Titan Oil & Gas, Inc. - FORM 10-Q

Attached files

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EX-31.1 - Titan Oil & Gas, Inc.	form10q022811ex31-1.htm
EX-32.2 - Titan Oil & Gas, Inc.	form10q022811ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the Quarterly Period Ended February 28, 2011

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from _____________ to _____________

Commission FileNnumber: 333-153762

TITAN OIL & GAS, INC.

(Exact name of registrant as specified in its charter)

7251 West Lake Mead Boulevard, Suite 300

Las Vegas, Nevada 89128

(Address of principal executive offices) (Zip Code)

702-562-4315

(Registrant's telephone number, including area code)

_____________________________________________________________

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

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.

[X] Yes [ ] No

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

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

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [X]
(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 54,227,000 shares of common stock, $0.001 par value, issued and outstanding as of April 12, 2011.

TABLE OF CONTENTS

	Page

PART I - Financial Information	3

Item 1. Financial Statements	3
Balance Sheets February 28, 2011 (unaudited), and August 31, 2010	3
Statements of Operations (unaudited) for the three and six-month periods ended
February 28, 2011 and 2010, and for the period from inception
on June 5, 2008 to February 28, 2011.	4
Statements of Cash Flows (unaudited) for the three and six-month periods ended
February 28, 2011 and 2010, and for the period from inception
on June 5, 2008 to February 28, 2011.	5
Notes to the Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 3 Quantitative and Qualitative Disclosures About Market Risk	19
Item 4 Controls and Procedures	19

PART II – Other Information	20

Item 1. Legal Proceedings	20
Item 1A. Risk Factors	20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3. Defaults Upon Senior Securities	20
Item 4. (Removed and Reserved)	20
Item 5. Other Information	20
Item 6. Exhibits	20

Item 1. Financial Statements.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

BALANCE SHEETS

	(Unaudited)
	February 28,			August 31,
	2011			2010
ASSETS:
Current Assets:
Cash	$	408,094		$	85,701
Prepaid expenses		3,417			1,319

Total Current Assets		411,511			87,020
Oil and Gas Property Interests (note 2)		396,596			56,914

Total Assets	$	808,107		$	143,934

LIABILITIES & STOCKHOLDERS’ EQUITY:
Current Liabilities:
Accounts Payable and Accrued Liabilities	$	14,958		$	46,230

Total Current Assets		14,958			46,230

Stockholders' Equity:
Common Stock, Par Value $.001
Authorized 100,000,000 shares,
54,227,000 shares issued at February 28, 2011
(53,760,000 shares issued at August 31, 2010)		54,227			53,760
Paid-In Capital		949,695			119,496
Deficit Accumulated Since Inception of the Exploration Stage		(210,773	)		(75,552	)

Total Stockholders' Equity		793,149			97,704

Total Liabilities and Stockholders' Equity	$	808,107		$	143,934

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

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

													Cumulative
													Since
	For the Three Months						For the Six Months						June 5, 2008
	Ended						Ended						(Inception) to
	February 28,						February 28,						February 28
	2011			2010			2011			2010			2011
Revenues	$	-		$	-		$	-		$	-		$	-
Cost of Revenues		-			-			-			-			-
Gross Margin		-			-			-			-			-

Expenses:
Professional Expenses		12,819			1,750			13,069			5,750			56,719
General and Administrative		17,636			3,550			22,899			4,486			54,801
Management Fees		15,000						15,000						15,000
Stock-based Compensation		88,825						88,825						88,825
Net Loss from Operations		(134,280	)		(5,300	)		(139,793	)		(10,236	)		(215,345	)

Other Income (Expenses)
Gain on Sale of Assets		4,572			-			4,572			-			4,572
Net Other Income (Expenses)		4,572			-			4,572			-			4,572

Net Loss	$	(129,708	)	$	(5,300	)	$	(135,221	)	$	(10,236	)	$	(210,773	)

Basic and Diluted
Loss per Share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Weighted Average Shares
Outstanding		54,110,578			87,600,000			54,023,823			87,600,000

Share amounts have been adjusted to reflect the 8:1 forward stock split completed on July 23, 2010.

