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 September 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)





3500
WASHINGTON AVE, SUITE 200


HOUSTON TX
77007


(Address
of principal executive offices)





(713)
448-0222


(Registrant's
telephone number)




369
TERMINAL AVE, SUITE 305


VANCOUVER,
BRITISH COLUMBIA, CANADA


V6A 4C4


(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
November 13, 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)





September
      30,
            
            
            December
      31,2008
            
            
            2007ASSETSCURRENT
      ASSETSCash
            
            $
            2,965
            
            
            $
            1,286Prepaid
      expense other current assets
            
            
            -
            
            
            
            3,000Total
      current assets
            
            
            2,965
            
            
            
            4,286Property,
      plant and equipment, net of accumulateddepreciation
      of $2,151 and $1,230, respectively
            
            
            3,476
            
            
            
            1,480Unproved
      oil and gas properties
            
            
            -
            
            
            
            50,000TOTAL
      ASSETS
            
            $
            6,441
            
            
            $
            55,766LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable
            
            $
            6,525
            
            
            $
            6,908Accrued
      liabilities
            
            
            607
            
            
            
            100Total
      current liabilities
            
            
            7,132
            
            
            
            7,008Long-term
      advances - related party
            
            
            44,286
            
            
            
            17,536Note
      payable to shareholders
            
            
            8,264
            
            
            
            8,264Total
      liabilities
            
            
            59,682
            
            
            
            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
            
            
            (224,710
            )
            
            
            (118,511
            )Total
      stockholders' equity (deficit)
            
            
            (53,241
            )
            
            
            22,958TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
            
            $
            6,441
            
            
            $
            55,766See
      notes to financial statements.





F-1




VELOCITY
OIL & GAS, INC.


(An Exploration
Stage Company)


STATEMENTS
OF EXPENSES


(Unaudited)








May
      16, 2006(Inception)Three
      Months Ended
            
            
            Nine
      Months Ended
            
            
            ThroughSeptember
      30,
            
            
            September
      30,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008Operating
      expenses:General
      and administrative
            
            $
            14,553
            
            
            $
            15,526
            
            
            $
            84,370
            
            
            $
            42,667
            
            
            $
            201,387Impairment
      of oil and gas properties
            
            
            20,020
            
            
            
            -
            
            
            
            20,020
            
            
            
            -
            
            
            
            20,020Depreciation
            
            
            372
            
            
            
            327
            
            
            
            921
            
            
            
            779
            
            
            
            2,151Total
      operating expenses
            
            
            34,945
            
            
            
            15,853
            
            
            
            105,311
            
            
            
            43,446
            
            
            
            223,558Operating
      loss
            
            
            (34,945
            )
            
            
            (15,853
            )
            
            
            (105,311
            )
            
            
            (43,446
            )
            
            
            (223,558
            )Interest
      expense
            
            
            (399
            )
            
            
            (120
            )
            
            
            (888
            )
            
            
            (144
            )
            
            
            (1,152
            )Net
      loss
            
            $
            (35,344
            )
            
            $
            (15,973
            )
            
            $
            (106,199
            )
            
            $
            (43,590
            )
            
            $
            (224,710
            )Basic
      and diluted net lossper
      common share
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.00
            )Weighted
      average commonshares
      outstanding
            
            
            11,620,500
            
            
            
            10,900,717
            
            
            
            11,550,062
            
            
            
            10,751,914See
      notes to financial statements.





F-2




VELOCITY
OIL & GAS, INC.


(An Exploration
Stage Company)


STATEMENTS
OF STOCKHOLDERS’ EQUITY (DEFICIT)


(Unaudited)


May
16, 2006 (Inception) Through September 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
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (106,199
            )
            
            
            (106,199
            )Balances
      at September 30, 2008
            
            
            11,620,500
            
            
            $
            11,621
            
            
            $
            159,848
            
            
            $
            (224,710
            )
            
            $
            (53,241
            )See
      notes to financial statements.





F-3




VELOCITY
OIL & GAS, INC.


