UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
20-F





[
]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934





OR





[X]  ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE   ACT
OF 1934





For the
fiscal year ended________December 31,
2008________





OR





[
]           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from ____________ to __________





OR





[
]  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934





Date of
event requiring this shell company report: ______





Commission
File Number: 000-51706





GIANT OIL & GAS
INC.


(Exact
name of Registrant as specified in its charter)





Alberta,
Canada


(Jurisdiction
of incorporation or organization)





246 Stewart Green S.W.,
Suite 4010, Calgary, Alberta, Canada T3H 3C8


(Address
of principal executive offices)





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





None





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





Common Stock, Fully Paid and
Non-Assessable Common Shares Without Par Value


(Title of
Class)





Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None





Indicate
the number of outstanding shares of each of the issuer's classes of capital or
common stock as of the close of the period covered by the annual
report:  44,672,660 common shares as of December 31, 2008 and
44,672,660 as of June 16, 2009. No preferred shares issued and
outstanding.





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]





1


If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. Yes [  ] No [X]




Note –
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.







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 ninety days.  Yes [X]   No
[  ]





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





Large
accelerated filer
[  ]                                                      Accelerated
filer
[  ]                                           Non-accelerated
filer [X]





Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:





U.S. GAAP
[  ]                             International
Financial Reporting Standards as
issued                                                                                                    Other
[ X]


by the International Accounting Standards Board [  ]





If “Other”
has been checked in response to the previous question, indicate by check mark
which financial statement item the registrant has elected to
follow.


Item 17 [
X] Item 18 [  ]





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








Index to
Exhibits on Page ___








2











GIANT
OIL & GAS INC.





FORM
20-F ANNUAL REPORT 2008





TABLE
OF CONTENTS








Oil
      and Gas Glossary
                                4Introduction
                                5Part
      IItem
      1.
                                Identity
      of Directors, Senior Management and Advisors
                                6Item
      2.
                                Offer
      Statistics and Expected Timetable
                                6Item
      3.
                                Key
      Information
                                6Item
      4.
                                Information
      on the Company
                                17Item
      4A.
                                Unresolved
      Staff Comments
                                31Item
      5.
                                Operating
      and Financial Review and Prospects
                                31Item
      6.
                                Directors,
      Senior Management and Employees
                                37Item
      7.
                                Major
      Shareholders and Related Party Transactions
                                43Item
      8.
                                Financial
      Information
                                44Item
      9.
                                The
      Offer and Listing
                                46Item
      10.
                                Additional
      Information
                                46Item
      11.
                                Quantitative
      and Qualitative Disclosures About Market Risk
                                49Item
      12.
                                Description
      of Other Securities Other Than Equity Securities
                                50Part
      IIItem
      13.
                                Defaults,
      Dividend Arrearages and Delinquencies
                                51Item
      14.
                                Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
                                51Item
      15.
                                Controls
      and Procedures
                                51Item
      16.
                                Reserved
                                52Part
      IIIItem
      17.
                                Financial
      Statements
                                54Item
      18.
                                Financial
      Statements
                                54Item
      19.
                                Exhibits
                                54Financial
      Statements
                                56Signature
      Page
                                76








3





OIL
AND GAS GLOSSARY








Term
            DefinitionAdsorption
            The
      accumulation of gases, liquids, or solutes on the surface of a solid or
      liquid.Basin
            A
      depressed area where sediments have accumulated during geologic time and
      considered to be prospective for oil and gas deposits.Coal
            A
      carbon-rich rock derived from plant material (peat)Development
            The
      phase in which a proven oil or gas field is brought into production by
      drilling production (development) wells.Drilling
            The
      using of a rig and crew for the drilling, suspension, production testing,
      capping, plugging and abandoning, deepening, plugging back, sidetracking,
      re-drilling or reconditioning of a well.Drilling
      logs
            Recorded
      observations made of rock chips cut from the formation by the drill bit,
      and brought to the surface with the mud, as well as rate of penetration of
      the drill bit through rock formations. Used by geologists to obtain
      formation data.Exploration
            The
      phase of operations which covers the search for oil or gas by carrying out
      detailed geological and geophysical surveys followed up where appropriate
      by exploratory drilling. Compare to "Development"
phase.Fracturing
            The
      application of hydraulic pressure to the reservoir formation to create
      fractures through which oil or gas may move to the
    wellbore.Methane
            The
      simplest of the various hydrocarbons and is the major hydrocarbon
      component of natural gas, and in fact is commonly known as natural gas. It
      is colorless, odorless, and burns efficiently without many
      byproductsMineral
      Lease
            A
      legal instrument executed by a mineral owner granting exclusive right to
      another to explore, drill, and produce oil and gas from a piece of
      landPermeability
            A
      measure of the ability of a rock to transmit fluid through pore
      spaces.Reserves
            Generally
      the amount of oil or gas in a particular reservoir that is available for
      production.Reservoir
            The
      underground rock formation where oil and gas has accumulated. It consists
      of a porous rock to hold the oil or gas, and a cap rock that prevents its
      escape





4





INTRODUCTION





We were
formed as a corporation under the Federal laws of Canada pursuant to the Canada
Business Corporations Act on April 2, 2004. We are an oil and gas exploration
stage company and anticipate acquiring, exploring, and if warranted and
feasible, developing oil and gas properties.





In this
Annual Report, the “Company”, “Giant Oil & Gas Inc.”, “Giant”, "we", "our",
and "us", refer to Giant Oil & Gas Inc. (unless the context otherwise
requires).  Summary discussions of documents referred to in this
Annual Report may not be complete, and we refer you to the actual documents for
more complete information.  Our principal corporate offices are
located at Suite 4010 – 246 Stewart Green S.W., Calgary, Alberta, T3H
3C8.





BUSINESS
OF GIANT OIL & GAS INC.





Giant Oil
& Gas Inc. is principally a company engaged in the acquisition and
exploration of oil and gas properties. The Company entered into its first
property option agreement on February 8, 2005 which related to an oil well in
Jack County, Texas.  The Company did not exercise its option under the
agreement and as a result no longer has an interest in the well.





The
Company currently has an interest in 51 Petroleum and Natural Gas leases with
the Province of Alberta, Canada.  All of these leases are located in
Alberta, Canada with the Company focusing on the two specific regions known as
the Highvale and Suffield areas.





FINANCIAL
AND OTHER INFORMATION





In this
Annual Report, unless otherwise specified, all dollar amounts are expressed in
Canadian Dollars (“CDN$” or “$”).  The Government of Canada permits a
floating exchange rate to determine the value of the Canadian Dollar against the
U.S. Dollar (US$).





FORWARD-LOOKING
STATEMENTS





This 20-F
includes forward-looking statements, principally in ITEM #4, “Information on the
Company” and ITEM #5, “Operating and Financial Review and
Prospects".  We have based these forward-looking statements largely on
our current expectations and projections about future events and financial
trends affecting our business.  These forward-looking statements are
subject to risks, uncertainties and assumptions including, among other things,
the factors discussed in this Annual Report under ITEM #3, “Key Information,
Risk Factors" and factors described in documents that we may furnish from time
to time to the Securities and Exchange Commission.





The words
"believe", "may", "estimate", "continue", "anticipate", "intend", "expect", and
similar words are intended to identify forward-looking statements.  In
light of these risks and uncertainties, the forward-looking information, events
and circumstances discussed in this Annual Report might not
occur.  Our actual results and performance could differ substantially
from those anticipated in our forward-looking statements.  We
undertake no obligation to update publicly or revise any forward-looking
statements because of new information, future events or otherwise.





5


PART
I





ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS





--- Not
applicable ---





ITEM 2.  OFFER STATISTICS
AND EXPECTED TIMETABLE.





--- Not
applicable ---





ITEM 3.  KEY
INFORMATION.





3.A. Selected Financial Data





The
selected financial data of the Company for the fiscal years ended December 31,
2008, 2007, 2006 and 2005 and from April 2, 2004 (inception) to December 31,
2004 was derived from the financial statements of the Company that have been
audited by Smythe Ratcliffe LLP, independent Chartered Accountants, as indicated
in their audit reports, which are included elsewhere in this
20-F.  The selected financial data should be read in conjunction with
the financial statements and other financial information included elsewhere in
this 20-F.





The
Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future.  The present
policy of the Company is to retain all available funds for use in its operations
and the expansion of its business.





The
selected financial information disclosed below has been derived from financial
statements of the Company, which have been prepared in accordance with Canadian
Generally Accepted Accounting Principles (GAAP).  There are no
material numerical differences between Canadian GAAP and US GAAP, as applicable
to the Company.





Selected
Financial Information




All
      in Canadian $ except Common Shares issued
              For
      the Twelve Months Ended December 31, 2008
              For
      the Twelve Months Ended December 31, 2007
              For
      the Twelve Months Ended December 31, 2006
              For
      the Twelve Months Ended December 31, 2005
              For
      the Period April 2, 2004 (Inception) to December 31,
  2004Operating
      Revenues
              -
              -
              -
              -
              -Interest
      Income
              -
              -
              -
              -
              -Loss
      from Operations
              $(1,437,061)
              $(3,950,269)
              $(38,
      160)
              $(56,655)
              $(5,800)Net
      Loss and comprehensive loss
              $(1,433,874)
              $(3,950,269)
              $(38,160)
              $(56,655)
              $(5,880)Loss
      per Share – Basic and Diluted
              $(0.01)
              $(0.09)
              $(0.00)
              $(0.00)
              $(0.00)As
      of December 31, 2008
              As
      of December 31, 2007
              As
      of December 31, 2006
              As
      of December 31, 2005
              As
      of December     31, 2004Total
      Assets
              $353,034
              $364,177
              $36,434
              $77,315
              $132,909Net
      Assets
              $336,486
              $308,747
              $31,378
              $70,027
              $127,150Total
      Liabilities
              $16,548
              $55,430
              $5,056
              $7,288
              $5,759Working
      Capital
              $38,344
              $39,022
              $23,701
              $70,027
              $127,150Share
      Capital
              $4,396,955
              $4,295,590
              $133,030
              $133,030
              $133,030Common
      Shares Issued
              44,672,660
              44,560,300
              41,560,300
              41,560,300
              41,560,300Dividends
      Declared
              -
              -
              -
              -
              -











6


3.A.3. Exchange Rates





In this
20-F, unless otherwise specified, all dollar amounts are expressed in Canadian
Dollars (CDN$).  The Government of Canada permits a floating exchange
rate to determine the value of the Canadian Dollar against the U.S. Dollar
(US$).





Set forth
below are the exchange rates for the Canadian Dollar at the end of four periods
ended December 31st since the Company’s inception on April 2, 2004, the average
rates for the period and the range of high and low rates for the
period.  The data for April 2008 and for each month during the most
recent six months is also provided.





For
purposes of this table, the rate of exchange means the noon buying rate in New
York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York.  The table sets
forth the number of Canadian Dollars required under that formula to buy one U.S.
Dollar.  The average rate means the average of the exchange rates on
the last day of each month during the period.





Table
No. 2


U.S.
Dollar/Canadian Dollar











Period
              Average
              High
              Low
              CloseApril
      2009
              1.22
              1.19
              1.27
              1.19March
      2009
              1.26
              1.22
              1.31
              1.26February
      2009
              1.25
              1.22
              1.27
              1.27January
      2009
              1.23
              1.18
              1.28
              1.23December
      2008
              1.23
              1.19
              1.30
              1.22November
      2008
              1.22
              1.15
              1.30
              1.24Fiscal
      Year Ended December 31, 2008
              1.07
              0.97
              1.30
              1.22Fiscal
      Year Ended December 31, 2007
              1.07
              0.91
              1.19
              0.98Fiscal
      Year Ended December 31, 2006
              1.13
              1.10
              1.17
              1.17Fiscal
      Year Ended December 31, 2005
              1.21
              1.15
              1.27
              1.17April
      2, 2004 to December 31, 2004
              1.30
              1.20
              1.38
              1.20


______________________________________________________________________________








3.B. Capitalization and Indebtedness





--- Not
applicable ---





3.C. Reasons for the Offer and Use of
Proceeds





--- Not
applicable ---





3.D. Risk Factors





This
investment has a high degree of risk.  Before you invest you should
carefully consider the risks and uncertainties described below and the other
information in this prospectus.  If any of the following risks
actually occur, our business, operating results and financial condition could be
harmed and the value of our stock could go down.  This means you could
lose all or a part of your investment.





7


RISKS
RELATING TO OUR COMPANY





1.
            We
      are an exploration stage company, with limited operating history in oil
      and gas exploration and we have focused primarily on establishing our
      operations, all of which raises substantial doubt as to our ability to
      successfully develop profitable business operations and makes an
      investment in our common shares very
risky.





We
incorporated on April 2, 2004 and since incorporation we have acquired early
stage properties but we have not generated any revenue since
inception.  Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered in establishing a business in
the oil and natural gas industries. We have yet to generate any revenues from
operations and have been focused on organizational and fund raising activities
and the acquisition of early stage exploration properties. There is nothing at
this time on which to base an assumption that our business operations will prove
to be successful or that we will ever be able to operate profitably. Our future
operating results will depend on many factors, including:





•
      our ability to raise adequate working
capital;


•
      success of our development and
exploration;


•
      demand for natural gas and oil;


•
      the level of our competition;


•
      our ability to attract and maintain key management and employees;
      and


•
      our ability to efficiently explore, develop and produce sufficient
      quantities of marketable natural gas or oil in a highly competitive and
      speculative environment while maintaining quality and controlling
      costs.





To achieve
profitable operations, we must, alone or with others, successfully execute on
the factors stated above.  If we are not successful in executing any
of the above stated factors, our business will not be profitable and may never
even generate any revenue, which make our common shares a less attractive
investment and harm the trading of our common shares trading on the OTC Bulletin
Board.





2.
            The
      field of oil and gas exploration is difficult to predict because of
      technological advancements and market factors, which factors our
      management may not correctly assess and it may make it difficult for
      investors to sell their our common
shares.





Because
the nature of our business is expected to change as a result of shifts in the
market price of oil and natural gas, competition, and the development of new and
improved technology, management forecasts are not necessarily indicative of
future operations and should not be relied upon as an indication of future
performance.





Our
Management may incorrectly estimate projected occurrences and events within the
timetable of our business plan, which would have an adverse effect on our
results of operations and, consequently, make our common shares a less
attractive investment and harm the trading of our common shares trading on the
OTC Bulletin Board.  Investors may find it difficult to sell their
shares on the OTC Bulletin Board should a market ever develop for our
shares.





8


3.
            Because
      we have no plan to generate revenue unless and until our exploration
      program is successful in finding productive wells, we will need to raise a
      substantial amount of additional capital in order to fund our operations
      for the next twelve months and in order to develop our property and
      acquire and develop new properties.  If the prospects for our
      property are not favorable or the capital markets are tight, we would not
      be able to raise the necessary capital and we will not be able to pursue
      our business plan, which would likely cause our common shares to become
      worthless.





Cash on
hand is insufficient to fund our anticipated operating needs of approximately
$222,000 for the next twelve months. As we have no plan to generate revenue
unless and until our exploration program is successful in finding productive
wells, we will require substantial additional capital to fund our operations for
the next twelve months and in order to participate in the development of our
property, which has not had any production of oil or natural gas, as well as for
the future acquisition and/or development of other
properties.  Because we currently do not have any cash flow from
operations we need to raise additional capital, which may be in the form of
loans from current shareholders and/or from public and private equity
offerings.  Our ability to access capital will depend on our success
in participating in properties that are successful in exploring for and
producing oil and gas at profitable prices.  It will also be dependent
upon the status of the capital markets at the time such capital is
sought.  Should sufficient capital not be available, the development
of our business plan could be delayed and, accordingly, the implementation of
our business strategy would be adversely affected. In such event it would not be
likely that investors would obtain a profitable return on their investments or a
return of their investments at all.





4.
            Even
      if we discover natural gas and oil on our properties we will need to raise
      a substantial amount of additional capital to fund our operations and
      commence the drilling of wells, and should we fail to do so, we will not
      be able to pursue our business plan, which would likely cause our common
      shares to become worthless.





Currently,
we are focused primarily on exploring our properties to determine the potential
of the properties to host multi-zone natural gas and oil.   We
have no revenues, and we do not have any plan to generate revenue unless and
until our exploration program is successful in finding productive
wells.  However, even if we discover natural gas and oil on our
properties we will need to raise a substantial amount of additional capital to
fund our operations and commence the drilling of wells, and should we fail to do
so, we will not be able to pursue our business plan, which would likely cause
our common shares to become worthless.  Because we currently do not
have any cash flow from operations, we will need to raise additional capital,
which may be in the form of loans from current shareholders and/or from public
and private equity offerings.  Should sufficient capital not be
available, the development of our business plan could be delayed and,
accordingly, the implementation of our business strategy would be adversely
affected, even if we discover natural gas or oil on our
properties.  In such event it would not be likely that investors would
obtain a profitable return on their investments or a return of their investments
at all.





9


5.
            We
      have an irrevocable option to repurchase an aggregate of 30,000,000 common
      shares held by our directors, and unaffiliated stockholders have no
      protection against our future potential decision to repurchase
      such  shares pursuant to current or potentially modified
      contracts, even if such repurchase would essentially use all or
      substantially all of the company’s working capital and essentially cause
      the company to become insolvent.





We have an
irrevocable option to repurchase 16,000,000 common shares held by Robert Coale,
our Director and founder and 14,000,000 common shares held by Rob Sandhu, our
Director, Chairman, President, Chief Executive Officer, Chief Operating Officer,
Secretary.   The right can be exercised by the Company at any
time and at its sole discretion.  The Company is not obligated to
repurchase the shares at any time or for any reason (such as termination of
employment, a change of control of the Company or failure to reach performance
goals).  The repurchase right held by the Company will continue with
respect to and for so long as any of the 30,000,000 shares issued to these
directors are held by them (or any of their affiliates or family members), and
will survive any such director’s resignation as an officer or director of the
Company. For further information on such agreements, see our disclosure below
under the section entitled “Material Contracts.”





The
exercise price of such repurchase option is $0.01 per share, amounting in the
aggregate to $160,000 for the shares held by Mr. Coale and $140,000 for the
shares held by Mr. Sandhu. Unaffiliated stockholders have no protection against
our future potential decision to repurchase the shares of the two directors
pursuant to current or potentially modified contracts, even if such repurchase
would essentially use all or substantially all of the company’s working capital
and essentially cause the company to become insolvent.





6.
            We
      are heavily dependent on contracted third parties and upon Rob Sandhu, who
      is our Director, Chairman, President, Chief Executive and Operating,
      Officer, and Secretary.  The loss of Mr. Sandhu, whose
      knowledge, leadership and technical expertise upon which we rely, would
      harm our ability to execute our business plan and continue our operations
      until we found a suitable
replacement.





We are
dependent on the continued contributions of Rob Sandhu, whose knowledge and
leadership would be difficult to replace.  Our success is also heavily
dependent on our ability to retain and attract experienced engineers,
geoscientists and other technical and professional staff.  We do not
currently have any consulting agreements in place with either Mr. Sandhu or
third parties under which we can ensure that we will have sufficient expertise
to undertake our planned exploration program.  We do not maintain any
key person insurance on Mr. Sandhu.   If we were to lose his
services, our ability to execute our business plan would be harmed and we may be
forced to cease operations until such time as we could hire a suitable
replacement for Mr. Sandhu.





7.
      Volatility of oil and gas prices and markets, over which we have no
      control, could make it difficult for us to achieve profitability and
      investors are likely to lose their investment in our common
      shares.





Our
ability to achieve profitability is substantially dependent on prevailing prices
for natural gas and oil.  The amounts of, and price obtainable for,
any oil and gas production that we achieve will be affected by market factors
beyond our control.  If these factors are not favorable over time to
our financial interests, it is likely that owners of our common shares will lose
their investments. Such factors include:





10


•
      worldwide or regional demand for energy, which is affected by economic
      conditions;


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


•
      weather conditions;


•
      domestic and foreign governmental
regulations;


•
      political conditions in natural gas and oil producing
    regions;


•
      the ability of members of the Organization of Petroleum Exporting
      Countries to agree upon and maintain oil prices and production levels;
      and


•
      the price and availability of other
fuels.





8.
            Drilling
      wells is speculative, often involving significant costs that are difficult
      to project and may be more than our estimates, unsuccessful drilling of
      wells or successful drilling of wells that are, nonetheless, unprofitable,
      any one of which is likely to reduce the profitability of our business and
      negatively affect our results of
operations.





Developing
and exploring for natural gas and oil involves a high degree of operational and
financial risk, which precludes definitive statements as to the time required
and costs involved in reaching certain objectives.  The budgeted costs
of drilling, completing and operating wells are often exceeded and can increase
significantly when drilling costs rise due to a tightening in the supply of
various types of oilfield equipment and related services.  Drilling
may be unsuccessful for many reasons, including title problems, weather, cost
overruns, equipment shortages and mechanical difficulties.  Moreover,
the successful drilling of a natural gas or oil well does not ensure a profit on
investment.  Exploratory wells bear a much greater risk of loss than
development wells.  A variety of factors, both geological and
market-related, can cause a well to become uneconomical or only marginally
economic and the results of our operations will be negatively affected as
well.





9.
            The
      natural gas and oil business involves numerous uncertainties and operating
      risks that can prevent us from realizing profits and can cause substantial
      losses.





Our
development, exploitation and exploration activities may be unsuccessful for
many reasons, including weather, cost overruns, equipment shortages and
mechanical difficulties. Moreover, the successful drilling of a natural gas and
oil well does not ensure a profit on investment.  A variety of
factors, both geological and market-related, can cause a well to become
uneconomical or only marginally economical.





