UNITED STATES


SECURITIESANDEXCHANGE COMMISSION





Washington,D.C.20549





FORM 10-QSB





xQUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period
endedMay 31, 2008





oTRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE EXCHANGE ACT





For the transition period from
_________________to_________________





Commission file
number    000-52309





Gulf Western Petroleum
Corporation





(Exact name of small business issuer as
specified in its charter)








Nevada
            
            98-0489324(State or other jurisdiction of
      incorporation or organization)
            
            (I.R.S. Employer Identification
      No.)








4801 Woodway Drive, Suite
306W


Houston,Texas77056





(Address of principal executive
offices)





(713)355-7001





(Issuer's telephone
number)





(Former name, former address and former
fiscal year, if changed since last report)





Check whether the issuer: (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.      YesxNoo













APPLICABLE ONLY TO CORPORATE
ISSUERS





Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act) Yeso;   Nox





The number of shares outstanding of the
issuer’s common equity as of(July 14, 2008was57,853,107)shares of common stock, par value
$0.001.





Transitional Small Business Disclosure
Format (Check one):      YesoNox








PART I – Financial
Information





Item 1.
            Financial
      Statements





Our consolidated financial statements
are stated in United States Dollars (US$) and are prepared in
accordance with United States Generally Accepted Accounting
Principles.











GULFWESTERN PETROLEUM
CORPORATION


CONSOLIDATED BALANCE
SHEETS


(Unaudited)




May 31,
              2008
            
            
            August 31,
              2007ASSETSCurrent
    assetsCash
            
            $
            14,160
            
            
            $
            1,925Accounts receivable
      -  gas sales
            
            
            218,900
            
            
            
            -Accounts receivable – joint
      interest
            
            
            -
            
            
            
            198,106Accounts receivable – related
      party
            
            
            -
            
            
            
            11,488Deferred financing costs, net of
      amortization of $253,633, and $0,
      respectively
            
            
            98,367
            
            
            
            -Other current
      assets
            
            
            1,200
            
            
            
            -Total current
      assets
            
            
            332,627
            
            
            
            211,519Deferred financing costs, net of
      amortizationof
      $63,138 and $7,015, respectively
            
            
            -
            
            
            
            56,123Accrued
      receivable
            
            
            198,073
            
            
            
            -Office equipment, net of
      depreciation of $12,819and $6,507,respectively
            
            
            17,932
            
            
            
            13,185Oil and gas properties, full cost
      method:Properties subject to
      amortization, net of amortization of$226,469and $0,
      respectively
            
            
            5,140,626
            
            
            
            1,090,988Properties not subject to
      amortization
            
            
            7,486,443
            
            
            
            10,642,207Total
assets
            
            $
            13,175,701
            
            
            $
            12,014,022LIABILITIESANDSTOCKHOLDERS’
      EQUITYCurrent
      liabilitiesAccounts
      payable
            
            $
            351,890
            
            
            $
            1,065,092Accounts payable – related
      parties
            
            
            689,108
            
            
            
            677,402Advances from
      stockholders
            
            
            180,996
            
            
            
            120,000Accrued
      interest
            
            
            57,890
            
            
            
            15,041Accrued interest – convertible
      note related party
            
            
            116,712
            
            
            
            116,712Convertible notes payable, net of
      unamortized debt discount of $430,475and $11,290,
      respectively
            
            
            3,294,525
            
            
            
            238,710Note payable, net of unamortized
      debt discount of 89,650 and $-0-, respectively
            
            
            410,350
            
            
            
            -Stock
    payable
            
            
            150,000
            
            
            
            100,000Total current
      liabilities
            
            
            5,251,471
            
            
            
            2,332,957Convertible note – related
      party
            
            
            2,000,000
            
            
            
            2,000,000Convertible notes payable, net of
      unamortized debt discount of $-0- and $17,536,
      respectively
            
            
            -
            
            
            
            482,464Asset retirement
      obligation
            
            
            52,535
            
            
            
            50,949Total
      liabilities
            
            
            7,304,006
            
            
            
            4,866,370STOCKHOLDERS’
      EQUITYCommon shares, $0.001 par
      value,1.2 billion shares authorized,57,853,107and 53,489,662 shares issued and
      outstanding, respectively
            
            
            57,853
            
            
            
            53,490Additional paid-in
      capital
            
            
            13,884,430
            
            
            
            10,911,412Deficit
      accumulated during development stage
            
            
            (3,817,250
            )
            
            
            (3,817,250
            )Accumulated deficit
            
            
            (4,253,338
            )
            
            
            -Total stockholders’
      equity
            
            
            5,871,695
            
            
            
            7,147,652Total liabilities and
      stockholders’ equity
            
            $
            13,175,701
            
            
            $
            12,014,022





The accompanying notes are an integral
part of these consolidated financial statements.











GULF
WESTERN PETROLEUM CORPORATION


CONSOLIDATED
STATEMENTS OF OPERATIONS


For
the Three and Nine Months Ended May 31, 2008 and May 31, 2007


(Unaudited)





Three
      Months
            
            
            Three
      Months
            
            
            Nine
      Months
            
            
            Nine
      MonthsEnded
            
            
            Ended
            
            
            Ended
            
            
            EndedMay
      31,
            
            
            May
      31,
            
            
            May
      31,
            
            
            May
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007Oil and gas
      revenue
            
            $
            331,271
            
            
            $
            -
            
            
            $
            620,251
            
            
            $
            -Operating
      expenses:Production
      expenses
            
            
            76,633
            
            
            
            -
            
            
            
            143,081
            
            
            
            -Depletion, depreciation and
      amortization
            
            
            124,337
            
            
            
            1,494
            
            
            
            232,781
            
            
            
            3,663General &
      administrative
            
            
            410,414
            
            
            
            990,850
            
            
            
            2,616,160
            
            
            
            1,781,543Total operating
      expenses
            
            
            611,384
            
            
            
            992,344
            
            
            
            2,992,022
            
            
            
            1,785,206Operating
      loss
            
            
            (280,113
            )
            
            
            (992,344
            )
            
            
            (2,371,771
            )
            
            
            (1,785,206
            )Other
      expenses and (income):Interest
    income
            
            
            -
            
            
            
            -
            
            
            
            (738
            )
            
            
            -Gain on extinguishment of
      debt
            
            
            -
            
            
            
            -
            
            
            
            (150,000
            )
            
            
            -Interest
      expense
            
            
            703,865
            
            
            
            50,413
            
            
            
            2,032,305
            
            
            
            566,416Foreign currency exchange
      gain
            
            
            -
            
            
            
            14,816
            
            
            
            -
            
            
            
            509Total other
      expense
            
            
            703,865
            
            
            
            65,229
            
            
            
            1,881,567
            
            
            
            566,925Net
      loss
            
            $
            (983,978
            )
            
            $
            (1,057,573
            )
            
            $
            (4,253,338
            )
            
            $
            (2,352,131
            )Net
      loss per share:Basic and
      diluted
            
            
            (0.02
            )
            
            
            (0.02
            )
            
            
            (0.07
            )
            
            
            (0.06
            )Weighted
      average shares outstanding:Basis and
      diluted
            
            
            56,963,508
            
            
            
            49,631,782
            
            
            
            56,803,710
            
            
            
            39,085,277





The accompanying notes are an integral
part of these consolidated financial statements.











GULFWESTERN PETROLEUM
CORPORATION


CONSOLIDATED STATEMENTS OFCASHFLOW


For the Nine Months EndedMay 31, 2008andMay 31, 2007


(Unaudited)




NineMonths
              Ended
              May 31,2008
            
            NineMonths
              Ended
              May 31, 2007CASHFLOWS FROM OPERATING
      ACTIVITIESNet loss
            
            $
            (4,253,338
            )
            
            $
            (2,352,131
            )Adjustments to reconcile net loss
      to cash used in operating activities:Depletion, depreciation, and
      amortization
            
            
            232,781
            
            
            
            3,663Foreign currency exchange (gain)
      loss
            
            
            -
            
            
            
            509Gain on extinguishment of
      debt
            
            
            (150,000
            )
            
            
            -Amortization of debt
      discount
            
            
            1,173,225
            
            
            
            75,390Amortization of deferred financing
      costs
            
            
            309,856
            
            
            
            -Bonus shares on notes
      payable
            
            
            -
            
            
            
            400,000Issuance of shares for services
      and notes payable
            
            
            20,887
            
            
            
            360,000Amortization of stock option
      expense
            
            
            783,469
            
            
            
            357,822Accretion
      expense
            
            
            1,587
            
            
            
            -Net change
    in:Bank
    overdraft
            
            
            -
            
            
            
            1,400Accounts receivable –gas sales
            
            
            (218,900
            )
            
            
            -Accounts receivable – joint
      interest
            
            
            33
            
            
            
