10-K 1 v144491_10-k.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
 
(Mark One)
x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Fiscal Year Ended: December 2008

OR

o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from_____ to ________

File No. 333-127813

Majestic Oil & Gas, Inc.
(Name of small business issuer in our charter)

Nevada
4600
20-1673271
(State or other jurisdiction of
incorporation or organization)
(Primary Standard
Industrial Classification
Code Number)
(I.R.S. Employer
Identification Number)

P.O Box 488 Cut Bank, Montana
59427
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone 406-873-5580

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ¨  No  x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes  ¨  No  x
 
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer    Accelerated filer  ¨ Non-accelerated filer  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 aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant (based upon the closing price of the Registrant’s Common Stock as of June 30, 2008) was approximately $1.2 million (based on 7,808,000 shares of common stock outstanding on such date). Shares of the Registrant’s Common Stock held by each executive officer and director and by each entity or person that, to the Registrant’s knowledge, owned 5% or more of the Registrant’s outstanding Common Stock as of June 30, 2008 have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
 
DOCUMENTS INCORPORATED BY REFERENCE

None 
 
 
TABLE OF CONTENTS

PART I
3
Item 1. Description of Business.
3
Item 2. Description of Property.
6
Item 3. Legal Proceedings.
6
Item 4. Submission of Matters to a Vote of Security Holders.
7
PART II
7
Item 5. Market for Common Equity and Related Stockholder Matters.
7
Item 6. Management's Discussion and Analysis or Plan of Operation.
8
Item 7. Financial Statements.
13
Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
15
Item 8A. Controls and Procedures
15
Item 8B. Other Information
16
PART III
16
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.
16
Item 10. Executive Compensation.
18
Item 11. Security Ownership of Certain Beneficial Owners and Management.
19
Item 12. Certain Relationships and Related Transactions.
20
Item 13. Exhibits and Reports on Form 8-K.
20
Item 14. Audit Fees
21

 
 
Part I
 
Item 1. Description of Business. 

Business Development

We were incorporated in Nevada on April 16, 2002 as M2 Group Energy Corporation. On June 21, 2004, we changed our name to Majestic Oil & Gas, Inc. We are authorized to issue 100,000,000 shares of common stock of which 7,808,000 shares are outstanding.

We, through our wholly-owned subsidiary, Grizzly Energy, Inc., own a 25% working interest in a producing gas well on a state of Montana lease located in Section 36-T29N-R5W, Pondera County, Montana (Ludwig/State #36-1). It currently has gas reserves of 26.72 million cubic feet of Proved Net Producing Reserves, which are reserves established based upon actual production. Net Reserves are gross reserves less taxes, royalties and all expenses.

Grizzly Energy acquired the 25% working interest from Altamont Oil and Gas, Inc., a Montana corporation and an affiliate of our President, Mr. Patrick Montalban, in July 2004 for 16,000 shares of Grizzly Energy common stock. Mr. Patrick Montalban owns and manages Altamont Oil and Gas, Inc. Mr. Patrick Montalban owns and manages Grizzly Energy, Inc. Thereafter in July 2004, Majestic Oil & Gas, Inc. acquired all 16,000 issued and outstanding shares of Grizzly Energy, Inc. common stock for the issuance of 1,600,000 shares of our common stock. Prior to the sale to Majestic Oil & Gas, Inc., Altamont Oil & Gas, Inc. incurred $120,000 in the acquisition of a 50% Working Interest in this well. Altamont retained the remaining 25% interest in this well.

Majestic Oil & Gas, Inc participated in the drilling of the Boucher 27-1 with Altamont and our 33% of the proportionate share of the drilling and completion costs were $32,187. For this expenditure, we earned a 25% working interest. The Boucher 27-1 well is located in Section 27-T29N-5W, Pondera County, Montana. During 2008 the well was recompleted allowing for increased production with our share of the recompletion costs totaling $4,780. This well currently has gas reserves of 14.39 million cubic feet of Proved Net Producing Reserves.

In addition to the above two wells, Majestic Oil & Gas, Inc. participated in the drilling of the B. Ag #25-1, Vandenbos #19-1, Vandenbos #19-2 and Jody Fields #4-1 wells during the Third Quarter of 2008 and the Boucher #18-1 and Stoltz #18-1 during the Fourth Quarter 2008. The Company’s share of drilling and completion costs for these wells are as follows:

B. Ag #25-1:
  
$
46,926
  
Vandenbos #19-1:
  
$
54,728
  
Vandenbos #19-2:
  
$
15,334
  
Jody Fields #4-1:
  
$
50,000
  
Boucher #18-1
  
$
60,039
  
Stoltz #18-1
  
$
59,687
  

As a result, Majestic Oil & Gas, Inc. earned a 25% Working Interest in the B. Ag #25-1, the Vandenbos #19-1, the Jody Fields #4-1, Boucher #18-1 and the Stoltz #18-1.

The Vandenbos #19-1 was the largest gas well drilled to-date, in the Lake Frances area, with initial production of 750 MCF per day. This well currently has natural gas reserves of 40.39 million cubic feet of Proved Net Producing Reserves. The B. Ag. #25-1 well was successfully completed and is currently producing as an economical natural gas well. This well currently has natural gas reserves of 2.52 million cubic feet of Proved Net Producing Reserves. The Vandenbos #19-2 was subsequently plugged and abandoned and the Jody Fields #4-1, which was drilled as a wildcat oil well has also been plugged and abandoned. The Boucher #18-1 and  Stoltz #18-1 are also producing as economical natural gas wells.

All wells in which Majestic Oil & Gas, Inc. holds a Working Interest are operated by Altamont Oil & Gas, Inc.

We believe that all the terms of the transactions and agreements with related parties in connection with our business development as described above were comparable to terms we could have obtained from unaffiliated parties.

Business

We are engaged in the exploration, development, acquisition and operation of oil and natural gas properties. Because oil and natural gas exploration and development requires significant capital and because our assets and resources are limited, we participate in the oil and natural gas industry through the purchase of interests in either producing wells or oil and natural gas exploration and development and production projects.

3
Estimates of proved reserves may vary and, as a result, revenues from production may vary significantly from our expectations. We base our estimates of our proved oil and natural gas reserves and future net revenues from those reserves upon analyses that rely upon various assumptions, including those required by the Securities and Exchange Commission, as to natural gas prices, taxes, development expenses, capital expenses, operating expenses and availability of funds. There are numerous uncertainties inherent in estimating quantities of reserves of gas and in projecting future rates of production and the timing of development expenditures, including many factors beyond the our control. The reserve estimates in this annual report are based on various assumptions, including, for example, constant oil and natural gas prices, operating expenditures and the availability of funds, and, therefore, are inherently imprecise indications of future net cash flows. Actual future production, cash flows, taxes, operating expenses, development expenditures and quantities of recoverable oil and gas reserves may vary substantially from those in the estimates. Any significant variance in these assumptions could materially affect the estimated quantity and value of reserves set forth in this prospectus. Additionally, our reserves may be subject to downward or upward revision based upon actual production performance, results of future development and exploration, prevailing oil and gas prices and other factors, many of which are beyond our control.

As we have yet to have oil production, we have no basis for estimates of our proved oil reserves and future net revenues from those reserves.

Geologic Data

All wells in which the Company has working interests are located in the Lake Frances Prospect. The Lake Frances Prospect is approximately 10,000 acres in oil and gas leases. The Prospect is located less than three and one half miles west of the Williams Gas Field which has so far produced 4.7 billion cubic feet of gas. The Lake Frances Field is owned in majority and 100% operated by Altamont Oil & Gas, Inc, which is a company owned and managed by Patrick M. Montalban.

Geologic data indicate structural and stratagraphic traps are found along the Lake Frances trend. The Bow Island Sandstones are approximately 100 to 115 million years old and were deposited during the Cretaceous Period. The Lake Frances Bow Island is genetically a Typical Bow Island Reservoir. The depositional environment is considered to be that of a transgressive, regressive Marine, Shoreline or Near Shelf Sandstone Bar trending in a north to northwest direction. The nature of the trap is a stratagraphic pinchout. During the Bow Island deposition there were numerous transgressive, regressive events, which created discontinuous lenses of sandstone interbedded with shales.

The production zones in the Lake Frances Area are the lst Bow Island “A” Sandstone, 2nd Bow Island Sandstone, 3rd Bow Island Sandstone and 4th Bow Island “A” and “C” Sandstone. The lithology for the lst Bow Island is Sandstone, grey, fine grained, quartzose, well sorted, rounded grains, micaceous in parts. Average thickness on the lst Bow Island is Sandstone, grey, fine to medium grained, grains (glauconitic). Average thickness in the 4th Bow Island is 8 feet with porosity’s averaging from 18% to 22%. The geological sample description of the lst Bow Island in the angular to rounded, many black chert grains, trace fine pyrite and green glauconitic, calcareous.

Each Sandstone has its own porosity and permeability characteristics. When comparing the 4th Bow Island in the Williams Gas Field, it is a continuous reservoir over a large area. The 4th Bow Island in the Lake Frances Field has also proved to be a continuous reservoir with the drilling and completion of the Boucher 27-1 well. Every well that has been drilled in the Lake Frances Area has produced from the same 4th Bow Island “C” Sandstone. The drive mechanism for the Bow Island is pressure depletion. The character of Bow Island Gas is 900 to 910 BTU dry sweet methane gas.
 
The primary objective of the Jody Fields #4-1, a wildcat oil well was the Madison/Sun River Dolomite. Other potential zones of interest are the Bow Island and Sunburst Sandstones. A wildcat well is considered to be a well that is drilled, based on a large element of hope, in a frontier area where very little is known about the subsurface. The drilling of this well determined that the site is located on the upside block of a structural fault, which creates an excellent opportunity for an oil deposit. A study of the logs from offsetting wells show good oil or hydrocarbon shows in the Madison/Sun River Dolomite.

