- Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON , D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2008

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _________________ to _______________

Commission File Number 2-73389

STRIKER OIL & GAS, INC.

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

Nevada		75-1764386
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

5075 Westheimer Rd., Suite 975 , Houston , Texas 77056

(Address of principal executive offices)

(713) 402-6700

(Issuer’s telephone number)

Check whether the issuer has (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.

Yes [ X] No [_]

As of November 3, 2008 , there were outstanding 24, 810 ,777 shares of common stock, $.001 par value per share.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

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 Ё	Accelerated filer Ё
Non-accelerated filer Ё	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 Ё No x

STRIKER OIL & GAS, INC.

INDEX TO FORM 10-Q

September 30, 2008


Part I	Financial Information		Page No.

	Item 1.	Financial Statements

		Consolidated Balance Sheets (unaudited) September 30, 2008 and December 31, 2007	1

		Consolidated Statements of Operations (unaudited) Three and Nine Months Ended September 30, 2008 and 2007	2

		Consolidated Statements of Cash Flow (unaudited) Nine Months Ended September 30, 2008 and 2007	3

		Notes to Unaudited Consolidated Financial Statements	4 - 10

	Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	11 - 18

	Item 3.	Controls and Procedures	19

Part II	Other Information

	Item 1.	Legal Proceedings	20

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

	Item 3.	Exhibits	22

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STRIKER OIL & GAS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
	September 30, 2008			December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	153,834		$	608,944
Oil and gas receivable, net of allowance of $ 68,671 and $166,790 respectively		263,016			1,574,097
Prepaid expenses		6,720			333,164
Deferred financing costs, net		43 , 212			59,131
Total current assets		466,782			2,575,336
Property and equipment:
Oil and gas properties, full-cost method:
Subject to depletion		12, 553 , 733			11,913,806
Unevaluated costs		2,024,781			711,521
Other fixed assets		461,016			263,059
Accumulated depletion, depreciation and impairment		(4,161,690	)		(3,165,108	)
Property and equipment, net		10,877,840			9,723,278
Other assets		13 2 , 448			128,146
Total assets		11, 477 , 0 7 0			12,426,760
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	585,612		$	797,502
Accrued liabilities		146,154			229,957
Notes payable		75,000			100,111
Notes payable – related party		451,000			-
Drilling contract liability		-			326,187
Current portion – secured convertible N/P, net of unamortized discount
of $ 410,664 and $1,064,419 respectively		2 34 , 072			2,166,341
Derivative liabilities		1,361,614			1,479,268
Total current liabilities		2,853,452			5,099,366
Long term liabilities:
Secured convertible note payable net of unamortized discount of
$ 2 , 550 , 635 and $4,232,519, respectively		1,453,824			221,995
Asset retirement obligation		675,504			748,757
Total long term liabilities		2,129,328			970,752
Total current and long term liabilities		4,982,780			6,070,118
Shareholders' equity:
Preferred stock, $.001 par value, 25,000,000 shares authorized, none issued		--			--
Common stock, $.001 par value, 1,500,000,000 shares authorized,
2 4 ,417 ,574 and 20, 212 , 968 issued and outstanding, respectively		24,417			20,213
Treasury stock, at cost; 1,237,839 shares		(331,014	)		(331,014	)
Additional paid-in capital		25, 471,611			21,767,652
Accumulated deficit		( 18 , 670,724	)		(15,100,209	)
Total shareholders’ equity		6,494,290			6,356,642
Total liabilities and shareholders' equity	$	11,477,070		$	12,426,760

See accompanying notes to unaudited consolidated financial statements.

Page 1

STRIKER OIL & GAS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2008			September 30, 2007			September 30, 2008			September 30, 2007

Oil and gas revenue	$	862,943		$	805,278		$	3,498,604		$	1,771,180
Oil and gas production costs		455,343			253,270			1,212,210			538,404
Depletion and accretion expense		197,056			382,719			1,026,405			864,239
Gross profit (loss)		210,544			169,289			1,259,989			368,537

Operating expenses:
General & Administrative		702,467			922,184			2,998,355			2,833,250
Drilling rig contract		-			123,025			-			525,489
Depreciation		14,023			11,412			39,603			33,659
Other		75,769			40,110			180,797			222,892
Total operating expenses		792,260			1,096,731			3,218,755			3,615,290

Income (l oss ) from operations		(581,716	)		(927,442	)		(1,958,766	)		(3,246,753	)

Other income (expense):
Interest income		1,357			17,817			10,242			30,392
Interest expense		(884,624	)		(257,955	)		(2,424,898	)		(1,433,761	)
Change in FV of derivatives		4,333,746			1,400,717			802,903			1,877,239
Total other		3,450,479			1,160,579			(1,611,753	)		473,870
Net Income ( loss )	$	2, 868,763		$	233,137		$	(3,570,519	)	$	(2,772,883	)

Net loss per share:
Basic	$ 0.12	$ 0.01	$ (0.17)	$ (0.14)
Diluted	$ 0.12	$ 0.01	$ (0.17)	$ (0.14)

Weighted average number of common shares outstanding:
Basic	23,762,850	20,205,794	21,614,876	19,826,868
Diluted	24,177,044	20,235,468	21,614,876	19,826,868

See accompanying notes to unaudited consolidated financial statements.

Page 2

STRIKER OIL & GAS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Unaudited)

	Nine Months Ended
	September 30, 2008	September 30, 2007
Cash flows from operating activities:
Net Loss
Adjustments to reconcile net loss to cash used in operating activities:	$ (3,570,519)	$ (2,772,883)
Depletion , depreciation , and amortization	996,581	897,899
Impairment of oil and gas properties	-	372,668
Stock issued for services	48,282	50,235
Stock option expense	-
Amortization of debt discounts	1,930,560	1,252,884
Amortization of deferred financing costs	15,919	11,541
Options issued for services	821,253	782,483
Gain on settlement of derivatives	(802,903)	(1,877,239)
Accretion of ARO liability	(73,253)	-
Changes in assets and liabilities:
Accounts receivable	1,311,081	(517,458)
Prepaid expenses	326,443	8,431
Prepaid drilling contract	(326,187)	858,789
Deferred financing costs		(78,500)
Accounts payable and accrued liabilities	(109,796)	491,154
Drilling contract liability	-	(535,000)
Net cash used in operating activities	567,461	(1,058,879)

Cash flows from investing activities:
Purchase of certificate of deposit	-	(100,000)
Investment in oil and gas properties and other fixed assets	(2,151,142)	(5,066,862)
Proceeds from sale of oil and gas property	-	750,032
Non-cash investment income	(4,301)	(3,883)
Note receivable – related party	-	-
Deposits	-	-
Net cash used in investing activities	(2,155,443)	(4,416,830)

Cash flows from financing activities:
Proceeds from secured convertible note payable	-	5,500,000
Repayments of secured convertible note payable	(135,655)	-
Exercise of stock options	839,638	1,950,040
Proceeds from short-term note payable	480,000	-
Repayments of short-term note payable	(54,111)	-
Debt issuance costs		(580,000)
Stock issued for cash	3,000	5,000
Net cash provided by financing activities	1,132,872	6,875,040

Net increase (decrease) in cash	(455,110)	1,399,331
Cash and cash equivalents, beginning of period	608,944	417,884
Cash and cash equivalents, end of period	$ 153,834	$ 1,817,215

See accompanying notes to unaudited consolidated financial statements.

Page 3

STRIKER OIL & GAS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

September 30, 2008

Note 1. Organization and Nature of Business

The accompanying unaudited consolidated financial statements of Striker Oil & Gas, Inc. (formerly Unicorp, Inc.) (the "Company" or "Striker") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited consolidated financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. Notes to the consolidated financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the fiscal year ended December 31, 2007 , as reported in the Form 10-K /1A, have been omitted.

These consolidated financial statements should be read in conjunction with the financial statements and footnotes, which are included as part of the Company's Form 10-K/1A for the year ended December 31, 2007.