            -Accounts receivable – related
      parties
            
            
            11,488
            
            
            
            (11,488
            )Other
assets
            
            
            (1,200
            )
            
            
            -Accounts
      payable
            
            
            (713,302
            )
            
            
            (502,073
            )Accounts payable - related
      parties
            
            
            11,706
            
            
            
            401,456Accrued
      interest
            
            
            42,849
            
            
            
            61,536Accrued interest – related
      parties
            
            
            -
            
            
            
            -CASHFLOWS USED IN OPERATING
      ACTIVITIES
            
            
            (2,748,859
            )
            
            
            (1,203,916
            )CASHFLOWS FROM INVESTING
      ACTIVITIESPurchase of property and
      equipment
            
            
            (11,059
            )
            
            
            (12,320
            )Investment in oil and gas
      properties
            
            
            (1,120,343
            )
            
            
            (3,539,770
            )CASHFLOWS USED IN INVESTING
      ACTIVITIES
            
            
            (1,131,402
            )
            
            
            (3,552,090
            )CASHFLOWS FROM FINANCING
      ACTIVITIESStock subscription advances,
      net
            
            
            50,000
            
            
            
            825,000Common stock issued in private
      placements
            
            
            -
            
            
            
            3,811,749Advancesfrom stockholders
            
            
            60,996
            
            
            
            119,176Proceeds from private
      placements
            
            
            677,315
            
            
            
            -Proceeds from notes
      payable
            
            
            385,185
            
            
            
            353,030Proceeds from convertible notes
      payable
            
            
            2,969,000
            
            
            
            -Proceeds from convertible
      debentures
            
            
            -
            
            
            
            -Repayment of notes
      payable
            
            
            -
            
            
            
            (665,530
            )Repayment of convertible notes
      payable
            
            
            (250,000
            )
            
            
            -CASHFLOWS PROVIDED BY FINANCING
      ACTIVITIES
            
            
            3,892,496
            
            
            
            4,443,425




NET INCREASE (DECREASE) INCASH
            
            $
            12,235
            
            
            $
            (312,581
            )Cash, beginning of
      period
            
            
            1,925
            
            
            
            312,581Cash, end of
      period
            
            $
            14,160
            
            
            $
            -Cash paid
    for:Interest
            
            $
            350,424
            
            
            $
            103,578Interest – related
      parties
            
            $
            150,137
            
            
            $
            1,302Income
taxes
            
            $
            -
            
            
            $
            -Supplemental Schedule of Non-cash
      Investing and Financing Activities:Common shares issued to acquire
      oil and gas properties
            
            
            -
            
            
            
            4,499,549Convertible note to related party
      for acquisition of oil and gas interests
            
            
            -
            
            
            
            2,000,000Rescission of assignment of oil
      and gas properties from parent
            
            
            
            
            
            
            (460,231
            )Issuance of bonus shares on
      notes
            
            
            -
            
            
            
            200,000Discount on senior secured
      convertible notes for beneficial conversion feature of notes, and relative
      fair value of stock and warrants issued in connection with
      notes
            
            
            1,399,710
            
            
            
            -Issuance of common shares to
      placement agent in connection with senior secured convertible
      notes
            
            
            96,000
            
            
            
            -Issuance of common shares for
      convertible debentures
            
            
            -
            
            
            
            78,477Asset retirement obligation
      incurred
            
            
            -
            
            
            
            39,700Discount on convertible note
      payable for relative fair value of stock and warrants issued in connection
      with note
            
            
            114,815
            
            
            
            -




The accompanying notes are an integral
part of these consolidated financial statements.









GULFWESTERN PETROLEUM
CORPORATION


CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY


For the Period fromAugust 31, 2007


ThroughMay 31, 2008


(Unaudited)




Common
              Shares
            
            
            Par
              Amount
            
            
            Additional
              Paid-In-Capital
            
            
            Accumulated
              Deficit
            
            
            TotalBalance,August 31,
    2007
            
            
            53,489,662
            
            
            $
            53,490
            
            
            $
            10,911,412
            
            
            $
            (3,817,250
            )
            
            $
            7,147,652Intrinsic value of beneficial
      conversion feature of, and relative fair value of common shares and
      warrants issued in conjunction with convertible secured notes issued onSeptember 10,
      2007
            
            
            1,500,000
            
            
            
            1,500
            
            
            
            1,398,210
            
            
            
            -
            
            
            
            1,399,710Issuance of common shares for
      services-September 10, 2007($0.32 per
      share)
            
            
            300,000
            
            
            
            300
            
            
            
            95,700
            
            
            
            -
            
            
            
            96,000-September 12, 2007($0.32 per
      share)
            
            
            51,725
            
            
            
            52
            
            
            
            16,500
            
            
            
            -
            
            
            
            16,552Issuance of common shares under
      terms of note payable,September 14, 2007($0.37 per
      share)
            
            
            11,720
            
            
            
            11
            
            
            
            4,324
            
            
            
            -
            
            
            
            4,335Issuance of units for cash in
      private placement,September 20, 2007($0.40 per
      unit)
            
            
            1,250,000
            
            
            
            1,250
            
            
            
            498,750
            
            
            
            -
            
            
            
            500,000Amortization of stock
      options
            
            
            -
            
            
            
            -
            
            
            
            380,512
            
            
            
            -
            
            
            
            380,512Net loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,888,787
            )
            
            
            (1,888,787
            )Balance,November 30,
      2007
            
            
            56,603,107
            
            
            $
            56,603
            
            
            $
            13,305,408
            
            
            $
            (5,706,037
            )
            
            $
            7,655,974Amortization of stock
      options
            
            
            -
            
            
            
            -
            
            
            
            380,518
            
            
            
            -
            
            
            
            380,518Net loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,380,573
            )
            
            
            (1,380,573
            )Balance,February 29,
      2008
            
            
            56,603,107
            
            
            $
            56,603
            
            
            $
            13,685,926
            
            
            $
            (7,086,610
            )
            
            $
            6,655,919Relative fair value of common
      shares issued under terms of note payable, and fair value of Class D
      Warrants canceled in conjunction with loan,March 12,
    2008
            
            
            1,000,000
            
            
            
            1,000
            
            
            
            113,815
            
            
            
            -
            
            
            
            114,815Amortization of stock
      options
            
            
            -
            
            
            
            -
            
            
            
            22,439
            
            
            
            -
            
            
            
            22,439Issuance of units for cash in
      private placement,March 17, 2008($0.25per unit)
            
            
            250,000
            
            
            
            250
            
            
            
            62,250
            
            
            
            -
            
            
            
            62,500Net loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (983,978
            )
            
            
            (983,978
            )Balance,May 31,
2008
            
            
            57,853,107
            
            
            $
            57,853
            
            
            $
            13,884,430
            
            
            $
            (8,070,588
            )
            
            $
            5,871,695








The accompanying notes are an integral
part of these consolidated financial statements.











GULFWESTERN PETROLEUM
CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)








NOTE 1 – ORGANIZATIONANDBUSINESS OPERATIONS





Gulf Western Petroleum Corporation
(“Gulf Western”) was incorporated onFebruary 21, 2006in the State ofNevadaas “Georgia Exploration,
Inc.”.   The name was changed to Gulf Western onMarch 8, 2007.  Gulf Western is engaged in
the acquisition, exploration and development of oil and natural gas reserves in
theUnited
States.  Gulf
Western holds oil and gas lease interests inTexas,KansasandKentucky.  Gulf Western holds
interests in eleven producing wells located in Dewitt and Lavaca County, Texas;
it holds proved undeveloped reserves in Wharton County, Texas; and holds oil and
gas lease interests in approximately 8,000 acres in Elk County, Kansas that
comprise a supply and infrastructure development program in Southeast
Kansas.   Gulf Western also holds oil and gas lease interests in
the State ofKentuckythat are exploratory in
nature.





OnJanuary 3, 2007, Gulf Western and Wharton Resources
Corp. (“Wharton” or “Wharton Corp.”) consummated a merger that was effected
through a reverse merger with the oil and gas lease interests and reserves held
by Wharton becoming the primary core assets of Gulf
Western.   Concurrent with the merger, Wharton’s executive
management and directors assumed control and responsibility for Gulf Western’s
activities and its strategic direction.   The merger effected a
change in control of Gulf Western and immediately following the merger,
Wharton’s former stockholders held approximately 71.4% of Gulf Western’s issued
and outstanding common shares.





