United StatesSecurities and Exchange CommissionWashington, D.C. 20549




Form 10-QSB




Quarterly Report pursuant to Section 13 or 15(D)of the Securities Exchange Act of 1934For the quarter ended September 30, 2007Commission file number 000-32669




Heartland Oil and Gas Corp.




Incorporated in Nevada
IRS ID No. 91-1918326




12603 Southwest Freeway, Suite 285Houston, TX 77477Telephone: (713) 231-0300


The registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.The registrant is a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).The registrant is not a shell company (as defined in Rule 12b-2 of the Exchange Act).Heartland had 27,207,721 shares of common stock outstanding as of November 2, 2007.

-1-




Heartland Oil and Gas Corp.Form 10-QSBFor the Quarterly Period Ended September 30, 2007Table of Contents




PagePART I

Financial Information

3Item 1.

Financial Statements

3Unaudited Consolidated Balance Sheets

3Unaudited Consolidated Statements of Operations

4Unaudited Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

5Unaudited Consolidated Statements of Cash Flows

6Notes to Consolidated Financial Statements (Unaudited)

7Item 2.

Management’s Discussion and Analysis or Plan of Operation

24Item 3.

Quantitative and Qualitative Disclosures about Market Risk

26Item 4.

Control and Procedures

26PART II

Other Information

27Item 1.

Legal Proceedings

27Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31Item 3.

Defaults Upon Senior Securities

32Item 4.

Submission of Matters to a Vote of Security Holders

32Item 5.

Other Information

32Item 6.

Exhibits

32Signatures



33




-2-


Item 1.	Financial Statements

Heartland Oil and Gas Corp.Balance Sheet




September 30, 2007

December 31, 2006Assets

Unaudited

AuditedCurrent assets:Cash

$
61,409

$
75,724Gas sales receivable

23,520

43,952Prepaid expense and other current assets

110,274

129,423Deferred offering cost

-

10,000Total current assets

195,203

259,099Oil and gas property-full cost methodUnproved, undeveloped (Note 3)

1,605,846

1,688,889Proved, developed properties, full cost method, net of accumulateddepletion of $296,369 and $175,842, respectively

2,016,646

792,504Pipeline and facilities, net of accumulated depreciation of$302,992 and $200,697, respectively

2,437,818

2,521,670Other property and equipment, net of accumulateddepreciation of $134,438 and $122,712, respectively

33,046

94,271Other property and equipment, net of accumulatedNotes receivable from Aztec Well Services, Inc., a wholly-owned (Note 4)subsidiary of new parent entity, including accrued interest receivableof $9,782

602,734

-Notes receivable from Catlin Oil and Gas, Inc., a wholly-owned (Note 4)subsidiary of  parent entity, including accrued interest receivableof $3,288

403,288

-Total Assets

$
7,294,581

$
5,356,433Liabilities and Stockholders’ EquityCurrent liabilities:Accounts payable and accrued liabilities, including due to Aztec WellServices, Inc., a wholly-owned subsidiary of new parent entity $1,163,468

$
1,364,012

$
214,180Notes and loans payable:Parent entity/company officer/shareholder, including accrued payable of $2,521

102,521

-Parent entity and its UPDA-O subsidiary

174,165

-Other related party relationships

50,361

68,554Other

50,361

-Total current liabilities

1,741,420

282,734Long-term asset retirement obligation

242,172

227,040Total Liabilities

1,983,592

509,774Stockholders’ equity:Preferred Stock - $0.001 par value, 5,000,000 shares authorized,4,756,000 shares issued and outstanding

4,756

-Common stock - $0.001 par value, 100,000,000 shares authorized,18,182,721 and 46,737,013 shares issued, and outstanding atSeptember 30, 2007 and December 31, 2006, repectively

18,183

46,737Common stock - $0.001 par value to be issued of 35,725,000 shares

35,725

-Additional paid-in capital

59,968,605

51,215,858Accumulated deficit

(54,716,280)

(46,415,936)Total stockholders’ equity

5,310,989

4,846,659Total liabilities and stockholders’ equity

$
7,294,581

$
5,356,433







See accompanying notes.




-3-






Heartland Oil and Gas Corp.Operations Statement(Unaudited)




Three Months
Three Months
Nine Months

Nine MonthsEnded
Ended
Ended

EndedSeptember 30, 2007
September 30, 2006
September 30, 2007

September 30, 2006Natural gas sales

$
94,287
$
101,411
$
323,997

$
269,860Compression & transportation revenue

3,983
6,124
15,831

16,375Total revenue

98,270
107,535
339,828

286,235Operating expenseLease operating expenses and production tax

96,343
115,712
284,296

329,659Exploration expense, expired leases

55,181
12,259
94,235

136,625Depreciation, depletion & accretion

89,581
112,903
281,774

314,682Share based compensation

14,916
92,673
34,054

325,625General and administrative

304,329
275,249
778,964

1,005,122Total operating expense

560,350
608,796
1,473,323

2,111,713Loss from operation

(462,080)
(501,261)
(1,133,495)

(1,825,478)Interest expense

(3,243)
-
(6,301,509)

-Interest income

10,700
5,171
13,073

17,452Stock based facilitation fees incurred to former convertible debtholders coincident to change in Company control
(895,620)
-
(895,620)

-Gain on sale of leases
17,208
-
17,208

-Net loss before extraordinary item
(1,333,035)
(496,090)
(8,300,343)

(1,808,026)Extraordinary gain on exchange of preferred stockfor convertible notes

-
1,299,958
-

1,299,958Net (loss) income

$
(1,333,035)
$
803,868
$
(8,300,343)

$
(508,068)Basic & diluted net income (loss) per common sharebefore extraordinary gain

$
(0.07)
$
(0.11)
$
(1.41)

$
(0.39)Basic & diluted weighted average
$
(0.07)
$
0.17
$
(1.41)

$
(0.11)Common shares outstanding

17,834,643
4,673,701
5,879,553

4,673,701







See accompanying notes.




-4-




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




Common
Common Shares
Preferred
Common
Common Stock
Preferred
Additional
AccumulatedShares
To Be Issued
Shares
Stock
To Be Issued
Stock
Paid-In Capital
Deficit
TotalBalance, December 31, 2004
4,673,701
-
-
$
4,674
$
-
$
-
$
45,690,265
$
(3,384,951)Issuance of stock options as compensation
-
-
-
-
-
-
$
618,539
-Net loss
-
-
-
-
-
-
-
$
(41,575,015)Balance, December 31, 2005
4,673,701
0
0
4,674
0
0
46,308,804
(44,959,966)
$
1,353,512Gain on preferred stock extinguishment
-
-
-
-
-
-
4,067,986
-
$
4,067,986Shareholder loan discount
-
-
-
-
-
-
532,013
-
$
532,013Issuance of stock options as compensation
-
-
-
-
-
-
394,986
-
$
394,986Net loss
-
-
-
-
-
-
-
$
(1,455,971)
$
(1,455,971)Balance, December 31, 2006
4,673,701
-
-
$
4,674
$
-
$
-
$
51,303,789
$
(46,415,937)
$
4,892,526Acquisition of Company common stock by UPDA:Shares issued to UPDA at par value
5,063,176
-
-
5,063
-
-
(50,632)
-
$
(45,569)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
-
-
29,667
-
$
29,700Offering 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 7
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 Five Star-see Note 7
7,500,000
35,725,000
4,756,000
7,500
35,725
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 4)
369,710
-
-
370
-
-
399,631
-
$
400,001Issuance of stock options as compensation
-
-
-
-
-
-
34,054
-
$
34,054Net loss
-
-
-
-
-
-
-
$
(8,300,343)
$
(8,300,343)Balance, September 30, 2007
18,182,720
35,725,000
4,756,000
$
18,183
$
35,725
$
4,756
$
59,968,605
$
(54,716,280)
$
5,310,989









See accompanying notes.




-5-






Heartland Oil & Gas Corp.Cash Flow Statement(Unaudited)




Nine Months

Nine MonthsEnded

EndedSeptember 30, 2007

September 30, 2006Cash flow used in operating activityNet loss
$
(8,300,343)

$
(508,068)Adjustments to reconcile net loss to net cashused in operating activity:Asset retirement obligation
15,132

(13,943)(Gain) loss on disposal of assets
(23,396)

3,136(Gain) loss on sale of oil and gas leases
(17,208)

-Interest expense resulting from discount on notes arising from theexchange of preferred stock for convertible debt (Note 5)

6,416,446

-Share-based compensation
34,054

325,625Depreciation,depletion and amortization
266,642

300,739Exploration expense, abandoned Leases
90,597

136,625Stock based facilitation fees incurred to former convertble debtholders coincident to change in Company control

895,620

-Extraordinary gain on exchange ofpreferred stock for convertible notes

-

(1,299,958)Interest income added to note receivable balances due from:Aztec Well Services, Inc.

(9,782)

-Catlin Oil and Gas, Inc.

(3,288)

-Interest expense added to notes and loans payable balances due to:Parent entity/company officer/shareholder

2,521

-Other related party relationships

361

-Other

361

-Changes in operating asset and liabilitiesDecrease in gas sales receivable
20,432

-Increase in other assets
-

(31,539)Decrease in prepaid expense and other current assets
19,149

79,385Well plugging cost paid
-

(435,040)Increase (decrease) in accounts payable andaccrued liabilities

1,149,832

(182,206)Net cash provided by operating activity
557,130

(1,625,244)Cash flow used in investing activityPurchase of furniture, fixtures & equipment
-

(324,804)Purchase of undeveloped leasehold
(7,554)

-Purchase of pipeline and facilities
(18,443)

-Acquisition and exploration of oil and gas property
(1,344,669)

(272,408)Proceeds from sale of equipment
40,800

173,795Proceeds from sale of oil and gas leases
17,208

-Advance made to Aztec Well Services, inc. wholly owned subsidiary of new parent entity
(592,952)

-Net cash used in investing activity
(1,905,610)

(423,417)Cash flow from financing activityProceeds of loan from parent entity/company officer/shareholder
100,000

-Proceeds of loans from parent entity and its UPDA-O subsidiary
174,165

-Proceeds of loan from other related party relationships
50,000

-Payment of loans from other related party relationshipProceeds of other loans
50,000

-Proceeds of issuanc of common stock to UPDA
1,000,000

-Payment of stock offering costs in cash
(40,000)

-Cash contribution on exchange of pref’d stock forconvertible notes

-

300,000Net cash provided by financing activity
1,334,165

300,000Net (decrease) in cash
(14,315)

(1,748,661)Cash
beginning of period
75,724

2,126,156Cash
end of period
$
61,409

$
377,495Non-cash financing transactions:Retirement of preferred shares on exchange forconvertible notes

$
-

$
(5,599,958)Credit to Additional Paid-in Capital for fair value ofconvertible notes issued in exchange forpreferred stock

$
-

$
4,599,999




See accompanying notes.




