UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 FORM
10-K/A
 (Amendment
No. 1)
  x
              Annual
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934 for the fiscal year ended December 31,
  2009.
 or
 
  ̈
              Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934 for the transition period from
                          
      to
                          .
 
 Commission
file number: 001-34371
  United
States Short Oil Fund, LP
 (Exact
name of registrant as specified in its charter)
  Delaware
                
                26-2939256(State
      or other jurisdiction of
                  incorporation
      or organization)
                
                (I.R.S.
      Employer
                  Identification
      No.)
  1320
Harbor Bay Parkway, Suite 145
 Alameda,
California 94502
 (Address
of principal executive offices) (Zip code)
  (510)
522-9600
 (Registrant’s
telephone number, including area code)
  Securities
registered pursuant to Section 12(b) of the Act:
 
 Units
                NYSE
      Arca, Inc.(Title
      of each class)
                (Name
      of exchange on which
registered)
 
 Securities
registered pursuant to Section 12(g) of the Act: None
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.    ̈ Yes    x No
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.    ̈ Yes    x No
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   x Yes     ̈ No
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).   ̈ Yes     ̈ No
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.   x
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 
 Large
      accelerated filer  ̈
                Accelerated
      filer  ̈Non-accelerated
      filer x
                Smaller
      reporting company  ̈(Do
      not check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
  ̈
Yes    x No
 
 The
aggregate market value of the registrant’s units held by non-affiliates of the
registrant as of June 30, 2009 was: $0.
 
 The
registrant had 300,000 outstanding units as of March 29, 2010.
  DOCUMENTS
INCORPORATED BY REFERENCE:
 None.
  
  UNITED
STATES SHORT OIL FUND, LP
 
 Table
of Contents
 
 Part
      II.Item
      8. Financial Statements and Supplementary Data.
                
                1Part
      IV.Item
      15. Exhibits and Financial Statement Schedules.
                
                22Signatures
                
                23
 
 Explanatory
Note
 
 The
United States Short Oil Fund, LP (“USSO”) is filing this Amendment No. 1 to its
annual report on Form 10-K (“Form 10-K/A”) for the fiscal year ended December
31, 2009 that was filed with the U.S. Securities and Exchange Commission on
March 30, 2010 (the “Form 10-K”).  This Form 10-K/A replaces pages 97
to 115 of Part II, Item 8 of the Form 10-K filed on March 30,
2010.  The purpose of the Form 10-K/A is to restate the audited
Consolidated Financial Statements of United States Commodity Funds LLC, the
general partner of USSO (the “General Partner”), included in the Form 10-K to
accurately reflect the accounting for startup expenses (offering costs) for the
funds managed by the General Partner (the “Funds”) after the General Partner’s
management concluded that there was an error relating to the accounting for
startup expenses.  The General Partner formerly treated the deferred
offering costs as a capitalized asset and, once a Fund’s registration statement
became effective, the General Partner charged the deferred offering costs to
equity.  However, the General Partner’s management concluded that
these startup expenses should instead be charged to operations as incurred and
should be reflected in the applicable period.  As a result of the
error in accounting for the Funds’ startup expenses, the General Partner’s
audited Consolidated Financial Statements have been restated to charge the
startup expenses to current operations; accordingly, the consolidated statements
of financial condition, consolidated statements of operations, consolidated
statements of changes in equity and consolidated statements of cash flows have
been restated to reflect this change.  The cumulative effect from the
error on equity as of December 31, 2007 is $(187,056).  The
significant effects of the restatement on the General Partner’s consolidated
statements of financial condition as of December 31, 2009 and 2008 and its
consolidated statements of operations and consolidated statements of cash flows
for the years then ended are included in Note 10 to the General Partner’s
audited Consolidated Financial Statements.
 
 There
were no changes to USSO’s audited financial statements included in the Form
10-K; therefore, USSO’s financial statements have not been included in the Form
10-K/A.
 
 Except as
set forth above, no other changes have been made to the Form 10-K, and the Form
10-K/A does not amend, update or change any other items or disclosure found in
the Form 10-K.  Further, the Form 10-K/A does not reflect events that
occurred after the filing of the Form 10-K.
  
  Part II
 
 Item
8.        Financial Statements and
Supplementary Data.
 UNITED
STATES COMMODITY FUNDS LLC AND SUBSIDIARIES
 (formerly
Victoria Bay Asset Management, LLC)
 
 CONTENTS
 
 PageReport
      of Independent Registered Public Accounting Firm
                    2Consolidated
      Statements of Financial Condition, as restated
                    3Consolidated
      Statements of Operations and Other Comprehensive Income (Loss), as
      restated
                    4Consolidated
      Statements of Changes in Equity (Deficit), as restated
                    5Consolidated
      Statements of Cash Flows, as restated
                    6Notes
      to Consolidated Financial Statements, as restated
                    7
  1
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Member of
 United
States Commodity Funds LLC and Subsidiaries
 
 We have
audited the accompanying consolidated statements of financial condition of
United States Commodity Funds LLC (formerly Victoria Bay Asset Management, LLC)
and Subsidiaries (the “Company”), as of December 31, 2009 and 2008, and the
related consolidated statements of operations and other comprehensive income
(loss), changes in equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
 We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of United States
Commodity Funds LLC (formerly Victoria Bay Asset Management, LLC) and
Subsidiaries as of December 31, 2009 and 2008, and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of
America.
 
 As
discussed in Note 10, the accompanying consolidated financial statements have
been restated.
  /s/
SPICER JEFFRIES LLP
  Greenwood
Village, Colorado
 March 30,
2010, except as to the fourth paragraph above and Note 10,
 which
are as of May 19, 2010
  2
 
 UNITED
STATES COMMODITY FUNDS LLC AND SUBSIDIARIES
 (formerly
Victoria Bay Asset Management, LLC)
 
 CONSOLIDATED STATEMENTS OF FINANCIAL
      CONDITION
 
 December 31,2009
                            
                            
                            2008As Restated (Note 10)ASSETSCash
      and cash equivalents
                            
                            $
                            1,789,182
                            
                            
                            $
                            125,815Management
      fees receivable
                            
                            
                            2,973,237
                            
                            
                            
                            893,111Investments
      (Notes 2 and 4)
                            
                            
                            43,304
                            
                            
                            
                            34,579Other
      assets
                            
                            
                            4,171
                            
                            
                            
                            1,960Total
      assets
                            
                            $
                            4,809,894
                            
                            
                            $
                            1,055,465LIABILITIES AND EQUITY
      (DEFICIT)LIABILITIES:Accounts
      payable
                            
                            $
                            505,858
                            
                            
                            $
                            624,688Income
      tax payable
                            
                            
                            181,031
                            
                            
                            
                            285,400Expense
      waiver payable (Note 3)
                            
                            
                            811,004
                            
                            
                            
                            311,038Total
      liabilities
                            
                            
                            1,497,893
                            
                            
                            
                            1,221,126COMMITMENTS AND
      CONTINGENCIES (Notes 6 and 8)EQUITY
      (DEFICIT):Member's
      equity (defict) (Notes 3 and 7)
                            
                            
                            3,310,041
                            
                            
                            
                            (167,621
                            )Noncontrolling
      interests (Note 3)
                            
                            
                            1,960
                            
                            
                            
                            1,960Total
      equity (deficit)
                            
                            
                            3,312,001
                            
                            
                            
                            (165,661
                            )Total
      liabilities and equity (deficit)
                            
                            $
                            4,809,894
                            
                            
                            $
                            1,055,465
 
 The
accompanying notes are an integral part of these statements.
  3
  UNITED
STATES COMMODITY FUNDS LLC AND SUBSIDIARIES
 (formerly
Victoria Bay Asset Management, LLC)
 
