Titan Oil & Gas, Inc. - FORM 10-K/A

Attached files

file	filename
EX-99.1 - Titan Oil & Gas, Inc.	form10ka1083111ex99-1.pdf
EX-31.1 - Titan Oil & Gas, Inc.	form10ka1083112ex31-1.htm
EX-32.1 - Titan Oil & Gas, Inc.	form10ka1083112ex32-1.htm
EX-99.1 - Titan Oil & Gas, Inc.	form10ka1083112ex99-1.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2011

Commission file number: 333-153762

TITAN OIL & GAS, INC.

(Exact name of registrant as specified in its charter)

Nevada		26-2780766
(State or Other Jurisdiction of incorporation or Organization)		(I.R.S. Employer Identification No.)

7251 West Lake Mead Boulevard, Suite 300

Las Vegas, Nevada 89128

(Address of principal executive offices)

(702) 562-4315

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

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 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 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 x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. x

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. (Check one):

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller Reporting Company x

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity as of the last business day of the registrant's most recently completed second fiscal quarter was $27,522,770.

The number of shares of the issuer’s common stock issued and outstanding as of March 29, 2012 was 54,227,000 shares.

Documents Incorporated By Reference: None

Explanatory Note

This Form 10-K/A is being filed as Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended August 31, 2011, filed with the Securities and Exchange Commission (the "SEC") on November 29, 2011 (“Original Annual Report”) for the purpose of responding to certain comments of the SEC regarding the Original Annual Report. Except for the amended disclosure set forth below, this Form 10-K/A has not been updated to reflect events that occurred after November 29, 2011, the filing date of the Original Annual Report. The Form 10-K/A includes the financial statements of the Company for the fiscal year ended August 31, 2011 along with an updated report from the Company's independent public auditors. Accordingly, this Form 10-K/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Annual Report, including any amendments to those filings. However, this Form 10-K/A includes Exhibits 31.1 and 32.1, new certifications by the Company’s Chief Executive Officer and Chief Financial Officer as required by Rule 12b-15.

Item 2. Description of Properties.

Oil and Gas Property Interests

The following table lists total capitalized costs for the Company’s properties at August 31, 2011. All of the Company’s properties are located in Alberta, Canada.

	August 31, 2011 (Cumulative)
	Southeast Alberta			Alberta Well Interest			Leaman Property				Total
	(unproven)			(unproven)			(proven)
Property acquisition and lease payments		$	167,857		$	6,043		$	149,325			$	323,225
Exploration Geological and geophysical			97,009			1,086			1,593				99,688
Asset Retirement Obligation			-			-			2,684				2,684
Accumulated Depletion			-			-			(8,317	)			(8,317	)
Total expenditures		$	264,866		$	7,129			145,285				417,280

Leaman Property

Acquisition of Interest

On April 14, 2011, the Company doing business in Alberta, Canada as TNGS Oil & Gas, Inc. entered into the General Conveyance Agreement with Huron, pursuant to which Huron conveyed to the Company a 6% working interest in the Assets in 800 acres of land located in the Leaman Property. Under the General and Conveyance Agreement, the Company began receiving its share of oil and gas revenue effective April 1, 2011. In consideration for the Assets, the Company paid Huron an aggregate CDN $140,000. Including closing costs and taxes the Leaman Property was acquired for a total of USD $148,367. The Leaman Property consists of six oil wells with five currently in production. Of the five currently in production, the Company receives revenue form four of the wells as a fifth well is currently in penalty. The one well in penalty is a result of Huron not paying its share of capital costs to the well’s operator. Huron did not pay its share of costs as the well has had minimal production to date. The Company does not expect to receive any future revenue from the well in penalty.

Description and Location of the Leaman Property

The Leaman Property consists of a 6% non-operated working interest in 800 acres of land in the Leaman area of Alberta, Canada. The Leaman Property is located 80 miles northwest of Edmonton. The Company’s rights include P&NG rights from the base of Nordegg to the Base of the Pekisko.

The following is a list of the lands acquired as part of the Leaman Property acquisition:

Lands	Company Interest	Lease No.	Expiry	Encumbrances	Wells
T57 R9W5: 31 P&NG below base Nordegg to base Pekisko	6.00%	0599070341	Continued	Crown Royalty	6-31-57-9W5 02/6-31-57-9W5 (1) 7-31-57-9W5 10-31-57-9W5 11-31-57-9W5 (1) 02/12-31-57-9W5
T58 R10W5: SE 1 P&NG below base Nordegg to base Pekisko	6.00%	0599030221	Continued	Crown Royalty

(1)	Company’s interest in the 02/6-31-57-9W5 and 11-31-57-9W5 wells is:

0% BPPO and 6.00% APPO

Facilities

Water Disposal Pipeline, Metering Equipment and facilities from 8-36-57-10W5 to 16-35-57-10W5 disposal well

3% working interest

16-35-57-10W5 disposal well

6% working interest

The wells on the Leaman Property are operated by Petrobakken Energy Ltd. (‘Petrobakken”). The Company sells the oil it receives from the Leaman Property directly to a third party and pays Petrobakken on a monthly basis for the well operating costs. Gas production has been minimal since the acquisition of Leaman by the Company

Reserves and Resources

GLJ Petroleum Consultants of Calgary, Alberta, Canada have prepared a reserve report on the Leaman Property as of March 31, 2011. The following is a summary of the reported results adjusted for the period ended August 31, 2011. All of the Company’s reserves are from the Leaman Property which is located in Alberta, Canada.

