UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)





[X]
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the quarterly period ended June 30,
2008





[  
      ]
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT





For the
transition period from ____________ to ______________





Commission
file number: 333-146405





VELOCITY OIL & GAS,
INC.


(Exact
name of registrant as specified in its charter)





Nevada
            1311
            20-5465816(State
      or jurisdiction
            (Primary
      Standard
            (IRS
      Employerof
      incorporation or
            Industrial
            Identification
      No.)organization)
            Classification
              Code
      Number)





369
Terminal Ave, Suite 305


Vancouver,
British Columbia, Canada


V6A 4C4


(Address
of principal executive offices)





(604)
765-3337


(Registrant's
telephone number)




595
Howe Street, Suite 323


Vancouver,
British Columbia, Canada


V6C
2T5


(Former
address of principal executive offices)





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. Yes  x    No   ̈





Indicate
by check mark whether the registrant is a large accelerated filer, and
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   ̈
            Smaller
      reporting company  x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. Yes   xNo    ̈





The
number of shares outstanding of each of the issuer’s classes of equity as of
August 19, 2008 is 11,620,500 shares of common stock, par value $0.001, and no
shares of preferred stock, par value $0.001.










PART
I. FINANCIAL INFORMATION





ITEM 1. FINANCIAL
STATEMENTS








VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


BALANCE
SHEETS


(Unaudited)





June
      30,
              2008
            
            
            December
      31,
              2007ASSETSCURRENT
      ASSETSCash
            
            $
            4,822
            
            
            $
            1,286Prepaid
      expense other current assets
            
            
            -
            
            
            
            3,000Total
      current assets
            
            
            4,822
            
            
            
            4,286Property,
      plant and equipment, net of accumulateddepreciation
      of $1,779 and $1,230, respectively
            
            
            3,848
            
            
            
            1,480Unproved
      oil and gas properties
            
            
            50,000
            
            
            
            50,000TOTAL
      ASSETS
            
            $
            58,670
            
            
            $
            55,766LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable
            
            $
            4,440
            
            
            $
            6,908Accrued
      liabilities
            
            
            5,827
            
            
            
            100Total
      current liabilities
            
            
            10,267
            
            
            
            7,008Long-term
      advances - related party
            
            
            58,036
            
            
            
            17,536Note
      payable to shareholders
            
            
            8,264
            
            
            
            8,264Total
      liabilities
            
            
            76,567
            
            
            
            32,808STOCKHOLDERS’
      EQUITY (DEFICIT)Preferred
      stock, $0.001 par value; 10,000,000 sharesauthorized;
      none issued and outstanding
            
            
            -
            
            
            
            -Common
      stock, $0.001 par value; 100,000,000 sharesauthorized;
      11,620,500 and 11,320,500 shares issued andoutstanding,
      respectively
            
            
            11,621
            
            
            
            11,321Additional
      paid-in-capital
            
            
            159,848
            
            
            
            130,148Deficit
      accumulated during the exploration stage
            
            
            (189,366
            )
            
            
            (118,511
            )Total
      stockholders' equity (deficit)
            
            
            (17,897
            )
            
            
            22,958TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
            
            $
            58,670
            
            
            $
            55,766See
      notes to financial statements.











F-1








VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


STATEMENTS
OF EXPENSES


(Unaudited)


Three
and Six Months Ended June 30, 2008 and 2007 and the Period from


May
16, 2006 (Inception) Through June 30, 2008








InceptionThree
      Months Ended
            
            
            Six
      Months Ended
            
            
            ThroughJune
      30,
            
            
            June
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008Operating
      expenses:General
      and administrative
            
            $
            45,734
            
            
            $
            11,665
            
            
            $
            69,817
            
            
            $
            27,141
            
            
            $
            186,834Depreciation
            
            
            323
            
            
            
            226
            
            
            
            549
            
            
            
            452
            
            
            
            1,779Total
      operating expenses
            
            
            46,057
            
            
            
            11,891
            
            
            
            70,366
            
            
            
            27,593
            
            
            
            188,613Operating
      loss
            
            
            (46,057
            )
            
            
            (11,891
            )
            
            
            (70,366
            )
            
            
            (27,593
            )
            
            
            (188,613
            )Interest
      expense
            
            
            (277
            )
            
            
            (24
            )
            
            
            (489
            )
            
            
            (24
            )
            
            
            (753
            )Net loss
            
            $
            (46,334
            )
            
            $
            (11,915
            )
            
            $
            (70,855
            )
            
            $
            (27,617
            )
            
            $
            (189,366
            )Basic
      and diluted net lossper
      common share
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.00
            )Weighted
      average commonshares
      outstanding
            
            
            11,563,357
            
            
            
            10,691,885
            
            
            
            11,514,456
            
            
            
            10,676,279See
      notes to financial statements.











F-2





VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


STATEMENTS
OF STOCKHOLDERS’ EQUITY (DEFICIT)


(Unaudited)


Period
from May 16, 2006 (Inception) Through June 30, 2008








DeficitAccumulated
            
            
            TotalAdditional
            
            
            During
      the
            
            
            Stockholders'Common
      Stock
            
            
            Paid-in
            
            
            Exploration
            
            
            EquityShares
            
            
            Amount
            
            
            Capital
            
            
            Stage
            
            
            (Deficit)Common
      shares issued for cash
            
            
            10,360,500
            
            
            $
            10,361
            
            
            $
            35,689
            
            
            $
            -
            
            
            $
            46,050Common
      shares issued for services
            
            
            300,000
            
            
            
            300
            
            
            
            -
            
            
            
            -
            
            
            
            300Warrants
      granted
            
            
            -
            
            
            
            -
            
            
            
            19,119
            
            
            
            -
            
            
            
            19,119Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (43,745
            )
            
            
            (43,745
            )Balances
      at December 31, 2006
            
            
            10,660,500
            
            
            
            10,661
            
            
            
            54,808
            
            
            
            (43,745
            )
            
            
            21,724Common
      shares issued for cash
            
            
            250,000
            
            
            
            250
            
            
            
            24,750
            
            
            
            -
            
            
            
            25,000Common
      shares issued for services
            
            
            10,000
            
            
            
            10
            
            
            
            990
            
            
            
            -
            
            
            
            1,000Common
      shares issued as finder's fees
            
            
            500,000
            
            
            
            500
            
            
            
            49,500
            
            
            
            -
            
            
            
            50,000Cancellation
      of common shares
            
            
            (100,000
            )
            
            
            (100
            )
            
            
            100
            
            
            
            -
            
            
            
            -Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (74,766
            )
            
            
            (74,766
            )Balances
      at December 31, 2007
            
            
            11,320,500
            
            
            
            11,321
            
            
            
            130,148
            
            
            
            (118,511
            )
            
            
            22,958Common
      shares issued for services
            
            
            300,000
            
            
            
            300
            
            
            
            29,700
            
            
            
            -
            
            
            
            30,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (70,855
            )
            
            
            (70,855
            )Balances
      at June 30, 2008
            
            
            11,620,500
            
            
            $
            11,621
            
            
            $
            159,848
            
            
            $
            (189,366
            )
            
            $
            (17,897
            )See
      notes to financial statements.














F-3





VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


STATEMENTS
OF CASH FLOWS


(Unaudited)


Six
Months Ended June 30, 2008 and 2007 and the Period from


May
16, 2006 (Inception) Through June 30, 2008





InceptionSix
      Months Ended
            
            
            ThroughJune
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
            
            $
            (70,855
            )
            
            $
            (27,617
            )
            
            $
            (189,366
            )Adjustments
      to reconcile net loss to cash usedin
      operating activities:Depreciation
      expense
            
            
            549
            
            
            
            452
            
            
            
            1,779Debt
      issued for interest
            
            
            -
            
            
            
            -
            
            
            
            264Stock
      issued for services
            
            
            30,000
            
            
            
            -
            
            
            
            31,300Warrant
      expense
            
            
            -
            
            
            
            -
            
            
            
            19,119Changes
      in assets and liabilities:Prepaid
      expenses and other current assets
            
            
            3,000
            
            
            
            5,658
            
            
            
            -Accounts
      payable
            
            
            (2,468
            )
            
            
            -
            
            
            
            4,440Accrued
      liabilities
            
            
            2,810
            
            
            
            24
            
            
            
            2,910CASH
      USED IN OPERATING ACTIVITIES
            
            
            (36,964
            )
            
            
            (21,483
            )
            
            
            (129,554
            )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
            
            
            -
            
            
            
            -
            
            
            
            (2,710
            )CASH
      PROVIDED BY INVESTING ACTIVITIES
            
            
            -
            
            
            
            -
            
            
            
            (2,710
            )CASH
      FLOWS FROM FINANCING ACTIVITIESAdvances
      from related party
            
            
            40,500
            
            
            
            -
            
            
            
            61,002Proceeds
      from note payable to shareholder
            
            
            -
            
            
            
            8,000
            
            
            
            8,000Repayments
      of advances from related party
            
            
            -
            
            
            
            (2,966
            )
            
            
            (2,966
            )Proceeds
      from issuance of common stock
            
            
            -
            
            
            
            8,000
            
            
            
            71,050CASH
      PROVIDED BY FINANCING ACTIVITIES
            
            
            40,500
            
            
            
            13,034
            
            
            
            137,086NET
      CHANGE IN CASH
            
            
            3,536
            
            
            
            (8,449
            )
            
            
            4,822Cash,
      beginning of period
            
            
            1,286
            
            
            
            12,008
            
            
            
            -Cash,
      end of period
            
            $
            4,822
            
            
            $
            3,559
            
            
            $
            4,822SUPPLEMENTAL
      INFORMATIONCash
      paid for:Interest
            
            $
            -
            
            
            $
            -Income
      Taxes
            
            
            -
            
            
            
            -Non-cash
      investing and financing activitiesFixed
      assets purchased on account
            
            $
            2,917
            
            
            $
            -See
      notes to financial statements.






F-4


VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


NOTES
TO FINANCIAL STATEMENTS


(Unaudited)





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature of
business. Velocity Oil and Gas, Inc. (“Velocity”) was incorporated in the State
of Nevada on May 16, 2006. Since inception, the Company is a start-up entity
with the intention of being involved in oil and gas exploration and development
with a geographic focus in Texas and Louisiana.





