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 March 31,
2009





[  
      ]
            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 of
      incorporation or organization)
                    (Primary
      Standard Industrial
      ClassificationCode
      Number)
                    (IRS
      Employer Identification
      No.)





3500
WASHINGTON AVE, SUITE 200


HOUSTON TX
77007


(Address
of principal executive offices)





(604)
765-3337


(Registrant's
telephone number)




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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).   Yes   ̈    No   ̈





Indicate
by check mark 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    ̈No   x





The
number of shares outstanding of each of the issuer’s classes of equity as of May
14, 2009 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)


CONSOLIDATED
BALANCE SHEETS





March
      31,
                              
                              
                              December
      31,2009
                              
                              
                              2008(Unaudited)ASSETSCURRENT
      ASSETSCash
                              
                              $
                              -
                              
                              
                              $
                              5,716Total
      current assets
                              
                              
                              -
                              
                              
                              
                              5,716Property,
      plant and equipment, net of accumulateddepreciation
      of $2,965 and $2,583, respectively
                              
                              
                              4,488
                              
                              
                              
                              4,870Unproved
      oil and gas properties
                              
                              
                              12,500
                              
                              
                              
                              12,500TOTAL
      ASSETS
                              
                              $
                              16,988
                              
                              
                              $
                              23,086LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESBank
      overdraft
                              
                              $
                              330
                              
                              
                              $
                              -Accounts
      payable
                              
                              
                              19,615
                              
                              
                              
                              16,938Accounts
      payable – related party
                              
                              
                              1,207
                              
                              
                              
                              1,207Accrued
      liabilities
                              
                              
                              65,618
                              
                              
                              
                              52,406Total
      current liabilities
                              
                              
                              86,770
                              
                              
                              
                              70,551Long-term
      advances - related party
                              
                              
                              70,676
                              
                              
                              
                              55,286Note
      payable to shareholders
                              
                              
                              12,764
                              
                              
                              
                              12,764Total
      liabilities
                              
                              
                              170,210
                              
                              
                              
                              138,601STOCKHOLDERS’
      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 shares issued andoutstanding
                              
                              
                              11,621
                              
                              
                              
                              11,621Additional
      paid-in capital
                              
                              
                              159,848
                              
                              
                              
                              159,848Deficit
      accumulated during the exploration stage
                              
                              
                              (324,691
                              )
                              
                              
                              (286,984
                              )Total
      stockholders' deficit
                              
                              
                              (153,222
                              )
                              
                              
                              (115,515
                              )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIT
                              
                              $
                              16,988
                              
                              
                              $
                              23,086See
      notes to consolidated financial statements.


F-1


VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF EXPENSES


Three
Months Ended March 31, 2009 and 2008 and the Period from


May
16, 2006 (Inception) Through March 31, 2009


(Unaudited)








May
      16, 2006(Inception)Three
      Months Ended
                  
                  
                  ThroughMarch
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008
                  
                  
                  2009Operating
      expenses:General
      and administrative
                  
                  $
                  36,897
                  
                  
                  $
                  24,083
                  
                  
                  $
                  299,804Impairment
      of oil and gas properties
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  20,020Depreciation
                  
                  
                  381
                  
                  
                  
                  226
                  
                  
                  
                  2,964Total
      operating expenses
                  
                  
                  37,278
                  
                  
                  
                  24,309
                  
                  
                  
                  322,788Operating
      loss
                  
                  
                  (37,278
                  )
                  
                  
                  (24,309
                  )
                  
                  
                  (322,788
                  )Interest
      expense
                  
                  
                  (429
                  )
                  
                  
                  (212
                  )
                  
                  
                  (1,903
                  )Net
      loss
                  
                  $
                  (37,707
                  )
                  
                  $
                  (24,521
                  )
                  
                  $
                  (324,691
                  )Basic
      and diluted net lossper
      common share
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )Weighted
      average commonshares
      outstanding
                  
                  
                  11,620,500
                  
                  
                  
                  11,320,500See
      notes to consolidated financial statements.