For Securities and Exchange Commission
("SEC") reporting purposes, the merger between Gulf Western and Wharton was
treated as a reverse merger with Wharton being the “accounting acquirer” and,
accordingly, it assumed Gulf Western’s reporting obligations with the
SEC.   In accordance with SEC requirements, the historical
consolidated financial statements and related disclosures presented herein for
the period prior to the date of merger (i.e.,January 3, 2007) are those of Wharton since its
inception onJanuary 20,
2005.   In
conjunction with the merger, each outstanding share of Wharton was converted
into 25,000 common shares in Gulf Western with a total of 30,000,000 common
shares issued to the former Wharton stockholders.  Of the 27,645,000
shares of Gulf Western outstanding at the time of the merger, 15,645,000 shares
of Gulf Western’s outstanding common stock were cancelled concurrent with the
closing of the merger.   Immediately following the merger, a
total of 42,000,000 shares of common stock were issued and
outstanding.  Wharton assumed the net liabilities of Gulf Western
totaling$66,631which were recorded as an expense on
the date of merger.





The accompanying unaudited interim
consolidated financial statements of Gulf Western have been prepared in
accordance with accounting principles generally accepted in the United States of
America and the rules of the SEC, and should be read in conjunction with the
audited consolidated financial statements and notes thereto contained in Gulf
Western’s Annual Report on Form 10-KSB/A filed with the SEC onApril 21, 2008.   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 consolidated financial
statements which would substantially duplicate the disclosures contained in the
audited consolidated financial statements for the most recent fiscal year endingAugust 31, 2007as reported in its Form 10-KSB/A have
been omitted.





NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES





Basis of
presentation





Gulf Western’s consolidated balance
sheets and related consolidated statements of operations, stockholders’ equity
and cash flows for the periods from inception throughMay 31, 2008are presented in U.S. dollars and have
been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and the rules of the Securities and Exchange
Commission.





Upon Gulf Western’s commencement of oil
and gas revenues in December 2007 from its Shamrock and Brushy Creek Projects
located inTexas, it exited from the development stage
during the second fiscal quarter endedFebruary 29, 2008. Accordingly, Gulf Western no longer
prepares its consolidated financial statements in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by
Development Stage Enterprises.











Use of estimates





The preparation of financial statements
in conformity with generally accepted accounting principles in theUnited Statesrequires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods.  Actual results could materially differ from those
estimates.





Management believes that it is
reasonably possible the following material estimates affecting the consolidated
financial statements could significantly change in the coming
year:  (1) estimates of proved oil and gas reserves, and (2) forecast
forward price curves for natural gas and crude oil.   The oil and
gas industry in theUnited
Stateshas historically
experienced substantial commodity price volatility, and such volatility is
expected to continue in the future.   Commodity prices affect the
level of reserves that are considered commercially recoverable; significantly
influence Gulf Western’s current and future expected cash flows; and impact the
valuation of proved reserves.





Accounts receivable





Gulf Western routinely assesses the
recoverability of all material trade, joint interest and other receivables. Gulf
Western accrues a reserve on a receivable when, based on the judgment of
management, it is probable that a receivable will not be collected and the
amount of any reserve may be reasonably estimated. Actual write-offs may exceed
the recorded allowance. No allowance for doubtful accounts was considered
necessary atMay 31,
2008or atAugust 31, 2007.





Oil and gas
properties





Gulf Western follows the full cost
method of accounting for its oil and natural gas properties, whereby all costs
incurred in connection with the acquisition, exploration for and development of
oil and natural gas reserves are capitalized.  Such costs include
lease acquisition, geological and geophysical activities, rentals on
non-producing leases, drilling, completing and equipping of oil and gas wells,
and asset retirement costs. Disposition of oil and gas properties are accounted
for as a reduction of capitalized costs, with no gain or loss recognized unless
such adjustment would significantly alter the relationship between capital costs
and proved reserves of oil and gas, in which case the gain or loss is recognized
to income.





Depletion and depreciation of proved oil
and gas properties is calculated on the units-of-production method based upon
estimates of proved reserves.  Such calculations include the estimated
future costs to developed proved reserves.  Oil and gas reserves are
converted to a common unit of measure based on the energy content of 6 Mcf of
gas to one barrel of oil. Costs of undeveloped properties are not included in
the costs subject to amortization. These costs are assessed periodically for
impairment.





Ceiling test





In applying the full cost method, Gulf
Western performs an impairment test (ceiling test) at each reporting date,
whereby the carrying value of property and equipment is compared to the
estimated present value of its proved reserves discounted at a 10-percent
interest rate of future net revenues based on current economic and operating
conditions, plus the cost of properties not being amortized plus the lower of
cost or fair market value of unproved properties included in costs being
amortized, less the income tax effects related to book and tax basis differences
of the properties.  As ofMay 31, 2008no impairment of oil and gas properties
was determined to be required.





Oil and gas properties, amortization of
capital investment





Gulf Western holds oil and gas interests
inTexas,KansasandKentuckypursuant to lease
agreements.  Gulf Western has interests in eleven wells that had
production during the nine months endingMay 31, 2008.  These wells are located inDewitt County,Texas(Shamrock Project) andLavaca County,Texas(Brushy Creek
Project).   Gulf Western amortizes capital costs incurred in its
acquisition, geological and geophysical, drilling and development activities on
a unit-of-production basis.  The unit rate is derived from actual
capital expenditures incurred plus future estimated development costs for proved
reserves, divided by total estimated proved recoverable
reserves.   The amortization rate is applied to actual quantities
of production sold from Gulf Western’s interests in the
wells.   Reserve quantities used in the derivation of the
amortization rate are based on estimated proved recoverable reserves as
developed by third party petroleum engineers engaged by Gulf Western to conduct
periodic evaluations of its proved oil and gas reserve
quantities.  The periodic reserve evaluations of Gulf Western’s
estimated proved oil and gas reserves are commissioned by Gulf Western at least
annually, or more frequently if technical or commercial results warrant an
interim update to the reserve estimates.  As estimated proved
recoverable reserves are assessed, changes in estimated total proved recoverable
reserves result in an adjustment to the amortize rate used by Gulf Western to
amortize its full cost pool capital investments over actual
production.











The amortization of the oil and gas
properties not classified as proved begins when the oil and gas properties
become proved, or their values become impaired. Gulf Western assesses the
realizability of its properties not characterized as proved on at least an
annual basis or when there is or has been an indication that an impairment in
value may have occurred.  The impairment of properties not classified
as proved is assessed based on management’s intention with regard to future
exploration and development of individually significant properties, and Gulf
Western’s ability to source capital funding required to finance such exploration
and development.   If the result of an assessment indicates that
a property is impaired, the amount of the impairment is added to the capitalized
costs in its full cost pool and they are amortized over proved
reserves.





Debt





Gulf Western accounts for debt at fair
value and recognizes interest expense for accrued interest payable under the
terms of the debt instrument. Principal and interest payments due within one
year are classified as current, whereas principal and interest payments for
periods beyond one year are classified as long term. Beneficial conversion
features of debt are valued and the related amounts recorded as discounts on the
debt. Discounts are amortized to interest expense using the effective interest
method over the term of the debt. Any unamortized discount upon settlement or
conversion of debt is recognized immediately as interest
expense.





Asset retirement
obligations





In accordance with SFAS No. 143,
“Accounting for Asset Retirement Obligations” Gulf Western records the fair
value of a liability for asset retirement obligations (“ARO”) in the period in which an obligation
is incurred and a corresponding increase in the carrying amount of the related
long-lived asset. The present value of the estimated asset retirement cost is
capitalized as part of the carrying amount of the long-lived asset and is
depreciated over the useful life of the asset.  The settlement date
fair value is discounted at Gulf Western’s credit adjusted risk-free rate in
determining the abandonment liability.  The abandonment liability is
accreted with the passage of time to its expected settlement fair
value.  AtMay
31, 2008, Gulf Western has
recorded an asset retirement obligation of $52,536, and accretion expense
associated with the obligation totaled $534 and $1,587 for the three and nine
months ending, respectively.   No liabilities were settled during
the period.





Revenue and cost
recognition





Gulf Western uses the sales method to
account for sales of crude oil and natural gas.  Under this method,
revenues are recognized based on actual volumes of oil and gas sold to
purchasers. The volumes sold may differ from the volumes to which Gulf Western
is entitled based on our interest in the properties. These differences create
imbalances which are recognized as a liability only when the imbalance exceeds
the estimate of remaining reserves. Costs associated with production are
expensed in the period incurred.





NOTE 3 – GOING
CONCERN





Gulf Western has incurred operating
losses since its inception and has a working capital deficit of $4,918,844 atMay 31, 2008, and has principal repayments totaling
$3,700,000 due on September 10, 2008 related to the convertible secured
notes issued onSeptember
10, 2007.These factors raise substantial doubt
about Gulf Western’s ability to continue as a going concern.





