UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
10-QSB
 
 xQuarterly Report under Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended September 30,
      2007.
 
 oTransition report under Section 13 or 15(d) of the Exchange
      Act
  Commission File Number
0-50834
  Apollo
Drilling, Inc.
 (Formerly
Siam Imports, Inc)
 (Exact
name of registrant as specified in its charter)
  Nevada
              
              73-1668122(State
      or other jurisdiction
              
              (I.R.S.
      Employerof
      incorporation or organization)
              
              Identification
      No.)
   3001
      Knox Street, Suite 403Dallas,
      TX
              
              75205(Address
      of principal executive offices)
              
              (Zip
      Code)
   Registrant's
telephone number, including area code:   214-389-9800
  None
 Former
Name, Address and Fiscal Year, if Changed Since Last Report
  Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes Nox
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
  Yeso Nox
  At August
31, 2007, there were 222,840,000 shares of our common stock issued and
outstanding.
     
  
 
 APOLLO DRILLING, INC.
  TABLE OF CONTENTS
  FORM 10-QSBA
QUARTERLY REPORT
 
  PART I: FINANCIAL INFORMATIONItem 1.
              Financial StatementsBalance Sheets as of September 30,
      2007 (unaudited) and December 31, 2006
              3Statements of Operations for the Three
      and Nine Month Periods Ended September 30, 2007 and 2006
      (unaudited)
              4Statement of Stockholders’ Equity for the
      Nine Month period ended September 30, 2007 (unaudited)
              5Statements of Cash Flows for the Nine Month Periods Ended
      September 30, 2007 and 2006  (unaudited)
              6Notes to Restated Consolidated Financial Statements
      (unaudited)
              7Item 2.
              Management's Discussion and
      Analysis or Plan of Operation
              12Item 3.
              Controls and Procedures
              17PART II: OTHER INFORMATIONItem 1.
              Legal Proceedings
              19Item 2.
              Unregistered Sales of Equity
      Securities and Use of Proceeds
              19Item 3
              Defaults Upon Senior
      Securities
              20Item 4.
              Submission of matters to a
      Vote of Security Holders
              20Item 5.
              Other Information
              20Item 6.
              Exhibits
              21Signatures
              22
   
 
 
 
 
 
 
 
  2
 Table of Contents
  
 
 
  
  PART 1.FINANCIAL INFORMATION
  APOLLO
DRILLING, INC.
  BALANCE
SHEETS
  September
      30, 2007
                (Unaudited)
              
              December
      31, 2006ASSETSCurrent
      AssetsCash
              
              $
              409
              
              $
              425,708Inventory
              
              
              451,500
              
              
              451,500Prepaid
      expenses and deposits
              
              
              168,700
              
              
              22,000Note
      receivable and advances, related parties
              
              
              28,633
              
              
              239,776Total
      Current Assets
              
              
              649,242
              
              
              1,138,984Fixed
      Assets
              
              
              1,138,672
              
              
              1,765,180TOTAL
    ASSETS
              
              $
              1,787,914
              
              $
              2,904,164LIABILITIES
      & STOCKHOLDERS’ EQUITYCurrent
      LiabilitiesAccounts
      Payable and accrued expenses
              
              $
              660,419
              
              $
              184,371Customer
      deposits
              
              
              —
              
              
              321,183Total
      Other Current Liabilities
              
              
              660,419
              
              
              505,554LT
      Notes Payable
              
              
              1,000,000
              
              
              1,000,000Total
      Liabilities
              
              $
              1,660,419
              
              $
              1,505,554Stockholders’
      EquityCommon
      Stock , $.01 par value, 500,000,000 shares authorized, 222,840,000 and
      177,340,000 shares issued and outstanding, respectively
              
              
              222,840
              
              
              177,340Additional
      Paid-in-Capital
              
              
              5,808,656
              
              
              3,127,904Accumulated
      deficit
              
              
              (5,904,001
              
              
              (1,906,634
              )TotalStockholders’Equity
              
              
              127,495
              
              
              1,398,610Total
      Liabilities and Stockholders’ Equity
              
              $
              1,787,914
              
              $
              2,904,164
 
  See
accompanying notes to Financial Statements
  
 
 
 
 
  3
 Table of Contents
  
 
 
 APOLLO
DRILLING, INC.
  STATEMENTSOF OPERATIONS
  (unaudited)
  Three
      Months Ended
              
              
              Three Months
      Ended
              
              
              Nine Months
      Ended
              
              
              Nine Months
      EndedSeptember 30, 2007
              
              
              September 30,
      2006
              
              
              September 30,
      2007
              
              
              September 30,
      2006Sales
      Revenue
              $
              —
              
              
              $
              —
              
              
              $
              532,710
              
              
              $
              —Cost
      of Goods Sold
              
              (99,528
              )
              
              
              8,195
              
              
              
              (946,391
              )
              
              
              (9,645
              )Gross
      Profit
              
              (99,528
              )
              
              
              (8,195
              )
              
              
              (413,681
              )
              
              
              (9,645
              )Compensation
              
              21,461
              
              
              
              —
              
              
              
              291,662
              
              
              
              —Other
      selling, general and administrative (including share based compensation
      totaling $2,726,250 and $0, respectively, for the nine months
      ended)
              
              162,878
              
              
              
              638,188
              
              
              
              2,941,435
              
              
              
              1,322,682Total operating
      expenses
              
              184,339
              
              
              
              638,188
              
              
              
              3,233,097
              
              
              
              1,322,682Net
      loss from operations
              
              (283,867
              )
              
              
              (646,383
              )
              
              
              (3,646,778
              )
              
              
              (1,332,327
              )Other
      income (expense)Gain/(Loss)
      on Sale of Assets
              
              (251,550
              )
              
              
              —
              
              
              
              (251,550
              )Interest
      expense
              
              (37,500
              )
              
              
              (28,750
              )
              
              
              (99,038
              )
              
              
              (31,809
              )Total
      other income (expense)
              
              (289,050
              )
              
              
              (28,750
              )
              
              
              (350,588
              )
              
              
              (31,809
              )Net
      loss
              $
              (572,917
              )
              
              $
              (675,133
              )
              
              $
              (3,997,366
              )
              
              $
              (1,364,136
              )Net
      loss per common shareBasic
      and diluted:Net
      loss
              $
              (0.002
              )
              
              $
              (0.03
              )
              
              $
              (0.02
              )
              
              $
              (0.09
              )Weighted
      average shares
              
              143,241,714
              
              
              
              24,236,413
              
              
              
              154,758,095
              
              
              