	Summary of Reserves
	August 31, 2011
	Proved Producing		Proved Plus Probable Producing
MARKETABLE RESERVES
Heavy Oil (Mbbl)
Gross Lease		131.0		153.8
Total Company Interest		6.2		7.3
Net After Royalty		5.9		6.9
Gas (MMcf)
Gross Lease		16.7		19.5
Total Company Interest		0.7		0.8
Net After Royalty		0.6		0.8
Oil Equivalent (Mbbl)
Gross Lease		133.8		157.1
Total Company Interest		6.3		7.4
Net After Royalty		6.0		7.0

The Company does not have any proved or probable undeveloped properties nor does it have any possible developed or undeveloped properties.

A copy of the amended report has been attached to this Amended Form 10-K as exhibit 99.1.

The following table shows the Company’s share of oil production in aggregate for the period from acquisition on April 1, 2011 to August 31, 2011. Gas production received by the Company has been negligible to date.

Production (1)		Sales Price (2)		Operating Costs (3)
(bbls)		($/bbl)		($/bbl)
	401		86		63

1.	Production is the Company’s 6% working interest in Leaman Wells.

2.	Average selling price is calculated based on aggregate gross sales proceeds of $34,593 for the period from April 1, 2011 to August 31, 2011 divided by barrels of oil sold.

3.	Average operating cost is calculated based on aggregate operating costs of $25,414 for the period from April 1, 2011 to August 31, 2011 divided by barrels of oil produced.

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

-:-

INDEPENDENT AUDITOR’S REPORT

August 31, 2011 and 2010

Contents		Page



Report of Independent Registered Public Accountants		7

Balance Sheets
	August 31, 2011 and 2010	8

Statements of Operations for the
	Years Ended August 31, 2011 and 2010 and the Cumulative Period
	from June 5, 2008 (inception) to August 31, 2011	9

Statement of Stockholders’ Equity
	Since June 5, 2008 (inception) to August 31, 2011	10

Statements of Cash Flows for the
	Years Ended August 31, 2011 and 2010 and the Cumulative Period
	from June 5, 2008 (inception) to August 31, 2011	11

Notes to Financial Statements		13




ROBISON, HILL & CO.				Certified Public Accountants
A PROFESSIONAL CORPORATION
				BRENT M. DAVIES, CPA
				DAVID O. SEAL, CPA
				W. DALE WESTENSKOW, CPA
				BARRY D. LOVELESS, CPA
				STEPHEN M. HALLEY, CPA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

Titan Oil & Gas, Inc.

(An Exploration Stage Company)

We have audited the accompanying balance sheets of Titan Oil & Gas, Inc. (an exploration stage company) as of August 31, 2011 and 2010 , and the related statements of operations, and cash flows for the year ended August 31, 2011 and 2010 , and the cumulative since June 5, 2008 (inception) to August 31, 2011, and the statement of stockholder’s equity since June 5, 2008 (inception) to August 31, 2011. 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.

We conducted our audits in accordance with the 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Titan Oil & Gas, Inc. (an exploration stage company) as of August 31, 2011 and 2010 , and the results of its operations and its cash flows for the year ended August 31, 2011 and 2010, and the cumulative since June 5, 2008 (inception) to August 31, 2011, 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 2 to the financial statements, the Company has incurred net losses of approximately $215,196, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

_/s/ Robison, Hill & Co.____

Certified Public Accountants

Salt Lake City, Utah

November 29, 2011

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS


	August 31,			August 31,
	2011			2010
ASSETS
Current Assets
Cash	$	195,619		$	85,701
Accounts Receivable		31,235			-
Prepaid expenses		8,054			1,319
Total Current Assets		234,908			87,020

Oil and Gas Property Interests, Net (Note 4)		417,280			56,914

Total Assets	$	652,188		$	143,934

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities	$	38,369		$	46,230
Total Current Liabilities		38,369			46,230

Long Term Liabilities
Asset Retirement Obligations (Note 5)		2,796			-
Total Long Term Liabilities		2,796			-

Total Liabilities		41,165			46,230

STOCKHOLDERS’ EQUITY
Common Stock, Par Value $.001 Authorized 100,000,000 shares, Issued 54,227,000 shares at August 31, 2011 (August 31, 2010 – 53,760,000)		54,227			53,760
Paid-In Capital		771,992			119,496
Deficit Accumulated Since Inception of Exploration Stage		(215,196	)		(75,552	)