Gulf Western’s ability to achieve and
maintain profitability and sustainable positive cash flows is dependent on its
ability to source sufficient financing to fund the acquisition, drilling and
development of existing and future oil and gas interests.   To
date, Gulf Western has raised a combination of secured and unsecured debt and
equity financing to fund the development of its projects.  Management
is seeking financing that it believes would allow Gulf Western to repay its
current debt; sustain commercial operations and to fund capital investments
necessary to at least maintain its existing oil and natural gas reserve
base.  There are no assurances that Gulf Western will be able to
obtain additional financing from investors or private lenders and, if available,
such financing may not be on commercial terms acceptable to Gulf Western or its
stakeholders.  The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.











NOTE 4 - RELATED PARTY
TRANSACTIONS





Mound Branch Project,Elk County,Kansas




Gulf
Western issued 4,039,053 common shares to Orbit Energy, LLC (“Orbit”) and a
$2,000,000 three-year unsecured note for the January 30, 2007 purchase of the
Mound Branch Project. Pursuant to the purchase and sale agreement, the issuance
of the common shares to Orbit for the acquisition were subject to ratable
surrender if Orbit did not deliver an independent report to Gulf Western
assessing the fair value of the purchased assets to be at least equal to the
$6.8 million purchase price paid to Orbit.   The purchase and
sale agreement provided for Orbit to deliver an independent valuation report to
Gulf Western no later than January 30, 2008, and any surrendered shares were to
be cancelled and returned to Gulf Western’s treasury.
 
 On
January 30, 2008, Gulf Western agreed to extend Orbit’s delivery of an
independent valuation report for three months until April 30,
2008.  In connection with the extension, Orbit agreed to defer the
quarterly interest payment due on January 30, 2008 under the $2.0 million
convertible note until April 30, 2008. As of July 15, 2008, Orbit has not
complied with the terms and conditions of the Mound Branch purchase and sale
agreement requiring the delivery of a valuation report confirming the fair value
of Mound Branch acquisition. No further extensions for delivery of the valuation
report have been granted by Gulf Western, and no further interest payments have
been made to Orbit on the $2.0 million unsecured note.  Until Orbit
complies with the contract provisions, it is management’s intention not to remit
any further interest payments to Orbit on the note.  Gulf Western may
be required to commission a third party valuation of the Mound Branch
acquisition, if Orbit does not comply with the provisions of the purchase and
sale agreement.
 
 At May
31, 2008 accrued interest on the Orbit unsecured note totals
$116,712.


Advances from
Stockholders




Periodically, principal shareholders who
are also officers and directors of Gulf Western make loans to the Company to
fund operating cash equirements.   Advances from shareholders
totaling $120,000 atAugust
31, 2007were repaid in
November 2007.  AtMay 31, 2008advances from shareholders total
$180,996.




Related Party
Payables




The Company has various payables to
officers and the companies of the officers. These amounts are reported in the
balance sheet as accounts payable - related party.




NOTE 5 – OILANDGASPROPERTIES





All of Gulf Western’s oil and gas
properties are located in theUnited States.  Gulf Western holds
interests in eleven wells that had production during the nine months endingMay 31, 2008.





Oil and gas property costs classified as
“Properties subject to amortization” atMay 31, 2008are associated with Gulf Western’s
capital investments in the Oakcrest prospect located in Wharton County, Texas;
its investments in the Shamrock and Brushy Creek projects in Dewitt County and
Lavaca County, Texas; and its investments in the Baxter Bledsoe and Bell
prospects in Clay County and Bell County, Kentucky.   Gulf
Western began amortizing capital costs during the second fiscal quarter endingFebruary 29, 2008upon achieving commercial production
from its oil and gas investments in the Shamrock and Brushy Creek
projects.   Oil and gas property costs classified as “Properties
subject to amortization” are amortized on a unit-of-production basis over the
estimated future recoverable proved reserves under the full cost method of
accounting.  Amortization of $121,933 and $226,469 were recorded for
the three-month and nine-month periods endingMay 31, 2008.





Oil and gas property costs excluded from
amortization atMay 31,
2008, and identified on the
consolidated balance sheet as “Properties not subject to amortization”, are as
follows:





Fiscal Year
      Incurred
            
            Acquisition
              Costs
            
            
            Exploration
              Costs
            
            
            TotalYear endingAugust 31,2006
            
            $
            12,000
            
            
            $
            -
            
            
            $
            12,000Year endingAugust 31,2007
            
            
            4,599,247
            
            
            
            2,710,633
            
            
            
            7,309,880Nine months endingMay 31,2008
            
            
            -
            
            
            
            164,563
            
            
            
            164,563Total
            
            $
            4,611,247
            
            
            $
            2,875,196
            
            
            $
            7,486,443











All oil and gas property costs
identified in the above table are associated with Gulf Western’s investment in
the Mound Branch project acquired from Orbit which is located inElk County,Kansas.





Oakcrest Prospect Amerpro Participation
Agreement





On June
10, 2008, Gulf Western entered into a Participation and Exclusivity Agreement
(“Agreement”) with Amerpro Industries US Ltd. (“Amerpro”) pursuant to which,
among other things, Gulf Western granted Amerpro the exclusive right to
participate in the initial four wells drilled on Gulf Western’s Oakcrest oil and
gas lease acreage held in Wharton Coutny, Texas, and granted Amerpro the option
to participate in additional wells in the Oakcrest prospect upon exercise of
their option.





Under the
terms of the Agreement, Amerpro is responsible for 100% of the costs to drill,
complete and connect each commercial well, and will earn an 86.175% working
interest in the wells and surrounding acreage with a 62.046% net revenue
interest in and to each commercial well.    Gulf Western
retains a 9.575% carried working interest in the Oakcrest prospect wells, and
upon Amerpro’s 110% payout of each commercial well, Gulf Western is entitled to
an additional 15.0% “back-in” to each well (10.8% net revenue
interest).  The Agreement provides for closing on or before August 1,
2008, or such other date as may be agreed by Gulf Western and
Amerpro.  The Agreement is subject to certain conditions including the
completion of due diligence and TSX Venture Exchange approval.





The
Agreement provides for Amerpro to pay $1,200,000 as a prospect generation
fee to Gulf Western, of which $100,000 has been received by Gulf
Western.   The remaining $1,100,000 is due on closing. Amerpro
also has the option to buy the right to participate in additional wells beyond
the four initial prospect wells by the remittance of an option fee of $3,700,000
due on or prior to closing.  If the option is exercised, the option
fee is payable directly to Metage Funds Limited and NCIM Limited to satisfy Gulf
Western’s indebtedness to them under the one-year convertible secured notes that
are secured by substantially all of Gulf Western’s assets, and
are scheduled to mature on September 10, 2008.  Prior to Closing on
August 1, 2008, Amerpro may terminate the Agreement and forfeit their initial
$100,000.





Should
the Amerpro Agreement close, the $1,200,000 prospect generation fee and the
$3,700,000 related to its option on the remaining wells will be accounted for in
accordance with the full cost method of accounting whereby proceeds from the
disposition of oil and gas properties are treated as a reduction to capitalized
cost with no gain or loss recognized unless the adjustment would significantly
alter the relationship between capitalized costs and proved reserves, in which
case the gain or loss will be recognized to income.





NOTE 6 – SECURED CONVERTIBLE NOTES
PAYABLE





Senior Secured Convertible Notes
Payable




OnSeptember 10, 2007, Gulf Western entered into a Security
Purchase Agreement (the “SPA”) with two lenders under which Gulf
Western borrowed a total of $3,700,000 under Senior Secured Convertible Notes
(the “Convertible Notes”) with Metage Funds Limited (“Metage”) and NCIM Limited
(“NCIM”).Gulf Western borrowed $3,200,000 from
Metage and $500,000 from NCIM.Pursuant to theSPA, Gulf Western issued 1,500,000 common
shares and issued 3,461,538 warrants to purchase shares of common stock in Gulf
Western at an exercise price of $0.26 per share for a period of five
years.The Convertible Notes and related
interestare convertible into common shares of
Gulf Western ata price of $0.39 per share at or before
maturity.TheConvertible Notes bear interest at 15%
per annum, and mature onSeptember 10, 2008.Under the terms of the
Convertible Notes interest for the first six months was due onMarch 10, 2008, and thereafter Gulf Western is
remitting interest to Metage and NCIM on the Convertible Notes on a monthly
basis.











The total$3,700,000principal balanceisdue at maturityand theConvertible Notes may be prepaid at any
time after the six-month anniversary of the Convertible Notes with a 2.5%
prepayment penalty. Gulf Western received net proceeds of $2,944,000 (after
$256,000 of placement fees) and the exchange of the $500,000 NCIM Convertible
Secured Note issued onJuly
3, 2007for $500,000 of the
Convertible Notes.Pursuant to the
Amerpro Participation Agreement executed onJune 10, 2008between Gulf Western and Amerpro,
should Amerpro exercise its right to participate in Oakcrest prospect wells
beyond the initial four wells, the $3,700,000 due Gulf Western is to be remitted
directly to Metage and NCIM by Amerpro in order to satisfy the principal balance
on Convertible Notes dueSeptember 10, 2008.