              15,251,809
   See
Accompanying Notes to Financial Statements
    
  
  
  
   4
 Table of Contents
  
  
 
 
 
 APOLLO
DRILLING, INC.
  STATEMENTOF STOCKHOLDERS’ EQUITY
  For
the Nine Month Period Ended September 30, 2007 and 2006
  (unaudited)
  Common
              
              
              
              
              
              AdditionalStock
              
              
              Common
              
              
              Paid
              
              
              AccumulatedShares
              
              
              Stock
      at Par
              
              
              in
      Capital
              
              
              Deficit
              
              
              TotalsBalance
      December 31, 2006
              
              $
              177,340,000
              
              
              $
              177,340
              
              
              $
              3,127,904
              
              
              $
              (1,906,635
              )
              
              $
              1,398,610Shares
      issued for services
              
              
              45,500,000
              
              
              
              45,500
              
              
              
              2,680,751
              
              
              
              —
              
              
              
              2,726,251Net
      loss
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (3,997,366
              )
              
              
              (3,997,366
              )Balance
      September 30, 2007
              
              $
              222,840,000
              
              
              $
              222,840
              
              
              $
              5,808,656
              
              
              $
              (5,904,001
              )
              
              $
              127,4952
 See
accompanying notes to consolidated financial statements
  
 
 
 
 
 
 
 
 
 
 
 
  5
 Table of Contents
  APOLLO DRILLING, INC.
 STATEMENTS
OF CASH FLOWS
 For
the Nine Month Period Ended September 30, 2007 and 2006
  2007
              
              2006(unaudited)OPERATING
      ACTIVITIESNet
      loss
              $
              (3,997,366
              )
              $(1,364,136
              )Adjustments
      to reconcile net loss to cash provided by operating
      activities:Depreciation
              
              127,322
              
              
              935Share-based
      compensation
              
              2,726,250
              
              
              800,000Loss
      on sale of assets
              
              251,550Changes
      in assets and Liabilities:Decrease
      (increase) in:Inventory
              
              —
              
              
              (451,500
              )Prepaid
      expenses and deposits
              
              (146,700
              )
              
              85,092Note
      receivable and advances, related parties
              
              211,142
              
              
              —Increase
      (decrease) in:Accounts
      payable and accrued expenses
              
              154,861
              
              
              100,200Affiliated
      company payable
              
              (795
              )
              
              (15,903
              )Net
      cash used in operating activities
              
              (673,736)
              
              
              (845,312
              )INVESTING
      ACTIVITIESCash
      acquired in acquisition
              
              —
              
              
              3,924Purchases
      of property, plant and equipment
              
              (1,563
              )
              
              (344,500
              )Proceeds
      from sale of equipment
              
              250,000
              
              
              —Net
      cash provided by (used in) investing activities
              
              248,437
              
              
              (340,576
              )FINANCING
      ACTIVITIESRepayment
      of notes payable
              
              (1,000,000
              )
              
              —Increase
      in net borrowings
              
              1,000,000
              
              
              1,000,000Issuance
      of common stock
              
              —
              
              
              250,000Net
      cash provided by financing activities
              
              —
              
              
              1,250,000NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              (425,299
              )
              
              64,112CASH
      AND CASH EQUIVALENTS — Beginning of year
              
              425,708
              
              
              58CASH
      AND CASH EQUIVALENTS — End of year
              $
              409
              
              $
              64,170SUPPLEMENTAL
      CASH FLOW DISCLOSURES:Interest
      paid
              $
              —
              
              $
              9,688Income
      taxes paid
              
              —
              
              
              —
 See
accompanying notes to financial statements
  
 
  
  
  
   6
 Table of Contents
  
    APOLLO
DRILLING, INC.
  NOTES TO FINANCIAL STATEMENTS
  DESCRIPTION
OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT
POLICIES
  
 Description
of business and history — Apollo Drilling, Inc. (the “Company”) was
incorporated on May 27, 2003 in the State of Nevada originally under the
name of Siam Imports. On May 12, 2006, the Company consummated a Securities
Purchase Agreement (the “Agreement”) with Apollo Resources International, Inc.
(“Apollo Resources”), a Utah corporation, to acquire 100% of Apollo Resources
ownership interest in Apollo Drilling, LLC, a Texas limited liability company in
exchange for 95,900,000 (post-split) shares of the Company’s common stock
(hereinafter referred to as “Apollo Transaction”)  and net assets
totaling $1,442,244.  In addition, as part of the agreement the
Company also affected a 7-for-1 reverse split of its common shares. As a result,
Apollo Drilling, LLC has become a wholly owned subsidiary of the Company. Prior
to the Apollo Transaction, the Company was non-operating public company with no
operations and nominal assets; 56,000,000 (post-split) shares of common stock
issued and outstanding; and Apollo Drilling, LLC was a privately held operating
company. The Apollo Transaction is considered to be a capital transaction in
substance, rather than a business combination. Inasmuch, the Apollo Transaction
is equivalent to the issuance of shares by a private company (Apollo Drilling,
LLC) for the nominal assets of a non-operational public company,
accompanied by a recapitalization. The accounting for Apollo Transaction is
similar to that resulting from a reverse acquisition, except goodwill is not
recorded. Accordingly, the historical financial information of the accompanying
financial statements are that of Apollo Drilling, LLC which the
95,900,000 shares issued by the Company are considered the historical
outstanding shares of Apollo Drilling, LLC for accounting purposes. The
Company’s operating activities are conducted through its wholly owned
subsidiary, Apollo Drilling, LLC.
  Apollo
Drilling, LLC, a Texas Limited Liability Company, was incorporated on
February 10, 2006. The Company provides contract drilling services to oil
and natural gas exploration and production companies. The primary assets of
Apollo Drilling, LLC are fully operational drilling rig and drill pipe inventory
located in Texas and non-operating drilling rigs that require refurbishment and
spare equipment, located in Oklahoma. The drilling rigs are capable of drilling
to depths of up to 6,500 feet. The Company plans to acquire additional rigs
and maintain a high utilization rate for the rigs, through the negotiation and
execution of contracts for drilling services.
  Basis of
presentation — The accompanying consolidated financial statements include
the accounts of Apollo Drilling, Inc. and its wholly owned subsidiary, Apollo
Drilling, LLC. The accompanying consolidated financial statements have been
prepared in accordance accounting principles generally accepted in the United
States. All material inter-company accounts and transactions have been
eliminated in consolidation.
  Going
concern — The Company incurred net losses of approximately $3,997,366
during the nine months ended September 30, 2007, raising substantial doubt about
the Company’s ability to continue as a going concern. The Company plans to
acquire additional rigs and maintain a high utilization rate for the rigs,
through the negotiation and execution of contracts for drilling services. The
Company will seek additional sources of capital through the issuance of debt or
equity financing, but there can be no assurance the Company will be successful
in accomplishing its objectives. The ability of the Company to continue as a
going concern is dependent on additional sources of capital and the success of
the Company’s plan. The financial statements do not include any adjustments that
might be necessary if the Company as a going concern.
  
