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, 2010________





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:  46,772,660 common shares as of December 31, 2010 and 45,272,660 as of June 29, 2011. 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]





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.




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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]





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














Index to Exhibits on Page 75








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GIANT OIL & GAS INC.





FORM 20-F ANNUAL REPORT 2010





TABLE OF CONTENTS








Oil and Gas Glossary
4Introduction
4Part 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
30Item 5.
Operating and Financial Review and Prospects
30Item 6.
Directors, Senior Management and Employees
36Item 7.
Major Shareholders and Related Party Transactions
41Item 8.
Financial Information
43Item 9.
The Offer and Listing
44Item 10.
Additional Information
45Item 11.
Quantitative and Qualitative Disclosures About Market Risk
49Item 12.
Description of Other Securities Other Than Equity Securities
49Part IIItem 13.
Defaults, Dividend Arrearages and Delinquencies
50Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
50Item 15.
Controls and Procedures
50Item 16.
Reserved
51Part IIIItem 17.
Financial Statements
54Item 18.
Financial Statements
54Item 19.
Exhibits
75Financial Statements
55Signature Page








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 39 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.





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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, 2010, 2009, 2008, 2007 and 2006 were derived from the financial statements of the Company that have been audited by BDO Canada LLP and 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.





Effective September 21, 2010 at the request of the Corporation, Smythe Ratcliffe Chartered Accountants (“Smythe”) resigned as auditors of the Corporation.  The Board of Directors of the Corporation has recommended BDO Canada LLP, Chartered Accountants, as the replacement auditors of the Corporation.  In the opinion of the Corporation, throughout the period Smythe was the Corporation’s auditors, there have been no reservations in the auditor’s reports or any “reportable events” as that term is defined in Section 4.11 of National Instrument 51-102 Continuous Disclosure Obligations.  The resignation of Smythe has not occurred because of any reportable disagreement or unresolved issue involving the Corporation, or any consultation with the successor auditor BDO Canada, LLP.





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.





6





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, 2010
For the Twelve Months Ended December 31, 2009
For the Twelve Months Ended December 31, 2008
For the Twelve Months Ended December 31, 2007
For the Twelve Months Ended December 31, 2006Operating Revenues
-
-
-
-
-Interest Income
-
-
-
-
-Loss from Operations
$(912,722)
$(1,347,026)
$(1,437,061)
$(3,934, 176)
$(38,891)Net Loss and comprehensive loss
$(940,265)
$(1,348,653)
$(1,433,874)
$(3,950,269)
$(38,649)Loss per Share – Basic and Diluted
$(0.02)
$(0.03)
$(0.03)
$(0.09)
$(0.00)As of December 31, 2010
As of December 31, 2009
As of December 31, 2008
As of December 31, 2007
As of December 31, 2006Total Assets
$359,938
$346,707
$353,034
$364,177
$36,434Net Assets
$298,384
$298,335
$336,486
$308,747
$31,378Total Liabilities
$61,554
$48,370
$16,548
$55,430
$5,056Working Capital
($56,296)
($36,584)
$38,344
$39,022
$23,701Share Capital
$4,456,955
$4,396,955
$4,396,955
$485,790
$133,030Common Shares Issued
46,772,660
44,672,660
44,672,660
44,560,300
41,560,300Dividends Declared
-
-
-
-
-








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 five periods ended December 31st since 2006, the average rates for the period and the range of high and low rates for the period.  The data for May 2011 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.





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Table No. 2


U.S. Dollar/Canadian Dollar








Period
Average
High
Low
CloseMay 2011
0.97
0.98
0.98
0.97April 2011
0.96
0.97
0.94
0.95March 2011
0.98
0.99
0.97
0.97February 2011
0.99
1.00
0.97
0.97January 2011
0.99
1.00
0.99
1.00December 2010
1.01
1.00
0.99
0.99Fiscal Year Ended December 31, 2010
1.01
1.00
0.99
0.99Fiscal Year Ended December 31, 2009
1.14
1.03
1.30
1.05Fiscal 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
1.17








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.