Title to Properties

We believe that we hold good and indefeasible title to our properties, in accordance with standards generally accepted in the natural gas industry. A title examination has been performed with respect to substantially all of our producing properties. Each of our leased properties represents a material portion of our holdings; and a title dispute could have adverse consequences for our production and retention of revenues from production of natural gas.

4
Our properties are subject to royalties and other customary outstanding interests. Our properties are also subject to operating agreements and current taxes. We do not believe that any of these burdens will materially interfere with the use of our properties.

Natural Gas Reserves

The following table summarizes information regarding our estimated proved natural gas reserves as of the dates indicated. All of our reserves are located in the United States. We base our estimates relating to our proved natural gas reserves and future net revenues of natural gas reserves upon reports prepared by Citadel Engineering Ltd, Petroleum Consultants. In accordance with SEC guidelines, we make the standardized and Proved Producing Reserves – 10% discount estimates of future net cash flows from proved reserves using natural gas sales prices in effect as of the dates of the estimates which are held constant throughout the life of the properties. We based our estimates of proved reserves upon the following end of the year prices: Year ended December 31, 2008


Reserve estimates are imprecise and may change as additional information becomes available. Furthermore, estimates of natural gas reserves, of necessity, are projections based on engineering data. There are uncertainties inherent in the interpretation of this data as well as the projection of future rates of production and the timing of development expenditures. Reservoir engineering is a subjective process of estimating underground accumulations of natural gas that cannot be measured in an exact way and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Reserve reports of other engineers might differ from the reports of our consultant, Citadel Engineering Ltd, Petroleum Consultants. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of this estimate. The amounts and timing of future operating and development costs may also differ from those used. You should not construe the estimated Proved Producing Reserves – 10% Discount values as representative of the fair market value of our proved natural gas properties. Proved Producing Reserves – 10% Discount values are based upon projected cash inflows at a 10% discount, which do not provide for change in natural gas prices or for escalation of expenses and capital costs. The meaningfulness of these estimates depends upon the accuracy of the assumptions upon which they were based. We evaluate natural gas reserves at constant temperature and pressure. A change in either of these factors can affect the measurement of natural gas reserves. We deduct operating costs, development costs and production-related and ad valorem taxes in arriving at the estimated future cash flows. We make no provision for income taxes, and base the estimates on operating methods and conditions prevailing as of the dates indicated. We cannot assure you that these estimates are accurate predictions of future net cash flows from natural gas reserves or their present value.

Natural Gas Sales

We sell the natural gas we produce to gas transmission companies. As is customary in the industry, virtually all of our contract pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of natural gas and prevailing supply and demand conditions, so that the price of the natural gas fluctuates to remain competitive with other available natural gas supplies. As a result, our revenues from the sale of natural gas will suffer if market prices decline and benefit if they increase. At this date, we do not currently engage in hedging transactions and do not have any contracts with future gas production under fixed price contracts.

At March 23, 2009, the weighted net average price of natural gas we produced sold at prices averaging approximately $5.01 per Thousand Cubic Feet.

A variety of factors affect the market for natural gas, including the availability of other domestic production, natural gas imports, the availability and price of alternative fuels, the proximity and capacity of natural gas pipelines, general fluctuations in the supply and demand for natural gas and the effects of state and federal regulations on natural gas production and sales. In particular, gas production and related operations are or have been subject to price controls, taxes and other laws and regulations relating to the gas industry. Failure to comply with such laws and regulations can result in substantial penalties. The regulatory burden on the gas industry increases our cost of doing business and affects its profitability. Although we believe we are in compliance with all applicable laws and regulations, because such laws and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws and regulations.

The Company has no oil production thus we have yet to establish a market. However, the Company intends to continue the pursuit of oil prospects and has plans to participate in the drilling of two additional sites offsetting the Jody Fields #4-1 well.

5
Competition

The oil and gas industry is highly competitive in all its phases. Properties in which we have an interest will encounter strong competition from many other oil and gas producers, including many that possess substantial financial resources, in acquiring economically desirable producing properties and exploratory drilling prospects, and in obtaining equipment and labor to operate and maintain their properties.
 
We are a very small company in our industry. Many of our current and potential competitors have significantly greater name recognition and more established operations and relationships with persons and entities involved in the oil and natural gas drilling and production business. We compete based upon our management’s experience in the industry.
 
Government Regulation
 
The federal government and various state and local governments have adopted laws and regulations regarding the protection of human health and the environment. These laws and regulations may require the acquisition of a permit by operators before drilling commences, prohibit drilling activities on certain lands lying within wilderness areas, wetlands, or where pollution might cause serious harm, and impose substantial liabilities for pollution resulting from drilling operations, particularly with respect to operations in onshore and offshore waters or on submerged lands. These laws and regulations may increase the costs of drilling and operating wells. Because these laws and regulations change frequently, the costs of compliance with existing and future environmental regulations cannot be predicted with certainty. We do not currently plan to engage or anticipate that in the future we will engage in exploration and production activities on federal land.

The transportation and certain sales of oil and natural gas in interstate commerce are heavily regulated by agencies of the federal government. Production of any oil and gas by properties in which we have an interest will be affected to some degree by state regulations. States have statutory provisions regulating the production and sale of oil and gas, including provisions regarding deliverability. Such statutes, and the regulations promulgated in connection therewith, are generally intended to prevent waste of oil and gas and to protect correlative rights to produce oil and gas between owners of a common reservoir. State regulatory authorities may also regulate the amount of oil and gas produced by assigning allowable rates of production to each well or proration unit.

Any exploration or production on Federal land will have to comply with the Federal Land Management Planning Act which has the effect generally of protecting the environment. Any exploration or production on private property whether owned or leased will have to comply with the Endangered Species Act and the Clean Water Act. The cost of complying with environmental concerns under any of these acts varies on a case by case basis. In many instances the cost can be prohibitive to development. Environmental costs associated with a particular project must be factored into the overall cost evaluation of whether to proceed with the project.

Research and Development Expenditures

Since inception, we have not incurred any expenditures in research or development.

Employees

We have six part-time employees, one of whom is Mr. Patrick Montalban, our President and CEO. The person supervising our day-to-day operations is Mr. Patrick Montalban. In this capacity, he currently devotes approximately 50% of his time to our business and anticipates that during the next 12 months he will devote approximately 60% of his time to Majestic Oil & Gas. As our business develops, if we raise additional funds and drill or participate in additional wells, Mr. Montalban may devote 75% of his time to our business. Mr. Montalban may have conflicts in allocating his time between our business and his other activities. Currently, Mr. Montalban receives no compensation from the Company for his services.

We have no collective bargaining agreements. We consider our relationship with our employees to be excellent.
 
Item 2. Description of Property. 

Our offices are located at 33 1st Avenue SW, Cut Bank, Montana 59427. Our telephone number is 406-873-5580. Our offices are in good condition and are sufficient to conduct our operations. This space is provided by our president at no cost.

We do not intend to renovate, improve, or develop properties. We are not subject to competitive conditions for property and currently have no property in insure. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activities.
 
Item 3. Legal Proceedings.

None
 
6
Item 4. Submission of Matters to a Vote of Security Holders.

None

PART II
 
Item 5. Market for Common Equity and Related Stockholder Matters.

Market Information

There is no established public trading market for the Company’s shares of common stock. Quotations may be obtained by researching the stock symbol “MJOG.” Various Internet quotation services detail information about daily transaction volume and price. One such service is the OTC Bulletin Board (www.otcbb.com) where a list of market makers is also detailed. The high and low range of actual transactions using the daily ending price, by quarters, for the years 2008 and 2007. 

   
High
  
Low
  
January 1 – March 31, 2007
  
$
0.51
  
$
0.19
  
April 1 – June 30, 2007
  
$
0.54
  
$
0.23
  
July 1 – September 30, 2007
  
$
0.63
  
$
0.30
  
October 1 – December 31, 2007
  
$
0.57
  
$
0.29
  
January 1 – March 31, 2008
  
$
0.55
  
$
0.26
  
April 1 – June 30, 2008
  
$
0.80
  
$
0.40
  
July 1 – September 30, 2008
  
$
0.31
  
$
0.54
  
October 1 – December 31, 2008
  
$
0.35
  
$
0.20
  

The above quotations may not reflect inter-dealer prices and should not be considered over-the-counter market quotations as that term is customarily used.

Options, Warrants, Convertible Securities

We have no outstanding warrants or options as of March 23, 2009.

The Company granted an option to buy 125,000 shares at $0.38 per share to a member of the Company’s Board of Directors on August 9, 2007. These options expired on August 9, 2008, without being exercised. The fair value of these options, $21,295, was recorded as stock compensation expense and additional paid in capital at the time the options were granted.

Penny Stock Considerations

Our shares are "penny stocks" as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus are subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:

·  Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commissions relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
·  Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
·  Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and
 
7
·  Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.

Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities.

Holders

As of the date of this registration statement, we had 33 holders of record of our common stock.

Dividends

We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the board of directors deems relevant.
 
Item 6. Management's Discussion and Analysis or Plan of Operation.

FORWARD LOOKING STATEMENTS

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, the Financial Statements of the Company and Notes thereto included elsewhere in this Report. Historical results and percentage relationships among any amounts in these financial statements are not necessarily indicative of trends in operating results for any future period. The statements, which are not historical facts contained in this Report, including this Plan of Operations, and Notes to the Financial Statements, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on currently available operating, financial and competitive information, and are subject to various risks and uncertainties. Future events and the Company's actual results may differ materially from the results reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, dependence on existing and future key strategic and strategic end-user customers, limited ability to establish new strategic relationships, ability to sustain and manage growth, variability of operating results, the Company's expansion and development of new service lines, marketing and other business development initiatives, the commencement of new engagements, competition in the industry, general economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the service requirements of its clients, the potential liability with respect to actions taken by its existing and past employees, risks associated with international sales, and other risks described herein and in the Company's other SEC filings.

The safe harbors of forward-looking statements provided by Section 21E of the Exchange Act are unavailable to issuers of penny stock. As we issued securities at a price below $5.00 per share, our shares are considered penny stock and such safe harbors set forth under the Reform Act are unavailable to us.