 Certain
reclassifications to prior years have been made to conform to the 2007
presentation.
 
 
  7
 Table of Contents
  
 
 
 Use of
estimates
  The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
  Cash and Cash
Equivalents — Cash equivalents consist of highly liquid investments
with original maturities of three months or less.
  Accounts
Receivable — At September 30, 2007, the amounts carried in
accounts receivable were considered by management to be collectible in
full.
  Allowance for Doubtful
Accounts — the allowance for doubtful accounts is established
through a provision for bad debts charged to expense. Trade accounts receivable
are charged against the allowance for doubtful accounts when management believes
that collectibility of the account is unlikely. The allowance is an amount that
management believes will be adequate to absorb estimated losses on existing
accounts, based on an evaluation of the collectibility of accounts, prior loss
experience and current economic conditions.  At September 30,
2007receivables were believed to be fully collectible.
  Inventory — Inventory
balances as of September 30, 2007, consisted of drilling rig equipment
totaling $451,500.
  Concentration of Credit
Risk — financial instruments which potentially subject the
Company to concentrations of credit risk consist principally of accounts
receivable and temporary cash investments. Exposure to losses on receivables is
principally dependent on each customer’s financial condition. The Company
controls its exposure to credit risk through credit approvals, credit limits and
monitoring procedures and establishes allowances for anticipated losses. The
Company places its temporary cash investments with quality financial
institutions and, by policy, limits the amount of credit exposure with any one
financial instrument. The Company maintains its cash in bank deposit accounts,
which, at times, may exceed federally insured limits. At September 30,
2007, the Company had $ 0 in bank deposit accounts. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk on cash and cash equivalents.
  Property and Equipment —
In accordance with Statement of Financial Accounting Standards No. 144
“Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company
reviews its long-lived assets to be held and used, whenever events or
circumstances indicate that the carrying value of those assets may not be
recoverable. An impairment loss is indicated if the sum of the expected future
net cash flows is less than the carrying amount of the assets. In this
circumstance, the Company recognizes an impairment loss for the amount by which
the carrying amount of the asset exceeds the estimated fair value of the
asset.
 Adoption of SFAS 143 —
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 143, “Accounting for Asset Retirement Obligations”
(SFAS 143”). SFAS 143 amended Statement of Financial Accounting
Standards No. 19, “Financial Accounting and Reporting by Oil and Gas
Production Companies” to require that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. Under the provisions of
SFAS 143, asset retirement obligations are capitalized as part of the
carrying value of the long-lived asset.
 Revenue — Oil and
natural gas drilling revenue is recognized at the time the services are
provided.  Revenue is recognized in accordance with SEC Staff
Accounting Bulletin (SAB) No. 104 “Revenue Recognition” (“SAB 104”),
when persuasive evidence of an arrangement exists, the fee is fixed or
determinable, collectibility is probable, delivery of a product has occurred and
title and risk of loss has transferred or services have been
rendered.  The Company maintains written contracts with standard day
rates for drilling services.
 Costs of Sales — Cost of
sales consists primarily of drilling supplies and parts sold directly to
customers; and in addition the depreciation of drilling equipment and labor
costs to operate the equipment.
  8
 Table of Contents
  
  
 
 Earnings per Share —
Earnings (loss) per common share is presented in accordance with the provisions
of the Statement of Financial Accounting Standards No. 128, “Earnings Per
Share” (SFAS 128), which requires the presentation of “basic” and “diluted”
earnings per share. Basic earnings (loss) per share are based on the weighted
average shares outstanding. Diluted earnings per share include the effect of
dilutive securities such as stock options and warrants.
  Basic net
income (loss) per share is computed by dividing net income (loss) available to
common shareholders (numerator) by the weighted average number of common shares
outstanding during the year (denominator). Diluted net income (loss) per share
is computed using the weighted average number of common shares and potential
common shares outstanding during the year. Potential common shares result from
the assumed exercise, using the treasury stock method, of outstanding stock
options, warrants and convertible notes having a dilutive effect. The numerator
for the periods presented is equal to the reported net loss.
  Accounting for Share-Based
Compensation —The Company measures all share-based payments,
including grants of employee stock options, using a fair-value based method in
accordance with Statement of Financial Accounting Standards No. 123R,
“Share-Based Payments.” The cost of services received in exchange for awards of
equity instruments is recognized in the statement of operations based on the
grant date fair value of those awards amortized over the requisite service
period. The Company utilizes a standard option pricing model, the Black-Scholes
model, to measure the fair value of stock options granted.
  The
Company determines the measurement date for share based transactions with
non-employees according to the terms of EITF 96-18, “Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services”. The Company measures fair value of
equity instruments using the stock price and other measurement assumptions as of
the earlier of either of the date at which a commitment for performance by the
counterparty to earn the equity instruments is, or the date at which the
counterparty’s performance is complete.
  Income Taxes —
Differences between accounting rules and tax laws cause differences between the
basis of certain assets and liabilities for financial reporting purposes and tax
purposes. The tax effects of these differences, to the extent they are
temporary, are recorded as deferred tax assets and liabilities under Statement
of Financial Accounting Standards (SFAS) 109. Temporary differences relate
primarily to net operating losses, depreciation and accrued expenses not
currently deductible. Deferred tax assets are reduced by a valuation allowance
to the extent the realization of the related deferred tax asset is not
assured.
  At
September 30, 2007, the Company had a federal operating loss carryforward of
approximately $1,400,000 which begin to expire in 2025.
 Components
of net deferred tax assets, including a valuation allowance, are as follows at
September  30, 2007:
  2007Deferred
      tax assets:Stock-based
      compensation
              
              $
              1,400,000Total
      deferred tax assets
              
              
              1,400,000Less:
      Valuation Allowance
              
              
              (1,400,000
              )Net
      Deferred Tax Assets
              
              $
              —
  The
valuation allowance for deferred tax assets as of September 30, 2007 was
$1,400,000. In assessing the recovery of the deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income in the
periods in which those temporary differences become deductible.
 