F-2


VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)


May
16, 2006 (Inception) Through March 31, 2009


(Unaudited)








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
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (168,473
                      )
                      
                      
                      (168,473
                      )Balances
      at December 31, 2008
                      
                      
                      11,620,500
                      
                      
                      
                      11,621
                      
                      
                      
                      159,848
                      
                      
                      
                      (286,984
                      )
                      
                      
                      (115,515
                      )Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (37,707
                      )
                      
                      
                      (37,707
                      )Balances
      at March 31, 2009
                      
                      
                      11,620,500
                      
                      
                      $
                      11,621
                      
                      
                      $
                      159,848
                      
                      
                      $
                      (324,691
                      )
                      
                      $
                      (153,222
                      )See
      notes to consolidated financial statements.


F-3


VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


Three
Months Ended March 31, 2009 and 2008 and the Period from


May
16, 2006 (Inception) Through March 31, 2009


(Unaudited)





May
      16, 2006InceptionThree
      Months Ended
                        
                        
                        ThroughMarch
      31,
                        
                        
                        March
      31,2009
                        
                        
                        2008
                        
                        
                        2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                        
                        $
                        (37,707
                        )
                        
                        $
                        (24,521
                        )
                        
                        $
                        (324,691
                        )Adjustments
      to reconcile net loss to cash usedin
      operating activities:Depreciation
                        
                        
                        382
                        
                        
                        
                        226
                        
                        
                        
                        2,965Debt
      issued for interest
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        264Impairment
      of oil and gas properties
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        20,020Stock
      issued for services
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        31,300Warrant
      expense
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        19,119Changes
      in assets and liabilities:Prepaid
      expenses and other receivables
                        
                        
                        -
                        
                        
                        
                        3,000
                        
                        
                        
                        -Accounts
      payable
                        
                        
                        2,677
                        
                        
                        
                        (5,543
                        )
                        
                        
                        7,115Accounts
      payable – related party
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,207Accrued
      liabilities
                        
                        
                        13,212
                        
                        
                        
                        1,695
                        
                        
                        
                        65,618NET
      CASH USED IN OPERATING ACTIVITIES
                        
                        
                        (21,436
                        )
                        
                        
                        (25,143
                        )
                        
                        
                        (177,083
                        )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (7,453
                        )Proceeds
      from sale of oil and gas properties
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        29,980NET
      CASH PROVIDED BY INVESTING ACTIVITIES
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        22,527CASH
      FLOWS FROM FINANCING ACTIVITIESAdvances
      from related party
                        
                        
                        15,390
                        
                        
                        
                        27,500
                        
                        
                        
                        100,392Bank
      overdraft
                        
                        
                        330
                        
                        
                        
                        
                        
                        
                        
                        330Proceeds
      from note payable to shareholder
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        12,500Repayments
      of advances from related party
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (29,716
                        )Proceeds
      from issuance of common stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        71,050NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                        
                        
                        15,720
                        
                        
                        
                        27,500
                        
                        
                        
                        154,556NET
      CHANGE IN CASH
                        
                        
                        (5,716
                        )
                        
                        
                        2,357
                        
                        
                        
                        -Cash,
      beginning of period
                        
                        
                        5,716
                        
                        
                        
                        1,286
                        
                        
                        
                        -Cash,
      end of period
                        
                        $
                        -
                        
                        
                        $
                        3,643
                        
                        
                        $
                        -Cash
      paid for:Interest
                        
                        $
                        -
                        
                        
                        $
                        -Income
      taxes
                        
                        
                        -
                        
                        
                        
                        -See
      notes to consolidated financial statements.


F-4


VELOCITY
OIL & GAS, INC.


(An
Exploration Stage Company)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature of
Business. Velocity Oil and Gas, Inc. (“Velocity”) was incorporated in the State
of Nevada on May 16, 2006. Since inception, the Company is a start-up entity
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 and its wholly-owned subsidiary, South Marsh LLC, a Delaware limited
liability company, 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
10-K. 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 2008 as reported in the
Form 10-K, 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.





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.