Striker was originally incorporated in May 1981 in the State of Nevada under the name of Texoil, Inc., changed its name to Unicorp, Inc. in March 1999, and subsequently changed its name to Striker Oil & Gas, Inc. in April 2008. Striker is a natural resource company engaged in the exploration, exploitation, acquisition, development and production and sale of natural gas, crude oil and natural gas liquids from conventional reservoirs within the United States. Substantial portions of the Striker’s operations are conducted in Louisiana, Mississippi and Texas.

On July 29, 2004, the Company closed on a transaction acquiring all of the common stock of Affiliated Holdings, Inc., a Texas corporation (“AHI”), pursuant to a stock agreement by and among the Company, AHI and the stockholders of AHI (the “Stock Transaction”). As a result of the Stock Transaction, AHI became a wholly-owned subsidiary of the Company, through which oil and gas operations are being conducted. References herein to the Company include AHI.

On April 4, 2008, the board of directors of the Company authorized a 1 for 5 reverse stock split of the common stock. The reverse stock split became effective for trading in the Company’s securities on April 24, 2008. Accordingly, all references to number of shares (except shares authorized), options, warrants and to per share information in these financial statements have been adjusted to reflect the reverse stock split on a retroactive basis.

New Accounting Pronouncements

In June 2008, the Financial Accounting Standards Board issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” (FSP EITF 03-6-1). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in computing earnings per share under the two-class method described in SFAS No. 128, “Earnings Per Share.” FSP EITF 03-6-1 is effective for the Company as of January 1, 2009 and in accordance with its requirements it will be applied retrospectively. The Company does not expect the adoption of FSP EITF 03-6-1 to have a material impact on its consolidated financial statements.

In March 2008, the Financial Accounting Standards Board issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”), and an amendment of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 161 requires entities to provide qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. The standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged but not required. SFAS 161 also requires entities to disclose more information about the location and amounts of derivative instruments in financial statements, how derivatives and related hedges are accounted for under SFAS 133, and how the hedges affect the entity’s financial position, financial performance, and cash flows. The Company is currently evaluating whether the adoption of SFAS 161 will have an impact on its financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces SFAS 141, “Business Combinations”; however it retains the fundamental requirements that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141(R) requires an acquirer to recognize the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, be measured at their fair values as of that date, with specified limited exceptions. Changes subsequent to that date are to be recognized in earnings, not goodwill. Additionally, SFAS 141 (R) requires costs incurred in connection with an acquisition be expensed as incurred. Restructuring costs, if any, are to be recognized separately from the acquisition. The acquirer in a business combination achieved in stages must also recognize the identifiable assets and liabilities, as well as the noncontrolling interests in the acquiree, at the full amounts of their fair values. SFAS 141(R) is effective for business combinations occurring in fiscal years beginning on or after December 15, 2008. The Company will apply the requirements of SFAS 141(R) upon its adoption on January 1, 2009 and is currently evaluating whether SFAS 141(R) will have an impact on its financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits companies to elect to measure many financial instruments and certain other items at fair value. Upon adoption of SFAS 159, a company may elect the fair value option for eligible items that exist at the adoption date. Subsequent to the initial adoption, the election of the fair value option should only be made at initial recognition of the asset or liability or upon a remeasurement event that gives rise to new-basis accounting. The decision about whether to elect the fair value option is applied on an instrument-by-instrument basis is irrevocable and is applied only to an entire instrument and not only to specified risks, cash flows or portions of that instrument. SFAS No. 159 does not affect any existing accounting standards that require certain assets and liabilities to be carried at fair value nor does it eliminate disclosure requirements included in other accounting standards. The Company adopted SFAS No. 159 effective January 1, 2008 and did not elect the fair value option for any existing eligible items.

Page 4

Fair Value Measurements

The Company adopted SFAS No. 157 effective January 1, 2008. SFAS 157 established a framework for measuring fair value in GAAP and clarified the definition of fair value within that framework. SFAS 157 does not require assets and liabilities that were previously recorded at cost to be recorded at fair value or for assets and liabilities that are already required to be disclosed at fair value, SFAS 157 introduced, or reiterated, a number of key concepts which form the foundation of the fair value measurement approach to be used for financial reporting purposes. The fair value of the Company’s financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). SFAS 157 also established a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1—quoted prices in active markets for identical assets and liabilities.

Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3—unobservable inputs.

The adoption of FAS 157 did not have an effect on the Company’s financial condition or results of operations, but SFAS 157 introduced new disclosures about how we value certain assets and liabilities. Much of the disclosure is focused on the inputs used to measure fair value, particularly in instances where the measurement uses significant unobservable (Level 3) inputs.

As required by SFAS 157, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. Following are the major categories of assets and liabilities measured at fair value on a recurring basis as of September 30, 2008 , using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

	Fair Value Measurements at September 30, 2008 Using
	Level 1		Level 2	Level 3		Total
Assets (Liabilities):
Derivative liabilities	$	-	$	$	(1,361,614)	$	( 1 , 361,614 )
Total	$	-	$	$	(1,361,614 )	$	(1,361,614 )

The Level 3 liability relates to derivatives that resulted from a securities purchase agreement entered into on May 17, 2007 for the sale of $7,000,000 in secured convertible debentures. In connection with this financing, the company issued warrants to purchase shares of its common stock. The secured convertible notes are potentially convertible into an unlimited number of common shares, resulting in the Company no longer having the control t o physically or net share settle existing non-employee stock options. Thus under EITF 00-19, all non-employee stock options that are exercisable during the period that the notes are outstanding are required to be treated as derivative liabilities and recorded at fair value until the provisions requiring this treatment have been settled.

The convertible notes are hybrid instruments which contain more than one embedded derivative feature which would individually warrant separate accounting as derivative instruments under SFAS 133. The various embedded derivative features have been bundled together as a single, compound embedded derivative instrument that has been bifurcated from the debt host contract. The single compound embedded derivative features include the conversion feature with the convertible notes, the interest rate adjustment, maximum ownership and default provisions. The Company valued the compound embedded derivatives based on a probability weighted discounted cash flow .

The following assumptions were utilized to value the single compound embedded derivative as of September 30, 2008:

Risk free interest rate	4.43	%
Timely registration	95.00	%
Default status	5.00	%
Alternative financing available and exercised	0.00	%
Trading volume, gross monthly dollars monthly rate increase	1.00	%
Annual growth rate stock price	29.2	%
Future projected volatility	160	%

The stock purchase warrants issued as part of the securiities purchase agreement are freestanding derivative financial instruments which were valued using the Black-Scholes method. Variables used in the Black-Scholes option-pricing model include (1) 5.11% to 4.50% risk-free interest rate, (2) expected warrant life is the actual remaining life of the warrant as of each period end, (3) expected volatility is from 211% to 90%; and (4) zero expected dividends.

The non-employee options were valued using the Black-Scholes method and the following variables were used: (1) risk free interest rate of 4.23%, (2) expected life equal to the actual remaining life (.85 to 4.6 years), (3) expected volatility of 174.79%, and (4) zero expected dividends.

The fair value of these instruments has been combined and reported as Derivative Liabilities in the consolidated balance sheet.

Page 5

Note 2. Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which anticipates the realization of assets and the liquidation of liabilities during the normal course of operations. However, as shown in these consolidated financial statements, the Company, as of September 30, 2008 , had a negative working capital of $ (2,386,670). In addition, the Company has an accumulated deficit of $ 18,670,724. These factors raise doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern will depend on management’s ability to successfully obtain additional forms of debt and/or equity financing to execute its drilling and exploration program. The Company believes it can obtain additional funding to execute its drilling and exploration program, but it cannot give any assurances that it will be successful in obtaining additional funding on terms acceptable to it, if at all. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Page 6

Note 3. Stock-Based Compensation

On July 2004, the Board of Directors adopted the 2004 Stock Option Plan (the “2004 Plan”), which allows for the issuance of up to 1,200,000 stock options to directors, executive officers, employees and consultants of the Company who are contributing to the Company’s success. The 2004 Plan was approved by the shareholders on September 20, 2004. As of September 30, 2008, there were 308,400 non-qualified stock options outstanding at exercise prices ranging from $1.75 to $17.50 per share. As of September 30, 2008, there were 135,859 shares available for issuance pursuant to the 2004 Plan.