Basis of
presentation. The accompanying unaudited interim financial statements of
Velocity Oil & Gas, Inc., have been prepared in accordance with accounting
principles generally accepted in the United
States of America and the rules of the Securities and Exchange Commission, and
should be read in conjunction with the audited financial statements and notes
thereto contained in Velocity’s Form S-1/A. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the financial statements that would substantially
duplicate the disclosures contained in the audited financial statements for
fiscal 2007 as reported in the Form S-1/A, have been omitted.





Use of
Estimates. In preparing financial statements, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities in the
balance sheet and expenses in the statement of expenses. Actual results could
differ from those estimates.





Property
and equipment is valued at cost. Additions are capitalized and maintenance and
repairs are charged to expense as incurred. Gains and losses on dispositions of
equipment are reflected in operations. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, which are
three and five years.





Impairment
of Long-Lived Assets. Velocity reviews the carrying value of its long-lived
assets annually or whenever events or changes in circumstances indicate that the
historical cost-carrying value of an asset may no longer be appropriate.
Velocity assesses recoverability of the carrying value of the asset by
estimating the future net cash flows expected to result from the asset,
including eventual disposition. If the future net cash flows are less than the
carrying value of the asset, an impairment loss is recorded equal to the
difference between the asset’s carrying value and fair value.





Income
taxes. Velocity recognizes deferred tax assets and liabilities based on
differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered. Velocity provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not.





Basic and
diluted net loss per share. The basic net loss per common share is computed by
dividing the net loss by the weighted average number of common shares
outstanding. Diluted net loss per common share is computed by dividing the net
loss adjusted for potential dilutive securities on an "as if converted" basis,
by the weighted average number of common shares outstanding. For the period from
May 16, 2006 (inception) to June 30, 2008, potential dilutive securities had an
anti-dilutive effect and were not included in the calculation of diluted net
loss per common share.





Share-Based
Compensation. Shares issued as compensation to employees and outside consultants
for services are recorded at the fair value of the stock as measured on the date
or dates the services were rendered.





Recently
issued accounting pronouncements. Velocity does not expect the adoption of
recently issued accounting pronouncements to have a significant impact on
Velocity’s results of operations, financial position or cash flow.





F-5


NOTE 2 –
GOING CONCERN





As shown
in the accompanying financial statements, Velocity incurred a net loss of
$70,855 for the six months ended June 30, 2008, has an accumulated deficit of
$189,366.  These conditions raise substantial doubt as to Velocity’s
ability to continue as a going concern.  Management is trying to raise
additional capital through sales of common and preferred stock.  The
financial statements do not include any adjustments that might be necessary if
Velocity is unable to continue as a going concern.







NOTE 3 –
UNPROVED PROPERTIES





On
November 8, 2007, Velocity signed a purchase and sale agreement for the
acquisition of 100% of the membership interest in South Marsh LLC, a Delaware
limited liability company, which owns unproved oil and gas properties in five
oil and gas leases in the Outer Continental Shelf Area of the Gulf of Mexico.
The purchase price of approximately $1 million will be paid by 50% of the future
production payment of the same properties.  One of the Directors of the
seller is a shareholder of
Velocity.





NOTE 4 –
PROPERTY AND EQUIPMENT





Property
and equipment consisted of the following at June 30, 2008 and December 31,
2007:





AmountDescription
            
            Life
            
            6/30/08
            
            
            12/31/07Computer
      equipment
            
            3
      years
            
            $
            2,710
            
            
            $
            2,710Furniture
      and fixtures
            
            5
      years
            
            
            2,917
            
            
            
            2,917Less:
      accumulated depreciation
            
            
            
            
            (1,779
            )
            
            
            (1,230
            )$
            3,848
            
            
            $
            1,480








NOTE 5 –
ADVANCES FROM RELATED PARTY





Velocity
borrows advances from its chief executive officer periodically.  The
advances are non-interest bearing and due on demand with twelve months and one
day’s notice.  At June 30, 2008 and December 31, 2007, there was an
outstanding balance of $58,036 and $17,536, respectively due the chief executive
officer.





NOTE 6 –
NOTES PAYABLE





Velocity
borrowed $8,000 from a shareholder in June 2007.  The note is due on
demand with twelve months and one day’s notice and bears interest at 6% per
annum.  The principal is convertible into common shares at $0.10 per
share. During 2007, the accrued interest of $264 was converted to debt. At June
30, 2008, the outstanding balance on the note was $8,264.





NOTE 7 –
COMMON STOCK





During
the six months ended June 30, 2008, Velocity issued a total of 300,000 common
shares for services valued and expensed at $30,000.







F-6


ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS





CERTAIN
STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q (THIS "FORM 10-Q"), CONSTITUTE
"FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR
THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR
BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
VELOCITY OIL & GAS, INC. ("THE COMPANY", "VELOCITY", "WE", "US" OR "OUR") TO
BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM
10-Q, UNLESS ANOTHER DATE IS STATED, ARE TO JUNE 30, 2008.





History





We were
formed as a Nevada corporation on May 16, 2006.  We have 110,000,000
shares of authorized stock, consisting of 100,000,000 shares of common stock,
$0.001 par value and 10,000,000 shares of preferred stock, $0.001 par
value.  We are an exploration stage company with limited operations,
which has not generated any revenues to date, and does not anticipate being able
to generate revenues until we can raise substantial additional
capital.





We are
currently focused on seeking out and purchasing producing and/or non-producing
non-operated oil and gas properties in the gulf coast region of Louisiana and
Texas.  We hope that through these anticipated purchases, we will be
able to generate oil and gas production and continue to grow our operations
through subsequent purchases, of which there can be no assurance.





Initially,
we intend to seek out low risk, high return investments and development
activities in the gulf coast region.  We currently plan to
acquire the rights to a 40% Working Interest in the South Marsh Island 138
Block but we will need to raise substantial additional capital either though the
sale of debt or equity securities or by entering into joint ventures with more
established oil and gas companies and/or institutional investors in the future
to obtain the necessary funds we will require to drill in our initial oil and
gas interest and move forward with our business plan.





MATERIAL
EVENTS:





On June
1, 2007, we issued Capersia Pte. Ltd. (“Capersia”), a shareholder of the Company
an $8,000 Promissory Note to evidence an $8,000 loan we received from Capersia
(the “Note”).  The Note had an effective date of June 13, 2007, and
bears interest at the rate of 6% per annum until paid in full.  The
Note is payable on demand with one year and one day prior written notice, and
any amounts not paid when due accrue interest at the rate of 15% per
annum.  Capersia has the right at any time prior to the date such Note
is repaid to convert any or all of the outstanding principal amount of the Note
into shares of the Company’s common stock at a conversion price of $0.10 per
share.  If converted in full, the $8,000 Note (not including any
accrued and unpaid interest) would convert into 80,000 shares of our common
stock.  Capersia has not provided us notice of their demand of
repayment of the Note as of the filing of this report.





Acquisition &
Participation Agreement with Polaris





In August
2007, we entered into an Acquisition & Participation Agreement with Polaris
Holdings, Inc. (the “Participation Agreement” and “Polaris”) pursuant to which
we obtained the rights to purchase (a) a 10% working interest in 80 acres of
land in the Manvel Field, Davis No. 1 Well in Brazoria County, Texas, subject to
an existing overriding royalty interest equal to 25% of 8/8th and a
25% working interest after the payout of the Davis No. 1 well on the land; and
(b) a 10% working interest in 160 acres of land in the Sandy Point Field,
Express No. 1 Fite Well, in Brazoria County, Texas, subject to an existing
overriding royalty interest equal to 25% of 8/8th, and a
one-eighth of eight-eighths (12.50% of 8/8th)
working interest (the “Leases”), funding permitting.





-2-


We issued
Polaris 4,000,000 shares of common stock and were required to pay Polaris
$20,000 prior to September 1, 2007, which date was extended until October 1,
2007, pursuant to a Letter Amendment to the Participation Agreement, and an
additional $40,000 on or before January 1, 2008, to earn the interest in the
Leases.  We did not make the required October 1, 2007 payment as
Polaris never provided us sufficient information regarding the Leases to allow
us to conduct due diligence.  We cancelled the Participation Agreement
on October 10, 2007, and cancelled the shares of common stock previously issued
to Polaris in connection with such Participation Agreement shortly
thereafter.





Purchase and Sale Agreement
with Entek





In
November 2007, we entered into a Purchase and Sale Agreement with Entek USA Inc.
(the “Purchase Agreement” and “Entek”) and an Assignment of Membership Interests
(the “Assignment”), pursuant to which we purchased all of the outstanding
membership interests in South Marsh LLC, a Delaware limited liability company
(“South Marsh”).  One of the Directors of Entek is Russell Brimage,
who is a shareholder of the Company.  Through the Purchase Agreement,
we obtained all of the interests in oil and gas leases acquired by South Marsh
pursuant to an Amended and Restated Participation Agreement, dated December 8,
2006, by and between, South Marsh, Ridgelake Energy, Inc., a Louisiana
corporation (“Ridgelake”), and GulfX, LLC, a Delaware limited liability company,
which was later amended by an Amended and Restated Participation Agreement
entered into in September 2007 (the “Participation
Agreement”).  Pursuant to the terms of this participation agreement,
South Marsh acquired the right to earn (a) a 10% working interest in Block 79,
Viosca Knoll Area covering approximately 5,760 acres of submerged lands within
the Outer Continental Shelf (“VK 79”); (b) a 10% working interest in Block A
307, High Island Area, covering approximately 5,760 acres of submerged lands
within the Outer Continental Shelf (“HI A 307”); (c) a 10% working interest in
the Block 317, Vermillion Area, covering approximately 5,000 acres of submerged
lands within the Outer Continental Shelf (“VM 317”); (d) a 11.25% working
interest in Block 138, South Marsh Island Area, covering approximately 5,000
acres of submerged lands within the Outer Continental Shelf (“SMI 138”); and (e)
a 15% working interest in Block 152, South Marsh Island Area, covering
approximately 2,500 acres of submerged lands within the Outer Continental Shelf
(“SMI 152”).  All of the leases are located in the Gulf of Mexico, off
the coast of Texas and Louisiana.  The effective date of the Purchase
Agreement was November 8, 2007.