Total Stockholders’ Equity		611,023			97,704

Total Liabilities and Stockholders’ Equity	$	652,188		$	143,934

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

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

							Cumulative
							Since
							June 5, 2008
	For the Year Ended						(Inception) to
	August 31,						August 31,
	2011			2010			2011
Revenues
Oil and Gas Revenue	$	34,593		$	-		$	34,593

Expenses
Operating Expenses		25,414			-			25,414
Depletion and Accretion		8,429			-			8,429
Professional Expenses		27,905			34,625			71,555
General and Administrative		28,686			19,663			57,588
Management Fees		15,000			-			15,000
Stock-based compensation		61,375			-			61,375
Directors’ Fees		12,000			3,000			15,000
Total Expenses		178,809			57,288			254,361
Net Loss from Operations		(144,216	)		(57,288	)		(219,768	)

Other Income (Expenses)
Gain on Sales of Assets (Note 4)		4,572			-			4,572
Net Other Income (Expense)		4,572			-			4,572

Net Loss	$	(139,644	)	$	(57,288	)	$	(215,196	)

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

Weighted Average Shares Outstanding (1)		54,126,247			72,597,479

(1) 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)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

										Deficit
										Accumulated
										During
	Common Stock						Paid-In			Exploration
	Shares(1)			Par Value			Capital			Stage			Total
Balance at June 5, 2008 (inception)		—		$	—		$	—		$	—		$	—

Common Stock Issued to Founder at $0.000125 per share, August 13, 2008		72,000,000			72,000			(63,000	)		—			9,000
Net Loss		—			—			—			(120	)		(120	)
Balance at August 31, 2008		72,000,000			72,000			(63,000	)		(120	)		8,880

Common Stock Issued for Cash at $0.00125 per share, February 27, 2009		15,600,000			15,600			3,900			—			19,500
Net Loss		—			—			—			(18,144	)		(18,144	)
Balance at August 31, 2009		87,600,000			87,600			(59,100	)		(18,264	)		10,236

Share Cancellation on March 24, 2010		(36,000,000	)		(36,000	)		36,000			—			—
Common Stock Issued at $0.025 per share, April 12, 2010		2,000,000			2,000			48,000			—			50,000
Common Stock Issued at $0.50 per share, August 18, 2010		160,000			160			79,840			—			80,000
August 2010, Compensation from the Issuance of Stock Options at Fair Market Value		—			—			14,756			—			14,756
Net Loss		—			—			—			(57,288	)		(57,288	)
Balance August 31, 2010 (Balance Carried Forward)		53,760,000			53,760			119,496			(75,552	)	$	97,704

Common Stock Issued at $0.025 per share, September 10, 2010		200,000			200			49,800			—			50,000
Common Stock Issued at $1.50 per share, January 31, 2011		67,000			67			100,433			—			100,500
Common stock issued at $2.00 per Share, January 10, 2011		200,000			200			399,800			—			400,000
August 2011, Compensation from the Issuance of Stock Options at Fair Market Value		—			—			102,463			—			102,463
Net Loss		—			—			—			(139,644	)		(139,644	)
Balance August 31, 2011		54,227,000		$	54,227		$	771,992		$	(215,196	)	$	611,023

(1) Reflects the 8:1 forward stock split completed on July 23, 2010. See Note 7.

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

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

							Cumulative
							Since
							June 5, 2008
	For the Year Ended						(Inception) to
	August 31,			August 31,			August 31,
	2011			2010			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(139,644	)	$	(57,288	)	$	(215,196	)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities
Depletion and Accretion Expense		8,429			—			8,429
Compensation Expense of Stock Options		61,375			—			61,375
Gain on Sale of Assets		(4,572	)		—			(4,572	)
Change in Operating Assets and Liabilities
(Increase) Decrease in Accounts Receivable		(31,235	)					(31,235	)
(Increase) Decrease in Prepaid Expenses		(6,735)			(1,319	)		(8,054	)
Increase (Decrease) in Accounts Payable and Accrued Liabilities		(1,230	)		15,418			15,941
Net Cash Used in Operating Activities		(113,612	)		(43,189)			(173,312	)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Oil and Gas Property Interests		(341,970	)		(13,099	)		(355,069	)
Proceeds from Disposal of Oil and Gas Interest		15,000			—			15,000
Net Cash Used in Investing Activities		(326,970	)		(13,099	)		(340,069	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of Common Stock		550,500			130,000			709,000
Net Cash Provided by Financing Activities		550,500			130,000			709,000

Net (Decrease) Increase in Cash and Cash Equivalents		109,918			73,712			195,619
Cash and Cash Equivalents at Beginning of Period		85,701			11,989			—
Cash and Cash Equivalents at End of Period	$	195,619		$	85,701		$	195,619

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

TITAN OIL & GAS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

					Cumulative
					Since
					June 5, 2008
	For the Year Ended				(Inception) to
	August 31,		August 31,		August 31,
	2011		2010		2011

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	—	$	—	$	—
Income taxes	$	—	$	—	$	—

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Accounts payable related to oil and gas property interests	$	22,428	$	29,059	$	22,428
Long Term Liabilities-Asset Retirement
Obligation	$	2,684	$	-	$	2,684

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 August 31, 2011 resulting in an additional stock-based compensation expense of $41,088 being capitalized to oil and gas property interests and $61,375 being expensed.

