Generation Zero (GNZR) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2009

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

For the transition period from ____________ to ______________

Commission file number: 333-146405

VELOCITY OIL & GAS, INC.

(Exact name of registrant as specified in its charter)

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

3500 WASHINGTON AVE, SUITE 200

HOUSTON TX 77007

(Address of principal executive offices)

(604) 765-3337

(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer   ¨
Non-accelerated filer  ¨	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes   ¨No   x

The number of shares outstanding of each of the issuer’s classes of equity as of May 14, 2009 is 11,620,500 shares of common stock, par value $0.001, and no shares of preferred stock, par value $0.001. 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VELOCITY OIL & GAS, INC.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2009			2008
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	-		$	5,716
Total current assets		-			5,716
Property, plant and equipment, net of accumulated
depreciation of $2,965 and $2,583, respectively		4,488			4,870
Unproved oil and gas properties		12,500			12,500
TOTAL ASSETS	$	16,988		$	23,086
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Bank overdraft	$	330		$	-
Accounts payable		19,615			16,938
Accounts payable – related party		1,207			1,207
Accrued liabilities		65,618			52,406
Total current liabilities		86,770			70,551
Long-term advances - related party		70,676			55,286
Note payable to shareholders		12,764			12,764
Total liabilities		170,210			138,601
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, $0.001 par value; 10,000,000 shares
authorized; none issued and outstanding		-			-
Common stock, $0.001 par value; 100,000,000 shares
authorized; 11,620,500 shares issued and
outstanding		11,621			11,621
Additional paid-in capital		159,848			159,848
Deficit accumulated during the exploration stage		(324,691	)		(286,984	)
Total stockholders' deficit		(153,222	)		(115,515	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	16,988		$	23,086
See notes to consolidated financial statements.

F-1

VELOCITY OIL & GAS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF EXPENSES

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

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

(Unaudited)

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

F-2

VELOCITY OIL & GAS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

									Deficit
									Accumulated			Total
							Additional		During the			Stockholders'
	Common Stock						Paid-in		Exploration			Equity
	Shares			Amount			Capital		Stage			(Deficit)
Common shares issued for cash		10,360,500		$	10,361		$	35,689	$	-		$	46,050
Common shares issued for services		300,000			300			-		-			300
Warrants granted		-			-			19,119		-			19,119
Net loss		-			-			-		(43,745	)		(43,745	)
Balances at December 31, 2006		10,660,500			10,661			54,808		(43,745	)		21,724
Common shares issued for cash		250,000			250			24,750		-			25,000
Common shares issued for services		10,000			10			990		-			1,000
Common shares issued as finder's fees		500,000			500			49,500		-			50,000
Cancellation of common shares		(100,000	)		(100	)		100		-			-
Net loss		-			-			-		(74,766	)		(74,766	)
Balances at December 31, 2007		11,320,500			11,321			130,148		(118,511	)		22,958
Common shares issued for services		300,000			300			29,700		-			30,000
Net loss		-			-			-		(168,473	)		(168,473	)
Balances at December 31, 2008		11,620,500			11,621			159,848		(286,984	)		(115,515	)
Net loss		-			-			-		(37,707	)		(37,707	)
Balances at March 31, 2009		11,620,500		$	11,621		$	159,848	$	(324,691	)	$	(153,222	)
See notes to consolidated financial statements.

F-3

VELOCITY OIL & GAS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

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

(Unaudited)

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

F-4

VELOCITY OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Basis of Presentation. The accompanying unaudited interim financial statements of Velocity and its wholly-owned subsidiary, South Marsh LLC, a Delaware limited liability company, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Velocity’s Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal 2008 as reported in the Form 10-K, have been omitted.

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

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

NOTE 2 – GOING CONCERN

As shown in the accompanying financial statements, Velocity incurred a net loss of $37,707 for the quarter ended March 31, 2009, and has an accumulated deficit of $324,691 and a working capital deficit of $86,770 as of March 31, 2009.  These conditions raise substantial doubt as to Velocity’s ability to continue as a going concern.  Management is trying to raise additional capital through sales of common and preferred stock.  The financial statements do not include any adjustments that might be necessary if Velocity is unable to continue as a going concern.

NOTE 3 – ADVANCES FROM RELATED PARTY

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

F-5

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q (THIS "FORM 10-Q"), CONSTITUTE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF VELOCITY OIL & GAS, INC. ("THE COMPANY", "VELOCITY", "WE", "US" OR "OUR") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-Q, UNLESS ANOTHER DATE IS STATED, ARE TO MARCH 31, 2009.