In
connection with the Purchase Agreement, all of the officers and Directors of
South Marsh resigned, and Frank Jacobs, our sole officer and Director was
appointed as the sole officer and Director of South Marsh.





In
consideration for the sale and assignment of the membership interests, we
granted Entek a production payment (the “Production Payment”) in and to all oil,
gas or mineral production attributable to the interests purchased equal to 50%
of the Net Proceeds (as defined below) of such production attributable to South
Marsh’s interest in the subject leases (or which South Marsh shall acquire
within five years from the date of the Purchase Agreement), until such time as
Entek has received a total of $1,072,258.  “Net Proceeds” are defined
in the Assignment of Production Payment, which evidences the grant of the
Production Payment, as any and all production of oil, gas or minerals, free of
all exploration, development and operating costs, but subject to (i) applicable
taxes measured by production or value, including gross production, severance and
other taxes, and (ii) all presently valid and subsisting royalties and other
burdens on production which are of record and burden on the interests purchased
as of the date of the Assignment of Production Payment.





The
Production Payment is a non-recourse obligation of the Company, payable solely
out of proceeds from production of the leases which South Marsh has the right to
participate in, as described above.  However, if prior to receiving an
assignment of a lease from Ridgelake, South Marsh assigns its rights under the
Participation Agreement to a third party, South Marsh will pay Entek its sunk
costs in the leases, which total an aggregate of $878,988.





-3-


In order
for South Marsh to acquire the working interests pursuant to the Participation
Agreement, South Marsh was required to make certain payments to Ridgelake
representing its respective “Cost Share” (as defined below) of the various
leases, which totaled approximately $1,072,258 as of the date of the
Purchase Agreement, which funds were previously paid by South Marsh in
connection with the Participation Agreement.  South Marsh is also
responsible for paying Ridgelake for its respective costs and expenses expended
by Ridgelake in maintenance and development of the leases, and its respective
cost of conducting the interest earning operations on each lease, based on the
Cost Share (collectively the “Lease Expenses”).  South Marsh’s “Cost
Share” on each of the leases is as follows:





Lease
            Cost
              ShareVK
      79
            13.34%HI
      A 307
            13.34%VM
      317
            13.34%


SMI
      138
            15.00%SMI
      152
            20.00%





South
Marsh’s failure to pay the required Lease Expenses when due will result in the
immediate termination of the Participation Agreement, and if that were to occur,
South Marsh would not earn any interest in the leases described
above.  Additionally, South Marsh has no obligation to participate in
any certain leases, although in the event it does not participate, it will
forfeit its right to earn any interest in such leases.  Additionally,
each working interest is subject to a proportional share of royalties and
overriding royalties applicable to such leases.





In the
event any wells are drilled on the leases, South Marsh and Ridgelake have agreed
to enter into a Joint Venture agreement in connection with such wells, and that
Ridgelake shall serve as the operator of any such wells and
leases.  South Marsh has not earned any working interests in any of
the leases to date.





Moving
forward it is currently anticipated that Ridgelake will propose to drill two
wells in fiscal 2008, one well on the VK 79 lease, estimated to cost
approximately $4.5 million in total (of which South Marsh’s required payment
would be $525,000) and one on the SMI 152 lease, estimated to cost approximately
$6 million (of which South Marsh’s required payment would be $800,000). 
These estimates are subject to change however, based on the actual drilling
costs of such wells, and as such, the estimates above may be higher or lower
than the actual amounts South Marsh is actually required to pay.  The
drilling costs associated with wells on the other leases have not been
determined yet; however, the Company anticipates such costs being in the order
of $500,000 to $1,000,000 per well.




Additionally,
South Marsh will be responsible for its share of ongoing lease expenses even
assuming the successful completion of one or both of the currently proposed
wells above.  The estimated lease expenses for each well, assuming
such wells produce, which will be required to be paid by the Company will be
approximately $80,000 per month; however, in the even any of the wells produce,
it is anticipated that the revenue such wells will generate will be in excess of
any lease operating expenses, and as a result, such expenses will be able to be
paid by the Company with funds it receives in revenue from the
well.





South
Marsh does not currently anticipate being required to make any payments to
Ridgelake in connection with the two proposed wells until the third quarter of
2008, funding permitting, nor does it believe that it will cease its business
operations if it is unable to raise capital by such time.  The Company
does not currently have any anticipated funding available for the payments to
Ridgelake and as such, is currently in negotiations with GOG as described below,
to sell its ownership of South Marsh.  In the event that the Company
is unable to sell the ownership interests of South Marsh, and South Marsh is
unable to make the required payments to Ridgelake in connection with the
proposed wells described above, South Marsh will not be able to participate in
the wells, and the Company will not earn any revenue from such wells, even if
they are successful.





-4-


We also
issued Sterling Grant Capital, Inc. 500,000 shares of our common stock as a
finder’s fee in connection with the South Marsh transaction.





We have
not paid any consideration to date, including cash and/or securities, to Entek
in connection with the Purchase Agreement, other than 500,000 shares of our
common stock issued to Sterling Grant Capital, Inc.





As a
result of the Purchase Agreement and the Assignment, South Marsh became a wholly
owned subsidiary of the Company.





Material Corporate
Events





On May 7,
2008, the Commission declared effective the Company’s amended registration
statement on Form S-1 (the “Registration Statement”).  The
Registration Statement provides for the resale of 2,741,500 shares of our common
stock by selling stockholders for their own account.  On May 15, 2008,
we obtained quotation for these shares on the Over-The-Counter Bulletin Board
(“OTCBB”) under the symbol VOIG.OB.





In
January 2008, Frank A. Jacobs, our sole officer and Director, agreed in writing
to provide us funding, including paying for our expenses associated with the
Registration Statement, including legal and accounting fees associated with
responding to the Commission’s comments to the Registration Statement and in
preparation of amendments to the Registration Statement, as well as general
business expenses, including our $575 per month office space lease until such
time as the Registration Statement is declared effective, as well as additional
expenses associated with our quotation on the OTCBB.  Since the
effectiveness of the Registration Statement and our quotation on the OTCBB, Mr.
Jacobs has continued to provide us funding, even though he is no longer required
to pursuant to his written commitment, and although we anticipate him to
continue to provide us funding moving forward until such time as we can raise
additional funding through the sale of debt or equity.  There are no
assurances that he will continue providing funding in the future.





Agreement Regarding the Sale
of South Marsh





In or
around July 2008, the Company began negotiations for the transfer of South Marsh
to a third party entity which is currently proposed to be organized in Germany,
and tentatively named “German Oil & Gas AG” (“GOG”).  It is
currently anticipated that our sole officer and Director, Frank A. Jacobs will
be a shareholder of GOG.  The terms of an agreement with GOG have not
been finalized as of the date this report.  However, in connection
with the proposed sale of South Marsh to GOG, a third-party on behalf of GOG
provided the Company a non-refundable payment of $29,980 in July
2008.  The Company will file a Form 8-K containing more details if
terms of the transfer can be agreed upon by all parties involved.





Purchase of Ownership
Interest in SMI 138





The
Company is also currently in negotiations to acquire a 40% working interest in
SMI 138 (as defined above) from Ridgelake.  Pursuant to an agreement
between Ridgelake, the Company and Offset Leo LLC, a Delaware limited liability
company (“Offset”), which agreement has not been finalized to date, Ridgelake
will assign a 40% interest to the Company and a 40% interest to
Offset.  Jacobs Oil & Gas, Ltd., which is controlled by our sole
officer and Director, Frank A. Jacobs, is a shareholder of
Offset.  Assignment of the interests to the Company and Offset is
subject to approval by the Minerals Management Service of the United States
Department of the Interior (the “MMS”).  The Company is not currently
qualified by the MMS to own any oil and gas lease of submerged lands under the
Outer Continental Lands Act.  The MMS must certify the Company as such
before the assignment will be approved.  There are no assurances that
the MMS will certify the Company and/or approve the assignment.  South
Marsh previously held the right to a 11.25% working interest in SMI 138, which
rights have lapsed as of the date of this filing.  The agreement to
acquire the 40% interest in SMI 138 is expected to be finalized by the end of
August 2008, and as of the date of this report, Offset, on behalf of itself and
the Company, has already provided a payment of $25,000 to Ridgelake as
consideration for the assignment, of which we will be responsible for repaying
$12,500 of such payment to Offset.  The Company will file a Form 8-K
containing more details of the assignment agreement upon its
finalization.  Assuming the acquisition closes, the Company will focus
on the development and drilling of SMI 138 sometime in 2009.  A well
on SMI 138 is anticipated to cost approximately $6 million, which funds the
Company anticipates requiring in the second quarter of 2009.  The well
will likely be funded by farming down the Company’s working interest in SMI 138
in the form of a lesser percentage working interest.  There are no
assurances however, that the Company will be able to make such an arrangement
with any other operators and/or that the Company will have sufficient funds to
pay the development costs of SMI 138 when such payments are
required.








-5-








PLAN
OF OPERATION FOR THE NEXT TWELVE MONTHS





We are
currently focused on acquiring our 40% interest in SMI 138, as described
above.  Additionally, if the agreement to transfer South Marsh to GOG
should not close for any reason, we will also continue to focus on earning the
interests that South Marsh has the right to earn as a result of the
Participation Agreement with Ridgelake, as described above.  We hope
that in the event we are able to vest the SMI 138 interest and/or the South
Marsh interests, funding permitting, we will be able to generate oil and gas
production and continue to grow our operations through subsequent purchases, of
which there can be no assurance.  Further, in the event the South
Marsh transfer agreement should not close, we will also likely pursue other
potential buyers of South Marsh.





Initially,
we intend to seek out low risk, high return investments and development
activities in the gulf coast region, such as the South Marsh acquisition
described above under “Description of Business.”  While we currently
have a tentative list of potential additional acquisitions, we will need to
raise substantial additional capital either though the sale of debt or equity
securities or by entering into joint ventures with more established oil and gas
companies and/or institutional investors in the future to obtain the necessary
funds we will require to move forward with our business plan.