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

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

							Cumulative
							Since
							June 5, 2008
	For the Six-Months Ended						(Inception) to
	February 28,						February 28
	2011			2010			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(135,221	)	$	(10,236	)	$	(210,773	)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Compensation Expense of Stock Options		88,825			-			88,825
Gain on Sale of Assets		(4,572	)		-			(4,572	)
Change in Operating Assets and Liabilities:
Decrease (Increase) in Prepaid Expenses		(2,098	)		-			(3,417	)
Increase (Decrease) in Accounts Payable		(9,038	)		(1,753	)		8,133
Net Cash Used in Operating Activities		(62,104	)		(11,989	)		(121,804	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Oil and Gas Property Interests		(181,003	)		-			(194,102	)
Proceeds From Disposal of Oil and Gas Interests		15,000			-			15,000
Net Cash Used in Investing Activities		(166,003	)		-			(179,102	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Common Stock		550,500			-			709,000
Net Cash Provided by Financing Activities		550,500			-			709,000

Net (Decrease) Increase in Cash and Cash Equivalents		322,393			(11,989	)		408,094
Cash and Cash Equivalents at Beginning of Period		85,701			11,989			-
Cash and Cash Equivalents at End of Period	$	408,094		$	-		$	408,094

Cash paid during the year for:
Interest	$	-		$	-		$	-
Income taxes	$	-		$	-		$	-

Accounts payable related to oil and gas property interests	$	6,825		$	-		$	6,825

The Company has granted stock options under its stock option plan. A portion of the stock options granted relates to geological consulting and as a result a portion of the expense has been capitalized to oil and gas property interests. For the year ended August 31, 2010, all of the stock-based compensation expense of $14,756 was capitalized. The vesting period for some of these options is up to three years. As a result, the unvested portion of the options has been revalued at February 28, 2011 resulting in an additional stock-based compensation expense of $191,341 being capitalized to oil and gas property interests and $88,825 being expensed.

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

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of accounting policies for Titan Oil & Gas, Inc. (formerly Xtrasafe, Inc.) (an exploration stage company) is presented to assist in understanding the Company's financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

Organization and Basis of Presentation

Titan Oil & Gas, Inc. (formerly Xtrasafe, Inc.) (an exploration stage company) was incorporated on June 5, 2008 under the laws of the State of Florida to market and sell an electronic safe system, through wholesale distribution channels and directly to institutional buyers such as hospitals, colleges, universities, and assisted living facilities throughout the United States.

On February 25, 2010 the Company’s principal shareholder entered into a stock purchase agreement which provided for the sale of 72,000,000 shares of common stock of the Company to David Grewal. Effective as of February 25, 2010 in connection with the share acquisition, Mr. Grewal was appointed President, Chief Executive Officer, Chief Financial Officer, Treasurer, Director, and Chairman of the Company.

On March 24, 2010, Mr. Grewal, the owner of 72,000,000 shares of common stock of the Company returned 36,000,000 common shares to the Company for cancellation. Mr. Grewal returned the shares for cancellation in order to reduce the number of shares issued and outstanding. Subsequent to the cancellation, the Company had 51,600,000 shares issued and outstanding, a number that Mr. Grewal, who was also a director of the Company, considered more in line with the Company’s business plans at that time.

On April 19, 2010, Mr. Grewal, as the holder of 36,000,000 (at the time representing 67%) of the issued and outstanding shares of the Company’s common stock, provided the Company with written consent in lieu of a meeting of stockholders authorizing the Company to amend the Company’s Articles of Incorporation for the purpose of changing the name of the Company from “Xtrasafe, Inc.” to “Titan Oil & Gas, Inc.” and to change its domicile from Florida to Nevada. In order to undertake the name and domicile change, the Company incorporated a wholly-owned subsidiary in Nevada named Titan Oil & Gas, Inc. and merged Xtrasafe, Inc. with the new subsidiary. Subsequent to the merger, the Company continued as a Nevada company named Titan Oil & Gas, Inc.

In connection with the change of the Company’s name to Titan Oil & Gas, Inc. the Company’s business was changed to oil and gas exploration. The change in name, business, and domicile received its final approval by the regulatory authorities on June 30, 2010.

Nature of Operations

The Company has no products or services as of February 28, 2011. The Company was established to market and sell an electronic safe system, through wholesale distribution channels and directly to institutional buyers such as hospitals, colleges, universities, and assisted living facilities throughout the United States. On June 30, 2010 the Company received final approval to change its name to Titan Oil & Gas, Inc. and to change its business to oil and gas exploration. In Alberta, Canada the Company has acquired the petroleum and natural gas rights to a total of 2,816 hectares of land and has acquired a 2.51255% working interest in an oil well. The Company has not received any revenue from these assets at February 28, 2011.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interim Reporting

The unaudited financial information furnished herein reflects all adjustments, which in the opinion of management are necessary to fairly state the financial position of Titan Oil & Gas, Inc. and the results of its operations for the periods presented. This report on Form 10-Q should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended August 31, 2010. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in the Company’s Form 10-K for the fiscal year ended August 31, 2010 has been omitted. The results of operations for the three and six-month periods ended February 28, 2011 are not necessary indicative of results for the entire year ending August 31, 2011.