(An Exploration
Stage Company)


STATEMENTS
OF CASH FLOWS


(Unaudited)








May
      16, 2006(Inception)Nine
      Months Ended
            
            
            ThroughSeptember
      30,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
            
            $
            (106,199
            )
            
            $
            (43,590
            )
            
            $
            (224,710
            )Adjustments
      to reconcile net loss to cash usedin
      operating activities:Depreciation
      and amortization expense
            
            
            921
            
            
            
            779
            
            
            
            2,151Debt
      issued for interest
            
            
            -
            
            
            
            -
            
            
            
            264Impairment
      of oil and gas properties
            
            
            20,020
            
            
            
            -
            
            
            
            20,020Stock
      issued for services
            
            
            30,000
            
            
            
            1,000
            
            
            
            31,300Warrant
      expense
            
            
            -
            
            
            
            -
            
            
            
            19,119Changes
      in assets and liabilities:Prepaid
      expenses and other receivables
            
            
            3,000
            
            
            
            4,090
            
            
            
            -Accounts
      payable and accrued liabilities
            
            
            124
            
            
            
            1,945
            
            
            
            7,132CASH
      USED IN OPERATING ACTIVITIES
            
            
            (52,134
            )
            
            
            (35,776
            )
            
            
            (144,724
            )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
            
            
            (2,917
            )
            
            
            -
            
            
            
            (5,627
            )Proceeds
      from sale of oil and gas properties
            
            
            29,980
            
            
            
            -
            
            
            
            29,980CASH
      PROVIDED BY INVESTING ACTIVITIES
            
            
            27,063
            
            
            
            -
            
            
            
            24,353CASH
      FLOWS FROM FINANCING ACTIVITIESAdvances
      from related party
            
            
            53,500
            
            
            
            -
            
            
            
            74,002Proceeds
      from note payable to shareholder
            
            
            -
            
            
            
            8,000
            
            
            
            8,000Repayments
      of advances from related party
            
            
            (26,750
            )
            
            
            (2,966
            )
            
            
            (29,716
            )Proceeds
      from issuance of common stock
            
            
            -
            
            
            
            27,800
            
            
            
            71,050CASH
      PROVIDED BY FINANCING ACTIVITIES
            
            
            26,750
            
            
            
            32,834
            
            
            
            123,336NET
      CHANGE IN CASH
            
            
            1,679
            
            
            
            (2,942
            )
            
            
            2,965Cash,
      beginning of period
            
            
            1,286
            
            
            
            12,008
            
            
            
            -Cash,
      end of period
            
            $
            2,965
            
            
            $
            9,066
            
            
            $
            2,965SUPPLEMENTAL
      INFORMATIONCash
      paid for:Interest
            
            $
            -
            
            
            $
            -Income
      Taxes
            
            
            -
            
            
            
            -See
      notes to financial statements.





F-4




VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


NOTES
TO FINANCIAL STATEMENTS





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature of
Business. Velocity Oil and Gas, Ltd. (“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 September 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
$106,199 for the nine months ended September 30, 2008 and has an accumulated
deficit of $224,710.  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.





In July
2008, Velocity received a nonrefundable deposit of $29,980, representing the
full purchase price, for the sale of 100% of Velocity’s membership interest in
South Marsh, LLC. The remaining $20,020 book value of the unproved property was
written-off through impairment of oil and gas properties during the nine months
ended September 30, 2008.





NOTE 4 –
PROPERTY AND EQUIPMENT





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





Description
            
            Life
            
            September
      30, 2008
            
            
            December
      31, 2007Computer
      equipment
            
            3
      years
            
            $
            2,710
            
            
            $
            2,710Furniture
      and fixtures
            
            5
      years
            
            
            2,917
            
            
            
            -Less:
      accumulated depreciation
            
            
            
            
            (2,151
            )
            
            
            (1,230
            )$
            3,476
            
            
            $
            1,480





NOTE 5 –
ADVANCES FROM RELATED PARTY





Velocity
borrows advances from its former chief executive officer, Frank Jacobs,
periodically.  The advances are non-interest bearing and due on demand
with twelve months and one day’s notice.  At September 30, 2008 and
December 31, 2007, there was an outstanding balance of $44,286 and $17,536,
respectively due to the former 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
September 30, 2008, the outstanding balance on the note was $8,264. Velocity
evaluated the convertible portion under FAS 133 and EITF 00-19 for consideration
of classification as a liability and derivative and determined both were not
applicable. Velocity then evaluated the convertible portion under EITF’s 98-5
and 00-27 for consideration of beneficial conversion feature and determined none
existed.