RESULTS
FROM OPERATIONS





FOR
THE THREE MONTHS ENDED JUNE 30, 2008 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2007





We did
not generate any oil and gas revenues for the three months ended June 30, 2008,
or for the three months ended June 30, 2007, and do not anticipate generating
any oil and gas revenues until we can raise sufficient capital to purchase
operating or non-operating oil and gas properties, until we can raise sufficient
capital to develop the SMI 138, assuming our proposed purchase of such interest
with Ridgelake is completed, and/or if such purchase of the SMI 138 is not
completed and our sale of South Marsh is not successful, until South Marsh (our
wholly owned subsidiary) earns the interests in certain leases as described
above, funding permitting, of which there can be no assurance.





We had
general and administrative expenses of $45,734 for the three months ended June
30, 2008, compared to general and administrative expenses of $11,665 for the
three months ended June 30, 2007, an increase of $34,069 or 292% from the prior
period.  The increase in general and administrative expenses was
mainly due to increased legal and accounting fees for the three months ended
June 30, 2008, compared to the three months ended June 30, 2007, due to our
status as a public company.





We had
$323 in depreciation expense for the three months ended June 30, 2008 compared
with depreciation expense of $226 for the three months ended June 30,
2007.





We had
total operating expenses and a total operating loss of $46,057 for the three
months ended June 30, 2008, compared to total operating expenses and a total
operating loss of $11,891 for the three months ended June 30, 2007, an increase
in total operating expenses of $44,166 or 287% from the prior period mainly due
to increased business activity.





We had
interest expense of $277 for the three months ended June 30, 2008, compared to
interest expense of $24 for the three months ended June 30, 2007, which increase
in expense was in connection with interest on the loan received from Capersia
Pte. Ltd., a shareholder of the Company (“Capersia”), as evidenced by the Note
described below.





We had a
total net loss of $46,334 for the three months ended June 30, 2008, compared to
a total net loss of $11,915 for the three months ended June 30, 2007, an
increase in net loss of $34,419 or 289% from the prior period,
which  was due mainly to the $34,069 or 292% increase in general and
administrative expenses.  We anticipate incurring net losses until and
unless we are able to earn our oil and gas interests, as disclosed above, and/or
obtain any other oil and gas interests, and unless such interests produce
sufficient revenues to support our operations, of which there can be no
assurance.











-6-


FOR
THE SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
2007





We did
not generate any oil and gas revenues for the six months ended June 30, 2008, or
for the six months ended June 30, 2007, and do not anticipate generating any oil
and gas revenues until we can raise sufficient capital to purchase operating or
non-operating oil and gas properties, until we can raise sufficient capital to
develop the SMI 138, assuming our proposed purchase of such interest with
Ridgelake is completed, and/or if such purchase of the SMI 138 is not completed
and our sale of South Marsh is not successful, until South Marsh (our wholly
owned subsidiary) earns the interests in certain leases as described above,
funding permitting, of which there can be no assurance.





We had
general and administrative expenses of $69,817 for the six months ended June 30,
2008, compared to general and administrative expenses of $27,141 for the six
months ended June 30, 2007, an increase of $42,676 or 157% from the prior
period.  The increase in general and administrative expenses was
mainly due to increased legal and accounting fees for the six months ended June
30, 2008, compared to the six months ended June 30, 2007, due to our status as a
public company.





We had
$549 in depreciation expense for the six months ended June 30, 2008 compared
with depreciation expense of $452 for the six months ended June 30,
2007.





We had
total operating expenses and a total operating loss of $70,366 for the six
months ended June 30, 2008, compared to total operating expenses and a total
operating loss of $27,593 for the six months ended June 30, 2007, an increase in
total operating expenses of $42,773 or 155% from the prior period.





We had
interest expense of $489 for the six months ended June 30, 2008, compared to
interest expense of $24 for the six months ended June 30, 2007, which increase
in expense was in connection with interest on the loan received from Capersia
Pte. Ltd., a shareholder of the Company (“Capersia”), as evidenced by the Note
described below.





We had a
total net loss of $70,855 for the six months ended June 30, 2008, compared to a
total net loss of $27,617 for the six months ended June 30, 2007, an increase in
net loss of $43,238 or 157% from the prior period, which was due mainly to the
$42,676 or 157% increase in general and administrative expenses.  We
anticipate incurring net losses until and unless we are able to earn our oil and
gas interests, as disclosed above, and/or obtain any other oil and gas
interests, and unless such interests produce sufficient revenues to support our
operations, of which there can be no assurance.





LIQUIDITY
AND CAPITAL RESOURCES





We had
total assets of $58,670 as of June 30, 2008, consisting of total current assets
of $4,822, which consisted solely of cash of $4,822, and non-current assets
consisting of $3,848 of property and equipment, net of accumulated depreciation
of $1,779 and unproved oil and gas properties of $50,000.





We had
total liabilities as of June 30, 2008 of $76,567, consisting of total current
liabilities of $10,267; which included $4,440 of accounts payable and $5,827 of
accrued liabilities; and non-current liabilities consisting of $58,036 of
long-term advances, related party, in connection with advances to the Company by
its officer and Director, Frank Jacobs and entities controlled by Mr. Jacobs,
which funding does not bear interest and is payable on demand with at least one
(1) year and one (1) day prior notice and/or is payable in shares of the
Company’s common stock at the option of the Company on the date such payment is
demanded (based on the then trading price of the Company’s common stock,
assuming such common stock is publicly traded); and $8,264 of note payable to
Capersia, of which $264 represented unpaid interest expense converted to
debt.





On June
1, 2007, we issued Capersia an $8,000 Promissory Note to evidence an $8,000 loan
we received from Capersia, which Promissory Note was amended in December 2007
(the “Note”).  The Note had an effective date of June 13, 2007, and
bears interest at the rate of 6% per annum until paid in full.  The
Note is payable on demand; however, Capersia has agreed to provide the Company
at least one (1) year and one (1) day notice prior to the due date of such Note,
and any amounts not paid when due accrue interest at the rate of 15% per
annum.  Capersia has the right at any time prior to the date such Note
is repaid to convert any or all of the outstanding principal amount of the Note
into shares of the Company’s common stock at a conversion price of $0.10 per
share.  If converted in full, the $8,000 principal amount of the Note
would convert into 80,000 shares of our common stock.  As of the
filing of this report, Capersia had not provided us notice of their intention to
demand repayment of the Note.





-7-


We had a
working capital deficit of $5,445 and a deficit accumulated during the
exploration stage of $189,366 as of June 30, 2008.





We had
$36,964 of net cash used in operating activities for the six months ended June
30, 2008, which mainly included a net loss of $70,855 and a $2,468 decrease in
accounts payable, offset by $30,000 of common shares issued for services, an
increase in prepaid expenses and other current assets of $3,000, an
increase in accrued liabilities of $2,810 and depreciation expense of
$549.





We had
$40,500 of net cash provided by financing activities for the six months ended
June 30, 2008, which was solely due to $40,500 of advances from related parties
in connection with long term loans advanced to the Company by the Company’s sole
officer and Director, Frank Jacobs and Jacobs Oil & Gas, Ltd., an entity
controlled by Mr. Jacobs, which loans are described in greater detail
above.





We raised
an aggregate of $61,050 through the sale of 610,500 units at a price of $0.10
per Unit from September 2006 through August 2007, which units each included one
(1) share of common stock, one (1) three (3) year Class A Warrant to purchase
one (1) share of our common stock at an exercise price of $0.25 per share, and
one (1) three (3) year Class B Warrant to purchase one (1) share of our common
stock at an exercise price of $0.50 per share.  However, we believe
that we will only be able to continue our business operations for approximately
the next three to six months with our current cash on hand and anticipate the
need for approximately $50,000 in additional funding to continue our business
operations for the next twelve months, which amount does not include the
approximately $1,300,000 in additional funds that South Marsh will need to earn
a working interest in the leases described above under “Purchase and Sale
Agreement with Entek,” which there can be no assurance we will be able to raise,
assuming the transfer of South Marsh does not close; or any funds we will be
required to raise in connection with the SMI 138, as described
above.  Historically, our business operations have consisted of
working to raise funds through the sale of Units as described above, working to
finalize the Polaris agreement, which has since been cancelled, and working to
finalize and enter into the Purchase Agreement with Entek, the review and
preparation of the Registration Statement and amendments thereto, which became
effective on May 7, 2008, and our other periodic filings.  As such,
our business operations to date have been minimal, and until such time as we are
able to vest the working interests provided for in the Participation Agreement
and/or SMI 138, we anticipate such business operations remaining that
way.





In or
around July 2008, the Company began negotiations for the transfer of South Marsh
to a third party entity which is currently proposed to be organized in Germany,
and tentatively named “German Oil & Gas” (“GOG”).  It is currently
anticipated that our sole officer and Director, Frank A. Jacobs will be a
shareholder of GOG.  The terms of an agreement with GOG have not been
finalized as of the date of this report.  However, in connection with
the proposed sale of South Marsh to GOG, a third-party on behalf of GOG provided
the Company a non-refundable payment of $29,980 in July 2008.  The
Company will file a Form 8-K containing more details if terms of the transfer
can be agreed upon by all parties involved.





We
currently rely on funds provided by Frank Jacobs, our sole officer and
Director.  Mr. Jacobs previously committed to provide us funding,
pursuant to his letter dated January 20, 2008, until the effectiveness of our
Registration Statement and to provide us funds for costs and fees associated
with our quotation on the Over-The-Counter Bulletin Board.  As both of
these events have occurred, Mr. Jacobs no longer has any obligations to provide
us funding.  While Mr. Jacobs may continue to provide us funding in
the future, there are no assurances that he will.













-8-


We
anticipate spending our cash on hand for the upcoming months on general business
expenses, travel expenses and transfer agent fees.  We anticipate
these expenses will be paid by Mr. Jacobs, but he has not committed to providing
us any additional funding.  We plan to keep our expenses at a minimum
until such time as we can raise additional capital, including seeking out equity
financing in an attempt to earn our interests through the Participation
Agreement.