 CONSOLIDATED
      STATEMENTS OF OPERATIONSAND OTHER COMPREHENSIVE INCOME
      (LOSS)
 
 Year Ended December 31,2009
                    
                    
                    2008As
      Restated (Note 10)REVENUE:Management
      fees
                    
                    $
                    27,224,589
                    
                    
                    $
                    8,631,883EXPENSES:Salaries,
      wages, payroll taxes and benefits
                    
                    
                    3,705,288
                    
                    
                    
                    1,389,888Distribution
      fees
                    
                    
                    2,896,155
                    
                    
                    
                    1,026,625Fund
      startup expenses
                    
                    
                    1,032,975
                    
                    
                    
                    719,494Administration
      fees
                    
                    
                    1,866,968
                    
                    
                    
                    665,696General
      and administrative
                    
                    
                    968,114
                    
                    
                    
                    460,794Professional
      fees
                    
                    
                    767,669
                    
                    
                    
                    1,159,643Custodial
      fees
                    
                    
                    306,575
                    
                    
                    
                    118,453Fees
      and licenses expense
                    
                    
                    138,074
                    
                    
                    
                    27,683Expense
      waiver expense (Note 3)
                    
                    
                    822,231
                    
                    
                    
                    311,038Transfer
      agent fees
                    
                    
                    110,126
                    
                    
                    
                    208,274Advertising
      and promotion
                    
                    
                    78,224
                    
                    
                    
                    79,202Total
      expenses
                    
                    
                    12,692,399
                    
                    
                    
                    6,166,790OTHER
      INCOME:Other
      income
                    
                    
                    53,444
                    
                    
                    
                    -Dividend
      income
                    
                    
                    3,934
                    
                    
                    
                    14Total
      other income
                    
                    
                    57,378
                    
                    
                    
                    14NET
      INCOME BEFORE INCOME TAXES
                    
                    
                    14,589,568
                    
                    
                    
                    2,465,107PROVISION
      FOR INCOME TAXES:Income
      tax expense (Note 5)
                    
                    
                    6,229,595
                    
                    
                    
                    1,260,622NET
      INCOME
                    
                    
                    8,359,973
                    
                    
                    
                    1,204,485OTHER
      COMPREHENSIVE INCOME (LOSS):Unrealized
      gain (loss) on investments (Note 7)
                    
                    
                    8,725
                    
                    
                    
                    (88,820
                    )COMPREHENSIVE
      INCOME
                    
                    $
                    8,368,698
                    
                    
                    $
                    1,115,665
 
 The
accompanying notes are an integral part of these statements.
  4
 
 UNITED
STATES COMMODITY FUNDS LLC AND SUBSIDIARIES
 (formerly
Victoria Bay Asset Management, LLC)
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
      (DEFICIT)
 
 Member'sEquity
                    
                    
                    Noncontrolling(Deficit)
                    
                    
                    Interests(Note
      3)BALANCES,December 31,
      2007
                    
                    $
                    (311,393
                    )
                    
                    $
                    2,940Adjustment
      to opening member's equity (Note 10)
                    
                    
                    (187,056
                    )
                    
                    
                    -BALANCES, December 31,
      2007, as restated
                    
                    
                    (498,449
                    )
                    
                    
                    2,940Purchase
      of interest in United States Short Oil Fund, LP
                    
                    
                    -
                    
                    
                    
                    980Redemption
      of interest in United States Heating Oil Fund, LP
                    
                    
                    -
                    
                    
                    
                    (980
                    )Redemption
      of interest in United States Gasoline Fund, LP
                    
                    
                    -
                    
                    
                    
                    (980
                    )Other
      comprehensive loss (Note 7)
                    
                    
                    (88,820
                    )
                    
                    
                    -Distributions
                    
                    
                    (784,837
                    )
                    
                    
                    -Net
      income
                    
                    
                    1,204,485
                    
                    
                    
                    -BALANCES,December 31,
      2008, as restated
                    
                    
                    (167,621
                    )
                    
                    
                    1,960Other
      comprehensive income (Note 7)
                    
                    
                    8,725
                    
                    
                    
                    -Redemption
      of interest in United States Short Oil Fund, LP
                    
                    
                    -
                    
                    
                    
                    (980
                    )Redemption
      of interest in United States 12 Month Natural Gas Fund, LP
                    
                    
                    -
                    
                    
                    
                    (980
                    )Purchase
      of interest in United States Short Natural Gas Fund, LP
                    
                    
                    -
                    
                    
                    
                    980Purchase
      of interest in United States Brent Oil Fund, LP
                    
                    
                    -
                    
                    
                    
                    980Distributions
                    
                    
                    (4,891,036
                    )
                    
                    
                    -Net
      income
                    
                    
                    8,359,973
                    
                    
                    
                    -BALANCES,December 31,
      2009, as restated
                    
                    $
                    3,310,041
                    
                    
                    $
                    1,960
 
 The
accompanying notes are an integral part of these statements.
  5
  UNITED
STATES COMMODITY FUNDS LLC AND SUBSIDIARIES
 (formerly
Victoria Bay Asset Management, LLC)
 
 CONSOLIDATED STATEMENTS OF CASH
      FLOWS
 
 Year Ended December 31,2009
                    
                    
                    2008As
      Restated (Note 10)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                    
                    $
                    8,359,973
                    
                    
                    $
                    1,204,485Adjustments
      to reconcile net income to net cash provided by operating
      activities:Increase
      in management fees receivable
                    
                    
                    (2,080,126
                    )
                    
                    
                    (392,983
                    )(Increase)
      decrease in other assets
                    
                    
                    (2,211
                    )
                    
                    
                    980Decrease
      in due to parent
                    
                    
                    -
                    
                    
                    
                    (109,539
                    )(Decrease)
      increase in income taxes payable
                    
                    
                    (104,369
                    )
                    
                    
                    254,498Increase
      in expense waiver payable
                    
                    
                    499,966
                    
                    
                    
                    311,038Decrease
      in accounts payable
                    
                    
                    (118,830
                    )
                    
                    
                    (410,757
                    )Net
      cash provided by operating activities
                    
                    
                    6,554,403
                    
                    
                    
                    857,722CASH
      FLOWS FROM FINANCING ACTIVITIES:Distributions
                    
                    
                    (4,891,036
                    )
                    
                    
                    (784,837
                    )Increase
      (decrease):Noncontrolling
      interest in United States Heating Oil Fund, LP
                    
                    
                    -
                    
                    
                    
                    (980
                    )Noncontrolling
      interest in United States Gasoline Fund, LP
                    
                    
                    -
                    
                    
                    
                    (980
                    )Noncontrolling
      interest in United States Brent Oil Fund, LP
                    
                    
                    980
                    
                    
                    
                    -Noncontrolling
      interest in United States 12 Month Natural Gas Fund, LP
                    
                    
                    (980
                    )
                    
                    
                    -Noncontrolling
      interest in United States Short Natural Gas Fund, LP
                    
                    
                    980
                    
                    
                    
                    -Noncontrolling
      interest in United States Short Oil Fund, LP
                    
                    
                    (980
                    )
                    
                    
                    980Net
      cash used in financing activities
                    
                    
                    (4,891,036
                    )
                    
                    
                    (785,817
                    )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                    
                    
                    1,663,367
                    
                    
                    
                    71,905CASH AND CASH EQUIVALENTS,beginning of year
                    
                    
                    125,815
                    
                    
                    