NOTE 2 –
GOING CONCERN





As shown
in the accompanying financial statements, Velocity incurred a net loss of
$37,707 for the quarter ended March 31, 2009, and has an accumulated deficit of
$324,691 and a working capital deficit of $86,770 as of March 31,
2009.  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 –
ADVANCES FROM RELATED PARTY





Velocity
borrows advances from a shareholder periodically.  The advances are
non-interest bearing and due on demand with twelve months and one day’s
notice.  At March 31, 2009 and December 31, 2008, there was an
outstanding balance of $70,676 and $55,286, respectively, due the
shareholder.


F-5


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 MARCH 31, 2009.





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 oil and gas exploration 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.





Whilst we
hold exploration assets we
are focused on seeking out and purchasing producing 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.





Our
current assets consist of a 40% working interest in SMI 138, as further
described below, and the right to participate in the drilling of West Cameron
629.





We own
low risk, high return investment and development projects 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.





The
Company recently also investigated the area of ‘green’ energy. It has entered
into discussions with two companies in Australia and Indonesia to form an
alliance to exploit the geothermal projects in Indonesia.





Plan
of Operation




Our goal
is to expand or build our business through a variety of efforts. We are
considering ongoing offerings of securities under Private Placements, possible
debt instruments, joint ventures with other companies public and private and
other activities to generate capital to grow and undertake our business plan
(for example, obtain, if possible, loans).




We have
no lines of credit or other bank financing arrangements. However, we are working
out a possible formal line of credit with Frank Jacobs, formerly a member of
management, who has advanced monies to us from time to time. (Mr. Jacobs may
still remain considered as an affiliate.) Generally, we have financed operations
to date through the proceeds of the private placement of equity and debt
securities and loans from our shareholders.


-2-


In
connection with our business plan, management will try and delay additional
increases in operating expenses and capital expenditures. We will need to raise
additional capital and revenues to meet both short term and long-term operating
requirements.




We have
undertaken certain actions and continue to implement changes designed to improve
our financial results and operating cash flows. The actions involve certain
cost-saving initiatives and growing strategies. For example, we do not have a
seasoned staff of public company officers beyond the extent of experience and
abilities of our CEO; so, for example, we have not engaged, thus avoided the
expenses, of formal officers like a Chief Financial Officer or
CFO.  Our financial statements contain information expressing
substantial doubt about our ability to continue as a going concern. The
consolidated financial statements have been prepared "assuming that we will
continue as a going concern," which contemplates that we will realize our assets
and satisfy our liabilities and commitments in the ordinary course of
business.




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 but discussions have
commenced to convert the debt to equity.





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”).   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.


-3-


As a
result of the Purchase Agreement and the Assignment, South Marsh became a wholly
owned subsidiary of the Company. We have not paid any consideration to date,
including cash and/or securities, to Entek in connection with the Purchase
Agreement.





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.





On or
around March 17, 2009, Ridgelake issued a cashcall for the continuation of the
leases VK-79, VM-317 and HI A 307. After considerable debate and study, in light
of the equity markets and the low gas prices in the Gulf of Mexico, the joint
venture participants unanimously decided to relinquish the acreage.


The
Company has no further rights or obligations under the Purchase and Sale
Agreement with Entek USA or the Participation Agreement with
Ridgelake.





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 organized in Germany named “German Oil & Gas AG”
(“GOG”).   The terms of an agreement with GOG were never finalized and
as reported earlier, the transfer of South Marsh was cancelled and the agreement
annulled.  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.





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 assigned 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.





The
assignment of the interests to South Marsh was approved by the Minerals
Management Service of the United States Department of the Interior (the
“MMS”).  South Marsh is qualified by the MMS to own any oil and gas
lease of submerged lands under the Outer Continental Lands Act. 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 this 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.





The
Company plans to 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 fourth
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.


-4-


Series A Preferred
Stock





On March
2, 2009, the Company's Board of Directors unanimously agreed by a written
consent to action without a meeting, to adopt a Certificate of Designations for
the creation of a Series A preferred stock (the "Series A Preferred
Stock").