Going Concern

The accompanying financial statements have been prepared in US dollars and in accordance with accounting principles generally accepted in the United States (GAAP) on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company only commenced its oil and gas exploration activities in April 2010. Previously, the Company had been in the business of marketing and selling electronic safe systems. The Company has not realized any revenue from its present operations. During the six-months ended February 28, 2011, the Company incurred a net loss of $135,221. Since inception on June 5, 2008 the Company has an accumulated deficit of $210,773 at February 28, 2011. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

The Company's ability to continue as a going concern is dependent on its ability to develop its oil and gas properties and ultimately achieve profitable operations and to generate sufficient cash flow from financing and operations to meet its obligations as they become payable. The Company expects that it will need approximately $100,000 to fund its operations during the next twelve months which will include minimum annual property lease payments as well as the costs associated with maintaining an office. While current cash on hand is sufficient to fund operations for the next twelve months, management has plans to seek additional capital through private placements and public offering of its common stock in the future. Although there are no assurances that management’s plans will be realized, management believes that the Company will be able to continue operations in the future. Accordingly, no adjustment relating to the recoverability and classification of recorded asset amounts and the classification of liabilities has been made to the accompanying financial statements in anticipation of the Company not being able to continue as a going concern.

Management’s Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company’s management to make estimates and assumptions that affect the amounts reported in these financial statements and notes. Significant areas requiring the use of estimates relate to accrued liabilities, stock-based compensation, and the impairment of long-lived assets. Management believes the estimates utilized in preparing these financial statements are reasonable and prudent and are based on management’s best knowledge of current events and actions the Company may undertake in the future. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. At February 28, 2011, $48,260 of cash was held in trust with the Company’s land broker for the purpose of future oil and gas lease acquisitions. This cash can be returned to the Company upon request without penalty and as a result the full balance has been included in cash at February 28, 2011.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign Currency

The Company has oil and gas property interests in Canada and as a result incurs some transactions in Canadian dollars. The Company translates its Canadian dollar balances to US dollars in the following manner: assets and liabilities have been translated using the rate of exchange at the balance sheet date. The Company’s results of operations have been translated using average rates.

Concentration of Credit Risk

The Company has no off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution in the form of a demand deposit.

Loss per Share

Net income (loss) per share is computed by dividing the net income by the weighted average number of shares outstanding during the period. As of February 28, 2011, the company has outstanding common stock options of 800,000. The effects of the Company’s common stock equivalents are anti-dilutive for February 28, 2011 and 2010 and are thus not presented.

Comprehensive Income

Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.

Stock Options

Under ASC 718, Compensation-Stock Compensation, the Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding as at the date of adoption.

The Company grants stock options to non-employees for services that include researching land availability, lease acquisitions, geological consulting and geophysical services including interpretation of seismic data. These options are accounted for under ASC 505 (EITF 96-18) and were measured at the fair value of the options as determined by an option pricing model on the measurement date and recognized as the related services are provided and the options earned.

Compensation expense for unvested options to non-employees is revalued at each period end and is being amortized over the vesting period of the options.

Oil and Gas Property Payments and Exploration Costs

The Company follows the full cost method of accounting for natural gas and oil operations. Under the full cost method all costs incurred in the acquisition, exploration and development of natural gas and oil reserves are initially capitalized into cost centers on a country-by-country basis. The Company’s current cost center is located in Canada. Such costs include land acquisition costs, geological and geophysical expenditures, carrying charges on non-producing properties, costs of drilling and overhead charges directly related to acquisition, exploration and development activities.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Oil and Gas Property Payments and Exploration Costs (Continued)

Costs capitalized, together with the costs of production equipment, are depleted and amortized on the unit-of-production method based on the estimated net proved reserves, as determined by independent petroleum engineers. The Company has adopted revised oil and gas reserve estimation and disclosure requirements. The primary impact of the new disclosures is to conform the definition of proved reserves with the SEC Modernization of Oil and Gas Reporting rules, which were issued by the SEC at the end of 2008. The accounting standards update revised the definition of proved oil and gas reserves to require that the average, first-day-of-the-month price during the 12-month period before the end of the year rather than the year-end price, must be used when estimating whether reserve quantities are economical to produce. This same 12-month average price is also used in calculating the aggregate amount of (and changes in) future cash inflows related to the standardized measure of discounted future net cash flows. The percentage of total reserve volumes produced during the year is multiplied by the net capitalized investment plus future estimated development costs in those reserves. Costs of acquiring and evaluating unproved properties are initially excluded from depletion calculations. These unevaluated properties are assessed periodically to ascertain whether impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion calculations.