-6-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 isexploration and development of oil and gas property in the United States. Through December 31, 2005, we were in theexploration 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 PropertyDevelopment and Acquisition Corporation (“UPDA”).  After adjusting the previous quarter’s issuance to UPDAfor the July 25, 2007 10:1 reverse stock split and through subsequent transactions, UPDA’s interest hasincreased to 87% as of September 30, 2007 (See Note 5).

-7-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1-Organization, Operations and Significant Accounting Policies (continued)Basis of PresentationIn 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 ofSeptember 30, 2007 and the results of its operations, changes in stockholders’ deficit, and cash flows for thenine months periods ended September 30, 2007 and 2006, respectively. Although management believes thatthe disclosures in these consolidated financial statements are adequate to make the information presented notmisleading, certain information and footnote disclosures normally included in financial statements that havebeen prepared in accordance with accounting principles generally accepted in the United States of Americahave been condensed or omitted pursuant to the rules and regulations of the Securities ExchangeCommission.The results of operations for the three and nine months ended September 30, 2007 are not necessarilyindicative of the results that may be expected for the full year ending December 31, 2007. The accompanyingconsolidated financial statements should be read in conjunction with the more detailed consolidated financialstatements, and the related footnotes thereto, filed with the Company’s Annual Report on Form 10-KSB/A forthe year ended December 31, 2006 filed on April 30, 2007.We have incurred recurring losses from operations and have accumulated a deficit of $54,716,280 sinceinception. At September 30, 2007, we had negative working capital. Since inception, we have fundedoperations through the issuance of capital stock and debt. We plan to continue raising additional funds throughfuture 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 Oiland Gas Corp. (HTOG) and its 100% owned subsidiaries Heartland Oil and Gas, Inc., Heartland GasGathering, 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, wetranslate the financial statements to U.S. dollars in accordance with Statement 52 of the Financial AccountingStandards Board (FASB), Foreign Currency Translation. We translate monetary assets and liabilitiesdenominated in foreign currencies using the exchange rate prevailing at the balance sheet date. We includegains and losses arising on translation or settlement of foreign-currency-denominated transactions or balancesin the determination of income. Our primary foreign currency transactions are in Canadian dollars. We have notentered into derivative instruments to offset the impact of foreign currency fluctuations.Basic and Diluted Net Income (Loss) Per ShareWe compute net income (loss) per share in accordance with FASB Statement 128, Earnings per Share.Statement 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of theincome statement. We compute basic EPS by dividing net income (loss) available to common shareholders(numerator) by the weighted average number of shares outstanding (denominator) during the period. DilutedEPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stockmethod and convertible preferred stock using the if-converted method. In computing Diluted EPS, we use theaverage stock price for the period in determining the number of shares assumed to be purchased from theexercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

-8-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1-Organization, Operations and Significant Accounting Policies (continued)Oil and Gas PropertyWe utilize the full cost method to account for our oil and gas property. Accordingly, we capitalize all costassociated with acquisition, exploration and development of oil and gas reserves, including such cost asleasehold 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.We have depleted the capitalized cost, including estimated future cost to develop the reserves and estimatedabandonment cost, net of salvage, on the units-of-production method using estimates of proved reserves. Wedo 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 beuneconomical, 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 SECRegulation S-X, Rule 4-10 (c) (4), Limitation on capitalized costs. The ceiling test limits such cost to theestimated 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 thatcapitalized cost, less accumulated depletion and related deferred income tax, do not exceed an amount (theceiling) equal to the sum of: (A) The present value of estimated future net revenue computed by applyingcurrent prices of oil and gas reserves (with consideration of price changes only to the extent provided bycontractual arrangements) to estimated future production of proved oil and gas reserves as of the date of thelatest balance sheet presented, less estimated future expenditures (based on current cost) to be incurred indeveloping and producing the proved reserves computed using a discount factor of ten percent and assumingcontinuation of existing economic conditions; plus (B) the cost of property not being amortized; plus (C) thelower 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 withthe acquisition and evaluation of unproved property until we determine whether or not proved reserves can beassigned to the property. Until we make such a determination, we assess the property at least annually toascertain whether impairment has occurred, in accordance with FASB Statement 144, Accounting forImpairment of Long-Lived Assets. In assessing impairment we consider factors such as historical experienceand 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 byother parties. We recognize an impairment loss only if the carrying amount of an unproved property is notrecoverable from its undiscounted cash flow. We measure an impairment loss as the difference between thecarrying amount and the fair value of the asset. We add the amount of impairment assessed to the cost to beamortized subject to the ceiling test.We account for sales of proved and unproved property as adjustments of capitalized cost with no gain or lossrecognized, unless such adjustments would significantly alter the relationship between capitalized cost andproved 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 recordproperty and equipment at cost. We provide depreciation for office furniture & equipment on a straight linebasis at annual rates ranging from 20 percent to 50 percent per annum, and for gathering and surface facilitieson a straight-line basis over 20 years.

-9-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1-Organization, Operations and Significant Accounting Policies (continued)Long-Lived AssetsIn accordance with FASB Statement 144,Accounting for the Impairment or Disposal of Long-Lived Assets, we review the carrying valueof intangible assets and other long-lived assets, such as other properties and equipment, on a regular basis for the existence of facts orcircumstances that may suggest impairment. We recognize impairment when the sum of the expected undiscounted future cash flow isless than the carrying amount of the asset. We measure impairment losses, if any, as the excess of the carrying amount of the assetover its estimated fair value.Income TaxWe account for income tax in accordance with FASB Statement 109, Accounting for Income Taxes. Under the asset and liabilitymethod of Statement 109, we record deferred tax assets and liabilities for the estimated future tax consequences attributable todifferences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Wemeasure deferred tax assets and liabilities using enacted tax rates in effect for the year in which those temporary differences areexpected to be recovered or settled.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of Americarequires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reportingperiod. We believe that the estimates we utilize in preparing the financial statements are prudent and reasonable. Actual results maydiffer 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 makeestimates 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 contractedamounts that approximate fair value. Financial instruments that potentially subject us to concentrations of credit risk consist primarily ofcash in excess of the federally insured amount of $100,000. To date, we have not incurred a loss relating to this concentration of creditrisk.Stock-Based CompensationEffective January 1, 2006, we account for stock-based compensation based on the fair value of the options at the grant date asprovided by FASB Statement 123(R), Stock-Based Compensation. We record compensation expense for all share-based awardsgranted, and for awards modified, repurchased or cancelled. We will recognize compensation expense for outstanding awards for whichthe requisite service had not been rendered as of January 1, 2006, over the remaining service period using the compensation costcalculated for pro forma disclosure purposes under FASB Statement 123, adjusted for expected forfeitures. We have adoptedStatement 123(R) using a modified prospective application. Prior to January 1, 2006 we recognized employee compensation expensefor our stock options plan using the intrinsic value method of accounting. Under the terms of the intrinsic value method, compensationexpense was the excess, if any, of the quoted market price of the stock at the grant date, over the amount an employee must pay toacquire the stock. Under our Amended 2005 Stock Option Plan, we may grant up to a maximum of 4,000,000 shares of common stockto key employees and consultants. The options granted under the plan vest over four years except as stated otherwise in the individualgrants, and are for a term not exceeding 10 years.For the nine month periods ended September 30, 2007 and 2006, we expensed the fair value of options granted to non-employees,employees, officers and directors.

-10-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1-Organization, Operations and Significant Accounting Policies (continued)Major CustomersFor the nine months ended September 30, 2007, one customer, Enbridge Marketing (U.S.) LP, was responsible for purchasing 100% ofour natural gas sales.Asset Retirement ObligationsWe account for asset retirement obligations in accordance with the provisions of Statement 143 “Accounting for Asset RetirementObligations”. Statement 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which itincurs 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 Pronouncements:In May 2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections,” that applies to all voluntary changes inaccounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accountingprinciple, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it isimpracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, thisStatement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of theearliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance ofretained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period ratherthan being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change inaccounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adoptedprospectively from the earliest date practicable. SFAS 154 will be effective for the Company for fiscal year ended December 31, 2007.The Company does not anticipate that the adoption of SFAS No. 154 will have an impact on the Company’s overall results ofoperations or financial position.In February 2006, the FASB issued SFAS 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of FASBStatements No. 133 and 140,” that allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previouslyrecognized financial instrument is subject to a re-measurement (new basis) event, on an instrument-by-instrument basis, in cases inwhich a derivative would otherwise have to be bifurcated. It also eliminates the exemption from applying Statement 133 to interests insecuritized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. ThisStatement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins afterSeptember 15, 2006. The Company does not anticipate that the adoption of SFAS No. 155 will have an impact on the Company’soverall results of operations or financial position.In March 2006, the FASB issued SFAS 156, “Accounting for Servicing of Financial Assets-an amendment of FASB StatementNo. 140,” that applies to the accounting for separately recognized servicing assets and servicing liabilities. This Statement requires thatall separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. An entity shouldadopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. The Company does not anticipatethat the adoption of SFAS No. 156 will have an impact on the Company’s overall results of operations or financial position.