The
Series A Preferred Stock has a par value of $0.001 per share. The Series A
Preferred Stock consists of one thousand (1,000) shares, each having no dividend
rights, no liquidation preference, and no conversion or redemption rights.
However, the one thousand (1,000) shares of Series A Preferred Stock have the
right, voting in aggregate, to vote on all shareholder matters equal to
fifty-one percent (51%) of the total vote. For example, if there are 10,000,000
shares of the Company's common stock issued and outstanding at the time of a
shareholder vote, the holders of Series A Preferred Stock, voting separately as
a class, will have the right to vote an aggregate of 10,408,163 shares, out of a
total number of 20,408,163 shares.





Additionally,
the Company shall not adopt any amendments to the Company's Bylaws, Articles of
Incorporation, as amended, make any changes to the Certificate of Designations,
or effect any reclassification of the Series A Preferred Stock, without the
affirmative vote of at least 66-2/3% of the outstanding shares of Series A
Preferred Stock. However, the Company may, by any means authorized by law and
without any vote of the holders of shares of Series A Preferred Stock, make
technical, corrective, administrative or similar changes to the Certificate of
Designations that do not, individually or in the aggregate, adversely affect the
rights or preferences of the holders of shares of Series A Preferred
Stock.





The
Series A Preferred Stock has not been officially designated with the Secretary
of State of Nevada to date, and the Company plans to file a Form 8-K when such
designation has been filed.





PLAN
OF OPERATION FOR THE NEXT TWELVE MONTHS





We are
currently focused on proceeding with the development and drilling of our 40%
interest in SMI 138, as described above.  Additionally, the Company
has secured the right to participate in the drilling of West Cameron
629.





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.





We intend
to seek out quality geo-thermal energy projects and acquire the expertise in
this field of power generation through the alliance with other companies. We
currently have a tentative list of potential 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 established companies
and/or institutional investors in the field of geothermal energy to obtain the
necessary funds we will require to move forward with our business
plan.





RESULTS
FROM OPERATIONS








FOR
THE THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 2008





We did
not generate any oil and gas revenues for the three months ended March 31, 2009,
or for the three months ended March 31, 2008, and do not anticipate generating
any oil and gas revenues until our exploration program is successful or until we
acquire producing oil and gas production properties, of which there can be no
assurance.


-5-


We had
general and administrative expenses of $36,897 for the three months ended March
31, 2009, compared to general and administrative expenses of $24,083 for the
three months ended March 31, 2008, an increase of $12,814 or 53.2% from the
prior period.  The increase in general and administrative expenses was
mainly due to increased legal and accounting fees for the three months ended
March 31, 2009, compared to the three months ended March 31, 2008, due to the
Company filing its registration statement and obtaining quotation on the
Over-The-Counter Bulletin Board.





We had
$381 in depreciation expense for the three months ended March 31, 2009 compared
with depreciation expense of $226 for the three months ended March 31,
2008.





We had
total operating expenses and a total operating loss of $37,278 for the three
months ended March 31, 2009, compared to total operating expenses and a total
operating loss of $24,309 for the three months ended March 31, 2008, an increase
in total operating expenses of $12,969 or 53.4% from the prior
period.





We had
interest expense of $429 for the three months ended March 31, 2009, compared to
interest expense of $212 for the three months ended March 31, 2008, an increase
in interest expense of $217, which increase in expense was in connection with
interest on the loan received from Capersia Pte. Ltd., a shareholder of the
Company (“Capersia”), as evidenced by the Note described below.





We had a
total net loss of $37,707 for the three months ended March 31, 2009, compared to
a total net loss of $24,521 for the three months ended March 31, 2008, an
increase in net loss of $13,186 or 53.8% from the prior period, which was due
mainly to the $12,814 or 53.2% increase in general and administrative
expenses.  We anticipate incurring net losses until and unless we are
able to earn our oil and gas interests, as disclosed above, and/or obtain any
other oil and gas interests, and unless such interests produce sufficient
revenues to support our operations, of which there can be no
assurance.





