007, the Company and Five Star Partners, LLP ("Five Star"), the holder of an aggregate of $1,729,000 of our outstanding Notes, agreed to amend the conversion terms of those Notes. Pursuant to the terms and conditions agreed to by the parties, the Company agreed to allow for the conversion of the Notes into shares of the Company’s common stock at their stated rate of $0.04 per common share.  Pursuant to this amendment, the Notes held by Five Star were convertible into an aggregate of 43,225,000 shares of the Company’s common stock. During the 2007 fiscal year, the Company issued an aggregate of 19,025,000 shares of common stock to Five Star pursuant to this conversion provision. During the six months ended June 30, 2008, the Company issued an additional 24,200,000 shares of common stock to Five Star pursuant to this conversion provision.The shares of common stock issued to Five Star, as described above, were restricted shares and cannot be resold unless they are subsequently registered pursuant to the Securities Act of 1933, as amended, or such sale is pursuant to a valid exemption from such registration. The transactions referred to above did not involve an underwriter or placement agent and there were no underwriter’s discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. The transactions referred to above were exempt transactions in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering. We did not engage in any public solicitations in connection with the above transactions.As of December 31, 2007 , the Company borrowed$215,000, respectively on a note bearing 8% interest, payable to Kamal Abdallah, President of UPDV. At December 31, 2007, this note has an outstanding balance payable on demand, including accrued interest of$5,793. Mr. Abdallah had an option to convert amounts due under the notes into common stock at the rate of $0.25 per shares. As further discussed below, on May 15, 2008, in consideration for a payment of $215,000 to him by an affiliate of Five Star Partners the notes were assigned to Five Star. On May 26, 2008 the Company agreed to convert this debt into 825,000,000 shares of the Company’s $0.001 split adjusted par value common stock, a conversion rate different from the conversion rate called for by the original promissory notes.  As of June 30, 2008, the Company had issued 586,000,000 shares to Five Star pursuant to this conversion agreement.

Item 3.
Defaults Upon Senior Securities.


None.

Item 4.
Submission of Matters to a Vote of Security Holders.


None

Item 5.
Other Information.


None

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Item 6.
Exhibits.




ExhibitNumber
Description2.1
Purchase and Sale Agreement, entered into as of August 15, 2007, by and between Heartland Oil and Gas Corp., a Nevada corporation, as the purchaser and Universal Property Development and Acquisition Corporation, a Nevada corporation and Catlin Oil & Gas, Inc., its subsidiary, as the Sellers.  Incorporated by reference to Exhibit 2.1 to our Form 8-K filed with the Securities and Exchange Commission on March 7, 2008.3.1
Articles of Incorporation. Incorporated by reference to our Form SB-2 Registration Statement filed with the Securities and Exchange Commission on October 23, 2001.3.2
Amended and Restated Bylaws. Incorporated by reference to our current report on Form 8-K filed with the Securities and Exchange Commission on March 24, 2006.3.3
Certificate of Amendment to Articles of Incorporation effective November 4, 2002. Incorporated by reference to our Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2002.3.4
Certificate of Amendment to Articles of Incorporation effective December 10, 2003. Incorporated by reference to our Form SB-2 Registration Statement filed with the Securities and Exchange Commission on November 15, 2004.3.5
Certificate of Designation for shares of Series A Convertible Preferred Stock, effective December 18, 2003. Incorporated by reference to our Form SB-2 Registration Statement filed with the Securities and Exchange Commission on February 17, 2004.3.6
Certificate of Designation for shares of Series B Convertible Preferred Stock, effective September 26, 2007.  Incorporated by reference to Exhibit 4.1 to our Form 8-K filed with the Securities and Exchange Commission on October 11, 2007.4.1
2005 Stock Option Plan. Incorporated by reference to our Form 10-KSB filed with the Securities and Exchange Commission on April 15, 2005.10.1
Form of Oil and Gas Lease. Incorporated by reference to our Form 10-KSB filed with the Securities and Exchange Commission on April 1, 2003.10.2
Stock Purchase Agreement, entered into as of April 19, 2007, by and between Heartland Oil and Gas, Corp., a Nevada corporation and Universal Property Development & Acquisition Corporation, a Nevada corporation. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed with the Securities and Exchange Commission on April 23, 2007.10.3
Form of Oil and Gas Lease with Option. Incorporated by reference to our Form 10-KSB/A filed with the Securities and Exchange Commission on October 22, 2003.10.4
Promissory Note of Heartland Oil and Gas Corp., a Nevada corporation, in the principal amount of $3,635,000. Incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the Securities and Exchange Commission on March 7, 2008.10.5
Promissory Note of Heartland Oil and Gas Corp., a Nevada corporation, in the principal amount of $3,250,000. Incorporated by reference to Exhibit 10.2 to our Form 8-K filed with the Securities and Exchange Commission on March 7, 2008.10.6
Amended and Restated Security Agreement, dated as of August 16, 2007, by and between Universal Property Development and Acquisition Corporation, a Nevada corporation, each of its subsidiaries, Kamal Abdallah, Christopher McCauley and Sheridan Asset Management, LLC, a Delaware limited liability company. Incorporated by reference to Exhibit 10.6 to our Form 10-KSB filed with the Securities and Exchange Commission on April 15, 2008.10.7
Amended and Restated Subsidiary Guarantee, dated as of August 16, 2007, in favor of Sheridan Asset Management LLC, as executed by each of the subsidiaries of Universal Property Development and Acquisition Corporation, a Nevada corporation. Incorporated by reference to Exhibit 10.7 to our Form 10-KSB filed with the Securities and Exchange Commission on April 15, 2008.10.8
Form of Common Stock Purchase Warrant, with an issue date of August 17, 2007, for the purchase of 937,140 shares of the common stock of HTOG issued to Sheridan Asset Management, LLC, a Delaware limited liability company. Incorporated by reference to Exhibit 10.8 to our Form 10-KSB filed with the Securities and Exchange Commission on April 15, 2008.10.9 #
Master Service Agreement between Heartland Oil and Gas Corp. and Aztec Well Services Inc. dated March 1, 2008.10.10 #
Lease Operating Agreement between Heartland Oil and Gas Corp. and Aztec Well Services Inc. dated March 1, 2008.21.1#
List of Subsidiaries.31.1 #*
Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2 #*
Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1 #*
Certificate of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2 #*
Certificate of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




____________________________




#
Filed herewith.*
This certification "accompanies" this Quarterly Report, is not deemed filed with the SEC and is not to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.




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Signatures


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

HEARTLAND OIL AND GAS CORP.(Registrant)Date: August 19, 2008

/S/    Kamal AbdallahKamal AbdallahChief Executive Officer and President




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