  Management
considers the scheduled reversals of future deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment. As
a result, management determined it was more likely than not the deferred tax
assets would not be realized as of September 30, 2007, and recorded a full
valuation allowance.
  
 Reconciliation
between the statutory rate and the effective tax rate for the nine months ended
September 30, 2007 is as follows:
  Federal
      statutory tax rate
              
              
              (35.0
              )%State
      taxes, net of federal benefit
              
              
              (8.7
              )%Change
      in valuation allowance
              
              
              43.7
              %Effective
      tax rate
              
              
              0.0
              %
  Recent Accounting
Pronouncements:
  The
Financial Accounting Standards Board has published FASB Interpretation
No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes”, to
address the non-comparability in reporting tax assets and liabilities resulting
from a lack of specific guidance in FASB Statement of Financial Account
Standards No. 109 (SFAS 109), “Accounting for Income Taxes”, on the
uncertainty in income taxes recognized in an enterprise’s financial statements.
Specifically, FIN No. 48 prescribes, (a) a consistent recognition
threshold and (b)  a measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return, and provides related guidance on derecognition, classification,
interest and penalties, accounting interim periods, disclosure and transition.
FIN No. 48 will apply to fiscal years beginning after December 15,
2006, with earlier adoption permitted. The Company is currently evaluating the
effects of FIN No. 48 but does not expect the adoption of FIN No. 48
to have a material impact on the consolidated financial
statements.
  In
September 2006, the FASB issued Statement No. 157, “Fair Value
Measurements” (FAS 157), which defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value measurements.
The provisions of FAS 157 become effective as of the beginning of our 2009
fiscal year. We are currently evaluating the impact that FAS 157 will have
on our financial statements.
    In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115” (FAS 159). FAS 159 permits companies to choose
to measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value and establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar types
of assets and liabilities. The provisions of FAS 159 become effective as of
the beginning of our 2009 fiscal year. We are currently evaluating the impact
that FAS 159 will have on our financial statements.
 
  9
 Table of Contents
  
 
 
  2.
              GOING CONCERN AND MANAGEMENT
      PLANS
  During
the period ending September 30, 2007, the Company recorded a net loss of
$3,997,366.   The Company’s continued existence is dependent upon
its ability to take advantage of acquisition opportunities, raise capital
through private securities offerings, secure collateralized debt financing and
use these sources of capital to grow and enhance its oil and gas drilling
business.
  Management
is focusing on expanding and improving its oil and natural gas drilling
operations through acquisition, organic growth and funding via collateralized
loans and private placement offerings, the Company plans to continue to increase
the profitability of its operations necessary to support
operations.
  There can
be no assurance that any of management’s plans as described above will be
successfully implemented or that the Company will continue as a going
concern.
  The Company’s
Liquidity Plan
  Recent
operating results give rise to concerns about the Company’s ability to generate
cash flow from operations sufficient to make scheduled debt payments as they
become due.
  The
Company’s need to raise additional equity or debt financing and the Company’s
ability to generate cash flow from operations sufficient to make scheduled
payments on its debts as they become due will depend on its future performance
and the Company’s ability to successfully raise capital and implement business
and growth strategies. The Company’s performance will also be affected by
prevailing economic conditions. Many of these factors are beyond the Company’s
control. If future cash flows and capital resources are insufficient to meet the
Company’s debt obligations and commitments, the Company may be forced to reduce
or delay activities and capital expenditures, obtain additional equity capital
or restructure or refinance its debt. In the event that the Company is unable to
do so, the Company may be left without sufficient liquidity and it may not be
able to meet its debt service requirements. In such a case, this could result in
a substantial portion of the Company’s indebtedness becoming immediately due and
payable. As a result, the Company may not be able to continue operations due to
liens, collateralized notes or other secured positions placed on the Company’s
assets.
  3.
              NOTE RECEIVABLE AND ADVANCES,
      RELATED PARTIES
  At September 30, 2007 the amounts
carried in note receivable and advances were considered by management to be
collectible in full. In addition the related interest rates were at market and
terms, and thus the amounts are stated at fair market value. Notes receivable
from related parties consist of advances made to the parent, Apollo, totaling
$28,633. The interest at 8% and principal are
due within the next fiscal year.
 4.
              PROPERTY AND
      EQUIPMENT
  Property
and equipment are stated at cost less accumulated depreciation. The Company
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets.
 
 
 
 
 
 
  10
 Table of Contents
  
 
  APOLLO
DRILLING, INC.
  NOTES TO FINANCIAL
STATEMENTS — (Continued)
  Depreciation
is calculated on a straight-line basis over the estimated useful lives of the
various assets as follows:
  Drilling
      rigs and components
              
              
              5-7 YearsAutomobiles
              
              
              5 Years
  Property,
plant and equipment consist of the following:
  September
      30,
              
              December 31,2007
              
              2006Drilling
      rigs and components
              $
              $1,135,361
              
              $
              1,926,631Computer
      and office equipment
              
              15,154
              
              
              13,024Automobiles
              
              28,372
              
              
              28,372Trailers
              
              8,800
              
              
              —1,187,687
              
              
              1,968,027Less
      fixed asset impairment
              
              
              
              
              (168,745)1,187,687
              
              
              1,799,282Less
      accumulated depreciation
              
              (49,015)
              
              
              (34,102)Total
      property, plant and equipment
              $
              1,138,672
              
              $
              1,765,180
  Depreciation
expense for the nine months ended September 30, 2007 was $127,322 and $34,102
for the year ended December 31, 2006.
  The
amount of drilling rigs and components is comprised of one fully operation
drilling rig, two disassembled partial drilling rigs that require refurbishment
and spare equipment.
  5.NOTES
      PAYABLE
  As of
March 31, 2007, the Company has an outstanding note payable to an affiliate of
the company  for $1,000,000, with interest at 18%. The proceeds from
the affiliate were used to repay the note payable amount outstanding as of
December 31, 2006 totaling $1,000,000.
 
 
 7.
              RELATED PARTY
      TRANSACTIONS
  As of
September 30, 2007 the Company had an outstanding $1,000,000 note payable to an
affiliate of the company.
 On
January 8, 2007, 44,750,000 common shares issued for $2,685,000 in services
to former officers and executives of the company.
 During
2006 the Company provided drilling services to the parent totaling
$532,710.
 
  11
 Table of Contents
  
 
  8.
              STOCK
      OPTIONS
  As of
September 30, 2007, the Company does not have any stock options outstanding, nor
does it have any written or verbal agreements for the issuance or distribution
of stock options at this time.
 