LIQUIDITY
AND CAPITAL RESOURCES





We had
total assets of $16,988 as of March 31, 2009 consisting of property and
equipment, net of accumulated depreciation of $4,488 and unproved oil and gas
properties of $12,500.





We had
total liabilities as of March 31, 2009 of $170,210, consisting of total current
liabilities of $86,770; which included a $330 bank overdraft, $20,822 of
accounts payable, $65,618 of accrued liabilities; and non-current liabilities
consisting of $70,676 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
$12,764 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. However, in view of the
current stock price of the Company a lower conversion price might have to be
considered by the Company in case Capersia requires repayment or conversion of
the loan to equity.  As of the filing of this report, Capersia had not
provided us notice of their intention to demand repayment of the
Note.


-6-


We had a
working capital deficit of $86,770 and a deficit accumulated during the
exploration stage of $324,691 as of March 31, 2009.





We had
$21,436 of net cash used in operating activities for the three months ended
March 31, 2009, which included a net loss of $37,707, an
increase in accounts payable of $2,677, depreciation expense of $382
and a decrease in accrued liabilities of $13,212.








We had
$15,720 of net cash provided by financing activities for the three months ended
March 31, 2009, which was due to $15,390 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 and
a $330 bank overdraft.





Our
business operations to date have been minimal, and until such time as we are
able to drill and develop SMI 138 or WC 629 and/or develop the geothermal
opportunities available to the Company, we anticipate such business operations
remaining that way.





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 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.


-7-


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):





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.





If we are
unable to raise additional funding, we will be unable to participate in the
drilling operations for SMI 138 and WC 629 and we might lose the right to earn
an interest in WC 629 or dilute our position in SMI 138. 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 implement our corporate
plan.


-8-


We do not
currently have any commitments or identified sources of additional capital from
third parties or from our officers, directors or majority
shareholders.   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.





SHAREHOLDERS
WHO HOLD UNREGISTERED SHARES OF COMMON STOCK COULD BE SUBJECT TO RESALE
RESTRICTIONS PURSUANT TO RULE 144, DUE TO FINRA OR THE SEC STILL CONSIDERING THE
COMPANY TO BE A “SHELL COMPANY”.





Whilst
the Company has taken the position that it is not a “shell company”, as outlined
in a Form 8-K filing made by the Company in January 2009, FINRA or the SEC could
put restrictions on the resale of unregistered shares of our common
stock.





WE
CURRENTLY HAVE NEGATIVE WORKING CAPITAL.





As stated
above, we currently anticipate that we will be funded by our former officer and
Director, Frank Jacobs, moving forward, other than in connection with
exploration investment, 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.





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.


-9-


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.





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.


-10-


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.


-11-


Risks Relating To The
Company's Securities





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
$86,770 and had an accumulated deficit of $324,691 as of March 31, 2009, 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 May 14, 2009, 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.


-12-


FRANK
A. JACOBS, OUR FORMER CHIEF EXECUTIVE OFFICER AND DIRECTOR, BENEFICIALLY OWNS AN
AGGREGATE OF 37% 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 4,310,000 shares or approximately 37% 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 significant 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.





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.


-13-


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





None.





ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.





None.





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





None.





ITEM 5. OTHER
INFORMATION





None.





ITEM 6.
EXHIBITS





Exhibit Number
                    Description of ExhibitExhibit
      3.1(1)
                    Articles
      of IncorporationExhibit
      3.2(1)
                    BylawsExhibit
      10.1(1)
                    Acquisition
      & Participation Agreement with Polaris Holdings,
  Inc.Exhibit
      10.2(1)
                    $8,000
      Promissory Note with Capersia Pte. Ltd.Exhibit
      10.3(1)
                    Amendment
      to Acquisition & Participation AgreementExhibit
      10.4(2)
                    Assignment
      of Membership InterestsExhibit
      10.5(2)
                    Assignment
      of Production Payment
 -14-
 Exhibit
      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




*   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.


-15-


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:
      May 15, 2009
                By:/s/ James
      MosesJames
      MosesPresident
      (Principal Executive Officer)And
      Principal Financial
Officer


-16-