                    53,910CASH AND CASH EQUIVALENTS,end of year
                    
                    $
                    1,789,182
                    
                    
                    $
                    125,815SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for taxes
                    
                    $
                    4,485,400
                    
                    
                    $
                    1,119,761
 
 The
accompanying notes are an integral part of these statements.
  6
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 1 -
                  ORGANIZATION AND
      OPERATION
 
 Victoria
Bay Asset Management, LLC was formed as a single-member limited liability
company in the State of Delaware on May 10, 2005. On June 13, 2008,
Victoria Bay Asset Management, LLC changed its name to United States Commodity
Funds LLC (the “Company”).  The Company is the General Partner (the
“General Partner”) of United States Oil Fund, LP (“USOF”), United States Natural
Gas Fund, LP (“USNG”), United States Heating Oil Fund, LP (“USHO”), United
States Gasoline Fund, LP (“USG”), United States 12 Month Oil Fund, LP
(“US12OF”), United States 12 Month Natural Gas Fund, LP (“US12NG”), United
States Short Oil Fund, LP (“USSO”), United States Brent Oil Fund, LP (“USBO”),
United States Short Natural Gas Fund, LP (“USSNG”), and is the Sponsor
(“Sponsor”) of United States Commodity Index Funds Trust
(“Trust”).  The Company is registered as a commodity pool operator
with the Commodity Futures Trading Commission (“CFTC”) and is a member of the
National Futures Association (“NFA”). USOF, USNG, USHO, USG, US12OF, US12NG and
USSO (collectively, the “Funds”) are commodity pools registered with the CFTC
and members of the NFA that issue units that may be purchased and sold on the
NYSE Arca, Inc. (“NYSE Arca”) under the ticker symbols “USO,” “UNG,” “UHN,”
“UGA,” “USL,” “UNL” and “DNO.”  USBO is a commodity pool that is in
the process of registering its units that may be purchased and sold on the NYSE
Arca and the United States Commodity Index Fund (“USCI”), a series of the Trust,
will also be a commodity pool and the Trust is in the process of registering
USCI’s units to be purchased and sold on the NYSE ARCA.  USSNG is a
commodity pool that has been formed but has not yet begun the process of
registering its units.
 
 USOF
began trading on April 10, 2006 by purchasing futures contracts for light, sweet
crude oil that are traded on the New York Mercantile Exchange (the
“Exchange”).  The investment objective of USOF is for the changes in
percentage terms of its units’ net asset value to reflect the changes in
percentage terms of the spot price of light, sweet crude oil delivered to
Cushing, Oklahoma, as measured by the changes in the price of the futures
contract on light sweet crude oil traded on the Exchange, that is the near month
contract to expire, except when the near month contract is within two weeks of
expiration, in which case it will be measured by the futures contract that is
the next month contract to expire, less USOF’s expenses.  USOF seeks
to accomplish its objective through investments in futures contracts for light,
sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas
and other petroleum-based fuels that are traded on the Exchange and other U.S.
and foreign exchanges and other oil interests such as cash-settled options on
futures contracts, forward contracts for crude oil, cleared swap contracts and
over-the-counter transactions that are based on the price of crude oil, heating
oil, gasoline, natural gas and other petroleum-based fuels, futures contracts
and indices based on the foregoing.
 
 USNG
began trading on April 18, 2007 by purchasing futures contracts for natural gas
that are traded on the Exchange.  The investment objective of USNG is
for the changes in percentage terms of its units’ net asset value to reflect the
changes in percentage terms of the spot price of natural gas delivered to the
Henry Hub, Louisiana, as measured by the changes in the price of the futures
contract on natural gas traded on the Exchange that is the near month contract
to expire, except when the near month contract is within two weeks of
expiration, in which case it will be measured by the futures contract that is
the next month contract to expire, less USNG’s expenses.   USNG
seeks to accomplish its objective through investments in futures contracts for
natural gas, crude oil, heating oil, gasoline, and other petroleum-based fuels
that are traded on the Exchange and other U.S. and foreign exchanges and other
natural gas-related investments such as cash-settled options on futures
contracts, forward contracts for natural gas, cleared swap contracts and
over-the-counter transactions that are based on the price of natural gas, crude
oil and other petroleum-based fuels, futures contracts and indices based on the
foregoing.
 7
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 1 -
                  ORGANIZATION AND
      OPERATION (continued)
 
 US12OF
began trading on December 6, 2007 by purchasing futures contracts for light,
sweet crude oil that are traded on the Exchange.  The investment
objective of US12OF is for the changes in percentage terms of its units’ net
asset value to reflect the changes in percentage terms of the spot price of
light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the
changes in the average of the prices of 12 futures contracts on crude oil traded
on the Exchange, consisting of the near month contract to expire and the
contracts for the following eleven months, for a total of 12 consecutive months’
contracts, except when the near month contract is within two weeks of
expiration, in which case it will be measured by the futures contracts that are
the next month contract to expire and the contracts for the following eleven
consecutive months, less US12OF’s expenses. When calculating the daily movement
of the average price of the 12 contracts each contract month will be equally
weighted.  US12OF seeks to accomplish its objective through
investments in futures contracts for light, sweet crude oil, other types of
crude oil, heating oil, gasoline, natural gas, and other petroleum-based fuels
that are traded on the Exchange and or other U.S. and foreign exchanges and
other oil interests such as cash-settled options on futures contracts, forward
contracts for oil, cleared swap contracts and over-the-counter transactions that
are based on the price of crude oil, other petroleum-based fuels, futures
contracts and indices based on the foregoing.
 
 USG began
trading on February 26, 2008 by purchasing futures contracts on gasoline that
are traded on the Exchange.  The investment objective of USG is for
the changes in percentage terms of its units’ net asset value to reflect the
changes in percentage terms of the spot price of unleaded gasoline, as measured
by the changes in the price of the futures contract on gasoline traded on the
Exchange that is the near month contract to expire, except when the near month
contract is within two weeks of expiration, in which case it will be measured by
the futures contract that is the next month contact to expire, less USG’s
expenses. USG seeks to accomplish its objective through investments in futures
contracts for gasoline, crude oil, natural gas, heating oil and other
petroleum-based fuels that are traded on the Exchange and other U.S. and foreign
exchanges and other gasoline-related investments such as cash-settled options on
futures contracts, forward contracts for gasoline, cleared swap contracts and
over-the-counter transactions that are based on the price of gasoline, crude oil
and other petroleum-based fuels, futures contracts and indices based on the
foregoing.
 
 USHO
began trading on April 9, 2008 by purchasing futures contracts on heating oil
that are traded on the Exchange.  The investment objective of USHO is
for the changes in percentage terms of its units’ net asset value to reflect the
changes in percentage terms of the spot price of heating oil, as measured by the
changes in the price of the futures contract on heating oil traded on the
Exchange that is the near month contract to expire, except when the near month
contract is within two weeks of expiration, in which case it will be measured by
the futures contract that is the next month contact to expire, less USHO’s
expenses. USHO seeks to accomplish its objective through investments in futures
contracts for heating oil, crude oil, gasoline, natural gas and other
petroleum-based fuels that are traded on the Exchange and other U.S. and foreign
exchanges  and other heating oil-related investments such as
cash-settled options on futures contracts, forward contracts for heating oil,
cleared swap contracts and over-the-counter transactions that are based on the
price of heating oil, crude oil and other petroleum-based fuels, futures
contracts and indices based on the foregoing.
  8
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 1 -
                  ORGANIZATION AND
      OPERATION (concluded)
 
 USSO
began trading on September 24, 2009 by selling futures contracts on light, sweet
crude oil that are traded on the Exchange.  The investment objective
of USSO is for the changes in percentage terms of its units’ net asset value to
inversely reflect the changes in percentage terms of the spot price of light,
sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in
the price of the futures contract on light, sweet crude oil as traded on the
Exchange that is the near month contract to expire, except when the near month
contract is within two weeks of expiration, in which case the futures contract
will be the next month contract to expire, less USSO’s expenses. USSO
accomplishes its objective through taking short positions in futures contracts
for light, sweet crude oil and other types of crude oil, heating oil, gasoline,
natural gas and other petroleum-based fuels that are traded on the Exchange and
other crude oil-related investments such as cash-settled options on Futures
Contracts, forward contracts for crude oil, cleared swap contracts and
over-the-counter transactions that are based on the price of crude oil, heating
oil, gasoline, natural gas and other petroleum-based fuels, futures contracts
and indices based on the foregoing.
 