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.


8





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 Markets.





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 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 Markets.  Investors may find it difficult to sell their shares on the OTC Markets should a market ever develop for our shares.





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 $150,000 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, Director and 14,000,000 common shares held by Michael Nott, Director, Chairman, President, Chief Executive Officer, Chief Operating Officer, and 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. Nott. 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 Michael Nott, who is our Director, Chairman, President, Chief Executive and Operating, Officer, and Secretary.  The loss of Mr. Nott, 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 Michael Nott, 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. Nott 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. Nott.   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. Nott.





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:





• 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.





10





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.





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.


11





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:





• 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





12.
Our auditors’ opinion in our December 31, 2010 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 $7,774,713 from December 31, 2005 to December 31, 2010.  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 39 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.





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 Officer 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.





13





16. Our principal shareholders, Officer 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 29, 2011 our Officer and Directors, in the aggregate, beneficially own approximately or have the right to vote approximately 66.3% 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 Officer 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 Officer 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 Officer, 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.





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 spend 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.





14





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.





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 33,600,000 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 29 2011, we had warrants outstanding to purchase an aggregate of 33,600,000 common shares.  We have registered the 33,600,000 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 10,800,000 Class A warrants, May 20, 2011 with respect to the 11,400,000 Class B warrants, and November 20, 2011 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.





15





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, Officer 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”.





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, Officer, 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 officer 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, our Officer 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 Officer 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 Officer 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 Officer predicated upon the securities laws of the United States or any state thereof.





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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 1-403-261-0074.  Our website is www.giantoilinc.com.





We are a company in the early stages of engaging in the exploration and development of oil and gas properties.  As of June 29, 2011, we currently have petroleum and natural gas rights to 6,597 hectares of land granted under 39 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 December 31, 2006 to December 31, 2010, 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. As of March 24, 2010, the lease had expired and the company no longer has any interest in the property.





From February 2007 through February 2008, the Company entered into 61 additional Petroleum and Natural Gas leases in multiple transactions with the Province of Alberta, Canada.  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 in the Taber, Grand Forks area of Ablerta, Canada to Power Oil and Gas Inc.





17





On March 11, 2010, the Company entered into an additional Petroleum and Natural Gas Lease with the Province of Alberta.  The lease was 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 five year lease with the government.  The bid price includes the first year’s minimum annual lease payments.





On March 24, 2010, the Cooking Lake Property expired and the Company no longer holds any interest in the property.





On June 14, 2010, the Company entered into a Property Option Agreement with Risor Energy Exploration Inc. (the “Optionee”), whereas the Company wishes to grant 100% right, title, and interest in the Highvale leases in the Central Plains area of Alberta consisting of eighteen Petroleum and Natural Gas Leases.





In a series of transactions from May 14, 2010 to August 13, 2010, the Company surrendered its rights and obligations to six Alberta Crown Petroleum and Natural Gas Leases.





On February 06, 2011, the Company surrendered its rights and obligations to three Alberta Crown Petroleum and Natural Gas Leases.





On March 13, 2011, the Company surrendered its rights and obligations to two Alberta Crown Petroleum and Natural Gas Leases.





On April 05, 2011, the Company surrendered its rights and obligations to one Alberta Crown Petroleum and Natural Gas Lease.





For all of its current properties, the Company has obtained the petroleum and natural gas rights only.





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.





18





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.





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.





19





PETROLEUM AND NATURAL GAS LEASES





The Company has interests in 39 Petroleum and Natural Gas (“P&NG”) 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 P&NG 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.





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 P&NG 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.  As of March 24, 2010, the Cooking Lake Property has expired and the company no longer has any interest in the property.





In a series of transactions from February 2007 through February 2008, the Company has entered into an additional 61 P&NG 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 P&NG 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.  This transaction reduced the Company’s total P&NG leases to 51 for an aggregate 9,075 hectares.