The
natural gas and oil business involves a variety of operating risks,
including:





•
      fires;


•
      explosions;


•
      blow-outs and surface cratering;


•
      uncontrollable flows of oil, natural gas, and formation
    water;


•
      natural disasters, such as hurricanes and other adverse weather
      conditions;


•
      pipe, cement, or pipeline failures;


•
      casing collapses;


•
      embedded oil field drilling and service
tools;


•
      abnormally pressured formations;
and


•
      environmental hazards, such as natural gas leaks, oil spills, pipeline
      ruptures and discharges of toxic
gases.





11


If we
experience any of these problems, it could affect well bores, gathering systems
and processing facilities, which could adversely affect our ability to conduct
operations. We could also incur substantial losses as a result of:





•
      injury or loss of life;


•
      severe damage to and destruction of property, natural resources and
      equipment;


•
      pollution and other environmental
damage;


•
      clean-up responsibilities;


•
      regulatory investigation and
penalties;


•
      suspension of our operations; and


•
      repairs to resume operations.





10.
            If
      we commence drilling, we do not currently have any contracts with
      equipment providers, we may face the unavailability or high cost of
      drilling rigs, equipment, supplies, personnel and other services which
      could adversely affect our ability to execute on a timely basis our
      development, exploitation and exploration plans within our budget and, as
      a result, negatively impact our financial condition and results of
      operations.





If we commence drilling, shortages or an
increase in cost of drilling rigs, equipment, supplies or personnel could delay
or interrupt our operations, which could negatively impact our financial
condition and results of operations.  Drilling activity in the
geographic areas in which we conduct drilling activities may increase, which
would lead to increases in associated costs, including those related to drilling
rigs, equipment, supplies and personnel and the services and products of other
vendors to the industry.  Increased drilling activity in these areas
may also decrease the availability of rigs.  We do not currently have
any contracts with providers of drilling rigs and, consequently we may not be
able to obtain drilling rigs when we need them.  Therefore, our
drilling and other costs may increase further and necessary equipment and
services may not be available to us at economical prices.





11.
            We
      are subject to complex laws and regulations, including environmental
      regulations, which can significantly increase our costs and possibly force
      our operations to cease.





If we
commence drilling and experience any leakage of crude oil and/or gas from the
subsurface portions of a well, our gathering system could cause degradation of
fresh groundwater resources, as well as surface damage, potentially resulting in
suspension of operation of a well, fines and penalties from governmental
agencies, expenditures for remediation of the affected resource, and liabilities
to third parties for property damages and personal injuries.  In
addition, any sale of residual crude oil collected as part of the drilling and
recovery process could impose liability on us if the entity to which the oil was
transferred fails to manage the material in accordance with applicable
environmental health and safety laws.





Drilling
operations generally involve a high degree of risk. Hazards such as unusual or
unexpected geological formations, power outages, labor disruptions, blow-outs,
sour gas leakage, fire, inability to obtain suitable or adequate machinery,
equipment or labor, and other risks are involved. We may become subject to
liability for pollution or hazards against which it cannot adequately insure or
which it may elect not to insure. Incurring any such liability may have a
material adverse effect on our financial position and operations.





Development,
production and sale of natural gas and oil in Canada are subject to extensive
laws and regulations, including environmental laws and
regulations.  We may be required to make large expenditures to comply
with environmental and other governmental regulations.  Matters
subject to regulation include:





12


•
      location and density of wells;


•
      the handling of drilling fluids and obtaining discharge permits for
      drilling operations;


•
      accounting for and payment of royalties on production from state, federal
      and Indian lands;


•
      bonds for ownership, development and production of natural gas and oil
      properties;


•
      transportation of natural gas and oil by
  pipelines;


•
      operation of wells and reports concerning operations;
  and


•
      taxation.





Under
these laws and regulations, we could be liable for personal injuries, property
damage, oil spills, discharge of hazardous materials, remediation and clean-up
costs and other environmental damages.  Failure to comply with these
laws and regulations also may result in the suspension or termination of our
operations and subject us to administrative, civil and criminal
penalties.  Moreover, these laws and regulations could change in ways
that substantially increase our costs.  Accordingly, any of these
liabilities, penalties, suspensions, terminations or regulatory changes could
materially adversely affect our financial condition and results of operations
enough to possibly force us to cease our business operations.





12.
            Our
      auditors’ opinion in our December 31, 2008 financial statements includes
      an explanatory paragraph in respect of there being substantial doubt about
      our ability to continue as a going concern.   We will need
      to raise additional capital in order to fund our operations for the next
      twelve months, and if we fail to raise such capital investors may lose
      some or all of their investment in our common
  shares.





We have
incurred net losses of $5,485,795 from April 2, 2004 (inception) to December 31,
2008.  Our 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.  We anticipate
generating losses for at least the next 12 months.  Therefore, there
is substantial doubt about our ability to continue operations in the future as a
going concern.  We will need to obtain additional funds in order to
fund our operations for the next twelve months.  Our plans to deal
with this cash requirement include loans from existing shareholders, raising
additional capital from the public or private sale of equity or entering into a
strategic arrangement with a third party.  If we cannot continue as a
viable entity, our shareholders may lose some or all of their investment in our
company.





13.
            If
      we do not maintain the property lease payments on our properties, we will
      lose our interest in the properties as well as losing all monies incurred
      in connection with the respective
property.





We have 51
Petroleum and Natural Gas leases in Alberta, Canada.  Our leases
require annual lease payments to the Alberta provincial
government.  See Item 4.D of this Form 20-F for a more detailed
description of the property obligations.  If we do not continue to
make the annual lease payments, we will lose our ability to explore and develop
the properties and we will not retain any kind of interest in the
properties.





13


14.
            We
      may not be able to compete with current and potential exploration
      companies, some of whom have greater resources and experience than we do
      in locating and commercializing oil and natural gas reserves and, as a
      result, we may fail in our ability to maintain or expand our
      business.





The
natural gas and oil market is intensely competitive, highly fragmented and
subject to rapid change.  We may be unable to compete successfully
with our existing competitors or with any new competitors.  We compete
with many exploration companies which have significantly greater personnel,
financial, managerial, and technical resources than we do.  This
competition from other companies with greater resources and reputations may
result in our failure to maintain or expand our business.





15.
            Since
      our directors work for other natural resource exploration companies, their
      other activities for those other companies may involve a conflict of
      interest with regard to their time, could slow down our operations or
      negatively affect our
profitability.





Our
officers and directors are not required to work exclusively for us and do not
devote all of their time to our operations.  In fact, our directors
work for other natural resource exploration companies.  Therefore, it
is possible that a conflict of interest with regard to their time may arise
based on their employment by such other companies.  Their other
activities may prevent them from devoting full-time to our operations which
could slow our operations and may reduce our financial results because of the
slowdown in operations.  It is expected that each of our directors
will devote approximately 1 hour per week to our operations on an ongoing basis,
and when required will devote whole days and even multiple days at a stretch
when property visits are required or when extensive analysis of information is
needed.





16.
Our principal shareholders, officers and directors own a controlling interest in
our voting stock and investors will not have any voice in our management, which
could result in decisions adverse to our general shareholders.





As of June
16, 2009 our officers and directors, in the aggregate, beneficially own
approximately or have the right to vote approximately 67.3% of our outstanding
common stock. As a result, these stockholders, acting together, will have the
ability to control substantially all matters submitted to our stockholders for
approval including:





·
            election  of  our  board  of  directors;


·
            removal  of  any  of  our  directors;


·
            amendment  of  our  Articles
      of
      Incorporation  or  bylaws;  and


·
            adoption
      of measures that could delay or prevent a change in control or impede a
      merger, takeover or other business combination involving
    us.





As a
result of their ownership and positions, our directors and executive officers
collectively are able to influence all matters requiring shareholder approval,
including the election of directors and approval of significant corporate
transactions.  In addition, it is possible for our directors and
executive officers to modify their share purchase agreements such that they
could force the repurchase of their shares and remain on the
board.  Also, sales of significant amounts of shares held by our
directors and executive officers, or the prospect of these sales, could affect
the market price of our common stock if the marketplace does not orderly adjust
to the increase in shares in the market and the value of your investment in the
Company may decrease.  Management's stock ownership may discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain
control of us, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our stock price.





14


17.
            We
      have no employees and our only officer works one day per week on our
      business and our directors work only one hour per week on our
      business.  Consequently, we may not be able to monitor our
      operations and respond to matters when they arise in a prompt or timely
      fashion.  Until we have additional capital or generate revenue,
      we will have to rely on consultants and service providers, which will
      increase our expenses and increase our
losses.





We do not
have any employees, our only officer works on our business one day per week and
our directors each spends one hour a week on our business.  With
practically no personnel, we have a limited ability to monitor our operations,
such as the progress of oil and gas exploration, and to respond to inquiries
from third parties, such as regulatory authorities or potential business
partners.  Though we may rely on third party service providers, such
as accountants and lawyers, to address some of our matters, until we raise
additional capital or generate revenue, we will have to rely on consultants and
third party service providers to monitor our operations, which will increase our
expenses and have a negative effect on our results of operations.





RISKS
RELATING TO OUR COMMON SHARES





18.           We
may, in the future, issue additional common shares, which would reduce
investors’ percent of ownership and may dilute our share value.





Our
Articles of Incorporation authorize the issuance of an unlimited number of
common shares without par value and an unlimited number of preferred shares
without par value.  The future issuance of our unlimited authorized
common shares may result in substantial dilution in the percentage of our common
shares held by our then existing shareholders. We may value any common shares
issued in the future on an arbitrary basis.  The issuance of common
shares for future services or acquisitions or other corporate actions may have
the effect of diluting the value of the shares held by our investors, and might
have an adverse effect on any trading market for our common shares.





19.           Our
common shares are subject to the "Penny Stock" Rules of the SEC and we have no
established market for our securities, which makes transactions in our stock
cumbersome and may reduce the value of an investment in our stock.





The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than USD $5.00 per share or with an
exercise price of less than USD $5.00 per share, subject to certain
exceptions.  For any transaction involving a penny stock, unless
exempt, the rules require:





·
            that
      a broker or dealer approve a person’s account for transactions in penny
      stocks; and


·
            the
      broker or dealer receive from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.





In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:





·
            obtain
      financial information and investment experience objectives of the person;
      and


·
            make
      a reasonable determination that the transactions in penny stocks are
      suitable for that person and the person has sufficient knowledge and
      experience in financial matters to be capable of evaluating the risks of
      transactions in penny stocks.





15


The broker
or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:





·
            sets
      forth the basis on which the broker or dealer made the suitability
      determination; and


·
            that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.





Generally,
brokers may be less willing to execute transactions in securities subject to the
"penny stock" rules.  This may make it more difficult for investors to
dispose of our common shares and cause a decline in the market value of our
stock.





Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions.  Finally, monthly statements have
to be sent disclosing recent


price
information for the penny stock held in the account and information on the
limited market in penny stocks.





20.           We
have registered 34,200,000 common shares underlying our warrants that may be
available for future sale.  The sale of these shares may depress the
market price of our common shares and shareholders could suffer a loss on their
investment.





As of June
16, 2009, we had warrants outstanding to purchase an aggregate of 34,200,000
common shares.  We have registered the 34,200,000 common shares
underlying the warrants and all of these warrants will be freely tradable under
U.S. federal law upon their respective vesting dates of November 20, 2008 with
respect to the 11,400,000 Class A warrants, May 20, 2009 with respect to the
11,400,000 Class B warrants, and November 20, 2009 with respect to the
11,400,000 Class C warrants. If such warrants are exercised in full and
converted to common shares, our shareholders may experience a decline in the
price of our common shares as such common shares are sold into the open
market.  If such decline in the price of our common shares were to
materialize, shareholders could suffer a loss on their investment.





21.           We
are a “foreign private issuer”, and you may not have access to the information
you could obtain about us if we were not a “foreign private
issuer”.





We are
considered a "foreign private issuer" under the Securities Act of 1933, as
amended. As an issuer incorporated in Canada, we will be required to prepare our
annual and interim financial statements in accordance with Canadian generally
accepted accounting principles. For purpose of our annual disclosure obligations
in the United States, we will annually file in the United States financial
statements prepared in accordance with Canadian GAAP together with
reconciliation to US GAAP.  In addition, as a foreign private issuer
we will not have to file quarterly reports with the SEC nor will our directors,
officers and 10% stockholders be subject to Section 16(b) of the Exchange Act.
As a foreign private issuer we will not be subject to the proxy rules of Section
14 of the Exchange Act. Furthermore, Regulation FD does not apply to non-U.S.
companies and will not apply to us. Accordingly, you may not be able to obtain
information about us as you could obtain if we were not a “foreign private
issuer”.





16


22.           Because
we do not intend to pay any cash dividends on our common shares, our
stockholders will not be able to receive a return on their shares unless they
sell them.





We intend
to retain any future earnings to finance the development and expansion of our
business. We do not anticipate paying any cash dividends on our common shares in
the foreseeable future.  Unless we pay dividends, our stockholders
will not be able to receive a return on their shares unless they sell
them.





23.           We
may become a passive foreign investment company, or PFIC, which could result in
adverse U.S. tax consequences to U.S. investors.





If we are
a “passive foreign investment company” or “PFIC” as defined in Section 1297 of
the Code, U.S. Holders will be subject to U.S. federal income taxation under one
of two alternative tax regimes at the election of each such U.S. Holder. Section
1297 of the Code defines a PFIC as a corporation that is not formed in the
United States and either (i) 75% or more of its gross income for the taxable
year is “passive income”, which generally includes interest, dividends and
certain rents and royalties or (ii) the average percentage, by fair market value
(or, if we elect, adjusted tax basis), of its assets that produce or are held
for the production of “passive income” is 50% or more.  Whether we are
a PFIC in any year and the tax consequences relating to PFIC status will depend
on the composition of our income and assets, including cash. U.S. Holders should
be aware, however, that if we become a PFIC, we may not be able or willing to
satisfy record-keeping requirements that would enable U.S. Holders to make an
election to treat us as a “qualified electing fund” for purposes of one of the
two alternative tax regimes applicable to a PFIC, which would result in adverse
tax consequences to our shareholders who are U.S. citizens.





24.           Because
we are incorporated in Canada under the Canadian Business Corporations Act and
all of our assets, officers, and two of our directors are located outside the
United States, it may be difficult for an investor to enforce within the United
States any judgments obtained against us or any of our officers and
directors.





All of our
assets are located outside of the United States and we do not currently maintain
a permanent place of business within the United States. In addition, all of our
officers and two of our directors are nationals and/or residents of countries
other than the United States, and all or a substantial portion of such persons'
assets are located outside the United States. As a result, it may be difficult
for an investor to effect service of process or enforce within the United States
any judgments obtained against us or our officers or directors, including
judgments predicated upon the civil liability provisions of the securities laws
of the United States or any state thereof. In addition, there is uncertainty as
to whether the courts of Canada would recognize or enforce judgments of United
States courts obtained against us or our directors and officers predicated upon
the civil liability provisions of the securities laws of the United States or
any state thereof.  There is even uncertainty as to whether the
Canadian courts would have jurisdiction to hear original actions brought in
Canada against us or our directors and officers predicated upon the securities
laws of the United States or any state thereof.





ITEM 4.  INFORMATION ON THE
COMPANY





4.A. History and Development of the
Company





We are an
exploration stage oil and gas company incorporated under the Canada Business
Corporations Act in Alberta, Canada on April 2, 2004 under the name “Giant Oil
& Gas Inc.”  Our office is located at Suite 4010 – 246 Stewart
Green S.W., Calgary, Alberta T3H 3C8 and our telephone number is
877-444-5015.  Our website is www.giantoilinc.com.





17


We are a
company in the early stages of engaging in the exploration and development of
oil and gas properties.  We currently have petroleum and natural gas
rights to 9,075 hectares of land granted under 51 leases entered into with the
province of Alberta, Canada.  With the exception of one lease that was
acquired from a third party, all of the leases were obtained through a public
auction process conducted by the province of Alberta.





No
commercially viable natural gas and oil deposits may exist on our
properties.  Our plan of operations is to carry out geological
analysis of our properties in order to ascertain whether it possesses deposits
of natural gas and oil.  We can provide no assurance to investors that
our properties contain commercially viable natural gas and oil deposits until
appropriate exploratory work is done and an evaluation based on that work
concludes further work programs are justified.  At this time, we
definitely have no known reserves on our properties.





For the
period from April 2, 2004 (inception) to December 31, 2008, we did not generate
any revenue.





4.B. Business Overview





Historical Corporate Development





We are an
exploration stage oil and gas company incorporated under the Canada Business
Corporations Act in Alberta, Canada on April 2, 2004 under the name “Giant Oil
& Gas Inc.”  We are a company in the early stages of engaging in
the exploration and development of oil and gas properties.  To
accomplish our objective, our strategy is to acquire exploration
prospects.





On
February 8, 2005, the Company entered into an Assignment of Interest Agreement
(“Agreement”) with JRC Enterprises Ltd. (“JRC”) giving the Company the
irrevocable assignment of a 10% working interest and 8% net revenue interest in
the Wimberly #5 (the “Well”), located in Jack County, Texas.  In
consideration for the Agreement, we paid JRC USD $6,000 (CDN $7,546) for a one
year option.  We did not exercise our option and as a result, we do
not currently have an interest in the Well.





On June
14, 2006, the Company entered into a Petroleum, Natural Gas and General
Conveyance Agreement with Stone Petroleums Ltd. et al whereby the Company
acquired a 100% interest in a petroleum and natural gas lease in the Cooking
Lake area of Alberta, Canada.  The rights associated with the lease
relate to petroleum and natural gas.





From
February 2007 to February 2008, the Company entered into 60 additional Petroleum
and Natural Gas leases in multiple transactions with the province of Alberta,
Canada.  These additional leases cover 10,922 hectares of land in
Alberta with a focus on the Highvale and Suffield areas.  All of the
leases were acquired through a public auction process that requires the Company
to submit sealed bids for land packages being auctioned by the 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 bid price includes the first year’s
minimum annual lease payments.





On July
23, 2008, the Company entered into an assignment and assumption agreement with
Power Oil and Gas Inc. et al whereby the Company assigned a 100% right and
interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a
total of 1,911 hectares in the Taber, Grand Forks area of Ablerta, Canada to
Power Oil and Gas Inc.








For all of
its current properties, the Company has obtained the Petroleum and Natural Gas
rights only.





18


Extensive
analysis of our properties will be required before we can make an evaluation as
to the economic feasibility of developing or finding valuable natural gas on
these grounds. In addition, there is no assurance that we will be able to make
the payments required by the lease agreements for the
properties.  There is no assurance that the properties will ever
generate any revenue.





We have
limited finances and require additional funding in order to accomplish our
exploration, development and acquisition objectives. There is no assurance that
we will have revenues in the future or that we will be able to secure other
funding necessary for our future growth and expansion.  There is also
no assurance that our oil and natural gas exploration activities will produce
commercially viable reserves.  Our efforts to extract oil and gas may
be unprofitable.





We may
seek relationships with other mineral exploration and development companies that
will allow us to exploit idle and/or undeveloped resources.





MATERIAL EFFECTS OF GOVERNMENT
REGULATIONS





Development,
production and sale of natural gas and oil in Canada are subject to extensive
laws and regulations, including environmental laws and
regulations.  The petroleum and natural gas leases currently leased by
the Company are owned by the Province of Alberta and are managed by the
Department of Energy.  We may be required to make large expenditures
to comply with environmental and other governmental
regulations.  Matters subject to regulation include:





•
      location and density of wells;


•
      the handling of drilling fluids and obtaining discharge permits for
      drilling operations;


•
            accounting for and payment of royalties on production from state, federal
      and Indian lands;


•
      bonds for ownership, development and production of natural gas and oil
      properties;


•
      transportation of natural gas and oil by
  pipelines;


•
      operation of wells and reports concerning operations;
  and


•
      taxation.





Under
these laws and regulations, we could be liable for personal injuries, property
damage, oil spills, discharge of hazardous materials, remediation and clean-up
costs and other environmental damages.  Failure to comply with these
laws and regulations also may result in the suspension or termination of our
operations and subject us to administrative, civil and criminal
penalties.  Moreover, these laws and regulations could change in ways
that substantially increase our costs.  Accordingly, any of these
liabilities, penalties, suspensions, terminations or regulatory changes could
materially adversely affect our financial condition and results of operations
enough to possibly force us to cease our business operations.





ANTICIPATED CHANGES TO FACILITIES AND
EMPLOYEES





Management
of the Company anticipates no changes to either facilities or employees in the
near future.





SEASONALITY, DEPENDENCY UPON PATENTS, LICENSES,
CONTRACTS, PROCESSES, SOURCES AND AVAILIBILTY OF RAW
MATERIALS





Certain of
the Company’s properties are in remote locations and subject to significant
temperature variations and changes in working conditions.  It may not
be possible to actively explore the Company’s properties in Alberta throughout
the year because seasonal changes in the weather.  If exploration is
pursued at the wrong time of year, the Company may incur additional costs to
address issues relating to the weather.





19


If we
commence drilling, shortages or an increase in cost of drilling rigs, equipment,
supplies or personnel could delay or interrupt our operations, which could
impact our financial condition and results of operations.  Drilling
activity in the geographic areas in which we conduct drilling activities may
increase, which would lead to increases in associated costs, including those
related to drilling rigs, equipment, supplies and personnel and the services and
products of other vendors to the industry. Increased drilling activity in these
areas may also decrease the availability of rigs.  We do not have any
contracts with providers of drilling rigs and, consequently we may not be able
to obtain drilling rigs when we need them.  Therefore, our drilling
and other costs may increase further and necessary equipment and services may
not be available to us at economical prices.