 US12NG
began trading on November 18, 2009 by purchasing futures contracts for natural
gas that are traded on the Exchange.  The investment objective of
US12NG is for the changes in percentage terms of its units’ net asset value to
reflect the changes in percentage terms of the spot price of natural gas
delivered at the Henry Hub, Louisiana, as measured by the changes in the average
of the prices of 12 futures contracts on natural gas traded on the Exchange,
consisting of the near month contract to expire and the contracts for the
following 11 months for a total of 12 consecutive months’ contracts, except when
the near month contract is within two weeks of expiration, in which case it will
be measured by the futures contracts that are the next month contract to expire
and the contracts for the following 11 consecutive months, less US12NG’s
expenses.  When calculating the daily movement of the average price of
the 12 contracts each contract month will be equally weighted.  US12NG
seeks to accomplish its objective through investments in futures contracts for
natural gas, crude oil, heating oil, gasoline and other petroleum-based fuels
that are traded on the Exchange and other U.S. and foreign exchanges and other
natural gas-related investments such as cash-settled options on futures
contracts, forward contracts for natural gas, cleared swap contracts and
over-the-counter transactions that are based on the price of natural gas, crude
oil and other petroleum-based fuels, futures contracts and indices based on the
foregoing.
 
 As of
December 31, 2009, USBO, USCI and USSNG had not formally begun
operations.  USBO and the Trust, on behalf of USCI, filed registration
statements on Form S-1 with the Securities and Exchange Commission (the “SEC”)
and the Company is in the process of filing amendments to Form S-1 for USBO and
USCI.
 
 The
Company is a wholly owned subsidiary of Wainwright Holdings, Inc.
(“Wainwright”), a Delaware corporation.  Wainwright is a holding
company that is controlled by the president of the Company and served as the
initial limited partner of the Funds.  It also serves as the initial
limited partner for USBO and USSNG.
 
 As the
General Partner of the Funds, the Company is required to evaluate the credit
risk of the Funds to their futures commission merchant, oversee the purchases
and sales of the Funds’ units by certain “authorized purchasers,” review the
daily positions and margin requirements of the Funds, and manage the Funds’
investments. The Company also pays continuing service fees to the marketing
agent for communicating with the authorized purchasers.
 9
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 2 -
                  SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES
 
 Principles of
consolidation
 
 The
Company, as General Partner of the Funds, USBO and USSNG and as Sponsor to the
Trust and USCI, has included the accounts of USBO, USSNG and USCI since their
inception in the consolidated financial statements. The Company has recorded a
noncontrolling interest for the amount directly owned by the limited partner
(representing the limited partner interest owned by Wainwright, except with
respect to the Trust, which does not have a limited
partner).  Subsequent to the Funds commencing operations, the Company
and Wainwright redeemed their partnership interests. Therefore, as of December
31, 2009, the accounts of each of the Funds were no longer included in the
accompanying consolidated statement of financial condition.  All
intercompany accounts and balances have been eliminated in
consolidation.
 
 Revenue
recognition
 
 The
Company recognizes revenue in the period earned under the terms of the Funds’
respective Limited Partnership Agreements, as amended from time to time (the
“Limited Partnership Agreements”). These agreements provide for fees based upon
a percentage of the daily average net asset value of the Funds.  In
connection with the Funds’ trading activities, commodity futures contracts,
cleared swap contracts, forward contracts, physical commodities, and related
options are recorded on the trade-date basis. All such transactions are recorded
on the identified cost basis and marked to market daily. Unrealized gains and
losses on open contracts are reflected in the statement of financial condition
and represent the difference between original contract amount and market value
(as determined by exchange settlement prices for futures contracts and related
options and cash dealer prices at a predetermined time for forward contracts,
physical commodities, and their related options) as of the last business day of
the year or as of the last date of the financial statements. Changes in the
unrealized gains or losses between periods are reflected in the statement of
operations.
 
 The
Company earns interest on its assets on deposit at the broker at the 90-day
Treasury bill rate for deposits denominated in U.S. dollars.  In
addition, the Funds earn interest on funds held with their custodian at
prevailing market rates earned on such investments.
 
 General Partner management
fee
 
 Under the
Funds’ respective Limited Partnership Agreements, the Company is responsible for
investing the assets of the Funds in accordance with the objectives and policies
of the Funds.  In addition, the Company has arranged for one or more
third parties to provide administrative, custody, accounting, transfer agency
and other necessary services to the Funds.  For these services, the
Funds are contractually obligated to pay the Company a management fee, which is
paid monthly, based on the average daily net assets of the
Funds.  Through December 31, 2008 USOF paid a fee equal to 0.50% per
annum on average daily net assets of $1,000,000,000 or less and 0.20% of average
daily net assets that were greater than $1,000,000,000.  Effective
January 1, 2009, USOF pays a management fee of 0.45% per annum on its average
daily net assets.  USNG pays a fee equal to 0.60% per annum on average
daily net assets of $1,000,000,000 or less and 0.50% of average daily net assets
that are greater than $1,000,000,000.  US12OF, USHO, USG and USSO each
pay a fee of 0.60% per annum on their average daily net
assets.  US12NG pays a fee of 0.75% per annum on its average daily net
assets.
 10
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 2 -
                  SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES(continued)
 
 General
Partner management fee (concluded)
 
 The Funds
pay for all brokerage fees, taxes and other expenses, including licensing fees
for the use of intellectual property, registration or other fees paid to the
SEC, the Financial Industry Regulatory Authority (“FINRA”) formerly the National
Association of Securities Dealers, or any other regulatory agency in connection
with the offer and sale of subsequent units after their initial registration and
all legal, accounting, printing and other expenses associated therewith. The
Funds also pay the fees and expenses of the independent
directors.
 
 Investments
 
 The
Company’s investments in common stock are classified as
available-for-sale-securities and are considered to be held for an indefinite
period.  Securities investments not classified as either
held-to-maturity or trading securities are classified as available-for-sale
securities.  Available-for-sale-securities are recorded at fair value
on the statement of financial condition, with the change in fair value excluded
from earnings and recorded as a component of other comprehensive income (loss)
included in member’s equity.  Unrealized holding gain (loss) on such
securities, which were added to (subtracted from) member’s equity were $8,725
and $(88,820) for the years ended December 31, 2009 and 2008 (see Note
7).
 
 Realized
gains or losses are recorded upon disposition of investments calculated based
upon the difference between the proceeds and the cost basis determined using the
specific identification method.
 
 Brokerage
commissions
 
 Brokerage
commissions on all open commodity futures contracts are accrued on a full-turn
basis.
 