Under full cost accounting rules, capitalized costs, less accumulated amortization and related deferred income taxes, shall not exceed an amount (the ceiling) equal to the sum of: (i) the after tax present value of estimated future net revenues computed by applying current prices of oil and gas reserves to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on currents costs) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; (ii) the cost of properties not being amortized; and (iii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized. If unamortized costs capitalized within a cost center, less related deferred income taxes, exceed the ceiling, the excess shall be charged to expense and separately disclosed during the period in which the excess occurs. Amounts thus required to be written off shall not be reinstated for any subsequent increase in the cost center ceiling.

The Company has not recognized any revenue from its oil and gas exploration activities which commenced in April, 2010.

Impairment of Long-lived Assets

In accordance with ASC 360, Property, Plant and Equipment, long lived assets such as equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Asset Retirement Obligations

In accordance with ASC 410, Asset Retirement and Environmental Obligations the fair value of an asset retirement cost, and corresponding liability, should be recorded as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. The Company has not yet undertaken any field exploration on its properties and as such has not yet incurred an asset retirement obligation. At least annually, the Company will reassess the need to record an obligation or determine whether a change in any estimated obligation is necessary. The Company will evaluate whether there are indicators that suggest the estimated cash flows underlying the obligation have materially changed. Should those indicators suggest the estimated obligation has materially changed the Company will accordingly update its assessment. The asset retirement obligation is measured at fair value on a non-recurring basis using level 3 inputs based on discounted cash flows involving estimates, assumptions, and judgments regarding the cost, timing of settlement, credit-adjusted risk-free rate and inflation rates.

Fair Value of Financial Instruments

The book values of cash, prepaid expenses, and accounts payable approximate their respective fair values due to the short-term nature of these instruments. The fair value hierarchy under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:


	•	Level one — Quoted market prices in active markets for identical assets or liabilities;

	•	Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

	•	Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.

NOTE 2 – OIL AND GAS PROPERTY INTERESTS (Unproven)

	February 28, 2011 (Cumulative)
	Southeast Alberta			Alberta Well Interest			Total
Property acquisition and lease payments		$	151,030		$	6,043	$	157,073
Geological and geophysical (1)			238,437			1,086		239,523
Total expenditures		$	389,467		$	7,129		396,596

(1)	Balance includes total capitalized stock-based compensation expense of $206,097.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Continued)

NOTE 2 – OIL AND GAS PROPERTY INTERESTS (Unproven) (Continued)

Property Acquisitions

Between September 2 and September 30, 2010 the Company entered into six Petroleum and Natural Gas (“PN&G”) Leases (the “Leases”) in the province of Alberta, Canada. Including fees and closing costs the rights to the Leases were acquired for an aggregate $76,850 and the purchase price includes the first year’s aggregate annual lease payments of $5,360. The total area covered by the Leases is 1,536 hectares. The interests in the Leases were acquired through public land sales held on a regular basis by the Alberta provincial government. Upon being notified that it has submitted the highest bid for a specific land parcel the Company immediately pays the government the bid price and enters into a formal lease with the government. Each of the Leases are for an initial five year term, requires minimum annual lease payments, and grants the Company the right to explore for potential petroleum and natural gas opportunities on the respective lease.

On December 15, 2010 the Company acquired an interest in a PN&G Lease (the “Lease”) in the province of Alberta, Canada. The rights to the Lease were acquired for $9,484 and the purchase price includes the first year’s annual lease payments of approximately $899. The total area covered by the Lease is 256 hectares. The interests in the Lease were acquired through a public land auction process held on a regular basis by the Alberta provincial government.

On January 12, 2011, the Company acquired an interest in two PN&G Leases (the “Leases”) in the province of Alberta, Canada. The rights to the Leases were acquired for an aggregate $49,613 and the purchase price includes the first year’s aggregate annual lease payments of approximately $2,724. The total area covered by the Company’s Leases is 768 hectares. The interests in the Lease were acquired through a public land auction process held on a regular basis by the Alberta provincial government.

All of the Company’s leases are subject to royalties payable to the government of Alberta. The royalty is calculated using a revenue-less-cost formula. In years prior to the recovery of the project’s capital investment, the royalty is 1% of gross revenue. Once the project costs have been recovered, the royalty is the greater of 1% of gross revenue or 25% of net revenue.

On February 16, 2011 the Company disposed of its interest in two Petroleum and Natural Gas Leases (the “Leases”) in the province of Saskatchewan. The rights to the Leases were sold to Westpoint Energy, Inc. (“Westpoint”) for total proceeds of $15,000 resulting in a gain of $4,572. The Company sold its interests in the Leases as the Leases are located in Saskatchewan while the majority of the Company’s other assets are located in Alberta where the Company is focusing its activities. The President and CEO of the Company is also the President and CEO of Westpoint. In addition, the Company and Westpoint have a member of the Board of Directors in common.