COMPETITION





The oil
and gas exploration industry is intensely competitive, highly fragmented and
subject to rapid change.  We may be unable to compete successfully
with our existing competitors or with any new competitors.  We compete
with many exploration companies that have significantly greater personnel,
financial, managerial, and technical resources than we do.  This
competition from other companies with greater resources and reputations may
result in our failure to maintain or expand our business.





4.C. Organizational Structure





The
Company is not part of a group and has no subsidiaries.





4.D. Property, Plant And Equipment





CORPORATE
OFFICES





We do not
own any real property.  We currently lease our corporate headquarters
at 246 Stewart Green S.W., Suite 4010, Calgary, Alberta T3H 3C8.  We
believe that our rented properties are adequate for our current and immediately
foreseeable operating needs.  We do not have any policies regarding
investments in real estate, securities or other forms of property.





A detailed
description of the Company’s exploration properties with additional information
for the properties of major significance to the Company is outlined
below.





PETROLEUM AND NATURAL GAS
LEASES





The
Company has interests in 51 petroleum and natural gas (“PN&G”) leases in
Alberta, Canada.  With the exception of the Company’s first lease
acquired in June 2006, all of these leases were acquired through the public
auction process with the government of Alberta.  To participate in the
auction, the Company is required to submit sealed bids for land packages being
auctioned by the 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.  All of the PN&G leases are for five-year
terms, require minimum annual lease payments, and grant the Company the right to
explore for petroleum and natural gas opportunities on the respective
lease.





20


OIL AND GAS PROPERTY
INTERESTS





Acquisition
of Interests





On June
14, 2006, the Company entered into a Petroleum, Natural Gas and General Rights
Conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources
Ltd., 349385 Alberta Ltd., and Torland Ltd. (together the “Vendor”) whereby the
Company acquired a 100% interest in a Petroleum and Natural Gas (“PN&G”)
lease with the government of the Province of Alberta.  The underlying
lease acquired by the Company is Alberta PN&G lease 0405030802, and the
property to which the lease pertains is located in the Cooking Lake area of
Alberta, as further described below. Upon signing of the Agreement the Company
paid the Vendor CDN $7,677 (including closing costs) and agreed to assume the
underlying lease payments to the Province of Alberta.  In addition,
the Vendor is entitled to an overriding 5% royalty on all petroleum substances
produced from the Cooking Lake Property, if any.  The Vendor is
entitled to a first and paramount lien upon all of the petroleum substances
produced or allocated to the property to secure the payment of any amounts due
and payable to the Vendor relating to the royalty.





In a
series of transactions from February 2007 to February 2008, the Company has
entered into an additional 60 PN&G leases in multiple transactions with the
Province of Alberta covering an additional aggregate 10,922 hectares of
land.  To participate in the auction, the Company is required to
submit sealed bids for land packages being auctioned by the 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.  All of the
PN&G leases are for five-year terms, require minimum annual lease payments,
and grant the Company the right to explore for petroleum and natural gas
opportunities on the respective lease.





On July
23, 2008, the Company entered into an assignment and assumption agreement with
Power Oil and Gas Inc. et al whereby the Company assigned a 100% right and
interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a
total of 1,911 hectares in the Taber, Grand Forks area of Ablerta, Canada to
Power Oil and Gas Inc., for $30,331.48.  This transaction reduced the
Company’s total PN&G leases to 51 for an aggregate 9,075
hectares.





Location





All of the
Company’s leases are located in the Province of Alberta with a focus on two
areas known as the Highvale and Suffield regions.





21


HIGHVALE














The
Highvale group of leases covers more than 6,000 acres in the Tomahawk/Highvale
area of west central Alberta. The area is known for its under-explored
multi-zone oil and gas potential along with highly prospective formations
including a Nisku interior patch reef oil trend, a zone which is of primary
interest to us. The majority of the area is accessible year round.





22


SUFFIELD











The
Suffield group of leases covers more than 5,200 acres in south eastern Alberta
in the center of one of the largest petroleum-producing regions in North
America. The Suffield area is known for its prolific gas production and also
heavy oil.





23


Property
Lease Information





The
Company’s properties are comprised of 51 leases with the government of the
province of Alberta, Canada.  The leases are for an initial term of
five years with a commencement date equal to the date of
acquisition.  The leases are renewable if certain conditions are
met.  All leases require the payment of the first year’s minimum
annual lease payments at the time of acquisition.  In general, minimum
annual lease payments are $3.50 per hectare.





Lease
      Commencement Date
            Number
      of Leases
            Land
      Area
              (Hectares)
            Annual
      Minimum Lease PaymentsMarch
      23, 2005 (1)
            1
            64
            $224February
      7, 2007
            6
            1,408
            $4,928March
      8, 2007
            1
            384
            $1,344March
      21, 2007
            6
            1,396
            $4,886April
      4, 2007
            1
            256
            $896May
      2, 2007
            2
            320
            $1,120May
      16, 2007
            2
            512
            $1,792May
      30, 2007
            9
            768
            $2,688June
      27, 2007
            4
            256
            $896July
      11, 2007
            1
            272
            $952July
      26, 2007
            1
            13
            $50August
      8, 2007
            2
            384
            $1,344August
      22, 2007
            6
            1,186
            $4,151September
      19, 2007
            4
            1,536
            $5,376October
      17, 2007
            1
            64
            $224November
      28, 2007
            2
            128
            $448January
      9, 2008
            1
            64
            $224February
      6, 2008
            1
            64
            $22451
            9,075
            $31,767





(1)  Lease
was acquired by the Company on June 14, 2006.  The Company assumed the
lease payments from the date of acquisition.  The annual lease
payments are due on the commencement date of the lease.





Regional
Geology





Alberta
contains vast amounts of coal distributed throughout the southern Plains,
Foothills, and Mountains.  Originally deposited in relatively
flat-lying peat swamps, organic matter (peat) was buried by sediments derived
from uplift (mountain building), in the west and gradually changed into coal
with increasing heat and pressure of burial.  Over time, the coals
were uplifted and partially eroded away, resulting in the present distribution
of coal across the Plains.  Coal-bearing strata dip gently westward
toward the Mountains where coals are folded and abruptly turn toward the surface
to be exposed in the Foothills.





Coal
typically occurs within a coal zone as discrete seams and/or packages with
several thin and thick seams interbedded with non-coaly rock layers or
beds.  A coal zone may be traceable over a large geographic
area.  Coal zones are found in strata ranging in age from Late
Jurassic (approximately 145 millions years old) to Tertiary (approximately 65
million years old).





The oldest
and deepest coals of the Alberta Plains belong to the Lower Cretaceous Mannville
Group coals.  The Mannville coals are widely distributed


across the
Alberta Plains, are thick, continuous and contain some of the highest gas
contents of any coals in the Alberta Plains.  Typically six or more
seams with cumulative coal thickness ranging from 2 to 14 meters occur over a
stratigraphic interval of 40 to 100 meters.  The thickest coals extend
from southeast Grande Prairie in a widening wedge between Edmonton and Calgary
to the Coronation area with coals occurring at depths ranging from about 800
meters to 2800 meters.





24


Upper
Cretaceous through Tertiary-aged coal also occurs across the Plains with older
coals being overlain by progressively younger rocks and coals.  Three
coal zones are recognized within the Upper Cretaceous Belly River
Group:  the McKay Coal Zone, near the base of the Belly River Group;
the Taber Coal Zone, located in the middle; and the Lethbridge Coal Zone, at the
top of the Belly River Group.  Compared to the Mannville coals, the
overall thin coals and restricted lateral continuity of the Belly River Group
coal seams have resulted in limited exploration efforts in these
coals.





The rank
of coal in Alberta ranges from very low (lignite) to high
(anthracite).  Coal near the surface in the Plains is generally of
sub-bituminous rank with lignite occurring in the north and northeast part of
the Plains, and high volatile bituminous C in the northwest and southwest areas
of the Plains.  Coal rank increases with burial depth.  In
the Plains, coal rank increases towards the west as seams dip and become
progressively deeper toward the mountains.  CBM content increases with
increasing rank so that with greater seam depths, gas contents are expected to
increase.  With increasing depth also comes increasing overburden
pressure, which may restrict permeability.





To date,
Horseshoe Canyon coals with relatively low gas contents, but with favourable
fracturing are being successfully exploited for CBM production in the
south-central plains.  Mannville coals are showing potentially
favourable amounts of fracturing and high gas contents in some locations are
undergoing evaluation in the north central to central plains.





Highvale
Property Geology





This play
type was described in some detail in the Canadian Discovery Digest under the
title “Oil Patches in the Nisku at Pembina”. The article contains much
information on the character of this geology including a proposed method of
formation and example logs that show the stratigraphic sequence characteristics.
The main focus of the area studied in the review lies to the south and west of
the Giant leases in Townships 48 and 49, Ranges 7 and 8, W5. The geological
trends that are mapped in the Digest article are shown to extend to the
northeast to the Giant leases but no detail to support the location of the trend
line boundaries is provided for the area.





As it has
an impact on the Giant leases, the prospect is referred to as an “Interior Patch
Reef Fairway”. This trend is one which is located between the well known Nisku
Pinnacle Reef Fairway to the west and sediments of the Nisku Shelf to the east.
West of the “Interior Patch Reef Fairway” and trending parallel to it is another
reef trend referred to in the Digest article as the “Nisku Patch Reef
Fairway”.  This trend lies to the west of the Giant
leases.





The
stratigraphic sequence in this area of the Nisku Formation occurs at a depth of
about 2,000 m and is overlain by silici-clastic sediments of the Calmar
Formation. This formation is continuous throughout this area and is usually
suitable for use as a marker bed. The Calmar Formation consists of calcareous
shale and siltstone interbedded with anhydrite the proportions of which are
variable. The Calmar Formation, in this area, is conformable with the Nisku
Formation that underlies it.  The Nisku and Calmar Formations are part
of the Winterburn Group. Below the Nisku Formation and in this area, apparently
in conformable relation to it, is the shale sequence of the Ireton Formation.
This formation is part of the Woodbend Group.





Generally,
the Nisku Formation is composed of silty and shaley dolomite and limestone, and
anhydrite.  In some places the sequence includes dolomitic mudstone of
a lagoonal origin whereas in others basinal clastic sediments may also
occur.  Within the project area, the sedimentary sequence of the Nisku
Formation is variable, depending on the location of it with respect to the
different prospect trends; east of the Giant leases, and forming the Nisku Inner
Bank, it consists only of a continuous sequence of carbonate whereas in the
Patch Reef environments the Nisku sequence is more varied.





25


In the
vicinity of the “Patch Reef Fairway” and the “Interior Patch Reef Fairway” to
the east of it, the Nisku Formation normally consists of three distinct units.
At the base is the Lobstick Member, which, in the Highvale area, consists of
fossiliferous, argillaceous and silty limestone.  Conformably
overlying the Lobstick Member is the Bigoray Member.  In the Giant
lease area the Bigoray Member consists of calcareous and dolomitic siltstone and
mudstone grading upwards to silty limestone.  Overlying the Bigoray
Member is a sequence of beds that is referred to as the Undifferentiated Member
in this study.  On some well logs, this unit consists almost entirely
of clean reefal limestone, whereas in other locations it is mainly siltstone or
shale.  From place-to-place a variety of names have been used to refer
to this part of the sequence, including the Cynthia Member, Wolf Lake Member and
Zeta Lake Member.





Previous
Work





In 2007
the Company completed its initial review of the Highvale
Property.  The study was undertaken by extracting data from various
well logs drilled in the area from one of the public drill hole database systems
named GeoCarta. The database system was searched to identify all wells that
penetrated to the Ireton Formation that immediately underlies the Nisku
Formation. Formation tops data for the Calmar Formation, the Nisku Formation and
the underlying Ireton Formation were extracted. From this information the depth
and elevation of all three units was compiled along with the depth and elevation
of the Ireton Formation. Initially there were a total of ninety-three wells in
the area that were available for inspection but these are of variable quality. A
total of seventy wells were found to be suitable for the extraction of the data
described above. The well logs were initially correlated using the standard
formation tops as identified by the EUB geologists of the Alberta Provincial
Government. Where necessary adjustments were made to these correlations for
local inconsistencies found in the inspection of one well with respect to
adjacent ones.





The
database was expanded to include the elevation and thickness data that applies
to the Lobstick, Bigoray and Undefined Members of the Nisku Formation. These
units are not identified in the public information and had to be manually added.
This was done by examining the log traces, making the various picks and adding
that data to the data base. The correlation of these units was checked by
preparing various cross sections where necessary adjustments to the database
were made to produce an internally consistent correlation. The results of the
section preparation and database compilation were used to define the geological
trends and to prepare various structure, contour and isopach maps.





The
boundaries of the “Patch Reef Fairway”, the “Interior Patch Reef Fairway” and
the Nisku Shelf were delineated according to the log definitions of the
Discovery Digest article. The relationship of these zones relative to the Giant
leases was determined. This information shows that the Giant leases are located
over the “Interior Patch Reef” trend and that the trend continues past the
leases in a northeasterly direction.





However,
it should be noted that the contacts between the zones is gradational in nature.
The change from the most important Shelf to Interior Patch Reef zone appears to
take place over a normal distance of about one to two kilometers. In addition,
the change of geological conditions should not be expected to be rectilinear but
to twist along the line of the trend as natural deposition processes are prone
to do. Further, the drill hole spacing determines the best resolution of the
position of the line and the present position shown may be found to be a little
different when additional in-fill drilling is completed.





The
structure contour maps of the Nisku and Ireton Formation tops are consistent
with each other, as was expected, and show that the area is subject to a gentle
dip of the beds to the southwest. The contours are surprisingly regular in the
trend except for one anomalous event that occurs in the north-central part of
the maps. There is nothing on the structure maps that is indicative of anything
regarding the prospect potential of the area.


26





The
following are the most important conclusions stemming from our
study:




·
            The
      block of Giant leases that were the target for investigation are located
      on the prospective trend that is currently being drilled and evaluated by
      several other oil and gas companies in this
  area;





·
            There
      is nothing to indicate that the Giant leases have any less geological
      potential for petroleum exploration than any of the adjacent lease areas
      that have been acquired as Nisku
prospects;





·
            The
      logs for the wells along the Interior Patch Reef trend show the
      development of reef conditions above the Bigoray Member or replacing it
      from place-to-place; and





·
            There
      is merit for this group of leases in the acquisition of further data for
      their prospect evaluation. As a first step, this may include the
      acquisition and evaluation of seismic survey
  data.





In 2008 the Companyacquired 2
new PN&G leases in and around our current land holdings.





Planned
Work by the company for 2009





The
Company’s plan of operations for 2009 relates primarily to acquiring new land in
and around our current land holdings and following up on our initial assessment
of the Highvale property completed in 2007.  Current funds available
to us do not allow us to undertake any drilling. However, we do intend on
working with our main contractor on locating and evaluating potential drill
sites so that in the event we are able to raise new funds, we will be able to
consider a drill program.








Suffield
Property Geology





This play
type was described in a report prepared by National Energy Board titled
“Conventional Heavy Oil Resources of the Western Canada Sedimentary Basin”
(August, 2001). Some aspects were also discussed in a different report prepared
by M. B. Dusseault for the Alberta Department of Energy titled “CHOPS: Cold
Heavy Oil Production with Sand in the Canadian Heavy Oil Industry” (March,
2002). Both of these reports describe the oil accumulations of this sequence at
Suffield as being in the “Heavy Oil Belt” that is most well known at
Lloydminster and which occurs adjacent to the Alberta and Saskatchewan
Provincial Border.





Details of
the stratigraphy and depositional environment of the target sequence at Suffield
were presented in a paper titled “Sedimentology, Ichnology and Stratigraphy of
the Ostracode Member (Lower Cretaceous) in the Jenner – Suffield Area, Southeast
Alberta” (June, 1997). This paper was authored by R. L. Karvonen and S. G.
Pemberton and published in Memoir 18 of the Canadian Society of Petroleum
Geologists (“CSPG”). Many aspects of the sedimentary geology of the Giant study
area draw heavily from the observations presented in the latter publication. The
paper contains much information on the character of this geology including a
proposed method of formation and example logs that show the stratigraphic
sequence characteristics.





The
stratigraphy and sedimentation of the Suffield area that encompasses the Giant
leases of the area was studied in detail by Karvonen and Pemberton. The results
of their work were presented in CSPG Memoir 18 and are used as the basis for the
stratigraphy adopted by Giant from its 2007 review of its leases.  The
following listed observations, extracted from their paper, are the key ones that
relate to the stratigraphy, sedimentology and depositional environment of the
sequence that is the target for development by Giant:


27


·
            The
      Lower Cretaceous Ostracode Zone is a widespread environmentally controlled
      biozone which is defined in the subsurface of central and southern
      Alberta.  Located at the top of the Lower Mannville Group, the
      Ostracode Zone varies from 6 m to 21 m in thickness.  The Upper
      Mannville Group consists of lithic and feldspathic sandstones, in contrast
      to the Lower Mannville Group which is characterized by siliceous
      sandstones capped in some areas by the Calcareous Member, the Ostracode
      Member equivalent.





·
            Previous
      work on the Mannville succession in southeast Alberta did not recognize
      the Ostracode sequence as described, but instead grouped the Ostracode
      sandstone with the upper Mannville sandstones into the ‘Glauconitic
      sandstone’. The Ostracode sand is itself a distinct barrier deposit,
      subsequently incised by genetically unrelated Upper Mannville fluvial
      valley deposits.





·
            Deposition
      of the Ostracode Member throughout much of central and southern Alberta
      represents the southward transgression of the Boreal sea within the
      Alberta Foreland Basin.  With this transgression, the relatively
      low topographic relief and slope resulted in the formation of an extensive
      shallow embayment.  Previously existing paleovalleys were
      flooded, resulting in the formation of small bays and estuaries until the
      topographic highs were eventually flooded.  The basal shale and
      limy units of the Ostracode interval are easily recognizable laterally
      extensive markers which represent deposition within this broad shallow
      brackish water embayment.  The Ostracode interval is
      representative of marine marginal marine to estuarine environments in
      central Alberta.  Stratigraphically the shoreface sands of the
      Ostracode Member produce a distinctive coarsening upwards log
      profile.  Ostracode Member sandstones average 9 m in thickness
      reaching a maximum of 24 m.





·
            The
      quartzose sediments of the Ostracode Member sit disconformably on the
      Ellerslie Member.  The influence of the paleotopographic relief
      of the pre-Cretaceous surface on depositional patterns decreases up
      section so that once Upper Mannville sedimentation began, the
      paleotopography was significantly subdued.  The Ostracode Member
      is disconformably overlain by the lithic-rich sediments of the Upper
      Mannville Group, which locally incises into the Ostracode
      Member.  The Ostracode Member is comprised predominantly of two
      lithologies, a limy or laminated carbonaceous shale with a moderate
      abundance of bioturbation, and a very fine to fine grained clean mature
      sublitharenite sandstone.  To the west-southwest, these
      sandstones laterally grade into bioturbated
  shales.





·
            To
      the east the Ostracode barrier sandstones grade laterally into the swamp
      and lagoonal deposits of the backshore.  There is also a local
      buildup on the top of the main Ostracode barrier forming a portion of the
      Suffield A Pool reservoir.  Core and stratigraphic observations
      indicate that this buildup is a washover deposit.  To the west
      the barrier sands grade laterally into the bioturbated shales and
      siltstones of the offshore.





·
            A
      coal typically caps the coarsening upwards unit and the overlying lagoonal
      deposits.  Overlying the coal are a series of interbedded
      shales, siltstones and carbonaceous rich sediments interpreted as costal
      plain deposits.  This blanket of costal plain sediments overlies
      the Ostracode interval throughout the area.  The Ostracode
      Member is incised in the Jenner-Suffield area by lithic Upper Mannville
      valleys of fluvial origin.





28


·
            The
      barrier sands of the Ostracode Member trend north-northwest, with a known
      length of over 104 km and an average width of 26 km.  There are
      two thick trends, possibly representing barrier step out which may have
      occurred while the barrier was keeping pace with a relative sea level
      drop.   Although the Ostracode barrier appears to have a
      sheet-like or blanket morphology, it is most probably a sequence of
      separate off-lapping sandstone bodies.  The easternmost
      sandstone trend has another sandstone unit stacked on it.  This
      sandstone unit reaches about 6 m in thickness and is interpreted to be a
      later feature, a washover lobe associated with the western bar, which
      seems to comprise the main shoreline trend.  A number of north
      trending split-like features are observed on the western, seaward, margin
      of the barrier.  The Jenner E pool is contained in one of these
      sandstone buildups which are interpreted as wave-formed offshore spits on
      the seaward side of the barrier.  The Mannville Group thins to
      the east, and the Ostracode Member becomes
  unrecognizable.





·
            The
      Ostracode barrier sands represent potential stratigraphic traps with
      considerable regional extent as they buildup and are overlain by shales,
      coals and siltstones of the costal plain.  Laterally adjacent
      sediments also represent potential seals; in the west these consist of
      non-reservoir bioturbated shales and siltstones of the offshore; to the
      east shaley sediments of the backshore and costal plain.  Traps
      could also be formed with the incision of tight upper Mannville valleys
      into the shoreface sandstones.





·
            Oilfields
      in the Ostracode sandstones are stratigraphic plays.  Traps are
      either formed by sand buildups as spits, bars and washovers, flanked by
      non-reservoir facies or by the incision of younger low permeable upper
      Mannville valley deposits.”





Previous
Work





In 2007
the Company completed its initial review of the Suffield
Property.  The study was undertaken by extracting data from various
well logs drilled in the area from one of the public drill hole database systems
named GeoCarta. The system was used to provide data for the completion of two
main tasks. These are:





·
            The
      compilation and analysis of data concerning production of oil from along
      the sand trends; and


·
            The
      preparation of a series of cross-sections and contour
  maps.