The following discussion of our financial condition and results of operations should be read in conjunction with the Financial Statements and Notes to the Condensed Consolidated Financial Statements appearing elsewhere in this report.

OVERVIEW

Majestic Oil & Gas, Inc is engaged in the exploration, development, acquisition and operation of oil and natural gas properties. Because oil and natural gas exploration and development requires significant capital and because our assets and resources are limited, we participate in the gas industry through the purchase of interests in either producing wells or oil and natural gas exploration, development and production projects.

Majestic Oil & Gas, Inc. is a development stage company, and as such it is difficult for us to forecast our revenues or earnings accurately. We believe that future period-to-period comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance as we have and will have no backlog of orders. Our operating results in one or more future quarters may fall below investor expectations which, assuming our common stock trades on a recognized market, would almost certainly cause the future trading price of our common stock to decline. You should read the following discussion together with the condensed consolidated financial statements and their accompanying notes, included elsewhere in the report.

8
Majestic Oil & Gas, Inc has participated in drilling programs in the Lake Frances Field during 2007 and 2008.  Four successful gas wells have been drilled to-date; the B Ag #25-1, Vandenbos #19-1, Boucher #18-1 and Stoltz #18-1.  Majestic Oil & Gas, Inc holds a 25% Working Interest in these four wells and the Company expects to see an increase in production volumes, as a result of these wells. In addition, Majestic Oil & Gas, Inc participated in the drilling of the Vandenbos #19-2 and the Jody Fields #4-1. The Vandenbos #19-2 well was subsequently plugged and abandoned, as was the Jody Fields #4-1 well, which was a wildcat oil well.

Based upon our Management's experience in the oil and natural gas industry and on recent events, including increasing global demand for energy and energy disruptions caused by natural disasters, we believe the trend in oil and gas prices will remain relatively stable or decrease slightly, but over the long-term are more likely to increase. We expect to generate positive net income from operations in the future, although our revenue and expenses will increase as we expand our drilling and ownership activities. However, the current economic crisis could have a negative impact on the Company’s revenues due to the recent decrease in oil and natural gas prices.   During the course of 2008, Majestic Oil & Gas, Inc saw a significant increase in the price received per MCF at a high of $7.71 and a dramatic decrease to a low of $3.36, as detailed under “Results of Operation.”  The current trend shows a continued decline in pricing.  The price we received for our production directly affects the amount of revenues we generate, which in turn affects the Company’s liquidity and overall financial position.


RESULTS OF OPERATIONS

Year ended December 31, 2008 vs. Year ended December 31, 2007:
   
Year Ended
December 31, 2008
    
Year Ended
December 31, 2007
  
Revenue
   $ 130,623     $ 41,189  
Expenses
   $ 199,303     $ 296,214  
Net Income (Loss)
   $ (68,680 )   $ (255,025 )

Revenues for the period ending December 31, 2008 were $130,623 compared to $41,189 for the period ending December 31, 2007. There was a large increase in the revenues between these two periods as a result of the increase in natural gas production with the drilling of two additional wells during 2008 and a full year’s production from two natural gas wells brought on line during the 4th Quarter 2007. In addition, the Company saw an increase in the price received per MCF overall. (MCF stands for the price per thousand cubic feet of natural gas)

Ludwig State 36-1
  
Share of
Production
Volumes
  
Price
Per
MCF 
  
Share of
Production
Volumes
  
Price
Per
MCF
  
   
2008
  
2007
  
January
    
284.63
    
3.91
    
426.94
    
3.57
  
February
    
265.65
    
4.45
    
365.06
    
3.53
  
March
    
261.73
    
4.98
    
397.24
    
3.83
  
April
    
255.96
    
5.36
    
378.47
    
3.50
  
May
    
255.54
    
6.33
    
370.43
    
3.67
  
June
    
246.06
    
6.75
    
339.08
    
3.80
  
July
    
243.17
    
7.71
    
348.36
    
3.60
  
August
    
240.69
    
5.90
    
336.39
    
2.95
  
September
    
225.84
    
4.52
    
309.58
    
2.55
  
October
    
243.99
    
3.47
    
310.61
    
3.07
  
November
    
229.35
    
3.39
    
265.03
    
3.78
  
December
    
242.76
    
3.36
    
278.85
    
4.06
  
 

 
9
Boucher 27-1
  
Share of
Production
Volumes
  
Price
Per
MCF
  
Share of
Production
Volumes
  
Price
Per
MCF
  
   
2008
  
2007
  
January
    
89.10
    
3.91
    
297.83
    
3.57
  
February
    
85.39
    
4.45
    
242.14
    
3.53
  
March
    
73.22
    
4.98
    
262.14
    
3.83
  
April
    
67.44
    
5.36
    
238.84
    
3.50
  
May
    
67.03
    
6.33
    
222.13
    
3.67
  
June
    
68.06
    
6.75
    
166.24
    
3.80
  
July
    
64.76
    
7.71
    
190.58
    
3.60
  
August
    
70.33
    
5.90
    
160.67
    
2.95
  
September
    
81.26
    
4.52
    
139.01
    
2.55
  
October
    
114.26
    
3.47
    
133.86
    
3.07
  
November
    
112.61
    
3.39
    
95.91
    
3.78
  
December
    
113.44
    
3.36
    
104.98
    
4.06
  
 
B. Ag #25-1
  
Share of
Production
Volumes
  
Price
Per
 MCF
  
Share of
Production
Volumes
  
Price
Per
MCF
  
   
2008
  
2007
  
January
    
40.80
    
3.91
              
February
    
41.80
    
4.45
              
March
    
42.20
    
4.98
              
April
    
42.40
    
5.36
              
May
    
41.00
    
6.33
              
June
    
39.80
    
6.75
              
July
    
41.00
    
7.71
              
August
    
39.40
    
5.90
              
September
    
37.80
    
4.52
              
October
    
40.00
    
3.47
              
November
    
37.40
    
3.39
    
21.45
    
3.78
  
December
    
37.00
    
3.36
    
51.15
    
4.06
  
 
Vandenbos #19-1
  
Share of
Production
Volumes
  
Price
Per
MCF
  
Share of
Production
Volumes
  
Price
Per
MCF
  
   
2008
  
2007
  
January
    
1792.93
    
3.91
              
Febtuary
    
1658.87
    
4.45
              
March
    
1578.84
    
4.98
              
April
    
1390.95
    
5.36
              
May
    
1328.66
    
6.33
              
June
    
1219.14
    
6.75
              
July
    
1144.48
    
7.71
              
August
    
1047.34
    
5.90
              
September
    
958.44
    
4.52
              
October
    
952.67
    
3.47
              
November
    
823.97
    
3.39
    
963.19
    
3.78
  
December
    
736.11
    
3.36
    
1,897.09
    
4.06
  
 
10
Boucher #18-1
  
Share of
Production
Volumes
  
Price
Per
MCF
  
Share of
Production
Volumes
  
Price
Per
MCF
   
2008
  
2007
January
                        
Febtuary
                        
March
                        
April
                        
May
                        
June
                        
July
                        
August
    
471.49
    
5.90
            
September
    
546.77
    
4.52
            
October
    
529.03
    
3.47
            
November
    
461.38
    
3.39
            
December
    
444.88
    
3.36
            

Stoltz #18-1
  
Share of
Production
Volumes
  
Price
Per
MCF
  
Share of
Production
Volumes
  
Price
Per
MCF
   
2008
  
2007
January
                        
Febtuary
                        
March
                        
April
                        
May
                        
June
                        
July
                        
August
    
43.27
    
5.90
            
September
    
54.03
    
4.52
            
October
    
73.13
    
3.47
            
November
    
52.61
    
3.39
            
December
    
38.80
    
3.36
            



Majestic Oil & Gas Operations, Inc’s Net Share of the production volumes from the Ludwig State #36-1, Boucher #27-1, B. Ag #25-1, Vandenbos #19-1, Boucher #18-1 and Stoltz #18-1 wells for period ending December 31, 2008 were 21,831 MCF compared to 9,313 MCF for period ending December 31, 2007. The production increased significantly, as a result of Majestic Oil & Gas, Inc’s participation in the drilling of two new wells being the Boucher #18-1 and Stoltz #18-1.  In addition, the Company realized a full year’s production from B. Ag #25-1 and Vandenbos #19-1, which were drilled during the 4th Quarter of 2007.   The Company expects to see an increase in production volumes in 2009 due to these four new wells. The Company has plans to continue its development of oil and natural gas prospects in the Lake Frances area.

Our total expenses decreased by $96,911 from the $296,214 reported for the year ending December 31, 2007 compared to the $199,303 reported for the year ending December 31, 2008. Of those expenses, Production (Lifting) Costs increased by $19,270 from $12,885 for the year ended December 31, 2007 to $32,155 for the year ended December 31, 2008. This increase was attributable to the increase in production between the two periods. There was a significant decrease in the Selling, General & Administrative Expenses of $156,539 from the $262,247 reported for the period ending December 31, 2007 compared to the $105,708 reported for the same period in 2008. The primary reason for the decrease was a decrease of $150,691 in professional fees incurred. Revenues for the period significantly increased, as a result of the increased production volumes and price per MCF.

The Company showed a Net Loss of ($68,680) for the period ending December 31, 2008. This compares to the Net Loss of ($255,025) for the period ending December 31, 2007. The variance between these periods is directly related to the increase in revenues and volumes during 2008, as well as the decrease in expenses for the period. We expect to see steady revenues during 2009, as a result of the volumes expected from the four new wells. The Companies revenues are subject to the volatility of natural gas prices, which continue to fluctuate.

The Company also plans to continue its pursuit of oil prospects in the Lake Frances Area, which if successful, could contribute to an increase in future revenues due to the price per barrel of oil. However, the price of crude oil has significantly decreased, as has the price of natural gas, since last reported.  In spite of the drop in the price of oil and Natural gas, Management is still confident that we will build the Company through continued drilling of oil and natural gas prospects.
 