NOTE 3 – SHARE CAPITAL

Share Issuances

On September 10, 2010 the Company closed a private placement of 200,000 common shares at $0.25 per share for a total offering price of $50,000. The common shares were offered by the Company pursuant to an exemption from registration under Regulation S of the Securities Act of 1933, as amended. The private placement was fully subscribed to by one non-U.S. person.

On January 3, 2011 the Company closed a private placement of 67,000 common shares at $1.50 per share for a total offering price of $100,500. The common shares were offered by the Company pursuant to an exemption from registration under Regulation S of the Securities Act of 1933, as amended. The private placement was fully subscribed to by one non-U.S. person.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Continued)

NOTE 3 – SHARE CAPITAL (Continued)

Share Issuances (Continued)

On January 10, 2011 the Company closed a private placement of 200,000 common shares at $2.00 per share for a total offering price of $400,000. The common shares were offered by the Company pursuant to an exemption from registration under Regulation S of the Securities Act of 1933, as amended. The private placement was fully subscribed to by one non-U.S. person.

Stock Options

On August 3, 2010 the Company adopted its 2010 Stock Option Plan (“the 2010 Plan”). The 2010 Plan provides for the granting of up to 5,000,000 stock options to key employees, directors and consultants, of common shares of the Company. Under the 2010 Plan, the granting of stock options, the exercise prices, and the option terms are determined by the Company's Option Committee, a committee designated to administer the 2010 Plan by the Board of Directors. For incentive options, the exercise price shall not be less than the fair market value of the Company's common stock on the grant date. (In the case of options granted to an employee who owns stock possessing more than 10% of the voting power of all classes of the Company's stock on the date of grant, the option price must not be less than 110% of the fair market value of common stock on the grant date.). Options granted are not to exceed terms beyond five years.

In order to exercise an option granted under the Plan, the optionee must pay the full exercise price of the shares being purchased. Payment may be made either: (i) in cash; or (ii) at the discretion of the Committee, by delivering shares of common stock already owned by the optionee that have a fair market value equal to the applicable exercise price; or (iii) with the approval of the Committee, with monies borrowed from us.

Subject to the foregoing, the Committee has broad discretion to describe the terms and conditions applicable to options granted under the Plan. The Committee may at any time discontinue granting options under the Plan or otherwise suspend, amend or terminate the Plan and may, with the consent of an optionee, make such modification of the terms and conditions of such optionee’s option as the Committee shall deem advisable.

On December 10, 2010 the Company granted 250,000 stock options at an exercise price of $1.30 to an officer of the Company. The Company used the Black-Scholes model to calculate the fair value of the stock options using the following assumptions: risk free rate – 0.17%, expected option life – 5 years, expected volatility – 92.6%, and expected dividend yield of 0%. The fair value of these options on grant date was $0.97 per option. Total stock option expense of $88,825 was recognized for the three-months ended February 28, 2011 with the entire balance being expensed as the option grant relates to management services provided to the Company. These stock options vest over a 24 month period and as a result the unvested portion of the options will be revalued in future periods.

For the year ended August 31, 2010, 550,000 stock options were granted to various consultants at an exercise price of $0.26 per share. Total stock option expense of $14,756 was recognized for the year ended August 31, 2010 with the entire balance capitalized to oil and gas property interests as the options were granted to consulting geologists. The vesting period for some of these options is up to three years. As a result, the unvested portion of the options has been revalued at February 28, 2011 resulting in an additional stock-based compensation expense of $191,341 being capitalized to oil and gas property interests. No stock options were granted in either of the three or six-month periods ended February 28, 2010.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Continued)

NOTE 3 – SHARE CAPITAL (Continued)

Stock Options (Continued)

The following table sets forth the options outstanding under the 2010 Plan as of February 28, 2011:

	Available for Grant	Options Outstanding	Weighted Average Exercise Price
Balance, August 31, 2010	4,450,000	550,000	$ 0.26
Options granted	(250,000)	250,000	$ 1.30
Balance, February 28, 2011	4,200,000	800,000	$ 0.59

The following table summarizes information concerning outstanding and exercisable common stock options under the 2010 Plan at February 28, 2011:

Exercise Prices	Options Outstanding	Remaining Contractual Life (in years)	Weighted Average Exercise Price	Number of Options Currently Exercisable	Weighted Average Exercise Price

$ 0.26	550,000	4.42	$ 0.26	75,000	$ 0.26
$ 1.30	250,000	4.75	$ 1.30	50,000	$ 1.30

	800,000			125,000

The aggregate intrinsic value of stock options outstanding at February 28, 2011 was $740,000 and the aggregate intrinsic value of stock options exercisable at February 28, 2011 was $104,250. No stock options have been exercised to date. As of February 28, 2011 there was $619,528 in unrecognized compensation expense that will be recognized over 3.0 years.