 Additions and
redemptions
 
 Authorized
purchasers may purchase creation baskets of the Funds only in blocks of 100,000
units at a price equal to the net asset value of the units calculated shortly
after the close of the core trading session on the NYSE Arca on the day the
order is placed.  Authorized purchasers may redeem units from the
Funds only in blocks of 100,000 units called “Redemption
Baskets.”  The amount of the redemption proceeds for a Redemption
Basket will be equal to the net asset value of the Funds’ units in the
Redemption Basket as of the end of each business day.
 
 The Funds
receive or pay the proceeds from units sold or redeemed within three business
days after the trade-date of the purchase or redemption.  The amounts
due from authorized purchasers are reflected in the Funds’ statement of
financial condition as receivables for units sold, and amounts payable to
authorized purchasers upon redemption are reflected as payable for units
redeemed.
 
 Partnership capital and
allocation of partnership income and losses
 
 Profit or
loss shall be allocated among the partners of the Funds in proportion to the
number of units each partner holds as of the close of each month.  The
Company, as General Partner, may revise, alter or otherwise modify this method
of allocation as described in the Limited Partnership
Agreements.
 11
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 2 -
                  SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES(continued)
 
 Calculation of net asset
value
 
 The Funds
calculate their net asset value on each NYSE Arca trading day by taking the
current market value of their total assets, subtracting any liabilities and
dividing the amount by the total number of units issued and
outstanding.  The Funds use the closing price for the contracts on the
relevant exchange on that day to determine the value of contracts held on such
exchange.
 
 Cash
equivalents
 
 Cash
equivalents are highly liquid investments with original maturity dates of three
months or less.
 
 Accounting
estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.
 
 Income
taxes
 
 The
Company has filed an election with the Internal Revenue Service to be treated as
an association taxable as a corporation.  The Company files a
consolidated federal income tax return with Wainwright and provides for income
taxes as if the Company filed separately.  The Company, however, does
not file on a consolidated basis for state income tax purposes.  The
Company accounts for income taxes in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Classification (“ASC”) Topic
740-10, Accounting for Income
Taxes (“FASB ASC Topic 740-10”).  Under the asset and liability
method of FASB ASC Topic 740-10, deferred tax assets and liabilities are
recognized for the estimated future tax consequences or benefits attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis.  Deferred tax assets
and liabilities are measured using the enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled.
 
 Fund startup
expenses
 
 The
Company expenses all startup expenses associated with the registration of the
Funds.  Fund startup expenses include offering costs relating to the
initial registration of units and include, but are not limited to, legal fees
pertaining to the initial registration of the Funds’ units, SEC and FINRA
registration fees, initial fees paid to be listed on an exchange and other
similar costs.
  12
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 2 -
                  SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES(continued)
 
 Recent accounting
pronouncements
 
 Effective
January 1, 2008, the Company adopted FASB ASC Topic 740-10, Accounting for Uncertainty in Income
Taxes (“FASB ASC Topic 740-10”), which establishes that a tax position
taken or expected to be taken in a tax return is to be recognized in the
consolidated financial statements when it is more likely than not, based on the
technical merits, that the position will be sustained upon examination. FASB ASC
Topic 740-10 is effective for private companies for fiscal years beginning after
December 15, 2008. The Company’s adoption of FASB ASC Topic 740-10 did not have
a material effect on its consolidated financial position, results of operations
or liquidity.
 
 Effective January 1, 2008, the
Company adopted FASB ASC Topic 820, Fair Value Measurements and
Disclosures (“FASB ASC Topic 820”).  FASB ASC Topic 820 defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurement.  The changes to past practice resulting from the
application of FASB ASC Topic 820 relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurement. FASB ASC Topic 820 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from sources independent of the Company (observable inputs)
and (2) the Company’s own assumptions about market participant assumptions
developed based on the best information available under the circumstances
(unobservable inputs).  The three levels defined by the FASB ASC Topic
820 hierarchy are as follows:
 
 Level I -
Quoted prices (unadjusted) in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
 
 Level II
- Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly. Level II assets
include the following: quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, inputs other than quoted prices that are
observable for the asset or liability, and inputs that are derived principally
from or corroborated by observable market data by correlation or other means
(market-corroborated inputs).
 
 Level III
- Unobservable pricing input at the measurement date for the asset or liability.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available.
  In some
instances, the inputs used to measure fair value might fall in different levels
of the fair value hierarchy. The level in the fair value hierarchy within which
the fair value measurement in its entirety falls shall be determined based on
the lowest input level that is significant to the fair value measurement in its
entirety.  The Company’s adoption of FASB ASC Topic 820 did not have a
material effect on its consolidated financial position, results of operations or
liquidity.
 
 In
December 2007, the FASB issued FASB ASC Topic 810-10-65, Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No.
51.  FASB ASC Topic 810-10-65 requires all entities to report
noncontrolling (minority) interests in subsidiaries as equity in the
consolidated financial statements. Additionally, FASB ASC Topic 810-10-65
requires that transactions between an entity and noncontrolling interests be
treated as equity transactions. FASB ASC Topic 810-10-65 is effective for fiscal
years beginning after December 15, 2008. Adoption on January 1, 2009, as
required, did not have a material effect on the Company’s financial condition,
results of operations or liquidity.  The minority interests previously
reflected in the Company’s financial statements have been reclassified to
conform to the current presentation.
  13
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 2 -
                  SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES(concluded)
 
 Recent
accounting pronouncements(concluded)
 
 In March
2008, the FASB released FASB ASC Topic 815-10, Disclosures about Derivative
Instruments and Hedging Activities.  FASB ASC Topic 815-10
requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of and gains and
losses on derivative instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. The Company adopted FASB ASC Topic
815-10 on January 1, 2009.  The Company’s adoption of FASB ASC Topic
815-10 did not have a material effect on the Company’s financial condition,
results of operations or liquidity.
 
 In May
2009, the FASB issued FASB ASC Topic 855-10-05, Subsequent
Events.  This standard is intended to establish general
standards of accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued.  Specifically, this standard sets forth the period after
the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date
in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet
date.  FASB ASC Topic 855-10-05 is effective for fiscal years and
interim periods ending after June 15, 2009.
 
 NOTE 3 -
                  CAPITALIZATION AND RELATED PARTY
      TRANSACTIONS
 
 During
the years ended December 31, 2009 and 2008, the Company paid $4,891,036 and
$784,837 in distributions to its member. The Company and USOF have incurred
offering and organizational costs in the amount of $2,023,991 which are not
included in the accompanying consolidated financial statements at December 31,
2008.  Wainwright has provided funding for these costs, but is under
no obligation to do so or continue funding these costs.  The Company
and USOF are not required to reimburse Wainwright or its affiliates for any such
costs incurred.
 
 The
Funds, USBO and USSNG were each capitalized with $1,000, of which the Company
contributed $20 and Wainwright contributed $980.  The Trust was
capitalized with $1,000, which was contributed solely by the Company, which is
included in cash and cash equivalents in the accompanying statement of financial
condition.
 