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

NOTE 1 – NATURE OF BUSINESS AND OPERATIONS AND BASIS OF PRESENTATION

Titan Oil & Gas, Inc. (an exploration stage company) was incorporated in the state of Florida 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.

On June 20, 2011 the Company incorporated a wholly-owned subsidiary in the province of Alberta Canada named TNGS Oil & Gas, Inc. (“TNGS”). The accompanying consolidated financial statements include the balances of TNGS.

Nature of Operations

The Company currently has a 6% working interest in four producing oil wells located in Alberta, Canada. The remaining of the Company’s oil and gas assets are not in production and do not contain any assigned resources or reserves. 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 approximately 2,816 hectares of land and has acquired a 2.51255% working interest in a non-producing oil well. In addition, the Company has acquired a 6% working interest in four producing oil wells as of August 31, 2011.

NOTE 2 – ABILITY TO CONTINUE AS A 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 acquired its first producing assets in April 2011. Previously, the Company had not realized any revenue from its oil and gas operations. During the year ended August 31, 2011, the Company incurred a net loss of $139,644. Since inception on June 5, 2008 the Company has an accumulated deficit of $215,196 to August 31, 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. Even with production form its Leaman assets it is expected that losses will continue in the future until additional producing assets can either be developed or acquired by the Company. 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. Current cash available is sufficient to fund the Company’s operations for the next twelve months. However, management has plans to seek additional capital through a private placement and public offering of its common stock. 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.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, asset retirement obligations, 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.

Reclassifications

Certain reclassifications have been made in the financial statements for the year ended August 31, 2010 to conform to accounting and financial statement presentation for the year ended August 31, 2011.

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 August 31, 2011, $3,751 (2010 - $35,711) of cash was held in trust with the Company’s land broker for the purpose of future oil and gas lease rental payments. 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 August 31, 2011.

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.

All amounts included in the accompanying financial statements and footnotes are stated in U.S. dollars.

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 all of its cash balances with two financial institutions in the form of demand deposits.

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 August 31, 2011, the company has outstanding common stock options of 800,000. The effects of the Company’s common stock equivalents are anti-dilutive for August 31, 2011 and 2010 and are thus not presented.

Comprehensive Income

The Company has adopted ASC 220 (formerly SFAS No. 130, “Reporting Comprehensive Income”), which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company has disclosed this information on its Statement of Operations. Comprehensive income is comprised of net income (loss) and all changes to capital deficit except those resulting from investments by owners and distribution 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.

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 recognized $34,593 revenue from its oil and gas exploration activities which commenced in April, 2011

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.

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.

Revenue recognition

Revenue from the production of crude oil and natural gas is recognized when title passes to the customer and when collection of the revenue is reasonably assured. The Company currently earns revenue from its 6% working interest it has in four producing wells in Alberta, Canada. The Company does not operate the wells but does currently market and sell its proportion of oil and gas produced from the wells. The customers take title when the crude oil is transferred to their pipeline.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are recognized for the future tax consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If it is determined that the realization of the future tax benefit is not more likely than not, the enterprise establishes a valuation allowance.

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.

New Accounting Pronouncements

On December 1, 2009 the Company adopted the guidance in Accounting Standards Codification (“ASC”) 805, “Business Combinations”. ASC 805 establishes principles and requirements for how the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired business; (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The adoption of this statement had no effect on the Company’s reported financial position or results of operations.

On December 1, 2009, the Company adopted the newly ratified guidance which is part of ASC 815-40, “Contracts in Entity’s Own Equity”. ASC 815-40 provides guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock. The adoption of this statement had no effect on the Company’s reported financial position or results of operations.

On December 1, 2009, the Company became subject to revised reporting requirements relating to oil and natural gas reserves that a company holds, which were prescribed by the SEC. Included in the new rule entitled ―Modernization of Oil and Gas Reporting Requirements”, are the following changes: 1) permitting use of new technologies to determine proved reserves, if those technologies have been demonstrated empirically to lead to reliable conclusions about reserve volumes; 2) enabling companies to additionally disclose their probable and possible reserves to investors, in addition to their proved reserves; 3) allowing previously excluded resources, such as oil sands, to be classified as oil and natural gas reserves rather than mining reserves; 4) requiring companies to report the independence and qualifications of a preparer or auditor, based on current Society of Petroleum Engineers criteria; 5) requiring the filing of reports for companies that rely on a third party to prepare reserve estimates or conduct a reserve audit; and 6) requiring companies to report oil and natural gas reserves using an average price based upon the prior 12-month period, rather than year-end prices. The new reporting requirements are applicable to registration statements filed on or after January 1, 2010, and for annual reports on Form 10K for fiscal years ending on or after December 31, 2009. As at August 31, 2011, the Company has proved and probable reserves and is therefore subject to the reporting requirements. The adoption of these reporting requirements will result in increased disclosures to the financial statements.