A summary of status of the Company’s unvested stock options as of February 28, 2011 under all plans is presented below:

	Number of Options		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value


Unvested at August 31, 2010		475,000	$	0.26	$	0.18
Granted		250,000	$	1.30	$	0.97
Vested		-		-		-

Unvested at February 28, 2011		725,000	$	0.62	$	0.45

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Continued)

NOTE 4 – RELATED PARTY TRANSACTIONS

During the quarter ended February 28, 2011 the Company paid its President and CEO $15,000 in management fees. The Company’s President and CEO does not have an employment contract with the Company but may be paid management fees from time-to-time. The Company pays two of its Directors $500 per month to serve on its Board of Directors. During the six-months ended February 28, 2011 the Company paid a total of $6,000 in Directors’ fees. No fees were paid during the prior period ended February 28, 2010.

NOTE 5 – SUBSEQUENT EVENT

On March 22, 2011 the Company’s offer letter for the acquisition of the Leaman property was accepted. The Leaman property consists of a 6% working interest in the petroleum and natural gas rights as well as the intangible and miscellaneous interests (collectively, the “Assets”) in 800 acres of land located in the Leaman area of Alberta, Canada (the “Leaman”). The Leaman contains six oil wells with five currently producing oil. In consideration for the Assets, the Registrant paid a land broker an aggregate CDN $140,000 (USD $144,700) plus taxes and closing costs. The closing of transaction is contemplated to be April 14, 2011 and will be completed using a General Conveyance Agreement.

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

The following discussion should be read in conjunction with the financial statements of Titan Oil & Gas, Inc. (formerly Xtrasafe, Inc.) (the “Company”), which are included elsewhere in this Form 10-Q. Certain statements contained in this report, including statements regarding the anticipated exploration and expansion of the Company's business, the intent, belief or current expectations of the Company, its directors or its officers, primarily with respect to the future operating performance of the Company and the products it expects to offer and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements. Future filings with the Securities and Exchange Commission, future press releases and future oral or written statements made by or with the approval of the Company, which are not statements of historical fact, may contain forward-looking statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. For a more detailed listing of some of the risks and uncertainties facing the Company, please see the Form 10-K for the year ended August 31, 2010 filed by the Company with the Securities and Exchange Commission.

All forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.

General

Titan Oil & Gas, Inc. was incorporated in the state of Florida on June 5, 2008 under the name Xtrasafe, Inc. to market and sell an electronic safe system, through wholesale distribution channels and directly to institutional buyers such as hospitals, colleges, universities, and assisted living facilities throughout the United States.

Effective as of September 13, 2010 the Board of Directors of Titan elected Mr. Jarnail Dhaddey President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Secretary, Treasurer and Director of the Company. Also effective as of September 13, 2010 Mr. Depinder Grewal resigned as President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Secretary, Treasurer and Director of the Company.

Oil and Gas Property Interests

Titan Oil & Gas Inc. is principally a company engaged in the acquisition and exploration of oil and gas properties.

On April 12, 2010 the Company executed a Sale and Conveyance Agreement (the “Agreement”) with 966749 Alberta Corp. (the “Vendor”) for the acquisition of a 2.51255% working interest in an oil well (the “Well”) located in Alberta, Canada. Under the Agreement the Company paid the Vendor $6,043 including taxes and closing costs. The underlying property lease is with the Alberta provincial government. The Well was initially drilled in 1998 and re-entered by Apex Energy (Canada) Inc. (”Apex”) in November 2003. To date there has been only minimal production from the well and currently the Well is not in production. Apex was the original operator but currently Harness Petroleum Inc. (“Harness”) is the operator of the Well. There are no current plans to re-enter the Well.

Also on April 12, 2010 the Company acquired an interest in two PN&G Leases (the “Leases”) in the province of Saskatchewan. Including fees and closing costs the rights to the Leases were acquired for an aggregate $9,873 and the purchase price includes the first year’s aggregate annual lease payments of $372. The total area covered by the Company’s portion of the Leases is 132 hectares. The interests in the Leases were acquired through a public land sale process held on a regular basis by the Saskatchewan provincial government. Upon being notified that it has submitted the highest bid for a specific land parcel the Company immediately pays the government the bid price and enters into a formal lease with the government. The Lease is for a 5 year term, requires minimum annual lease payments, and grants the Company the right to explore for potential petroleum and natural gas opportunities on the respective lease.