As stated
above, we anticipate transferring South Marsh to GOG within the next few months,
assuming we can come to terms with GOG.  If the transfer should not
close for any reason, we do not anticipate needing any funds in connection with
the Participation Agreement with South Marsh until the third quarter of
2008.  We anticipate raising additional funds we may require for the
Participation Agreement and/or for general working capital through the sale of
equity securities, of which there can be no assurance.  We anticipate
that in the event we are unable to raise funds through the sale of debt or
equity securities, Mr. Jacobs will continue to provide us funding through loans
or equity investments, even though his written commitment no longer requires him
to provide us any funding.





We do not
currently have any formal commitments or identified sources of additional
capital from third parties or from our officers, directors or majority
shareholders. We can provide no assurance that additional financing will be
available on favorable terms, if at all. If we are not able to raise the capital
necessary to continue our business operations, we may be forced to abandon or
curtail our business plan and/or suspend our exploration
activities.




In the
future, we may be required to seek additional capital by selling debt or equity
securities, selling assets, or otherwise be required to bring cash flows in
balance when we approach a condition of cash insufficiency. The sale of
additional equity or debt securities, if accomplished, may result in dilution to
our then shareholders. We provide no assurance that financing will be available
in amounts or on terms acceptable to us, or at all.





Critical
Accounting Policies





Our
discussion and analysis of our financial condition and results of operations is
based upon our unaudited financial statements, which have been prepared in
accordance with accounting principals generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of any contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including those related to
uncollectible receivable, investment values, income taxes, the recapitalization
and contingencies. We base our estimates on various assumptions that we believe
to be reasonable under the circumstances, the results of which form the basis
for making judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.




Recently issued accounting
pronouncements. The Company does not expect the adoption of any recently
issued accounting pronouncements to have a significant impact on the Company’s
results of operations, financial position or cash flows.





ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to
provide the information required by this Item as it is a “smaller reporting
company,” as defined by Rule 229.10(f)(1).





ITEM 4. CONTROLS AND
PROCEDURES





(a)
Evaluation of disclosure controls and procedures. Our Chief Executive Officer
and Principal Financial Officer, after evaluating the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by
this Quarterly Report on Form 10-Q (the "Evaluation Date"), has concluded that
as of the Evaluation Date, our disclosure controls and procedures were effective
to provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.





(b)
Changes in internal control over financial reporting. There were no changes in
our internal control over financial reporting during the covered by this
Quarterly Report on Form 10-Q, that materially affected, or were reasonably
likely to materially affect, our internal control over financial
reporting.






-9-


PART II - OTHER
INFORMATION





ITEM 1. LEGAL
PROCEEDINGS





From time
to time, we may become party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
currently involved in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.





ITEM 1A. RISK
FACTORS





The
Company’s securities are highly speculative and should only be purchased by
persons who can afford to lose their entire investment in us. You should
carefully consider the following risk factors and other information in this
report before deciding to become a holder of our common stock. If any of the
following risks actually occur, our business and financial results could be
negatively affected to a significant extent.





The
Company's business is subject to the following Risk Factors (references to
"our," "we," "Velocity" and words of similar meaning in these Risk Factors refer
to the Company):





Risks Relating To Our
Planned Business Operations





WE
WILL NEED ADDITIONAL FINANCING TO CONTINUE OUR BUSINESS PLAN, ACQUIRE, DRILL AND
STUDY WELLS, WHICH FINANCING, IF WE ARE UNABLE TO RAISE MAY FORCE US TO SCALE
BACK OR ABANDON OUR BUSINESS PLAN.





We raised
an aggregate of $61,050 through the sale of 610,500 Units at a price of $0.10
per unit from September 2006 through August 2007, which Units each included one
(1) share of common stock; one (1) three (3) year Class A Warrant to purchase
one (1) share of our common stock at an exercise price of $0.25 per share; and
one (1) three (3) year Class B Warrant to purchase one (1) share of our common
stock at an exercise price of $0.50 per share (each a “Unit”).  We
have not generated any oil and gas revenues to date and anticipate the need for
approximately $50,000 in additional funding to continue our business operations
for the next twelve months.  Further, in the event our agreement to
transfer South Marsh to GOG does not close, we will need approximately
$1,300,000 of additional funding during the next 12 months, for South Marsh to
earn interests in two wells pursuant to the Participation Agreement, of which
there can be no assurance will be raised, which is described in greater detail
below under “Pursuant to the terms of our wholly owned subsidiary, South Marsh’s
Participation Agreement, South Marsh is required to pay substantial amounts of
money to Entek, in order to earn working interests in the interests subject to
the Participation Agreement.”  If we are unable to raise the
additional funding we currently require, we will be unable to participate in the
drilling operations for the two first concessions and we might loose the right
to earn those concessions. Furthermore, pursuant to the terms of the
Participation Agreement, we are required to pay our respective costs of any
proposed well on a lease-by-lease basis, and if we fail to timely remit such
payments or choose not to participate in any particular lease, we will forfeit
all rights to earn an interest in such lease, and any and all prior funds paid
in connection with such lease and Ridgelake may terminate the Participation
Agreement altogether. If our agreement to purchase the SMI 138 closes (as
described above) we anticipate the need for up to $2.4 million in the second
quarter of 2009, which funds may not be available on favorable terms, if at
all.  Our sole officer and Director, Frank Jacobs, has not committed
to loaning or investing additional funding in the Company. Moving forward, we
anticipate Mr. Jacobs will continue funding us, although he has made no such
commitments.  We also hope to raise additional funds through the sale
of debt and/or equity to enable us to earn our interests pursuant to the
Participation Agreement.





We do not
currently have any commitments or identified sources of additional capital from
third parties or from our officers, directors or majority
shareholders.  We anticipate transferring South Marsh; however, in the
event such a transfer does not occur, we anticipate the need for additional
funding, both for working capital and to earn our interests through the
Participation Agreement.   We can provide no assurance that additional
financing will be available on favorable terms, if at all. If we are not able to
raise the capital necessary to continue our business operations and/or vest the
working interests pursuant to the Participation Agreement, we may be forced to
abandon or curtail our business plan and/or suspend our exploration activities,
if any.








-10-





SHAREHOLDERS
WHO HOLD UNREGISTERED SHARES OF OUR COMMON STOCK ARE SUBJECT TO RESALE
RESTRICTIONS PURSUANT TO RULE 144, DUE TO OUR STATUS AS A “SHELL
COMPANY.”





Pursuant
to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell
company” is defined as a company that has no or nominal operations; and, either
no or nominal assets; assets consisting solely of cash and cash equivalents; or
assets consisting of any amount of cash and cash equivalents and nominal other
assets.  As such, we are a “shell company” pursuant to Rule 144, and
as such, sales of our securities pursuant to Rule 144 are not able to be made
until 1) we have ceased to be a “shell company; 2) we are subject to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all
of our required periodic reports for the prior one year period; and a period of
at least twelve months has elapsed from the date “Form 10 information” has been
filed with the Commission reflecting the Company’s status as a non-“shell
company.”  Because none of our securities can be sold pursuant to Rule
144, until at least a year after we cease to be a “shell company” (as described
in greater detail above), any securities we issue to consultants, employees, in
consideration for services rendered or for any other purpose will have no
liquidity until and unless such securities are registered with the Commission
and/or until a year after we cease to be a “shell company” and have complied
with the other requirements of Rule 144, as described above.  As a
result, it may be harder for us to fund our operations and pay our consultants
with our securities instead of cash.  Furthermore, it will be harder
or us to raise funding through the sale of debt or equity securities unless we
agree to register such securities with the Commission, which could cause us to
expend additional resources in the future.  Our status as a “shell
company” could prevent us from raising additional funds, engaging consultants
using our securities to pay for any acquisitions (although none are currently
planned), which could cause the value of our securities, if any, to decline in
value or become worthless.   Furthermore, as we may not ever
cease to be a “shell company,” investors who purchase our restricted securities
and/or non-free trading shares of our securities may be forced to hold such
securities indefinitely.





WE
CURRENTLY HAVE NEGATIVE WORKING CAPITAL.





As stated
above, we raised $61,050 from September 2006 through August 2007, through sales
of units. Additionally, we borrowed $8,000 from a shareholder of the
Company in June 2007, pursuant to the sale of a Promissory Note; however, as of
June 30, 2008, we had a working capital deficit of $5,445 and a total deficit
accumulated during the exploration stage of $189,366.  We currently
anticipate that we will be funded by our sole officer and Director, Frank
Jacobs, moving forward, other than in connection with our Participation
Agreement, although he is not obligate to do such.  Additionally, we
will need to raise substantial additional capital to continue our business
operations.  Moving forward, we may be forced to raise such funds on
unfavorable terms, if at all.  Our failure to raise additional capital
could diminish the value of our securities and/or cause them to become
worthless.





WE
HAVE BEEN CONTACTED IN CONNECTION WITH VARIOUS MERGER AND ACQUISITION
OPPORTUNITIES AND MAY CHOOSE TO ENTER INTO A MERGER AND/OR ACQUISITION
TRANSACTION IN THE FUTURE.





We have
been contacted by parties seeking to merge and/or acquire us. While we have no
immediate plans to merge with or acquire any entity, in the event that we do
enter into a merger and/or acquisition with a separate company in the future,
our majority shareholders will likely change and new shares of common or
preferred stock could be issued resulting in substantial dilution to our then
current shareholders. As a result, our new majority shareholders will likely
change the composition of our Board of Directors and replace our current
management. The new management will likely change our business focus and we can
make no assurances that our new management will be able to properly manage our
direction or that this change in our business focus will be successful. If we do
enter into a merger or acquisition, and our new management fails to properly
manage and direct our operations, we may be forced to scale back or abandon our
operations, which will cause the value of our common stock to decline or become
worthless. We have not entered into any merger or acquisition agreements as of
the date of this filing.











-11-


WE
RELY HEAVILY ON FRANK A. JACOBS, OUR CHIEF EXECUTIVE OFFICER AND DIRECTOR
AND IF HE WERE TO LEAVE, WE COULD FACE SUBSTANTIAL COSTS IN SECURING A SIMILARLY
QUALIFIED OFFICER AND DIRECTOR.