In conjunction with theSPA, Gulf Western entered into a
registration rights agreement (the “Registration Rights Agreement”) with the
lenders pursuant to which Gulf Western was required to: (i) file a registration
statement with the Securities and Exchange Commission with respect to the Common
Stock issued under theSPAand the Common Stock issuable upon
exercise of the Warrants and conversion of the Senior Secured Convertible Notes
within 60 days afterSeptember 12, 2007; and to: (ii) cause such registration
statement to be declared effective under the Securities Act of 1933, as amended,
and the rules promulgated there under, not later than 150 days afterSeptember 12,
2007. If such registration
statement is not filed by the 60th day afterSeptember 12, 2007, (November 12, 2007), or the
registration statement is not declared effective on or prior to the 150th day
afterSeptember 12,
2007, liquidated damages in
the form of registration rights penalties, calculated based on a prescribed
formula in theSPA, in the maximum amount of
$150,000.




On April
8, 2008, in connection with the recently adopted reduced holding periods for
non-affiliates under Rule 144 under the Securities Act of 1933, as amended, Gulf
Western, Metage and NCIM executed a Termination of Registration Rights Agreement
which (i) terminated the registration rights agreement and (ii) waived, released
and discharged any further obligations under the registration rights agreement,
including the obligation on  the part of the Company to pay any
registration delay payments accrued or incurred
thereunder.  Accordingly, Gulf Western reversed its prior accrual for
the estimated liability for registration delay penalties as of February 29, 2008
and reflected the revision as a gain on debt extinguishment.  On April
14, 2008 Gulf Western filed an Application to Withdraw the Registration
Statement on Form SB-2, originally filed with the SEC on December 5, 2007.




Gulf Western evaluated the terms of the
Convertible Notes, the issuance of common stock and attached warrants in
accordance with EITF 98-5 and EITF 00-27, and concluded that the intrinsic value
of the conversion feature of the Convertible Notes represented a beneficial
conversion feature in the amount of $426,137. The relative fair value of the
warrants and common shares issued were $646,791 and $326,782, respectively as
derived through the Black-Scholes option pricing model.The total discount of
$1,399,710associated with the intrinsic value of
the beneficial conversion feature, and the relative fair value of the warrants
and stock is being amortized to interest expense using the effective interest
method over the twelve month term of the Convertible Notes.The total debt discount, including theestimatedregistration rights penalties, on the
issuance of the Convertible Notes was $1,549,710.




The principal assumptions used in the
Black-Scholes valuation model to determine the intrinsic value of the conversion
feature of the Convertible Notes and the relative fair value of the warrants and
common shares issued were: a risk-free interest rate of 4.0%; the current stock
price on the date of issuance of $0.32 per common share; the exercise price of
the warrants of $0.26 per share; expected warrant term of five years; conversion
price of $0.39 per common share, volatility of 121.16%; and a dividend yield of
0.0%.




The Convertible Notes are secured by a
lien on substantially all of the assets of the Gulf Western, including all of
the equity interests of Gulf Western’s subsidiaries and Gulf Western’s rights in
certain real property, pursuant to the terms of a Security Agreement and Pledge
Agreement entered into in connection with the closing of transactions under theSPA. In addition, Gulf Western Petroleum,
LP, Wharton Resources Corp. and Wharton Resources LLC, each a wholly-owned
subsidiary of Gulf Western, entered into a Guaranty with the Buyers, whereby
each of the subsidiaries guaranteed the payment and performance of all
obligations of Gulf Western under the Convertible Notes and terms of theSPA.Gulf Western Petroleum, LP also entered
into a Mortgage, Deed of Trust, Assignment of Production, Security Agreement,
Fixture Filing and Financing Statement with respect to certain properties inTexasandKansasto secure the obligations of Gulf
Western under theSPAand the Convertible
Notes.











In conjunction with the Convertible
Notes, Gulf Western issued 300,000 shares of common stock to a placement agent
valued at $96,000 ($0.32 per share) and cash fees totaling $256,000.A total of $352,000 was recorded as
deferred financing costs, and are being amortized using the effective interest
method over the one year life of the debt.During the three andninemonths endedMay 31, 2008, deferred financing costs of
$88,723and $253,633, respectively, were charged to interest
expense associated with the issuance of the Convertible Notes.If the Convertible Notes are converted
or repaid prior to the maturity date, any unamortized cost at the time of
conversion or repayment will be immediately recognized and charged to net
income.




Convertible Secured
Note




OnJuly 3, 2007, Gulf Western borrowed $500,000 under
an eighteen-month convertible secured note from NCIM with a maturity date ofJanuary 3, 2009.   Under the terms of
the convertible note, principal repayments were scheduled to commence in October
2007 at $33,333 per month and the note bore interest at a rate of 12.0% per
annum, payable quarterly.   The note provided the lender the
right to convert all or part of the outstanding balance into shares of common
stock at a conversion rate of $0.45 per share, and could be repaid by Gulf
Western at any time at 105% of the then outstanding principal and accrued
interest.  In conjunction with the Convertible Notes issuedSeptember 10,
2007, this note was
exchanged for the NCIM Convertible Note.




Short-Term Convertible
Note




OnSeptember 14, 2007, Gulf Western repaid in full $250,000
under a short term convertible note payable issued in June 2007 to a private
investor.  Gulf Western paid $6,329 in interest in connection with the
repayment of the note.




Orbit Energy, LLC Mound Branch
Convertible Note




As consideration to Orbit Energy, LLC
for Gulf Western’s purchase of its interests in the Mound Branch Project, Gulf
Western issued a thirty-six month $2.0 million unsecured convertible note datedJanuary 30,
2007with principal due at
maturity, bearing interest at 10.0% per annum due quarterly in arrears (the
“Orbit Note”).   Pursuant to the terms of the Orbit Note, after
the initial twelve months: a) Orbit has the ability to convert the outstanding
principal and interest balance into common shares at a conversion price of $1.00
per share, and b) Gulf Western may prepay all or a portion of the convertible
loan without penalty.   In the event of a change in control of
Gulf Western, the maturity of the unsecured Orbit Note is accelerated and $2.0
million and accrued interest becomes due.




OnJuly 3, 2007, Gulf Western and Orbit amended the
Orbit Note to provide that interest payable by Gulf Western for the first
quarter on the note was deferred until the interest due date for the second
quarter. Accrued interest throughOctober 31, 2007totaling $150,137 was paid by Gulf
Western to Orbit onNovember 20, 2007.   AtMay 31, 2008the outstanding principal under the
note is $2.0 million and accrued interest totals $116,712.


Loan
Agreement
  On March
12, 2008, Gulf Western entered into a twelve month loan agreement with a private
investor under which Gulf Western borrowed $500,000.  The loan bears
interest at a rate of 10% per annum, payable monthly 90 days in
arrears.   In connection with the loan agreement, Gulf Western
issued 1,000,000 shares of common stock to the lender as bonus shares for making
the loan.  At the request of the lender and concurrent with the loan,
Class D warrants for 1,000,000 common shares at $2.00 per share were
cancelled.  The cancelled warrants had been acquired by the lender in
a prior private equity placement with Gulf Western.
  The
relative fair value of the of the loan and common shares issued, and the fair
value of the Class D warrants cancelled were as follows:
 
 Securities
      Issued
              
              Fair ValueLoan
      principal
              
              $
              500,000Fair
      value of Class D warrants cancelled
              
              
              73,925Total
      consideration received
              
              $
              573,925Relative
      fair value of loan
              
              $
              385,185Relative
      fair value of common shares issued
              
              
              188,740Total
      relative fair value of loan and common shares issued
              
              $
              573,925
 
 
 The
common shares issued to the lender were valued at $0.25 per
shares.  The fair value of the Class D warrants cancelled was derived
through using the Black-Scholes valuation model on the date of cancellation. The
parameters used in the Black-Scholes valuation model were: a risk free rate of
1.72%; the stock price on the date of cancellation of $0.25 per common share;
the exercise price of $2.00 per share; expected term of 2.5 years; volatility of
123.21%; and a dividend yield of 0.0%.
  The debt
discount on the loan totals $114,816 and is being amortized over the twelve
month term of the loan using the effective interest method.  The total
debt discount amortization on the loan through May 31, 2008 is $25,165 with a
remaining unamortized debt discount of $89,650 at May 31, 2008.
 
 Interest
expense of $25,165 was recorded during the three months ended May 31, 2008
related to the amortization of the debt discount.