On September 4, 2007, the Board of Directors adopted the 2007 Stock Option Plan (the “2007 Plan”), which allows for the issuance of up to 1,600,000 stock options to directors, executive officers, employees and consultants of the Company who are contributing to the Company’s success. All options are fully vested and have a 3 year life. As of September 30, 2008, there were 1 4 5 , 0 00 shares available for issuance pursuant to the 2007 Plan.

During the second quarter , the Company issued options to purchase 760,700 shares of the Company’s common stock under the 2007 Plan at exercise prices ranging from $0.50 to $1.50 per share to various consultants for services. All options are fully vested and have a 3 year life. The fair market value of the options was $702,091 on the date of grant. The fair market value of these options was calculated using the Black-Scholes option pricing model and the following inputs: (1) risk free interest rate of 1.25%, (2) volatility of 270.9% (3) exercise prices ranging from $0.50 to $1.50 per share, (3) expected term of 1.5 years and (4) zero expected dividends. All 760,700 options were exercised during the second quarter and the company received cash proceeds of $779,780.

During the 2008 third quarter, the Company issued 200,000 options to one Director of the Company. The fair market value of these options was calculated using the Black-Scholes option pricing model and the following inputs: (1) risk free interest rate of 1.25%, (2) volatility of 270.9% (3) exercise price of $.05 per share, (3) expected term of 1.5 years and (4) zero expected dividends. As of September 30, 2008, there are 417,200 stock options outstanding at prices ranging from $.70 to $1.50 per share.

During April 2008, the Board of Directors adopted the 2008 Stock Option Plan (the “2008 Plan”), which allows for the issuance of up to 2,000,000 stock options to directors, executive officers, employees and consultants of the Company who are contributing to the Company’s growth and success. As of September 30, 2008, there are 950,000 stock options outstanding at exercise prices ranging from $.05 to $.75 and 1,050,000 stock options available for issuance.

In February, 2008, an option to purchase 130,000 shares of the Company’s common stock was exercised by the former CEO for gross proceeds of $6,500.

In June 2008, an option to purchase 66,667 shares of the Company’s common stock as exercised by our VP of Land and Development for gross proceeds of $3,333. In June 2008, the Company issued 35,000 shares to a vendor as a payment for services. The fair market value of the shares on the date of issuance was $44,100.

In September 2008, 200,000 o ptions we re issued for services. These options were exercised and the Company received cash proceeds of $10,000.

Note 4. Accounts Receivable

Accounts receivable consists of the following:

	September 30, 2008			December 31, 2007
Accrued production receivable	$	250,278		$	1,740,887
Joint interest receivables		81,409			-
Allowance for bad debts		(68,671	)		(166,790	)
	$	263,016		$	1,574,097

Page 7

Note 5. Secured Convertible Notes Payable

To obtain funding for the Company’s ongoing operations, the Company entered into a securities purchase agreement with YA Global Investments, L.P. (formerly, Cornell Capital Partners L.P.), an accredited investor, on May 17, 2007, for the sale of $7,000,000 in secured convertible debentures. YA Global Investments provided the Company with an aggregate of $7,000,000 as follows:

· $3,500,000 was disbursed on May 17, 2007;

· $2,000,000 was disbursed on June 29, 2007; and

· $1,500,000 was disbursed on October 24, 2007.

Accordingly, during 2007 the Company received a total of $7,000,000, less a 10% commitment fee of $700,000 and a $15,000 structuring fee for net proceeds of $6,285,000 pursuant to the securities purchase agreement. The Company had previously paid an additional $15,000 to Yorkville Advisors as a structuring fee. The Company incurred debt issuance costs of $78,500 associated with the issuance of the secured convertible notes. These costs were capitalized as deferred financing costs and are being amortized over the life of the secured convertible notes using the effective interest method. Amortization expense related to the deferred financing costs was $ 7,881 for the three months ended September 30, 2008 .

In connection with the securities purchase agreement, the Company issued YA Global Investors warrants to purchase an aggregate of 1,624,300 shares of common stock. All of the warrants expire five years from the date of issuance.

In connection with the securities purchase agreement, the Company also entered into a registration rights agreement; and a security agreement in favor of YA Global Investments.

The registration rights agreement provided for the filing, by July 2, 2007, of a registration statement with the Securities and Exchange Commission registering the common stock issuable upon conversion of the secured convertible debentures and warrants. The registration statement was declared effective by the SEC on October 12, 2007.

The Company executed a security agreement in favor of YA Global Investments granting them a first priority security interest in certain of the Company’s goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper and intellectual property. The security agreement states that if an event of default occurs under the secured convertible debentures or security agreements, YA Global Investments has the right to take possession of the collateral, to operate the Company’s business using the collateral, and have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise to satisfy the Company’s obligations under these agreements.

On February 20, 2008, the Company entered into an Amendment Agreement with YA Global Investments, amending certain notes and warrants entered into in connection with the Securities Purchase Agreement dated May 17, 2007. The amendment agreement includes the following changes:

·	The interest rate was increased from 9% to 14%;

·	The maturity date was changed from November 17, 2009 to December 31, 2010;

·	The conversion price was changed from $2.50 per share to $0.75 per share; and

·	The Company agreed to make monthly payments of principal and interest of $100,000 beginning March 1, 2008 and a one-time balloon payment of $1,300,000 due and payable on December 31, 2009.

The amendment agreement modified warrants as follows:

Warrant	Description	Original Exercise Price per Share	Amended Exercise Price per Share
A-1	Warrant to purchase 509,000 shares of common stock	$2.75	$0.75
B-1	Warrant to purchase 430,800 shares of common stock	$3.25	$1.25
C-1	Warrant to purchase 373,400 shares of common stock	$3.75	$1.35
D-1	Warrant to purchase 311,100 shares of common stock	$4.50	$2.50

In addition, in connection with the Amendment, the Company issued the following four warrants:

Warrant	Description	Exercise Price Per Share
A-2	Warrant to purchase 1,357,334 shares of common stock	$0.75
B-2	Warrant to purchase 689,280 shares of common stock	$1.25
C-2	Warrant to purchase 426,743 shares of common stock	$1.75
D-2	Warrant to purchase 248,880 shares of common stock	$2.50

All of the warrants expire five years from the date of issuance.

The Company analyzed the convertible notes and the warrants for derivative financial instruments, in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock. The convertible notes are hybrid instruments which contain more than one embedded derivative feature which would individually warrant separate accounting as derivative instruments under SFAS 133. The various embedded derivative features have been bundled together as a single, compound embedded derivative instrument that has been bifurcated from the debt host contract. The single compound embedded derivative features include the conversion feature with the convertible notes, the interest rate adjustment, maximum ownership and default provisions. The Company valued the compound embedded derivatives based on a probability weighted discounted cash flow model. The value at inception of the single compound embedded derivative liability was $1,958,285 and was bifurcated from the debt host contract and recorded as a derivative liability. The discount for the derivative will be accreted to interest expense using the effective interest method over the life of the convertible notes.

Page 8

Probability - Weighted Expected Cash Flow Methodology

Assumptions: Single Compound Embedded Derivative within Convertible Note

	Inception May 17, 2007			As of September 30, 2008
Risk free interest rate		4.86	%		4.43	%
Timely registration		95.00	%		95.00	%
Default status		5.00	%		5.00	%
Alternative financing available and exercised		0.00	%		0.00	%
Trading volume, gross monthly dollars monthly rate increase		1.00	%		1.00	%
Annual growth rate stock price		29.7	%		29. 0	%
Future projected volatility		211	%		160	%

The stock purchase warrants are freestanding derivative financial instruments which were valued using the Black-Scholes method. The fair value of the derivative liability of the warrants was recorded at $2,723,239 at inception on May 17, 2007. The unamortized discount of the warrant derivative liability of $2,539,093 will be accreted to interest expense using the effective interest method over the life of the convertible notes, or 37 months. The total accretion expense was $ 181,233 and $416,286 for the three and nine months ended September 30, 2008 , respectively . The remaining value of $955,739 was expensed at inception to change in fair value of derivative financial instruments since the total fair value of the derivative at inception exceeded the note proceeds.