11

Drilling Activity

The following table sets forth the results of our drilling activities during the years 2008 and 2007:

   
Drilling Activity
  
   
Gross Wells
  
Net Wells
  
Year
    
Total
    
Producing
    
Dry
    
Total
    
Producing
    
Dry
  
2008
    
3
    
2
    
1
    
0.75
    
0.50
    
0.25
  
2007
    
3
    
2
    
1
    
0.75
    
0.50
    
0.25
  
 
Net Production, Average Sales Price and Average Production Costs (Lifting)

The table below sets forth the net quantities of oil and gas production (net of all royalties, overriding royalties and production due to others) attributable to the Company for the years 2008 and 2007, and the average sales price, and average production costs (including depreciation, depletion and amortization, lease operating costs and all associated taxes) on a per unit of production basis:

   
2008
  
2007
  
Net Production
              
Oil (Bbls)
    
-
        
Gas (Mcf)
    
21,831
    
9,313.2
  
               
Average Sales Prices
          
-
  
Oil (per Bbl)
  
$
    
$
    
Gas (per Mcf)
  
$
5.98
  
$
4.42
  
               
Average Production Cost Per MCF
  
$
1.47
  
$
1.38
  
 
LIQUIDITY AND RESOURCE CAPITAL

We are still a development stage company. From our inception to December 31, 2008, we incurred an accumulated deficit of ($623,814). This deficit is primarily the result of approximately $300,000 in expenses associated with stock issuances during fiscal year ended December 31, 2002, and $266,868 in legal, accounting and filing fees incurred since inception associated with being a publicly traded company. As of December 31, 2008, we had $79,790 of current cash available. Our cash resources of $79,790 are not sufficient to satisfy our cash requirements over the next 12 months.
 
We need an additional minimum of $1,000,000 to finance our planned expansion in the next 12 months, which funds will be used for drilling of development oil and natural gas wells in the Lake Frances and Williams Fields. We hope to be able to raise additional funds from an offering of our stock in the future. However, this offering may not occur, or if it occurs, may not raise the required funding. We may also consider securing debt financing. We may not raise other equity or debt financing sufficient to fund this amount. If we don't raise or generate these funds, the implementation of our short-term business plan will be delayed or eliminated.

Our ability to continue as a going concern is dependent on our ability to raise funds to implement our planned development; however we may not be able to raise sufficient funds to do so. Our independent auditors have indicated that there is substantial doubt about our ability to continue as a going concern over the next twelve months. Our poor financial condition could inhibit our ability to achieve our business plan.

COMMITMENTS AND CONTINGENCIES

On July 1, 2004, the Company entered into an operating agreement with Altamont Oil & Gas, Inc., through which Altamont Oil & Gas, Inc. will operate the wells in which we have acquired a working interest. Our share of monthly operating costs will be deducted from our monthly share of production revenue.

The Company acquired leases covering approximately 3,962.56 net acres of undeveloped land during 2007, for the purposes of future oil and gas development. This acreage is located in Pondera County, Montana in the vicinity of the Williams and Lake Frances Gas Fields. These leases remain in good standing with the term of the leases being for periods of 3 or 5 years. Management considers the value of the properties to be as much or more than for what they were acquired.

During the Second Quarter 2007, the Company entered into a Farm-out Agreement with Altamont Oil & Gas, Inc and Numbers, Inc to conduct a 10-well natural gas development program. This development program is still pending and will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana. The Lake Frances Field is located south of Valier, Montana just offsetting the Lake Frances reservoir. The Williams Field is located 7 miles east of the town of Valier, Montana.
 
12
 
Item 7. Financial Statements.

 
 
 
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008 AND 2007,
AND
INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2008



 
13
 
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)

Table of Contents

 
 
 Page
   
INDEPENDENT AUDITORS’ REPORT
F-1
     
CONSOLIDATED FINANCIAL STATEMENTS
  
 
Balance Sheets
F-2
 
Income
F-3
 
Changes in Stockholders’ Equity
F-4
 
Cash Flows
F-5
 
Notes to Consolidated Financial Statements
F-6 through F-16
     
SUPPLEMENTAL INFORMATION
  
 
Disclosures about Oil and Gas Producing Activities and Properties - Unaudited
F-17 through F-20
     




 
14


Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders
Majestic Oil and Gas, Inc.
(A development stage company)
Cut Bank, Montana

We have audited the consolidated balance sheet of Majestic Oil and Gas, Inc. (a development stage company - the “Company”) as of December 31, 2008 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2008 and for the cumulative period from Inception (April 16, 2002) to December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.  The financial statements of Majestic Oil & Gas, Inc. as of December 31, 2007, were audited by other auditors whose report dated March 14, 2008, expressed an unqualified opinion on those statements

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Majestic Oil and Gas Inc. as of December 31, 2008, and the consolidated results of their operations and cash flows for the year ended December 31, 2008 and for the cumulative period from Inception (April 16, 2002) to December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1, the Company has incurred losses since inception and has only recently commenced principal operations.  These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 
Richey May & Co.
 
Englewood, Colorado
March 30, 2009
 
F-1
 
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2008 AND 2007
 
 
   
2008
    
2007
  
             
ASSETS
            
Cash and cash equivalents
   $ 79,790     $ 77,329  
Trade receivables
     24,070       17,641  
                 
Total current assets
     103,860       94,970  
                 
PROPERTY AND EQUIPMENT
                
Oil and gas properties, using the full cost pool method of
                
accounting:
                
Properties being amortized
     455,894       325,051  
Properties not subject to amortization
     138,383       124,526  
Less accumulated depletion, amortization and impairment
     (129,400 )     (68,800 )
                 
Net property and equipment
     464,877       380,777  
                 
OTHER ASSETS
                
Website development costs (less accumulated amortization)
     1,240       2,080  
                 
Total other assets
     1,240       2,080  
                 
Total assets
   $ 569,977     $ 477,827  
                 
                 
LIABILITIES
                
Accounts payable
   $ 5,708     $ 538  
Production taxes and royalties payable
     4,409       4,435  
                 
Total current liabilities
     10,117       4,973  
                 
Asset retirement obligation
     8,879       3,193  
                 
Total liabilities
     18,996       8,166  
                 
STOCKHOLDERS' EQUITY
                
Common stock, no par value-
                
 Authorized, 100,000,000 shares
                
Issued and outstanding, 7,808,000 in 2008 and
                
7,508,000 shares in 2007
     1,155,500       1,005,500  
Additional paid in capital
     21,295       21,295  
Stock subscription receivable
     (2,000 )     (2,000 )
(Deficit) accumulated during the development stage
     (623,814 )     (555,134 )
                 
      550,981       469,661  
                 
Total liabilities and stockholders' equity
   $ 569,977     $ 477,827  
 
See notes to consolidated financial statements.
F-2

MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2008 AND 2007,
AND THE PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2008
 
 
               
Inception
  
   
Year Ended
    
Year Ended
    
(April 16, 2002)
  
   
December 31,
    
December 31,
    
to December 31,
  
   
2008
    
2007
    
2008
  
                   
REVENUE
   $ 130,623     $ 41,189     $ 427,219  
                         
PRODUCTION (LIFTING) COSTS
     32,155       12,885       124,106  
EXPLORATION EXPENSES
     -       2,362       3,862  
DEPLETION, DEPRECIATION, AMORTIZATION
                        
& IMPAIRMENT
     61,440       18,720       130,660  
                         
INCOME FROM OIL & GAS PRODUCING
                        
ACTIVITIES
     37,028       7,222       168,591  
                         
SELLING, GENERAL & ADMINISTRATIVE
                        
EXPENSES
     105,708       262,247       792,405  
                         
NET LOSS
   $ (68,680 )   $ (255,025 )   $ (623,814 )
                         
                         
EARNINGS PER SHARE
                        
                         
Net income (loss), basic and diluted
   $ (0.01 )   $ (0.04 )        
                         
Weighted average number of shares
                        
outstanding
     7,739,868       6,715,595          
Dilutive potential shares-
                        
stock warrants
     -       -          
                         
Adjusted weighted average shares
     7,739,868       6,715,595          

See notes to consolidated financial statements.
 
F-3
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2008 AND 2007,
AND THE PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2008
 
  
                                     
                           
(Deficit)
        
                           
Accumulated
        
   
Common Stock
    
Additional
    
Stock
    
During
        
               
Paid In
    
Subscription
    
Development
        
   
Shares
    
Amount
    
Capital
    
Receivable
    
Stage
    
Total
  
                                     
BEGINNING BALANCE,
                                    
INCEPTION
 
                                  
(APRIL 16, 2002) TO
                                    
DECEMBER 31, 2005
     6,240,000     $ 624,000     $ -     $ -     $ (280,041 )   $ 343,959  
                                                 
Net loss
     -       -       -       -       (20,068 )     (20,068 )
                                                 
BALANCE, DECEMBER 31, 2006
     6,240,000       624,000       -       -       (300,109 )     323,891  
                                                 
Common stock issued for services
     330,000       147,000       -       -       -       147,000  
Warrants exercised
 
   938,000       234,500       -       (2,000 )     -       232,500  
Common stock options issued
  
 
 -       -       21,295       -       -       21,295  
Net loss
     -       -       -       -       (255,025 )     (255,025 )
                                                 
BALANCE, DECEMBER 31, 2007
     7,508,000       1,005,500       21,295       (2,000 )     (555,134 )     469,661  
                                                 
Common stock issued
     300,000       150,000       -       -       -       150,000  
Net loss
     -       -       -       -       (68,680 )     (68,680 )
                                                 
BALANCE, DECEMBER 31, 2008
     7,808,000     $ 1,155,500     $ 21,295     $ (2,000 )   $ (623,814 )   $ 550,981  
 
See notes to consolidated financial statements.
 