NOTE 7 – STOCKHOLDERS’
EQUITY





Issuance of Common
Shares and Warrants In Private Placement Offerings




On
September 20, 2007, Gulf Western completed a private placement transaction for
1,250,000 units at a price of $0.40 per unit for aggregate proceeds of $500,000.
Each unit consisted of one common share, one Class C Warrant and one Class D
Warrant.  Each Class C Warrant may be exercised at a price of $0.65
per share for a period of 3 years to acquire one additional share of common
stock of Gulf Western. Each Class D Warrant may be exercised at a price of $2.00
per share for a period of three years to acquire one additional share of common
stock.  The relative fair value of the common shares and the Class C
and Class D Warrants for the private placement transactions closed on September
20, 2007, was as follows:





Securities
      Issued
            
            Relative
              Fair ValueCommon Shares (1,250,000
shares)
            
            $
            265,918ClassCWarrants (1,250,000 sharesat $0.65 per share)
            
            
            145,384ClassDWarrants (1,250,000 sharesat $2.00 per share)
            
            
            88,698Total
    placement
            
            $
            500,000





The
relative fair value of the Class C and Class D Warrants issued in connection
with the units sold were estimated using the Black-Scholes valuation model. The
parameters used in the Black-Scholes valuation model were: a risk-free interest
rate of 4.19%; the current stock price on the date of issuance of $0.33 per
common share; the exercise price of the warrants of $0.65 and $2.00 per share,
respectively; expected terms of three years; volatility of 108%; and a dividend
yield of 0.0%.





OnMarch 17, 2008, Gulf Western completed a private
placement transaction for 250,000 units at a price of $0.25 per unit for
aggregate proceeds of $62,500.  Each unit consisted of one common
share, 1/2 of one Class E Warrant and 1/2 of one Class G
Warrant.  Each Class E Warrant is for 1 common share with a 3 year
term, and each Class G warrant is for 1 common share with a 3 year
term.  Each whole warrant is for 1 common share, with an exercise
price of $0.45 and $2.00 per common share for the Class E and Class G warrants,
respectively.





The relative fair value of the common
shares and the Class E and Class G Warrants for the private placement
transactions closed onMarch 17, 2008was as follows:





Securities
      Issued
            
            Relative
              Fair ValueCommon Shares (250,000
shares)
            
            $
            41,698ClassEWarrants (125,000 sharesat $0.45 per share)
            
            
            13,029ClassGWarrants (125,000 sharesat $2.00 per share)
            
            
            7,773Total
    placement
            
            $
            62,500





The relative fair value of the Class E
and Class G Warrants issued in connection with the units sold were estimated
using the Black-Scholes valuation model.   The parameters used in
the Black-Scholes valuation model were: a risk-free interest rate of 1.52%; the
current stock price on the date of issuance of $0.24 per common share; the
exercise price of the warrants of $0.45 and $2.00 per share, respectively;
expected terms of three years; volatility of 123%; and a dividend yield of
0.0%.




Shares Issued for
Services




During the nine months endedMay 31, 2008, Gulf Western issued 51,725 common
shares to consultants for their services to Gulf Western.  The shares
issued for services were valued at $16,552, which was determined based on the
share price on the date that Gulf Western became obligated to issue the shares
to the consultants.











NOTE 8 – WARRANTS





Warrants outstanding and exercisable as
ofMay 31, 2008, are summarized
below:





Exercise
            
            
            Weighted
              Average
              Remaining
            
            
            Number of
      WarrantsDescription
            
            Price
            
            
            Life
(years)
            
            
            Outstanding
            
            
            ExercisableClass A Warrants issued in private
      placements
            
            $
            2.00
            
            
            
            1.92
            
            
            
            6,442,500
            
            
            
            6,442,500Class B Warrants issued in private
      placements
            
            $
            3.00
            
            
            
            1.92
            
            
            
            6,442,500
            
            
            
            6,442,500Class C Warrants issued in private
      placements
            
            $
            0.65
            
            
            
            2.31
            
            
            
            1,250,000
            
            
            
            1,250,000Class D Warrants issued in private
      placements
            
            $
            2.00
            
            
            
            2.31
            
            
            
            250,000
            
            
            
            250,000Class E Warrants issued in private
      placements
            
            $
            0.45
            
            
            
            2.78
            
            
            
            125,000
            
            
            
            125,000ClassGWarrants issued in private
      placements
            
            $
            2.00
            
            
            
            2.78
            
            
            
            125,000
            
            
            
            125,000Warrants issued in connection with
      senior secured convertible note
            
            $
            0.26
            
            
            
            4.28
            
            
            
            3,461,538
            
            
            
            3,461,538Convertible Secured
      Note
            
            $
            0.30
            
            
            
            2.09
            
            
            
            125,000
            
            
            
            125,000Short Term
    Note
            
            $
            0.32
            
            
            
            2.08
            
            
            
            200,000
            
            
            
            200,000Placement agent
      warrants
            
            $
            0.40
            
            
            
            1.10
            
            
            
            100,000
            
            
            
            100,000Total
            
            
            
            
            
            
            
            
            
            
            18,521,538
            
            
            
            18,521,538





Warrants for 85,000 common shares at
$1.25 per share expired onJanuary 3, 2008.  OnMarch 12, 2008at the request of the warrant holder,
Class D warrants for 1,000,000 common shares at $2.00 were cancelled in
association with the warrant holder lending $500,000 to Gulf
Western.  Pursuant to the terms of the loan, Gulf Western issued
1,000,000 common shares to the lender at no cost as additionally consideration
under the terms of the loan.   OnMay 31, 2008Gulf Western’s common share price
closed at $0.18 per share. The intrinsic value of warrants outstanding as ofMay 31, 2008was $-0-.










Item 2.
              Management’s Discussion and
      Analysis andPlan
      of Operations
  The
following Management Discussion and Analysis and related Plan of Operations
(collectively referred hereinafter as “Plan of Operations”) should be read in
conjunction with our consolidated financial statements and related notes
included elsewhere in this Form 10-QSB. Our consolidated financial statements
are prepared in accordance with United States Generally Accepted Accounting
Principles. In this quarterly report, unless otherwise specified, all dollar
amounts are expressed in United States dollars. All references to “common
shares” refer to the common shares in our capital stock.  As used in
this quarterly report, the terms “we”, “us” and “our” refer to Gulf Western
Petroleum Corporation, unless otherwise indicated.
  Overview
  We are an
oil and natural gas exploration and development company.  This
quarterly report, including the consolidated financial statements and notes
contained herein together with this Plan of Operations, should be read in
conjunction with the description of our business and the description of our
properties contained in our Annual Report on Form 10-KSB/A for the year ended
August 31, 2007.   Some of the statements made herein may be
“forward-looking statements” and are qualified in their entirety as further
described in last section of this Plan of Operations entitled – “Forward Looking
Statements”.
  We hold
oil and gas interests that are located in Texas, Kansas and
Kentucky.  Our core business is the identification, acquisition,
exploration and development of oil and natural gas reserves located onshore in
the United States.  During our second fiscal quarter ending February
29, 2008 we accomplished our first commercial levels of natural gas production
from our interests located in Dewitt County, Texas (Shamrock Project) and Lavaca
County, Texas (Brushy Creek Projects).   Since commencement of
production, we have generated operating revenues from our sales of natural gas
production totaling approximately $620,251.  For the three-month
period ending May 31, 2008 our revenues from the Shamrock Project and Brushy
Creek Projects total approximately $185,100 and $146,160,
respectively.  As part of establishing revenues from sale of natural
gas production, we exited from the development stage (as defined by the
Statement of Financial Accounting Standards No. 7, Accounting for Development
Stage Enterprises) during our second fiscal quarter ending February 29, 2008,
and the financial statements presented herein are presented
accordingly.
  We hold
oil and gas interests with reserves classified as proved undeveloped in our
Oakcrest Prospect (“Prospect”) located in Wharton County, Texas that have
estimated proved undeveloped recoverable reserves of approximately 3.9 Bcfe net
to our 95.75% working interest, as reported in our Annual Report on Form
10-KSB/A at August 31, 2007 from filed with the SEC on April 21,
2008.   Since establishing operating revenues from our Dewitt
County, Texas and Lavaca County, Texas oil and gas interests, we have
devoted substantially all our manpower and cash resources to raising financing
necessary to fund the drilling and development of the Wharton County oil and gas
lease interests.   On June 10, 2008, we entered into a
Participation and Exclusivity Agreement (“Agreement”) with Amerpro Industries US
Ltd. (“Amerpro”) that provides for Amerpro to fund 100% of the drilling and
development costs for the first four wells drilled in the Oakcrest Prospect, and
an option to buy the right to participate in additional wells in the Prospect
beyond the initial four wells.  Under the Agreement we will retain
9.575% carried working interest in the Prospect wells, and upon Amerpro’s 110%
payout of each commercial well, we are entitled to an additional 15.0% “back-in”
to each well (with an associated 10.8% net revenue
interest).
 