On December 1, 2009 Accounting Standards Update (ASU) No. 2010-03 ― “Oil and Gas Reserve Estimation and Disclosures.” became effective for the Company. The guidance requires additional disclosures to be made relating to current oil and gas reserve estimation. The adoption of these reporting requirements will result in increased disclosures to the financial statements as the Company has proved and probable reserves.

In April 2010, the FASB issued ASU No. 2010-17, "Revenue Recognition - Milestone Method (Topic 605): Milestone Method of Revenue Recognition" (codified within ASC 605 - Revenue Recognition). ASU 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. ASU 2010-17 is effective for interim and annual periods beginning after June 15, 2010. The adoption of this statement had no effect on the Company’s reported financial position or results of operations.

In March 2010, the FASB issued ASU No. 2010-11, "Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives" (codified within ASC 815 - Derivatives and Hedging). ASU 2010-11 improves disclosures originally required under SFAS No. 161. ASU 2010-11 is effective for interim and annual periods beginning after June 15, 2010. The adoption of this statement had no effect on the Company’s reported financial position or results of operations.

In May 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-19 (ASU 2010-19), Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have any effect on the Company’s reported financial position or results of operations.

In September 2011, the Financial Accounting Standards Board (FASB) issued an update that is intended to simplify the annual goodwill impairment assessment process by permitting a company to assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before applying the two-step goodwill impairment test. If a company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the company would be required to conduct the current two-step goodwill impairment test. This change is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011, but early adoption is permitted. The adoption of this statement is not expected to have an effect on the Company’s reported financial position or results of operations.

NOTE 4 – OIL AND GAS PROPERTY INTERESTS (Unproven)

	August 31, 2011 (Cumulative)
	Southeast Alberta			Alberta Well Interest			Leaman Property				Total
	(unproven)			(unproven)
Property acquisition and lease payments		$	167,857		$	6,043		$	149,325			$	323,225
Geological and geophysical (1)			97,009			1,086			1,593				99,688
Asset Retirement Obligation			-			-			2,684				2,684
Accumulated Depletion			-			-			(8,317	)			(8,317	)
Total expenditures		$	264,866		$	7,129			145,285				417,280

(1) Balance includes total capitalized stock-based compensation expense of $55,844.

Leaman Property

On April 14, 2011, the company entered into a general conveyance agreement (the “General Conveyance Agreement”) with Huron Energy Corporation (“Huron”), pursuant to which Huron conveyed to the Company 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”). In consideration for the Assets, the Company paid Huron an aggregate CDN $140,000. Including closing costs and taxes the Leaman was acquired for a total of USD $148,367. The Leaman consists of six oil wells with five currently in production. Of the five currently in production, the Company receives revenue form four of the wells as a fifth well is currently in penalty. The one well in penalty is a result of Huron not paying its share of capital costs to the well’s operator. Huron did not pay its share of costs as the well has had minimal production to date. The Company does not expect to receive revenue from the well in penalty. The Company has registered to do business in the province of Alberta under the name TNGS Oil & Gas, Inc. (“TNGS”). The General Conveyance Agreement has been executed through the Company’s TNGS registration.

The Company has received a reserve report on its Leaman property. Based on the report prepared by GLJ Petroleum Consultants of Calgary, Alberta, Canada, the Company’s portion of estimated proved plus probable producing resources and reserves, on an after royalty basis, is 7,400 recoverable barrels equivalent of oil. As a result $8,317 has been recorded as depletion expense at August 31, 2011. The actual recoverable number of barrels may differ materially from this estimate.

Southeast Alberta Property

On August 19, 2010 the Company acquired an interest in one Petroleum and Natural Gas (“P&NG) Lease (the “August 2010 Lease”) in the province of Alberta, Canada. Including fees and closing costs the rights to the August 2010 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 August 2010 Lease is 256 hectares.

Between September 2 and September 30, 2010 the Company entered into six additional P&NG Leases (the “September 2010 Leases”) in the province of Alberta, Canada. Including fees and closing costs the rights to the September 2010 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 September 2010 Leases is 1,536 hectares.

On December 15, 2010 the Company acquired an interest in a P&NG Lease (the “December 2010 Lease”) in the province of Alberta, Canada. The rights to the December 2010 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 December 2010 Lease is 256 hectares.

On January 12, 2011, the Company acquired an interest in two PN&G Leases (the “January 2011 Leases”) in the province of Alberta, Canada. The rights to the January 2011 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 January 2011 Leases is 768 hectares.