 In addition, the Company, as General Partner, through no obligation to
do so, has agreed to pay certain expenses, including those relating to audit
expenses and tax accounting and reporting requirements normally borne by
USHO,  USG, US12OF, USSO and US12NG to the extent that such expenses
exceed 0.15% (15 basis points) of  their NAV, on an annualized basis.
The Company, as General Partner has no obligation to continue such payments in
subsequent years.
  14
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 3 -
                  CAPITALIZATION AND RELATED PARTY TRANSACTIONS(concluded)
 
 The
Company’s consolidated statement of financial condition reflects noncontrolling
interests in its subsidiaries as of December 31, 2009 and 2008.  A
schedule of the noncontrolling interests is presented below:
 
 December
      31,2009
                        
                        
                        2008Limited
      partner interest in United States 12 Month Natural Gas Fund,
      LP
                        
                        $
                        -
                        
                        
                        $
                        980Limited
      partner interest in United States Short Natural Gas Fund,
    LP
                        
                        
                        980
                        
                        
                        
                        -Limited
      partner interest in United States Short Oil Fund, LP
                        
                        
                        -
                        
                        
                        
                        980Limited
      partner interest in United States Brent Oil Fund, LP
                        
                        
                        980
                        
                        
                        
                        -$
                        1,960
                        
                        
                        $
                        1,960
 
 NOTE
      4 -
                  FAIR
      VALUE MEASUREMENTS
 
 The
following table summarizes the valuation of the Company’s investments at
December 31, 2009 and 2008 using the fair value hierarchy:
  At December 31,
      2009:
                      
                      Total
                      
                      
                      Level
      I
                      
                      
                      Level
      II
                      
                      
                      Level
      IIIInvestments
                      
                      $
                      43,304
                      
                      
                      $
                      43,304
                      
                      
                      $
                      -
                      
                      
                      $
                      -At December 31,
      2008:
                      
                      Total
                      
                      
                      Level
      I
                      
                      
                      Level
      II
                      
                      
                      Level
      IIIInvestments
                      
                      $
                      34,579
                      
                      
                      $
                      34,579
                      
                      
                      $
                      -
                      
                      
                      $
                      -
 
 NOTE
      5 -
                  INCOME
      TAXES
 
 The
Company has filed an election with the Internal Revenue Service to be treated as
an association taxable as a corporation.  The Company files a
consolidated federal income tax return with Wainwright and provides for income
taxes as if the Company filed separately.  The Company, however, does
not file on a consolidated basis for state income tax purposes.  In
connection with filing a consolidated federal income tax return, the Company has
recorded federal income tax expense (benefit) and has recorded a corresponding
due from parent and due to parent for its federal tax liability
(benefit).
 
 Deferred
tax assets and liabilities reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.  Significant
components of the Company’s deferred tax liabilities and assets as of December
31, 2009 and 2008, as restated, are as follows:
  15
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 5
-               INCOME TAXES
(concluded)
 
 December
      31,2009
                          
                          
                          2008Deferred
      tax liabilities
                          
                          $
                          -
                          
                          
                          $
                          -Deferred
      tax assets:Funds'
      startup expenses (offering costs)
                          
                          $
                          518,000
                          
                          
                          $
                          363,000Unrealized
      losses on investments
                          
                          
                          220,000
                          
                          
                          
                          224,000Valuation
      allowance for deferred tax asset
                          
                          
                          (738,000
                          )
                          
                          
                          (587,000
                          )$
                          -
                          
                          
                          $
                          -
 
 The
valuation allowance increased by $151,000 for the year ended December 31, 2009
and increased by $148,000 for the year ended December 31, 2008.
 
 The
portion of the deferred tax asset shown relating to the Company’s unrealized
losses on investments reported above relates to the unrealized losses on
investments and is accounted for as other comprehensive loss (see Note
7).
 
 NOTE
      6 -
                  CONTRACTS
      AND AGREEMENTS
 
 The
Company, together with each of the Funds, is a party to marketing agent
agreements with ALPS Distributors, Inc. (“ALPS”), a Colorado corporation,
whereby ALPS provides certain marketing services for the Funds as outlined in
their respective marketing agent agreements. Under the agreement dated as of
March 13, 2006, as amended, whereby ALPS provides certain marketing services for
USOF, the Company pays ALPS a marketing fee of $425,000 per annum plus the
following incentive fee: 0.00% on USOF’s assets from $0 — $500 million; 0.04% on
USOF’s assets from $500 million — $4 billion; and 0.03% on USOF’s assets in
excess of $4 billion. Under the agreement dated as of April 17, 2007, whereby
ALPS provides certain marketing services for USNG, and the agreement dated as of
November 13, 2007, whereby ALPS provides certain marketing services for US12OF,
the Company pays ALPS fees equal to 0.06% on each of USNG’s, US12OF’s and
US12NG’s assets up to $3 billion and 0.04% on each of USNG’s and US12OF’s assets
in excess of $3 billion.  Under the agreement dated as of February 15,
2008, whereby ALPS provides certain marketing services for USG, and the
agreement dated March 10, 2008 whereby ALPS provides certain marketing services
for USHO, the Company pays ALPS fees equal to 0.06% on each of USG’s and USHO’s
assets up to $3 billion and 0.04% on each of USG’s and USHO’s assets in excess
of $3 billion.  Under the agreement dated as of June 8, 2009, whereby
ALPS provides certain marketing services for USSO, the Company pays ALPS fees
equal to 0.06% on USSO’s assets up to $3 billion; and 0.04% on USSO’s assets in
excess of $3 billion.
 
 The above
fees do not include the following expenses, which are also borne by the Company:
the cost of placing advertisements in various periodicals, web construction and
development, and the printing and production of various marketing
materials.
  16
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE6 -
                  CONTRACTS AND AGREEMENTS
      (concluded)
 
 The
Company and each of the Funds are parties to custodian agreements with Brown
Brothers Harriman & Co. (“Brown Brothers”), whereby Brown Brothers holds
investments on behalf of the Funds. The Company pays the fees of the custodian,
which shall be determined by the parties from time to time. In addition, the
Company, with each of the Funds, are parties to administrative agency agreements
with Brown Brothers, whereby Brown Brothers acts as the administrative agent,
transfer agent and registrar for each of the Funds. The Company also pays the
fees of Brown Brothers for its services under these agreements and such fees
will be determined by the parties from time to time.
 
 Currently,
the Company pays Brown Brothers for its services, in the foregoing capacities,
the greater of a minimum amount of $75,000 annually or an asset-based charge of
(a) 0.06% for the first $500 million of combined net assets, (b) 0.0465% for
combined net assets greater than $500 million but less than $1 billion, and (c)
0.035% of combined net assets in excess of $1 billion. The Company also pays a
$20,000 annual fee for transfer agency services and transaction fees ranging
from $7.00 to $15.00 per transaction.
 
 Each of
the Funds has entered into brokerage agreements pursuant to which UBS Securities
LLC acts as the futures commission merchant (the “FCM”). The agreements provide
that the FCM will charge commissions of approximately $7 to $8 per round-turn
trade plus applicable exchange and NFA fees for futures contracts and options on
futures contracts.
 
 Each of
the Funds has invested primarily in futures contracts traded on the Exchange
since the commencement of its operations. On May 30, 2007, USOF and USNG entered
into a license agreement with the Exchange whereby the Funds were granted a
non-exclusive license to use certain of the Exchange’s settlement prices and
service marks. The agreement has an effective date of April 10, 2006. Under the
license agreement, the Funds pay the Exchange an asset-based fee for the
license. Pursuant to the agreement, the Funds pay a licensing fee that is equal
to 0.04% for the first $1,000,000,000 of combined assets of the Funds and 0.02%
for combined assets above $1,000,000,000. US12OF, USG, USHO and USSO entered
into the above license agreement on the same terms with an effective date of
December 4, 2007. Other funds managed by the Company that invest primarily in
futures contracts traded on the Exchange will also be granted a similar
non-exclusive license on the same terms.
 
 The Funds
expressly disclaim any association with the Exchange or endorsement of the Funds
by the Exchange and acknowledge that “NYMEX” and “New York Mercantile Exchange”
are registered trademarks of such Exchange.
 