  9.
              LITIGATION
  On
February 13, 2007 The Cervelle Group, filed a complaint against the Company
alleging breach of contract by failing to pay $20,000 and issue
10,000 shares of the Company’s common stock for services performed. The
Company intends to vigorously defend this action, however the company has
recorded $20,000 in accrued liabilities.
  
 
 ITEM 2.
              Management’s Discussion and
      Analysis.
   The
following discussion should be read in conjunction with the Company’s Financial
Statements and the notes thereto and the other information included in
Item 7 of this Annual Report on Form 10-KSB.
  Overview
  The
Company derives its revenue primarily from providing oil and natural gas
exploration drilling services The Company also focused on raising capital
through private placements of its common stock and securing collateralized debt
financing essential to providing the capital to expand its business
operations.
  Critical Accounting
Policies
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the accompanying financial
statements and related footnotes. Management bases its estimates and assumptions
on historical experience, observance of industry trends and various other
sources of information and factors. Actual results could differ from these
estimates. Critical accounting policies are defined as those that are reflective
of significant judgments and uncertainties, and potentially could result in
materially different results under different assumptions and
conditions.
  Revenue
Recognition
  Oil and
natural gas exploration drilling revenue is recognized at the time services are
provided.
  Results of
Operations
  Due to
minimal operations during the nine months ended September 30, 2006, only nine
months ended September 30, 2007 operations will be
discussed.
  12
 Table of Contents
  
 
 
 Sales
  The
Company recorded revenue of $532,710 for the nine months ended September 30,
2007. The Company commenced operations in October 2006. The Company provided
$532,710 drilling services to the parent, Apollo Resources International,
Inc.
  Cost of
Sales
  Cost of
sales was $946,391 for the nine months ended September 30, 2007, and consisted
of drilling supplies $388,404, salaries $430,665, and depreciation of
$127,322.
  Operating
Expenses
  Operating
expenses were $3,233,097 for the nine months ended September 30, 2007 and
consisted primarily of approximately $2,726,250 in share based compensation,
salaries of $88,991, insurance and consulting $202,646 and miscellaneous of
$215,210.
  Other Income and
Expenses
  Interest
expense for the nine months ended September 30, 2007 totaled
$99,038.
 Liquidity and Capital
Resources
  Cash used
by operating activities was $673,736 for the nine months ended September 30,
2007.
  Net cash
provided by investing activities was $248,473 for the nine months ended
September 30, 2007 due to the acquisition of property, plant and
equipment.
  Net cash
provided by financing activities was $0, for the nine months ended
September 30, 2007.
 During
the period ending September 30, 2007, the Company recorded a net loss of
$3,997,366. The Company’s continued existence is dependent upon its ability to
take advantage of acquisition opportunities, raise capital through private
securities offerings, secure collateralized debt financing and use these sources
of capital to grow and enhance its oil and gas drilling
operations.
  There can
be no assurance that any of management’s plans as described above will be
successfully implemented or that the Company will continue as a going
concern.
  The Company’s
Liquidity Plan
  Recent
operating results give rise to concerns about the Company’s ability to generate
cash flow from operations sufficient to make scheduled debt payments as they
become due. As of September 30, 2007, the Company continued to seek other
financing from private placements and other acquisitions to expand its
operations.
  The
Company’s need to raise additional equity or debt financing and the Company’s
ability to generate cash flow from operations sufficient to make scheduled
payments on its debts as they become due will depend on its future performance
and the Company’s ability to successfully raise capital and implement business
and growth strategies. The Company’s performance will also be affected by
prevailing economic conditions. Many of these factors are beyond the Company’s
control. If future cash flows and capital resources are insufficient to meet the
Company’s debt obligations and commitments, the Company may be forced to reduce
or delay activities and capital expenditures, obtain additional equity capital
or restructure or refinance its debt. In the event that the Company is unable to
do so, the Company may be left without sufficient liquidity and it may not be
able to meet its debt service requirements. In such a case, this could result in
a substantial portion of the Company’s indebtedness becoming immediately due and
payable. As a result, the Company may not be able to continue operations due to
liens, collateralized notes or other secured positions placed on the Company’s
assets.
  
  
 
  13
 Table of Contents
  
 
 Risk Factors
  The Company’s
limited operating history makes evaluating its business and prospects
difficult.
 The
Company’s limited operating history make it difficult to evaluate its current
business and prospects or to accurately predict its future revenues or results
of operations. The Company’s revenue and income potential are unproven, and its
business plan is constantly evolving. The oil and gas industry is constantly
changing and the market for alternative fuels is evolving; therefore the Company
may need to
 continue
to modify its business plan to adapt to these changes. As a result, the Company
is more vulnerable to risks, uncertainties, expenses and difficulties than more
established companies.
 
 
 The Company has
operating losses and it anticipates losses for the foreseeable future. Unless
the Company is able to generate profits and positive cash flow it may not be
able to continue operations.
  The
Company incurred a net loss of $ 4,010,416 for the nine months ended
September 30, 2007. The Company expects operating losses to continue for the
foreseeable future as it incurs expenditures for future acquisitions and general
business enhancement.
  With
increased on-going operating expenses, the Company will need to generate
significant revenues to achieve profitability. Consequently, the Company may
never achieve profitability. Even if the Company does achieve profitability, it
may not sustain or increase profitability on a quarterly or annual basis in the
future.
  Risks relating to our
industry
  Oil and
gas prices are volatile. A decline in prices could adversely affect the
financial position, financial results, cash flows, access to capital and ability
to grow.
  The
Company’s revenues, operating results, profitability and future rate of growth
depend in great part upon the prices it receives for the oil it sells. Prices
also affect the amount of cash flow available for capital expenditures and the
ability to borrow money or raise additional capital.
  Historically,
the markets for oil and gas have been volatile and they are likely to continue
to be volatile. Wide fluctuations in oil and gas prices may result from
relatively minor changes in the supply of and demand for oil and natural gas,
market uncertainty and other factors that are beyond the Company’s control,
including:
 
   • 
weather conditions;
 
 • 
the level of consumer demand;
 
 • 
the availability of pipeline capacity;
  • 
the price and level of foreign imports;
 
 • 
domestic and foreign governmental regulations and taxes;
  • 
the ability of the members of the Organization of Petroleum Exporting Countries
to agree to and maintain
 oil
price and production controls;
  • 
political instability or armed conflict in oil-producing
regions; and
  • 
the overall economic environment.
 