-11-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1-Organization, Operations and Significant Accounting Policies (continued)In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The Interpretation clarifies theway companies are to account for uncertainty in income tax reporting and filing and prescribes a consistent recognition threshold andmeasurement attribute for recognizing, derecognizing, and measuring the tax benefits of a tax position taken, or expected to be taken,on a tax return. The Interpretation is effective for fiscal years beginning after December 15, 2006, although early adoption is possible.The Company does not plan to adopt early and the Company is currently in the process of evaluating the impact, if any, the adoption ofthe Interpretation will have on the 2007 financial statements.In September 2006, the FASB issued SFAS 157, “Fair Value Measurements,” which defines fair value, establishes a framework formeasuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board havingpreviously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, thisStatement does not require any new fair value measurements. The adoption of SFAS No. 157 will not have an impact on theCompany’s overall results of operations or financial position.In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 158, “Employers’ Accounting for DefinedBenefit Pension and Other Postretirement Plans, an Amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”).SFAS No. 158 requires companies to report the funded status of their defined benefit pension and other postretirement benefit plans ontheir balance sheets as a net liability or asset as of December 31, 2006. The new standard does not address the accounting treatmentfor pension and postretirement benefits in the income statement. This will have no impact on the Company’s results of operations orfinancial position.In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for FinancialAssets and Financial Liabilities-Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to choose tomeasure eligible financial instruments and other items at fair value at specified election dates. A business entity shall report unrealizedgains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair valueoption may be applied instrument by instrument but only upon the entire instrument-not portions of the instrument. SFAS No. 159 iseffective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company does not anticipate thatthe adoption of SFAS No. 159 will have an impact on the Company’s overall results of operations or financial position.Note 2-Going ConcernWe have incurred significant losses since inception.  As of September 30, 2007 we have an accumulated deficit of $54,716,280, and anet loss for the nine months of $8,300,343.  At September 30, 2007, we had limited financial resources. Our continuation is dependentupon our ability to raise additional capital, to exploit our mineral holdings, and to generate sufficient revenue from our plannedoperations to enable us to attain and maintain profitable operations.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 beavailable to us when needed or, if available, that we can obtain it on commercially reasonable terms. If we are not able to obtain theadditional financing on a timely basis, we may be unable to conduct our operations as planned, and we may not be able to meet ourother obligations as they become due. In such event, we would be forced to scale down or perhaps even cease our operations.

-12-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 3-Oil and Gas PropertiesUndeveloped PropertiesWe own and operate nearly 700,000 acres in two areas in eastern Kansas: the south block, located on the Cherokee basin, where wehave established reserves and production; and the north block, located in the Forest City basin, where we hold significant leases whichexpire between 2007 and 2012.

Nine Months Ended

Year EndedUndeveloped Acreage


September 30, 2007

December 31, 2006Beginning Balance


$
1,688,889

$
1,776,322Acquisition of undeveloped acreage


7,554

63,732Less expired leases


(90,597)

(151,165)Total undeveloped properties


$
1,605,846

$
1,688,889


Developed Properties, Cherokee basinOur developed properties are located on an approximately 100,000 acre leasehold position located in the Cherokee basin, primarily inLinn and Miami counties, Kansas. We have 24 wells in four batteries producing gas across a 12 mile area of the Cherokee basin. Fromeast to west, these areas are named Jake (1 well), Lancaster (16 wells), Osawatomie (4 wells), and Beagle (3 wells). In June 2007 wecommenced a drilling program to further develop the Lancaster and Jake pilots. Six wells were drilled in the Lancaster area during thesecond quarter of 2007 and 5 of them were completed in the fourth quarter and are connected and producing at this time.  In the thirdquarter 2007, fourteen more wells were drilled and are awaiting completion and pipeline hook-up.  We have a dominant acreageposition in the Cherokee basin and are negotiating pipeline rights-of-way in and between these producing areas.

Nine Months Ended

Year EndedDeveloped Properties


September 30, 2007

December 31, 2006Beginning Balance


$
792,504

$
1,316,102Acquisition, exploration, drilling and lease and well equipment


1,344,669

322,595Less accumulated depletion


(120,527)

(175,842)Less plugging and abandonment costs


-

(228,064)Less impairment costs


-

(442,287)Total developed properties


$
2,016,646

$
792,504


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

Nine Months Ended

Year EndedPipeline and facilities


September 30, 2007

December 31, 2006Beginning Balance


$
2,521,670

$
2,332,155Acquisition of equipment


18,443

316,595Less depreciation


(102,295)

(127,080)Total pipeline and facilities


$
2,437,818

$
2,521,670




-13-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 4- Related Party Notes ReceivableNote Receivable AztecNote Receivable Aztec represents promissory notes received by the Company for a series of advances made to Aztec Well Services,Inc. (“Aztec”), a wholly-owned subsidiary of UPDA, totaling $592,952 between May 31 and June 30, 2007.  These unsecured notesbear interest at 5% per annum, with principal and interest receivable on demand.The notes receivable balance of $602,734 at September 30, 2007 includes accrued interest income earned of $9,782 to that date. Thenotes receivable balance of $602,734 has been presented as a long-term asset in Consolidated Balance Sheet of the Company atSeptember 30, 2007 based upon the ability and intent of Aztec to remit the amount due to the Company.Note Receivable CatlinNote Receivable Catlin consists of promissory note, dated August 1, 2007, received by the Company in exchange for the Companyissuing Common Stock to finance UPDA’s 60%-owned Catlin Oil and Gas, Inc. (“Catlin”), subsidiary for $400,000. This unsecured notebears interest at 5% per annum, with principal and interest receivable in full by or before August 1, 2010.  The notes receivable balanceof $403,288 at September 30, 2007 includes accrued interest income earned of $3,288 to that date.Note 5-Notes and loans payableParent entity/company officer/shareholderAs of September 30, 2007 and December 31, 2006, the amount due consists of the following:

Terms and to Whom Payable

September 30,

December 31,2007

2006On June 7, 2007 we borrowed $100,000 on a note bearing 8% interest, payable to Kamal Abdallah, President of UPDA. At September 30, 2007, this note, which is payable on demand, has an outstanding balance including accrued interest of $2,521.

$
102,521

$
-


Parent entity and its wholly-owned UPDA-O subsidiaryAs of September 30, 2007 and December 31, 2006, the amount due consists of the following:

Terms and to Whom Payable

September 30,

December 31,2007

2006Non interest bearing amounts due to UPDA, new parent entity of the Company

$
141,000

$
-Non interest bearing amounts due to UPDA-O subsidiary of UPDA

33,165

-Total

$
174,165

$
-




-14-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




Other related party relationships


As of September 30, 2007 and December 31, 2006, the amount due consists of the following:

Terms and to Whom Payable

September 30,

December 31,2007

2006A loan payable in the amount of $50,000 to Triple Crown Consulting, a minority owner in the Canyon Creek Oil and Gas, Inc. UPDA subsidiary, with interest accrued at 8% per annum. At September 30, 2007, this loan, which is payable on demand, has an outstanding balanceincluding accrued interest of $361.

$
50,361

$
-Other

-

68,554Total

$
50,361

$
68,554




Other notes and loans payable


As of September 30, 2007 and December 31, 2006, notes payable to related parties consist of the following:

Terms and to Whom Payable

September 30,

December 31,2007

2006A loan payable in the amount of $50,000 to RAKJ Holding, Inc. with interest accrued at 8% per annum. At September 30, 2007, this loan, which is payable on demand, has an outstanding balance including accrued interest of $361.  The shareholders of RAKJ Holdings, Inc. also provided a pledge of collateral in the form of a certificate of deposit for a line of credit toContinental Fuels, Inc., a subsidiary of UPDA
$
50,361
$
-


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 BaystarCapital 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 inconsideration of the issuance of convertible senior secured promissory notes (the “Notes”). The Notes matured on the earlier ofMarch 28, 2007 or the date of any subsequent financing in which we issue equity securities or other securities that could result in theissuance of equity securities (the “Maturity Date”), have no interest rate and reflect the full Note Principal Amount. The Notes weresecured by all of our assets, except that the Payees agreed to release security interests in assets located in the following Kansascounties in the event of a sale of those assets: Atchison, Brown, Doniphan, Jackson, Jefferson, Leavenworth, Nemaha andPottawatomie. We were permitted to prepay the Note Principal Amount in full and in cash at any time prior to the Maturity Date. OnMarch 28, 2007, we and the Payees extended the due date of the Notes to April 4, 2007. On April 4, 2007 the Notes were againextended to April 16, 2007.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 aQualified Financing, the Payees would convert approximately 81% of the Note Principal Amount into the additional securities issued inthe Qualified Financing on the same price and terms as the other investors in the Qualified Financing with the remaining balance of theNote Principle Amount being cancelled; provided, however, that if the Payees did not invest a total of at least $2,000,000 in theQualified Financing, then the Payees would not have the right to convert the Note Principal Amount into the Qualified Financing. In thisevent, the Bridge Amount would be converted into the securities issued in the Qualified Financing on the same price and terms as theother investors in the Qualified Financing and the Series B Amount would automatically be converted into a new preferred stock havingsubstantially similar terms as our Series B Preferred Stock, except that the rights contained in Article XIII of our Certificate ofDesignation, Preferences and Rights relating to the Series B Preferred Stock (the “Certificate”) would be deleted. A Qualified Financingis defined in the Notes as our issuance of new securities in an amount of at least $15,000,000.In addition, pursuant to the Notes, the Payees agreed to forbear collection of any liquidated damages or other amounts we owed underthe Registration Rights Agreement dated October 1, 2004, if any, and to waive payment of any such amounts if we completed aQualified Financing, regardless of whether the Payees participated in the Qualified Financing. Also, the Payees waived their right todeclare a Redemption Event under the Certificate, if any, through September 29, 2006.

-15-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Because of the preferred stock, exchanged for the Notes, SDS Capital Group Ltd. and BayStar Capital II L.P. were related parties to us.The Notes contained customary negative covenants, including a covenant that we were not to incur additional indebtedness, and theNotes 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) ofthe 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,characterized the above exchange of redeemable preferred stock for the convertible Notes as an extinguishment of the redeemablepreferred stock. The Notes were to be recorded at fair value. The fair value of the Notes were to be used to record an extraordinarygain or loss on the extinguishment of the preferred stock. We engaged a qualified valuation firm, which determined that the fair value ofthe Notes was $4,600,000 on September 29, 2006. This value resulted in a gain of $1,299,958, which we recorded during the yearended December 31, 2006.GAAP, as described in EITF Issue 00-27, paragraph 7, and EITF 98-5, paragraph 6, provided that if the conversion feature of the Noteswas beneficial to the holder (has intrinsic value), which it was, the intrinsic value is recorded as a reduction of the carrying amount ofthe Notes and an addition to paid-in capital. The Notes are convertible into common stock at a rate of four cents per share. Thecommon stock traded for nine cents per share on September 29, 2006, the closing date of the exchange. Therefore the conversion hadan intrinsic value of five cents per share. The Notes were convertible into 157,500,000 common shares. Therefore the conversionfeature had an intrinsic value of $7,875,000, which was in excess of the total proceeds received in exchange for the Notes. Thereforethe full fair value of the Notes was credited to additional paid-in capital during the year December 31, 2006 in conjunction withrecognition of the 1,299,958 gain on the conversion. We assigned an initial carrying value to the Notes of $1. We accreted interest onthe Notes up to their $6,300,000 face value over the 180 day life of the Notes. Interest expense of $6,296,446 resulting from accretingthe notes from a $1 value has been recorded for the six months ended June 30, 2007 related to these notes.The accounting described above is summarized as:

Initial Series B Preferred Stock

$
6,000,000Classification 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 Corporationon April 19, 2007, these notes were held by UPDA and have been extended to December 31, 2007.