 The
Company has contracted an accounting firm to prepare each of the Funds, USBO,
USSNG and the Trust’s yearly income tax filings with the Internal Revenue
Service and various states. The cost associated with any registered new fund is
expected to be comparable.
 17
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE
      7 -
                  ACCUMULATED
      OTHER COMPREHENSIVE LOSS
 
 Changes
in accumulated other comprehensive loss for the years ended December 31, 2009
and 2008 are as follows:
 
 Balance, December 31,
      2007
                        
                        $
                        (433,189
                        )Unrealized
      holding losses on investments
                        
                        
                        (88,820
                        )Balance,December 31,
      2008
                        
                        
                        (522,009
                        )Unrealized
      holding gains on investments
                        
                        
                        8,725Balance,December 31,
      2009
                        
                        $
                        (513,284
                        )
 
 The
Company records its other comprehensive loss net of income tax expense
(benefit).  As of December 31, 2009 and 2008, the Company has not
recorded an income tax expense or benefit associated with its accumulated other
comprehensive loss (see Note 5).
 
 NOTE
      8 -
                  OFF-BALANCE
      SHEET RISKS AND CONTINGENCIES
 
 The Funds
engage in the trading of U.S. futures contracts, options on U.S. contracts,
cleared swap contracts and over-the-counter derivative transactions
(collectively “derivatives”).  The Funds are exposed to both market
risk, the risk arising from changes in the market value of the contracts; and
credit risk, the risk of failure by another party to perform according to the
terms of a contract.
 
 All of
the contracts currently traded by the Funds, with the exception of USNG, are
exchange-traded.  The risks associated with exchange-traded contracts
are generally perceived to be less than those associated with over-the-counter
transactions since, in over-the-counter transactions, the Funds must rely solely
on the credit of their respective individual counterparties.  To the
extent the Funds enter into non-exchange traded contracts, they are subject to
the credit risk associated with counterparty non-performance.  The
credit risk from counterparty non-performance associated with such instruments
is the net unrealized gain, if any.  The Funds also have credit risk
since the sole counterparty to all domestic futures contracts is the exchange
clearing corporation.  In addition, the Funds bear the risk of
financial failure by the clearing broker.
 
 The
purchase and sale of futures and options on futures contracts require margin
deposits with an FCM. Additional deposits may be necessary for any loss on
contract value. The Commodity Exchange Act requires an FCM to segregate all
customer transactions and assets from the FCM’s proprietary
activities.
 
 A
customer’s cash and other property, such as U.S. Treasury Bills, deposited with
an FCM are considered commingled with all other customer funds subject to the
FCM’s segregation requirements. In the event of an FCM’s insolvency, recovery
may be limited to a pro rata share of segregated funds available. It is possible
that the recovered amount could be less than the total of cash and other
property deposited.
  18
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 8 -
                  OFF-BALANCE SHEET RISKS AND
      CONTINGENCIES
(concluded)
 
 For
derivatives, risks arise from changes in the market value of the contracts.
Theoretically, the Funds are exposed to market risk equal to the value of
futures and forward contracts purchased and unlimited liability on such
contracts sold short. As both buyers and sellers of options, the Funds pay or
receive a premium at the outset and then bear the risk of unfavorable changes in
the price of the contract underlying the option.
 
 The
Company’s policy is to continuously monitor its exposure to market and
counterparty risk through the use of a variety of financial, position and credit
exposure reporting and control procedures.  In addition, the Company
has a policy of reviewing the credit standing of each clearing broker or
counter-party with which it conducts business.
 
 The
financial instruments held by the Company are reported in the statement of
financial condition at market or fair value, or at carrying amounts that
approximate fair value, because of their highly liquid nature and short-term
maturities.
 
 The
Company has securities for its own account and may incur losses if the market
value of the securities decreases subsequent to December 31,
2009.
 
 The
Company has a substantial portion of its assets on deposit with banks. Assets
deposited with banks are subject to credit risk. In the event of a bank's
insolvency, recovery of the Company's assets on deposit may be limited to
account insurance or other protection afforded such deposits. As of December 31,
2009, the Company had cash of $1,531,655 in excess of the federally insured
amount of $250,000.
 
 NOTE
      9 -
                  SUBSEQUENT
      EVENTS
 
 In
accordance with FASB ASC Topic 855-10-05, the Company has performed an
evaluation of subsequent events through March 30, 2010 which is the date the
financial statements were
originally available to be issued and May 19, 2010, which is the date the
financial statements were available to be re-issued.
 
 NOTE
      10 -
                  RESTATEMENT
      OF CONSOLIDATED FINANCIAL
STATEMENTS
 
 The
Company’s management concluded that there was an error relating to the Company’s
accounting for the Funds’ startup expenses (offering costs).  The
Company’s initial accounting treatment was to treat the deferred offering costs
as a capitalized asset and, once the Fund’s registration statement became
effective, the Company charged the deferred offering costs to
equity.  However, the Company’s management concluded that these
startup expenses should instead be charged to operations as incurred and should
be reflected as a period cost.  As a result of the error in accounting
for the Funds’ startup expenses, the consolidated financial statements have been
restated to charge the startup expenses to current operations; accordingly, the
consolidated statements of financial condition, consolidated statements of
operations, consolidated statements of changes in equity and consolidated
statements of cash flows have been restated to reflect this change.
 
 The
cumulative effect from the error on equity as of December 31, 2007 is
$(187,056).  The following is a summary of the significant effects of
the restatement on the Company’s consolidated statements of financial condition
as of December 31, 2009 and 2008 and its consolidated statements of operations
and consolidated statements of cash flows for the years then
ended.
  19
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 10
-
                  RESTATEMENT OF CONSOLIDATED
      FINANCIAL STATEMENTS
(continued)
 
 December 31, 2009
                            
                            
                            December 31, 2008As Previously
                              Reported
                            
                            
                            Adjustment
                            
                            
                            As Restated
                            
                            
                            As Previously
                              Reported
                            
                            
                            Adjustment
                            
                            
                            As RestatedConsolidated
      Statements of Financial Condition Data:Assets:Cash
                            
                            $
                            1,789,182
                            
                            
                            $
                            -
                            
                            
                            $
                            1,789,182
                            
                            
                            $
                            125,815
                            
                            
                            $
                            -
                            
                            
                            $
                            125,815Receivables
                            
                            
                            2,973,237
                            
                            
                            
                            -
                            
                            
                            
                            2,973,237
                            
                            
                            
                            893,111
                            
                            
                            
                            -
                            
                            
                            
                            893,111Investments
                            
                            
                            43,304
                            
                            
                            
                            -
                            
                            
                            
                            43,304
                            
                            
                            
                            34,579
                            
                            
                            
                            -
                            
                            
                            
                            34,579Deferred
      offering costs
                            
                            
                            453,351
                            
                            
                            
                            (453,351
                            )
                            
                            
                            -
                            
                            
                            
                            352,794
                            
                            
                            
                            (352,794
                            )
                            
                            
                            -Other
      assets
                            
                            
                            4,171
                            
                            
                            
                            -
                            
                            
                            
                            4,171
                            
                            
                            
                            1,960
                            
                            
                            
                            -
                            
                            
                            
                            1,960$
                            5,263,245
                            
                            
                            
                            
                            
                            
                            $
                            4,809,894
                            
                            
                            $
                            1,408,259
                            
                            
                            
                            
                            
                            
                            $
                            1,055,465Liabilities:Accounts
      payable and accrued expenses
                            
                            $
                            505,858
                            
                            
                            $
                            -
                            
                            
                            $
                            505,858
                            
                            
                            $
                            624,688
                            
                            
                            $
                            -
                            
                            
                            $
                            624,688Income
      taxes payable
                            
                            
                            181,031
                            
                            
                            