 These
factors and the volatility of the energy markets make it extremely difficult to
predict future oil and gas price movements with any certainty. Declines in oil
and gas prices would not only reduce revenue, but could reduce the amount of oil
and gas that we can produce economically and, as a result, could have a material
adverse effect on the Company’s financial condition, results of operations and
reserves. Further, oil and gas prices do not necessarily move in
tandem.
 
 
 
 
  14
 Table of Contents
  
  Competition in
the oil and natural gas industry is intense, and many of the Company’s
competitors have greater financial and other
resources.
  The
Company operates in the highly competitive areas of oil and natural gas
exploration. The Company faces intense competition from both major and other
independent oil and natural gas companies. Many of the Company’s competitors
have financial and other resources substantially greater than the Company’s and
some of them are fully integrated oil companies. The Company also competes with
other major as well as mid-size and small oil and natural gas companies in
attempting to secure drilling rigs, pipeline hook-up services and other
equipment necessary for drilling and completing wells. If the Company cannot
compete effectively, it may experience future price reductions, reduced gross
margins and loss of market share, any of which will materially adversely affect
its business, operating results and financial condition.
 Oil and gas
drilling and producing operations can be hazardous and may expose the Company to
environmental liabilities.
  Oil and
gas operations are subject to many risks, including well blowouts, cratering and
explosions, pipe failure and ruptures, fires, formations with abnormal
pressures, uncontrollable flows of oil, natural gas, brine or well fluids, and
other environmental hazards and risks. If any of these risks occurs, the Company
could sustain substantial losses as a result of:
  
 
 • 
injury or loss of life;
  • 
severe damage to or destruction of property, natural resources and
equipment;
  • 
pollution or other environmental damage;
  • 
clean-up responsibilities;
  • 
regulatory investigations and penalties; and
 
 • suspension of
operations.
 
 The
Company’s liability for environmental hazards includes those created either by
the previous owners of properties that have been purchased or leased or by
acquired companies prior to the date of acquisition. The Company maintains
insurance against some, but not all, of the risks described above. Insurance may
not be adequate to cover casualty losses or liabilities. If a significant
accident or event occurs that is not fully insured, it could adversely affect
the Company’s financial position or results of operations. Also, in the future
the Company may not be able to obtain insurance at premium levels that justify
its purchase.
  Operations are
subject to various laws and governmental regulations that could restrict future
operations and increase operating costs.
  Many
aspects of operations are subject to various federal, state and local laws and
governmental regulations, including laws and regulations
governing:
   
 • 
environmental quality;
  • 
pollution control;
  • 
remediation of contamination;
  • 
preservation of natural resources; and
  • 
worker safety.
 
 The
Company’s operations are subject to stringent laws and regulations relating to
containment, disposal and controlling the discharge of hazardous oilfield waste
and other non hazardous waste material into the environment, requiring removal
and cleanup under certain circumstances, or otherwise relating to the protection
of the environment. The Company is also subject to the requirements of the
federal  Occupational Safety and Health Act (“OSHA”) and comparable
state statutes. The OSHA hazard communication standard, the Environmental
Protection Agency “community right-to-know” regulations under Title III of
the Federal Superfund Amendment and Reauthorization Act and comparable state
statutes
  15
 Table of Contents
  
 
 
 require
the Company to organize and report information about the hazardous materials
used in operations to employees, state and local government authorities and
local citizens.
  Environmental
laws and regulations are complex and subject to frequent change. In some cases,
they can impose liability for the entire cost of cleanup on any responsible
party without regard to negligence or fault and can impose liability on the
Company for the conduct of others or conditions others have caused, or for the
Company’s acts that complied with all applicable requirements when performed by
the Company. The Company may also be exposed to environmental or other
liabilities originating from businesses and assets purchased from others. The
Company’s compliance with amended, new or more stringent requirements, stricter
interpretations of existing requirements or the future discovery of
contamination may require the Company to make material expenditures or subject
it to liabilities that it currently does not anticipate.
 
 Risks relating to our common
stock
 
  A large number of
shares will be available for future sale and the sale of these shares may
depress the market price of the Company’s common
stock.
  As of
May 22, 2007, the Company had outstanding 222,090,000 shares of common
stock, of which approximately 222,840,000 shares are still considered
“restricted securities” as that term is defined under Rule 144 promulgated
under the Securities Act of 1933. These restricted shares are eligible for sale
under Rule 144 at various times would cause them to beneficially own more
than 4.99% of the Company’s outstanding common stock, this restriction does not
prevent the selling shareholders from converting and/or exercising some of their
holdings, selling the shares obtained and then converting the rest of their
holdings. In this way, the selling shareholders could sell more than this limit
while never holding more than this limit.
  The Company does
not intend to pay cash dividends on its common stock in the foreseeable
future.
  The
Company currently anticipates that it will retain all future earnings, if any,
to finance the growth and development of its business and do not anticipate
paying cash dividends on its common stock in the foreseeable future. Any payment
of cash dividends will depend upon the financial condition, capital
requirements, earnings and other factors deemed relevant by the Company’s board
of directors.
 
  Forward
Looking Statements
  Certain
disclosure and analysis in this report, including information incorporated by
reference, includes forward-looking statements that are subject to various risks
and uncertainties. In addition to statements of historical fact, this Annual
Report on Form 10-KSB contains forward-looking statements. The presentation
of future aspects of the Company’s business found in these statements is subject
to a number of risks and uncertainties that could cause actual results to differ
materially from those reflected in such statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management’s analysis only as of the date hereof. Without limiting the
generality of the foregoing words such as “may,” “will,” “expect,” “believe,”
“anticipate,” “intend,” or “could” or the negative variations thereof or
comparable terminology are intended to identify forward-looking
statements.
  These
forward-looking statements are subject to certain events, circumstances,
assumptions, risks and uncertainties that may cause the Company’s actual results
to be materially different from any future results expressed or implied by the
Company in those statements. Some of these risks might include, but are not
limited to, the following:
 
 • 
volatility or decline of Apollo Drilling’s stock price;
 
 • 
potential fluctuation in quarterly results;
 
 • 
ability of Apollo Drilling to earn revenues or profits;
 
 • 
sufficiency of revenues to cover operating costs;
  16
 Table of Contents
  
 
  • 
availability and cost of raw materials;
 
 • 
any impact of competition, competitive products, and pricing;
   • 
adequacy of capital to continue or expand its business, inability to raise
additional capital or financing to implement its business plans;
   • 
ability to commercialize its technology or to make sales;
   • 
overall expected growth in the alternative fuels industry;
   • 
changes in interest rates and capital market conditions;
   • 
changes in laws and other regulatory actions;
   • 
acquisitions of business enterprises, including the ability to integrate
acquired businesses effectively;
   • 
litigation with or legal claims and allegations by outside
parties
 