Variables used in the Black-Scholes option-pricing model include (1) 5.11% to 2.28 % risk-free interest rate, (2) expected warrant life is the actual remaining life of the warrant as of each period end, (3) expected volatility is from 211% to 1 60 %; and (4) zero expected dividends.

Both the embedded and freestanding derivative financial instruments were recorded as liabilities in the consolidated balance sheet and measured at fair value. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded as either a gain or loss in the income statement.

To determine the appropriate ac counting for the February 2008 m odifications noted above, the Company applied the provisions of EITF 96-19. Under EITF 96-19, a substantial modification of loan terms results in accounting for the modification as a debt extinguishment. EITF 96-19 specifies that a modification should be considered substantial if the present value of the cash flows under the new terms is at least 10% different from the present value of the remaining cash flows under the original loan terms. EITF 96-19 requires the use of the original effective interest rate for calculating the present value of the cash flows under the modified loan.

In order to apply EITF 96-19, the Company determined the annual payments (principal and interest) under the new loan terms. If either debt instrument is callable or putable, EITF 96-19 requires that the present value calculation should be made assuming the instrument is called (put) and assuming the instrument is not called (put). The cash flow assumptions that generate the smaller change are to be used in the 10% test. In this case, both instruments had a call options.

Using the original effective interest rate as the discount factor for each set of cash flows, the Company computed the present values under the various scenarios. In completing the analysis, the change in value based on the modification and issuance of additional warrants was treated as a current period cash flow. Based on this analysis, the Company determined that the difference between the cash flows under the original terms and the modified terms was not in excess of 10% which suggested that the February 2008 Modifications were not substantial and the notes were not extinguished. The value of the additional warrants issued are accounted for as a derivative liability and treated as an additional debt discount of $1,030,193 to the note and that is amortized over the remaining life of the note. Total accretion expense related to this portion of the discount was $ 84 ,819 and $203,476 for the three months and nine months ended September 30, 2008, respectively . The embedded derivatives and warrants continue to be reported at fair with the change in fair value recorded in current earnings.

The impact of the application of SFAS No. 133 and EITF 00-19 in regards to the derivative liabilities on the balance sheet and statements of operations as of and through September 30, 2008 are as follows:

	Period ending September 30, 2008			Year ending December 31, 2007
Derivative liability – single compound embedded derivatives within the convertible notes	$	206,470		$	1,233,244
Derivative liability – warrants		1,118,287			206,156
Derivative liability – options		36,857			40,492
Total	$	1 ,3 61 , 614		$	1,479,892

Net change in fair value of derivatives		(3,911,368	)		(3,437,780	)

The following summarizes the financial presentation of the convertible notes at inception and September 30, 2008 :

				At Inception
	September 30, 2008			May 17, 2007
Notional amount of convertible notes	$	4,649,195		$	3,500,000
Adjustments:
Unamortized discount		(2,961,298	)		(3,500,000	)
Convertible notes balance, net	$	1,6 87 ,897		$	-

Page 9

Existing Non-Employee Stock Options

The secured convertible notes are potentially convertible into an unlimited number of common shares, resulting in the Company no longer having the control too physically or net share settle existing non-employee stock options. Thus under EITF 00-19, all non-employee stock options that are exercisable during the period that the notes are outstanding are required to be treated as derivative liabilities and recorded at fair value until the provisions requiring this treatment have been settled.

As of the date of issuance of the notes on May 17, 2007, the fair value of options to purchase 717,000 shares totaling $107,766 was reclassified to the liability caption “Derivative liability” from additional paid-in capital. The fair value of $36,857 as of September 30, 2008, was determined using the closing price of $0.21, the respective exercise price ($1.75 to $17.50), the remaining term on each contract (.85 to 4.6 years), the relevant risk free interest rate (4.23%) as well as the relevant volatility (174.79%).

The determination of fair value for the non-employee stock options includes significant estimates by management including volatility of the Company’s common stock and interest rates, among other items. The recorded value of the non-employee stock options can fluctuate significantly based on fluctuations in the fair value of the Company’s common stock, as well as in the volatility of the stock price during the term used for observation and the term remaining for exercise of the stock options. The fluctuation in estimated fair value may be significant from period-to-period which, in turn, may have a significant impact on the Company’s reported financial condition and results of operations.

Note 6. Notes Payable

During March 2006, the Company issued $75,000 principal amount in the form of a two-year, 10% convertible unsecured note to La Mesa Partners, L.C. The note became due on March 9, 2008 and the funds were used to pay for lease bonus costs on the Company’s Ohio and Logan County, Kentucky prospects. At the option of the note holder, the note is convertible into common stock of the Company at a conversion price of $1.00 per share anytime after March 9, 2007. Interest on the 10% convertible note is payable quarterly out of available cash flow from operations as determined by the Company’s Board of Directors, or if not paid but accrued, will be paid at the next fiscal quarter . The conversion price of the note was calculated based on a discount to the bid price on the date of funding. As the conversion price was below the fair value of the common stock on the date issued, the Company has recorded the beneficial feature of the note in accordance with the provisions found in EITF 98-5 by recording a $22,500 discount on the note. The discount was being amortized over a twelve month period beginning April 1, 2006.

N otes payable at September 30, 2008 and December 31, 2007, are as follows:

	September 30, 2008		December 31, 2007
La Mesa Partners, L.C.	$	75,000	$	75,000
Advantage Premium Finance		-		25,111
Total convertible notes payable	$	75,000	$	100,111

Note 7. Notes Payable – Related Party

During August 2008, the Company issued a $480,000 note to Mr. Kevan Casey, our Chief Executive Officer. The note has a 12 month maturity and a 10% interest. Interest on the note is accrued monthly. Funds were utilized to finance the Company’s current drilling of various Catfish wells. During September, the Company repaid $29,000 of the note, leaving an outstanding balance at September 30, 2008 of $451,000

Note 8. Common Stock

During the nine months ended September 30, 2008 , the Company issued the f ollowing shares of common stock:

·	20,000 shares of its common stock to an individual for legal services which were valued at $12,000 ($0.60 per share).

·	10,000 shares of its common stock to an individual for consulting services valued at $6,000 ($0.60 per share).

·	130,000 shares of its common stock upon the exercise of an option for gross proceeds of $6,500.

·	35,000 to an individual for legal services which were valued at $32,102 ($0.92 per share).

·	66,668 to the Company’s VP of Land upon the exercise of an option for gross proceeds of $3,334

·	150,000 to an individual upon the exercise of an option for gross proceeds of $75,000. Options were issued for services which were valued at $95,198.

·	55,000 to an individual upon the exercise of an option for gross proceeds of $48,750. Options were issued for services which were valued at $61,306.

·	555,700 to an individual upon the exercise of an option for gross proceeds of $656,030. Options were issued for services which were valued at $545,587.

·	77,100 shares of common stock were issued to Mr. Ryan Cravey. Options were granted to Mr. Cravey for services rendered to the Company in quarter ending June 30, 2008. Options were fully vested.

·	36,380 shares of common stock were issued for $27,238, as payment in kind to YA Global Investments on August 15, 2008.

·	293,268 shares of common stock were issued for $100,000, as payment in kind to YA Global Investments on August 4, 2008.

·	280,025 shares of common stock were issued, for $45,700, as payment in kind to YA Global Investments on September 5, 2008.

·	125,270 shares of common stock, for $22,000 was issued as payment in kind to YA Global Investments for quarter ending September 30, 2008. However shares were issued on October 1, 2008

·	8,571 shares of common stock for $3,000 on September 5, 2008 to Mr. Kevan Casey, which were purchased on July 30, 2008.

·	200,000 options were issued and the Company received proceeds of $10,000 on September 30, 2008. Shares were issued in November 2008.