NOTE 7 –
SUBSEQUENT EVENTS




On or
about September 29, 2008, South Marsh entered into an Assignment agreement with
Ridgelake to acquire a 40% working interest in the South Marsh Island 138 Block
(“SMI 138”).  Pursuant to the Assignment agreement between Ridgelake
Energy, Inc., a Louisiana corporation (“Ridgelake”), South Marsh and Offset Leo
LLC, a Delaware limited liability company (“Offset”), which agreement has an
effective date of June 1, 2008, Ridgelake will assign a 40% interest to South
Marsh and a 40% interest to Offset.  Jacobs Oil & Gas, Ltd., which
is controlled by our former officer and Director, Frank Jacobs, is a shareholder
of Offset.  Assignment of the interests to South Marsh and Offset is
subject to approval by the Minerals Management Service of the United States
Department of the Interior (the “MMS”).  South Marsh is currently
qualified by the MMS to own any oil and gas lease of submerged lands under the
Outer Continental Lands Act.  After its entry into the Assignment
agreement, South Marsh filed for approval of the assignment with the MMS and
anticipates receiving approval from the MMS within the ensuing weeks of this
Report.  South Marsh previously held the right to an 11.25% working
interest in SMI 138, which rights have lapsed as of the date of this
filing.  Prior to its entry into the Assignment agreement, Offset
provided a payment of $25,000 to Ridgelake as consideration for the assignment,
of which Velocity was responsible for repaying $12,500 of such payment to
Offset.  Velocity has not made this $12,500 payment to Offset as of
the date of this report.





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 SEPTEMBER 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.  On or about September 29, 2008,
with an effective date of June 1, 2008, we entered into an Assignment agreement
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.








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) an 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”), which interest expired on July 31, 2008 as the Company elected not
to participate in drilling on SMI 152 as management deemed the project to have
limited economic potential.  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.





-2-




In
connection with the Purchase Agreement, all of the officers and Directors of
South Marsh resigned, and Frank Jacobs, our former 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.





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 remaining leases is as follows:





Lease
            Cost
              ShareVK
      79
            13.34%HI
      A 307
            13.34%VM
      317
            13.34%SMI
      138
            15.00%










-3-




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.





On July
1, 2008, Ridgelake proposed to drill a well on the SMI 152 lease whereby the
Company would be required to pay Ridgelake a cash-call within 30 days and share
in the expenses of such well, if the Company desired to
participate.  Upon Ridgelake’s proposal, the Company elected not to
participate in this lease as management deemed the project to have limited
economic potential.  As such, the Company’s interest in the SMI 152
lease expired on July 31, 2008, and the Company has forfeited its right to earn
any interest on this lease in the future.





Moving
forward it is currently anticipated that Ridgelake will propose to drill a well
in fiscal 2009 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). 
These estimates are subject to change however, based on the actual drilling
costs of such well, and as such, these estimates 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 event 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 a proposed well on the VK 79 lease until sometime
in 2009, 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.





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.





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.




-4-




In
January 2008, Frank A. Jacobs, our former 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.  Effective September 15, 2008,
Mr. Jacobs resigned as officer and Director of the Company, and James Moses was
appointed as sole officer and Director of the Company.  However, we
still anticipate Mr. Jacobs, who remains the Company’s largest shareholder, 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 former officer and Director, Frank 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 deposit was recorded against the book value of South Marsh
and the remaining $20,020 was written-off through impairment of oil and gas
properties. The Company will file a Form 8-K containing more details if terms of
the transfer can be agreed upon by all parties involved.  As of the
date of this Report, GOG has indicated to the Company that, in light of the
current state of the financial markets, it desires to wait for an indefinite
period before moving forward with negotiations on the terms of the
transfer.