                            -
                            
                            
                            
                            181,031
                            
                            
                            
                            285,400
                            
                            
                            
                            -
                            
                            
                            
                            285,400Expense
      waiver payable
                            
                            
                            811,004
                            
                            
                            
                            -
                            
                            
                            
                            811,004
                            
                            
                            
                            311,038
                            
                            
                            
                            -
                            
                            
                            
                            311,038Total
      liabilities
                            
                            
                            1,497,893
                            
                            
                            
                            
                            
                            
                            
                            1,497,893
                            
                            
                            
                            1,221,126
                            
                            
                            
                            
                            
                            
                            
                            1,221,126Equity
      (Deficit):Member's
      equity (deficit)
                            
                            
                            3,763,392
                            
                            
                            
                            (453,351
                            )
                            
                            
                            3,310,041
                            
                            
                            
                            185,173
                            
                            
                            
                            (352,794
                            )
                            
                            
                            (167,621
                            )Noncontrolling
      interests
                            
                            
                            1,960
                            
                            
                            
                            -
                            
                            
                            
                            1,960
                            
                            
                            
                            1,960
                            
                            
                            
                            -
                            
                            
                            
                            1,960Total
      equity
                            
                            
                            3,765,352
                            
                            
                            
                            
                            
                            
                            
                            3,312,001
                            
                            
                            
                            187,133
                            
                            
                            
                            
                            
                            
                            
                            (165,661
                            )$
                            5,263,245
                            
                            
                            
                            
                            
                            
                            $
                            4,809,894
                            
                            
                            $
                            1,408,259
                            
                            
                            
                            
                            
                            
                            $
                            1,055,465
  20
 
 UNITED
      STATES COMMODITY FUNDS LLC AND SUBSIDIARIES(formerly
      Victoria Bay Asset Management, LLC)NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
 
 NOTE 10
-
                  RESTATEMENT OF CONSOLIDATED
      FINANCIAL STATEMENTS
(concluded)
 
 Year Ended December 31, 2009
                      
                      
                      Year Ended December 31, 2008As Previously
                        Reported
                      
                      
                      Adjustment
                      
                      
                      As Restated
                      
                      
                      As Previously
                        Reported
                      
                      
                      Adjustment
                      
                      
                      As RestatedConsolidated
      Statements of Operations and Other Comprehensive Income (Loss)
      Data:Revenue
                      
                      $
                      27,224,589
                      
                      
                      $
                      -
                      
                      
                      $
                      27,224,589
                      
                      
                      $
                      8,631,883
                      
                      
                      $
                      -
                      
                      
                      $
                      8,631,883Operating
      expenses
                      
                      
                      (11,659,424
                      )
                      
                      
                      (1,032,975
                      )
                      
                      
                      (12,692,399
                      )
                      
                      
                      (5,447,296
                      )
                      
                      
                      (719,494
                      )
                      
                      
                      (6,166,790
                      )Other
      income
                      
                      
                      57,378
                      
                      
                      
                      -
                      
                      
                      
                      57,378
                      
                      
                      
                      14
                      
                      
                      
                      -
                      
                      
                      
                      14Provision
      for income taxes
                      
                      
                      (6,229,595
                      )
                      
                      
                      -
                      
                      
                      
                      (6,229,595
                      )
                      
                      
                      (1,260,622
                      )
                      
                      
                      -
                      
                      
                      
                      (1,260,622
                      )Net
      income
                      
                      
                      9,392,948
                      
                      
                      
                      
                      
                      
                      
                      8,359,973
                      
                      
                      
                      1,923,979
                      
                      
                      
                      
                      
                      
                      
                      1,204,485Other
      comprehensive income (loss)
                      
                      
                      8,725
                      
                      
                      
                      -
                      
                      
                      
                      8,725
                      
                      
                      
                      (88,820
                      )
                      
                      
                      -
                      
                      
                      
                      (88,820
                      )Comprehensive
      income
                      
                      $
                      9,401,673
                      
                      
                      
                      
                      
                      
                      $
                      8,368,698
                      
                      
                      $
                      1,835,159
                      
                      
                      
                      
                      
                      
                      $
                      1,115,665Consolidated
      Statement of Cash Flows Data:Cash
      flows from operating activities:Net
      income
                      
                      $
                      9,392,948
                      
                      
                      $
                      (1,032,975
                      )
                      
                      $
                      8,359,973
                      
                      
                      $
                      1,923,979
                      
                      
                      $
                      (719,494
                      )
                      
                      $
                      1,204,485Changes
      in operating accounts
                      
                      
                      (2,838,545
                      )
                      
                      
                      1,032,975
                      
                      
                      
                      (1,805,570
                      )
                      
                      
                      (1,066,257
                      )
                      
                      
                      719,494
                      
                      
                      
                      (346,763
                      )6,554,403
                      
                      
                      
                      
                      
                      
                      
                      6,554,403
                      
                      
                      
                      857,722
                      
                      
                      
                      
                      
                      
                      
                      857,722Cash
      flows from financing activities:Distributions
                      
                      
                      (4,891,036
                      )
                      
                      
                      -
                      
                      
                      
                      (4,891,036
                      )
                      
                      
                      (784,837
                      )
                      
                      
                      -
                      
                      
                      
                      (784,837
                      )Noncontrolling
      interests
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (980
                      )
                      
                      
                      -
                      
                      
                      
                      (980
                      )(4,891,036
                      )
                      
                      
                      
                      
                      
                      
                      (4,891,036
                      )
                      
                      
                      (785,817
                      )
                      
                      
                      
                      
                      
                      
                      (785,817
                      )Net
      increase in cash
                      
                      
                      1,663,367
                      
                      
                      
                      
                      
                      
                      
                      1,663,367
                      
                      
                      
                      71,905
                      
                      
                      
                      
                      
                      
                      
                      71,905Cash,
      beginning of year
                      
                      
                      125,815
                      
                      
                      
                      
                      
                      
                      
                      125,815
                      
                      
                      
                      53,910
                      
                      
                      
                      
                      
                      
                      
                      53,910Cash,
      end of year
                      
                      $
                      1,789,182
                      
                      
                      
                      
                      
                      
                      $
                      1,789,182
                      
                      
                      $
                      125,815
                      
                      
                      
                      
                      
                      
                      $
                      125,815
  21
 
 Part IV
 
 Item
15.      Exhibits and Financial Statement
Schedules.
 
 Listed
below are the exhibits which are filed as part of this Form 10-K/A (according to
the number assigned to them in Item 601 of Regulation S-K):
 
 Exhibit
                          Number
                        
                        Description of Document31.1*
                        
                        Certification
      of Principal Executive Officer Pursuant to Rule 13a-14(a) under the
      Securities Exchange Act of 1934.31.2*
                        
                        Certification
      of Principal Financial Officer Pursuant to Rule 13a-14(a) under the
      Securities Exchange Act of 1934.32.1*
                        
                        Certification
      of Principal Executive Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (18 U. S. C. 1350).32.2*
                        
                        Certification
      of Principal Financial Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (18 U. S. C. 1350).*
                        
                        Filed
      herewith.
  22
  SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
  United
States Short Oil Fund, LP (Registrant)
 By:  United
States Commodity Funds LLC, its general partner
 (formerly
known as Victoria Bay Asset Management, LLC)
 
 By:
                    /s/
      Nicholas D. GerberNicholas
      D. GerberPresident
      and Chief Executive Officer(Principal
      executive officer)Date:  May
      24, 2010By:
                    /s/
      Howard MahHoward
      MahChief
      Financial Officer(Principal
      financial and accounting officer)Date:
      May 24, 2010
  23