  
 ITEM 3.
              CONTROLSAND
PROCEDURES
  Our
management, including the principal executive officer and principal financial
officer, evaluated our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934) related to the recording, processing, summarization and reporting of
information in our reports that we file with the SEC. These disclosure controls
and procedures have been designed to provide reasonable assurance that material
information relating to us, is made known to our management, including these
officers, by other of our employees, and that this information is recorded,
processed, summarized, evaluated and reported, as applicable, within the time
periods specified in the Sec’s rules and forms.
 Based on
managements evaluation, and as determined by the Company, there were no control
deficiencies that constituted material weaknesses related to internal controls
over financial reporting with respect to the  preparation, review,
presentation and disclosure of the consolidated statements, during the third
quarter 2007.  Our principal executive officer and principal financial
officer have concluded that our disclosure controls and procedures are
effective.
 During the second quarter 2007,
management implemented enhancements to Apollo Drilling’s internal
controls  over financial reporting with respect to the consolidated
financial statements. Apollo Drilling created templates to be used
in  financial reporting to  provide more detailed
information. Also, the disclosure processes  for testing GAAP
compliance have been  improved through the utilization of GAAP
checklists and implementing a process that ensures the timely review and
approval  of complex accounting estimates by qualified accounting
personnel.  In addition, management hired a new Chief Financial
Officer and Controller.  Management has assessed the operating
effectiveness of these enhanced controls and believes the prior quarters
material weaknesses have been remediated.  As a result, management
believes there are no material inaccuracies or omissions of material fact and to
the best of its knowledge, believes that the consolidated financial statements
for the six months ended June 30, 2007 fairly present in all material respects
the financial condition and results of operations for the Corporation in
conformity with accounting principles generally accepted in the United States of
America.
  17
 Table of Contents
  
 
 Extension of Compliance Date for
Management’s Report on Internal Control Over Financial
Reporting
  The
Company is a non-accelerated filer as defined in Rule 12b-2 of the Act. On
September 21, 2005, the Securities and Exchange Commission extended the
compliance dates for non-accelerated filers concerning the provisions of
Exchange Act Rule 13a-15(d) or 15d-15(d), whichever applies, requiring
an
 evaluation
of changes to internal control over financial reporting requirements with
respect to the company’s first periodic report due after the first annual report
that must include management’s report on internal control over financial
reporting. A company that is a non-accelerated filer must begin to comply with
these requirements for its first fiscal year ending on or after July 15,
2007. In addition, the compliance period was extended to the amended portion of
the introductory language in paragraph 4 of the certification required by
Exchange Act Rules 13a-14(a) and 15d-14(a) that refers to the certifying
officers’ responsibility for establishing and maintaining internal control over
financial reporting for the company, as well as paragraph 4(b). The amended
language must be provided in the first annual report required to contain
management’s internal control report and in all periodic reports filed
thereafter. The extended compliance dates also apply to the amendments of
Exchange Act Rules 13a-15(a) and 15d-15(a) relating to the maintenance of
internal control over financial reporting.
 Under the
internal control reporting provisions of the Act, Management will be responsible
for establishing and maintaining adequate internal control over financial
reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of
America.
  The
Company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the
Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
Company’s assets that could have a material effect on the financial
statements.
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
  Prior to
the extended deadline in 2007, management will conduct an evaluation of the
effectiveness of internal control over financial reporting based on the
framework in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management will determine whether the Company’s internal control
over financial reporting is effective. Management’s assessment of the
effectiveness of the Company’s internal control over financial reporting will be
audited by an independent registered public accounting firm and stated in their
report which will be included in the Company’s Form 10-KSB
filing.
  All of
the changes described in the remediation of material weaknesses occurred
during the second quarter of 2007.  Other than as described
previously, there have not been any changes in the Company’s internal controls
during 2007 that have materially affected, or are reasonably likely to
materially affect the Company’s internal control over financial
reporting.
 
  18
 Table of Contents
  
 
 PART II
OTHER INFORMATION
  Item 1.   Legal Proceedings
 On
February 13, 2007 The Cervelle Group, filed a complaint against the Company
alleging breach of contract by failing to pay $20,000 and issue
10,000 shares of the Company’s common stock for services performed. The
Company intends to vigorously defend this action, however the company has
recorded $20,000 in accrued liabilities.
 
 Item 2.
              Equity Securities and Use of
  Proceeds
   Market for Registrant’s Common
Equity
  The
Company’s common stock is traded on the OTCBB under the symbol APDR.OB. The
stock prices set forth below represent the highest and lowest sales prices per
share of the Company’s common stock as reported by the OTCBB. The prices
reported in the following table reflect inter-dealer prices without retail
mark-up, mark-down or commissions and may not represent actual transactions.
Prices after October 18, 2006 reflect the 7 to 1 stock split. Prior to
august 2006 the Company’s common stock did not trade on any public
exchange.
 
  Quarter
      Ended
              
              High
              
              
              LowSeptember
      30, 2007
              
              $
              0.02
              
              
              $
              0.02June
      30, 2007
              
              $
              0.10
              
              
              $
              0.08March
      31, 2007
              
              $
              0.06
              
              
              $
              0.04December 31,
      2006
              
              $
              0.32
              
              
              $
              0.07
  
 
 Holders of
Record
  As of
September 30, 2007 there were approximately 35 holders of record of the
Company’s common stock.
  Dividends
  The
Company’s has paid no cash dividends on its common stock.
  Securities Authorized for Issuance
under Equity Compensation Plans
  As of
March 31, 2007, the Company does not have any stock options outstanding, nor
does it have any written or verbal agreements for the issuance or distribution
of stock options at this time.
  Description of
Securities
  Common
Stock. At August 31, 2007, the Company had 222,840,000 shares of its common
stock outstanding and 500,000,000 shares authorized. Common stock holders
have full voting rights.
  Preferred
Stock. At August 31, 2007 the Company had 15,000,000 authorized and none issued
or outstanding.
  As of
August 31, 2007 there were 215,000,000 shares issued and outstanding to
officers and directors and affiliates.
  At
December 31, 2006 there were no equity compensation plans approved or
outstanding and no options granted or outstanding.
  Change in Securities and Use of
Proceeds
  Changes
in equity securities are as follows:
  On
January 8, 2007, 44,750,000 common shares issued for $2,685,000 in
services.
 On
February 26, 2007, 750,000 common shares issued for $41,250 in
services.
   19
 Table of Contents
  
 
 Item 3.
              Defaults upon Senior
  Securities
  None
 
  Item 4.Submission of Matters to a Vote of Security
      Holders
  Effective
January 30, 2007 the Company accepted the resignation of William Pritchard
as a Director.
 Effective May 1, 2007 Mr. Dennis McLaughlin resigned as Chief
Executive Officer and Chairman of the Board.
  Effective
May 1, 2007 Mr. Jeff F. Raley was elected to the Board of Directors
and to serve as Chairman and Chief Executive Officer.
 