Our
success depends upon the personal efforts and abilities of Frank A. Jacobs, our
Chief Executive Officer and Director. Mr. Jacobs spends approximately 30 hours
per week on Company matters.  Our ability to operate and implement our
exploration activities is heavily dependent on the continued service of Mr.
Jacobs and will depend on our ability to attract qualified contractors and
consultants on an as-needed basis.  Additionally, we currently rely on
Mr. Jacobs to provide us funding for working capital and expenses, although he
is not obligated to provide such funding.





We
anticipate facing continued competition for such contractors and consultants,
and may face competition for the services of Mr. Jacobs in the future. We do not
have any employment contract with Mr. Jacobs, nor do we currently have any key
man insurance on Mr. Jacobs. Mr. Jacobs is our driving force and is responsible
for maintaining our relationships and operations. In addition to Mr. Jacobs
position with the Company, he serves as President and as a Director of
Fibre-Crown Manufacturing Inc. a Canadian public company listed on the TSXV
Exchange (FBRH:TSXV), and as such, the amount of time he is able to spend on
Company matters may be reduced in the future.





We cannot
be certain that we will be able to retain Mr. Jacobs and/or attract and retain
contractors and consultants in the future. If we were to lose the services of
Mr. Jacobs, it is unlikely that Mr. Jacobs would continue to fund the Company,
and we would likely be required to raise additional funding from alternative
sources, which may not be available on favorable terms, if at
all.  The loss of Mr. Jacobs and/or our inability to attract and
retain qualified contractors and consultants on an as-needed basis could have a
material adverse effect on our business and operations.





BECAUSE
OF THE SPECULATIVE NATURE OF OIL AND GAS EXPLORATION, THERE IS SUBSTANTIAL RISK
THAT WE WILL NOT FIND ANY COMMERCIALLY EXPLOITABLE OIL OR GAS AND THAT OUR
BUSINESS WILL FAIL.




The
search for commercial quantities of oil as a business is extremely risky. We
cannot provide investors with any assurance that will be able to obtain
properties in the future and/or that any properties we obtain will contain
commercially exploitable quantities of oil and/or gas.  Future
exploration expenditures made by us, if any, may not result in the discovery of
commercial quantities of oil and/or gas in any future properties we may acquire
the rights to, and problems such as unusual or unexpected formations and other
conditions involved in oil and gas exploration often result in unsuccessful
exploration efforts. If we are unable to find commercially exploitable
quantities of oil and gas, in any properties we may acquire in the future,
and/or we are unable to commercially extract such quantities we may find in any
properties we may acquire in the future, we may be forced to abandon or curtail
our business plan, and as a result, any investment in us may become
worthless.




BECAUSE
OF THE INHERENT DANGERS INVOLVED IN OIL AND GAS EXPLORATION, THERE IS A RISK
THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS OPERATIONS,
WHICH COULD FORCE US TO EXPEND A SUBSTANTIAL AMOUNT OF MONEY IN CONNECTION WITH
LITIGATION AND/OR A SETTLEMENT.





The oil
and natural gas business involves a variety of operating hazards and risks such
as well blowouts, pipe failures, casing collapse, explosions, uncontrollable
flows of oil, natural gas or well fluids, fires, spills, pollution, releases of
toxic gas and other environmental hazards and risks. These hazards and risks
could result in substantial losses to us from, among other things, injury or
loss of life, severe damage to or destruction of property, natural resources and
equipment, pollution or other environmental damage, cleanup responsibilities,
regulatory investigation and penalties and suspension of operations. In
addition, we may be liable for environmental damages caused by previous owners
of property purchased and leased by us in the future. As a result, substantial
liabilities to third parties or governmental entities may be incurred, the
payment of which could reduce or eliminate the funds available for the purchase
of properties and/or property interests, exploration, development or
acquisitions or result in the loss of our properties and/or force us to expend
substantial monies in connection with litigation or settlements. As such, there
can be no assurance that any insurance obtained by us in the future will be
adequate to cover any losses or liabilities. We cannot predict the availability
of insurance or the availability of insurance at premium levels that justify our
purchase. The occurrence of a significant event not fully insured or indemnified
against could materially and adversely affect our financial condition and
operations. We may elect to self-insure if management believes that the cost of
insurance, although available, is excessive relative to the risks presented. In
addition, pollution and environmental risks generally are not fully insurable.
The occurrence of an event not fully covered by insurance could have a material
adverse effect on our financial condition and results of operations, which could
lead to any investment in us becoming worthless.










-12-


WE
REQUIRE SUBSTANTIAL ADDITIONAL FINANCING TO PURCHASE PROPERTIES AND BEGIN OUR
EXPLORATION AND DRILLING ACTIVITIES, WHICH FINANCING IS OFTEN HEAVILY DEPENDENT
ON THE CURRENT MARKET PRICE FOR OIL AND GAS, WHICH WE ARE UNABLE TO
PREDICT.





Our
growth and continued operations could be impaired by limitations on our access
to capital markets. If the market for oil and/or gas were to weaken for an
extended period of time, our ability to raise capital would be substantially
reduced. There can be no assurance that capital from outside sources will be
available, or that if such financing is available, that it will not involve
issuing securities senior to the common stock or equity financings which will be
dilutive to holders of common stock. Such issuances, if made, would likely cause
a decrease in the value of our common stock.





We raised
an aggregate of $61,050 through the sale of 610,500 units at a price of $0.10
per Unit from September 2006 through August 2007, which units each included one
(1) share of common stock, one (1) three (3) year Class A Warrant to purchase
one (1) share of our common stock at an exercise price of $0.25 per share, and
one (1) three (3) year Class B Warrant to purchase one (1) share of our common
stock at an exercise price of $0.50 per share.  We anticipate the need
for approximately $50,000 in funding to continue our business operations for the
next twelve months, and, in the event the agreement to transfer South Marsh does
not close, approximately $1,300,000 in additional funding for South Marsh to
earn a working interest in the leases described above under “Purchase and Sale
Agreement with Entek,” and in the event our purchase of SMI 138 closes,
approximately $2.4 million in additional funding by the second quarter of 2009,
which there can be no assurance we will be able to raise.





ASSUMING
THE AGREEMENT WITH RIDGELAKE TO ASSIGN A 40% INTEREST IN SMI 138 IS FINALIZED,
WE WILL NEED SUBSTANTIAL FUNDS TO EARN OUR WORKING INTEREST IN SMI 138, WHICH
FUNDS MAY BE UNAVAILABLE.





In the
third quarter of 2008, the Company began negotiations to acquire a 40% working
interest in SMI 138 from Ridgelake, as described above under “Material
Events.”  Assuming the assignment agreement with Ridgelake closes, and
assuming the assignment is approved by the MMS, the Company will focus on the
development and drilling of SMI 138 sometime in 2009.  A well on SMI
138 is anticipated to cost approximately $2.4 million, which funds the Company
estimates needing in the second quarter of 2009.  The well will likely
be funded by farming down the Company’s working interest in SMI
138.  There are no assurances, however, that the Company will be able
to make such an arrangement with any operator.  If the Company is
unable to get funding operators, the Company will have to find an alternative
source of funding for the well, which funding may be unavailable or unavailable
on favorable terms to the Company.  If such funding is unavailable,
the Company may be forced to curtail its operations and/or lose its interest in
SMI 138.





THE
COMPANY’S PURCHASE OF SMI 138 IS SUBJECT TO APPROVAL BY THE MINERALS MANAGEMENT
SERVICE OF THE UNITED STATES DEPARTMENT OF THE INTERIOR.





The
Company is in negotiations to acquire a 40% working interest in SMI 138 (as
defined above) from Ridgelake.  Pursuant to an agreement between
Ridgelake, the Company and Offset Leo LLC, a Delaware limited liability company
(“Offset”), which agreement has not been finalized to date, Ridgelake will
assign a 40% interest to the Company and a 40% interest to
Offset.  Assignment of the interests to the Company and Offset is
subject to approval by the Minerals Management Service of the United States
Department of the Interior (the “MMS”).  The Company is not currently
qualified by the MMS to own any oil and gas lease of submerged lands under the
Outer Continental Lands Act.  The MMS must certify the Company as such
before the assignment will be approved.    As such, there
can be no assurances that the MMS will certify the Company and/or that the
assignment will be approved.  If the MMS does not certify the Company
and/or the assignment is not approved, the Company could be forced to curtail or
abandon its current business plan and any investment in the Company could become
devalued or worthless.











-13-


THE
MARKET FOR OIL AND GAS IS INTENSELY COMPETITIVE, AND AS SUCH, COMPETITIVE
PRESSURES COULD FORCE US TO ABANDON OR CURTAIL OUR BUSINESS PLAN.





The
market for oil and gas exploration services is highly competitive, and we only
expect competition to intensify in the future. Numerous well-established
companies are focusing significant resources on exploration and are currently
competing with us for oil and gas opportunities. Additionally, there are
numerous companies focusing their resources on creating fuels and/or materials
which serve the same purpose as oil and gas, but are manufactured from renewable
resources. As a result, there can be no assurance that we will be able to
compete successfully or that competitive pressures will not adversely affect our
business, results of operations and financial condition. If we are not able to
successfully compete in the marketplace, we could be forced to curtail or even
abandon our current business plan, which could cause any investment in us to
become worthless.





WE
MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH, WHICH COULD LEAD TO OUR
INABILITY TO IMPLEMENT OUR BUSINESS PLAN.





Our
growth is expected to place a significant strain on our managerial, operational
and financial resources, especially considering that we currently only have one
Director and one executive officer. Further, as we enter into contracts, we will
be required to manage multiple relationships with various consultants,
businesses and other third parties. These requirements will be exacerbated in
the event of our further growth. There can be no assurance that our systems,
procedures and/or controls will be adequate to support our operations or that
our management will be able to achieve the rapid execution necessary to
successfully implement our business plan. If we are unable to manage our growth
effectively, our business, results of operations and financial condition will be
adversely affected, which could lead to us being forced to abandon or curtail
our business plan and operations.