Purchase of Ownership
Interest in SMI 138





On or
about September 29, 2008, South Marsh entered into an Assignment agreement with
Ridgelake to acquire a 40% working interest in SMI 138 (as defined
above).  Pursuant to the Assignment agreement between Ridgelake, South
Marsh and Offset Leo LLC, a Delaware limited liability company (“Offset”), which
agreement has an effective date of June 1, 2008, Ridgelake will assign a 40%
interest to South Marsh and a 40% interest to Offset.  Jacobs Oil
& Gas, Ltd., which is controlled by our former officer and Director, Frank
Jacobs, is a shareholder of Offset.  Assignment of the interests to
South Marsh and Offset is subject to approval by the Minerals Management Service
of the United States Department of the Interior (the “MMS”).  South
Marsh is currently qualified by the MMS to own any oil and gas lease of
submerged lands under the Outer Continental Lands Act.  After its
entry into the Assignment agreement, South Marsh filed for approval of the
assignment with the MMS and anticipates receiving approval from the MMS within
the ensuing weeks of this Report.  South Marsh previously held the
right to an 11.25% working interest in SMI 138, which rights have lapsed as of
the date of this filing.  Prior to its entry into the Assignment
agreement, Offset provided a payment of $25,000 to Ridgelake as consideration
for the assignment, of which we were responsible for repaying $12,500 of such
payment to Offset.  We have not made this $12,500 payment to Offset to
date.





The
assignment is subject to all royalty and overriding royalties that burden the
lease, including the following royalties and overriding royalties: (a) a
16.66667% royalty payable to the United States of America under the terms of the
SMI 138 lease, (b) a 3.33333% of 8/8ths overriding royalty interest that was
previously granted to Beacon Exploration and Production Company, L.L.C. by
Ridgelake in December 2005, and (c) overriding royalty interests in the amount
of 1/3rd of 1.0% of 8/8ths each (a total of 1.0% of 8/8ths) previously granted
by Ridgelake in December 2006 to (1) Petrosand Energy, L.L.C., (2) Digwell
Energy, L.L.C. and (3) Delta Oil and Gas, L.L.C.  Further, pursuant to
the Assignment agreement, Ridgelake reserved to itself an additional 4.0% of
8/8ths overriding royalty interest (the “Additional Interest”) which shall
attach to all oil, gas, and other minerals which are allocated under the
Assignment agreement.  The Additional Interest shall be free of
drilling and operating expenses, but shall bear its proportionate part of
severance and production taxes.





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 $6 million, which funds the
Company anticipates it will require 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-




If and
when the Company finalizes terms for the transfer of South Marsh to a third
party entity, as described above under “Agreement Regarding the Sale of South
Marsh,” Velocity Oil & Gas, Inc. will apply to the MMS to be registered as a
qualified holder of offshore licenses, and the 40% SMI 138 interest will be
transferred from South Marsh to Velocity Oil & Gas, Inc. prior to closing of
the transfer.  However, there can be no assurances that the MMS will
certify the Company and/or that the transfer from South Marsh to the Company
will be approved.





PLAN
OF OPERATION FOR THE NEXT TWELVE MONTHS





We are
currently focused on proceeding with the development and drilling of our
recently acquired 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.  Funding
permitting, we hope that we will be able to generate oil and gas production on
the SMI 138 interest and/or the South Marsh interests 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





THREE
MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30,
2007





We did
not generate any oil and gas revenues for the three months ended September 30,
2008, or for the three months ended September 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, and/or, assuming 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 $14,553 for the three months ended
September 30, 2008, compared to general and administrative expenses of $15,526
for the three months ended September 30, 2007, a decrease of $973 or 6.3% from
the prior period.  The decrease in general and administrative expenses
was mainly due to decreased legal expenses for such period.





We had
impairment of oil and gas properties of $20,020 for the three months ended
September 30, 2008, compared to no impairment during the same period in the
prior year.





We had
$372 in depreciation expense for the three months ended September 30, 2008
compared with depreciation expense of $327 for the three months ended September
30, 2007.





We had
total operating expenses and a total operating loss of $34,945 for the three
months ended September 30, 2008, compared to total operating expenses and a
total operating loss of $15,853 for the three months ended September
30, 2007, an increase of $19,092 or 120.4% from the prior period, which was
mainly due to the impairment of oil and gas properties during the three months
ended September 30, 2008.





-6-




We had
interest expense of $399 for the three months ended September 30, 2008, compared
to interest expense of $120 for the three months ended September 30, 2007, the
increase was in connection with an increase in the Company’s credit card debt
and 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 $35,344 for the three months ended September 30, 2008,
compared to a total net loss of $15,973 for the three months ended September 30,
2007, an increase in net loss of $19,371 or 121.3% from the prior period,
which was due mainly to the impairment of oil and gas
properties.  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.