On August 19, 2010 the Company acquired an interest in one PN&G Lease (the “Lease”) in the province of Alberta, Canada. Including fees and closing costs the rights to the Lease were acquired for an aggregate $13,099 and the purchase price includes the first year’s aggregate annual lease payments of $842. The total area covered by the Lease is 256 hectares. The interest in the Lease was acquired through a public land sale process held on a regular basis by the Alberta provincial government. Upon being notified that it has submitted the highest bid for a specific land parcel the Company immediately pays the government the bid price and enters into a formal lease with the government. The Lease is for a 5 year term, requires minimum annual lease payments, and grants the Company the right to explore for potential petroleum and natural gas opportunities on the respective lease.

Between September 2 and 30, 2010 the Company entered into six additional PN&G leases (the “Leases”) with the Alberta provincial government. The terms of the Leases are the same as those previously entered into between the Company and the Alberta government. The additional leases cover a total area of 1,536 hectares and have minimum annual lease payments of $5,360.

All of the Company’s leases are subject to royalties payable to the governments of Alberta or Saskatchewan. The royalty is calculated using a revenue-less-cost formula. The leases are renewable if certain conditions are met. For all of its current properties, the Company has obtained the Petroleum and Natural Gas rights only.

On March 22, 2011 the Company’s offer letter for the acquisition of the Leaman property was accepted. The Leaman property consists of a 6% working interest in the petroleum and natural gas rights as well as the intangible and miscellaneous interests (collectively, the “Assets”) in 800 acres of land located in the Leaman area of Alberta, Canada (the “Leaman”). The Leaman contains six oil wells with five currently producing oil. In consideration for the Assets, the Company has made a deposit with a land broker of CDN $140,000 (USD $144,700) plus taxes and closing costs. The closing of transaction is contemplated to be April 14, 2011 and will be completed using a General Conveyance Agreement.

There are no proven reserves or resources of any kind on any of the Company’s properties.

Financing Over the Next Twelve Months

On January 3, 2011 the Company closed a private placement of 67,000 common shares at $1.50 per share for a total offering price of $100,500 and on January 10, 2011 the Company closed a private placement of 200,000 common shares at $2.00 per share for a total offering price of $400,000. The common shares were offered by the Company pursuant to exemptions from registration under Regulation S of the Securities Act of 1933, as amended. The private placements were fully subscribed to by non-U.S. persons. Over the next twelve months, the Company intends to explore various options for obtaining additional funding. The Company does not intend to hire any employees or to make any purchases of equipment over the next twelve months, as it intends to rely upon outside consultants to provide all the necessary expertise for any work being conducted.

Current cash on hand is sufficient for all of the Company’s commitments for the next 12 months. However, in order to further explore and develop our properties, additional funding will be required. We anticipate that the additional funding that we require will be in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund additional phases of the exploration programs, should we decide to proceed. We believe that debt financing will not be an alternative for funding any further phases in our Exploration program. The risky nature of this enterprise and lack of tangible assets places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable mine can be demonstrated. We do not have any arrangements in place for any future equity financing.

Notwithstanding, we cannot be certain that the required additional financing will be available or available on terms favorable to us. If additional funds are raised by the issuance of our equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt or other equity instruments, we may be subject to certain limitations in our operations, and issuance of such securities may have rights senior to those of the then existing holders of common stock. If adequate funds are not available or not available on acceptable terms, we may be unable to fund expansion, develop or enhance services or respond to competitive pressures.

Oil and Gas Property Interests

Our current properties are without known resources or reserves of natural gas or oil. The Company is an exploration stage company and there is no assurance that a commercially viable oil or gas deposit exists on any of our properties. Further evaluation will be required on each property before a final evaluation as to the economics and legal feasibility of any property is determined.

Results of Operations

From June 5, 2008 (inception) to February 28, 2011 we have incurred losses of $210,773 and for the six-months ended February 28, 2011 our net loss was $135,221 compared to a loss of $10,236 in the comparative period in 2010. The principal components of our losses for this period were regulatory compliance, and general and administrative costs relating to office expenses.

Revenues

We have no revenues and have only achieved losses since inception. For the three and six-month periods ended February 28, 2011 and 2010 we did not generated any revenues from our operations.

Operating Expenses

For the six-months ended February 28, 2011 our net loss was $135,221 compared to $10,236 for the corresponding period in 2010. The significant increase in the current period was due to the Company increasing its level of operations compared to the prior period. For the six-months ended February 28, 2011 we incurred $88,825 in expensed stock-based compensation, $15,000 in management fees, and $6,000 in directors’ fees while none of these items were incurred in the six-months ended February 28, 2010. General and administrative expenses increased in the current period due to an overall increase in activity.