THE
PRICE OF OIL AND NATURAL GAS HAS HISTORICALLY BEEN VOLATILE AND IF IT WERE TO
DECREASE SUBSTANTIALLY, OUR PROJECTIONS, BUDGETS, AND REVENUES, IF ANY, WOULD BE
ADVERSELY EFFECTED, AND WE WOULD LIKELY BE FORCED TO MAKE MAJOR CHANGES IN OUR
BUSINESS PLAN.





Our
future financial condition, results of operations, if any, and the carrying
value of our future oil and natural gas properties, if any, depend primarily
upon the prices we will receive for our oil and natural gas production, if any
in the future. Oil and natural gas prices historically have been volatile and
likely will continue to be volatile in the future, especially given current
world geopolitical conditions. Our cash flows from operations will be highly
dependent on the prices that we receive for any oil and natural gas we may
produce in the future.





This
price volatility also affects the amount of our cash flows available for capital
expenditures and our ability to borrow money or raise additional capital. The
prices for oil and natural gas are subject to a variety of additional factors
that are beyond our control. These factors include:





·
            the
      level of consumer demand for oil and natural gas;·
            the
      domestic and foreign supply of oil and natural gas;·
            the
      ability of the members of the Organization of Petroleum Exporting
      Countries ("OPEC") to agree  to and maintain oil price and
      production controls;·
            the
      price of foreign oil and natural gas;·
            domestic
      governmental regulations and taxes;·
            the
      price and availability of alternative fuel sources;·
            weather
      conditions;·
            market
      uncertainty due to political conditions in oil and natural gas producing
      regions, including the Middle East; and·
            worldwide
      economic conditions.









-14-


These
factors as well as the volatility of the energy markets generally make it
extremely difficult to predict future oil and natural gas price movements with
any certainty. Declines in oil and natural gas prices would not only reduce our
revenue due to the sale of oil and gas, if any, but could reduce the amount of
oil and natural gas that we can produce economically, if any, and, as a result,
could have a material adverse effect upon our financial condition, results of
operations, oil and natural gas reserves and the carrying values of our future
oil and natural gas properties, if any. If the oil and natural gas industry
experiences significant price declines, we may be unable to make planned
expenditures, among other things. If this were to happen, we may be forced to
abandon or curtail our business operations, which would cause the value of an
investment in us to decline in value, or become worthless.





OUR
FUTURE ESTIMATES OF RESERVES, IF ANY, COULD HAVE FLAWS, OR MAY NOT ULTIMATELY
TURN OUT TO BE CORRECT OR COMMERCIALLY EXTRACTABLE AND AS A RESULT, OUR FUTURE
REVENUES AND PROJECTIONS, IF ANY, COULD BE INCORRECT.





Estimates
of reserves and of future net revenues prepared by different petroleum engineers
may vary substantially depending, in part, on the assumptions made and may be
subject to adjustment either up or down in the future. Our actual amounts of
production, revenue, taxes, development expenditures, operating expenses, and
quantities of recoverable oil and gas reserves in connection with any future oil
and gas properties we may acquire in the future, if any, may vary substantially
from estimates prepared by petroleum engineers.  Oil and gas reserve
estimates are necessarily inexact and involve matters of subjective engineering
judgment. In addition, any estimates of our future net revenues and the present
value thereof, in connection with any future properties we may acquire, if any,
will be based on assumptions derived in part from historical price and cost
information, which may not reflect current and future values, and/or other
assumptions which may be made by us that only represent our best estimates. If
these estimates of quantities, prices and costs prove inaccurate, we may be
unsuccessful in obtaining any oil and gas reserves. Additionally, if declines in
and instability of oil and gas prices occur, then write downs in the capitalized
costs associated with any oil and gas assets we may acquire in the future may be
required. If our future reserve estimates, associated with any properties we may
acquire in the future are found to be incorrect, the value of our common stock
could decrease and we may be forced to write down the capitalized costs of such
oil and gas properties, if any.





OUR
FUTURE OPERATIONS WILL BE HEAVILY DEPENDENT ON ENVIRONMENTAL REGULATIONS, WHICH
WE ARE UNABLE TO PREDICT, AND WHICH MAY CHANGE IN THE FUTURE, CAUSING US TO
EXPEND SUBSTANTIAL ADDITIONAL CAPITAL.





Public
interest in the protection of the environment has increased dramatically in
recent years. Our future planned oil and natural gas production operations and
our future planned processing, handling and disposal of hazardous materials,
such as hydrocarbons and naturally occurring radioactive materials are subject
to stringent regulation. We could incur significant costs, including cleanup
costs resulting from a release of hazardous material, third-party claims for
property damage and personal injuries fines and sanctions, as a result of any
violations or liabilities under environmental or other laws. Changes in or more
stringent enforcement of environmental laws could force us to expend additional
operating costs and capital expenditures to stay in compliance than we currently
anticipate needing to expend, and could consequently force us to curtail or
abandon our business operations.





Various
federal, state and local laws regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment,
directly impact oil and gas exploration, development and production operations,
and consequently may impact our future operations and costs. These regulations
include, among others, (i) regulations by the Environmental Protection Agency
and various state agencies regarding approved methods of disposal for certain
hazardous and non-hazardous wastes; (ii) the Comprehensive Environmental
Response, Compensation, and Liability Act, Federal Resource Conservation and
Recovery Act and analogous state laws which regulate the removal or remediation
of previously disposed wastes (including wastes disposed of or released by prior
owners or operators), property contamination (including groundwater
contamination), and remedial plugging operations to prevent future
contamination; (iii) the Clean Air Act and comparable state and local
requirements which may result in the gradual imposition of certain pollution
control requirements with respect to air emissions from our operations; (iv) the
Oil Pollution Act of 1990 which contains numerous requirements relating to the
prevention of and response to oil spills into waters of the United States; (v)
the Resource Conservation and Recovery Act which is the principal federal
statute governing the treatment, storage and disposal of hazardous wastes; and
(vi) state regulations and statutes governing the handling, treatment, storage
and disposal of naturally occurring radioactive material.




Management
believes that we are in substantial compliance with applicable environmental
laws and regulations. To date, we have not expended any material amounts to
comply with such regulations, and management does not currently anticipate that
future compliance will have a materially adverse effect on our consolidated
financial position, results of operations or cash flows. However, if we are
deemed to not be in compliance with applicable environmental laws, we could be
forced to expend substantial amounts to be in compliance, which would have a
materially adverse effect on our financial condition. If this were to happen,
any investment in us could be lost.













-15-


Risks Relating To The
Company's Securities





WE
MAY HAVE POTENTIAL LIABILITY FOR SHARES OF COMMON STOCK WHICH MAY HAVE BEEN SOLD
IN VIOLATION OF FEDERAL AND/OR STATE SECURITIES LAWS.





An
aggregate of 115,000 shares of common stock and 230,000 warrants to purchase
shares of our common stock were sold by us in September 2006 through August 2007
to seven (7) non-accredited investors and one (1) accredited
investor.  Those shares and warrants were not registered under federal
or state securities laws, and exemptions from registration provided by these
securities laws may not have been available or may not have been perfected due
to that fact that such investors who purchased our shares were not provided
audited financial statements, risk factors, or a description of our business
history and results of operations, with the result that we may be deemed to have
violated the registration requirements of these securities laws with respect to
the offer and sale of the shares of common stock. In July and August 2007, we
offered rescission to such investors, and provided each investor pursuant to
applicable state laws, at least thirty (30) days to decide whether to accept or
reject the rescission offer. All but one of the investors elected to reject the
rescission offer and reaffirm their purchases, and we subsequently returned the
rescinding investor’s subscription fee of $200 and cancelled such investor’s
2,000 shares and warrants. In connection with the rescission offer, we provided
every non-accredited and accredited shareholder, who we believed that at that
time may not have been provided full disclosure documents in connection with the
purchase of our shares, audited financial statements, risk factors and business
information similar to what information is included in this Prospectus. Although
all but one of the investors elected to reject rescission, certain state
securities laws do not expressly provide that a rescission offer will terminate
a purchaser's right to rescind a sale of securities that was not registered
under the relevant securities laws as required. As a result, we may continue to
be potentially liable under certain securities laws for such sales of common
stock even after completing our rescission offer. We anticipate that such
liability in aggregate would not exceed the total price of the remaining 113,000
purchased Units, or $11,300.





WE
CURRENTLY HAVE A SPORADIC, ILLIQUID, VOLATILE MARKET FOR OUR COMMON STOCK, AND
THE MARKET FOR OUR COMMON STOCK MAY REMAIN SPORADIC, ILLIQUID, AND VOLATILE IN
THE FUTURE.





On May
15, 2008, we obtained quotation for our common stock on the Over-The-Counter
Bulletin Board (“OTCBB”) under the symbol VOIG.OB.  Since this time,
there has been a limited market for our common stock on the OTCBB that has been
volatile, illiquid and sporadic and is subject to wide fluctuations in response
to several factors, including, but not limited to:





(1)
            actual
      or anticipated variations in our results of operations;(2)
            our
      ability or inability to generate new revenues;(3)
            increased
      competition;(4)
            conditions
      and trends in oil and gas industry; and(5)
            the
      market for oil and gas.





Furthermore,
our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price and liquidity of our common stock.





OUR
AUDITORS HAVE EXPRESSED A CONCERN ABOUT OUR ABILITY TO CONTINUE AS A GOING
CONCERN.





Our
auditors, in our audited financial statements, expressed a concern about our
ability to continue as a going concern. We had working capital deficit of $5,445
and had an accumulated deficit of $189,366 as of June 30, 2008, and have not
generated any revenues to date. These factors raise substantial doubt as to
whether we will be able to continue as a going concern. The attached financial
statements do not include any adjustments relating to the recoverability and
classification of liabilities that might be necessary should we be unable to
continue as a going concern.













-16-


NEVADA
LAW AND OUR ARTICLES OF INCORPORATION AUTHORIZE US TO ISSUE SHARES OF PREFERRED
STOCK, WHICH SHARES MAY HAVE RIGHTS AND PREFERENCES GREATER THAN OUR CURRENTLY
OUTSTANDING COMMON STOCK.