NINE
MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30,
2007





We did
not generate any oil and gas revenues for the nine months ended September 30,
2008, or for the nine months ended September 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, and/or, assuming 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 $84,370 for the nine months ended
September 30, 2008, compared to general and administrative expenses of $42,667
for the nine months ended September 30, 2007, an increase of $41,703 or 97.7%
from the prior period.  The increase in general and administrative
expenses was mainly due to increased legal and accounting fees for the nine
months ended September 30, 2008, compared to the nine months ended September 30,
2007, due to the Company filing its registration statement and obtaining
quotation on the Over-The-Counter Bulletin Board.





We had
impairment of oil and gas properties of $20,020 for the nine months ended
September 30, 2008, compared to no impairment during the same period in the
prior year.





We had
$921 in depreciation expense for the nine months ended September 30, 2008
compared with depreciation expense of $779 for the nine months ended September
30, 2007.





We had
total operating expenses and a total operating loss of $105,311 for the nine
months ended September 30, 2008, compared to total operating expenses and a
total operating loss of $43,446 for the nine months ended September 30, 2007, an
increase of $61,865 or 142.4% from the prior period.





We had
interest expense of $888 for the nine months ended September 30, 2008, compared
to interest expense of $144 for the nine months ended September 30, 2007, an
increase in interest expense of $744, which 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 $106,199 for the nine months ended September 30, 2008,
compared to a total net loss of $43,590 for the nine months ended September 30,
2007, an increase in net loss of $62,609 or 143.6% from the prior period, which
was due mainly to the $41,703 or 97.7% increase in general and administrative
expenses and the impairment of oil and gas properties.  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.





-7-




LIQUIDITY
AND CAPITAL RESOURCES




We had
total assets of $6,441 as of September 30, 2008, consisting of total current
assets of $2,965, which consisted solely of cash, and non-current assets
consisting of $3,476 of property and equipment, net of accumulated depreciation
of $2,151.





We had
total liabilities as of September 30, 2008 of $59,682, consisting of total
current liabilities of $7,132; which included $6,525 of accounts payable, $607
of accrued liabilities; and non-current liabilities consisting of $44,286 of
long-term advances, related party, in connection with advances to the Company by
its former 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.





We had a
working capital deficit of $4,167 and a deficit accumulated during the
exploration stage of $224,710 as of September 30, 2008.





We had
$52,134 of net cash used in operating activities for the nine months ended
September 30, 2008, which included a net loss of $106,199, offset by $30,000 of
common shares issued for services, $20,020 of impairment of oil and gas
properties, an increase in prepaid expenses and other current assets
of $3,000, depreciation expense of $921 and an increase in accounts payable and
accrued liabilities of $124.





We had
$27,063 of net cash provided by investing activities for the nine months ended
September 30, 2008, which included $29,980 of proceeds received from the sale of
oil and gas properties, offset by $2,917 of purchase of fixed
assets.





We had
$26,750 of net cash provided by financing activities for the nine months ended
September 30, 2008, which was due to $53,500 of advances from related parties in
connection with long term loans advanced to the Company by the Company’s former
officer and Director, Frank Jacobs and Jacobs Oil & Gas, Ltd., an entity
controlled by Mr. Jacobs, which loans are described in greater detail above,
offset by $26,750 of repayments of advances from related party.





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 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
$525,000 in additional funds that South Marsh will need to earn a working
interest in the VK 79 lease 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 to GOG does not close; or any funds we will be
required to raise in connection with the development of 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.





-8-




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 former 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
deposit was recorded against the book value of South Marsh and the remaining
$20,020 was written-off through impairment of oil and gas properties. The
Company will file a Form 8-K containing more details if terms of the transfer
can be agreed upon by all parties involved.  As of the date of this
Report, GOG has indicated to the Company that, in light of the current state of
the financial markets, it desires to wait for an indefinite period before moving
forward with negotiations on the terms of the transfer.





We
currently rely on funds provided by Frank Jacobs, our former 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.  Further, effective September 15, 2008, Mr. Jacobs
resigned as officer and Director of the Company, and James Moses was appointed
as sole officer and Director of the Company.  Despite his resignation,
we anticipate Mr. Jacobs, who remains the Company’s largest shareholder, will
continue to provide us funding in the future; however, there are no assurances
that he will.





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.





We
anticipate transferring South Marsh to GOG sometime in the first quarter of
2009, assuming we can come to terms with GOG after resuming negotiations, of
which there can be no assurances.  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 sometime in 2009.  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 principles 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.