History

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

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

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

We own low risk, high return investment and development projects in the gulf coast region.  On or about September 29, 2008, with an effective date of June 1, 2008, we entered into an Assignment agreement to acquire the rights to a 40% Working Interest in the South Marsh Island 138 Block, but we will need to raise substantial additional capital either though the sale of debt or equity securities or by entering into joint ventures with more established oil and gas companies and/or institutional investors in the future to obtain the necessary funds we will require to drill in our initial oil and gas interest and move forward with our business plan.

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

Plan of Operation

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

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

-2-

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

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

MATERIAL EVENTS:

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

Purchase and Sale Agreement with Entek

In November 2007, we entered into a Purchase and Sale Agreement with Entek USA Inc. (the “Purchase Agreement” and “Entek”) and an Assignment of Membership Interests (the “Assignment”), pursuant to which we purchased all of the outstanding membership interests in South Marsh LLC, a Delaware limited liability company (“South Marsh”).   Through the Purchase Agreement, we obtained all of the interests in oil and gas leases acquired by South Marsh pursuant to an Amended and Restated Participation Agreement, dated December 8, 2006, by and between, South Marsh, Ridgelake Energy, Inc., a Louisiana corporation (“Ridgelake”), and GulfX, LLC, a Delaware limited liability company, which was later amended by an Amended and Restated Participation Agreement entered into in September 2007 (the “Participation Agreement”).  Pursuant to the terms of this participation agreement, South Marsh acquired the right to earn (a) a 10% working interest in Block 79, Viosca Knoll Area covering approximately 5,760 acres of submerged lands within the Outer Continental Shelf (“VK 79”); (b) a 10% working interest in Block A 307, High Island Area, covering approximately 5,760 acres of submerged lands within the Outer Continental Shelf (“HI A 307”); (c) a 10% working interest in the Block 317, Vermillion Area, covering approximately 5,000 acres of submerged lands within the Outer Continental Shelf (“VM 317”); (d) an 11.25% working interest in Block 138, South Marsh Island Area, covering approximately 5,000 acres of submerged lands within the Outer Continental Shelf (“SMI 138”); and (e) a 15% working interest in Block 152, South Marsh Island Area, covering approximately 2,500 acres of submerged lands within the Outer Continental Shelf (“SMI 152”), which interest expired on July 31, 2008 as the Company elected not to participate in drilling on SMI 152 as management deemed the project to have limited economic potential.  All of the leases are located in the Gulf of Mexico, off the coast of Texas and Louisiana.  The effective date of the Purchase Agreement was November 8, 2007.

-3-

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

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

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

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

Agreement Regarding the Sale of South Marsh

In or around July 2008, the Company began negotiations for the transfer of South Marsh to a third party entity organized in Germany named “German Oil & Gas AG” (“GOG”).   The terms of an agreement with GOG were never finalized and as reported earlier, the transfer of South Marsh was cancelled and the agreement annulled.  In connection with the proposed sale of South Marsh to GOG, a third-party on behalf of GOG provided the Company a non-refundable payment of $29,980 in July 2008.

Purchase of Ownership Interest in SMI 138

On or about September 29, 2008, South Marsh entered into an Assignment agreement with Ridgelake to acquire a 40% working interest in SMI 138 (as defined above).  Pursuant to the Assignment agreement between Ridgelake, South Marsh and Offset Leo LLC, a Delaware limited liability company (“Offset”), which agreement has an effective date of June 1, 2008. Ridgelake assigned a 40% interest to South Marsh and a 40% interest to Offset.  Jacobs Oil & Gas, Ltd., which is controlled by our former officer and Director, Frank Jacobs, is a shareholder of Offset.

The assignment of the interests to South Marsh was approved by the Minerals Management Service of the United States Department of the Interior (the “MMS”).  South Marsh is qualified by the MMS to own any oil and gas lease of submerged lands under the Outer Continental Lands Act. South Marsh previously held the right to an 11.25% working interest in SMI 138, which rights have lapsed as of the date of this filing.  Prior to its entry into the Assignment agreement, Offset provided a payment of $25,000 to Ridgelake as consideration for the assignment, of which we were responsible for repaying $12,500 of such payment to Offset.  We have not made this $12,500 payment to Offset to this date.