Pursuant
to our Articles of Incorporation, we have 100,000,000 shares of common stock and
10,000,000 shares of preferred stock authorized. As of August 19, 2008, we had
11,620,500 shares of common stock issued and outstanding and - 0 - shares of
preferred stock issued and outstanding. As a result, our Board of Directors has
the ability to issue a large number of additional shares of common stock without
shareholder approval, which if issued would cause substantial dilution to our
then shareholders. Additionally, shares of preferred stock may be issued by our
Board of Directors without shareholder approval with voting powers, and such
preferences and relative, participating, optional or other special rights and
powers as determined by our Board of Directors. As a result, shares of preferred
stock may be issued by our Board of Directors which cause the holders to have
super majority voting power over our shares, provide the holders of the
preferred stock the right to convert the shares of preferred stock they hold
into shares of our common stock, which may cause substantial dilution to our
then common stock shareholders and/or have other rights and preferences greater
than those of our common stock shareholders. Investors should keep in mind that
the Board of Directors has the authority to issue additional shares of common
stock and preferred stock, which could cause substantial dilution to our
existing shareholders. Additionally, the dilutive effect of any preferred stock,
which we may issue may be exacerbated given the fact that such preferred stock
may have super majority voting rights and/or other rights or preferences which
could provide the preferred shareholders with voting control over us and/or
provide those holders the power to prevent or cause a change in control. As a
result, the issuance of shares of common stock and/or preferred stock may cause
the value of our securities to decrease and/or become worthless.





FRANK
A. JACOBS, OUR CHIEF EXECUTIVE OFFICER AND DIRECTOR BENEFICIALLY OWNS AN
AGGREGATE OF 88% OF OUR COMMON STOCK AND CAN EXERCISE CONTROL OVER CORPORATE
DECISIONS INCLUDING THE APPOINTMENT OF NEW DIRECTORS.





Frank A.
Jacobs, our Chief Executive Officer and Director beneficially owns an aggregate
of 10,180,000 shares or approximately 88% of our outstanding common stock
(assuming the issuance of shares of common stock in connection with the exercise
of certain warrants which he beneficially owns). Accordingly, Mr. Jacobs will
exercise control in determining the outcome of all corporate transactions or
other matters, including the election of directors, mergers, consolidations, the
sale of all or substantially all of our assets, and also the power to prevent or
cause a change in control. Any investors who purchase shares will be minority
shareholders and as such will have little to no say in the direction of the
Company and the election of Directors. Additionally, it will be difficult if not
impossible for investors to remove Mr. Jacobs as a Director of the Company,
which will mean he will remain in control of who serves as officers of the
Company as well as whether any changes are made in the Board of Directors. As a
potential investor in the Company, you should keep in mind that even if you own
shares of the Company's common stock and wish to vote them at annual or special
shareholder meetings, your shares will likely have little effect on the outcome
of corporate decisions.





IF
WE ARE LATE IN FILING OUR QUARTERLY OR ANNUAL REPORTS WITH THE SEC, WE MAY BE
DE-LISTED FROM THE OVER-THE-COUNTER BULLETIN BOARD.





Pursuant
to Over-The-Counter Bulletin Board ("OTCBB") rules relating to the timely filing
of periodic reports with the SEC, any OTCBB issuer which fails to file a
periodic report (Form 10-Q's or 10-K's) by the due date of such report (not
withstanding any extension granted to the issuer by the filing of a Form
12b-25), three (3) times during any twenty-four (24) month period is
automatically de-listed from the OTCBB. Such removed issuer would not be
re-eligible to be listed on the OTCBB for a period of one-year, during which
time any subsequent late filing would reset the one-year period of de-listing.
If we are late in our filings three times in any twenty-four (24) month period
and are de-listed from the OTCBB, our securities may become worthless and we may
be forced to curtail or abandon our business plan.













-17-


INVESTORS
MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR COMMON STOCK DUE TO
FEDERAL REGULATIONS OF PENNY STOCKS.





Our
common stock will be subject to the requirements of Rule 15(g)9, promulgated
under the Securities Exchange Act as long as the price of our common stock is
below $5.00 per share. Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser
and receive the purchaser's consent prior to the transaction. The Securities
Enforcement Remedies and Penny Stock Reform Act of 1990, also requires
additional disclosure in connection with any trades involving a stock defined as
a penny stock. Generally, the Commission defines a penny stock as any equity
security not traded on an exchange or quoted on NASDAQ that has a market price
of less than $5.00 per share. The required penny stock disclosures include the
delivery, prior to any transaction, of a disclosure schedule explaining the
penny stock market and the risks associated with it. Such requirements could
severely limit the market liquidity of the securities and the ability of
purchasers to sell their securities in the secondary market.





IN
THE FUTURE, WE WILL INCUR SIGNIFICANT INCREASED COSTS AS A RESULT OF OPERATING
AS A FULLY REPORTING COMPANY IN CONNECTION WITH SECTION 404 OF THE SARBANES
OXLEY ACT, AND OUR MANAGEMENT WILL BE REQUIRED TO DEVOTE SUBSTANTIAL TIME TO NEW
COMPLIANCE INITIATIVES.





Moving
forward, we anticipate incurring significant legal, accounting and other
expenses in connection with our status as a fully reporting public company. The
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and new rules subsequently
implemented by the SEC have imposed various new requirements on public
companies, including requiring changes in corporate governance practices. As
such, our management and other personnel will need to devote a substantial
amount of time to these new compliance initiatives. Moreover, these rules and
regulations will increase our legal and financial compliance costs and will make
some activities more time-consuming and costly. The Sarbanes-Oxley Act requires,
among other things, that we maintain effective internal controls for financial
reporting and disclosure of controls and procedures. In particular, commencing
in calendar 2009 (one year after we began publicly reporting), we must perform
system and process evaluation and testing of our internal controls over
financial reporting to allow management to report on the effectiveness of our
internal controls over financial reporting, and in fiscal 2009, to allow our
independent registered public accounting firm to report on the effectiveness of
our internal controls over financial reporting, as required by Section 404 of
the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our
independent registered public accounting firm, may reveal deficiencies in our
internal controls over financial reporting that are deemed to be material
weaknesses. Our compliance with Section 404 will require that we incur
substantial accounting expense and expend significant management efforts. We
currently do not have an internal audit group, and we will need to hire
additional accounting and financial staff with appropriate public company
experience and technical accounting knowledge. Moreover, if we are not able to
comply with the requirements of Section 404 in a timely manner, or if we or our
independent registered public accounting firm identifies deficiencies in our
internal controls over financial reporting that are deemed to be material
weaknesses, the market price of our stock could decline, and we could be subject
to sanctions or investigations by the SEC or other regulatory authorities, which
would require additional financial and management resources.





ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS





In May
2008, the Company issued an aggregate of 200,000 restricted shares of its common
stock to Island Capital Management, LLC (“Island”), in consideration for an
affiliate of Island agreeing to serve as the Company’s transfer
agent.  We claim an exemption from registration afforded by Section
4(2) of the Securities Act of 1933 (the "Act") since the foregoing issuance did
not involve a public offering, the recipient took the shares for investment and
not resale and we took appropriate measures to restrict transfer. No
underwriters or agents were involved in the foregoing issuance and no
underwriting discount or commissions were paid by us.





In or
around June 2008, the Company issued an aggregate of 100,000 shares of its
restricted common stock to David M. Loev, the Company’s legal counsel in
consideration for legal services rendered.  We claim an exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 (the "Act")
since the foregoing issuance did not involve a public offering, the recipient
took the shares for investment and not resale and we took appropriate measures
to restrict transfer. No underwriters or agents were involved in the foregoing
issuance and no underwriting discount or commissions were paid by
us.













-18-


ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.





None.





ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS





None.





ITEM 5. OTHER
INFORMATION





None.





ITEM 6.
EXHIBITS





Exhibit Number
            Description of
      ExhibitExhibit
      3.1(1)
            Articles
      of IncorporationExhibit
      3.2(1)
            BylawsExhibit
      10.1(1)
            Acquisition
      & Participation Agreement with Polaris Holdings,
  Inc.Exhibit
      10.2(1)
            $8,000
      Promissory Note with Capersia Pte. Ltd.Exhibit
      10.3(1)
            Amendment
      to Acquisition & Participation AgreementExhibit
      10.4(2)
            Assignment
      of Membership InterestsExhibit
      10.5(2)
            Assignment
      of Production PaymentExhibit
      10.6(2)
            Purchase
      and Sale Agreement By and Between Entek USA Inc. and Velocity Oil &
      Gas, Inc.Exhibit
      10.7(+)(3)
            Amended
      and Restated  Participation Agreement between South Marsh,
      Ridgelake and GulfXExhibit
      10.8(2)
            Amendment
      to Amended and Restated Participation AgreementExhibit
      10.14(3)
            Amended
      Promissory Note with Capersia








-19-





Exhibit
      10.15(3)
            Letter
      Agreement Regarding Terms of Jacobs Oil & Gas, Inc.
      AdvancesExhibit
      10.16(3)
            Letter
      Agreement Regarding Terms of Jacobs Oil & Gas, Inc.
      AdvancesExhibit
      99.1(3)
            Letter
      From Frank Jacobs31*
            Certificate
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232*
            Certificate
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002




*   Filed
as an exhibit to this report.




+  Includes
all material exhibits of the Amended and Restated Participation Agreement
between South Marsh, Ridgelake and GulfX.





(1) Filed
as an exhibit to our Form SB-2 Registration Statement filed with the Commission
on October 1, 2007, and incorporated herein by reference.





(2) Filed
as an exhibit to our Form SB-2 Registration Statement filed with the Commission
on December 21, 2007, and incorporated herein by reference.




(3) Filed
as an exhibit to our Form S-1 Registration Statement filed with the Commission
on March 21, 2008, and incorporated herein by reference.





SIGNATURES





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





VELOCITY
      OIL & GAS, INC.DATED:
      August 19, 2008
            By:/s/
      Frank A. JacobsFrank
      A. JacobsChief
      Executive Officer (Principal Executive Officer)And
      Principal Financial Officer









-20-