All of the leases comprising the Southeast Alberta Property 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.

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.

Saskatchewan Property

On April 12, 2010 the Company acquired an interest in two P&NG leases in the province of Saskatchewan (the “Saskatchewan Leases”). Including fees and closing costs the rights to the Saskatchewan Leases were acquired for an aggregate $9,873 and the purchase price included the first year’s aggregate annual lease payments of $372. The total area covered by the Company’s portion of the Saskatchewan Leases is approximately 132 hectares. The interests in the Saskatchewan 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 Saskatchewan Leases are for a 5 year term, require minimum annual lease payments, and grant the Company the right to explore for potential petroleum and natural gas opportunities on the respective lease. The Company’s Saskatchewan Leases are subject to royalties payable to the government of Saskatchewan.

On February 16, 2011 the Company disposed of its Saskatchewan Leases 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 Saskatchewan Leases as they 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.

Alberta Well Interest

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 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.

NOTE 5 – ASSET RETIREMENT OBLIGATION

As at August 31, 2011 the Company’s asset retirement obligation was comprised of its 6% working interest in the Leaman property. The Company has estimated its obligation at August 31, 2011 as $2,796 which includes $112 in accretion expense.

NOTE 6 - RELATED PARTY TRANSACTIONS

The Company currently pays two of its directors $500 per month to serve on its Board of Directors. The payments are made quarterly in advance. The total amount paid to the Directors for the year ended August 31, 2010 was $12,000 (2010 - $3,000).

NOTE 7 – SHARE CAPITAL

Common Share Transactions

On August 13, 2008, the Company issued 72,000,000 common shares at $0.000125 per share to its founder for total proceeds of $9,000.

On February 27, 2009 the Company issued 15,600,000 common shares at$0.00125 per share for total proceeds of $19,500.

On March 24, 2010, the Company’s controlling shareholder, Mr. Grewal 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 is also a director of the Company, considered more in line with the Company’s business plans at that time.

On April 12, 2010 the Company closed a private placement of 2,000,000 common shares at $0.025 per share for a total offering price of $50,000.

On August 18, 2010 the Company closed a private placement of 160,000 common shares at $0.50 per share for a total offering price of $80,000.

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.

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.

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.

Stock Splits

On April 19, 2010 the Company received a written consent in lieu of a meeting of stockholders (the “Written Consent”) from the holder of 36,000,000 (at the time representing 67%) of the issued and outstanding shares of our common stock. The Written Consent adopted the resolution to change the Company’s name to Titan Oil & Gas, Inc. In connection with the name change the Written Consent also adopted a resolution to split the Company’s common stock. The Board of Directors subsequently approved an 8:1 forward stock split. The record and payment dates of the forward split were July 22 and July 23, 2010 respectively. All of the common shares issued and outstanding on July 22, 2010 were split. All references to share and per share amounts have been restated in these financial statements to reflect the split.

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.

For the year ended August 31, 2011, 250,000 (2010 – 550,000) stock options were granted to various consultants at an exercise price of $1.30 per share. The Black-Scholes option pricing model was used to calculate to estimate the fair value of the options at the grant date. The following assumptions were made:

	2011	2010

Risk Free Rate	0.17%	0.19%
Expected Life of Option	5 years	5 years
Expected Volatility of Stock (Based on Historical Volatility)	115.6%	92.6%
Expected Dividend yield of Stock	0.00	0.00

Expected volatilities are based on industry comparables using available data and other factors due to the fact the Company’s business changed substantially from the previous electronic safe business to oil and gas exploration in 2010. When applicable, the Company will use historical data to estimate option exercise, forfeiture and employees termination within the valuation model. For non-employees, the expected term of the options approximates the full term of the options

Total stock-based compensation expense of $102, 463 (2010 - $14,756) was recognized for the year ended August 31, 2011 with $41,088 (2010 - $14,756) being capitalized to oil and gas property interests and $61,375 (2010 - $0) being expensed. The stock-based compensation expense includes expense relating to the 2011 stock option grants as well as the expense relating to the revaluation of the 2010 grants as the 2010 grants have vesting periods of up to four years.

The following table sets forth the options outstanding under the 2010 Plan as of August 31, 2011:

	Available for Grant	Options Outstanding	Weighted Average Exercise Price
Balance, August 31, 2009	-	-	$ -
Approval of 2010 Plan	5,000,000	-	-
Options granted	(550,000)	550,000	$ 0.26
Balance, August 31, 2010	4,450,000	550,000	$ 0.26
Options granted	(250,000)	250,000	$ 1.30
Balance, August 31, 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 August 31, 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	3.92	$ 0.26	200,000	$ 0.26
$ 1.30	250,000	4.25	$1.30	50,000	$1.30
	800,000			250,000

The aggregate intrinsic value of stock options outstanding at August 31, 2011 was $0 (2010 - $0) and the aggregate intrinsic value of stock options exercisable at August 31, 2011 was also $0 (2010 - $0). No stock options were exercised in 2011 or 2010. As of August 31, 2011 there was $45,031 in unrecognized compensation expense that will be recognized over three years.