Note 9 . Subsequent Events

On October 24, 2008, the Company issued 250,000 shares of common stock to a Consultant for various services. The Company also issued 288,722 shares of common stock to YA Global Investments as payment in kind under the secured convertible debentures.

Page 10

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion and analysis of the Company’s financial condition as of September 30, 2008, and its results of operations for the three and nine months ended September 30, 2008 and 2007, should be read in conjunction with the audited consolidated financial statements and notes included in Striker’s Form 10-K/1A for the year ended December 31, 2007, filed with the Securities and Exchange Commission.

Overview

Striker is a natural resource company engaged in the exploration, acquisition, development, production and sale of natural gas, crude oil and natural gas liquids from conventional reservoirs within the United States. A majority of the Company’s operations are in the states of Louisiana, Mississippi and Texas.

Property and Equipment

Following is a description of the properties to which the Company is participating as of September 30, 2008, or intends to participate during fiscal 2008.

Abbeville Field – Vermillion Parish, Louisiana

The Company has a 96.25% and 73.5% working interest, respectively, in two producing oil wells and a saltwater disposal well with production facilities in the Abbeville Field located in Vermillion Parish, Louisiana. The two wells are currently producing approximately 23 gross barrels of oil per day. The Company’s consulting geophysicist has found a prospect on the Company’s leasehold believed to contain significant fault separated additional reserves from one of the primary producing zones in the field. The prospect was located using the 3-D seismic survey which the Company owns in the field.

The Company is the designated operator of the field and intends to perform a full reservoir engineering analysis to determine if there are additional opportunities to expand production within the field and at the same time will utilize the 3-D seismic survey to search for additional exploration and/or development prospects.

North Edna Field – Jefferson Davis Parish, Louisiana

The Company has a 35% working interest and a 25.9% net revenue interest in the LeJeune well No. 1. The well was successfully worked over during the previous quarter but is currently shut-in due to equipment problems. The Company expects that additional downhole and surface equipment will be installed by the operator in the fourth quarter to restore the No. 1 well to production.

North Sand Hill Field – Greene County, Mississippi

This well is producing approximately 3 gross barrels of oil per day. In addition to the producing well, the Company has acquired an “orphan well” from the State of Mississippi which it intends to convert into a saltwater disposal well. The Company has a 60% working interest and an approximate 47.55% net revenue interest. An additional proven undeveloped well location has been identified by the Company’s independent reservoir engineer in this field which the Company anticipates will be drilled during the first half of fiscal 2009.

South Creole Prospect – Cameron Parish, Louisiana

The Company has one producing well - the Carter 29-1 well in which it owns a 21.247% working interest and an approximate 14.87% net revenue interest in the well. As of the end of the reporting quarter, this well was producing approximately 3,100 gross Mcf of gas and 40 gross barrels of condensate per day.

North Cayuga Prospect – Henderson County, Texas

On January 2007, the Company entered into an agreement to participate in the North Cayuga prospect located in Henderson County, Texas. The Easter Seals Well No. 1-R had been drilled to a depth of approximately 9,000 feet and initially tested approximately 50 barrels of oil per day from the Rodessa Bacon Lime sand but did not sustain production. The Company and its working interest partners are attempting to farm out this acreage.

Catfish Creek Prospect – Henderson and Anderson Counties, Texas

In April 2007, the Company entered into a participation agreement to participate in the Catfish Creek prospect located in Henderson and Anderson Counties, Texas. The operator of this prospect recompleted the previously drilled Catfish Creek well No. 1 in September 2007 which flow tested 87 barrels of oil and 266 gross Mcf of gas per day from the Rodessa Bacon Lime formation located between the depths of 9,651 to 9,658 feet. Production was commenced from the well in October 2007 at a restricted rate for gas flaring until a gas pipeline is installed. In addition to the No.1 well, the Catfish Creek well No. 2 has been drilled and completed in the Pettet formation with pay behind pipe in the Bacon Lime and Gloyd lobes of the Rodessa formation. Operations to drill the No. 3 will commence in early October 2008. The Catfish Creek prospect area consists of over 10,000 gross acres of leasehold. . The Company has a 33.32% before payout and 25% after payout working interest in each shallow well drilled above 10,800 feet and an approximate 25% before payout and 18.75% after payout working interest in each deep well drilled below 10,800 feet . The Company expects that the installation of a four and one-half mile gas pipeline to connect its gas production from the Catfish Creek Prospect will be completed by the end of November 2008. Once completed the No. 1 and No. 2 wells will be sand fractured to enhance production and ramped up to full production status.

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Welsh Field – Jefferson Davis Parish, Louisiana

The Company currently has two producing wells in the field; however mechanical issues with one of the salt water disposal wells has caused the Company to shut in two production wells due to insufficient disposal capacity. Current gross production is 34 barrels of oil per day. The Company intends to perform well repairs and/or recomplete into new formations the remaining seven wells. In addition to the Welsh Field, the Company obtained additional acreage in the North, Northeast and Northwest Welsh prospects and is evaluating two proven undeveloped well locations for possible drilling in 2009.

Lavaca River Prospect – Lavaca County, Texas

The Company has a 10% carried working interest to casing point in the Lavaca River Prospect. The Company received a cash payment of $50,000 in connection with lowering its carried interest from 15% to 10%. This prospect will target the Yegua sands at a depth of approximately 5,500 feet and has expected reserves of 1 to 2 Bcf of gas. Striker expects this well to be drilled in the fourth quarter of 2008.

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Critical Accounting Policies

General

The Unaudited Consolidated Financial Statements and Notes to Unaudited Consolidated Financial Statements contain information that is pertinent to this management’s discussion and analysis. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of any contingent assets and liabilities. Management believes these accounting policies involve judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the related asset and liability amounts. Management believes it has exercised proper judgment in determining these estimates based on the facts and circumstances available to its management at the time the estimates were made. The significant accounting policies are described in more detail in Note 2 to the Company’s audited consolidated financial state ments included in its Form 10-K /1A filed with the SEC.

Oil and Gas Properties

The Company follows the full cost method of accounting for its oil and gas properties. Accordingly, all costs associated with the acquisition, exploration and development of oil and gas properties, including costs of undeveloped leasehold, geological and geophysical expenses, dry holes, leasehold equipment and overhead charges directly related to acquisition, exploration and development activities are capitalized. Proceeds received from disposals are credited against accumulated cost except when the sale represents a significant disposal of reserves, in which case a gain or loss is recognized. The sum of net capitalized costs and estimated future development and dismantlement costs for each cost center is depleted on the equivalent unit-of-production method, based on proved oil and gas reserves as determined by independent petroleum engineers. Excluded from amounts subject to depletion are costs associated with unevaluated properties. Natural gas and crude oil are converted to equivalent units based upon the relative energy content, which is six thousand cubic feet of natural gas to one barrel of crude oil. Net capitalized costs are limited to the lower of unamortized costs net of deferred tax or the cost center ceiling. The cost center ceiling is defined as the sum of (i) estimated future net revenues, discounted at 10% per annum, from proved reserves, based on unescalated year-end prices and costs, adjusted for contract provisions and financial derivatives, if any, that hedge its oil and gas reserves; (ii) the cost of properties not being amortized; (iii) the lower of cost or market value of unproved properties included in the cost center being amortized and; (iv) income tax effects related to differences between the book and tax basis of the natural gas and crude oil properties.

Revenue Recognition

Revenue is recognized when title to the products transfer to the purchaser. The Company follows the “sales method” of accounting for its natural gas and crude oil revenue, so that it recognizes sales revenue on all natural gas or crude oil sold to its purchasers, regardless of whether the sales are proportionate to its ownership in the property. A receivable or liability is recognized only to the extent that it has an imbalance on a specific property greater than the expected remaining proved reserves.