-16-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Acquisition of Our Promissory Notes by UPDA and Five StarOn April 20, 2007, UPDA also closed a note purchase transaction (the “Note Purchase”) pursuant to the terms and conditions of a NotePurchase Agreement, dated April 19, 2007, between UPDA as the buyer and SDS Capital Group SPC, Ltd. and Baystar Capital II, L.P.(together the “Sellers”) whereby UPDA purchased four million seven hundred fifty-six thousand dollars ($4,756,000) in face amount ofour outstanding Convertible Senior Secured Promissory Notes (the “Notes”) for an aggregate purchase price of $1,500,000 in cash and26,260,504 restricted shares of the common stock of UPDA. Five Star purchased one million seven hundred twenty-nine thousand($1,729,000) in face amount of Notes.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 UPDA were convertible into 118,900,000 shares of our commonstock.  The Notes acquired by Five Star were convertible into 43,225,000 shares of our common stock.   In the event of a fullconversion of the Notes to shares of our common stock, UPDA 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 UPDA and Five Star’s agreement to extend the maturity date ofthe Notes from April 16, 2007 to December 31, 2007, we executed consents to the transfer of the Notes to UPDA and Five Star and theassignment by the Sellers of their security interests under an existing security agreement covering the Notes to UPDA and Five Star.UPDA entered into a second loan agreement with Sheridan for $3,250,000 on August 16, 2007, which is discussed in Note 9.On December 7, 2006 we also borrowed $65,000 on a note bearing 18% interest, payable to SDS Capital Group SPC, Ltd., one of ourtwo preferred stockholders. The maturity date of the note is March 28, 2007 and the note was subsequently repaid on January 31,2007.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. (“SDS”) and $57,500 was received from Baystar Capital II, L.P. (“Baystar”). $65,000 of these funds, plus interest of $1,820was 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. These notes were acquired by UPDA and Five Star through the Note Purchase transaction described above, and the maturitydate of these notes was extended to December 31, 2007 pursuant to the terms of that transaction.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 theDecember 7, 2006 note to SDS Capital Group SPC, Ltd. The maturity date of the new notes was March 28, 2007; however onMarch 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 Corporationon April 19, 2007, these notes were assigned to UPDA and were incorporated into the $4,756,000 notes described above.On April 20, 2007, Five Star Partners, LLC (“Five Star”) also closed a note purchase transaction (the “Note Purchase”) pursuant to theterms and conditions of a Note Purchase Agreement, dated April 19, 2007, between it as the buyer and SDS Capital Group SPC, Ltd.and Baystar Capital II, L.P. (together the “Sellers”) whereby it purchased $1,729,000 in face amount of our outstanding ConvertibleSenior Secured Promissory Notes (the “Notes”) for an aggregate purchase price of 21,008,404 restricted shares of the common stockof UPDA.On September 26, 2007, the Company and UPDA agreed to revise the terms of the Notes held by UPDA.  Pursuant to the revisedterms, UPDA agreed to convert the entire $4,756,000 face amount of the Notes held by them into 4,756,000 shares of our newlycreated Series B Convertible Preferred stock.  During the third quarter of 2007, Five Star presented $1,729,000 in face amount of Notesto the Company for conversion into 43,225,000 shares of common stock.

-17-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 6-Asset Retirement ObligationsWe account for asset retirement obligations in accordance with the provisions of Statement 143 “Accounting for Asset RetirementObligations”. Statement 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which itincurs 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.

Nine Months Ended

Year EndedSeptember 30, 2007

December 31, 2006Beginning asset retirement obligations


$
227,040

$
671,140Additions related to new property


-

-Plugging and well-site restoration of 64 wells


-

462,926Liabilities incurred


-

-Accretion


15,132

18,826Total asset retirement obligations


$
242,172

$
227,040


Note 7-Sale of Common Stock, Stock Options and WarrantsOptionsA summary of the changes in our common share purchase options is below:

September 30, 2007

December 31,2006Weighted



WeightedAverage



AverageExercise



ExerciseNumber

Price

Number

PriceBalance, beginning of year

372,500

$
6.10

480,500

$
8.40Granted

130,000

$
1.40

-ExercisedForfeited / Expired

(194,000)

$
(6.50)

(108,000)

$
(13.40)Balance, end of period

308,500

$
3.80

372,500

$
6.10


Additional information regarding options outstanding at September 30, 2007 is:

Outstanding

ExercisableWeightedaverageremaining

Weighted

VestedNumber of

contractual

average

Number of

Exerciseshares

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


WarrantsBelow is a summary of our warrant activity:

Exercise

ExpirationWarrants

Price

DatesOutstanding at December 31, 2006

49,765

$     38.40

2007Expired during the nine months ended September 30, 2007

(49,765)

$    (38.40)Outstanding at September 30, 2007

-




-18-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7-Sale of Common Stock, Stock Options and Warrants (continued)Reverse stock splitOn July 25, 2007, the Company’s previously announced 10:1 reverse stock split became effective.Acquisition of Our Common Stock by UPDAPursuant to the terms of a Stock Purchase Agreement dated April 19, 2007, by and between the Company and UPDA, a Nevadacorporation, UPDA agreed to purchase a total of 5,063,176 shares (the “Shares”) of our common stock in a private transaction with theCompany 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 UPDA of the aggregate purchase price and the transfer of the Shares by us to UPDA.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 aresult of the closing of the Stock Sale on April 20, 2007, UPDA owned 5,063,176 of the 9,736,878 shares of our common stock thatwere outstanding after such closing. Therefore, as of April 20, 2007, UPDA owned 52% of our issued and outstanding common stock.On April 23, 2007, subsequent to the closing of the Stock Sale, 333,333 shares of common stock were issued to Energy CapitalSolutions. The company entered into a letter agreement with Energy Capital Solutions (ECS) on May 31, 2006, with a document date ofMay 30, 2006.  The company extended this agreement with a First Amendment dated January 29, 2007.  Under the terms of theseagreements, ECS was eligible to receive 4% of the transaction proceeds in cash and 3% of the transactions proceeds in equity orHeartland stock according to the terms and timeline of the Potential Investor.The Stock Sale constituted a change of control transaction for us as UPDA owns a majority of our outstanding voting securities.Therefore, UPDA has the voting power to pass actions requiring shareholder approval and has the voting power to control the electionof directors to our board of directors.The Company is obligated under a series of employment offering letters, issued well prior to the UPDA Company common stockacquisition described above, to provide severance pay to certain key employees for a six month period after a change in the control ofthe Company and a material change in position has occurred. These employment obligations total approximately $60,000.  As ofSeptember 30, 2007 all of the obligations under these employment letters were paid.Unregistered Sales of Equity SecuritiesPursuant to the terms and conditions of the Note Purchase transaction whereby UPDA and Five Star acquired the Notes, the Registrantapproved the issuance of an aggregate of 542,800 shares of its common stock to SDS and Baystar as part of the consideration in thattransaction. Therefore, on July 27, 2007, the Registrant issued 373,446 shares of common stock to SDS and 169,354 shares toBaystar. The Company incurred a non cash charge, based on the trading price of its Common Stock on the date of issuance, forfacilitation fees incurred to these former convertible debt holders coincident to change in Company’s control, 52% ownership by UPDA.The shares of common stock issued to SDS and Baystar are restricted shares and were issued in a transaction exempt from theregistration requirements of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(2) of the Securities Actand Rule 506 of Regulation D there under and the Registrant affixed appropriate legends to the stock certificates so issued. The sharesissued to SDS and Baystar are subject to Rule 144 under the Securities Act and therefore generally cannot be resold for a period oftwelve months from the date of issuance. No general solicitations were made in connection with the transaction, and prior to makingany offer or sale, the Registrant had reasonable grounds to believe and believed that SDS and Baystar were capable of evaluating themerits and risks of the investment and were able to bear the economic risk of the investment.On July 31, 2007, the Registrant and Five Star, the holder of an aggregate of $1,729,000 of the outstanding Notes, agreed to amendthe terms of those Notes. Pursuant to the terms and conditions agreed to by the parties, the Registrant agreed to allow for theconversion of the Notes into shares of the Registrant’s common stock at their stated rate of $0.04 per common share. As a condition tothis agreement, Five Star has agreed to not hold at any time more than 9.9% of the outstanding common stock of the Registrant. FiveStar further agreed that it could not hereinafter demand payment of the principal amount of the Notes in cash. Furthermore, Five Staragreed to invest a minimum of $2,500,000 in the Registrant through the acquisition of additional shares of the Registrant’s commonstock from the Registrant at prices equal to the closing price of the Registrant’s common stock on the day prior to purchase, or $.85per share, whichever amount is greater. Five Star agreed to convert the notes and invest $2,500,000 in exchange for additional sharesof the Registrant’s common stock, and being able to convert the notes using 43,225,000 shares.  This was because the language of thenotes were questionable with regards to the conversion rate that was to be used in determining the total shares that were to beconverted due to the 10:1 July 25, 2007 reverse split, and this was what was negotiated and agreed to by both parties (43,225,000shares versus a reverse split adjusted 4,322,500 shares.). Five Star agreed to make this additional investment in the Registrant by orbefore 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 ofthe note.