 On
September 25, 2006, the Board of Directors approved the following corporate
actions by written consent, which became effective in October, in lieu of a
meeting pursuant to Section 78.320 of the Nevada General Corporation Law:
The reincorporation merger of our company pursuant to which we will merge with
and into Apollo Drilling, Inc., a Delaware corporation formed for such purposes,
which will result in:
   • 
      a change of domicile of the company from the State of Nevada to the State
      of Delaware;
              
              
              • 
      the change of the corporate name to “Apollo Drilling, Inc.”;
              
              
              • 
      the right to receive seven (7) shares of common stock, par value
      $0.001 per share, of Apollo Drilling for each one (1) share
      of our common stock, par value $0.001 per share, owned as of
      the effective time of the reincorporation merger;
              
              
              • 
      the persons presently serving as executive officers and directors serving
      in their same respective positions with Apollo Drilling;
              
              • 
      the adoption of a new Certificate of Incorporation under the laws of the
      State of Delaware, pursuant to which our authorized capital stock will be
      changed from 25,000,000 shares of authorized capital stock, all of
      which are common stock, par value $0.001 per share, to
      515,000,000 shares of authorized capital stock, consisting of
      500,000,000 shares of common stock, par value $0.001 per share,
      and 15,000,000 shares of “blank check” preferred stock, par value
      $0.001 per share, with the right conferred upon the Board of
      Directors to set the dividend, voting, conversion, liquidation and other
      rights, as well as the qualifications, limitations and restrictions, with
      respect to the preferred stock as the Board of Directors may determine
      from time to time; and the adoption of new Bylaws under the laws of
      the State of Delaware.
              
              On
      October 15, 2007 our board of directors approved and recommended to our
      stockholders to sell part of the drilling rigs in order to raise cash for
      debt and liquidity needs, and to consider the operation of oil and gas
      properties located in Northeastern Oklahoma.






Item 5.
            Other Information




None







20
 Table of Contents





ITEM 6.
            EXHIBITS






ExhibitNumber**
            3
            .1
            
            Articles
      of incorporation (filed in the Company’s Form 10-SB Registration Statement
      filed July 6, 2004 and incorporated herein by
    reference).**
            3
            .2
            
            Bylaws
      (filed in the Company’s Form 10-SB Registration Statement filed
      July 6, 2004 and incorporated herein by
reference).**
            10
            .1
            
            Term
      Loan and Joinder Agreement.**
            10
            .2
            
            Reincorporation
      merger with and into Apollo Drilling (filed in the company’s Schedule
      14 C Information on September 25, 2006, and incorporated herein
      by reference).*
            31
            .1
            
            Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) under the
      Securities Act on 1934.*
            31
            .2
            
            Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) under the
      Securities Act on 1934.*
            32
            .1
            
            Certification
      of Chief Executive Officer pursuant to 18 U.S.C., Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*
            32
            .2
            
            Certification
      of Chief Executive Officer pursuant to 18 U.S.C., Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.




*
      Filed
            herewith


**Previously filed





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SIGNATURES




Pursuant
to the requirements of Section 13(a) 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.




APOLLO
DRILLING, INC.,




a
Delaware Corporation (Registrant)




By:
            /s/
      Jeff F. RaleyJeff
      F. Raley, CEOBy:
            /s/
      Dennis G. McLaughlinDennis
      G. McLaughlin, DirectorDated:
      March 20,  2008

























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Exhibit 31.1


CERTIFICATION


I,
Jeff F. Raley, Chief Executive Officer of Apollo Drilling, Inc., certify
that:


1. I
have reviewed this Quarterly Report on Form 10-QSB/A of Apollo Drilling,
Inc..;


2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statement made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;


3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;


4. The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


a)
            
            designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;b)
            
            evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation; andc)
            
            disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the registrant’s internal control over financial
      reporting; and


5. The
registrant’s other certifying officers and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions):


a)
            
            all
      significant deficiencies and material weaknesses in the design or
      operation of internal controls over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
andb)
            
            any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal
      controls over financial reporting.


Date:
March 20, 2008


/s/ Jeff  F. RaleyJeff  F.
      RaleyChief
      Executive Officer





























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Exhibit 31.2


CERTIFICATION


I,
Dennis G. McLaughlin, Director of Apollo Drilling, Inc., certify
that:


1. I
have reviewed this Quarterly Report on Form 10-QSB/A of Apollo Drilling,
Inc..;


2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statement made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;


3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;


4. The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


a)
            
            designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;b)
            
            evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation; andc)
            
            disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the registrant’s internal control over financial
      reporting; and


5. The
registrant’s other certifying officers and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions):


a)
            
            all
      significant deficiencies and material weaknesses in the design or
      operation of internal controls over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
andb)
            
            any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal
      controls over financial reporting.


Date:
March 20, 2008


/s/ Dennis G. McLaughlinDennis
      G. McLaughlinDirector






















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Exhibit 32.1


CERTIFICATION OF PERIODIC REPORT


I,
Jeff F. Raley, Chief Executive Officer of Apollo Drilling, Inc (the “Company”),
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. Section 1350, that, to the best of my knowledge:


(1) the
Quarterly Report on Form 10-QSB/A of the Company for the six months ended June
30, 2007 (the “Report”) fully complies with the requirements of Section 13
(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
78o(d)); and


(2) the
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.


Date:
March 20, 2008


/s/Jeff. F. RaleyJeff.
      F. RaleyChief
      Executive Officer


A
signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.








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Exhibit 32.2


CERTIFICATION OF PERIODIC REPORT


I,
Dennis G. McLaughlin, Director of Apollo Drilling, Inc. (the “Company”),
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. Section 1350, that, to the best of my knowledge:


(1) the
Quarterly Report on Form 10-QSB/A of the Company for the six months ended June
30, 2007 (the “Report”) fully complies with the requirements of Section 13
(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
78o(d)); and


(2) the
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.


Date:
March 20, 2008


/s/Dennis G. McLaughlinDennis
      G. McLaughlinDirector


A
signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.