The
purpose of the production data analysis was to find out how production from
parts of the zones near the Giant leases compared with the results from more
distant locations. This analysis helps to determine the potential for commercial
success by drilling on the Giant leases. The drilled parts of the sand trends
were subdivided into twenty five blocks that are here referred to as well
clusters. The total number of wells in each cluster was recorded. Each well
cluster was then searched to identify all flowing, producing, suspended or
abandoned oil wells to produce an “oil well” data sub-set.  Each of
these data sets was processed using the “Pool Evaluator” routine that is part of
the GeoCarta system. The results are presented as a report that contains
numerous statistical results concerning the selected well cluster. Altogether,
3,729 wells for the “total well” data set and, of these, 1,632 wells are
included in the “oil well” set.





The
database was also used for the preparation of the cross-sections included in the
study. Four sections that include the target sand zone were prepared and these
are approximately oriented perpendicular to the orientation of the sand zones.
An isopach map of the sand body zones has already been presented in the Karvonen
and Pemberton paper. The GeoCarta database was used for the extraction of
formation tops information then used for the generation of a structure contour
map.


29





The
stratigraphic nomenclature of Karvonen and Pemberton, which is used in this
report, identifies the Ostracod Member sand sequence as belonging to the Lower
Mannville Group while earlier workers identified the sequence as being part of
the Upper Mannville. The earlier age determination was used in the Provincial
Government’s Energy and Utilities Board drilling records to determine that the
numerous pools along this trend were within the Upper Mannville. This means that
the sequence identified for the pools in the records of the Provincial
Government are not different from those addressed in our report but the
disconnect of the nomenclature can be confusing if due care is not
taken.





Giant had
maps prepared showing the boundaries of the Ostracod Member sand zone and the
location of the Giant leases over this zone in the Suffield area. The limits to
these trends, modified from a map prepared by Karvonen and Pemberton, are based
on a selection of the drilling data within the target and a broader region. More
detailed work at any location may cause the limits of these zones to be
modified.





It is
important to note that, as Karvonen and Pemberton have determined in their
detailed study of the area, the sand sequence of the Ostracod Member is not a
single sheet like body but rather a series of stacked sand bodies any of which
may serve as a reservoir for a pool. In fact, there are records where more than
one pool exists in this stratigraphic interval in a single well. Karvonen and
Pemberton noted that in the Township 20, Range 7 area, where the combined sand
thickness of the zone is more than 16 m, an individual reservoir sand unit is 6
m thick. Furthermore the combined sand thickness of this trend is not indicative
of the number or thickness of the stacked sand units from one place to the
next.





Overall,
the study shows that all of the Giant leases lie within the sand zone of the
Ostracod Member in this area. However some of the leases have more immediate
prospect potential than others. The leases that are located in Townships 16 and
17, Range 5, occur where the total sand thickness of the zone is as much as 20
m. In addition, the two leases in Township 16, Range 8 and in Township 15, Range
9 are both located at the ends of current drilling trends. There is no apparent
reason, from this data, why these pools that have already been tested should not
also be found on these leases. The lease in Townships 16 and 17, Range 5 is the
most prospective of these.





The
drilling records of the wells that were used in this report to analyse the
production data show the different oil pool names. Altogether there are a total
of fifty two separate Upper Mannville pools identified for the trends studied in
this report, as well as one for the Glauconitic. While some of these may occur
in different parts of the vertical sand sequence and others are distinctly
separated laterally from others as separate traps, many appear to simply be
extensions of other named pools that are likely to be in connection with each
other.





The
production success ratio map which is a measure of the percentage of oil wells
compared with the total wells in any well cluster shows that, with the exception
of a few areas, in Townships 21, 20, 19 and 18 Range 8, the chance of successful
drilling on the Giant leases is about the same as in any other area studied. It
also shows that the success ratio may be about 50%. These maps show that, as
long as drilling is conducted on existing trends of horizontal drilling, the
potential for successful oil production may be about the same as for any other
location on the same trends in the areas studied south of Township
19.





The
following are the most important conclusions stemming from our
study:




·
            The
      block of Giant leases that were the target for investigation are located
      on the prospective sand zone of the Lower Mannville Ostracod Member in
      this area that is currently being drilled, evaluated and developed by
      several other oil and gas companies in this
  area;


30


·
            Overall,
      the study shows that all of the Giant leases lie within the sand zone of
      the Ostracod Member in this area. However some of the leases have more
      immediate prospect potential than others. The lease in Townships 16 and
      17, Range 5 is the most prospective of
these.





·
            The
      production analysis maps show that the chance of successful drilling on
      the Giant leases is about the same as most other parts of other area
      studied, as long as the drilling is located within the lateral boundaries
      of existing horizontal drilling trends. In this case, the success ratio
      may be about 50%.





·
            This
      study has focused on the oil production potential in the Giant leases but
      there is also additional potential for natural gas production from the
      same zones.





Planned
Work by the Company for 2009





The
Company’s plan of operations for 2009 relates primarily to acquiring new land in
and around our current land holdings and following up on our initial assessment
of the Suffield property completed in 2007.  Current funds available
to us do not allow us to undertake any drilling. However, we do intend on
working with our main contractor on locating and evaluating potential drill
sites so that if funds become available we will be able to consider a drill
program.





ITEM 4A.  UNRESOLVED STAFF
COMMENTS





--- Not
applicable ---





ITEM 5.  OPERATING AND FINANCIAL REVIEW AND
PROSPECTS





The
following discussion for the fiscal years ended December 31, 2008, 2007, 2006
and 2005 should be read in conjunction with the financial statements of the
Company and the notes thereto.





Certain
statements contained in the foregoing MD&A and elsewhere in this 20-F
constitute forward-looking statements.  Such forward-looking
statements involve a number of known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements.  Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of the
financial statements were made, and readers are advised to consider such
forward-looking statements in light of the risks set forth in section 3.D.
above.





31


OVERALL
PERFORMANCE





The
following table sets forth the audited statement of operations data for Giant
Oil & Gas Inc. for the fiscal years indicated:





Giant
      Oil & Gas Inc.
                Periods
      Ended December 31,2008
              2007
              2006
              2005
              2004Revenue
              $Nil
              $Nil
              $Nil
              $Nil
              $NilInterest
      income
              $Nil
              $Nil
              $Nil
              $Nil
              -Expenses
              $1,437,061
              $3,950,269
              $38,649
              $57,123
              $5,880Loss
      from Operations
              ($1,437,061)
              ($3,950,269)
              ($38,649)
              ($57,123)
              ($5,880)Net
      loss and comprehensive loss
              ($1,433,874)
              ($3,950,269)
              ($38,649)
              ($57,123)
              ($5,880)Net
      loss per
      share:            Basic
      and Diluted
              $0.03
              $0.09
              $0.00
              $0.00
              $0.00Weighted
      average # of     common shares
      outstanding
              44,627,962
              44,182,218
              41,560,300
              41,560,300
              35,670,997





Results
of Operations of Fiscal 2008 vs. Fiscal 2007





We are a
natural resource exploration company in the exploration stage with an objective
of acquiring, exploring, and, if warranted and feasible, developing oil and gas
properties.  Oil and natural gas exploration and development requires
significant capital and our assets and resources are limited. Therefore, we
participate in the oil and gas industry through the optioning of oil and gas
exploration and development projects.





Revenue
- Cost of Revenue





We did not
earn any revenues during the years ended December 31, 2008 or 2007. We do not
anticipate earning revenues until such time as we have entered into commercial
production of our oil and gas properties. We can provide no assurance that we
will discover commercially exploitable levels of oil or gas on our properties,
or if such resources are discovered, that we will enter into commercial
production of our oil and gas properties.





32


General
and Administrative Expenses





For the
year ended December 31, 2008 we had a net loss of $1,433,874 compared to
$3,950,269 in 2007.  The decrease in the loss of $2,516,395 was
primarily related to the recognition of $1,360,248 in stock-based compensation
in 2008 while 3,876,878 was recognized in 2007.   No stock
options were granted in 2008 while 3,200,000 stock options were granted in
2007.  Office and sundry costs increased to $30,322 in 2008 from
$24,100 in 2007 as a result of higher accounting and office costs related to the
Company needing more administrative services in 2008 due to its increased level
of activity.  Professional fees increased to $34,760 in 2008 from
$16,200 in 2007 related to audit fee increases due to additional
activity.  During 2008 the Company acquired an additional 2 oil and
gas leases and assigned 10 oil and gas leases.  As of December 31,
2008 the Company had interests in 51 oil and gas leases while in 2007 the
Company had interests in 59 oil and gas leases.  Directors’ fees
decreased to $6,000 in 2008 from $9,500 in 2007.  Only one of our
Directors received $500 per month for serving on the board in 2008 while in 2007
There were two Directors receiving fees.  As of January 2009, all
Directors fees have been temporarily suspended in order to minimize operating
expenses.  The foreign exchange gain was $$3,187 in 2008 compared to a
foreign exchange loss of $16,093 in 2007.  The decrease relates to the
Company granting stock options in U.S. dollars in 2007.  When the
stock options were exercised during 2007, the Company retained the U.S. dollars
for a period of time before converting them to Canadian dollars.  As a
result, a foreign exchange loss was incurred.  No such activity took
place in 2008.





Results
of Operations of Fiscal 2007 vs. Fiscal 2006





We are a
natural resource exploration company in the exploration stage with an objective
of acquiring, exploring, and, if warranted and feasible, developing oil and gas
properties.  Oil and natural gas exploration and development requires
significant capital and our assets and resources are limited. Therefore, we
participate in the oil and gas industry through the optioning of oil and gas
exploration and development projects.





Revenue
- Cost of Revenue





We did not
earn any revenues during the years ended December 31, 2007 or 2006. We do not
anticipate earning revenues until such time as we have entered into commercial
production of our oil and gas properties. We can provide no assurance that we
will discover commercially exploitable levels of oil or gas on our properties,
or if such resources are discovered, that we will enter into commercial
production of our oil and gas properties.





General
and Administrative Expenses





For the
year ended December 31, 2007 we had a net loss of $3,950,269 compared to $38,649
in 2006.  The increase in the loss of $3,911,620 was primarily related
the recognition of $3,876,878 in stock-based compensation in 2007 while none was
recognized in 2006.   No stock options were granted in prior
years while in 2007, 3,200,000 stock options were granted.  The
balance of the increased loss related to an increase in office and sundry,
directors’ fees and foreign exchange.  Office and sundry costs
increased to $24,100 in 2007 from $14,345 in 2006 as a result of higher
accounting and office costs related to the Company needing more administrative
services in 2007 due to its increased level of activity.  As of
December 31, 2007 the Company had interests in 59 oil and gas leases while in
2006 the Company had acquired only a single lease and as such had not commenced
significant operations.  Directors’ fees increased to $9,500 in 2007
from $4,000 in 2006.  One of the Company’s Directors began receiving
$500 per month for serving as a Director when he joined the Board in May 2006
while two additional directors were added to the Board in May
2007.  The foreign exchange loss was $16,093 in 2007 compared to $247
in 2006.  The increase relates to the Company granting stock options
in U.S. dollars in 2007.  When the stock options were exercised, the
Company retained the U.S. dollars for a period of time before converting them to
Canadian dollars.  As a result, a foreign exchange loss was
incurred.  No such activity took place in 2006.


33


5.B.  Liquidity and Capital
Resources





Liquidity





We are an
oil and gas exploration company with an objective of acquiring, exploring, and
if warranted and feasible, developing oil and gas properties.


We have
members on our board of directors who have extensive experience in the oil and
gas industry. However, exploration activities of properties without any proven
reserves require a considerable amount of time and money, and the subsequent
return on investment for our shareholders would be very long term
indeed.  Should we make a finding of natural gas we would consider our
alternatives to such finding, including the possibility of selling any findings
to a major oil and gas company. By selling its findings to another oil and gas
company, it would provide an immediate return to our shareholders without the
long time frame and cost of putting an oil or gas operation into operation
ourselves, and it would also provide future capital for the company to continue
operations.





Since our
incorporation we have financed our operations almost exclusively through the
sale of our common shares to investors.  As we are an oil and gas
exploration and development company with no producing resource properties, we do
not generate operating income or cash flow from our business
operations.  Until a significant body of oil or gas is found, our
working capital requirements will be dependent upon the amount of our
exploration budget for any given year.  We expect to continue to
finance operations through the sale of equity.  However, there is no
guarantee that we will be successful in arranging financing on acceptable
terms.





On May 20,
2004, we closed a private placement with six investors for the sale of
11,400,000 units, which generated gross proceeds to us of $114,000. On June 7,
2004, we closed a private placement with forty Canadian investors for the sale
of 160,300 common shares, for total gross proceeds of $16,030. During 2007 we
received $350,760 from the exercise of common stock options and on April 18,
2008 we received $101,365 (USD $100,000) in proceeds from the sale of 112,360
common shares.





During
2008 we used $67,541 for operating activities compared to $73,928 in 2007, a
decrease of $6,387. The decrease in cash used from operations relates to
accounts payable and accrued liabilities of $6,672 in 2008 compared to ($4,820)
in 2007.





In 2008
$101,365 was received in proceeds from the sale of common stock, while in 2007
$350,760 was received from the exercise of stock options.  Investing
activities in 2008 consisted of $104,282 relating to the acquisition of oil and
gas property interests.  In 2007, $216,494 was incurred on oil and gas
property interests. During 2008, $30,311 was received from the assignment of 10
oil and gas leases.








During
2007 we used $73,928 for operating activities compared to $41,516 in 2006, an
increase of $32,412.  The increase related to a higher net loss in
2007 of $3,950,269 compared to $38,649 even though $3,876,878 of the increase
related to non-cash, stock-based compensation.  The balance of the
increase in the net loss contributed $34,742 to the increase in cash used from
operations.





No
financing activities took place in 2006 while in 2007 $350,760 was received from
the exercise of stock options.  Investing activities in 2007 consisted
of $216,494 relating to the acquisition of oil and gas property
interests.  In 2006, $7,677 was incurred on oil and gas property
interests and $60,468 was received from the redemption of short-term
investments.





34


We had
cash of $47,252 as of December 31, 2008. We anticipate that we will incur
through the end of our next fiscal year:





·
            $157,000
      in connection with property acquisitions, annual minimum lease payments
      and exploration expenditures;





·
            $65,000
      for operating expenses, including working capital and general,
      administrative and professional legal and accounting expenses associated
      with our being a reporting issuer under the Securities Exchange Act of
      1934.








At
December 31, 2008 we had working capital of $38,344. On April 18, 2008 we
received $100,840 (USD $100,000) in proceeds from the sale of 112,360 common
shares. Even with the proceeds of $100,840, our working capital at December 31,
2008 is not sufficient for our planned work for the next 12
months.  We shall require additional funding and we anticipate that
such funding 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 program, 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 well can be
demonstrated.  We do not have any arrangements in place for any future
equity financing.





Critical
accounting estimates





The
preparation of financial statements in conformity with Canadian GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosures of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses for the reporting period.  Actual results could differ from
these estimates and would impact future results of operations and cash
flows.





The
Company follows the full cost method for accounting for its oil and natural gas
property interests as prescribed by the Canadian Institute of Chartered
Accountants, (“CICA”) Accounting Guideline 16 - Oil and Gas Accounting – Full
Cost.  Under this method all costs related to the acquisition of, the
exploration for, and the development of oil and natural gas reserves are
capitalized on a country-by-country basis.  These capitalized costs
are depleted or depreciated on a unit-of-production basis on the estimated
proved reserves.  Certain costs associated with the acquisition and
exploration of unproven properties are excluded from depletion and depreciation
until it is determined whether proved reserves are attributable to the
properties. Where the Company has entered into option agreements for the
acquisition of an interest in oil and gas properties that provide for periodic
payments, amounts unpaid are not recorded as a liability since they are paid
entirely at the Company’s option.  Estimates of undiscounted future
cash flows that we use for conducting impairment tests are subject to
significant judgment decisions based on assumptions of highly uncertain future
factors such as, crude oil and natural gas prices, production quantities,
estimates of recoverable reserves, and production and transportation costs.
Given the significant assumptions required and the strong possibility that
actual future factors will differ, we consider the impairment test to be a
critical accounting procedure.





35


Management
has made significant assumptions and estimates determining the fair market value
of stock-based compensation granted during the year.  These estimates
have an effect on the stock-based compensation expense recognized and the
contributed surplus balance on the Company’s Balance Sheet.  The value
of each option award is estimated on the date of grant using the Black-Scholes
option-pricing model. The Black-Scholes option-pricing model requires the input
of subjective assumptions, including the expected term of the option award and
stock price volatility. The expected term of options granted for the purposes of
the Black-Scholes calculation is the term of the award. Because our common stock
has only recently begun trading in a public market, the expected volatility is
based on comparable junior oil and gas companies who granted similar term
options.  In addition, determining the fair value of our shares
requires management to consider factors in addition to share price since a
public quotation of our shares is based on limited trading of our
stock.  These estimates involve inherent uncertainties and the
application of management judgment. An expected forfeiture rate of nil was used
in the recognition of the compensation for those options not yet vested at
December 31, 2008.





5.C. Research and
Development, Patents and Licenses etc.





---
Not applicable ---





5.D. Trends.





--- No
Disclosure Necessary ---





5.E. Off-Balance Sheet Arrangements.





We do not
have any off balance sheet arrangements as of December 31, 2008 or 2007 or of
the date of this report.





5.F.Contractual
Obligations.





We have
the following contractual obligations as expressed in CDN dollars as at December
31, 2008:





Contractual Obligations
              Payments due by periodTotal
              Less
      than 1 year
              1-3
      years
              3-5
      years
              More
      than five yearsAnnual
      Lease Payments:Plains
      Leases
              $  126,399
              $
      31,767
              $
      63,088
              $31,544
              $
      0Capital
      (Finance) Lease Obligations
              0
              0
              0
              0
              0Operating
      Lease Obligations
              0
              0
              0
              0
              0Purchase
      Obligations
              0
              0
              0
              0
              0Other
      Long-Term Liabilities Reflected on the Company’s Balance Sheet Under the
      GAAP of the primary financial statements
              0
              0
              0
              0
              0Total
              $126,399
              $31,767
              $
      63,088
              $31,544
              $  0





At
December 31, 2008 the Company had interests in 51 petroleum and natural gas
lease located in Alberta, Canada.





At
December 31, 2008 and 2007, the Company had trade payables and accrued
liabilities of $16,548 and $55,430 respectively.  All of these
obligations are unsecured and due in less than one year.





36




Recent
Accounting Pronouncements Applicable to the U.S.






SFAS 157






In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value
Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework
for measuring fair value in accordance with generally accepted accounting
principles, and expands disclosures about fair value measurements. The
provisions of FAS 157 are effective fiscal years beginning after November 15,
2007.






SFAS 159






In
February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities - including an amendment of FASB Statement No.
115” (“SFAS No. 159”) which permits entities to choose to measure many financial
instruments and certain other items at fair value. This statement is effective
for fiscal periods beginning after November 15, 2007.






SFAS
141(R)






In
December 2007, the FASB issued SFAS 141(R) “Business Combinations” and SFAS 160
“Non-controlling Interests in Financial Statements”, which are both effective
for fiscal years beginning after December 15, 2008. SFAS 141(R), which will
replace FAS 141, is applicable to business combinations consummated after the
effective date of December 15, 2008.







ITEM 6.  DIRECTORS, SENIOR MANAGEMENT, AND
EMPLOYEES





6.A. Directors and Senior Management





Directors
and Senior Management


______________________________________________________________________________





The
following table sets forth certain information regarding the members of our
board of directors and our executive officers as of June 16, 2009.





Name
              
              Age
              
              Positions
      and Offices HeldRob
      Sandhu
              
              32
              
              Director,
      Chairman, President, Chief Executive and Operating Officer and
      SecretaryRobert
      Coale
              
              69
              
              DirectorMichael
      Nott
              
              36
              
              Director





The
business address of our officers and directors is c/o Giant Oil & Gas Inc.,
Suite 4010 - 246 Stewart Green, S.W., Calgary, AB, T3H 3C8





Our
directors hold office until the next annual meeting of our shareholders or until
their successors are duly elected and qualified.  Set forth below is a
summary description of the principal occupation and business experience of each
of our directors and executive officers for at least the last five
years.





Rob Sandhu was appointed to
his positions with the Company on October 1, 2007.  Since May, 2007 he has
also served as a Director of Power Oil & Gas Inc., a publicly traded oil and
gas exploration company.  He is an oil and natural gas drilling specialist
who has been working as a professional petroleum driller since 1999. During the
preceding five years Mr. Sandhu has worked for the Halliburton Group as a
directional driller and as a drilling operator for Phoenix Technology Income
Trust. From 2000 to 2004 he was a field supervisor for Precision Drilling
Technical Services Group.  He has field drilling experience throughout
Alberta. Mr. Sandhu has technical training from the Southern Alberta Institute
of Technology in Calgary.





37


Mr. Coale
has been a Director of Patriot Gold Corp. since June 2003 and our past Chairman,
President, and Chief Executive and Operating Officer from October 2005 until
September 2008.   He has also been a Director of Giant Oil &
Gas Inc., a publicly traded natural gas exploration company since April 2004.