-19-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7-Sale of Common Stock, Stock Options and Warrants (continued)On September 26, 2007, the Company and UPDA agreed to revise the terms of the Notes held by UPDA.  Pursuant to the revisedterms, UPDA agreed to convert the entire $4,756,000 face amount of the Notes held by them into 4,756,000 shares of our newlycreated Series B Convertible Preferred stock.  During the third quarter of 2007, Five Star presented $1,729,000 in face amount ofNotes to the Company for conversion into 43,225,000 shares of common stock.This transaction is recordable as a conversion of a debt instrument into an equity instrument 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 asconsideration versus the pre-split share amounts (for Five Star of 43,225,000 shares versus 4,322,500 shares, and for UPDA of118,900,000 versus 11,890,000 shares of common stock, assuming full conversion of preferred shares) multiplied by the July 25, 2007post-split value of $1.40 per share amounts to $204,277,500 (five Star of $54,463,500; and UPDA of $148,814,000).  Under EITF 06-6this amount would normally be required to be recorded in the Company’s Financial Statements as a charge in the Statement ofOperations as interest expense, with a corresponding credit to additional paid-in capital.  However, EITF No. 98-5, entitled “Accountingfor Convertible Securities with Beneficial Conversion Feature or Contingently Adjustable Conversion Rations,” further limits the amountto be recorded to the consideration received by the Company.  Five Star purchased the $1,729,000 convertible notes owed by theCompany directly from SDS and Bay Star.  The Company received no fresh cash proceeds from the transfer of these Companyconvertible notes payable from SDS and Bay Star to Five Star.  The Company received no other fresh cash proceeds from the transferof the Company convertible notes payable from SDS and Bay Star to UPDA.Accordingly, since the Company received no fresh proceeds from either Five Star or UPDA from the transfer of the convertible notes tothese entities, the Company has no amounts to be recorded for interest expense and a corresponding credit to additional paid-in capitalrelated 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 into43,225,000 shares of common stock.  Pursuant to the terms of the agreement described above, the Company issued 7,500,000 sharesof its common stock to Five Star as of September 30, 2007, with the remaining 35,725,000 shares to be issued in the future.  Theshares of common stock issued to Five Star are restricted shares and were issued in a transaction exempt from the registrationrequirements of the Securities Act pursuant to Section 4(2) thereof and Rule 506 of Regulation D there under. The shares issued toFive Star are subject to Rule 144 under the Securities Act and therefore generally cannot be resold for a period of twelve months fromthe date of issuance. However, the outstanding Notes of the Registrant converted by Five Star have been fully paid and outstanding fora period in excess of two years from the date of their issuance by the Registrant. No additional consideration is payable upon theconversion of the Notes to shares of our common stock. While the shares of common stock to be issued upon conversion of the Notesare restricted shares, the holders of the shares issued upon conversion may request the removal of any restrictive legends that wouldbe attached thereto in accordance with the provisions of Rule 144(k) under the Securities Act of 1933, as amended. The removal of anyrestrictive legends from the shares of common stock issued on conversion of the Notes will be dictated by the provisions of Rule 144(k).Designation and issuance of our Series B Convertible Preferred SharesOn September 26, 2007, the Company and UPDA agreed to revise the terms of the Notes held by UPDA.  Pursuant to the revisedterms, UPDA agreed to convert the entire $4,756,000 face amount of the Notes held by them into 4,756,000 shares of our newlycreated Series B Convertible Preferred stock. Therefore, the conversion rate of the Notes converted by UPDA was one share of SeriesB preferred stock for each one dollar of Notes converted. The 4,756,000 shares of Series B Convertible Preferred Stock were issued toUPDA on September 30, 2007 and all of the Notes held by UPDA were surrendered to the Company for cancellation. The shares ofSeries B Convertible Preferred Stock held by UPDA are convertible in to 118,900,000 shares of the Company’s common stock andUPDA 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 ourcommon stock are entitled to vote.Pursuant to the Certificate of Designations, Preferences and Rights for Series B Convertible Preferred Stock filed by the Company, theCompany authorized 5,000,000 shares of Series B Convertible Preferred Stock, par value $0.001 per share, for issuance. Each shareof the Series B Convertible Preferred Stock is convertible into twenty-five (25) shares of the Company’s common stock. Each share ofthe Series B Convertible Preferred Stock has a liquidation preference over our common stock up to a maximum of one (1) dollar perpreferred share. The shares of Series B Convertible Preferred Stock have the right to vote on an “as converted” basis in any matters forwhich the holders of our common stock are entitled to vote.Changes to the Our Board of DirectorsAs a condition to the closing of the Stock Sale, Messrs. Robert Poley, John Martin and Todd Mackintosh resigned as members of ourboard of directors on April 20, 2007. Mr. Philip Winner remained as the sole member of our board of directors. Mr. Winner, as theremaining board member, has appointed Messrs. Kamal Abdallah and Christopher McCauley to fill two of the vacancies on the board ofdirectors. The appointment of Messrs. Abdallah and McCauley to our board of directors became effective on May 13, 2007.

-20-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7-Sale of Common Stock, Stock Options and Warrants (continued)On July 27, 2007, Mr. Philip Winner resigned his position on the board of directors and, the board of directors of the Registrantapproved the appointment of Mr. Steven A. Fall to the board of directors to fill a vacancy thereon. Mr. Fall is also the Registrant’sInterim President.The Board of Directors of the Registrant currently consists of three members, Mr. Kamal Abdallah, Mr. Christopher McCauley andMr. Steven A. Fall.On July 27, 2007, the board of directors of the Registrant approved the appointment of Mr. Kamal Abdallah as the Chairman of theRegistrant’s board of directors. On July 27, 2007, the board of directors of the Registrant appointed Mr. Christopher McCauley to theposition of Secretary of the Registrant.Company shares issued to finance UPDA’s Catlin subsidiary oil property acquisition is evidenced by a promissory note receivable fromCatlin.On July 1, 2007, Catlin Oil and Gas Inc. entered a Purchase and Sale Agreement with Jilpetco Inc., Petro Pro, PKC Energy and JedMiesner for 93.75% of seller’s rights, title and interest in and to Properties, Leases, Wells, Equipment, and Contracts except RetainedInterest by Petro Pro of 6.25% of 8/8th’s working interest, with a net revenue interest of 0.04812500 and 1% of 8/8th’s overriding royaltyinterest   The purchase price was $3,600,000 together with 12,500,000 UPDA restricted shares of common stock, par value $0.001 pershare plus 4,000,000 Heartland Oil& Gas Corp restricted shares of common stock.  The number of shares of UPDA Common Stockand the number of shares of HOGC Common Stock was adjusted as of the date of closing to reflect a total payment of $800,000 inUPDA Common Stock and $400,000 in Heartland Common Stock.  The Heartland shares were issued on September 14, 2007 inexchange for a  long-term promissory note receivable from Catlin for $400,000 ( See Note 4).Issuance of Options by Our Board of DirectorsOn April 17, 2007, the board of directors of the Company authorized 1,300,000 options to be granted to certain directors and keyemployees. The options have an exercise price of $.14 per share and a three-year term. The options vested on the date of issuance.Mr. Philip Winner was granted 500,000 options and Mr. Robert Poley, Mr. Todd Mackintosh and Mr. John Martin were granted 166,667,166,667, and 166,666 options respectively. The remaining 300,000 options were granted to key employees.Note 8-Income TaxAt September 30, 2007, we had approximately $41,300,000 in pretax US federal and state net operating loss carry forwards, expiringthrough 2026. 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 carry forwards under Internal Revenue Code Section 382. We provide for deferredtax arising from temporary differences in the book and tax carrying amounts of assets and liabilities. Temporary differences ariseprimarily from differences in reporting stock-based compensation, intangible drilling and completion cost and oil and gas impairmentexpense. We have fully reserved the deferred tax assets that arise from such operating loss carry forwards and temporary differencesof approximately $15,901,000 at September 30, 2007, in the accompanying financial statements as follows.

September 30, 2007Net operationg loss deduction





$
15,901,000Valuation Allowance





(15,901,000)Net Deferred Tax Asset





$
-


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

September 30, 2007Federal statutory tax rate






34.0%State Tax Rate






4.5%Effective Tax Rate






38.5%Valuation Allowance






-38.5%Net Effective Tax Rate






-




-21-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 9-Other Related Party TransactionsConsulting AgreementsWe entered into management consulting agreements dated October 1, 2004, as amended, with a director for the payment ofmanagement fees of $7,500 CAD per month, for the three months ended June 30, 2006, he was paid $19,892 USD for managementservices under the terms of that agreement. For the six months ended June 30, 2006 he was paid $39,357 USD for managementservices.  The management consulting agreement was terminated on September 30, 2006.We entered into a consulting agreement for services on an hourly basis with our contract CFO. For the nine months ended September30, 2007 and September 30, 2006 he was paid $13,465 and $89,613, respectively for services rendered under this agreement. Heresigned his position on April 23, 2007.Effective January 1, 2006, we approved the payment of director’s fees for non-employee directors at the rate of $200 per hour.  For thenine months ended September 30, 2007 and nine months ended September 30, 2006 we incurred $4,810 and $168,308, respectivelyfor director’s fees. All non-employee directors resigned their positions on April 23, 2007.UPDA Relationship to Former and Current Convertible Debt Holders of the CompanyOn April 6, 2007 UPDA entered into a Loan Agreement with Sheridan Asset Management (“Sheridan”) in which Sheridan agreed tolend the Company $3,635,000 with an original issue discount of $908,750 based upon a 29.12% yield to maturity (“the Note”). TheCompany’s use of the $2,726,250 net proceeds from the subscription amount was (a) $1,000,000 to acquire 52% of Heartland Oil andGas’s (“Heartland”) outstanding common stock (the “Stock Sale”), (b) $1,500,000 for the note purchase transaction (the “NotePurchase”), $100,000 was used to pay the originator fee to the lender and closing costs, and the remainder was used by Heartland forworking capital. The note matures on April 6, 2008. This note is pursuant to the Loan agreement dated April 6, 2007.On April 6, 2007, UPDA issued Sheridan a warrant to purchase 2,234,382 fully paid and nonassessable shares of the Company’scommon 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 UPDA’s agreement with Sheridan, the Company’s two operating subsidiaries Canyon Creek andCatlin entered into Guarantee Agreements for the note, whereby the Company and its subsidiaries have pledged all their assets tosecure the amounts due to Sheridan. In addition, Kamal Abdallah, Chairman and CEO and Christopher McCauley, Vice President andGeneral Council have provided the lender with personal guarantees. The 50,631,764 shares of Heartland that are now owned by UPDAhave also been pledged as collateral for the amounts due to Sheridan.On April 20, 2007 UPDA closed the Note Purchase with SDS Capital Group and Bay Star Capital (together the “Sellers”) in whichUPDA purchased $4,756,000 in outstanding promissory notes of Heartland for an aggregate purchase price of $1,500,000 and26,260,504 restricted shares of common stock of UPDA. During April 2007, UPDA issued the 26,260,504 shares of its common stock toSDS Capital and Bay Star Capital.Five Star currently holds 3,090,000 shares of Class B Convertible Preferred Stock convertible into 61,800,000 shares of Common Stockof UPDA.Readers of the Company’s current consolidated financial statements herein should consult the most recent Form 10QSB or 10KSB onfile with the SEC for a better understanding of the Company’s current financial status.Secured Sheridan borrowing by UPDA and its subsidiaries under second loan agreement with restrictive covenant.