On March 11, 2010, the Company entered into an additional P&NG lease with the Province of Alberta.  This lease covers 192 hectares of land in the Highvale area.  The lease was 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 five year lease with the government.    The bid price includes the first year’s minimum annual lease payments.  This transaction increased the Company’s total P&NG leases to 52 for an aggregate 9,267 hectares.





OnMarch 24, 2010, the Cooking Lake Property expired and the company no longer holds any interest in the property.This transaction decreased the Company’s total P&NG leases to 51 for an aggregate 9,075 hectares.





20





On June 14, 2010, the Company entered into a Property Option Agreement with Risor Energy Exploration Inc. (the “Optionee”), whereas the Company wishes to grant 100% right, title and interest in the Highvale leases in the Central Plains area of Alberta consisting of eighteen Petroleum and Natural Gas Leases for a total of approximately 3,316 hectares.  Upon signing the Agreement, the Optionee paid $5,000 and agreed to pay $175,000 on or before June 15, 2011 to earn full right and authority to the property.  Subsequent to this agreement, the Optionee has forwarded payments of $7,500 on August 03, 2010, $6,500 on October 12, 2010 and $5,000 on November 12, 2010.  The Company has not received the final payment due on June 15, 2011 but is currently negotiating a time extension for payment and is satisfied that the agreement is in good standings.





In a series of transactions from May 14, 2010 to August 13, 2010, the Company surrendered its rights and obligations to six P&NG leases for the combined annual lease payment amount of $3,752.  This transaction decreased the Company’s total P&NG leases to 45 for an aggregate 8,133 hectares.





On February 06, 2011, the Company surrendered its rights and obligations to three P&NG leases for the combined annual lease payment amount of $2,688.  This transaction decreased the Company’s total P&NG leases to 42 for an aggregate 7,365 hectares.





On March 13, 2011, the Company surrendered its rights and obligations to two P&NG leases for the combined annual lease payment amount of $1,792.  This transaction decreased the Company’s total P&NG leases to 40 for an aggregate 6,853 hectares.





On April 05, 2011, the Company surrendered its rights and obligations to one P&NG lease for the annual lease payment amount of $896.  This transaction decreased the Company’s total P&NG leases to 39 for an aggregate 6,597.





21





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.





HIGHVALE








The Highvale group of leases covers approximately 8,000 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 5,300 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 39 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 PaymentsFebruary 7, 2007
3
640
$2,240March 8, 2007
1
384
$1,344March 21, 2007
4
885
$3,096May 2, 2007
2
320
$1,120May 30, 2007
8
512
$1,792June 27, 2007
4
256
$896July 11, 2007
1
272
$952August 8, 2007
1
128
$448August 22, 2007
5
1,152
$4,032September 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
$224March 11, 2010
1
192
$67239
6,597
$23,088





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.





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.


24





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.





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.





25





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.





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.





26





Planned Work by the Company for 2011





The Company’s plan of operations for 2011 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:





·
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.





27





·
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.





·
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.





28





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.





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.


29





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;





·
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 2011





The Company’s plan of operations for 2011 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, 2010, 2009, 2008, 2007 and 2006 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.





30





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 31,2010


2009


2008


2007


2006Revenue

$Nil


$Nil


$Nil


$Nil


$NilInterest income

$Nil


$Nil


$Nil


$Nil


$NilExpenses

$
912,722


$
1,347,026


$
1,437,061


$
3,934,176


$
38,891Loss from Operations

$
(912,722
)

$
(1,347,026
)

$
(1,437,061
)

$
(3,934,176
)

$
(38,649
)Net loss and comprehensive loss

$
(940,265
)

$
(1,348,653
)

$
(1,433,874
)

$
(3,950,269
)

$
(38,649
)Net loss per share

Basic and Diluted

$
(0.02
)

$
(0.03
)

$
(0.03
)

$
(0.09
)