F-4
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2008 AND 2007,
AND THE PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2008
 
  
               
Inception
  
               
(April 16, 2002)
  
   
Year Ended
    
Year Ended
    
to
  
   
December 31,
    
December 31,
    
December 31,
  
   
2008
    
2007
    
2008
  
                   
OPERATING ACTIVITIES
                  
Net income (loss)
   $ (68,680 )   $ (255,025 )   $ (623,814 )
Charges and credits to net income
                        
(loss) not affecting cash
                        
  Depletion and amortization
     61,440       18,720       130,660  
  Organizational expenses paid
                        
  with stock
     -       -       300,000  
  Legal fees paid with stock
     -       147,000       172,000  
  Stock compensation expense
     -       21,295       21,295  
  Changes in assets and liabilities
                        
  Trade receivables
     (6,429 )     (9,197 )     (24,070 )
  Accounts payable
     5,170       (2,781 )     5,708  
  Production taxes and royalties
                        
  payable
     (26 )     (7,790 )     4,409  
                         
NET CASH (USED) PROVIDED BY
                        
OPERATING ACTIVITIES
     (8,525 )     (87,778 )     (13,812 )
                         
INVESTING ACTIVITIES
                        
Website development
     -       (2,500 )     (2,500 )
Additions to property and equipment
     (139,014 )     (254,197 )     (425,398 )
                         
NET CASH (USED) BY
                        
INVESTING ACTIVITIES
     (139,014 )     (256,697 )     (427,898 )
                         
FINANCING ACTIVITIES
                        
Proceeds from issuance of
                        
common stock
     150,000       232,500       521,500  
                         
NET CASH PROVIDED BY
                        
FINANCING ACTIVITIES
     150,000       232,500       521,500  
                         
NET CHANGE IN CASH AND
                        
CASH EQUIVALENTS
     2,461       (111,975 )     79,790  
                         
CASH AND CASH EQUIVALENTS
                        
AT BEGINNING OF PERIOD
     77,329       189,304       -  
                         
CASH AND CASH EQUIVALENTS
                        
AT END OF PERIOD
   $ 79,790     $ 77,329     $ 79,790  
 
See notes to consolidated financial statements.
F-5
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Principal Business Activity and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Majestic Oil & Gas, Inc. and its wholly owned subsidiary, Grizzly Energy, Inc.  All material inter-company transactions and balances between the entities have been eliminated.

Majestic Oil & Gas, Inc. (Company) is a development stage enterprise and its operations consist of oil and natural gas development and production in the Rocky Mountain region. The financial statements and notes to the financial statements are the representation of the Company’s management, who is responsible for their integrity and objectivity. The accounting polices of the Company are in accordance with generally accepted accounting principles and conform to the standards applicable to development stage enterprises.

Going Concern

The Company is in the development stage and has incurred losses since its inception that have resulted in an accumulated deficit.  Management of the Company believes it will require additional financing that it has not yet secured in order to emerge from the development stage.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management intends to vigorously pursue financing either from creditors or from a future stock offering.  However, such financing may not occur, or if it does occur, may not raise sufficient funds to emerge from the development stage. The Company’s financial statements do not include any adjustments related to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and expenses.  Actual results could differ from these estimates.

The oil and gas industry is subject, by its nature, to environmental hazards and clean up costs. At this time, management knows of no substantial losses from environmental accidents or events for which the Company may be currently liable.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between financial and income tax reporting.  The deferred tax assets and liabilities, if any, represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred income tax assets, if any, are adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, it is more likely than not such benefits will be realized.

F-6
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109.” FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with SFAS No. 109. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. Upon the adoption of FIN 48, the Company had no unrecognized tax benefits. During the years ended December 31, 2008 and 2007, the Company recognized no adjustments for uncertain tax benefits. The Company would recognize interest and penalties, if any, related to uncertain tax positions in general and administrative expenses. No interest and penalties related to uncertain tax positions were accrued at December 31, 2008. The Company expects no material changes to unrecognized tax positions within the next twelve months.

Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Trade Receivables

The Company is subject to credit risk associated with the purchases of its produced natural gas. Exposure to this risk is controlled through credit approvals and monitoring procedures. Collateral is not required. The Company believes all trade receivables currently outstanding are collectible, accordingly, no allowance for doubtful accounts has been established.

Concentrations of Credit Risk

The Company’s cash balance is maintained in a single financial institution. Also, the Company’s receivables are due from entities within the oil & gas industry and are dependent on the general economic conditions of the industry. The receivables are not collateralized.

Fair Value of Financial Instruments

The Company’s financial instruments consist of primarily of trade receivables, accounts payable and accrued production taxes and royalties. The carrying amount of trade receivables, accounts payable and accrued production taxes and royalties approximates its fair value because of the short-term maturity of such instruments
 
F-7
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
Impairment of Long-Lived Assets

Long-lived assets and identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected undiscounted future cash flows from the use of the assets and their eventual disposition is less than the carrying amount of the assets, an impairment loss is recognized and measured using the assets’ fair value or discounted cash flows.

Earnings per Share of Common Stock

Basic earnings per share is determined in accordance with Statement of Financial Accounting Standard  (SFAS) No. 128 using net income divided by the weighted average shares outstanding during the period.  Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued.  The effect of outstanding common stock warrants and options was anti-dilutive for 2008 and 2007.

Oil and Gas Properties

The Company utilizes the full cost method of accounting for oil and gas properties.  Accordingly, all costs associated with the acquisition, exploration and development of oil and gas reserves (including costs of abandoned leaseholds, delay lease rentals, dry hole costs, geological and geophysical costs, certain internal costs associated directly with acquisition, drilling and well equipment inventory, exploration and development activities, estimated dismantlement and abandonment costs, site restoration and environmental exit costs, etc.) are capitalized.

All capitalized costs of oil and gas properties, net of estimated salvage values, plus the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves.  Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs.  If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

In addition, the capitalized costs are subject to a “ceiling test” which basically limits such costs to the aggregate of the “estimated present value,” discounted at a 10-percent interest rate, of future net revenues from proved reserves, based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties.

Gains or losses are not recognized upon the sale or other disposition of oil and gas properties, unless the sale represents a significant portion of oil and gas interests and the gain significantly alters the relationship between capitalized costs and proved oil and gas reserves of the cost center.
 
F-8
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
Website Development Costs

The Company has capitalized the costs associated with development of its website, and is amortizing the cost over a three year period.

Asset Retirement Obligations

The Company follows SFAS No. 143 “Accounting for Asset Retirement Obligations”. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires recognition of the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. The liability is capitalized as part of the related asset’s carrying amount. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. The Company’s retirement obligations related to plugging, dismantlement, removal, site reclamation and similar activities of its oil and gas exploration activities.

Revenue Recognition

Revenue from the sale of oil and gas production is recognized at the time of delivery of the product to the purchaser.

Stock Based Compensation

The Company accounts for stock based compensation in accordance with SFAS No.123(R), “Share-Based Payment,” which specifies the revised accounting alternative requirements for pre-2006 stock based compensation grants existing at January 1, 2006 and the required accounting for new grants starting January 1, 2006.

The Company values its stock options awarded on or after January 1, 2006 at the fair value at grant date using the Black-Scholes option pricing model. Compensation expense for stock options is recorded over the vesting period on a straight line basis. Compensation paid in vested stock is valued at the fair value at the applicable measurement date and charged to expense at that date. The Company did not make any stock option awards prior to January 1, 2006.

During the year ended December 31, 2007, the Company incurred a one-time expense for options granted to a Director of the Company to purchase 125,000 shares at $0.38 per share. The fair value of these options, $21,295, was recorded as stock compensation expense and additional paid in capital at the time the options were granted. The fair value of these options was estimated on the date of grant using the Black-Scholes valuation model. The key input variables used in valuing these options granted in 2007 were: risk-free interest rate 5.1%; dividend yield of zero; stock price volatility of 165% based on historical volatility of the Company’s stock; and expected option lives of one half year based on stated life of the options and future expectations.

During the year ended December 31, 2008, the Company did not make any stock option awards.
 
F-9
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
Recently Issued Accounting Pronouncements
 
Effective January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurement”, which provides a framework for measuring fair value under generally accepted accounting principles. SFAS No. 157 would apply to all financial instruments that are being measured and reported on a fair value basis. Currently, the Company has no financial instruments to which this statement would apply.
 
On December 4, 2007, SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” was issued. The objective of SFAS No. 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years, and interim period within those fiscal years, beginning on or after December 15, 2008. The Company does not have a noncontrolling interest in a subsidiary at this time and cannot evaluate the impact SFAS No. 160 will have on future financial statements.
 
In March 2008, SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of SFAS No. 133” was issued. SFAS No. 161 gives financial statement users better information about he reporting entity’s hedges by providing for qualitative disclosures about the objectives and strategies for using derivatives, quantitative data bout the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. SFAS No. 161 is effective for the Company as of January 1, 2009, with early application encouraged. The adoption of this new standard is expected to have no effect on the financial and reporting disclosures of the Company.
 
In May 2008, SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” was issued. The objective of SFAS No. 162 is to identify the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). SFAS No. 162 will go into effect 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” Management is assessing the impact the adoption of SFAS No. 162 will have on the Company.
 
In December 2008 the SEC unanimously approved amendments to revise its oil and gas reserves estimation and disclosure requirements. The amendments, among other things, allows the use of new technologies to determine proved reserves; permits the optional disclosure of probable and possible reserves; modifies the prices used to estimate reserves for SEC disclosure purposes to a 12-month average instead of a period end price; and requires that if a third party is primarily responsible for preparing or auditing reserve estimates, the Company make disclosures relating to the independence and qualifications of the third party, including filing as an exhibit any report received from the third party. The revised rules are effective January 1, 2010. The new requirements do not have an impact on the Company’s 2008 financial statements.
 
F-10
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
NOTE 2 - ORGANIZATION AND DEVELOPMENT OF THE COMPANY

The Company was formed on April 16, 2002 as a corporation. The Company is a development stage enterprise and it is management’s intention that operations will ultimately consist of oil and natural gas development and production in the Rocky Mountain region. The accompanying financial statements reflect organizational activities and limited oil and gas development and production activities and they are not necessarily indicative of what the financial statements will reflect once the intended operations of the Company are fully underway.