-22-




Heartland Oil and Gas Corp.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


On August 16, 2007, UPDA and its UPDA-O, Heartland, Catlin, Canyon Creek, and Aztec subsidiaries entered into a second LoanAgreement with Sheridan (the “Holder”) for $3,250,000. The proceeds of the loan were used to complete the Palo Pinto acquisition.The outstanding Principal Amount under the Loan shall be due and payable by the Company, in thirty-six (36) consecutive equalinstallments in the amount of $90,278, due on each Settlement Date.  The Company shall pay interest on the unpaid Principal Amountof 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 the Company to the Holder, the Company 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 andCEO and Christopher McCauley, Vice President and General Council have provided the lender with personal guarantees. The SeniorSecured Promissory Note dated August 16, 2007 under this second loan agreement contains certain negative covenants to be met bythe Company, which include : limitations on dividends and distribution and repurchase of Company common stock other thandistribution to the Company by its wholly owned subsidiary; limits on sale, transfer and disposal of Company assets except for sale byUPDA of Catlin assets to Heartland pursuant to the term of purchase agreement; issuance of more than $250,000 in fair value at anytime in common stock or securities exchangeable for, convertible into or exercisable for common stock of the Company; incur anycapital expense in excess of $500,000; consummate any merger or acquisition except on terms satisfactory to Sheridan; maintenanceby the Company of a cash flow coverage ratio. (See Note 5.)As of September 30, 2007 and subsequent thereto through the date of  the issuance of theses financial statements, UPDA and itssubsidiaries described in the preceding paragraph were and have remained in compliance with all of the covenant describedconcerning the second loan agreement.Note 10-Future CommitmentsSale of Royalty Interests/LeasesOn September 6, 2007, the company sold various leases in Nemaha County, Kansas to Noble Petroleum, Inc. for total of $17,208. Thecompany also retains and expects a one thirty second (1/32) over-riding royalty interest of oil, gas and mineral revenues which thecompany leases to Noble Petroleum, Inc.  The Company realized a gain on sale of these leases of $17,208 as the cost of the leaseswas previously written off.Note 11-Subsequent EventsOn October 4, 2007, the company sold various leases in Nemaha County, Kansas to Noble Petroleum, Inc. for total of $138,536. Thecompany retained and expects a one thirty second (1/32) over-riding royalty interest of oil, gas and mineral revenues from the abovementioned leases.  The Company will realize a gain on sale of these leases of $138,536 in the fourth quarter of 2007 as the cost of theleases was previously written off.During the third quarter of 2007, Five Star presented $1,729,000 in face amount of Notes to the Company for conversion into43,225,000 shares of common stock.  Pursuant to the terms of the agreement described in Note 7, the Company issued 7,500,000shares of its common stock to Five Star as of September 30, 2007, with the remaining 35,725,000 shares to be issued in the future.The Company issued an additional 9,025,000 shares of its common stock to Five Star in October 2007.

-23-


Item 2.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThis discussion reports material changes from December 31, 2006 through September 30, 2007, as well as other information. Weencourage the reader to also read Management’s Discussion and Analysis of Financial Condition and Results of Operations in ourAnnual Report on Form 10-KSB for the period ended December 31, 2006.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-lookingstatements 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 knownand unknown risks, uncertainties and other factors, including the risks enumerated in the section entitled “Risk Factors”, that may causeour actual results or the actual results in our industry, of our levels of activity, performance or achievement to be materially differentfrom 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 update any of the forward-looking statements to conform these statements to actual results.Overview and OutlookHeartland Oil and Gas Corporation is an oil and gas company primarily engaged in exploration, development, and sale of Coal BedMethane (“CBM”) in the Cherokee basin and Forest City basin of eastern Kansas. Heartland Oil and Gas Corporation holds our interestin nearly 1 million acres in eastern Kansas. We incorporated in Nevada in 1998. Heartland Gas Gathering LLC, our wholly-ownedaffiliate, is responsible for gas sales and operation of our pipeline and associated facilities. Heartland Oil and Gas, Inc., our wholly-owned subsidiary, operates our project areas in eastern Kansas.Our website is located at http://heartlandoilandgas.com. The website can be used to access recent news releases and Securities andExchange Commission (SEC) filings, our Annual Report, Proxy Statement, Board committee charters, code of business conduct andethics, and other items of interest. SEC filings, including supplemental schedules and exhibits, can also be accessed free of chargethrough the SEC website at http://www.sec.gov. The information on our website, other links contained in our website and our websiteare not incorporated into this Report.By the end of 2005 we contracted to sell our gas and committed funds to construct a 5.5 mile gas gathering line and processing plant toinitiate gas sales from Lancaster, our largest battery. We initiated continuous gas sales in February 2006. Gas from the other threebatteries is being vented while awaiting pipeline hook-up. A battery is a well or group of wells and associated production facilities in onegeneral area.Lancaster is currently producing approximately 300 thousand cubic feet of gas per day (“Mcfgpd”). Sales average approximately 225Mcfgpd net of fuel gas, shrinkage, dehydration, and carbon dioxide extraction necessary to get the gas to sales quality. Afterprocessing, the gas delivered to the sales line averages 1006 million British thermal units per thousand cubic feet. The system andfacilities are sized to support production growth from Lancaster, the adjacent batteries currently venting gas, and future developmentdrilling between existing project areas. The adjacent batteries are currently venting approximately 200 Mcfgpd.Liquidity and Capital ResourcesOn April 23, 2007, the Registrant completed the sale of 5,063,176 shares of its common stock to UPDA in a private transaction withgross proceeds to the Registrant from the sale equaling $1,000,000 (the “Stock Sale”). The Stock Sale was pursuant to the terms andconditions of a Stock Purchase Agreement, dated April 19, 2007, between the Registrant and UPDA.We have incurred recurring losses from operations. Our continuation is dependent upon a successful program of acquisition andexploration, and achieving a profitable level of operations. We will need to raise approximately $10 million additional financing toexecute our business plan. The issuance of additional equity securities by us would result in a significant dilution in the equity interestsof our current stockholders. Obtaining loans, assuming those loans would be available, would increase our liabilities and future cashcommitments. We cannot assure that we will be able to obtain further funds we desire for our continuing operations or, if available, thatfunds can be obtained on commercially reasonable terms. If we are not able to obtain additional financing on a timely basis, we wouldcease our operations.

-24-


Results of Operations for the Periods Ended September 30, 2007 and 2006.RevenueNatural Gas SalesNatural gas sales for the three months ended September 30, 2007 were $94,287 compared to sales of $101,411 for the three monthsended September 30, 2006. The decrease of $7,124 was the result of lower prices. Natural gas sales for the nine months endedSeptember 30, 2007 were $323,997 compared to sales of $269,860 for the nine months ended September 30, 2006. This increase of$54,137 was the result of higher volume partially off set by lower prices. We had our first production on February 18, 2006 therefore,the nine months ended September 30, 2006 represents only 224 days of production, versus 272 days of production for 2007.

Three Months Ended

Nine Months EndedSeptember 30,

September 30,

(Decrease)

September 30,

September 30,

(Decrease)2007

2006

Increase

2007

2006

IncreaseMCF Volume

16,966

18,748

(1,782)

51,838

47,483

4,355Average Price

$
5.56

$
5.41

$
0.15

$
6.25

$
5.68

$
0.57Total Revenue

$
94,287

$
101,411

$
(7,124)

$
323,997

$
269,860

$
54,137


Compression and transportation revenueCompression and transportation revenue represents the fees charged to our royalty owners for their proportionate share of these costs;the revenue and fees associated with Heartland Oil and Gas Corp. have been eliminated on consolidation. Compression andtransportation revenue for three months ended September 30, 2007 and September 30, 2006 was $3,983 and $6,124, respectively.Compression and transportation revenue for nine months ended September 30, 2007 and September 30, 2006 was $15,831 and$16,375, respectively.  The decline represents reduced billable expenses to the royalty holders.Operating expense

Three Months Ended

Nine Months EndedSeptember 30, 2007

September 30, 2006

September 30, 2007

September 30, 2006Direct expense



$
96,343

$
115,712

$
284,296

$
329,659Exploration expense, expired leases


55,181

12,259

94,235

136,625Depreciation, depletion & accretion


89,581

112,903

281,774

314,682Share based compensation


14,916

92,673

34,054

325,625General and administrative


304,329

275,249

778,964

1,005,122Total operating expense


$
560,350

$
608,796

$
1,473,323

$
2,111,713


Direct expense is the cost associated with operating producing wells and production taxes associated with the gas sales. Directexpense for the three months ended September 30, 2007 was $96,343, a decrease of $19,369 from $115,712 for the three monthsended September 30, 2006. This decrease was due to lower workover costs incurred during the three months ended September 30,2007. Direct expense for the nine months ended September 30, 2007 was $284,296, a decrease of $45,363 from the same periodended September 30, 2006 of $329,659. This decrease was attributable, in part, to lower workover costs on the producing wells for thenine months ended September 30, 2007.Exploration expense represents the cost of expired leases. The cost of expired leases for the three months ended September 30, 2007was $55,181, as compared to a cost of $12,259 for the three months ended September 30, 2006. The cost of expired leases for thenine months ended September 30, 2007 was $94,235, as compared to a cost of $136,625 for the nine months ended September 30,2006. The higher costs in 2006 were the result of more leases expiring in that nine month period.Depreciation, depletion and accretion expense for the three months ended September 30, 2007 was $89,581, compared to $112,903for the three months ended September 30, 2006. During the nine months ended September 30, 2007 and September 30, 2006, theexpense was $281,774 and $314,682 respectively. The decrease in expense is due to a reduction in depletion expense.Share based compensation for the three months ended September 30, 2007 was $14,916, compared to $92,673 for the three monthsended September 30, 2006. During the nine months ended September 30, 2007 and September 30, 2006, the expense was $34,054and $325,625 respectively. The decrease occurred because there were no new options issued during the period of June 10, 2005 toApril 25, 2007.