 The
Agreement provides for closing by August 1, 2008, and prior to or at closing
Amerpro is to pay us $1.2 million prospect generation fee and $3.7 million if
they opt to participate in the additional wells in the
Prospect.  Under the Agreement, Amerpo is required to remit the $3.7
million payment directly to our Lenders Metage and NCIM in satisfaction of the
principal repayments on our convertible secured notes that mature on September
10, 2008.   Prior to closing, Amerpro may terminate the Agreement
and forfeit an initial $100,000 paid to us on June 13, 2008 without further
penalty.  However if the Agreement is terminated by Amerpro, they are
prohibited from directly or indirectly acquiring any interest in the Prospect
for one-year from their termination and are required to convey to us any
interest obtained at no cost and free and clear of all liens and encumbrances.
There is no certainty that the Agreement will close by August, 1, 2008; however,
closing is key to our meeting our principal repayment obligations of $3,700,000
due September 10, 2008 on our senior secured convertible notes, and key to
Amerpro’s contractual ability to participate in the drilling and development of
the Oakcrest Prospect since the underlying oil and gas lease is collateral for
and pledged as security under the convertible secured notes with Metage and
NCIM.
  
  We are
also engaged in a natural gas supply and gas gathering system development
project in Southeast Kansas (the “Mound Branch Project”), and hold interests in
eight existing wells that are capable of production, if and when a natural gas
gathering system can be developed.  In connection with the Mound
Branch Project we hold oil and gas lease acreage totaling approximately 8,000
acres in Elk County Kansas and a portion of the right-of-way easements needed to
effect the installation of the necessary gas gathering system.  We
require financing to progress this project which may involve joint interest
participation by third parties or other agreements that would entail the scaling
back of our economic interests and participation in the gathering system and/or
supply development aspects of the project.
  We also
hold oil and gas lease interests in Bell and Baxter Counties, Kentucky that are
characterized as exploratory in nature and that comprise our Baxter Bledsoe
and Bell Prospects.
  Oil
and Gas Revenues
  We
established commercial production from our Shamrock and Brushy Creek Projects
during the second fiscal quarter ending February 29,
2008.   Total operating revenues since commencement of production
is approximately $620,251 and $331,271 for the nine month and three month
periods ending May 31, 2008, respectively.  For the same periods
ending May 31, 2007, we did not have production or revenues.
  Our wells
in the Shamrock Project and the Brushy Creek Projects are identified in the
following tables together with the net production and total revenues for the
three months ending May 31, 2008.  Also identified are our working
interest and net revenue interests in each well together with the average sales
price derived from the sale of production.
  Shamrock Project, Dewitt
County, Texas
 
 For
      the three months ending May 31,
      2008
              
              Bushmill
                No. 1
              
              
              Pollinard
      Lee
                No. 1
              
              
              Miller
                Thomas
                No. 1
              
              
              Red
                Breast
                No. 1
              
              
              Michael
      Collins
                No. 1Production,
      net (Mcf)
              
              
              2,207
              
              
              
              8,542
              
              
              
              9,735
              
              
              
              136
              
              
              
              437Revenues
              
              $
              20,624
              
              
              $
              80,872
              
              
              $
              78,282
              
              
              $
              1,438
              
              
              $
              3,893Ave
      sales rate / (Mcf)
              
              $
              9.34
              
              
              $
              9.47
              
              
              $
              8.04
              
              
              $
              10.57
              
              
              $
              8.91Working
      interest
              
              
              90.0
              %
              
              
              90.0
              %
              
              
              90.0
              %
              
              
              45.0
              %
              
              
              9.0
              %Net
      revenue interest
              
              
              63.0
              %
              
              
              63.0
              %
              
              
              63.0
              %
              
              
              31.5
              %
              
              
              6.3
              %
 
 
 Brushy Creek Projects,
Lavaca County, Texas
 
 For
      the three months ending May 31,
      2008
              
              Goodrich-Poindexter
                No. 1
              
              
              Williams
      No. 6
              
              
              O’Neal-Smith
                No.1
              
              
              Nichols
                No. 1
              
              
              Goodrich-Deleplain
                No.1
              
              
              Pope
                No. 1Production,
      net (Mcf)
              
              
              4,485
              
              
              
              5,008
              
              
              
              1,927
              
              
              
              295
              
              
              
              3,501
              
              
              
              1,391Revenues
              
              $
              40,312
              
              
              $
              42,087
              
              
              $
              17,029
              
              
              $
              2,304
              
              
              $
              31,401
              
              
              $
              13,029Ave
      sales rate/ (Mcf)
              
              $
              8.99
              
              
              $
              8.40
              
              
              $
              8.84
              
              
              $
              7.81
              
              
              $
              8.97
              
              
              $
              9.37Working
      interest
              
              
              43.75
              %
              
              
              38.28
              %
              
              
              35.00
              %
              
              
              31.03
              %
              
              
              30.63
              %
              
              
              30.63
              %Net
      revenue interest
              
              
              31.71
              %
              
              
              27.75
              %
              
              
              25.38
              %
              
              
              22.50
              %
              
              
              22.20
              %
              
              
              22.20
              %
   General
and Administrative Expenses
  For the
three and nine months ended May 31, 2008, general and administrative expenses
totaled $410,414 and $2,616,160, respectively, versus $990,850 and $1,781,543,
respectively, for the three and nine months ended May 31,
2007.   The decrease in the three month costs are
principally related to a non-cash non-recurring charge for common shares issued
to a consultant for services and non-cash amortization of the fair value of
stock options issued to officer and directors that were amortized over
a twelve month period ending February 29, 2008.  The reduction in
the referenced non-cash charges were partially offset with costs incurred in
connection raising financing, and profession, legal and accounting fees incurred
in connection with our preparation and filing of a registration statement that
was required by the senior secured convertible notes and associated warrants
issued on September 10, 2007 (this registration obligation has since been
terminated by the lenders and warrant holders).
  
  The
increase in expenses for the nine months ended May 31, 2008 compared to the nine
months ended May 31, 2007 is related to non-cash amortization of the fair value
of stock options issued to officers and directors that were granted on May 10,
2007 and were being amortized over a twelve month period ending February
29, 2008, contract labor costs associated with our ramping up of our business,
legal and professional fees, and travel costs and consultant fees associated we
our initiatives to raise funding.
  Interest
Expense
  For the
three and nine month periods ending May 31, 2008 interest expense totaled
$703,865 and $2,032,306, respectively.  This compares to interest
expense of $50,413 and $566,416 for the same periods ended May 31,
2007.  The increase in interest expense is primarily associated with
interest on the convertible secured notes issued September 10, 2007, and the
associated amortization of deferred financing costs and debt discounts arising
for the sourcing the financing and other considerations issued as part of the
negotiation and execution of the convertible secured notes.
  Oil
and Gas Capital Investments at May 31, 2008
  A summary
of our capital investment in oil and gas properties as of May 31, 2008 is
provided in the following table.  Total capital investments in each
project / prospect are identified; and it is noted whether the capital costs are
subject to and included in our amortization of oil and gas properties or
not.
  Project/Prospect
              Location
              
              Capital
      InvestmentSubject to
      amortization:Brushy
      Creek projects
              Lavaca,
      TX
              
              $
              1,699,504Oakcrest
      prospect
              Wharton
      County, TX
              
              
              968,893Shamrock
      project
              Dewitt,
      TX
              
              
              1,962,623Baxter Bledsoe
      prospect
              Clay County,
      KY
              
              
              342,000Bell
      prospect
              Bell
      County, KY
              
              
              326,475Other
              Louisiana
              
              
              67,600Cumulative
      amortization
              
              
              
              (226,469
              )Total
              
              
              $
              5,140,626Not subject to
      amortization:Mound
      Branch project
              Elk
      County, KS
              
              $
              7,486,443Total
              
              
              $
              7,486,443
 
 The
amortization rate for our oil and gas property capital investments applied to
our production during the nine months ending May 31, 2008 was $2.985 per
Mcf.
  Capital
Resources and Liquidity
  As of May
31, 2008 we had cash of $14,160 and a working capital deficit of
$4,918,844.   We have principal repayments on the senior secured
convertible notes with Metage and NCIM totaling $3,700,000 due on September 10,
2008.   This compares to a cash balance at May 31, 2007 of $ - 0
-, and a working capital deficit of $2,126,789.   Since our
inception we have funded our oil and gas exploration and development activities,
and out operating and working capital requirements through the issuance or
equity and debt securities in private placements, and through contribution of
funds and services by our officers and directors.
  