The Company is currently traded on the Over the Counter Bulletin Board under the symbol MJOG.OB.

NOTE 3 - NON-CASH TRANSACTIONS AND BUSINESS COMBINATION

During the year ended December 31, 2007, the Company issued a total of 330,000 shares of its common stock to Michael Williams, Esq. in payment of ongoing legal fees associated with compliance with securities law. This resulted in a $147,000 charge to legal expense during the year ended December 31, 2007.

The Company follows SFAS No. 143 “Accounting for Asset Retirement Obligations”. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires recognition of the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. As of December 31, 2008, an additional asset retirement obligation of $5,686 was recorded, and a corresponding amount was added to the full cost pool bringing the total asset retirement obligation to $8,879. No accretion expense was recorded for the years ended December 31, 2008 and 2007, as it was not considered to be significant.

NOTE 4 - COMMON STOCK WARRANTS

The Company issued common stock warrants to the stockholders that purchased common stock from the Company for cash. These warrants entitle the holders to purchase additional shares of common stock from the Company for $0.25 per share. During the year ended December 31, 2007, a total of 938,000 of the 1,390,000 warrants issued and outstanding were exercised for a total of $234,500. As of December 31, 2008, $2,000 remained to be collected, and is reflected as a stock subscription receivable. The remaining 452,000 warrants expired.

The warrants were issued 1:1 for each common share purchased for cash as follows: during the years ended December 31, 2008 and 2007 no warrants were issued, and during the period from inception (April 16, 2002) through December 31, 2008 a total of 1,390,000 warrants were issued.

F-11
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
NOTE 5 - RELATED PARTY TRANSACTIONS

Altamont Oil & Gas, Inc. (Altamont), an entity related through common ownership and management, is the operator of the wells in which the Company owns its working interests.  As the operator of the wells, Altamont is responsible for remitting production taxes to the taxing authorities and royalty payments to the royalty interest owners. Currently, all revenue earned by the Company is received from Altamont. As of December 31, 2008, the Company had an outstanding receivable from Altamont of $24,070 for gas sales, and a payable to Altamont of $4,409 for production taxes and royalties.

During 2007, the Company entered into a Farm-out Agreement with Altamont Oil & Gas, Inc and Numbers, Inc., an entity related through common ownership and management, to conduct a 10-well natural gas development program.  This development program is still pending and will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana.   The Lake Frances Field is located south of Valier, Montana just offsetting the Lake Frances reservoir.  The Williams Field is located 7 miles east of the town of Valier, Montana.

NOTE 6 - INCOME TAXES

The effective income tax rate differs from the U.S. Federal statutory income tax rate due to the following:
 
   
2008
    
2007
  
             
Federal statutory income tax rate
     34.00%       34.00%  
State income tax rate
     6.75%       6.75%  
Permanent differences
                
Valuation allowance
     -40.75%       -40.75%  
                 
Effective tax rate
     0.00%       0.00%  
 
The sources of temporary differences resulting in deferred tax assets and deferred tax liabilities are as follows:
 
Deferred tax assets
            
Federal and state net operating loss carryovers
   $ 197,700     $ 93,900  
Organizational costs
     2,300       7,400  
Total deferred tax assets
     200,000       101,300  
                 
Deferred tax liabilities
                
Oil and gas properties and related equipment
     (83,600 )     (59,600 )
Total deferred tax liabilities
     (83,600 )     (59,600 )
                 
Net deferred tax asset
     116,400       41,700  
                 
Less: Valuation allowance
     (116,400 )     (41,700 )
                 
Deferred tax liability
   $ -     $ -  
 
During the years ended December 31, 2008 and 2007, the Company recorded valuation allowances that reduced the total deferred tax assets to zero. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that the carry-forwards are expected to be available to reduce taxable income. Because the Company is in the development stage, and may not achieve its desired level of profitability in its intended area of operation, a valuation allowance has been established that reduces the deferred tax asset to zero in all periods presented. There was no other activity in the valuation allowance during the years ended December 31, 2008 and 2007, or during the period from inception (April 16, 2002) to December 31, 2008.
 
F-12
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
Operating loss carry-forwards total approximately $514,000 as of December 31, 2008 and for tax purposes expire in the years 2026 through 2028.


NOTE 7 - STOCK OPTIONS

Although the Company does not have a formal stock option plan, all options granted in the past have been approved by the Board of Directors.

The Company granted a non-qualified stock option to buy 125,000 shares at $0.38 per share to a member of the Company’s Board of Directors on August 9, 2007.  These options expired on August 9, 2008, without being exercised. The Company recorded a total of $21,295 for stock compensation expense.

The following table presents the stock options outstanding at December 31:
 
         
Weighted Average
  
   
Shares
    
Exercise Price
  
Outstanding at December 31, 2007
     125,000     $ 0.38  
Granted
     -       -  
Exercised
     -       -  
Forfeited
     (125,000 )     (0.38 )
                 
Outstanding at December 31, 2008
     -     $ -  
                 
Exercisable at December 31, 2008
     -     $ -  

NOTE 8 - COMMITMENTS AND CONTINGENCIES

On July 1, 2004, the Company entered into an operating agreement with Altamont Oil & Gas, Inc., through which Altamont Oil & Gas, Inc. will operate the wells in which the Company has acquired a working interest. The payments received by the Company for its share of monthly production revenue from Altamont Oil & Gas, Inc. are net of its share of monthly operating costs and production royalty payments, both of which are paid directly by Altamont Oil & Gas, Inc.
 
 
NOTE 9 - OIL AND GAS PROPERTY ACQUISITIONS

During the year ended December 31, 2007 the Company entered into a Farm-out Agreement with Altamont and Numbers, Inc., an entity whose owner is a member of the Board of Directors of the Company, to drill a 10-well natural gas development program.  This development program will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana.  The Lake Frances Field is located south of Valier, Montana just offsetting the Lake Frances reservoir.  The Williams Field is located 7 miles east of the town of Valier, Montana. The locations for the development program were determined from information gathered from a geological and engineering study.  The surveying of each location and the permitting of each drill site with the Montana Board of Oil & Gas is currently being completed.  The Company will receive 100% of the revenues until the drilling and completion costs have been recovered, at which time the Company's interest will revert to 50%. No wells have as yet been drilled under this agreement.
 
F-13
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
The Company participated in a drilling program during late 2007 and early 2008. As part of this drilling program, the Company has a 25% working interest in the B. Ag 25-1 well, a 25% working interest in the Vandenbos 19-1 well, a 12.5% working interest in the Vandenbos 19-2 well, a 25% working interest in the Jody Fields 4-1 well, a 25% working interest in the Boucher 18-1 well, and a 25% working interest in the Stoltz 18-1 well, all of which are in Pondera County, Montana. The B. Ag 25-1 well, the Vandenbos 19-1 well, the Boucher 18-1 and the Stoltz 18-1 well are producing gas wells. The Vandenbos 19-2 well and the Jody Fields 4-1 well were dry holes.

The Company acquired a variety of oil and gas leases during the years ended December 31, 2008 and 2007, both from unrelated third parties and from Altamont. These leases are for future oil and gas development and are not part of any current drilling program. The amount paid to Altamont was the same amount originally paid by Altamont to acquire the leases.

On June 10, 2004, the Company acquired a 25% working interest the Boucher 27-1 well in Pondera County, Montana from an unrelated third party for $32,187.  The Boucher 27-1 well is a producing gas well.

On July 1, 2004, the Company acquired 100% of the outstanding stock of Grizzly Energy, Inc. from Altamont Oil & Gas, Inc., an entity related through common ownership and management. Grizzly Energy, Inc. was acquired in a stock-for-stock exchange where 100% of the outstanding shares of Grizzly Energy, Inc. were acquired for 1,600,000 shares of the Company. Grizzly Energy, Inc. owns a 25% working interest in the State 36-1 well, a producing gas well in Pondera County, Montana.
 
F-14
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
Net capitalized costs related to the Company’s oil and gas producing activities are summarized as follows as of December 31, 2007 and 2006:
 
   
2008
    
2007
  
             
Proved properties:
            
             
Capitalized costs
   $ 455,894     $ 325,051  
                 
Less accumulated depletion,
                
  depreciation, amortization
                
  and impairment
     (129,400 )     (68,800 )
                 
Net capitalized costs - proved properties
   $ 326,494     $ 256,251  
                 
Unproved properties
                
                 
Capitalized costs
     138,383       124,526  
                 
Net capitalized costs
   $ 464,877     $ 380,777  

Under the full cost method, depletion is computed on the units of production method based on proved reserves, or upon reasonable estimates where proved reserves have not been established due to the recent commencement of production. Depletion expense recognized was $60,600 and $18,300 for the years ended December 31, 2008 and 2007, respectively.

The unproved properties include a variety of lease acquisitions in Pondera County, and costs associated with an exploratory oil well in Pondera County which has not been completed. These capitalized costs associated with unproved properties have been excluded from amortization, and we do not know when they will be complete and added to the amortization base.

The Company follows SFAS No. 143 “Accounting for Asset Retirement Obligations”. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires recognition of the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. As of December 31, 2008, an asset retirement obligation of $8,879 was recorded, and a corresponding amount was added to the full cost pool. No accretion expense was recorded during the years ended December 31, 2008 and 2007, as it was not considered to be significant. As of December 31, 2007, the estimated future cost to plug and abandon the Company’s gas wells was $3,193. The estimated liability is based on historical experience in plugging and abandoning wells, estimated cost to plug and abandon wells in the future and federal and state regulatory requirements.
 