-25-


General and administrative expenses for the three months ended September 30, 2007 was $304,329, compared to $275,249 for thethree months ended September 30, 2006. The increase was mainly the result of overall increase in rent expense and professionalexpenses in the amount of $29,080. During the nine months ended September 30, 2007 and September 30, 2006, the expense was$778,964 and $1,005,122 respectively. The decrease was a result of reduction in overall administrative expenses of $226,158.Interest IncomeInterest income for the three months ended September 30, 2007 and September 30, 2006 was $10,700 and $5,171 respectively. Fornine months ended September 30, 2007 interest income was $13,073 and for the nine months ended September 30, 2006 it was$17,452. This decrease in the nine months ended September 30, 2007 was the result of the drop in our cash position during the sametime period.Interest expenseInterest expense for the three months ended September 30, 2007 was $3,243 compared to no interest expense for the three monthsended September 30, 2006. Interest expense for the nine months ended September 30, 2007 was $6,301,509 compared to no interestexpense for the nine months ended September 30, 2006. Interest expense in the amount of $6,296,446 resulted from the effect of theconversion of $6.3 million of Preferred stock to convertible debt. The value of the debt on the date of conversion was $1 with thebalance being accreted up to the face value of $6.3 million over 180 days, principally during the three months ended March 31, 2007.Stock based facilitation fees incurred to former convertible debt holdersPursuant to the terms and conditions of the Note Purchase transaction whereby UPDA and Five Star acquired the Notes, the Registrantapproved the issuance of an aggregate of 542,800 shares of its common stock to SDS and Baystar as part of the consideration in thattransaction. Therefore, on July 27, 2007, the Registrant issued 373,446 shares of common stock to SDS and 169,354 shares toBaystar. The Company incurred a non cash charge, based on the trading price of its Common Stock on the date of issuance, forfacilitation fees incurred to these former convertible debt holders coincident to change in Company’s control, 52% ownership by UPDA.Item 3.	Quantitative and Qualitative Disclosures about Market RiskWe conduct no hedging activity. We have no derivative contracts.Item 4.	Controls and ProceduresAs required by Rule 13a-15 under the Exchange Act, we have carried out an evaluation of the effectiveness of the design and operationof our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report, being September 30,2007. This evaluation was carried out under the supervision and with the participation of our company’s management, including ourcompany’s chief executive officer and chief financial officer. Based upon that evaluation, our company’s chief executive officer and chieffinancial officer concluded that our company’s disclosure controls and procedures are effective as of the end of the period covered bythis report.Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to bedisclosed in our company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, withinthe time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that information required to be disclosed in our company’s reports filedunder the Exchange Act is accumulated and communicated to management, including our Company’s president and chief executiveofficer as appropriate, to allow timely decisions regarding required disclosure.

-26-




Part II-Other Information


Item 1.	Legal ProceedingsOn September 6, 2007, the Company’s Motion for Conversion to Chapter 60 and for Trial Continuance came on for hearing in theDistrict Court of Miami County, Kansas and was granted. The trial scheduled for September 6, 2007 was rescheduled. This is an actionfile by plaintiffs seeking to evict Heartland from the land on which its compressor is located in Kansas. In consideration of this on-goingcase in Kansas, the Company has already located a new site to which the Company can move these facilities at nominal expensesshould that becomes necessary.Item 1A.	Risk FactorsMuch of the information included in this registration statement includes or is based upon estimates, projections or other “forward lookingstatements”. Such forward looking statements include any projections or estimates made by us and our management in connection withour business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in goodfaith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimesmaterially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.Those forward-looking statements also involve certain risks and uncertainties. Factors, risks and uncertainties that could cause orcontribute to such differences include those specific risks and uncertainties discussed below and those discussed in our Form 10-KSBAnnual Report for the year ended December 31, 2006. The cautionary statements made in this document should be read as beingapplicable to all related forward-looking statements wherever they appear in this document.Our common shares are considered speculative during the development of our new business operations. Prospective investors shouldconsider carefully the risk factors set out below.Risks Related To Our BusinessWe have had negative cash flow from operations and if we are not able to obtain further financing our business operations will fail.To date we have had negative cash flow from operations and we have been dependent on sales of our equity securities and debtfinancing to meet our cash requirements and have incurred net losses totaling $8,300,343 for the nine months ended September 30,2007 and $1,455,970 for the year ended December 31, 2006. We have cumulative net losses of $54,716,280 from inception toSeptember 30, 2007. As of September 30, 2007 we had negative working capital. To continue our operations, we need additionalfinancing. We will also need new capital to pay for the continued exploration and development of our properties. Such outside capitalmay include the sale of additional stock and/or commercial borrowing. Capital may not continue to be available if necessary to meetthese continuing development costs or, if the capital is available, it may not be on terms acceptable to us. The issuance of additionalequity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercialloans, assuming those loans would be available, will increase our liabilities and future cash commitments.If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we will be unable to continue our business,the result of which would be that our stockholders would lose some or all of their investment.

-27-


A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction inour ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in theprice of our common stock could be especially detrimental to our liquidity and our continued operations. Any reduction in our ability toraise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effecton our business plans and operations, including our ability to develop new products and continue our current operations. If our stockprice declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.If we issue additional shares in the future this will result in dilution to our existing stockholders.Our Certificate of Incorporation authorizes the issuance of 900,000,000 shares of common stock and 100,000,000 shares of preferredstock. Our board of directors has the authority to issue additional shares up to the authorized capital stated in the certificate ofincorporation. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provideadditional financing in the future. The issuance of any such shares may result in a reduction of the book value or market price of theoutstanding shares of our common stock. Given our current stock price and our capital requirements, if we do issue any such additionalshares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders.We have a limited operating history and if we are not successful in continuing to grow our business, we may have to scale back or evencease our ongoing business operations.We have a limited history of revenues from operations and have limited tangible assets. We have yet to generate positive earnings andthere can be no assurance that we will ever operate profitably. Our company has a limited operating history and must be considered inthe development stage. Our success is significantly dependent on a successful acquisition, drilling, completion and production program.Our company’s operations are subject to all the risks inherent in the establishment of a developing enterprise and the uncertaintiesarising from the absence of a significant operating history. We may be unable to locate recoverable reserves or operate on a profitablebasis. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of theirinvestment in our company.Acreage expirationsTypical of an oil and gas lease, our leases have an expiration date. If our leases are not drilled prior to expiration, our leases willterminate. We have the option to renew much of our acreage, but that will require additional capital.Actual quantities of recoverable oil and gas reserves and future cash flow from those reserves, future production, oil and gas prices,revenue, taxes, development expenditures and operating expenses most likely will vary from estimates.Estimating accumulations of oil and gas is complex. The process relies on interpretations of available geologic, geophysical,engineering and production data. The extent, quality and reliability of this data can vary. The process also requires certain economicassumptions, such as oil and gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds, some ofwhich are mandated by the SEC. The accuracy of a reserve estimate is a function of:

•

quality and quantity of available data;•

interpretation of that data; and•

accuracy of various mandated economic assumptions.


Any significant variance could materially affect the quantities and present value of our reserves. In addition, we may adjust estimates ofproved reserves to reflect production history, results of development and exploration and prevailing oil and gas prices.In accordance with SEC requirements, we base the estimated discounted future net cash flow from proved reserves on prices andcosts on the date of the estimate. Actual future prices and costs may be materially higher or lower than the prices and costs as of thedate of the estimate.The loss of key personnel could adversely affect our business. We depend to a large extent on the efforts and continued employment ofour executive Management team and other key personnel.

-28-


The loss of the services of these or other key personnel could adversely affect our business, and we do not maintain key maninsurance on the lives of any of these persons. Our drilling success and the success of other activities integral to our operations willdepend, in part, on our ability to attract and retain experienced geologists, engineers, landmen and other professionals. Competition formany of these professionals is intense. If we cannot retain our technical personnel or attract additional experienced technical personnel,our ability to compete could be harmed.As many of our properties are in the exploration and development stage we cannot assure that we will establish commercial discoverieson those properties.Exploration for economic reserves of oil and gas is subject to a number of risk factors. Many properties that are explored are ultimatelynot developed into producing oil and/or gas wells. Many of our properties are in the exploration and development stage and are withoutproved reserves of oil and gas.The potential profitability of oil and gas ventures depends upon factors beyond our control.The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices andmarkets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or anycombination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments.Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have becomeincreasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or otherdeleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, productionfrom any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gaswhich may be acquired or discovered will be affected by numerous factors beyond our control. These factors include the proximity andcapacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowableproduction and environmental protection. These factors cannot be accurately predicted and the combination of these factors may resultin our company not receiving an adequate return on invested capital.Competition in the oil and gas industry is high. We cannot assure that we will be successful in acquiring leases we wish to acquire.The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil andgas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a highdegree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, aswell as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will be completed. Ourbudget anticipates our acquisition of additional acreage in the Cherokee basin. This acreage may not become available or if it isavailable for leasing, that we may not be successful in acquiring the leases. There are other competitors that have operations in theCherokee basin and the presence of these competitors could adversely affect our ability to acquire additional leases.Acquisitions are subject to the uncertainties of evaluating recoverable reserves and potential liabilities.We expect that our future growth will be dependent in part on acquisitions. Successful acquisitions require an assessment of a numberof factors, many of which are beyond our control. These factors include recoverable reserves, exploration potential, future oil andnatural gas prices, operating costs, production taxes and potential environmental and other liabilities. Such assessments are inexactand their accuracy is inherently uncertain. In connection with our assessments, we perform a review of properties which we believe isgenerally consistent with industry practices. However, such a review will not reveal all existing or potential problems. In addition, ourreview may not allow us to become sufficiently familiar with the properties, and we do not always discover structural, subsurface andenvironmental problems that may exist or arise. Our review prior to signing a definitive purchase agreement may be even more limited.We generally are not entitled to contractual indemnification for pre-closing liabilities, including environmental liabilities, on acquisitions.Often, we acquire interests in properties on an “as is” basis with limited remedies for breaches of representations and warranties. Ifmaterial breaches are discovered by us prior to closing, we could require adjustments to the purchase price or if the claims aresignificant, we or the seller may have a right to terminate the agreement. We could, however, fail to discover breaches or defects priorto closing and incur significant unknown liabilities, including environmental liabilities, or experience losses due to title defects, for whichwe would have limited or no contractual remedies or insurance coverage.There are risks in acquiring producing properties, including difficulties in integrating acquired properties into our business, additionalliabilities and expenses associated with acquired properties, diversion of Management attention, and costs of increased scope,geographic diversity and complexity of our operations.