Robert Coale has been a
Director of the Company since April 2004.  He also served as our
Chairman, President, and Chief Executive and Operating Officer and Secretary
from April 2004 until October 1, 2007. Since June 2003 he has been a Director
of, and since October 2005 until September 2008 he was the President, and Chief
Executive and Operating Officer and Secretary of Patriot Gold Corp., a publicly
traded natural resource exploration company.  He is a Professional
Engineer with two engineering degrees (1963 - MetE. - Colorado School of Mines,
1971 - MSc. - University of the Witwatersrand in South Africa) and an MBA from
the University of Minnesota (1982) and has over 45 years of resource related
business and management experience.   Mr. Coale is currently an
independent consulting engineer specializing in mineral processing and natural
gas fueling systems including development of projects for converting low-grade
or stranded natural gas sources into liquefied natural gas.





Michael Nott is an
accomplished oil and natural gas geologist who has been working as a
professional geologist since 1999.  From August 2006 until June 2008 he has
also served as a Director of Power Oil & Gas Inc., a publicly traded oil and
natural gas exploration company.  Currently Mr. Nott is an Operations
Geologist with Encana Oil & Gas in the Horn River Group working on shale gas
projects in NE British Columbia. From 2006 to 2008, he worked as a project
geologist in the Unconventional Gas Research Group with the Alberta Research
Council which is primarily involved with the research and testing of Coal Bed
Methane and Shale gas.  From 1999 to 2006, he worked as a Well Analyst and
Hydrocarbon Geologist for CL Consultants Ltd. in Calgary, Alberta.  He has
field experience across North America including Alberta, Saskatchewan, NE
British Columbia, New Brunswick and Colorado.  Mr. Nott is 36 years old and
graduated from the University of New Brunswick with a Bachelor of Science degree
in Geology and is a member of the Association of Professional Engineers,
Geologists, and Geophysicists of Alberta.





We are not
aware of any material legal proceedings that have occurred within the past five
years concerning any director, director nominee, or control person which
involved a criminal conviction, a pending criminal proceeding, a pending or
concluded administrative or civil proceeding limiting one's participation in the
securities or banking industries, or a finding of securities or commodities law
violations.





There are
no family relationships between any two or more Directors or Senior
Management.





There are
no arrangements or understandings with major shareholders, customers, suppliers
or others, pursuant to which any person referred to above was selected as a
Director or member of senior management.





6.B. Compensation





Cash Compensation





Except as
describe herein, none of our officers or directors have received or earned any
compensation or bonus for services rendered in the fiscal year ended December
31, 2008.  Effective May 1, 2006 Mr. Nott began receiving $500 per
month for serving on our Board of Directors.  During the fiscal year
ended December 31, 2008, total directors fees of $6,000 (2007 - $9,500) were
paid. The monthly fees owing to Mr. Nott has been temporarily suspended as of
January 2009 in order to conserve operating expenses.





38


We do not
maintain key-man life insurance for any of our executive officers or
directors.





At the
Company’s Annual General Meeting held June 23, 2006, a majority of the Company’s
shareholders approved the Company’s 2006 stock option plan.  The stock
option plans provides for the granting of up to a maximum of 5,000,000 common
stock options.  To date, 3,200,000 options have been granted under the
plan at an exercise price of $0.22 per option.





Outstanding
Equity Awards as at December 31, 2007





Name
              Number
      of Options Granted
              Exercise
      Price per Option
              Grant
      Date
              Expiration
      Date
              Mkt.
      Value of Securities Underlying Options on Date of Grant
              Number
      of Securities Underlying Unexercised Options, Exercisable
              Number
      of Securities Under-lying Un-exercised Options,
    Un-exercisable
              Grant
      Date Fair Value of Stock Options(1)Rob
      Sandhu(2)
              200,000
              $1.65
              10/01/07
              10/01/17
              $1.65
              66,666
              133,334
              $319,340Robert
      Coale
              -
              -
              -
              -
              -
              -
              -
              -Michael
      Nott
              -
              -
              -
              -
              -
              -
              -
              -





(1) The
figures in this column represent the grant date fair value of stock option
grants as determined using the Black-Scholes model. For more information
regarding the assumptions used to value stock option grants, please refer to
note 5(b) of the Company’s audited financial statements for the fiscal year
ended December 31, 2008 filed with this Form 20-F.





(2) Mr.
Sandhu was granted 200,000 options on October 1, 2007.  The options
vest in equal installments of 33,333 every six months commencing April 1, 2008
and ending October 1, 2010.





Change of Control Remuneration.





The
Company had no plans or arrangements in respect of remuneration received or that
may be received by Executive Officers of the Company in Fiscal 2008 to
compensate such officers in the event of termination of employment (as a result
of resignation, retirement, change of control) or a change of responsibilities
following a change of control.





6.C. Board Practices





6.C.1. Terms of Office.





Refer to
ITEM 6.A.1.





6.C.2. Directors’ Service Contracts.





With the
exception of Michael Nott, there are no Director Service
contracts.  Mr. Nott’s service contract will terminate upon his
ceasing to serve as a Director of the Company.





39


6.C.3. Board of Director Committees.





The Audit
Committee oversees the accounting and financial reporting processes of the
Company and all audits and external reviews of the financial statements of the
Company on behalf of the Board, and has general responsibility for oversight of
internal controls, accounting and auditing activities of the Company. The
Committee reviews, on a continuous basis, any reports prepared by the Company's
external auditors relating to the Company's accounting policies and procedures,
as well as internal control procedures and systems. The Committee is also
responsible for examining all financial information, including annual financial
statements, prepared for securities commissions and similar regulatory bodies
prior to filing or delivery of the same. The Audit Committee also oversees the
annual audit process, the Company's internal accounting controls, any complaints
and concerns regarding accounting, internal controls or auditing matters and the
resolution of issues identified by the Company's external auditors. The Audit
Committee recommends to the Board the firm of independent auditors to be
nominated for appointment by the shareholders and the compensation of the
auditors. The Audit Committee meets on an as needed basis.





Until
September 2008 the Company’s Audit Committee consisted of the following three
directors, all of who are financially literate and knowledgeable about the
Company’s affairs: Duncan Budge, Don Neal, and Michael Nott.  Mr.
Duncan Budge is the audit committee’s financial expert member as an accountant
with over 25 years experience in business. As of September 2008 the Board of
Directors is empowered to appoint a new audit committee for the
Corporation.





6.D. Employees





We have no
employees at this time. We utilize outside contractors where possible, and rely
on the industry expertise of management and our Board of Directors. These
contractors will be responsible for surveying, geology, engineering,
exploration, and excavation. The geologists will evaluate the information
derived from the exploration and excavation and the engineers will


advise us on the economic feasibility of
removing the mineralized material. We presently employ no member of our
management team.  We do not foresee any significant changes in the
number of employees or consultants we will have over the next twelve months,
unless the growth of our business demands it.





6.E. Share Ownership





The
following table lists, as of June 16, 2009 Directors and Senior Management who
beneficially own the Company's voting securities, consisting solely of common
shares and the amount of the Company's voting securities owned by the Directors
and Senior Management as a group.





Shareholdings
of Directors and Senior Management


________________________________________________________________________________





Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "SEC") and generally includes voting or investment
power with respect to securities.  In accordance with SEC rules,
shares of common shares issuable upon the exercise of options or warrants which
are currently exercisable or which become exercisable within 60 days following
the date of the information in this table are deemed to be beneficially owned
by, and outstanding with respect to, the holder of such option or
warrant.  Except as indicated by footnote, and subject to community
property laws where applicable, to our knowledge, each person listed is believed
to have sole voting and investment power with respect to all shares of common
shares owned by such person.





40





Name
      of Beneficial Owner
              
              Number
      of Shares
                of
      common shares
                Beneficially
      Owned *
              
              Percent
      of
                common
      shares
                Beneficially
      OwnedRob
      Sandhu
              
              14,066,666(1)(2)
              
              31.5%Robert
      Coale
              
              16,000,000(1)
              
              35.8%Michael
      Nott
              
              -
              
              -All
      directors and executive officers as a group  (three
      persons)
              
              30,066,666
              
              67.3%





*                        Based
on 44,672,660shares
outstanding as of June 16, 2009.





(1)
            14,000,000
      shares owned by Mr. Sandhu and 16,000,000 shares owned by Mr. Coale are
      subject to our option to purchase all or any portion of these shares are a
      purchase price of CDN $0.01 per share.  We are not obligated to
      repurchase the shares at any time or for any reason (such as termination
      of employment, resignation from the Board or as officer, a change of
      control of the Company or failure to reach performance
      goals).  If Messrs. Sandhu and/or Coale ceases to be employed
      by, or ceases to perform services to the Corporation by reason of death or
      disability or termination, the remaining members of the Board of Directors
      shall, at their sole discretion, have the right to assign Messrs. Sandhu
      and/or Coale shares to another Director, without monitory
      consideration.  Our repurchase right will continue with respect
      to and for so long as any of the 30 million shares issued to Messrs.
      Sandhu and Coale are held by them (or any of their affiliates or family
      members), and will survive the resignation as an officer or director of
      the Company by Mr. Sandhu and/or Mr. Coale.  We may exercise our
      right of repurchase as to some or all of the shares held (directly or
      indirectly) by theses Directors by delivering a notice of such exercise to
      Mr. Sandhu and/or Mr. Coale not less than ten business days prior to the
      closing of such repurchase.  Messrs. Sandhu and Coale agree that
      they shall not, directly or indirectly, sell, exchange, pledge,
      hypothecate, transfer, gift, grant an irrevocable proxy with respect to,
      devise, assign or in any other way dispose of, encumber or grant a
      security interest in, any of the shares or any interest
      therein.  Messrs. Sandhu and Coale also agree and acknowledge
      that said restriction is in addition to all applicable securities laws and
      regulation.





(2)
            Represents
      options that are currently exercisable or that are exercisable within 60
      days of the date of this report.  Mr. Sandhu was granted 200,000
      stock options on October 1, 2007 at an exercise price of
      $1.65.  These options vest every six months in equal
      installments of 33,333 commencing April 1, 2008 and ending October 1,
      2010.





Our major
shareholders do not have voting rights that differ from the other holders of our
common shares.





Stock
Options.





The terms
of options grantable by the Company are done at the discretion of the Option
Committee of the Board of Directors, including the number of common shares under
option, the exercise price and expiry date of such options and any amendments
thereto.  The Company adopted a formal written stock option plan (the
"Plan") on June 23, 2006.





41


Such
“terms and conditions”, including the pricing of the options, expiry and the
eligibility of personnel for such stock options; and are described
below.





The
principal purposes of the Company’s stock option program are to (a) promote a
proprietary interest in the Company among the officers, directors, employees and
consultants of the Company, (b) retain and attract the qualified officers,
directors, employees and consultants the Company requires, (c) provide a
long-term incentive element in overall compensation, and (d) promote the
long-term profitability of the Company.





The Plan
provides that stock options may be granted to service providers for the
Company.  The term “service providers” means (a) any full or part-time
employee or Officer, or insider of the Company; (b) any other person employed by
a company or individual providing management services to the Company; (c) any
other person or company engaged to provide ongoing consulting services for the
Company (any person in (a), (b), or (c) hereinafter referred to as an “Eligible
Person”); and (e) any corporation controlled by such Eligible Person, the issued
and outstanding voting shares of which are, and will continue to be,
beneficially owned, directly or indirectly, by such Eligible Person and/or
spouse, children and/or grandchildren of such Eligible
Person.   Subject to the foregoing, the board of directors or
Committee, as applicable, shall have full and final authority to determine the
persons who are to be granted options under the Plan and the number of shares
subject to each option.





The Plan
shall be administered by the board of directors of the Company or a committee
established by the board of directors for that purpose.  Subject to
approval of the granting of options by the board of directors or Committee, as
applicable, the Company shall grant options under the Plan.





The Plan
provides that the aggregate number of shares of the Company, which may be issued
and sold under the Plan, will not exceed 5,000,000.  The Company shall
not, upon the exercise of any option, be required to issue or deliver any shares
prior to (a) the admission of such shares to listing on any stock exchange on
which the Company’s shares may them be listed, and (b) the completion of such
registration or other qualification of such shares under any law, rules or
regulation as the Company shall determine to be necessary or
advisable.  If any shares cannot be issued to any optionee for
whatever reason, the obligation of the Company to issue such shares shall
terminate and any option exercise price paid to the Company shall be returned to
the optionee.





If a stock
option expires or otherwise terminates for any reason without having been
exercised in full, the number of common shares reserved for issuance under that
expired or terminated stock option shall again be available for the purposes of
the Plan.  The Plan provides that it is solely within the discretion
of the Board to determine who should receive stock options and in what amounts,
subject to the following conditions:





(a)
      options will be non-assignable and
  non-transferable;


(b)
      options may be exercisable for a maximum of ten years from grant
      date;


(c)
            options
      to acquire no more than 5% of the issued shares of the Company under the
      Plan together with any other options for services may be granted to any
      one individual in any 12-month
period;


(d)
      options to acquire no more than 10% of the issued shares of the
      Company


may
      be granted to any insiders in any 12-month
  period;


(e)
            the
      issuance of shares to insiders of the Company may not exceed 10% of the
      issued and outstanding shares within a one-year
  period;


(f)
            the
      issuance of shares to an insider of the Company and his or her associates
      under the Plan and all other compensation arrangements, within a one-year
      period, may not exceed 5% of the issued and outstanding
      shares;


(g)
            options
      held by an option holder who is a director, employee, or consultant may
      with the consent of the directors exercise such option within 90 days
      after the option holder ceases to be a director, employee, or consultant,
      subject to an earlier expiration period
thereof;


42


(h)
      in the event of an option holder’s death, the option holder’s
      personal


representative
may exercise any portion of the option holder’s vested


outstanding
options for a period of one year following the option holder’s


death,
with the consent of the board of directors.





The Plan
provides that other terms and conditions may be attached to a particular stock
option, such terms and conditions to be referred to in a schedule attached to
the option certificate.  Stock options granted to directors, senior
officers, employees or consultants will vest when granted unless otherwise
determined by the Board on a case-by-case basis.





The price
at which an option holder may purchase a common share upon the exercise of a
stock option will be as set forth in the option certificate issued in respect of
such option and in any event will not be less than the market price of the
Company’s common shares as of the date of the grant of the stock option (the
“Award Date”).  The market price of the Company’s common shares for a
particular Award Date will typically be the closing trading price of the
Company’s common shares on the day immediately preceding the Award Date, or
otherwise in accordance with the terms of the Plan.  Where there is no
such closing price or trade on the prior trading day “market price” shall mean
the average of the most recent bid and ask of the shares of the Company on any
stock exchange on which the shares are listed or dealing network on which the
shares of the Company trade.





In no case
will a stock option be exercisable at a price less than the minimum prescribed
by each of the organized trading facilities or the applicable regulatory
authorities that would apply to the award of the stock option in
question.





Common
shares will not be issued pursuant to stock options granted under the Plan until
they have been fully paid for by the option holder.





ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS





7.A. Major Shareholders.





7.A.1.a. Holdings By Major
Shareholders.





The
Company has two shareholders who own more than 5% of the issued
shares.  As at June 16, 2009, Rob Sandhu and Robert Coaleown an aggregate
30,000,000 shares, or 67.2% of the common shares.





7.A.1.b. Significant Changes in Major Shareholders’
Holdings.





On
September 10, 2008, 14,000,000 shares of the common stock of the Company held by
Donald Neal were gifted by Mr. Neal to Rob Sandhu, pursuant to an assignment,
dated September 10, 2008, among, Mr. Neal, Mr. Sandhu and the
Company.  No consideration was paid by Mr. Sandhu for the gifting of
such shares. Such assignment was made subsequent to Mr. Neal resigning as
Director and terminating his relationship with the Company.





7.A.1.c. Different Voting Rights.





The
Company’s major shareholders do not have different voting rights.





7.A.2. Canadian Share Ownership.





As of June
16, 2009 the Company’s shareholders’ list showed 44,672,660 common shares
outstanding which were held by approximately fifty-five (55) registered
stockholders of record.  Of the registered stockholders, 19,522,660
shares are held by individuals with Canadian addresses.





The
Company’s shares began trading in April 2007 under the symbol
GGSIF:OTC:BB.





43


7.A.4. Change of Control of Company
Arrangements.





There are
no arrangements, known to the Company, the operation of which may at a
subsequent date result in a change in control of the Company.





7.B. Related Party Transactions





Other than
the transactions described below in this section, there are no transactions
during the last two years, or proposed transactions, to which we were or are to
be a party, in which any of the following persons had or is to have a direct or
indirect material interest:




·
            Any
      director or executive officer of the small business
  issuer;






·
            Any
      majority security holder; and






·
            Any
      member of the immediate family (including spouse, parents, children,
      siblings, and in-laws) of any of the persons in the
  above.




In May
2004, pursuant to an agreement, we issued 16,000,000 common shares to Robert
Coale, one of directors and founder.   Such shares are restricted
and the certificates representing such shares contain a restrictive
legend.  In May 2004, we also issued 14,000,000 common shares to one
of our directors and founder, Donald Neal.





In
September 2008, 14,000,000 shares of the common stock of the Company held by
Donald Neal were gifted by Mr. Neal to Rob Sandhu, pursuant to an assignment,
dated September 10, 2008, among, Mr. Neal, Mr. Sandhu and the
Company.  No consideration was paid by Mr. Sandhu for the gifting of
such shares. Such assignment was made subsequent to Mr. Neal resigning as
Director and terminating his relationship with the Company.








The common
shares beneficially owned by Mr. Sandhu and Mr. Coale are subject to our right,
exercisable at any time, to purchase any or all of these shares from Mr. Sandhu
and Mr. Coale at a purchase price of CDN$0.01 per share.  We have this
right until we, in our sole discretion, decide to terminate the
agreement.





Shareholder Loans





There are
no loans to shareholders.





Amounts Owing to Senior
Management/Directors





At
December 31, 2008 and 2007 no amounts were owed to senior management or
directors.  There have been no transactions since inception, or
proposed transactions, which have materially affected or will materially affect
the Company in which any director, executive officer, or beneficial holder of
more than 5% of the outstanding common shares, or any of their respective
relatives, spouses, associates or affiliates has had or will have any direct or
material indirect interest.  Management believes the transactions
referenced above were on terms at least as favorable to the Company as the
Company could have obtained from unaffiliated parties.





7.C. Interests of Experts and
Counsel





--- Not
applicable ---





ITEM 8.  FINANCIAL
INFORMATION





44


8.A.  Statements and Other Financial
Information





The
Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with United States GAAP, as
discussed in footnotes to the financial statements.





The
financial statements as required under ITEM #17 are attached hereto and found
immediately following the text of this Annual Report.  The audit
report of Smythe Ratcliffe LLP is included herein immediately preceding the
financial statements.





Audited Financial Statements:





Fiscal
2008/2007/2006/2005 Ended December 31st





8.A.7. Legal/Arbitration Proceedings





The
directors and the management of the Company do not know of any material, active
or pending, legal proceedings against them; nor is the Company involved as a
plaintiff in any material proceeding or pending litigation.





The
directors and the management of the Company know of no active or pending
proceedings against anyone that might materially adversely affect an interest of
the Company.





8.A.8. Policy on Dividend
Distributions





The
Company has never declared or paid a dividend to its
shareholders.  The Company does not have any policy on dividend
distributions.





8.B. Significant Changes





On
February 8, 2006 the Company did not exercise its options on its interests in a
gas well in Jack County, Texas.  The Company’s initial option payment
of USD $6,000 made on February 8, 2005 will not be refunded and we do not
currently have an interest in this property.





On June
14, 2006 the Company acquired a 100% interest in an Alberta oil sands lease (the
“Cooking Lake Property”).  The rights to the Cooking Lake Property
were acquired for $7,677 (including closing costs) which was paid upon
signing.  The rights that were acquired relate to the petroleum and
natural gas rights only.  The Cooking Lake Property covers 64 hectares
of land in the Cooking Lake area of Alberta, which is approximately 12.5
miles east of Edmonton in the Plains region of Alberta.  The lease,
which expires in March 2010, gives the Company the right to explore the Cooking
Lake Property covered by the lease.  Giant’s acquisition of the lease
includes an overriding 5% royalty agreement with the vendor.  The
royalty is to be paid on a well-to-well basis and is payable on all petroleum
substances produced by any well on the Property.  The Cooking Lake
Property is subject to an annual lease payment payable to the government of
Alberta in the amount of CDN $224 until expiry on March 24, 2010.





In a
series of transactions from February 7, 2007 to February 6, 2008, the Company
entered into 60 leases in multiple transactions with the Province of Alberta for
a total of 10,922 hectares of land.  All of the leases were acquired
through the public auction process conducted by the provincial
government.  To participate in the auction, the Company is required to
submit sealed bids for land packages being auctioned by the 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.  All of the
PN&G leases are for five-year terms, require minimum annual lease payments,
and grant the Company the right to explore for petroleum and natural gas
opportunities on the respective lease.





45


On March
19, 2007, by way of letter agreements with each individual warrant holder, the
Company and each respective warrant holder have agreed to extend the vesting of
the Company’s Class A, Class B and Class C warrants (the
“Warrants”).  Originally, all of the Warrants were to have vested on
May 20, 2007 (the “Warrant Commencement Date”).  As a result of the
agreements between the Company and the respective warrant holders, the Warrant
Commencement Date has been extended from May 20, 2007 to May 20, 2008 with
respect to the Class A Warrants, to November 20, 2008 with respect to the Class
B Warrants, and to May 20, 2009 with respect to the Class C
Warrants.  All other terms of the Warrant agreements remain
unchanged.





On March
19, 2008 by way of new letter agreements, the vesting dates were extended from
May 20, 2008 to November 20, 2008 with respect to the Class A Warrants, from
November 20, 2008 to May 20, 2009 with respect to the Class B Warrants, and from
May 20, 2009 to November 20, 2009 with respect to the Class C
Warrants.  In addition, the expiry dates have been extended from May
20, 2009 to May 20, 2010 with respect to the Class A Warrants, from May 20, 2010
to May 20, 2011 with respect to the Class B Warrants, and from May 20, 2011 to
May 20, 2012 with respect to the Class C Warrants.  All other terms of
the Warrant agreements remained unchanged.