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

The Company plans to focus on the development and drilling of SMI 138 sometime in 2009.  A well on SMI 138 is anticipated to cost approximately $6 million, which funds the Company anticipates it will require in the fourth quarter of 2009.  The well will likely be funded by farming down the Company’s working interest in SMI 138 in the form of a lesser percentage working interest.  There are no assurances however, that the Company will be able to make such an arrangement with any other operators and/or that the Company will have sufficient funds to pay the development costs of SMI 138 when such payments are required.

-4-

Series A Preferred Stock

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

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

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

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

PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS

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

Funding permitting, we hope that we will be able to generate oil and gas production on the SMI 138 interest and/or the South Marsh interests and continue to grow our operations through subsequent purchases, of which there can be no assurance.  

We intend to seek out quality geo-thermal energy projects and acquire the expertise in this field of power generation through the alliance with other companies. We currently have a tentative list of potential acquisitions.  We will need to raise substantial additional capital either though the sale of debt or equity securities or by entering into joint ventures with established companies and/or institutional investors in the field of geothermal energy to obtain the necessary funds we will require to move forward with our business plan.

RESULTS FROM OPERATIONS

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

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

-5-

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

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

We had total liabilities as of March 31, 2009 of $170,210, consisting of total current liabilities of $86,770; which included a $330 bank overdraft, $20,822 of accounts payable, $65,618 of accrued liabilities; and non-current liabilities consisting of $70,676 of long-term advances, related party, in connection with advances to the Company by its former officer and Director, Frank Jacobs and entities controlled by Mr. Jacobs, which funding does not bear interest and is payable on demand with at least one (1) year and one (1) day prior notice and/or is payable in shares of the Company’s common stock at the option of the Company on the date such payment is demanded (based on the then trading price of the Company’s common stock, assuming such common stock is publicly traded); and $12,764 of note payable to Capersia, of which $264 represented unpaid interest expense converted to debt.

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

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

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

We had $15,720 of net cash provided by financing activities for the three months ended March 31, 2009, which was due to $15,390 of advances from related parties in connection with long term loans advanced to the Company by the Company’s former officer and Director, Frank Jacobs and Jacobs Oil & Gas, Ltd., an entity controlled by Mr. Jacobs, which loans are described in greater detail above and a $330 bank overdraft.

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

We currently rely on funds provided by Frank Jacobs, our former officer and Director.  Mr. Jacobs previously committed to provide us funding, pursuant to his letter dated January 20, 2008, until the effectiveness of our Registration Statement and to provide us funds for costs and fees associated with our quotation on the Over-The-Counter Bulletin Board.  As both of these events have occurred, Mr. Jacobs no longer has any obligations to provide us funding.  Further, effective September 15, 2008, Mr. Jacobs resigned as officer and Director of the Company, and James Moses was appointed as sole officer and Director of the Company.  Despite his resignation, we anticipate Mr. Jacobs, who remains the Company’s largest shareholder, will continue to provide us funding in the future; however, there are no assurances that he will.

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

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

Critical Accounting Policies

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

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

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

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

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

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

Risks Relating To Our Planned Business Operations

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

If we are unable to raise additional funding, we will be unable to participate in the drilling operations for SMI 138 and WC 629 and we might lose the right to earn an interest in WC 629 or dilute our position in SMI 138. Moving forward, we anticipate Frank Jacobs, our former officer and Director and the Company’s largest shareholder, will continue funding us, although he has made no such commitments.  We also hope to raise additional funds through the sale of debt and/or equity to enable us to implement our corporate plan. 

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We do not currently have any commitments or identified sources of additional capital from third parties or from our officers, directors or majority shareholders.   If we are not able to raise the capital necessary to continue our business operations and/or vest the working interests pursuant to the Participation Agreement, we may be forced to abandon or curtail our business plan and/or suspend our exploration activities.

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

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

WE CURRENTLY HAVE NEGATIVE WORKING CAPITAL.

As stated above, we currently anticipate that we will be funded by our former officer and Director, Frank Jacobs, moving forward, other than in connection with exploration investment, although he is not obligate to do such.  Additionally, we will need to raise substantial additional capital to continue our business operations.  Moving forward, we may be forced to raise such funds on unfavorable terms, if at all.  Our failure to raise additional capital could diminish the value of our securities and/or cause them to become worthless.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

· the level of consumer demand for oil and natural gas;

· the domestic and foreign supply of oil and natural gas;

· the ability of the members of the Organization of Petroleum Exporting Countries ("OPEC") to agree  to and maintain oil price and production controls;

· the price of foreign oil and natural gas;

· domestic governmental regulations and taxes;

· the price and availability of alternative fuel sources;

· weather conditions;

· market uncertainty due to political conditions in oil and natural gas producing regions, including the Middle East; and

· worldwide economic conditions.