-29-


Increasing our reserve base through acquisitions is an important part of our business strategy. Our failure to integrate acquiredbusinesses successfully into our existing business, or the expense incurred in consummating future acquisitions, could result in ourincurring unanticipated expenses and losses. In addition, we may have to assume cleanup or reclamation obligations or otherunanticipated liabilities in connection with these acquisitions. The scope and cost of these obligations may ultimately be materiallygreater than estimated at the time of the acquisition.In connection with future acquisitions, the process of integrating acquired operations into our existing operations may result inunforeseen operating difficulties and may require significant Management attention and financial resources that would otherwise beavailable for the ongoing development or expansion of existing operations. Possible future acquisitions could result in our incurringadditional debt, contingent liabilities and expenses, all of which could have a material adverse effect on our financial condition andoperating results.Oil and gas operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excessof those anticipated causing an adverse effect on us.Oil and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including lawsregulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations arealso subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating thedesign and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to beconducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, orlocal authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliancewith such laws may cause substantial delays, or require capital outlays in excess of those anticipated, thus causing an adverse effecton us. Additionally, we may be subject to liability for pollution or other environmental damages which we may elect not to insure againstdue to prohibitive premium costs and other reasons. To date we have not been required to spend any material amount on compliancewith environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain ouroperations.Exploration and production activity is subject to certain environmental regulations which may prevent or delay our operations.In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating toenvironmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delaythe commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect onour operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, waterdischarges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facilitysites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changedand we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us anydifferently or to any greater or lesser extent than other companies in the industry.We believe that our operations comply, in all material respects, with all applicable environmental regulations. However, we are not fullyinsured against all possible environmental risks.

-30-


Exploratory drilling involves many risks. We may become liable for pollution or other liabilities which may have an adverse effect on ourfinancial position.Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, poweroutages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor, andother risks are involved. We may become subject to liability for pollution or hazards against which we cannot adequately insureor which we may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position andoperations.Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations which may limit a stockholder’sability to buy and sell our stock.Our stock is a penny stock. The U.S. Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “pennystock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practicerequirements on broker-dealers who sell to persons other than established customers and “accredited investors” as defined inRegulation D promulgated under the Securities Act of 1933, as amended. The term “accredited investor” refers generally to institutionswith assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or$300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwiseexempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides informationabout penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer withcurrent bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction andmonthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offerquotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior toeffecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the pennystock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make aspecial written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s writtenagreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in thesecondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the abilityof broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketabilityof our common stock.NASD sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.In addition to the “penny stock” rules described above, the NASD has adopted rules that require that in recommending an investment toa customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior torecommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts toobtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretationsof these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at leastsome customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our commonstock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

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


On July 31, 2007, the Company and Five Star Partner’s, LLC (“Five Star”), the holder of an aggregate of $1,729,000 of the outstandingConvertible Senior Secured Promissory Notes (the “Notes”) of the Company, agreed to amend the terms of those Notes. Pursuant tothe terms and conditions agreed to by the parties, the Company agreed to allow for the conversion of the Notes into shares of theCompany’s common stock at their stated rate of $0.04 per conversion share. As a condition to this agreement, Five Star has agreed tonot hold at any time more than 9.9% of the outstanding common stock of the Company. Five Star further agreed that it could nothereinafter demand payment of the principal amount of the Notes in cash. 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 pricesequal to the closing price of the Company’s common stock on the day prior to purchase, or $.85 per share, whichever amount isgreater. Five Star agreed to make this additional investment in the Company by or before December 31, 2007.During the third quarter of 2007, Five Star presented $1,729,000 in face amount of Notes to the Company for conversion into43,225,000 shares of common stock.  Pursuant to the terms of the agreement described above, the Company issued 7,500,000 sharesof its common stock to Five Star as of September 30, 2007, with the remaining 35,725,000 shares to be issued in the future.  Theshares of common stock issued to Five Star are restricted shares and were issued in a transaction exempt from the registrationrequirements of the Securities Act pursuant to Section 4(2) thereof and Rule 506 of Regulation D there under. The shares issued toFive Star are subject to Rule 144 under the Securities Act and therefore generally cannot be resold for a period of twelve months fromthe date of issuance. However, the outstanding Notes of the Registrant converted by Five Star have been fully paid and outstanding fora period in excess of two years from the date of their issuance by the Registrant. No additional consideration is payable upon theconversion of the Notes to shares of our common stock. While the shares of common stock to be issued upon conversion of the Notesare restricted shares, the holders of the shares issued upon conversion may request the removal of any restrictive legends that wouldbe attached thereto in accordance with the provisions of Rule 144(k) under the Securities Act of 1933, as amended. The removal of anyrestrictive legends from the shares of common stock issued on conversion of the Notes will be dictated by the provisions of Rule 144(k).

-31-


Issuance of Our Preferred Stock to UPDAOn September 26, 2007, the Company and UPDA agreed to revise the terms of the Notes held by UPDA.  Pursuant to the revisedterms, UPDA agreed to convert all of the $4,756,000 face amount of the Notes held by them into 4,756,000 shares of our newly createdSeries B Convertible Preferred stock. Therefore, the conversion rate of the Notes converted by UPDA was one share of Series BPreferred stock for each one dollar of Notes converted. The 4,756,000 shares of Series B Convertible Preferred Stock were issued toUPDA on September 30, 2007 and all of the Notes held by UPDA were surrendered to the Company for cancellation. The shares ofSeries B Convertible Preferred Stock held by UPDA are convertible in to 118,900,000 shares of the Company’s common stock andUPDA 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 ourcommon stock are entitled to vote.Pursuant to the Certificate of Designations, Preferences and Rights for Series B Convertible Preferred Stock filed by the Company, theCompany authorized 5,000,000 shares of Series B Convertible Preferred Stock, par value $0.001 per share, for issuance. Each shareof the Series B Convertible Preferred Stock is convertible into twenty-five (25) shares of the Company’s common stock. Each share ofthe Series B Convertible Preferred Stock has a liquidation preference over our common stock up to a maximum of one (1) dollar perpreferred share. The shares of Series B Convertible Preferred Stock have the right to vote on an “as converted” basis in any matters forwhich the holders of our common stock are entitled to vote.Item 3.	Defaults upon Senior Securities.None.Item 4.	Submission of Matters to a Vote of Security Holders.NoneItem 5.	Other Information.NoneItem 6.	Exhibits.

Exhibit No.
Description3.1
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
Bylaws of Adriatic Holdings Ltd. Incorporated by reference to our Form SB-2 Registration Statement filed with the Securities and Exchange Commission on October 23, 2001.3.3
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 B Convertible Preferred Stock, effective September 30, 2007. Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2007.3.6
Certificate of Amendment to Articles of Incorporation effective July 18, 2007. Incorporated by reference to our Form 14C Definitive Information Statement filed with the Securities and Exchange Commission on July 3, 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, 2005.31.1
Certification of Chief Executive Officer (pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.**31.2
Certification of Chief Financial Officer (pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended **32.1#
Certification of Chief Executive Officer (pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350)) **32.2#
Certification of Chief Financial Officer (pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350)) ****
Filed herewith#
This certification “accompanies” the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company 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-Q), irrespective of any general incorporation language contained in such filing.




-32-




Signatures


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

HEARTLAND OIL AND GAS CORP.(Registrant)Date: November 14, 2007
/s/ Steven A. FallChief Executive Officer and President




-33-


Exhibit 31.1

Certification of Chief Executive OfficerPursuant to Section 302 of Sarbanes Oxley Act of 2002


I, Steven A. Fall, President, Chief Executive Officer, and Director certify that:1. I have reviewed this September 30, 2007 report on Form 10-QSB of Heartland Oil and Gas Corp.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleading withrespect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flow of the registrant as of, and for, the periods presented in this annualreport;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a - 15(e) and 15d - (e) and internal control over financial reporting (as defined in Exchange Act Rules13a - 15(f) and 15d - 15(f)) for the registrant and have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularlyduring the period in which this annual report is being prepared;b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designated underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions abutthe effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internal control overfinancial reporting.5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information and haveidentified for the registrant’s auditors any material weaknesses in internal controls; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal controls over financial reporting.

/s/ Steven A. FallNovember 14, 2007
Steven A. FallPresident, Chief Executive Officer, and Director




-34-




Exhibit 31.2




Certification of Chief Financial OfficerPursuant to Section 302 of Sarbanes Oxley Act of 2002


I, Steven A. Fall, Chief Financial Officer, and Director certify that:1. I have reviewed this September 30, 2007 report on Form 10-QSB of Heartland Oil and Gas Corp.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleading withrespect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flow of the registrant as of, and for, the periods presented in thisannual report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - (e) and internal control over financial reporting (as defined inExchange Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;b) designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesignated under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions abut the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based onsuch evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internalcontrol over financial reporting.5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information andhave identified for the registrant’s auditors any material weaknesses in internal controls; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal controls over financial reporting.

/s/ Steven A. FallNovember 14, 2007
Steven A. FallChief Financial Officer




-35-




Exhibit 32.1




Certification of Chief Executive OfficerPursuant to Section 906 of Sarbanes Oxley Act of 2002


In Connection with the Quarterly Report of Heartland Oil and Gas Corp. on Form 10-QSB for the period ending September 30, 2007, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven A. Fall, President, Chief ExecutiveOfficer and Director of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of2002, that:1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2) The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the registrant.

/s/ Steven A. FallNovember 14, 2007
Steven A. FallPresident, Chief Executive Officer, and Director




-36-




Exhibit 32.2




Certification of Chief Financial OfficerPursuant to Section 906 of Sarbanes Oxley Act of 2002


In Connection with the Quarterly Report of Heartland Oil and Gas Corp. on Form 10-QSB for the period ending September 30, 2007, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steve A. Fall, Chief Financial Officer andDirector of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2) The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the registrant.

/s/ Steven A. FallNovember 14, 2007
Steven A. FallChief Financial Officer




-37-