F-15
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
 
 
The following table presents the Company’s current asset retirement obligation activity in 2008:
 
Asset retirement obligations at December 31, 2007
   $ 3,193  
Liabilities incurred during the year
     5,686  
Liabilities settled during the year
     -  
Accretion expense
     -  
         
Asset retirement obligations at December 31, 2008
   $ 8,879  
 
The Company’s results of operations from oil and gas producing activities (excluding corporate overhead and financing costs) are presented below for the years ended December 31, 2008, 2007 and the period from April 16, 2002 (Inception) to December 31, 2008:
 
               
Period From
  
   
Year
    
Year
    
Inception
  
   
Ended
    
Ended
    
(April 16, 2002)
  
   
December 31,
    
December 31,
    
to
  
   
2008
    
2007
    
December 31, 2008
  
                   
Oil and gas sales
   $ 130,623     $ 41,189     $ 427,219  
Production costs
     (32,155 )     (12,885 )     (124,106 )
Depletion, depreciation
                        
  and amortization
     (60,600 )     (18,300 )     (129,400 )
                         
      37,868       10,004       173,713  
                         
Income tax provision
     -       -       -  
                         
    $ 37,868     $ 10,004     $ 173,713  

 
F-16

 
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY

 
SUPPLEMENTARY INFORMATION




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
SUPPLEMENTARY INFORMATION
DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES - UNAUDITED
DECEMBER 31, 2008 AND 2007
 
 
OIL AND GAS PRODUCING ACTIVITIES AND PROPERTIES

Net capitalized costs related to the Company’s oil and gas producing activities are summarized as follows as of December 31, 2008 and 2007:
 
   
2008
    
2007
  
             
Proved properties:
            
             
Capitalized costs
   $ 455,894     $ 325,051  
                 
Less accumulated depletion,
                
  depreciation, amortization
                
  and impairment
     (129,400 )     (68,800 )
                 
Net capitalized costs - proved properties
   $ 326,494     $ 256,251  
                 
Unproved properties
                
                 
Capitalized costs
     138,383       124,526  
                 
Net capitalized costs
   $ 464,877     $ 380,777  
 
Costs incurred in oil and gas property acquisition, exploration and development activities, including capital expenditures are summarized as follows for the years ended December 31, 2008, 2007, and the period from April 16, 2002 (Inception) to December 31, 2008:
 
               
Period From
  
   
Year
    
Year
    
Inception
  
   
Ended
    
Ended
    
(April 16, 2002)
  
   
December 31,
    
December 31,
    
to
  
   
2008
    
2007
    
December 31, 2008
  
                   
Property acquisition costs:
                  
Proved
   $ -     $ -     $ 192,187  
Unproved
     13,857       124,526       138,383  
Exploration costs
     -       13,335       13,335  
Development costs
     125,157       116,336       241,493  
Asset retirement obligation
     5,686       3,193       8,879  
                         
    $ 144,700     $ 257,390     $ 594,277  
 
F-17
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
SUPPLEMENTARY INFORMATION
DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES - UNAUDITED
DECEMBER 31, 2008 AND 2007
 
 
The Company’s results of operations from oil and gas producing activities (excluding corporate overhead and financing costs) are presented below for the years ended December 31, 2008 and 2007, and the period from April 16, 2002 (Inception) to December 31, 2008:

               
Period From
  
   
Year
    
Year
    
Inception
  
   
Ended
    
Ended
    
(April 16, 2002)
  
   
December 31,
    
December 31,
    
to
  
   
2008
    
2007
    
December 31, 2008
  
                   
Oil and gas sales
   $ 130,623     $ 41,189     $ 427,219  
Production costs
     (32,155 )     (12,885 )     (124,106 )
Depletion, depreciation
                        
  and amortization
     (60,600 )     (18,300 )     (129,400 )
                         
      37,868       10,004       173,713  
                         
Income tax provision
     -       -       -  
                         
    $ 37,868     $ 10,004     $ 173,713  
 
Estimated Quantities of Proved Oil and Gas Reserves (Unaudited)

The reserve information presented below is based upon reports prepared by the independent petroleum engineering firm of Citadel Engineering Ltd. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of mature producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. All of the Companies reserves are located in the United States.

Proved oil and gas reserves are the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

The standardized measure of discounted future net cash flows is computed by applying year-end prices of oil and gas to the estimated future production of proved oil and gas reserves, less estimated future expenditures to be incurred in developing and producing the proved reserves, less estimated future income tax expenses to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions. The estimated future net cash flows are then discounted using a rate of 10 percent a year to reflect the estimated timing of the future cash flows.
 
F-18
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
SUPPLEMENTARY INFORMATION
DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES - UNAUDITED
DECEMBER 31, 2008 AND 2007
 
 
Presented below is a summary of the changes in estimated proved reserves of the Company for the years ended December 31, 2008 and 2007:

                         
   
2008
    
2007
  
   
Oil
    
Gas
    
Oil
    
Gas
  
   
(Bbls)
    
(Mcf)
    
(Bbls)
    
(Mcf)
  
Proved reserves
                        
Beginning of the year
     -       116,462       -       81,426  
Revisions of previous estimates
     -       (10,891 )     -       (30,934 )
Improved recovery
     -       -       -       -  
Purchases of reserves in place
     -       -       -       -  
Extensions and discoveries
     -       25,708       -       75,283  
Production
     -       (21,831 )     -       (9,313 )
Sales of reserves in place
     -       -       -       -  
                                 
End of the year
     -       109,448       -       116,462  
 
All of the proved reserves currently owned by the Company are proved developed reserves. Proved developed reserves are those expected to be recovered through existing wells, equipment, and operating methods.

   
2008
    
2007
  
Standardized Measure of Discounted Future
            
  Net Cash Flows
            
Future cash inflows
   $ 479,000     $ 477,000  
Future production costs
     (44,000 )     (34,000 )
Future development costs
     (9,000 )     (5,000 )
Future income tax expenses
     (44,000 )     (44,000 )
                 
Future net cash flows
     382,000       394,000  
                 
10% annual discount for estimated
                
 timing of cash flows
     (108,000 )     (130,000 )
                 
Standardized measures of discounted future net
                
  cash flows relating to proved oil and gas reserves
   $ 274,000     $ 264,000  
 
 
F-19
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
SUPPLEMENTARY INFORMATION
DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES - UNAUDITED
DECEMBER 31, 2008 AND 2007
 
 
The following reconciles the standardized measure of discounted future net cash flow during 2008 and 2007:
 
   
2008
    
2007
  
             
Beginning of the year
   $ 264,000     $ 162,000  
Net change in prices and production costs
     79,000       (3,000 )
Extensions and discoveries
     58,000       170,000  
Revision of previous estimates
     (25,000 )     (47,000 )
Net change in estimated future development costs
     (4,000 )     10,000  
Sales of oil and gas produced, net of production costs
     (98,000 )     (28,000 )
                 
End of the year
   $ 274,000     $ 264,000  



 

 
 
 
F-20
Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None
 
ITEM 8A. CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer/Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2008. Based upon such evaluation, the Chief Executive Officer/Chief Financial Officer has concluded that, as of December 31, 2008, the Company’s disclosure controls and procedures were ineffective. This conclusion by the Company’s Chief Executive Officer/Chief Financial Officer does not relate to reporting periods after December 31, 2008.

Management’s Report on Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2008 based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission. Furthermore, due to our financial situation, we will be implementing further internal controls as we become operative so as to fully comply with the standards set by the Committee of Sponsoring Organizations of the Treadway Commission.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its evaluation as of December 31, 2008, our management concluded that our internal controls over financial reporting were ineffective as of December 31, 2008. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness relates to the lack of segregation of duties in that our CEO and CFO are the same person.  In the preparation of audited financial statements, footnotes and financial data all of our financial reporting is carried out by our Chief Financial Officer, and we do not have an audit committee or independent CEO to monitor or review the work performed.   The lack of segregation of duties results from lack of a separate Chief Financial Officer with accounting technical expertise necessary for an effective system of internal control.  We are, in fact, a small, relatively simple operation from a financial point of view. In order to mitigate this material weakness to the fullest extent possible, all financial reports are reviewed by an outside accounting firm that is not our audit firm. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. To mitigate further this material weakness to the fullest extent possible, although our CEO/CFO has identified the financial reporting risks and the controls and address and monitors the controls on an ongoing basis, our outside accounting firm that is not our audit firm performed direct tests of our internal controls and procedures in place during the year ended December 31, 2008 to identify material weaknesses that in its opinion need to be addressed. No material weaknesses, other than the material weakness identified above, were identified as a result of this testing. Finally, as soon as our finances allow, we will hire an independent Chief Financial Officer.

15
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the quarter ended December 31, 2008 that materially affected, or is reasonably likely to materially affect, the Company s internal control over financial reporting.

 
PART II - ITEM 8B. OTHER INFORMATION

None—Not Applicable
 
PART III
 
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

Name
  
Age
  
Position
Patrick M. Montalban
  
51
  
President, CEO and Director
Danny M. Mitchell
  
80
  
Corporate Secretary and Director
Bruce D. Hirsche
  
60
  
Director

Mr. Patrick M. Montalban has been our President, CEO, and director since our inception. He has been President, CEO and director of our wholly-owned subsidiary Grizzly Energy Inc. from August 2002 to date. He has been President, CEO and director of Altamont Oil and Gas which owns and operates gas producing wells in Montana from April 1999 to date. From September 2000 to January 2002 he was Director, President and CEO of Mountainview Energy Ltd. a publicly listed oil and gas company on the CDNX. From January 1999 to date, he has beenVice-President of Exploration and Production and Director for Montalban Oil & Gas Operations, Inc, a company primarily engaged in the business of the exploration and production of oil and gas properties. Previously, Mr. Montalban was a director, Executive Vice President and Chief Operating Officer of Quicksilver Resources, Inc., formerly MSR Exploration Ltd., and predecessor companies from July 1983 to January 1999. Between January, 1990 and January, 1999, Mr. Montalban was director, President and Chief Operating Officer of Gypsy Highview Gathering System Inc., a gas gathering, compression and pipeline company and subsidiary of Quicksilver Resources Inc. Mr. Montalban is currently a director Great Northern Drilling Company a private oil and gas company. He is a petroleum geologist who obtained a BA in Geology from the University of Montana in 1981. He devotes 50% of his time to our business.