$
0.00Weighted average # of common shares outstanding


45,170,742



44,672,660



44,639,722



44,182,218



41,560,300





Results of Operations of Fiscal 2010 vs. Fiscal 2009





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, 2010 or 2009. 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, 2010, we had a net loss of $940,265 compared to $1,348,653 in 2009.  The decrease in the loss of $408,388 was primarily related to the recognition of $880,312 in stock-based compensation in 2010 while $1,310,504 was recognized in 2009.  Office and sundry costs increased to $4,731 in 2010 from $3,904 in 2009 as a result of increased telecommunication costs and investor relation activity.  Professional fees decreased to $26,120 in 2010 from $31,875 in 2009 related to a decrease in audit fees.  Directors’ fees were $Nil in 2010 and 2009.    There was a foreign exchange gain of $37 in 2010, compared to a loss of $1,627 in 2009. The minimal foreign exchange impact is a result of holding insignificant foreign denominated balances in 2010.  All decreases relate to the minimal activity of the Company’s operations.





31





Results of Operations of Fiscal 2009 vs. Fiscal 2008





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, 2009 or 2008. 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, 2009, we had a net loss of $1,348,653 compared to $1,433,874 in 2008.  The decrease in the loss of $85,221 was primarily related to the recognition of $1,110,504 in stock-based compensation in 2009 while 1,360,248 was recognized in 2008.  Office and sundry costs decreased to $3,904 in 2009 from $30,322 in 2008 as a result of lower office costs related to the Company needing less administrative services in 2009 due to its decreased level of activity.  Professional fees decreased to $31,400 in 2009 from $34,760 in 2008 related to a decrease in audit fees.  During 2009, the Company acquired no additional oil and gas leases whereas in 2008, the Company acquired two additional oil and gas leases and assigned ten oil and gas leases.  Directors’ fees decreased to $Nil in 2009 from $6,000 in 2008.    The foreign exchange loss was $1,627 in 2009 compared to a gain of $3,187 in 2008.  All decreases relate to the minimal activity of the Company’s operations.





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 3,000,000 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 2010, we used $40,052 for operating activities compared to $3,569 in 2009, an increase of $32,785.


32








In 2010, $60,000 was received in proceeds from the exercise of warrants, while in 2009 $Nil was received in proceeds from the sale of common stock, stock options or the exercise of warrants.  Investing activities in 2010 were $(22,900), compared to $(36,779) relating to the disposition of oil and gas property interests, offset by option payments received of $24,000, whereas $Nil was received in 2009.





During 2009, we used $3,569 for operating activities compared to $113,095 in 2008, a decrease of $109,526. The decrease in cash used from operations relates primarily to the recognition of $1,310,504 in stock-based compensation in 2009 while $1,360,248 was recognized in 2008.  Office and sundry costs decreased to $3,904 in 2009 from $30,322 in 2008 due to lower office costs related to the Company needing less administrative services in 2009 due to its decreased level of activity.





In 2009, $Nil was received in proceeds from the sale of common stock, while in 2008 $101,365 was received from the exercise of stock options.  Investing activities in 2009 consisted of $(36,779) relating to $24,000 received from option payments compared to $(58,748) relating to $30,311 to the acquisition of oil and gas property interests.





We had cash of $3,862 as of December 31, 2010. We anticipate that we will incur through the end of our next fiscal year:





·
$100,000 in connection with property acquisitions, annual minimum lease payments and exploration expenditures;





·
$50,000 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, 2010, we had a working capital deficiency of $56,296.  Our working capital at December 31, 2010 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.







These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent on its ability to develop its oil and gas properties and ultimately achieve profitable operations and to generate sufficient cash flow from financing and operations to meet its obligations as they become payable. The Company expects that it will need approximately $150,000 to fund its operations during the next twelve months which will include minimum annual property lease payments as well as the costs associated with maintaining an office.  Management has plans to seek additional capital through a private placement and public offering of its common stock.  Although there are no assurances that management’s plans will be realized, management believes that the Company will be able to continue operations in the future





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.