-9-




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 Principal 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 Principal
Executive Officer and Principal 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.





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):





-10-




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 $525,000
of additional funding sometime in 2009, for South Marsh to earn an interest in
the VK 79 lease, assuming Ridgelake decides to move forward with drilling,
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 this concession and we might lose the right to earn that concession.
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. 
Additionally, we anticipate the need for up to $2.4 million in the second
quarter of 2009, in connection with the development of SMI 138, which funds may
not be available on favorable terms, if at all.  Moving forward, we
anticipate Frank Jacobs, our former officer and Director and the Company’s
largest shareholder, 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.





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.





-11-




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 September
30, 2008, we had a working capital deficit of $34,148 and a total deficit
accumulated during the exploration stage of $204,690.  We currently
anticipate that we will be funded by our former 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.





WE
RELY HEAVILY ON JAMES MOSES, OUR PRESIDENT 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 James Moses, our
President and Director. Mr. Moses spends approximately 10 hours per week on
Company matters.  Our ability to operate and implement our exploration
activities is heavily dependent on the continued service of Mr. Moses and will
depend on our ability to attract qualified contractors and consultants on an
as-needed basis.  Additionally, we currently rely on our former
officer and Director, Frank 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. Moses in the future. We do not
have any employment contract with Mr. Moses, nor do we currently have any key
man insurance on Mr. Moses.  Mr. Moses is our driving force and is
responsible for maintaining our relationships and operations. In addition to Mr.
Moses’ position with the Company, he serves as a Partner at Fortbridge
Consulting, an investor relations firm in Sydney, Australia, 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. Moses and/or attract and retain
contractors and consultants in the future. The loss of Mr. Moses 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.





-12-




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 we 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.





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 $525,000 in additional funding for South Marsh to earn
a working interest in the VK 79 lease described above under “Purchase and Sale
Agreement with Entek,” and, in connection with our 40% interest in SMI
138,  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.





-13-




WE
WILL NEED SUBSTANTIAL FUNDS TO EARN OUR WORKING INTEREST IN SMI 138, WHICH FUNDS
MAY BE UNAVAILABLE.





On or
about September 29, 2008, the Company entered into an Assignment agreement with
Ridgelake whereby the Company acquired a 40% working interest in SMI 138, as
described above under “Material Events.” 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.





Pursuant
to the Assignment agreement between Ridgelake, South Marsh and Offset Leo LLC, a
Delaware limited liability company (“Offset”), which agreement has been
finalized to date, Ridgelake will assign a 40% interest to South Marsh and a 40%
interest to Offset.  Assignment of the interests to South Marsh and
Offset is subject to approval by the Minerals Management Service of the United
States Department of the Interior (the “MMS”).  South Marsh is
currently qualified by the MMS to own any oil and gas lease of submerged lands
under the Outer Continental Lands Act.  After its entry into the
Assignment agreement, South Marsh filed for approval of the assignment with the
MMS and anticipates receiving approval from the MMS within the ensuing weeks of
this Report.  However, there can be no assurances that the MMS will
approve the assignment.  If the MMS does not approve the assignment,
the Company could be forced to curtail or abandon its current business plan and
any investment in the Company could become devalued or worthless.





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.





-14-




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.





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.





-15-




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.





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.





-16-




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
$34,148 and had an accumulated deficit of $204,690 as of September 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.





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 November 11, 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.





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FRANK
A. JACOBS, OUR FORMER 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 former 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 James Moses, our current
sole officer and Director, or any other Director that Mr. Jacobs may appoint. 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.





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.





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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.





ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.





None.





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





None.





ITEM 5. OTHER
INFORMATION




None.




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ITEM 6.
EXHIBITS





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 CapersiaExhibit
      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
      10.17(4)
            Assignment
      agreement with Ridgelake Energy, Inc.Exhibit
      99.1(3)
            Letter
      From Frank Jacobs31*
            Certificate
      of the Principal Executive Officer and Principal Financial Officer
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232*
            Certificate
      of the Principal Executive Officer and Principal Financial Officer
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002





-20-





*   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.





(4) Filed
as an exhibit to our Form 8-K Report filed with the Commission on November 10,
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:
      November 14, 2008
            By:/s/ James
      MosesJames
      MosesPresident
      (Principal Executive Officer)And
      Principal Financial Officer





-21-