For the three-months ended February 28, 2011 our net loss was $129,708 compared to $5,300 for the corresponding period in 2010. The significant increase in the current period was due to the Company increasing its level of operations compared to the prior period. For the three-months ended February 28, 2011 we incurred $88,825 in expensed stock-based compensation, $15,000 in management fees, and $3,000 in directors’ fees while none of these items were incurred in the six-months ended February 28, 2010. General and administrative expenses increased in the current period due to an overall increase in activity.

Other Income (Expenses)

During the quarter ended February 28, 2011 the Company disposed of its interest in two Petroleum and Natural Gas Leases in the province of Saskatchewan. The rights to the Leases were sold to Westpoint Energy, Inc. (“Westpoint”) for total proceeds of $15,000 resulting in a gain of $4,572. The Company sold its interests in the Leases as the Leases are located in Saskatchewan while the majority of the Company’s other assets are located in Alberta where the Company is focusing its activities.

Related Party Transactions

The disposal of the Saskatchewan leases was made to a related party as the President and CEO of the Company is also the President and CEO of Westpoint. In addition, the Company and Westpoint have a member of the Board of Directors in common.

Liquidity and Capital Resources

We had a cash balance of $408,094 as of February 28, 2011. We anticipate that we will incur the following expenses over the next twelve months:

·	$60,000 for operating expenses, including working capital and general, legal, accounting and administrative expenses associated with reporting requirements under the Securities Exchange Act of 1934.

·	$40,000 for annual lease payments and for the on-going assessment of our properties.

Net cash used in operating activities during the six-months ended February 28, 2011 was $62,104 compared to $11,989 during the six-months ended February 28, 2010. The increase was largely due to an increase in the net loss to $135,221 in 2011 compared to $10,236 in 2010. Partially offsetting the effect of the higher loss was a non-cash expense relating to stock-based compensation of $88,825. In the current period we also incurred outflows from the reduction in accounts payable and accrued liabilities of $9,038 while in 2010 the cash outflow was $1,753 from changes in accounts payable and accrued liabilities. Cash flows from financing activities in 2011 consisted of $550,500 received from the sale of common stock while investing activities consisted of $181,003 related to the acquisition of oil and gas property interests and $15,000 received from the disposal of the Saskatchewan leases. There were no financing or investing activities in for the six-months ended February 28, 2010.

Going Concern Consideration

As shown in the accompanying financial statements, the Company has incurred a net loss of $210,773 for the period from June 5, 2008 (inception) to February 28, 2011, and has no sales. Current cash on hand is sufficient for all of the Company’s commitments for the next 12 months. However, in order to further explore and develop our properties, additional funding will be required. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations. Management has plans to seek additional capital through a private placement and public offering of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

There is substantial doubt about our ability to continue as a going concern. Accordingly, our independent auditors included an explanatory paragraph in their report on the August 31, 2010 financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

Smaller reporting companies are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report and have concluded that our disclosure controls and procedures over financial reporting were not effective based upon the COSO criteria due to the following material weakness:

Our Company’s administration is composed of small number of administrative individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible.

In light of this material weakness, we performed additional analyses and procedures in order to conclude that our financial statements for the quarter ended February 28, 2011 included in this Quarterly Report on Form 10-Q were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the quarter ended February 28, 2011 are fairly stated, in all material respects, in accordance with US GAAP.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer (Principal Financial Officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Controls over Financial Reporting

During the most recently completed quarter ended February 28, 2011, the Company made use of a small number of administrative assistants and as a result, a limitation in the segregation of duties occurred. This weakness has been reported by the Company.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

Item 1A. Risk Factors.

Smaller reporting companies are not required to provide the information required by this Item.

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

On January 20, 2011 the Registrant closed a private placement of 200,000 common shares at $2.00 per share for a total offering price of $400,000. The common shares were offered by the Company pursuant to an exemption from registration under Regulation S of the Securities Act of 1933, as amended. The private placement was fully subscribed to by one non-U.S. person. The proceeds from this financing will be used for land acquisitions and general working capital purposes.

Item 3. Defaults upon Senior Securities.

None.

Item 4. (Removed and Reserved)

Item 5. Other information.

None.

Item 6. Exhibits.

Exhibit 31.1 – Certification of Principal Executive, Financial and Accounting Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1 – Certification of Principal Executive, Financial and Accounting Officer Pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

Date: April 12, 2011

TITAN OIL & GAS, INC.

By: /s/ Jarnail Dhaddey

Jarnail Dhaddey

President, Chief Executive

Officer, Secretary and Treasurer

(Principal Executive, Financial, and Accounting Officer)

Attached files

Titan Oil & Gas, Inc. Reports

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