A summary of status of the Company’s unvested stock options as of August 31, 2011 under all plans is presented below:

	Number of Options	Weighted Average Exercise Price	Weighted Average Grant Date Fair Value
Unvested at August 31, 2009	-	-	-
Granted	550,000	$ 0.26	$ 0.18
Vested	(75,000)	$ 0.26	$ 0.18

Unvested at August 31, 2010	475,000	$ 0.26	$ 0.18
Granted	250,000	$ 1.30	$ 0.97
Vested	(175,000)	$ 0.56	$ 0.47

Unvested at August 31, 2011	550,000	$ 0.64	$ 0.59

NOTE 8 - INCOME TAXES

Deferred tax assets of the Company are as follows:

	2011			2010
Non-capital losses carried forward		52,300			25,700
Less: valuation allowance		(52,300	)		(25,700	)
Deferred tax asset recognized		-			-

A valuation allowance has been recorded to reduce the net benefit recorded in the financial statements related to these deferred tax assets. The valuation allowance is deemed necessary as a result of the uncertainty associated with the ultimate realization of these deferred tax assets.

The provision for income tax differs from the amount computed by applying statutory federal income tax rate of 34% (2010 – 34%) to the net loss for the year. The sources and effects of the tax differences are as follows:

	2011			2010
Computed expected tax benefit		47,500			19,500
Permanent differences		(20,900	)		-
Change in valuation allowance		(26,600	)		(19,500	)
Income tax provision		-			-

As of August 31, 2011, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $153,900 (2010 - $75,600) which expire between 2028 and 2031.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

As at August 31, 2011 the Company has entered into a total of ten PN&G leases with the Alberta provincial government (Note 4). Each lease is for a period of five years and has an annual minimum lease payment of CDN $3.50 (USD $3.57) per hectare. The first year’s minimum annual lease payment is included in the initial purchase price. Therefore, the commitments at August 31, 2011 are for the balance of the respective lease term.

Total annual minimum lease payments are as follows:

Contractual Obligations	Payments due by period
	Total	Less than 1 year	1-3 years	3-5 years
Annual PN&G Lease Payments:
Southeast Alberta Property Lease	$ 39,337	$ 10,063	$ 20,126	$ 9,148
Office Lease Obligation	$ 1,494	$ 1,494	$ -	$ -
Total	$ 40,831	$ 11,557	$ 20,126	$ 9,148

Commencing March 1, 2011 the Company renewed its one-year lease for its office space at $249 per month. It is expected that the Company will renew the lease for another year when the current lease expires.

SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In December 2008, the United States Securities and Exchange Commission (SEC) released a final rule, "Modernization of Oil and Gas Reporting," which amended the oil and gas reporting requirements effective January 1, 2010. The key revisions include:

·	using a 12-month average price to determine reserves;

·	including non-traditional resources in reserves if they are intended to be upgraded to synthetic oil and gas;

·	the ability to use reliable technologies to determine and estimate reserves;

·	permitting the optional disclosure of probable and possible reserves;

·	reporting the independence and qualifications of the reserve preparer or auditor and filing a report as an exhibit when a third party is relied upon to prepare reserve estimates or conduct reserve audits; and

disclosing the development of any proved undeveloped reserves, including the total quantity of proved undeveloped reserves at year-end, material changes to proved undeveloped reserves during the year, investments and progress toward the development of proved undeveloped reserves and an explanation of the reasons why material concentrations of proved undeveloped reserves have remained undeveloped for five years or more after disclosure as proved undeveloped reserves

In January 2010, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update (ASU) No. 2010-03, "Oil and Gas Reserve Estimations and Disclosures" (ASU 2010-03). ASU 2010-03 aligns the current oil and gas reserve estimation and disclosure requirements of the Extractive Industries - Oil and Gas topic of the FASB Accounting Standards Codification (ASC Topic 932) with the changes required by the SEC final rule, "Modernization of Oil and Gas Reporting." ASU No. 2010-03 must be applied prospectively as a change in accounting principle that is inseparable from a change in accounting estimate and is effective for entities with annual reporting periods ending on or after December 31, 2009.

Oil and Gas Reserves.

Users of this information should be aware that the process of estimating quantities of "proved," "proved developed" and "proved undeveloped" crude oil, natural gas liquids and natural gas reserves is complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. Consequently, material revisions (upward or downward) to existing reserve estimates may occur from time to time. Although reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the significance of the subjective decisions required and variances in available data for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial statement disclosures.

Proved reserves represent estimated quantities of crude oil, natural gas liquids and natural gas that geoscience and engineering data can estimate, with reasonable certainty, to be economically producible from a given day forward from known reservoirs under economic conditions, operating methods and government regulation before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.