On July
23, 2008, the Company entered into an assignment and assumption agreement with
Power Oil and Gas Inc. et al whereby the Company assigned a 100% right and
interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a
total of 1,911 hectares in the Taber, Grand Forks area of Ablerta, Canada to
Power Oil and Gas Inc.








ITEM 9.  THE OFFER AND
LISTING





9.C. Markets





Admission
to Quotation on the OTC Bulletin Board





Our stock
began trading on the OTC Bulletin Board in April 2007 under the symbol
GGSIF:OTC:BB.  The OTC Bulletin Board differs from national and
regional stock exchanges in that it:





(1)
      is not situated in a single location but operates through communication of
      bids, offers and confirmations between broker-dealers,
  and





(2)
            securities
      admitted to quotation are offered by one or more Broker-dealers rather
      than the  "specialist" common to stock
  exchanges.





To qualify
for quotation on the OTC Bulletin Board, an equity security must have at least
one registered broker-dealer, known as the market maker, willing to list bid or
sale quotations and to sponsor the company listing.





ITEM 10.  ADDITIONAL
INFORMATION





10.A. Share Capital





--- Not
applicable ---





10.B.  Memorandum and Articles of
Association





The
Company’s Articles of Incorporation were filed with the Director under the Canada Business Corporations Act on April 2,
2004.  The corporate bylaws were adopted by the directors of the
Company on April 2, 2004.





46


The
directors of the Company are empowered under Schedule C to the Articles of
Incorporation to (1) borrow money upon the credit of the Company; (2) issue,
reissue, sell or pledge the debt obligations of the Company; (3) give a
guarantee on behalf of the Company to secure performance of an obligation of any
person; and (4) charge, mortgage, hypothecate, pledge or otherwise create a
security interest in all or any of the currently owned or subsequently acquired
property and assets of the Company, including, without limitation, real and
personal property, movable and immovable property, tangible and intangible
assets, book debts, right, powers, franchises and undertakings, to secure any
obligation of the Company.  The Company’s Articles of Incorporation
and By-Laws do not place any restrictions on the voting powers of interested
directors.  With respect to the directors of the Company, section 3 of
the By-Laws of the Company provides that, as long as an interested director has
complied with the applicable provisions of the Canada Business Corporations Act,
any director shall not be disqualified by his office from contracting with the
Company, nor shall any contract or arrangement entered into by or on behalf of
the Company with any director or in which any director is in any way interested
be liable to be voided, nor shall any director so contracting or interested be
liable to account to the Company for any profit realized from such contract or
arrangement by reason of that director or officer holding that office or of the
fiduciary relationship thereby established provided that such officer or
director shall have complied with the provisions of the Canada Business
Corporations Act





The
holders of the Company’s Common shares are entitled to receive notice of, and
attend and vote at all, meetings of shareholders.   Currently,
there are no specific rights, preferences and restrictions attaching to each of
the Company’s preferred shares.  The Company may issue preferred
shares in one or more series and, pursuant to Schedule A to the Company’s
Articles of Incorporation, the directors may, by majority resolution, alter the
Articles of Incorporation to create, define and attach rights and restrictions
to the shares of each series.





Pursuant
to section 12 of the Company’s By-Laws, the quorum at meetings of the Company’s
shareholders shall be constituted by the presence of two shareholders entitled
to vote at any such meeting holding or representing by proxy not less than
one-twentieth of the shares entitled to be voted at such meeting.





There are
no limitations on the rights of non-resident or foreign shareholders to hold or
exercise voting rights on the securities of the Company imposed by foreign law
or by the Articles of Incorporation or any other constituent document of the
Company.





10.C. Material Contracts





Since
inception (April 2, 2004), the Company has entered into the material contracts
listed below:





1.
            Property
      Option Agreement between the Company and JRC Enterprises Ltd.
      On     February 8, 2005.  This option
      agreement was not exercised by the Company by February 8, 2006 and as a
      result the Company no longer has a right to the property related to this
      agreement.





2.
            We
      have an agreement with Robert Coale, one of our Directors, which allows us
      at any time to send a notice to Mr. Coale that we are purchasing all or
      any portion of his 16,000,000 shares. The irrevocable option which he
      granted us is exercisable at any time at an exercise price of CDN $0.01
      per share.  We have the same option right with respect to
      14,000,000 shares owned by Mr. Sandhu, our Chairman, President, Chief
      Executive and Operating Officer and Secretary and Director. Under these
      agreements, if we elect to exercise our option to purchase their shares,
      we shall pay the applicable purchase price thereof no later than 10
      business days after the delivery of a
notice.





3.


On June
14, 2006 the Company acquired a 100% interest in an Alberta oil sands lease (the
“Cooking Lake Property”).  The rights to the Cooking Lake Property
were acquired for $7,677 (including closing costs) which was paid upon
signing.  The rights that were acquired relate to the petroleum and
natural gas rights only.  The Cooking Lake Property covers 64 hectares
of land in the Cooking Lake area of Alberta, which is approximately 12.5
miles east of Edmonton in the Plains region of Alberta.  The lease,
which expires in March 2010, gives the Company the right to explore the Cooking
Lake Property covered by the lease.  Giant’s acquisition of the lease
includes an overriding 5% royalty agreement with the vendor.  The
royalty is to be paid on a well-to-well basis and is payable on all petroleum
substances produced by any well on the Property.  The Cooking Lake
Property is subject to an annual lease payment payable to the government of
Alberta in the amount of CDN $224 (USD $191) until expiry on March 24,
2010.





4.
            On
      March 19, 2007, by way of letter agreements with each individual warrant
      holder, the Company and each respective warrant holder have agreed to
      extend the vesting of the Company’s Class A, Class B and Class C warrants
      (the “Warrants”).  Originally, all of the Warrants were to have
      vested on May 20, 2007 (the “Warrant Commencement Date”).  As a
      result of the agreements between the Company and the respective warrant
      holders, the Warrant Commencement Date has been extended from May 20, 2007
      to May 20, 2008 with respect to the Class A Warrants, to November 20, 2008
      with respect to the Class B Warrants, and to May 20, 2009 with respect to
      the Class C Warrants.  All other terms of the Warrant agreements
      remain unchanged.





5.
            In a
      series of transactions from February 7, 2007 to February 6, 2008, the
      Company entered into 60 leases in multiple transactions with the Province
      of Alberta to acquire 10,922 hectares of land.  All of the
      leases were acquired through the public auction process conducted by the
      provincial government.  To participate in the auction, the
      Company is required to submit sealed bids for land packages being
      auctioned by the 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.  All of the PN&G leases
      are for five-year terms, require minimum annual lease payments, and grant
      the Company the right to explore for petroleum and natural gas
      opportunities on the respective
lease.





6.
            On
      March 19, 2008 by way of new letter agreements, the vesting dates of the
      warrants were extended from May 20, 2008 to November 20, 2008 with respect
      to the Class A Warrants, from November 20, 2008 to May 20, 2009 with
      respect to the Class B Warrants, and from May 20, 2009 to November 20,
      2009 with respect to the Class C Warrants.  In addition, the
      expiry dates have been extended from May 20, 2009 to May 20, 2010 with
      respect to the Class A Warrants, from May 20, 2010 to May 20, 2011 with
      respect to the Class B Warrants, and from May 20, 2011 to May 20, 2012
      with respect to the Class C Warrants.  All other terms of the
      Warrant agreements remained
unchanged.





7.
            On
      July 23, 2008, the Company entered into an assignment and assumption
      agreement with Power Oil and Gas Inc. et al whereby the Company assigned a
      100% right and interest in 10 Alberta Crown Petroleum and Natural Gas
      Lease Agreements for a total of 1,911 hectares in the Taber, Grand Forks
      area of Ablerta, Canada to Power Oil and Gas
  Inc.





10.D. Exchange Controls





There are
no government laws, decrees or regulations in Canada, which restrict the export
or import of capital or, subject to the following sentence, which affect the
remittance of dividends or other payments to nonresident holders of our common
shares. However, any such remittance to a resident of the United States is
generally subject to non-resident tax pursuant to Article X of the 1980
Canada-United States Income Tax Convention. See “Material Income Tax
Considerations” above for additional discussion on tax matters.





47


There are
currently no limitations of general application imposed by Canadian federal or
provincial laws on the rights of non-residents of Canada to hold or vote our
common shares. There are also no such limitations imposed by the articles of
incorporation with respect to our common shares. There are, however, certain
requirements on the acquisition of control of our securities by non-residents of
Canada. The Investment Canada Act requires notification to and, in certain
cases, advance review and approval by, the Government of Canada, of the
acquisition by a “non-Canadian” of “control” of a “Canadian business”, all as
defined in the Investment Canada Act. Generally speaking, in order for an
acquisition to be subject to advance review and approval, the asset value of the
Canadian business being acquired must meet or exceed certain monetary
thresholds.





10.E. Taxation





Canadian Federal Income Tax
Considerations





The
following is a brief summary of some of the principal Canadian federal income
tax consequences to a holder of common shares of the Company (a "U.S. Holder")
who deals at arm's length with the Company, holds the shares as capital property
and who, for the purposes of the Income Tax Act (Canada) (the "Act") and the
Canada – United States Income Tax Convention (the "Treaty"), is at all relevant
times resident in the United States, is not and is not deemed to be resident in
Canada and does not use or hold and is not deemed to use or hold the shares in
carrying on a business in Canada. Special rules, which are not discussed below,
may apply to a U.S. Holder that is an insurer that carries on business in Canada
and elsewhere.





Under the
Act and the Treaty, a U.S. Holder of common shares will generally be subject to
a 15% withholding tax on dividends paid or credited or deemed by the Act to have
been paid or credited on such shares. The withholding tax rate is 5% where the
U.S. Holder is a corporation that beneficially owns at least 10% of the voting
shares of the Company and the dividends may be exempt from such withholding in
the case of some U.S. Holders such as qualifying pension funds and
charities.





In
general, a U.S. Holder will not be subject to Canadian income tax on capital
gains arising on the disposition of shares of the Company unless (i) at any time
in the five-year period immediately preceding the disposition, 25% or more of
the shares of any class or series of the capital stock of the Company was owned
by (or was under option of or subject to an interest of) the U.S. holder,
persons with whom the U.S. holder did not deal at arm's length, or the U.S
holder, together with such persons and (ii) the value of the common shares of
the Company at the time of the disposition derives principally from real
property (as defined in the Treaty) situated in Canada. For this purpose, the
Treaty defines real property situated in Canada to include rights to explore for
or exploit mineral deposits and other natural resources situated in Canada,
rights to amounts computed by reference to the amount or value of production
from such resources, certain other rights in respect of natural resources
situated in Canada and shares of a corporation the value of whose shares is
derived principally from real property situated in Canada.





A U.S.
Holder who is subject to Canadian income tax in respect of a capital gain
realized on a disposition of a common share must include one-half of the capital
gain (taxable capital gain) in computing the Holder's taxable income earned in
Canada.  The Holder may, subject to certain limitations, deduct
one-half of any capital loss (allowable capital loss) arising on a disposition
of taxable Canadian property from taxable capital gains realized in the year of
disposition in respect of taxable Canadian property and, to the extent not so
deductible, from such taxable capital gains realized in any of the three
preceding years or any subsequent year.





48


United States Taxation





For
federal income tax purposes, an individual who is a citizen or resident of the
United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain
or loss on the sale of the Company's common shares equal to the difference
between the proceeds from such sale and the adjusted tax basis of the common
shares.  The gain or loss will be a capital gain or capital loss if
the Company's common shares are a capital asset in U.S. Taxpayer's
hands.





For
federal income tax purposes, a U.S. Taxpayer will be required to include in
gross income dividends received on the Company's common shares.  A
U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be
entitled, subject to certain limitations, to a credit (or alternatively, a
deduction) against federal income tax liability.  A domestic
corporation that owns at least 10% of the voting shares should consult its tax
advisor as to applicability of the deemed paid foreign tax credit with respect
to dividends paid on the Company's common shares.





Under a
number of circumstances, United States Investor acquiring shares of the Company
may be required to file an information return with the Internal Revenue Service
Center where they are required to file their tax returns with a duplicate copy
to the Internal Revenue Service Center, Philadelphia, PA 19255.  In
particular, any United States Investor who becomes the owner, directly or
indirectly, of 10% or more of the shares of the Company will be required to file
such a return.  Other filing requirements may apply, and United States
Investors should consult their own tax advisors concerning these
requirements.





The US
Internal Revenue Code provides special anti-deferral rules regarding certain
distributions received by US persons with respect to, and sales and other
dispositions (including pledges) of stock of, a passive foreign investment
company.  A foreign corporation, such as the Company, will be treated
as a passive foreign investment company if 75% or more of its gross income is
passive income for a taxable year or if the average percentage of its assets (by
value) that produce, or are held for the production of, passive income is at
least 50% for a taxable year.  The Company believes that it may be a
passive foreign investment company for the taxable year ended December 31,
2005.  Individual investors should consult with there own tax advisors
regarding the tax implications in their own situation.





10.F. Dividends and Paying Agents





--- Not
applicable ---





10.G. Statement by Experts





--- Not
applicable ---








ITEM 11.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





FOREIGN
CURRENCY EXCHANGE RATE SENSITIVITY







The
Company's operating expenses and liabilities are primarily incurred in Canadian
dollars.






To the
extent the Company engages in transactions in US dollars, the results of the
Company’s operations are subject to currency transaction risk and currency
translation risk. The operating results and financial position of the Company
are reported in Canadian dollars in the Company’s financial statements. The
fluctuation of the US dollar in relation to the Canadian dollar will
consequently have an impact upon the operations of the Company and may also
affect the value of the Company’s assets and the amount of shareholders’
equity.




49




The
Company’s functional currency is the Canadian dollar and its expenses are
predominantly incurred in Canadian dollars. The Company incurs a relatively
small portion of its expenses in U.S. dollars.






The
Company has not entered into any agreements or purchased any instruments to
hedge possible currency risks at this time.







INTEREST
RATE SENSITIVITY





The
Company currently has no significant long-term or short-term debt requiring
interest payments. Thus, the Company has not entered into any agreement or
purchased any instrument to hedge against possible interest rate risks at this
time.





The
Company's interest earning investments are primarily short-term, or can be held
to maturity, and thus, any reductions in carrying values due to future interest
rate declines are believed to be immaterial. However, as the Company has a
significant cash or near-cash position, which is invested in such instruments,
reductions in interest rates will reduce the interest income from these
investments.








ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES





12.A. Debt Securities





The
Company has no debt outstanding.





12.B. Warrants and Rights





We have
warrants outstanding to purchase an aggregate of 34,200,000 common shares. Of
these warrants, the 11,400,000 Class A warrants are exercisable at $0.10 per
share beginning November 20, 2008 and expiring May 20, 2010, the 11,400,000
Class B warrants are exercisable at $0.50 per share beginning May 20, 2009 and
expiring May 20, 2011, and the 11,400,000 Class C warrants are exercisable at
$1.10 per share beginning November 20, 2009 and expiring May 20, 2012. The
warrants are non-transferable and provide for a cashless exercise
option.





We have
the right, in our sole and absolute discretion, to (i) accelerate the exercise
date of the warrants to a date which is prior to the date the warrants can be
exercised and /or (ii) reduce the exercise price. If we exercise our right to do
so, we shall provide notice thereof to the warrant holder.





12.C. Other Securities





--- Not
applicable ---





12.D. American Depository Shares





--- Not
applicable ---








50





PART
II





ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES





There have
been no defaults, dividend arrearages or delinquencies.








ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY


HOLDERS AND USE OF
PROCEEDS





There have
been no modifications to securities of any class of the Company.





ITEM 15.  CONTROLS AND
PROCEDURES





Evaluation of Disclosure
Controls and Procedures





As
required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange
Act”), the Company’s management carried out an evaluation of the effectiveness
of the design and operation of its disclosure controls and procedures as of
December 31, 2008, being the date of the Company’s most recently completed
fiscal year end. This evaluation was carried out under the supervision and with
the participation of our Principal Executive Officer and Principal Financial
Officer, Mr. Rob Sandhu.  Based upon that evaluation, our principal
executive officer and principal financial officer concluded that our disclosure
controls and procedures are effective.





Internal Controls over
Financial Reporting





The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Under the supervision of the Company’s
Principal Executive Officer, the Company’s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles (“GAAP”). The Company’s controls include policies and procedures
that:





 ̈
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;


 ̈
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with GAAP;
      and


 ̈
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on the annual financial statements or interim
      financial statements.





Because of
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.





Management
conducted an evaluation of the design and operation of the Company’s internal
control over financial reporting as of December 31, 2008, based on the criteria
set forth in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. This evaluation included
review of the documentation of controls, evaluation of the design effectiveness
of controls, testing of the operating effectiveness of controls and a conclusion
on this evaluation. Based on this evaluation, management concluded that our
internal control over financial reporting was not effective as of December 31,
2008 due to the following material weakness:


51


Our
company’s administration is composed of a 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.





Limitations of Controls and
Procedures





The
Company’s management, including the Principal Executive Officer and Principal
Financial Officer, believe that any disclosure controls and procedures or
internal controls over financial reporting, 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, they cannot provide absolute
assurance that all control issues and instances of fraud, if any, within the
Company have been prevented or detected. These inherent limitations include 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 unauthorized override of the control. The design of any systems 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. Accordingly,
because of the inherent limitations in a cost effective control system,
misstatements due to error or fraud may occur and not be detected.





Attestation Report of
Registered Public Accounting Firm





This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the
Company’s independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management’s report in
this annual report.





Changes in Internal Controls
over Financial Reporting





During the
most recently completed fiscal year ended December 31, 2008, there were no
changes in the Company’s internal control over financial reporting that have
materially affected, or are reasonably likely to affect, the Company’s internal
control over financial reporting.





ITEM 16.  RESERVED





ITEM 16A.  AUDIT COMMITTEE FINANCIAL
EXPERT





Until
September 2008 the Company’s Audit Committee consists of three directors, all of
who are financially literate and knowledgeable about the Company’s
affairs.  Mr. Duncan Budge is the audit committee’s financial expert
member as a qualified accountant with over 25 years experience in business. In
addition to serving on the Board of Giant Oil & Gas Inc., he also served on
the Board and was the Audit Committee Chair of Patriot Gold Corp., Strata Oil
& Gas Inc and Power Oil & Gas Inc.  As of September 2008 the
Board of Directors is empowered to appoint a new audit committee for the
Corporation.





52


ITEM 16B.  CODE OF ETHICS





The
Company has adopted a code of ethics that applies to the Company's principal
executive officer, principal financial officer, principal accounting officer or
controller, persons performing similar functions and other officers of the
Company. This code of ethics is filed as an exhibit to this Form
20-F.  A copy of the code of ethics can be obtained from the Company
by making a request in writing addressed to the Corporate Secretary and mailing
such request to 246 Stewart Green S.W., Suite 4010, Calgary, Alberta, Canada,
T3H 3C8.





The code
of ethics was adopted on March 6, 2006.





Item 16C. PRINCIPAL ACCOUNTIING FEES AND
SERVICES





The audit
committee is directly responsible for the appointment, compensation and
oversight of auditors; the audit committee has in place procedures for receiving
complaints and concerns about accounting and auditing matters; and has the
authority and the funding to engage independent counsel and other outside
advisors.





The Audit
Committee may delegate to one or more designated members of the Audit Committee
the authority to grant pre-approvals required by this
policy/procedure.  The decisions of any Audit Committee member to whom
authority is delegated to pre-approve a service shall be presented to the full
Audit Committee at its next scheduled meeting.





Fees,
including reimbursements for expenses, for professional services rendered by
Smythe Ratcliffe LLP in
2008 and 2007, the Company’s auditors.


Fiscal
      Year ended December 31, 2007 and 2006
                      
                      
                      Fiscal
      Year
                      
                      
                      Fiscal
      YearPrincipal
      Accountant Fees and Services
                      
                      
                      2008
                      
                      
                      2007Audit
      Fees
                      
                      
                      $
                      34,760
                      
                      
                      $
                      16,200Audit
      Related Fees
                      
                      
                      $Nil
                      
                      
                      $NilTax
      Fees
                      
                      
                      $Nil
                      
                      
                      $NilAll
      Other
                      
                      
                      $Nil
                      
                      
                      $
                      16,200Total
                      
                      
                      $
                      34,760
                      
                      
                      $
                      16,200


Audit
related fees relate to services provided to review the Company’s annual
financial statements and related disclosures.





ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR
AUDIT COMMITTEES





--- Not
applicable ---





ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE
      ISSUER AND AFFILIATED
PURCHASERS





There have
been no purchases of the Company's common shares by the Company or


affiliated
purchasers during the period covered by this report.


53





PART
III





ITEM 17.  FINANCIAL
STATEMENTS





The
Company's financial statements are stated in Canadian dollars (CDN$) and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with United States GAAP, except as
discussed in footnotes to the financial statements.





The
financial statements as required under ITEM 17 are attached hereto and found
immediately following the text of this Annual Report.  The audit
report of Smythe Ratcliffe LLP, is included herein immediately preceding the
audited financial statements.





ITEM 18.  FINANCIAL
STATEMENTS





The
Company has elected to provide financial statements pursuant to ITEM
17.