  Our
current level of operating cash flows generated from the sale of natural gas
production are insufficient to meet our operating, general and administrative,
debt services and working capital requirements on a monthly basis. Our current
available cash is not sufficient to fund our capital requirements or to
sustain our operating needs over the next twelve-month period. To execute our
plans, we will require substantial financing and are actively working on
options to raise funding necessary to meet our $3,700,000 principal repayment
obligations due September 10, 2008 on our senior secured convertible notes
issued September 10, 2007. Our primary options are to raise equity through
private placements, or to utilize third party joint interest participation in
our exploration and development projects. which would also allow us to
reduce our capital investment cash requirements.  Such third party
joint interest participation will reduce our interests in projects; but, would
also permit us to meet our very near-term funding needs for debt service, reduce
our capital expenditure financing needs and allow us to progress our oil and gas
capital program; and help us meet our operating and working capital
needs.  Third party joint interest participation in our projects /
prospects also reduces our project / prospect risk profile, and reduces our
dependence on the success of an individual project / prospect.
  Should we
raise funds through equity placements, existing stakeholders’ interests in Gulf
Western could be negatively affected due to the dilution of their existing
interests in us. Substantially all our assets are pledged as security to the
note holders of our senior secured convertible notes issued on September
10, 2007 that mature on September 10, 2008.  If we are
not successful in executing our plans we will be unable to repay the $3.7
million principal balance on the maturity of the notes; and we may not be
able to continue our business and could cause us to cease operations, or at
a minimum we will be required to scale back our business. The result of
these actions would be that the existing stakeholders in us would lose some if
not all of their investment.
  Our net
cash flow from production is approximately $125,000 per month. Our monthly
net operating cash requirements, including interest payments, are
approximately $215,000 each month with a monthly operating deficit of
approximately $90,000.  Our available cash at July 15, 2008 is
approximately $7,000.  Over the next twelve months, we intend to use
substantially all of our funds as they become available to fund our net
operating cash requirements of $1.58 million; to fund our $750,000 exploration
and development projects; and to meet our $3.7 million debt and $500,000
loan principal repayment obligations on the convertible notes and our March 12,
2008 loan agreement, respectively. Investments related to our exploration
and development projects include approximately (i) $150,000 to supervise and
monitor the drilling of at least two Oakcrest Prospect wells in Texas, pursuant
to the terms and conditions of the Amerpro participation agreement scheduled to
close by August 1, 2008; (ii) $200,000 to further assess the Mound Branch
Project; and (iii) $150,000 for the workover of various wells in the
Shamrock and Brushy Creek projects that may arise over the next twelve months;
and  (iv) $250,000 for other prospect identification, screening,
evaluation and development.
  Estimated
      Funding Requirements During the Twelve Months Ending May
      31, 2009Exploration,
      drilling, development and operating expenditures:Oakcrest
      Prospect (1)
              
              $
              150,000Mound
      Branch Project
              
              
              200,000Shamrock
      and Brushy Creek - Workovers
              
              
              150,000Other
      prospects
              
              
              250,000Debt
      service, principal on convertible notes:Senior
      secured convertible notes due September 10, 2008
              
              
              3,700,000One-year
      term loan executed March 12, 2008
              
              
              500,000Operating, general and
      administrative, and interest, net(2)
              
              
              1,080,000Working
      capital
              
              
              500,000Total
              
              $
              6,530,000
 
  (1)
              Prepared
      on the basis that the Amerpro participation in the Oakcrest Prospect is
      closed on or before August 1, 2008.  Estimated funding
      requirements are associated primarily with our supervision of the operator
      during the drilling phase of the initial wells in the
      prospect.
  
  (2)
              Monthly
      operating, general and administrative, and interest on debt funding
      requirements identified are net of projected monthly operating cash flows
      from our Shamrock and Brushy Creek natural gas
      production.  Includes total monthly interest due on the senior
      secured convertible notes and the March 12, 2008 loan agreement of
      approximately $50,500 per month.


Off Balance Sheet
Arrangements




We do not have any off balance sheet
financial arrangements.




Forward Looking
Statements




This quarterly report contains
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. These statements relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as “may”, “should”, “expects”, “plans”,
“anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled “Risk Factors” in our
Annual Report on Form 10-KSB/A for the year endedAugust 31, 2007, that may cause our or our industry’s
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements.




Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Except as required by applicable law, including the securities
laws of theUnited
States, we do not intend to
update any of the forward-looking statements to conform these statements to
actual results.











Item 3.
            Controls and
      Procedures




Evaluation of Disclosure Controls and
Procedures





As of the end of the period covered by
this report, the Company’s management, including its Chief Executive Officer,
President and Chief Financial Officer, carried out an evaluation of the
effectiveness of the Company’s disclosure controls and procedures pursuant to
Rule 13a-15 of the Securities and Exchange Act of 1934, as amended (the
“Exchange Act”). Based on that evaluation, the Chief Executive Officer,
President and Chief Financial Officer concluded the
following:





(i)
            that the Company’s disclosure
      controls and proceduresare designed to ensure (a) that
      information required to be disclosed by the Company in the reports it
      files or submits under the Exchange Act is recorded, processed, summarized
      and reported, within the time periods specified in the SEC’s rules and
      forms, and (b) that such information is accumulated and communicated to
      the Company’s management, including the Chief Executive Officer, President
      and Chief Financial Officer, as appropriate, to allow timely decisions
      regarding required disclosure; and


(ii)
            that the Company’s disclosure
      controls and procedures are
effective.





Changes in Internal Control Over
Financial Reporting





There have been no changes in the
Company’s internal control over financial reporting during the three months
endedMay 31,
2008that have materially
affected, or that are reasonably likely to materially affect, the Company’s
internal control over financial reporting.











PART II – OTHER
INFORMATION





Item 1.
            Legal
      Proceedings





We know of no material, active or
pending legal proceedings against us, nor are we involved as a plaintiff in any
material proceeding or pending litigation. There are no proceedings in which any
of our directors, officers or affiliates, or any registered or beneficial
shareholder, is an adverse party or has a material interest adverse to our
interest.




Item 2.
            RecentSaleof Unregistered
      Securities





None





Item 3.
            Default Upon Senior
      Securities





None




Item 4.
            Submission of Matters to a Vote of
      Security Holders





None




Item 5.
            Other
      Information





None










Item 6.
            
            Exhibits3.1
            
            Articles of Incorporation of the
      Company (incorporated by reference to Exhibit 3.1 to the Company’s
      Registration Statement (Registration No. 333-133759) on Form SB-2 filed on
      May 3, 2006).3.2
            
            Certificate of Amendment to
      Article of Incorporation of the Company (incorporated by reference to
      Exhibit 3.2 to the Company’s Registration Statement (Registration No.
      333-141234) on Form S-8 filed onMarch 12, 2007).3.2
            
            Bylaws of the Company
      (incorporated by reference to Exhibit 3.2 to the Company’s Registration
      Statement on Form 8-A filed onNovember 9, 2006).4.1
            
            Specimen Stock Certificate
      (incorporated by reference to Exhibit 4.1 to the Company’s Registration
      Statement on Form 8-A filed onNovember 9, 2006).4.2+
            
            2007 Non-Qualified Stock
      OptionPlan (incorporated by reference to
      Exhibit 4.1 to the Company’s Registration Statement (Registration No.
      333-141234) on Form S-8 filed onMarch 12,
      2007).31.1*
            
            Section 302 Certification under
      Sarbanes-Oxley Act of 2002 of Wm. Milton Cox (principal executive
      officer).31.2*
            
            Section 302 Certification under
      Sarbanes-Oxley Act of 2002 of Donald L. Sytsma (principal financial and
      accounting officer).32.1*
            
            Section 906 Certification under
      Sarbanes-Oxley Act of 2002 0f Wm. Milton Cox (principal executive
      officer).32.2*
            
            Section 906 Certification under
      Sarbanes-Oxley Act of 2002 0f Donald L. Sytsma (principal financial and
      accounting officer).








*
            Filed
  herewith.





+
            Management contract or
      compensatory plan or
arrangement











SIGNATURES








Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this quarterly report on Form 10-QSB to be signed on its behalf
by the undersigned, thereunto duly authorized.





GULFWESTERN PETROLEUM
      CORPORATIONDate:July 17,
      2008
            By:
            /s/ Wm. Milton
      CoxWm. Milton Cox,
      Chairmanand Chief Executive
      Officer








Pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, this quarterly report on Form
10-QSB has been signed by the following persons in the capacities and on the
dates indicated.





Signature
            
            Capacity In Which
      Signed
            
            Date/s/ Wm. Milton
      Cox
            
            Chairman and
      Chief Executive Officer and Director
            
            July 17,
      2008Wm. Milton
      Cox
            
            (Principal
      Executive Officer)/s/ Donald L.
      Sytsma
            
            Chief Financial
      Officer, Corporate Secretary andTreasurer and
      Director
            
            July 17,
      2008Donald L.
      Sytsma
            
            (Principal
      Financial and Principal Accounting Officer)/s/ Bassam
      Nastat
            
            President and
      Director
            
            July 17,
      2008Bassam
      Nastat