Accounting For Stock-Based Compensation

In December 2004, the Financial Accounting Standards Boards (“FASB”) issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”) . This statement requires the cost resulting from all share-based payment transactions be recognized in the financial statements at their fair value on the grant date. SFAS No. 123(R) was adopted by the Company on January 1, 2006. The Company previously accounted for stock awards under the recognition and measurement principles of APB No. 25, Accounting for Stock Issued to Employees , and related interpretations. The Company adopted SFAS No. 123(R) using the modified prospective application method described in the statement. Under the modified prospective application method, the Company applied the standard to new awards and to awards modified, repurchased, or cancelled after January 1, 2006.

Results of Operations for the Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007

Revenue

For the nine months ended September 30, 2008 , the Company generated revenue from the sale of oil and natural gas of $ 3,498,604 , an increase of $ 1,727,424 ( 97.5 %) over the prior year period ’s amount of $ 1,771,180 . Re venue from the sale of oil was $ 1,926,857 for the 2008 period compared to $ 1,336,308 for the same period in 2007. The average price received per barrel of oil was $109.20 for the 2008 period compared to $62.96 for the 2007 period. Oil and gas revenues are as follows:

September 30, 2008
	Volume		Sales
Oil (barrels)		17,609	$	1,926,857
Gas (mcfs)		146,019		1,571,747
Total			$	3,498,604

September 30, 2007
	Volume		Sales
Oil (barrels)		21,224	$	1,336,308
Gas (mcfs)		62,123		434,872
Total			$	1,771,180

Page 13

Oil and Gas Production Costs and Depletion Expense

Oil and gas production costs are comprised of the cost of operations, maintenance and repairs and severance taxes of the Company’s interests in its producing oil and gas properties. Oil and gas production costs were $ 1,212,210 for the nine months ended September 30, 2008 , compared to $ 538,404 for the nine months ended September 30, 2007 . The Company experienced an increase in lease operating expenses of $ 673,809 (including severance taxes) over the prior year period. The increase was attributable to an increase in the number of producing properties over the prior year period and well repair expenses.

Depletion expense was $ 956,979 for the nine months ended September 30, 2008 , which was a n increase, $92,740 over the prior year period of $ 864,239 . The Company follows the full cost method of accounting for its oil and gas properties. As the oil and gas properties are evaluated, they are transferred to the full cost pool, either as successful with associated oil and gas reserves, or as unsuccessful with no oil and gas reserves.

Gross Profit (Loss)

	Three Months Ended				Nine Months Ended
	September 30, 2008		September 30, 2007		September 30, 2008		September 30, 2007

Oil and gas revenue	$	862,943	$	805,278	$	3,498,604	$	1,771,180
Oil and gas production costs		455,343		253,270		1,212,210		538,404
Depletion and accretion expense		197,056		382,719		1,026,405		864,239
Gross profit (loss)		210,544		169,289		1,259,989		368,537

The Company experienced increases in gross profit from oil and gas operations for both, three and nine months ending in September 30, 2008. The Company has experienced a significant increase in revenue due to the successful completion of the Carter 29 Well No.1, State Lease 139 44 Well No. 1, Farmers Well No. 11 and Catfish Creek Well No. 1. As discussed above, the Company experienced an increase in oil and gas production costs due to the addition of these producing properties, well repairs at North Edna Fields and increased severance taxes as a result of increased revenue.

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Operating Expenses – for the nine months ended September 30, 2007 and 2008

Operating expenses for the nine months ended September 30, 2008 were $ 3,218,755 which was a decrease of $396,535 when compared to the prior year period of $ 3,615,290 . The major components of operating expenses are as follows:

Office administration – Office administration expenses are comprised primarily of office rent, office supplies, postage, telephone and communications and Internet. The increase in office administration expense for the three and nine months ended September 30, 2008 was primarily driven by an increase in rent and office supplies .

	Three months ended September 30,				Percentage			Nine months ended September 30,				Percentage
	2008		2007		Change			2008		2007		Change
Office Administration		52,958		50,024		6	%		181,720		163,752		11	%

Payroll and related – Payroll and related expenses increased from $ 522,558 for the 2007 period to $ 742,719 for the 2008 period, an increase of 42 %. Payroll expenses increased as the Company added technical and administrative personnel to fully implement its business plan. The Company also increased its employee benefits expense, which has also increased the overall payroll expenses.

	Three months ended September 30,				Percentage			Nine months ended September 30,				Percentage
	2008		2007		Change			2008		2007		Change
Payroll & Related		269,488		246,955		9	%		742,719		522,558		42	%

·	Professional services – Professional services are comprised of accounting and audit fees, legal fees, engineering fees, directors’ fees and other outside consulting fees. Cost increased primarily reflecting legal settlement and legal contingencies.

	Three months ended September 30,				Percentage			Nine months ended September 30,				Percentage
	2008		2007		Change			2008		2007		Change
Professional Services		220,786		263,601		-16	%		652,727		585,061		12	%

Investor relations - The Company continued to invest in its investor relations program during the period to inform current and potential investors of its projects and results of operations. The Company intends to continue to incur these costs in the future to keep its investors apprised of the progress of the Company.

	Three months ended September 30,				Percentage			Nine months ended September 30,				Percentage
	2008		2007		Change			2008		2007		Change
Investor Relations		39,874		92,400		-57	%		709,045		446,703		59	%

·	Stock option expense – For the nine months ended September 30, 2008, the Company performed a Black-Scholes valuation of stock options issued to its employees and various contractors and recorded additional expense for the period.

	Three months ended September 30,				Percentage			Nine months ended September 30,				Percentage
	2008		2007		Change			2008		2007		Change
Stock Option Expense		119,362		270,775		-56	%		810,262		763,266		6	%

Drilling rig contract – The Company had an agreement with the operator of the St. Martinville prospect, the second well drilled with the rig, that the operator would pay a flat fee of $200,000 to truck the rig to the operator’s well and rig up in preparation for drilling. The Company was obligated to pay the excess cost which amounted to $345,414 and was charged to expense. Additionally, pursuant to its rig sharing agreement with a third party, the Company reimbursed the third party 50% of the cost to move the drilling rig from the St. Martinville prospect to the third party’s location. This resulted in a charge to expense of $402,464 for the period ending September 30, 2007 . The Company has fulfilled its obligation pursuant to the drilling rig contract and does not anticipate any charges in the future.

·	Depreciation – The Company has record depreciation expense associated with its computer and office equipment, furniture and fixtures and leasehold improvements. The Company is depreciating these assets using the straight-line method over useful lives from three to seven years.

	Three mont hs ended September 30,				Percentage			Nine months ended September 30,				Percentage
	2008		2007		Change			2008		2007		Change
Depreciation		14,023		11,412		23	%		39,603		33,659		18	%

Other operating expenses – Other operating expenses are comprised primarily of travel and entertainment, geological and geophysical costs of maps, logs and log library memberships and licenses and fees. The Company has been able to reduce these expenses long-term and will continue to do so as the Company sees feasible.

	Three months ended September 30,				Percentage			Nine months ended September 30,				Percentage
	2008		2007		Change			2008		2007		Change
Other Operating Expenses		75,769		40,110		53	%		180,797		222,892		-17	%

Page 15

Other Income (Expense)

During the nine months ended September 30, 2008 , the Company received interest income of $ 10,242 on its interest bearing checking accounts and certificates of deposits. Interest income decreased reflecting lower interest rates on our investments’ accounts and a reduction in the average balance of interest-bearing investments.

During the nine months ended September 30, 2008 , the Company incurred interest expense of $ 2 , 847 , 276 related to its convertible debt. This compares with $1, 433 ,7 61 for the nine months ended September 30, 2007 . The increase of $ 1,413,516 or 99 % is due to the interest and related discount amortization of convertible notes placed in May 2007.

The Company is required to measure the fair value of the warrants and the embedded conversion features related to its secured convertible notes on the date of each reporting period. The effect of this re-measurement is to adjust the carrying value of the liabilities related to the warrants and the embedded conversion features. Accordingly, the Company recorded $ 1,877 , 239 non-cash other income related to the change in FV of derivatives during the nine months ended September 30, 2008 . The Company recorded non-cash other income of $ 802,903 in the nine months ended September 30, 2007 , related to the change in the fair market value of the warrants and embedded derivative liability.