Mr. Danny Mack Mitchell has been our Vice President and director since our inception. He has been President and CEO and director of Comanche Drilling Company from 1961 to date. Comanche Drilling Co. owned and operates oil and gas wells in the State of Montana from 1959 to date. Comanche Drilling has drilled over 2000 wells in the Northern Rockies from 1961 to July 2000. From 1965 to July 2000 he was President and CEO of Danco a private Pipe and Sales Company. From 1986 to July 2000 he was owner President and CEO and director of Tulsa Tool Works. Tulsa Tool Works manufactured and fabricated oil field equipment. He is a Mechanical Engineer who obtained a BS in Mechanical Engineer from Gonzaga University in 1959.

Bruce D. Hirsche, Barrister & Solicitor was appointed to the Board of Directors on December 13, 2006. Mr. Hirsche is a partner with Parlee McLaws, a law firm, specializing in Securities Law. He received his Bachelor of Law (L.L.B.) Degree in 1974 from the University of Alberta and his Masters Degree (L.L.M.) in 2003 from York University, Osgoode Hall Law School. Mr. Hirsche is currently a member of the Law Society of Alberta, the Canadian Bar Association and the Edmonton Bar Association. Mr. Hirsche is currently a Director and Officer of several public and private companies, as follows:
 
16

 
Mr. Hirsche was a Director and Officer of MSR Exploration Ltd, now Quicksilver Resources, Inc from July 1991 to September 1997. Other Directorship and Officer positions include Global Tree Technologies from January 1991 to present, Shelton Canada Corp from June 1997 to present, Rock Resources, Inc from February 2000 to July 2003, EquiTech Corporation from June 2000 to February 2004, Innovotech Inc from January 2001 to present, AltaRex Corp (now Twin Butte Energy) from May 2003 to February 2004, AltaRex Medical Corp from December 2003 to present, ViRexx Medical Corp from December 2003 to Present, Arrow Energy Ltd from September 2008 to present.

Directors serve for a one-year term. Our bylaws currently provide for a board of directors comprised of a minimum of one director.

Board Committees

We currently have no compensation committee or other board committee performing equivalent functions. Currently, all members of our board of directors participate in discussions concerning executive officer compensation.

Family Relationships
  
There are no family relationships among our officers or directors.

Legal matters

No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last five years in any of the following, except as set forth below:

 
·
Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.

 
·
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 
·
Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and

 
·
Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Section 16(a) of the Securities Exchange Act of 1934, as amended

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who beneficially own more than 10% of a registered class of the Company's equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company's securities with the SEC on Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial Ownership of Securities). Directors, executive officers and beneficial owners of more than 10% of the Company's Common Stock are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms that they file. Our directors and executive officers have filed such reports as required, except for a Form 4 for options to Mr. Hirsche, which has now been filed.

17
Item 10. Executive Compensation.

Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to our Principal Executive Officer for the years ended December 31, 2008 and 2007.

Name
Title
Year
Commission
Bonus
Stock
awards
Option
Awards
*
Non- equity
Incentive
plan
compen-sation
Non qualified
deferred
compen-sation
All other
Compen-sation
 
Total
Patrick Montalban
President
2008
0
0
0
0
0
0
0
0
Patrick Montalban
President
2007
0
0
0
0
0
0
0
0
 
Summary Equity Awards Table
 
The following table sets forth certain information for our executive officers concerning unexercised options, stock that has not vested, and equity incentive plan awards as of December 31, 2008.
 

 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END MARCH 31, 2008
Name
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
 
 
 
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
 
 
 
 
 
Equity
Incentive Plan
Awards:  
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
 
 
 
 
Option
Exercise
Price
 
 
 
 
 
 
 
 
 
 
Option
Expiration
Date
 
 
 
 
 
None
 
 
 
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
 
 
 
 
 
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
 
Equity
Incentive
Plan
Awards:
Number
Of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
Patrick Montalban
0
0
0
0
None
0
0
0
0

Narrative disclosure to summary compensation and option tables

We have no employment or other compensation agreement or arrangement with Mr. Montalban.

At no time during the last fiscal year with respect to any person listed in the Table above was there:
 
 
·
any outstanding option or other equity-based award repriced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined;
 
·
any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;
 
·
any option or equity grant;
 
·
any non-equity incentive plan award made to a named executive officer;
 
·
any nonqualified deferred compensation plans including nonqualified defined contribution plans; or
 
·
any payment for any item to be included under All Other Compensation in the Summary Compensation Table.
 
18
 
Board of Directors
 
Director Compensation
 
Name
Year ended
December 31, 2008
Fees earned or paid in cash
($)
Stock awards
($)
Option awards
($)
Non-equity
incentive plan
compensation
($)
Nonqualified deferred
compensation earnings
($)
All other compensation
($)
Total
($)
Patrick M. Montalban
0
0
0
0
0
0
0
0
Dan Mitchell
0
0
0
0
0
0
0
0
Bruce D. Hirsche
0
0
0
0
0
0
0
0
 
Narrative to Director Compensation Table
 
We have no compensation arrangements (such as fees for retainer, committee service, service as chairman of the board or a committee, and meeting attendance) with directors.
 
 Item 11. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth the ownership, as of the date of this annual report, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group. There are not any pending or anticipated arrangements that may cause a change in control.
 
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown.

Name and Address
  
Number of Shares
of Common Stock
  
Percentage
  
Patrick M. Montalban [1]
P.O Box 488 Cut Bank, Montana 59427
    
4,600,000
    
61.3
  
Danny Mitchell
P.O Box 488 Cut Bank, Montana 59427
    
90,000
    
1.2
  
Bruce Hirsche [1]
    
0
    
0.0
  
All officers and directors as a group [three persons]
    
4,690,000
    
62.5
  

 [1] Represents currently exercisable options.
 
19

 
This table is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Except as set forth above, applicable percentages are based upon 7,808,000 shares of common stock outstanding as of December 31, 2008.
 
Item 12. Certain Relationships and Related Transactions.

Grizzly Energy acquired a 25% working interest from Altamont Oil and Gas, Inc., a Montana corporation and an affiliate of our President, Mr. Patrick Montalban, in July 2004 for 16,000 shares of Grizzly Energy common stock. Mr. Patrick Montalban owns and manages Altamont Oil and Gas, Inc. Thereafter in July 2004, Majestic Oil & Gas, Inc. acquired all 16,000 issued and outstanding shares of Grizzly Energy, Inc. common stock for the issuance of 1,600,000 shares of our common stock. Prior to the sale to Majestic Oil & Gas, Inc, Altamont Oil & Gas, Inc. incurred an expense of $120,000 in the acquisition of a 50% Working Interest in this well. Altamont retained the remaining 25% interest in this well. The purpose of this transaction was to acquire the working interest.

During the period from inception (April 16, 2002) to December 31, 2002, the Company paid consulting fees totaling $28,000 to Patrick M. Montalban, President, CEO and director to the Company, for studies of various oil and natural gas prospects. There has been no other cash compensation paid to Mr. Montalban during the period from inception (April 16, 2002) through December 31, 2008 for his services to the Company.

Majestic Oil & Gas, Inc has participated in the drilling and completion of the following producing natural gas wells, earning a 25% Working Interest: Boucher #27-1, B. Ag #25-1,Vandenbos #19-1, Boucher #18-1 and Stoltz #18-1. Altamont Oil & Gas, Inc. is the operator of all the wells in which the Company owns a working interest. As the operator of the wells, Altamont is responsible for remitting production taxes to the taxing authorities and royalty payments to the royalty interest owners. The Company pays Altamont a fee of $250 per month per well as an operating fee. The purpose of this transaction was to obtain the services of an experienced operator necessary for the operation of the wells in which we have a working interest.

During the Second Quarter 2007, the Company entered into a Farm-out Agreement with Altamont Oil & Gas, Inc and Numbers, Inc, a Montana corporation and an affiliate of our Director, Mr. Bruce Hirsche, to conduct a 10-well natural gas development program. This development program is still pending and will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana. The Lake Frances Field is located south of Valier, Montana just offsetting the Lake Frances reservoir. The Williams Field is located 7 miles east of the town of Valier, Montana.

We believe the transactions and agreements with related parties were comparable to terms we could have obtained from non-affiliated parties.

We have adopted an oral policy that any opportunity to acquire or develop any oil and gas property or any working interest therein which becomes known to Mr. Montalban or Altamont will be first offered to us. As we would then develop the property or interest, and not Altamont, we would bear all the costs and receive all the profits from these properties or interests, if acquired.
 
Item 13. Exhibits and Reports on Form 8-K.

(a) List of documents filed as part of this Report:

None

(b) Exhibits:

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer, Patrick Montalban
 
32.1 Section 1350 Certification, Patrick Montalban
 
20
Item 14. Audit Fees

Audit Fees

Audit fees paid during:
      
The year ended December 31, 2008:
  
$
24,047
  
The year ended December 31, 2007:
  
$
23,400
  

No other fees as specified in Item 9(e) of Schedule 14A charged.

Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Title
  
Name
  
 Date
  
Signature
             
Principal Executive
            
Officer
  
Patrick Montalban
  
March 30, 2009
  
 /s/ Patrick Montalban
             
             
Principal Accounting
  
Patrick Montalban
  
March 30, 2009
  
 /s/ Patrick Montalban
Officer            
 
            
             
Principal Financial
            
Officer
  
Patrick Montalban
  
March 30, 2009
  
 /s/ Patrick Montalban
             

In accordance with the Exchange Act, this report has been signed below by the following persons and in the capacities and on the dates indicated.

SIGNATURE
  
NAME
  
TITLE
  
DATE
             
/s/ Patrick Montalban
  
Patrick Montalban
  
Director
  
March 30, 2009
/s/ Bruce Hirsche
  
Bruce Hirsche
  
Director
  
March 30, 2009
/s/ Danny Mitchell
  
Danny Mitchell
  
Director
  
March 30, 2009

 
21