The following tables set forth the Company’s portion of net proved and probable reserves at August 31, 2010 and 2011 and the changes in the net proved and probable reserves for the year ended August 31, 2011 on an after-royalty basis,

Net Proved Reserves

All of the Company’s reserves are located in Alberta, Canada. The Company does not have any proved or probable undeveloped properties nor does it have any possible developed or undeveloped properties.

Crude Oil (MBbl)

Net proved reserves at August 31, 2010	-
Purchases in place	7.3
Production	(0.4	)
Net proved reserves at August 31, 2011	6.9

Gas (MMcf)

Net proved reserves at August 31, 2010	-
Purchases in place	0.8
Production	(0.0	)
Net proved reserves at August 31, 2011	0.8

Oil Equivalent (Mbbl)

Net proved reserves at August 31, 2010	-
Purchases in place	7.4
Production	(0.4	)
Net proved reserves at August 31, 2011	7.0

Capitalized Costs Relating to Oil and Gas Producing Activities

The following table sets forth the capitalized costs relating to Titan’s crude oil and natural gas producing activities at August 31, 2011 and 2010

	2011			2010
Proved		153,602			-
Unproved		271,995			56,914
Total		425,597			56,914
Accumulated depletion		(8,317	)		-
Net capitalized costs		417,280			56,914

Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities

The acquisition, exploration and development costs disclosed in the following tables are in accordance with definitions in the Extractive Industries - Oil and Gas Topic of the ASC.

·	Acquisition costs include costs incurred to purchase, lease or otherwise acquire property.

·	Exploration costs include additions to exploratory wells, including those in progress, and exploration expenses.

·	Development costs include additions to production facilities and equipment and additions to development wells, including those in progress.

	2011		2010
Acquisition Costs of Properties
Proved		149,325		-
Unproved		144,885		13,099
Subtotal		294,210		13,099
Exploration costs		47,760		-
Total		341,970		13,099

Results of Operations

The following tables set forth results of operations for oil producing activities for the year ended August 31, 2011. Gas production received by the Company has been negligible to date.

Crude oil sales	$	34,593
Production costs		25,414
Depletion and accretion		8,429
Income before income taxes		750
Income tax provision		-
Results of operations		750

Revenue and Operating Costs Per Barrel

The following table shows the Company’s sales and production costs per barrel for the period from acquisition on April 1, 2011 to August 31, 2011. Gas production received by the Company has been negligible to date.

Production (1)		Sales Price (2)		Operating Costs (3)
(bbls)		($/bbl)		($/bbl)
	401		86		63

1.	Production is the Company’s 6% working interest in Leaman Wells.

2.	Average selling price is calculated based on aggregate gross sales proceeds of $34,593 for the period from April 1, 2011 to August 31, 2011 divided by barrels of oil sold.

3.	Average operating cost is calculated based on aggregate operating costs of $25,414 for the period from April 1, 2011 to August 31, 2011 divided by barrels of oil produced.

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

The following information has been developed utilizing procedures prescribed by ASC Topic 932 and based on crude oil and natural gas reserves and production volumes estimated by GLJ. The estimates were based on a 12-month average for commodity prices for the year 2011. The following information may be useful for certain comparison purposes, but should not be solely relied upon in evaluating the Company or its performance. Further, information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flows be viewed as representative of the current value of the Company.

The future cash flows presented below are based on sales prices, cost rates and statutory income tax rates in existence as of the date of the projections. It is expected that material revisions to some estimates of crude oil and natural gas reserves may occur in the future, development and production of the reserves may occur in periods other than those assumed, and actual prices realized and costs incurred may vary significantly from those used.

Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated.

August 31, 2011

Future cash inflows (1)	$	65,000
Future production costs		28,000
Future income taxes		12,000
Future net cash flows		25,000
Discount to present value at 10% annual rate		(1,000	)
Standardize measure of discounted future net cash flows relating to proved oil and gas reserves		24,000

(1)	Estimated crude oil prices used to calculate 2011 future cash inflows for Canada was $80.47.

PART IV

Item 15. Exhibits and Financial Schedules.

EXHIBIT NUMBER		DESCRIPTION
99.1		Amended Reserve Report dated November 8, 2011 prepared by GLJ Petroleum Consultants
31		Rule 13a-14(a)/15d14(a) Certification
32		Section 1350 Certification

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TITAN OIL & GAS, INC.

Dated: March 29, 2012	By:	/s/ Jack Adams
	Name:	Jack Adams
	Title:	President, Chief Executive and Operating Officer, Secretary and Treasurer, and Director (Principal Executive, Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE

/s/Jack Adams Jarnail Dhaddey	Director, President, Chief Executive and Operating Officer, Secretary, and Treasurer (Principal Executive, Financial, and Accounting Officer)	March 29, 2012

/s/ Vivek Warrier Vivek Warrier	Director	March 29, 2012

Attached files

Titan Oil & Gas, Inc. Reports

Also read