Net Income (Loss)

The Company recorded net loss for the nine months ended September 30, 2008 , of $ 3 ,570 ,518 , or $0. 17 per share (basic and diluted), and a net loss of $ 2 , 772 , 883 or $0.1 4 per share (basic and diluted), for the nine months ended September 30, 2007 .

Liquidity and Capital Resources

As of September 30, 2008 , the Company has a negative working capital balance of $ (1,025,055) (excluding the derivative liability of $ 1,361 , 614 ) and cash balances in non-restrictive accounts of $ 153, 83 4 . The Company is required to obtain additional funding to fully implement its development drilling program at its Catfish Creek and North Cayuga prospects and development of its Welsh Field acquisition and to continue to seek new acquisitions and drilling opportunities. The funding the Company will be seeking will be either through debt and/or equity financings and there can be no assurance that the Company will be successful in raising such financing. The failure to raise such financing would require the Company to scale back its current operations and possibly forego future opportunities.

Net cash used by operating activities for the nine months ended September 30, 2008 , was $567,461 . The Company recorded net loss of $ 3,570,519.

The Company’s ability to continue as a going concern will depend on management’s ability to successfully obtain additional forms of debt and/or equity financing to execute its drilling and exploration program. The Company is required in the future to obtain additional funding to fully develop its current and future projects for which it intends to participate and there can be no assurance that the Company will be able to obtain funding on terms acceptable to it, or at all. The Company believes it can obtain additional funding to execute its drilling and exploration program, but it cannot give any assurances that it will be successful in obtaining additional funding on terms acceptable to it, if at all. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Anticipated Revenue

The company previously announced that it expected to achieve $5 million in revenue for fiscal 2008. However the company now expects to achieve revenue of $3.8 – 4.1 million for fiscal 2008. This downward revision is due to various factors including: shut-in production from Hurricane Gustav and Hurricane Ike, recent drop in hydrocarbon prices and the delay of the installation of its pipeline in East Texas.

Page 16

Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits companies to elect to measure many financial instruments and certain other items at fair value. Upon adoption of SFAS 159, a company may elect the fair value option for eligible items that exist at the adoption date. Subsequent to the initial adoption, the election of the fair value option should only be made at initial recognition of the asset or liability or upon a remeasurement event that gives rise to new-basis accounting. The decision about whether to elect the fair value option is applied on an instrument-by-instrument basis is irrevocable and is applied only to an entire instrument and not only to specified risks, cash flows or portions of that instrument. SFAS No. 159 does not affect any existing accounting standards that require certain assets and liabilities to be carried at fair value nor does it eliminate disclosure requirements included in other accounting standards. Baseline adopted SFAS No. 159 effective January 1, 2008 and did not elect the fair value option for any existing eligible items.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 does not impose fair value measurements on items not already accounted for at fair value; rather it applies, with certain exceptions, to other accounting pronouncements that either require or permit fair value measurements. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market. The standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (“FSP FAS 157-2”), which delays the effective date of SFAS 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until fiscal years beginning after November 15, 2008. These non-financial items include assets and liabilities such as non-financial assets and liabilities assumed in a business combination, reporting units measured at fair value in a goodwill impairment test and asset retirement obligations initially measured at fair value. Effective January 1, 2008, the Company adopted SFAS 157 for fair value measurements not delayed by FSP FAS No. 157-2. The adoption resulted in additional disclosures as required by the pronouncement (See Note 5 – Notes Payable) related to our fair value measurements for oil and gas derivatives and marketable securities but no change in our fair value calculation methodologies. Accordingly, the adoption had no impact on our financial condition or results of operations.

Page 17

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Page 18

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

The Company's management evaluated, with the participation of its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the effectiveness of the design/operation of its disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(c) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of September 30, 2008 .

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our principal executive officer and our principal financial officer. Based on that evaluation, management concluded that our financial disclosure controls and procedures were not effective related to the preparation of the Form 10-Q / A filing as of March 31, 2008

In June 2008, the Company determined that certain errors were made in the accounting for derivatives related to its YA Global financing as follows:

The payment of principal due under the YA Global financing during the fourth quarter of 2007 resulted in a change in the fair value of associated derivative. The change should not have been presented as a Gain on settlement of derivatives but included in the Change in fair value of derivatives caption.

The discount associated with the YA Global debt paid off in cash during the period should not have been recorded as a reduction in Additional paid in capital, but as additional interest expense.

The mark to market adjustment for the derivative liability associated with the Company’s nonemployee stock options should not have been recorded as a reduction in Additional paid in capital. Pursuant to paragraph 9 of EITF 00-19, the adjustment should have been reported in earnings as a Change in fair value of derivatives.

These errors required the Company to restate its consolidated financial statements for the year ended December 31, 2007 included in its 2007 Annual Report on Form 10-K and its condensed consolidated financial statements for the three months ended March 31, 2008. The decision to restate the consolidated financial statements was made by the Company’s Audit Committee. The disclosure of the restatement and its impact on the originally reported amounts is disclosed in Note 9 of the Consolidated Financial Statements found in Part I, Item 1 of Form 10-Q/A.

As a result of the errors noted above, the Company identified a material weakness in internal control related to the accounting for derivative instruments. The Company has engaged outside accounting experts to advise it regarding the accounting for derivative instruments to ensure accounting entries are properly recorded. The Company believes this change to our system of disclosure and procedure controls will be adequate to provide reasonable assurance that the information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported correctly.

(b) Changes in internal control over financial reporting

There have been no changes in internal control over financial reporting during the nine months ended September 30, 2008 , that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting. As noted in 3(a) above, we noted a material weakness in our financial disclosure controls at March 31, 2008. We are in the process of updating our remediation process as noted in Item 3(a).

Page 19

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Michael, Annette, Christopher, and Travis Tripkovich v. Affiliated Holdings, Inc., No. 72217-F, 16th Judicial District Court, St. Martin Parish, Louisiana was filed July 6, 2007, and served on Affiliated Holdings, Inc. on July 26, 2007. The Petition alleges that Michael Tripkovich was employed as a natural gas compression technician land supervisor with American Warrior, when he was diagnosed with chronic myelogenous leukemia in January of 2006. Prior to his employment with American Warrior, Mr. Tripkovich was employed by Hanover Corporation, Energy Industries, Fusion Plus, Inc., PMSI, Inc., and Southern Maintenance, Inc., and others for approximately nineteen (19) years. At all of these places of employment, his job duties included maintaining natural gas compressors at onshore and offshore oil and gas production and collection facilities located throughout Louisiana, Texas, Mississippi and Alabama. According to the Petition, almost all of the sites inspected by Mr. Tripkovich housed glycol units, which separated water from oil and which dried natural gas.

The plaintiff contends that during the course of his employment as a natural gas compression technician land supervisor, he was exposed to radon, radon-emitting matter, benzene and benzene-containing substances, including but not limited to, glycol, condensate, toluene, xylene, natural gas, and crude oil. Specifically, he contends that he worked at and/or near natural gas production sites and glycol units, which emitted radon, radon-emitting matter, and benzene and benzene-containing substances. Further, he alleges that he became overwhelmed by radon and/or benzene fumes and was forced to inhale toxic fumes emitted from the glycol units on a daily basis. In fact, the plaintiff provides an extensive list of the glycol units on which he worked, including serial number and location, one of which he contends was owned by Affiliated Holdings, Inc. in Abbeville, Louisiana.

Mr. Tripkovich, his wife, and children are suing for past, present, and future medical bills; past, present and future physical pain and suffering; mental anguish and distress; past, present, and future lost wages and loss of earning capacity; loss of enjoyment of life; possibility and fear of death; loss of consortium and punitive damages.

At the present time, the Company is filing a formal motion for extension of time to file responsive pleadings. The Company anticipates responding to the Petition by filing Exceptions on a number of bases, including the dilatory exception vagueness and ambiguity of the Petition, the peremptory exception of prescription, and the peremptory exception of no cause of action on the issue of punitive damages (or one that will seek to limit the time frame during which punitive damages were available), among others. Additionally, the Company will file a Motion for Summary Judgment on the basis that the plaintiff’s sole remedy against Affiliated Holdings, Inc. is worker’s compensation, if the appropriate facts are elicited during the Company’s investigation of this matter. The Company was one of 113 companies identified in the suit.