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

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Risks Relating To The Company's Securities

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

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

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

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

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

Our auditors, in our audited financial statements, expressed a concern about our ability to continue as a going concern. We had working capital deficit of $86,770 and had an accumulated deficit of $324,691 as of March 31, 2009, and have not generated any revenues to date. These factors raise substantial doubt as to whether we will be able to continue as a going concern. The attached financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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

Pursuant to our Articles of Incorporation, we have 100,000,000 shares of common stock and 10,000,000 shares of preferred stock authorized. As of May 14, 2009, we had 11,620,500 shares of common stock issued and outstanding and - 0 - shares of preferred stock issued and outstanding. As a result, our Board of Directors has the ability to issue a large number of additional shares of common stock without shareholder approval, which if issued would cause substantial dilution to our then shareholders. Additionally, shares of preferred stock may be issued by our Board of Directors without shareholder approval with voting powers, and such preferences and relative, participating, optional or other special rights and powers as determined by our Board of Directors. As a result, shares of preferred stock may be issued by our Board of Directors which cause the holders to have super majority voting power over our shares, provide the holders of the preferred stock the right to convert the shares of preferred stock they hold into shares of our common stock, which may cause substantial dilution to our then common stock shareholders and/or have other rights and preferences greater than those of our common stock shareholders. Investors should keep in mind that the Board of Directors has the authority to issue additional shares of common stock and preferred stock, which could cause substantial dilution to our existing shareholders. Additionally, the dilutive effect of any preferred stock, which we may issue may be exacerbated given the fact that such preferred stock may have super majority voting rights and/or other rights or preferences which could provide the preferred shareholders with voting control over us and/or provide those holders the power to prevent or cause a change in control. As a result, the issuance of shares of common stock and/or preferred stock may cause the value of our securities to decrease and/or become worthless.

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FRANK A. JACOBS, OUR FORMER CHIEF EXECUTIVE OFFICER AND DIRECTOR, BENEFICIALLY OWNS AN AGGREGATE OF 37% OF OUR COMMON STOCK AND CAN EXERCISE CONTROL OVER CORPORATE DECISIONS INCLUDING THE APPOINTMENT OF NEW DIRECTORS.

Frank A. Jacobs, our former Chief Executive Officer and Director beneficially owns an aggregate of 4,310,000 shares or approximately 37% of our outstanding common stock (assuming the issuance of shares of common stock in connection with the exercise of certain warrants which he beneficially owns). Accordingly, Mr. Jacobs will exercise significant control in determining the outcome of all corporate transactions or other matters, including the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. Any investors who purchase shares will be minority shareholders and as such will have little to no say in the direction of the Company and the election of Directors. Additionally, it will be difficult if not impossible for investors to remove James Moses, our current sole officer and Director, or any other Director that Mr. Jacobs may appoint. As a potential investor in the Company, you should keep in mind that even if you own shares of the Company's common stock and wish to vote them at annual or special shareholder meetings, your shares will likely have little effect on the outcome of corporate decisions.

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

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

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

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

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

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

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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

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Exhibit 10.6(2)	Purchase and Sale Agreement By and Between Entek USA Inc. and Velocity Oil & Gas, Inc.
Exhibit 10.7(+)(3)	Amended and Restated  Participation Agreement between South Marsh, Ridgelake and GulfX
Exhibit 10.8(2)	Amendment to Amended and Restated Participation Agreement
Exhibit 10.14(3)	Amended Promissory Note with Capersia
Exhibit 10.15(3)	Letter Agreement Regarding Terms of Jacobs Oil & Gas, Inc. Advances
Exhibit 10.16(3)	Letter Agreement Regarding Terms of Jacobs Oil & Gas, Inc. Advances
Exhibit 10.17(4)	Assignment agreement with Ridgelake Energy, Inc.
Exhibit 99.1(3)	Letter From Frank Jacobs
31*	Certificate of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certificate of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*   Filed as an exhibit to this report. 

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

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

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

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

(4) Filed as an exhibit to our Form 8-K Report filed with the Commission on November 10, 2008, and incorporated herein by reference.

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SIGNATURES

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

	VELOCITY OIL & GAS, INC.
DATED: May 15, 2009	By: /s/ James Moses
	James Moses
	President (Principal Executive Officer)
	And Principal Financial Officer

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