ITEM 19.  EXHIBITS





Exhibit
                Numbers
              Description
      of Document(1)1.1
              Articles
      of  Incorporation of the Company(1)1.2
              Articles
      of Amendment(1)1.3
              By-Laws
      of the Company(1)2.1
              Specimen
      Common Stock Certificate(1)2.2
              Form
      of Class A Warrant(1)2.3
              Form
      of Class B Warrant(1)2.4
              Form
      of Class C Warrant(1)2.5
              Agreement
      between the Company and Robert Coale dated May 7, 2004(1)2.6
              Agreement
      between the Company and Donald Neal dated May 7, 2004(2)2.7
              Form
      of Warrant Extension letter agreement dated March 19,
  2007(3)2.8
              Form
      of Warrant Extension letter agreement dated March 19,
  2008(4)2.9
              Form
      of subscription agreement dated April 18, 2008(5)4.1
              Option
      Agreement with JCR Enterprises Ltd.(6)4.2
              Petroleum,
      Natural Gas and General Rights Conveyance Agreement dated June 14, 2006,
      among the Company, Stone Petroleums Ltd., Supernova Resources Ltd., 349385
      Alberta Ltd., and Torland Ltd.(6)4.3
              Royalty
      Agreement dated June 14, 2006, among the Company, Stone Petroleums Ltd.,
      Supernova Resources Ltd., 349385 Alberta Ltd., and Torland
      Ltd.(6)11.1
              Code
      of Ethics*12.1
              Certification
      of Principal Executive and Financial Officer*13.1
              Section
      1350 Certification


* Filed
herewith.


54





(1)
            Previously
      filed with the Company’s registration statement on Form F-1, Registration
      No. 333-125381, submitted to the SEC on May 21,
  2005.





(2)
            Previously
      filed with the Company’s registration statement filed on Form F-1/A,
      Registration No. 333-125381 submitted to the SEC on September 7,
      2005.





(3)
            Previously
      filed with the Company’s registration statement on Form 20-F, Registration
      No. 333-125381, submitted to the SEC on June 30,
  2006.





(4)
            Previously
      filed with the Company’s form 6-K submitted to the SEC on March 23,
      2007.





(5)
            Previously
      filed with the Company’s form 6-K submitted to the SEC on April 7,
      2008.





(6)
            Previously
      filed with the Company’s form 6-K submitted to the SEC on April 28,
      2008.





(7)
            Previously
      filed with the Company’s registration statement on Form 20-F, Registration
      No. 333-125381, submitted to the SEC on May 5,
  2008.





(8)
            Previously
      filed with the Company’s form 6-K submitted to the SEC on June 23,
      2008.





(9)
            Previously
      filed with the Company’s form 6-K submitted to the SEC on September 11,
      2008.


55




GIANT OIL & GAS
INC.
 (An
Exploration Stage Company)
 
 Financial
Statements
 December
31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 
 
 
 
 
 
 
 Index
                PageReport
      of Independent Registered Public Accounting Firm
                57Financial
      StatementsBalance
      Sheets
                58Statements
      of Operations
                59Statements
      of Shareholders’ Equity
                60Statements
      of Cash Flows
                61Notes
      to Financial Statements
                6 2-
      75
 
  56
   
 
 
 
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 TO
THE SHAREHOLDERS OF GIANT OIL & GAS INC.
 (An
Exploration Stage Company)
 
 We have
audited the balance sheets of Giant Oil & Gas Inc. (an Exploration Stage
Company) as at December 31, 2008 and 2007 and the statements of operations,
shareholders’ equity and cash flows for the years ended December 31, 2008,
2007 and 2006.  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 audits.
 
 We
conducted our audits in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board
(United States).  Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
 
 In our
opinion, these financial statements present fairly, in all material respects,
the financial position of the Company as at December 31, 2008 and 2007 and the
results of its operations and its cash flows for the years ended
December 31, 2008, 2007 and 2006 in accordance with Canadian generally
accepted accounting principles.
 
 
 “Smythe
Ratcliffe LLP” (signed)
 
 Chartered
Accountants
 
 Vancouver,
Canada
 June 16,
2009
 
 
 COMMENTS
BY AUDITORS FOR US READERS ON CANADA – UNITED STATES REPORTING
DIFFERENCES
 
 In the
United States, reporting standards for auditors require the addition of an
explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by matters such as that described in note 1 to the
financial statements.  Our report to the shareholders dated June 16,
2009 is expressed in accordance with Canadian reporting standards, which do not
permit a reference to such an uncertainty in the auditors’ report when the
uncertainty is adequately disclosed in the financial statements.
 
 
 “Smythe
Ratcliffe LLP” (signed)
 
 Chartered
Accountants
 
 Vancouver,
Canada
 June 16,
2009
 
 
  57
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Balance
Sheets
 December
31
 (Expressed
in Canadian Dollars)
  2008
                2007(note
      10)AssetsCurrentCash
                $
                47,252
                $
                87,399Goods
      and services tax receivable
                
                6,485
                
                4,397Prepaid
      expenses
                
                1,155
                
                2,65654,892
                
                94,452Oil and Gas Property
      Interests (note 4)
                
                298,142
                
                269,725$
                353,034
                $
                364,177Liabilities
      and Shareholders’ EquityCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                $
                16,548
                $
                55,430Shareholders’
      EquityCapital
      StockAuthorizedUnlimited
      common shares without par valueUnlimited
      preferred shares without par valueIssued
      and outstanding - 44,672,660 common shares (2007 – 44,560,300) (notes 5
      and 6)
                
                4,396,955
                
                4,295,590Contributed
      surplus
                
                1,425,326
                
                65,078Deficit
      accumulated during the exploration stage
                
                (5,485,795)
                
                (4,051,921)336,486
                
                308,747$
                353,034
                $
                364,177
 
 Nature of
Operations and Going Concern (note 1)
 
 Approved
on behalf of the Board:
 
 “Rob
Sandhu”
 ................................................................................................  Director
 Rob
Sandhu
 
 “Michael
Nott”
 ................................................................................................  Director
 Michael
Nott
 
  See notes
to financial statements.
 58
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Statements
of Operations
 Years
Ended December 31
 (Expressed
in Canadian Dollars)
  2008
                  
                  
                  2007
                  
                  
                  2006(note
      10)
                  
                  
                  (note
      10)ExpensesStock-based
      compensation (note 5)
                  
                  $
                  1,360,248
                  
                  
                  $
                  3,876,878
                  
                  
                  $
                  -Office
      and administration
                  
                  
                  30,322
                  
                  
                  
                  24,100
                  
                  
                  
                  13,856Audit
      fees
                  
                  
                  34,760
                  
                  
                  
                  16,200
                  
                  
                  
                  12,000Directors’
      fees
                  
                  
                  6,000
                  
                  
                  
                  9,500
                  
                  
                  
                  4,000Legal
      and filing fees
                  
                  
                  1,583
                  
                  
                  
                  4,761
                  
                  
                  
                  3,546Consulting
                  
                  
                  4,148
                  
                  
                  
                  2,737
                  
                  
                  
                  5,000Total
      Expenses
                  
                  
                  1,437,061
                  
                  
                  
                  3,934,176
                  
                  
                  
                  38,402Other
      Item:Foreign
      exchange (gain) loss
                  
                  
                  (3,187
                  )
                  
                  
                  16,093
                  
                  
                  
                  247Net
      Loss and Comprehensive Loss
                    for
      Year
                  
                  $
                  1,433,874
                  
                  
                  $
                  3,950,269
                  
                  
                  $
                  38,649Basic
      and Diluted Loss Per Share
                  
                  $
                  0.03
                  
                  
                  $
                  0.09
                  
                  
                  $
                  0.00Weighted
      Average Number of
                    Common
      Shares Outstanding
                  
                  
                  44,639,722
                  
                  
                  
                  44,182,218
                  
                  
                  
                  41,560,300
 
 
 
  See notes
to financial statements.
 59
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Statements
of Shareholders’ Equity
 Years
Ended December 31
 (Expressed
in Canadian Dollars)
  
 Number
                    of
                    Common
                    Shares
                  
                  
                  Capital
                    Stock
                  
                  
                  Contributed
                    Surplus
                  
                  
                  Deficit
                    Accumulated
                    During
      the
                    Exploration
                    Stage
                  
                  
                  TotalBalance,
      December 31, 2005
                  
                  
                  41,560,300
                  
                  
                  $
                  133,030
                  
                  
                  $
                  -
                  
                  
                  $
                  (63,003
                  )
                  
                  $
                  70,027Net
      loss for year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (38,649
                  )
                  
                  
                  (38,649
                  )Balance,
      December 31, 2006
                  
                  
                  41,560,300
                  
                  
                  $
                  133,030
                  
                  
                  $
                  -
                  
                  
                  $
                  (101,652
                  )
                  
                  $
                  31,378Net
      loss for year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (3,950,269
                  )
                  
                  
                  (3,950,269
                  )Stock-based
      compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,876,878
                  
                  
                  
                  
                  
                  
                  
                  3,876,878Exercise
      of common stock options in February 2007 (note5(a))
                  
                  
                  3,000,000
                  
                  
                  
                  4,162,560
                  
                  
                  
                  (3,811,800
                  )
                  
                  
                  
                  
                  
                  
                  350,760Balance,
      December 31, 2007
                  
                  
                  44,560,300
                  
                  
                  $
                  4,295,590
                  
                  
                  $
                  65,078
                  
                  
                  $
                  (4,051,921
                  )
                  
                  $
                  308,747Net
      loss for year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,433,874
                  )
                  
                  
                  (1,433,874
                  )Private
      placement, common shares for cash at $0.89 USD per share on April 18, 2008
      (note 5(a))
                  
                  
                  112,360
                  
                  
                  
                  101,365
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  101,365Stock-based
      compensation
                    (note
      5(c))
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,360,248
                  
                  
                  
                  -
                  
                  
                  
                  1,360,248Balance,
      December 31, 2008
                  
                  
                  44,672,660
                  
                  
                  $
                  4,396,955
                  
                  
                  $
                  1,425,326
                  
                  
                  $
                  (5,485,795
                  )
                  
                  $
                  336,486
 
 
 
 
  See notes
to financial statements.
 60
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Statements
of Cash Flows
 Years
Ended December 31
 (Expressed
in Canadian Dollars)
  2008
                  
                  
                  2007
                  
                  
                  2006(note
      10)Operating
      ActivitiesNet
      loss for the year
                  
                  $
                  (1,433,874
                  )
                  
                  $
                  (3,950,269
                  )
                  
                  $
                  (38,649
                  )Adjustments
      to reconcile net loss to
                    net
      cash used in operating activitiesStock-based
      compensation
                  
                  
                  1,360,248
                  
                  
                  
                  3,876,878
                  
                  
                  
                  -Accounts
      receivable
                  
                  
                  (2,088
                  )
                  
                  
                  (3,410
                  )
                  
                  
                  (681
                  )Prepaid
      expenses
                  
                  
                  1,501
                  
                  
                  
                  (1,947
                  )
                  
                  
                  46Accounts
      payable and accruedliabilities
                  
                  
                  6,672
                  
                  
                  
                  4,820
                  
                  
                  
                  (2,232
                  )Cash
      Used in Operating Activities
                  
                  
                  (67,541
                  )
                  
                  
                  (73,928
                  )
                  
                  
                  (41,516
                  )Investing
      ActivitiesAcquisition
      of oil and gas property interests
                  
                  
                  (104,302
                  )
                  
                  
                  (216,494
                  )
                  
                  
                  (7,677
                  )Proceeds
      from assignment of oil and gas property interests
                  
                  
                  30,331
                  
                  
                  
                  -
                  
                  
                  
                  -Proceeds
      from short-term
                    investment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  60,468Cash
      Provided by (Used in) Investing Activities
                  
                  
                  (73,971
                  )
                  
                  
                  (216,494
                  )
                  
                  
                  52,791Financing
      ActivitiesProceeds
      from the exercise of stock options
                  
                  
                  -
                  
                  
                  
                  350,760
                  
                  
                  
                  -Shares
      issued for cash
                  
                  
                  101,365
                  
                  
                  
                  -
                  
                  
                  
                  -Cash
      Provided by Financing Activities
                  
                  
                  101,365
                  
                  
                  
                  350,760
                  
                  
                  
                  -Inflow
      (Outflow) of Cash
                  
                  
                  (40,147
                  )
                  
                  
                  60,338
                  
                  
                  
                  11,275Cash,
      Beginning of Year
                  
                  
                  87,399
                  
                  
                  
                  27,061
                  
                  
                  
                  15,786Cash,
      End of Year
                  
                  $
                  47,252
                  
                  
                  $
                  87,399
                  
                  
                  $
                  27,061Supplementary
      InformationIncome
      taxes paid
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Interest
      paid
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Investment
      in oil and gas property
                    interest
      included in accounts payable
                  
                  $
                  -
                  
                  
                  $
                  45,554
                  
                  
                  $
                  -
  See notes
to financial statements.
 61
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
  1.
              NATURE
      OF OPERATIONS AND GOING CONCERN
 
 The
Company was incorporated in Canada under the Business Corporations Act on
April 2, 2004 and is an exploration stage company engaged principally in
the acquisition, exploration and development of oil and gas property interests
in North America.
 
 These
financial statements have been prepared on a going concern basis, which presumes
the realization of assets and discharge of liabilities in the normal course of
business for the foreseeable future.
 
 At
December 31, 2008, the Company had working capital of $38,344 (2007 - $39,022)
and an accumulated deficit of $5,485,795 (2007 - $4,051,921).  The
Company will require additional financing or outside participation to undertake
further acquisitions and exploration and subsequent development of future oil
and gas property interests.  The Company will require additional
equity financing to meet its administrative overhead costs, and to continue
exploration work on its oil and gas interests in 2010.
 
 The
application of the going concern concept is dependent upon the Company’s ability
to generate future profitable operations and receive continued financial support
from its creditors and shareholders or raise additional equity financing. The
current financial equity market conditions and the challenging funding
environment make it difficult to raise funds by placement of common shares.
There is no assurance that the Company will be successful with any financing
ventures. Management is actively engaged in the review and due diligence on new
projects, is seeking to raise the necessary capital to meet its funding
requirements and has undertaken available cost cutting measures. There can be no
assurance that management’s plan will be successful. Therefore a significant
uncertainty exists in relation to the Company’s ability to continue as a going
concern.
 
 If the
going concern assumption were not appropriate for these financial statements
then adjustments would be necessary in the carrying values of assets and
liabilities, the reported expenses and the balance sheet classifications used.
Such adjustments would be material.
 
 The
business of oil and gas exploration involves a high degree of risk and there can
be no assurance that current exploration programs will result in profitable
operations. The Company has limited sources of revenue, and has significant cash
requirements to meet its administrative overhead and maintain its oil and gas
interests. The recoverability of amounts shown for resource properties is
dependent on several factors. These include the discovery of economically
recoverable reserves, the ability of the Company to obtain the necessary
financing to complete the development of these properties, and future profitable
production or proceeds from disposition of oil and gas interests.
 
 2.
              SIGNIFICANT
      ACCOUNTING POLICIES
 
 (a)
              Basis
      of presentation
 
 These
financial statements are prepared in accordance with Canadian generally accepted
accounting principles (“GAAP”). The functional and reporting currency of the
Company is the Canadian dollar. Canadian GAAP differs in certain respects from
accounting principles generally accepted in the United States (see note
9).
 
 62
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 
 
 2.
              SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 (b)
              Use
      of estimates
 
 The
preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses for the reporting
period.  Significant areas requiring the use of estimates include the
carrying value of oil and gas property interests, valuation of accrued
liabilities, variables used in the calculation of stock-based compensation and
the determination of the valuation allowance for future income tax
assets.  Management believes the estimates are reasonable; however,
actual results could differ from these estimates and could impact future results
of operations and cash flows.
 
 (c)
              Financial
      instruments
 
 The
Company classifies its financial instruments into one of these five categories:
held-for-trading, held-to-maturity, loans and receivables, available-for-sale
financial assets or other financial liabilities. All financial instruments are
measured in the balance sheet at fair value, except for loans and receivables,
held-to-maturity investments and other financial liabilities, which are measured
at amortized cost. Subsequent measurement and changes in fair value will depend
on their initial classification as follows: held-for-trading financial assets
are measured at fair value and changes in fair value are recognized in net
income; available-for-sale financial instruments are measured at fair value with
changes in fair value recorded in other comprehensive income until the
investment is no longer recognized or impaired, at which time the amounts would
be recorded in net income.
 
 Transaction
costs that are directly attributable to the acquisition or issuance of financial
instruments that are classified as other than held-for-trading, which are
expensed as incurred, are included in the initial carrying value of such
instruments.
 
 (d)
              Comprehensive
      income
 
 Comprehensive
income is the overall change in the net assets of the Company for a period,
other than changes attributable to transactions with shareholders. It is made up
of net income and other comprehensive income. Other comprehensive income
includes gains or losses, which generally accepted accounting principles
requires to be recognized in a period but excluded from net income for that
period. The Company has no items of other comprehensive income in any period
presented. Therefore, net loss as presented in the Company’s statements of
operations and deficit equals comprehensive loss.
  63
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 
 
 2.
              SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 (e)
              Oil
      and gas property interests
 
 The
Company follows the full cost method of accounting for petroleum and natural gas
interests whereby all costs of exploration for and development of petroleum and
natural gas reserves are capitalized.  These costs include leasehold
acquisition costs, geological and geophysical expenses, drilling costs of
successful as well as unsuccessful wells and overhead charges related directly
to exploration and development activities.
 
 If the
interests are sold, the proceeds of the interests will be applied against
capitalized costs unless such sale significantly impacts the rate of
depletion.
 
 Costs
associated with unproven reserves are reviewed by management to determine
whether they have become impaired. The ceiling test is calculated by comparing
the carrying value of oil and gas interest to the sum of undiscounted cash flows
expected to result from future production of proved reserves and carrying value
of unproved properties, net of any impairments. Estimates of future net revenues
are based on expected future commodity prices and costs rather than those
existing at the measurement date. It is possible that changes could occur that
would adversely affect management’s estimates resulting in further write-downs
of the carrying value of the interest. If impairment occurs, the carrying value
of the related interest will be reduced to reflect the estimated net realizable
value.
 
 The
amounts shown for petroleum and natural gas interests represent costs incurred
to date less depletion and impairment if any, and do not necessarily reflect
present or future values.
 
 (f)
              Future
      income taxes
 
 The
Company follows the asset and liability method of accounting for future income
taxes.  Under this method, future tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis, and losses carried forward.  Future tax
assets and liabilities are measured using substantively enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  The effect on
future tax assets and liabilities of a change in tax rates is recognized in
operations in the period in which the change is enacted or substantially
assumed.  The amount of future income tax assets is limited to the
amount of the benefit that is more likely than not to be realized.
 
 (g)
              Stock-based
      compensation
 
 The
Company accounts for stock-based compensation using a fair value based method
with respect to all stock-based payments measured and recognized, to directors,
employees and non-employees.  For directors and employees, the fair
value of the option is measured at the date of grant.  For
non-employees, the fair value of the options is measured on the earlier of the
date at which the counterparty performance is complete or the date the
performance commitment is reached, or the date at which the equity instruments
are granted if they are fully vested and non-forfeitable.  For
directors, employees and non-employees, the fair value of the options is accrued
and charged either to operations or oil and gas property interests, with the
offset credit to contributed surplus, over the vesting period.  If and
when the stock options are exercised, the applicable amounts from contributed
surplus are transferred to capital stock.
 64
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
  2.
              SIGNIFICANT ACCOUNTING
      POLICIES (Continued)
 
 (h)
              Loss
      per share
 
 Basic loss
per share is calculated using the weighted average number of common shares
outstanding during the year.  The Company uses the treasury stock
method for calculating diluted loss per share.  Under this method the
dilutive effect on earnings per share is recognized on the use of the proceeds
that could be obtained upon exercise of options, warrants and similar
instruments.  It assumes that the proceeds would be used to purchase
common shares at the average market price during the period. However, the
calculation of diluted loss per share excludes the effects of various
conversions and exercise of options and warrants that would be
anti-dilutive.
 
 Shares
held in escrow, other than where their release is subject to the passage of
time, have not been included in the calculation of the weighted average number
of common shares outstanding.
 
 (i)
              Asset
      retirement obligations (“ARO”)
 
 The
Company recognizes an estimate of the liability associated with an ARO in the
financial statements at the time the liability can be reasonably estimated. The
estimated fair value of the ARO is recorded as a long-term liability, with a
corresponding increase in the carrying amount of the related
asset.  The capitalized amount is depleted on a straight-line basis
over the estimated life of the asset.  The liability amount is
increased each reporting period due to the passage of time and the amount of
accretion is charged to earnings in the period.  The ARO can also
increase or decrease due to changes in the estimates of timing of cash flows or
changes in the original estimated undiscounted cost.  Actual costs
incurred upon settlement of the ARO are charged against the ARO to the extent of
the liability recorded.  At present, the Company has no material AROs
to record in the financial statements.
 
 (j)
              Foreign
      currency transactions
 
 Amounts
recorded in foreign currency are translated into Canadian dollars as
follows:
 
 (i)
              Monetary
      assets and liabilities at the rate of exchange in effect at the balance
      sheet date;
 
 (ii)
              Non-monetary
      items at the historical exchange rate;
and
 
 (iii)
              Expenses,
      at the exchange rate on the date of the
  transaction.
 
 Gains and
losses arising from translation are included in the current year’s
loss.
  65
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 
 2.
              SIGNIFICANT ACCOUNTING
      POLICIES (Continued)
 
 (k)
              Changes
      in accounting policies
 
 On January
1, 2008, the Company adopted the following provisions of the Canadian Institute
of Chartered Accountants’ (“CICA”) Handbook.  There was no material
impact on the Company’s financial condition or operating results as a result of
the adoption of these new standards:
 
 (i)
              Financial
      instruments
 
 Section
3862, “Financial Instruments – Disclosures”, and Section 3863, “Financial
Instruments – Presentation” replace Section 3861, revising its disclosure
requirements and carrying forward its presentation requirements. These new
sections place increased emphasis on disclosure about the nature of and risks
arising from financial instruments and how the entity manages those risks.
Section 3862 specifies disclosures that enable readers to evaluate: (i) the
significance of financial instruments for the entity’s financial position and
performance; and (ii) the nature and extent of risks arising from financial
instruments to which the entity is exposed and how the entity manages those
risks.
 