We have reached a tentative settlement agreement with Mr. Tripkovich under which the Company will pay $22,000 to Mr. Tripkovich. Payment was made on October 17, 2008.

Page 20

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

Recent Sales of Unregistered Securities

None.

Page 21

ITEM 3. EXHIBITS

Exhibit No.		Description

3.1	Articles of Incorporation of Registrant, filed as an exhibit to the registration statement on Form S-2, filed with the Securities and Exchange Commission on October 13, 1981 and incorporated herein by reference.

3.2	Certificate of Amendment to Articles of Incorporation of Registrant, filed as an exhibit to the annual report on Form 10-KSB, filed with the Securities and Exchange Commission on March 6, 1998 and incorporated herein by reference.

3.3	Bylaws, as amended, filed as an exhibit to the annual report on Form 10-KSB, filed with the Securities and Exchange Commission on March 6, 1998 and incorporated herein by reference.

4.1	Securities Purchase Agreement, dated May 17, 2007, by and between Unicorp, Inc. and Cornell Capital Partners L.P., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on May 21, 2007 and incorporated herein by reference.

4.2	Secured Convertible Debenture issued to Cornell Capital Partners L.P., dated May 17, 2007, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on May 21, 2007 and incorporated herein by reference.

4.3	Registration Rights Agreement, dated May 17, 2007, by and between Unicorp, Inc. and Cornell Capital Partners L.P., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on May 21, 2007 and incorporated herein by reference.

4.4	Form of Warrant, dated May 17, 2007, issued by Unicorp, Inc. to Cornell Capital Partners L.P., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on May 21, 2007 and incorporated herein by reference.

4.5	Security Agreement, dated May 17, 2007, by and between Unicorp, Inc. and Cornell Capital Partners L.P., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on May 21, 2007 and incorporated herein by reference.

10.1	Agreement and Plan of Reorganization dated December 15, 1997 by and between Unicorp, Inc., The Laissez-Faire Group, Inc., and L. Mychal Jefferson II with respect to the exchange of all of the shares owned by L. Mychal Jefferson II in The Laissez-Faire Group, Inc. for an amount of shares of Unicorp, Inc. equal to 94 percent of the issued and outstanding shares of its capital stock, filed as an exhibit to the current report on Form 8-K, filed with the Securities and Exchange Commission on February 18, 1998 and incorporated herein by reference.

10.2	Agreement of Purchase and Sale of Assets effective as of January 1, 1998 by and between Unicorp, Inc. and Equitable Assets Incorporated with respect to purchase of 58,285.71 tons of Zeolite, filed as an exhibit to the current report on Form 8-K, filed with the Securities and Exchange Commission on April 9, 1998 and incorporated herein by reference.

10.3	Option to Acquire the Outstanding Stock of Whitsitt Oil Company, Inc. effective as of January 1, 1998 by and between Unicorp, Inc. and AZ Capital, Inc., filed as an exhibit to the current report on Form 8-K, filed with the Securities and Exchange Commission on April 9, 1998 and incorporated herein by reference.

10.4	Agreement and Plan of Reorganization dated March 1, 1999 by and between Unicorp, Inc., The Auto Axzpt.com Group, Inc. and R. Noel Rodriguez with respect to the exchange of all of ‘the shares owned by the shareholders in The Auto Axzpt.com, Inc. for shares of Unicorp, Inc., filed as an exhibit to the current report on Form 8-K, filed with the Securities and Exchange Commission on April 7, 1999 and incorporated herein by reference.

10.5	Agreement dated as of March 23, 2001, between Unicorp, Inc., Equitable Assets, Incorporated, Texas Nevada Oil & Gas Co. and Opportunity Acquisition Company, filed as an exhibit to the quarterly report on Form 10-QSB, filed with the Securities and Exchange Commission on April 16, 2002 and incorporated herein by reference.

10.6	July 31, 2001 First Amendment of Agreement dated March 23, 2001, between Unicorp, Inc., Equitable Assets, Incorporated, Texas Nevada Oil & Gas Co. and Houston American Energy Corp., filed as an exhibit to the quarterly report on Form 10-QSB, filed with the Securities and Exchange Commission on April 16, 2002 and incorporated herein by reference.

10.7	Exchange Agreement dated July 29, 2004, between Unicorp, Inc. and Affiliated Holdings, Inc., filed as an exhibit to the quarterly report on Form 10-QSB, filed with the Securities and Exchange Commission on August 5, 2004 and incorporated herein by reference.

10.8	2004 Stock Option Plan, filed as an exhibit to the definitive information statement on Schedule 14C, filed with the Securities and Exchange Commission on September 1, 2004 and incorporated herein by reference.

10.9	Employment Agreement with Kevan Casey, filed as an exhibit to the current report on Form 8-K, filed with the Securities and Exchange Commission on January 26, 2007 and incorporated herein by reference.

10.10	Employment Agreement with Carl A. Chase, filed as an exhibit to the current report on Form 8-K, filed with the Securities and Exchange Commission on January 26, 2007 and incorporated herein by reference.

10.11	Standby Equity Agreement dated as of February 3, 2006, by and between Unicorp, Inc. and Cornell Capital Partners, L.P., filed as an exhibit to the registration statement on Form SB-2, filed with the Securities and Exchange Commission on November 16, 2005 and incorporated herein by reference.

10.12	Registration Rights Agreement dated as of February 3, 2006, by and between Unicorp, Inc. and Cornell Capital Partners, LP, filed as an exhibit to the registration statement on Form SB-2, filed with the Securities and Exchange Commission on November 16, 2005 and incorporated herein by reference.

10.13	Assignment and Bill of Sale effective June 1, 2005 between Affiliated Holdings, Inc. and Jordan Oil Company, Inc., filed as an exhibit to the registration statement on Form SB-2, filed with the Securities and Exchange Commission on November 16, 2005 and incorporated herein by reference.

10.14	Assignment and Bill of Sale effective August 1, 2005 between Affiliated Holdings, Inc. and Walter Johnson, filed as an exhibit to the registration statement on Form SB-2, filed with the Securities and Exchange Commission on November 16, 2005 and incorporated herein by reference.

10.15	Participation Letter Agreement dated June 2, 2005 between Affiliated Holdings, Inc. and Jordan Oil Company, Inc., filed as an exhibit to the registration statement on Form SB-2, filed with the Securities and Exchange Commission on November 16, 2005 and incorporated herein by reference.

10.16	Participation Letter Agreement dated July 21, 2005 between Affiliated Holdings, Inc. and Jordan Oil Company, Inc., filed as an exhibit to the registration statement on Form SB-2, filed with the Securities and Exchange Commission on November 16, 2005 and incorporated herein by reference.

Page 22


10.17	Farmout Agreement dated April 12, 2005 between Affiliated Holdings, Inc. and La Mesa Partners, L.C, filed as an exhibit to the registration statement on Form SB-2, filed with the Securities and Exchange Commission on November 16, 2005 and incorporated herein by reference.

14.1	Code of Ethics, filed as an exhibit to the annual report on Form 10-KSB, filed with the Securities and Exchange Commission on April 15, 2005 and incorporated herein by reference.

21.1	List of subsidiaries, filed as an exhibit to the quarterly report on Form 10-QSB, filed with the Securities and Exchange Commission on November 22, 2004 and incorporated herein by reference.
31.1	Certification of Kevan Casey , CEO
31.2	Certification of Kevan Casey, CFO
32.1	Certification for Sarbanes-Oxley Act of Kevan Casey , CEO
32.2	Certification for Sarbanes-Oxley Act of Kevan Casey, CFO

* Indicates management contract or compensatory plan or arrangement.

Page 23

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

Signature Title Date

/s/ Kevan Casey Chief Executive Officer and Director November 19 , 2008

Kevan Casey

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