 (ii)
              Section
      1535, “Capital Disclosures”, establishes standards for disclosing
      information about an entity’s capital and how it is managed (see Note
      11).  Under this standard, the Company is required to disclose
      the following:
 
 ·
              qualitative
      information about its objectives, policies and procedures for managing
      capital;
 ·
              summary
      quantitative data about what it manages as
  capital;
 ·
              whether
      during the period it complied with any externally imposed capital
      requirement to which it is subject;
and
 ·
              when
      the Company has not complied with such externally imposed capital
      requirements, the consequences of such
  non-compliance.
 
 (iii)
              Section
      1400, “General Standards of Financial Statement Presentation”, to include
      requirements for management to assess and disclose an entity’s ability to
      continue as a going concern (see Note
1).
  66
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 
 2.
              SIGNIFICANT ACCOUNTING
      POLICIES (Continued)
 
 (l)
              Future
      accounting changes
 
 (i)
              Goodwill
      and Intangible Assets
 
 In
February 2008, the CICA issued Section 3064, “Goodwill and Intangible Assets”,
replacing Section 3062, “Goodwill and Other Intangible Assets”, and Section
3450, “Research and development costs”. This section establishes standards for
the recognition, measurement, presentation and disclosure of goodwill subsequent
to its initial recognition and of intangible assets by profit-oriented
enterprises. Standards concerning goodwill are unchanged from the standards
included in the previous Section 3062. The new section is effective for years
beginning on or after January 1, 2009. This new section is not expected to have
any significant impact on the Company’s financial statements.
 
 (ii)
              International
      Financial Reporting Standards
("IFRS")
 
 In 2006,
the Canadian Accounting Standards Board ("AcSB") published a new strategic plan
that will significantly affect financial reporting requirements for Canadian
companies. The AcSB strategic plan outlines the convergence of Canadian
GAAP with IFRS over an expected five year transitional period.  In February
2008 the AcSB announced that January 1, 2011 is the changeover date for
publicly-listed companies to use IFRS, replacing Canada's own GAAP. The
effective date for the Company is for interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2011. The effective
date will require the restatement for comparative purposes of amounts reported
by the Company for the year ended December 31, 2010. While the Company has
begun assessing the adoption of IFRS for 2011, the financial reporting impact of
the transition to IFRS cannot be reasonably estimated at this time.
 
  67
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
  
 3.
              FINANCIAL
      INSTRUMENTS
 
 The
Company has designated its cash as held-for-trading and accounts payable and
accrued liabilities as other liabilities.
 
 (a)
              Fair
      value
 
 The
carrying values of cash, and accounts payable and accrued liabilities
approximate their fair values because of the short-term maturity of these
financial instruments.
 
 (b)
              Interest
      rate risk
 
 The
Company is not exposed to significant interest rate price risk due to the short
term to maturity of its monetary assets and liabilities. Future cash flows from
interest income on cash will be affected by interest rate
fluctuations.
 
 (c)
              Other
      price risk
 
 Other
price risk is the risk that the fair or future cash flows of a financial
instrument will fluctuate because of changes in market prices, other than those
arising from interest rate risk or currency risk. The Company is not exposed to
significant other price risk on its financial instruments.
 
 (d)
              Liquidity
      risk
 
 Liquidity
risk is the risk that the Company will not be able to meet its financial
obligations as they fall due. The Company manages its liquidity risk by
forecasting cash flows used in operations and anticipated from investing and
financing activities. At December 31, 2008, the Company had accounts payable
other than accrued liabilities of $1,548 (2007 - $48,430), which were due within
30 days. The Company does not have sufficient cash and cash equivalents as at
December 31, 2008 in order to meet short-term business requirements such as
overhead costs and oil and gas lease payments. Management is currently planning
on equity, third-party and related party financing to manage its liquidity and
settlement of liabilities. The Company will be required to raise additional debt
or equity to meet its obligations for 2010. There is no assurance that
management’s strategy will be successful.
 
 (e)
              Credit
      risk
 
 Credit
risk is the risk of financial loss to the Company if a customer or counterparty
to a financial instrument fails to meet its contractual obligations. The Company
is exposed to credit risk with respect to its cash; however, the risk is
minimized as cash is held at a major Canadian financial
institution.
 
 (f)
              Foreign
      currency risk
 
 The
Company is not exposed to significant foreign currency risk. The Company
considers the Canadian dollar to be its functional currency and translates the
results of foreign operations into Canadian currency using approximately the
average exchange rate for the year. The exchange rate may vary from time to
time. Management has concluded the effect of any exchange rate fluctuations to
be immaterial.
 68
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 
 4.
              OIL
      AND GAS PROPERTY INTERESTS
 
 The
cumulative costs of the Company’s oil and gas interests are as
follows:
 
 2008
                  
                  
                  2007Balance,
      beginning of the year
                  
                  $
                  269,725
                  
                  
                  $
                  7,677Lease
      and acquisition costs
                  
                  
                  46,769
                  
                  
                  
                  194,994Sale
      of property interests
                  
                  
                  (30,331
                  )
                  
                  
                  0Geological
      and geophysical
                  
                  
                  11,815
                  
                  
                  
                  65,575Camp
      and field supplies
                  
                  
                  164
                  
                  
                  
                  1,479Total
      costs for the year
                  
                  
                  28,417
                  
                  
                  
                  262,048Balance,
      end of the year
                  
                  $
                  298,142
                  
                  
                  $
                  269,725
 
 Highvale
and Suffield Properties, Alberta, Canada
 
 With the
exception of the property acquired on June 14, 2006, all of the Company’s oil
and gas property interests have been acquired as a series of leases in multiple
transactions with the province of Alberta, Canada.  Most of the
Company’s leases are located in the Highvale and Suffield regions of
Alberta.  All of the leases are for a five year term, require minimum
annual lease payments of $3.50 per hectare, and grants the Company the right to
explore for potential natural gas opportunities on the respective leased
property.
 
 On June
14, 2006, the Company entered into a petroleum, natural gas and general rights
conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources
Ltd., 349385 Alberta Ltd. and Torland Ltd. (together, the “Vendor”) whereby the
Company acquired a 100% interest in a petroleum and natural gas lease with the
government of the province of Alberta. Upon signing the Agreement, the Company
paid $7,677 and agreed to assume the underlying minimum annual lease payments of
$224 payable to the government of Alberta plus a royalty on any petroleum
products produced from the property.
 
 In
addition, the Vendor is entitled to an overriding 5% royalty on all petroleum
substances produced from the Cooking Lake property and a first and paramount
lien upon all of the petroleum substances produced or allocated to the property
to secure the payment of any amounts due and payable to the Vendor relating to
the royalty.
 
 On July
23, 2008, the Company executed an assignment and assumption agreement with Power
Oil and Gas Inc., a company related by common directors, whereby, the Company
assigned all of the rights and obligations of ten Alberta Crown Petroleum and
Natural Gas Lease Agreements for the total amount of $30,331, which was
equivalent to the carrying value of the ten leases.
 
 As at
December 31, 2008, the Company has 51 leases requiring total annual lease
payments of $31,767 to 2012.
 
 69
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 
 5.
              CAPITAL
      STOCK
 
 (a)
              Common
      shares
 
 During the
years ended December 31, 2008 and 2007, the Company had the following common
share transactions:
 
 (i)
              In
      February 2007, pursuant to the exercise of common stock options, the
      Company issued 3,000,000 common shares at $0.12 (US $0.10) per common
      share for gross proceeds of $350,760. The Company transferred $3,811,800
      from contributed surplus to capital stock, which is the amount of
      stock-based compensation previously recognized upon grant of the options
      now being exercised.
 
 (ii)
              On
      April 18, 2008, the Company issued 112,360 common shares at $0.90 (US
      $0.89) per common share for gross proceeds of
  $101,365.
 
 (b)
              Stock
      options
 
 On June
23, 2006, the stockholders of the Company approved the Company’s 2006 stock
option plan whereby the Company may grant options to its directors, officers,
and consultants for up to 5,000,000 shares of common stock.  The
exercise price of each option equals the market price of the Company’s stock on
the date of grant.  Options vest over a three-year period, unless
otherwise specified by the Board of Directors.  All options have a
ten-year term.
 
 No stock
options were granted in 2008. During 2007, 3,200,000 options were granted to
consultants and employees, of which 3,000,000 options granted to consultants
vested upon grant and 200,000 granted to a director and officer of the Company,
vest over a four year period with the related stock-based compensation expense
amortized over the vesting period.
 
 The fair
value of the options granted in 2007 determined using the Black-Scholes option
pricing model was $4,129,698. During the year ended December 31, 2008, the
Company recognized stock-based compensation of $167,172 (2007 - $3,876,878; 2006
- $nil) related to these options. At December 31, 2008 there is $85,648 (2007 -
$252,820; 2006 - $nil) in unrecognized stock-based compensation which will be
recognized in future periods as the options vest.
 
 An
estimated forfeiture rate of zero has been assumed and the fair value of each
option granted was estimated as at the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions and
resulting fair value:
 
 2008
                  
                  
                  2007
                  
                  
                  2006Risk-free
      interest rate
                  
                  
                  N/A
                  
                  
                  
                  4.12
                  %
                  
                  
                  N/ADividend
      yield
                  
                  
                  N/A
                  
                  
                  Nil
                  
                  
                  
                  N/AExpected
      volatility
                  
                  
                  N/A
                  
                  
                  
                  133
                  %
                  
                  
                  N/AExpected
      average option term (years)
                  
                  
                  N/A
                  
                  
                  
                  10
                  
                  
                  
                  N/AWeighted
      average fair value
                  
                  
                  N/A
                  
                  
                  $
                  1.21
                  
                  
                  
                  N/A
   70
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 5.
              CAPITAL STOCK(Continued)
 
 (b)
              Stock
      options (Continued)
 
 Expected
volatilities are based on industry comparables using available data and other
factors due to the fact that the Company’s stock has only limited trading
history.  When applicable, the Company will use historical data to
estimate option exercise, forfeiture, and employee termination within the
valuation model.  For non-employees, the expected term of the options
approximate the full term of the options.
 
 The
following table sets forth a summary of options granted:
 
 Options
      Outstanding
                  
                  
                  Weighted
      Average Exercise PriceBalance,
      December 31, 2006
                  
                  
                  -
                  
                  
                  $
                  -Options
      granted
                  
                  
                  3,200,000
                  
                  
                  $
                  0.22Options
      exercised
                  
                  
                  (3,000,000
                  )
                  
                  $
                  0.12Balance,
      December 31, 2007 and 2008
                  
                  
                  200,000
                  
                  
                  $
                  1.65
 
 The
following table summarizes information concerning outstanding and exercisable
common stock options under the 2006 Plan at December 31, 2008:
 
 Exercise
                  Price
                Options
                  Outstanding
                Expiry
      date
                Number
      of Options Currently Exercisable$
      1.65
                200,000
                October
      1, 2017
                66,666
 
 (c)
              Share
      purchase warrants
 
 As at
December 31, 2008, the Company has share purchase warrants outstanding entitling
the holders to acquire common shares as follows:
 
 Exercise
                  Price
                Expiry
                  Date
                Outstanding
      at
                  December
      31, 2006
                Issued
                Exercised
                Expired
                Outstanding
      at
                  December
      31, 2007 and 2008$
      0.10
                May
      20, 2010
                11,400,000
                -
                -
                -
                11,400,000$
      0.50
                May
      20, 2011
                11,400,000
                -
                -
                -
                11,400,000$
      1.10
                May
      20, 2012
                11,400,000
                -
                -
                -
                11,400,000$
      0.57
                
                34,200,000
                -
                -
                -
                34,200,000
 
 Originally,
all of the warrants were to have become exercisable on May 20,
2007.  On March 19, 2007, the Company and each respective warrant
holder agreed to postpone the vesting of the Company’s Class A, Class B and
Class C warrants to May 20, 2008, November 20, 2008 and May 20, 2009,
respectively.  Subsequent to the year ended December 31, 2007, the
vesting dates were further extended from May 20, 2008 to November 20, 2008 with
respect to the Class A Warrants, from November 20, 2008 to May 20, 2009 with
respect to the Class B Warrants, and from May 20, 2009 to November 20, 2009
with respect to the Class C Warrants.  In addition, the expiry dates
have been extended from May 20, 2009 to May 20, 2010 with respect to the Class A
Warrants, from May 20, 2010 to May 20, 2011 with respect to the Class B
Warrants, and from May 20, 2011 to May 20, 2012 with respect to the Class C
Warrants.
  71
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
   5.
              CAPITAL STOCK(Continued)
 
 (c)
              Share
      purchase warrants (continued)
 
 All other
terms of the Warrant agreements remained unchanged.The aggregate fair value of
the modification to the warrants determined using the Black-Scholes pricing
model was $2,059,980. The fair value of the original warrants and the fair value
of the modified warrants were estimated as at the date of modification using the
Black-Scholes option pricing model with the following assumptions: risk-free
interest rate of 2.00%, dividend yield of 0.00%, volatility of 125.27% and
weighted average expected life ranging from 2.79 to 3.79 years. During the year
ended December 31, 2008, the Company recognized stock-based compensation of
$1,193,076 (2007 - $nil; 2006 - $nil) related to the modification of these
warrants. At December 31, 2008 there is $866,904 (2007 - $nil; 2006 - $$nil) in
unrecognized stock-based compensation which will be recognized in future periods
as the warrants vest.
 
 All of
these warrants are unexercised and outstanding as at December 31,
2008.  The Company has the right, at its sole discretion, to
accelerate the maturity date and to lower the exercise price of all of the
warrants.
 
 (d)
              Stock-based
      compensation
 
 For the
year ended December 31, 2008, the Company has recognized $1,360,248 (2007 -
$3,876,878; 2006 - $Nil) in stock-based compensation attributed as
follows:
 
 2008
                2007
                2006Management
      services (Note 5(b))
                $        167,172
                $    3,876,878
                $                -Modification
      cost (Note 5(c))
                1,193,076
                -
                -$     1,360,248
                $    3,876,878
                $                -
 
 6.           SHARE
REPURCHASE OPTION
 
 The
Company holds an irrevocable right to repurchase all or a portion of the
30,000,000 common shares owned by two of its Directors for a price of $0.01 per
common share.  The right can be exercised by the Company at any time
and at its sole discretion.  The Company is not obligated to
repurchase the common shares at any time or for any reason (such as termination
of employment, a change of control of the Company or failure to reach
performance goals).  The repurchase right held by the Company will
continue with respect to and for so long as any of the 30,000,000 common shares
issued to these directors are held by them (or any of their affiliates or family
members), and will survive any such director’s resignation as an officer or
director of the Company.  The Company may exercise its share
repurchase option as to some or all of the common shares held, directly or
indirectly, by these directors by delivering a notice of such exercise to such
director(s) not less than seven calendar days prior to the closing of such
repurchase.  The directors agree that they shall not, directly or
indirectly, sell, exchange, pledge, hypothecate, transfer, gift, grant an
irrevocable proxy with respect to, devise, assign or in any other way dispose
of, encumber or grant a security interest in any of the common shares or any
interest therein. The directors also agree and acknowledge that said restriction
is in addition to all applicable securities laws and regulations.
 
  72
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
  7.
              INCOME
      TAXES
 
 The
reconciliation of income tax provision computed at Canadian statutory rates of
31% (2007: 34.12%; 2006: 34.12%) to the reported income tax provision is as
follows:
 
 2008
                  
                  
                  2007
                  
                  
                  2006Income
      tax benefit computed at Canadian statutory rates
                  
                  $
                  444,501
                  
                  
                  $
                  1,347,832
                  
                  
                  $
                  13,187Stock-based
      compensation
                  
                  
                  (421,677
                  )
                  
                  
                  (1,322,791
                  )
                  
                  
                  -Other
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (637
                  )22,824
                  
                  
                  
                  25,041
                  
                  
                  
                  12,550Change
      in future income taxes resulting from enacted tax rate
      reduction
                  
                  
                  (12,210
                  )
                  
                  
                  -
                  
                  
                  
                  -Change
      in valuation allowance
                  
                  
                  (10,614
                  )
                  
                  
                  (25,041
                  )
                  
                  
                  (12,550
                  )Income
      tax provision
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
 
 The
components of the future income tax assets are as follows:
 
 2008
                  
                  
                  2007Non-capital
      loss
                  
                  $
                  244,195
                  
                  
                  $
                  170,570Appropriate
      tax rate
                  
                  
                  26
                  %
                  
                  
                  31
                  %Income
      tax asset
                  
                  
                  63,491
                  
                  
                  
                  52,877Valuation
      allowance
                  
                  
                  (63,491
                  )
                  
                  
                  (52,877
                  )$
                  -
                  
                  
                  $
                  -
 
 The
valuation allowance reflects the Company’s estimate that the tax assets more
likely than not will not be realized.
 
 The
Company has accumulated non-capital losses for income tax purposes of
approximately $244,000.  The losses expire as follows:
 
 2014
                  
                  $
                  5,1472015
                  
                  
                  56,8702026
                  
                  
                  35,1622027
                  
                  
                  73,3912028
                  
                  
                  73,625$
                  244,195
   73
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
 
 8.
              RELATED
      PARTY TRANSACTIONS
 
 During the
year ended December 31, 2008, directors’ fees of $6,000 (2007 - $9,500) were
paid to the directors of the Company.  These transactions were in the
normal course of business, and measured at the exchange amount agreed upon by
the related parties, except as noted in note 4.
 
 9.
              DIFFERENCES
      BETWEEN CANADIAN AND UNITED STATES
GAAP
 
 Recent
US accounting pronouncements
 
 
 (a)
              In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
      Measurements” (“SFAS 157”).  SFAS 157 defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles, and expands disclosures about fair value
      measurements. This statement does not require any new fair value
      measurements; however, for some entities the application of this statement
      will change current practice. SFAS 157 is effective for the Company
      effective January 1, 2008. The adoption of SFAS 157 has no significant
      impact on the Company’s financial
statements.
 
 (b)
              In
      February 2007, the FASB issued SFAS No.159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”).  SFAS
      159 permits companies to choose to measure many financial instruments and
      certain other items at fair value. This statement expands the use of fair
      value measurement and applies to companies that elect the fair value
      option. The fair value option established by this statement permits all
      entities to choose to measure eligible items at fair value at specified
      election dates. This statement is effective for the Company effective
      January 1, 2008. The adoptions of SFAS 159 did not have a significant
      impact on the Company’s financial
statements.
 
 (c)
              In
      December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
      (“SFAS 141(R)”), which replaced SFAS 141. SFAS 141(R) requires assets and
      liabilities acquired in a business combination, contingent consideration
      and certain acquired contingencies to be measured at their fair values as
      of the date of acquisition. SFAS 141(R) also requires that
      acquisition-related costs and restructuring costs be recognized separately
      from the business combination. SFAS 141(R) is effective for fiscal years
      beginning after December 15, 2008 and will be effective for business
      combinations entered into after January 1, 2009. The Company will assess
      the impact of SFAS 141(R) on future
  acquisitions.
 
 The
Company currently has no reconciling items to its financial statements prepared
in accordance with Canadian GAAP to comply with US GAAP.
 
 10.
              PRIOR
      YEAR’S BALANCES
 
 Certain of
the prior year’s balances have been restated to be consistent with the current
year’s presentation.
 
  74
 GIANT
OIL & GAS INC.
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2008 and 2007
 (Expressed
in Canadian Dollars)
  11.
              CAPITAL
      MANAGEMENT
 
 The
Company considers its capital to be its shareholders’ equity.  The
Company’s objectives when managing its capital are to safeguard the Company’s
ability to continue as a going concern in order to pursue the development of its
oil and gas property interests and to maintain a flexible capital structure,
which optimizes the costs of capital at an acceptable risk.
 
 The
Company manages the capital structure and makes adjustments to it in light of
changes in economic conditions and the risk characteristics of the underlying
assets.  To maintain or adjust the capital structure, the Company may
attempt to issue new shares, issue new debt, acquire or dispose of assets, or
adjust the amount of cash and term deposits.
 
 In order
to facilitate the management of its capital requirements, the Company prepares
expenditure budgets that are updated as necessary depending on various factors,
including successful capital deployment and general industry
conditions.
 
 In order
to maximize ongoing development efforts, the Company does not pay out
dividends.  The Company’s investment policy is to invest its
short-term excess cash in highly liquid short-term interest-bearing investments,
selected with regard to the expected timing of expenditures from continuing
operations. There were no changes in the Company’s approach to capital
management during the year ended December 31, 2008. The Company is not subject
to externally imposed capital requirements.
 
  75









Signature
Page





Pursuant
to the requirements of Section 12g of the Securities Exchange Act of 1934, the
Registrant certifies that it meets all of the requirements for filing on Form
20-F and has duly caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.








Giant Oil
& Gas Inc. SEC File No. 333-125381 Registrant





Dated:
June 16, 2009          Signed:
/s/ Rob
Sandhu


Rob
Sandhu


Director,
Chairman, President,


Chief
Executive and Operating


Officer
and Secretary








Dated:
June 16, 2009          Signed:
/s/ Robert
Coale


Robert
Coale


Director








Dated:
June 16, 2009          Signed:
/s/ Michael
Nott


Michael
Nott


Director