33





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.





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, 2010.





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, 2010 or 2009 or of the date of this report.





34





5.F.Contractual Obligations.





We have the following contractual obligations as expressed in CDN dollars as at December 31, 2010:





Contractual Obligations
Payments due by periodTotal
Less than 1 year
1-3 years
3-5 years
More than five yearsAnnual Lease Payments:Plains Leases
$  23,088
$ 23,088
$3,104
$672
$ 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
$23,088
$ 23,088
$ 3,104
$672
$ 0





At December 31, 2010, the Company had interests in 39 petroleum and natural gas lease located in Alberta, Canada.





At December 31, 2010 and 2009, the Company had trade payables and accrued liabilities of $61,554 and $48,370 respectively.  All of these obligations are unsecured and due in less than one year.







Recent Accounting Pronouncements Applicable to the U.S.






ASU 2010-06






In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (ASC 820):  Improving Disclosures about Fair Value Measurements” which amends the disclosure requirements related to recurring and nonrecurring fair value measurements.  This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3.  This update also requires a reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis.  In addition, to these new disclosure requirements, this update clarifies certain existing disclosure requirements.  For example, this update clarifies that reporting entities are required to provide fair value measurement disclosures for each class of assets and liabilities rather than each major category of assets and liabilities.  This update also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements.  The adoption of ASU 2010-06 has been reflected in the Company’s financial statements.






ASU 2010-09






In February 2010, FASB issued ASU 2010-09, “Subsequent Event (Topic 855) Amendments to Certain Recognition and Disclosure Requirements”.  ASU 2010-09 removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements.  Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of GAAP.  All of the amendments in ASU 2010-09 are effective upon issuance of the final ASU, except for the use of the issued date for conduit debt obligors.  That amendment is effective for interim or annual periods ending after June 15, 2010.  The adoption of ASU 2010-09 has been reflected in the Company’s financial statements.







35





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 Officer as of June 29, 2011.





Name

Age

Positions and Offices HeldMichael Nott

38

Director, President, Chief Executive and Operating Officer and SecretaryRobert Coale

71

DirectorRon Daems

43

Director





The business address of our Officer 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 Officer for at least the last five years.





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 Santos Ltd. in the Gunnedah Appraisal Group working on coalbed methane gas projects in the Gunnedah Basin SE Queensland, Australia.  Prior to that, he worked as 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 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.  Effective June 30, 2010, Mr. Nott was appointed President, Chief Executive and Operating Officer, and Secretary of the Company.





Robert Coale has been a Director of the Company since April 2004.  Currently Mr. Coale is the President and Director of Patriot Gold Corporation as well as Director of Rush Metals Corporation; both of which are publicly traded exploration companies.  He is also technical advisor to Premium Exploration Inc. and a past Director of American Goldfields Inc. and Franciso Gold Corporation.  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.





Ron Daems brings extensive financial and resource industry experience to Giant Oil & Gas Inc.  In the span of his career he has focused primarily on business development, strategic planning and financial analysis, while serving as project manager for numerous capital ventures.  From 2000 through 2003, Mr. Daems founded and became the CEO of Emerging Business Solutions Inc., a privately held business development company focused primarily on assisting startup companies in the resource sector to develop their land acquisition strategies and their operational and administrative systems.  Mr. Daems is currently the President and Director of Strata Oil & Gas Inc., a Director of Power Oil & Gas Inc., and Rush Metals Corp.





36





Involvement in Certain Legal Proceedings





In the last five years, we are not aware of any material legal proceedings that have occurred 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, our Officer or Directors have not received or earned any compensation or bonus for services rendered in the fiscal year ended December 31, 2010.  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, 2010, total directors fees of $Nil were paid (2009 - $Nil). The monthly fees owing to Mr. Nott have been stopped as of January 2009 due to less activity at the Board level and in order to conserve operating capital.





We do not maintain key-man life insurance for our Executive Officer 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, 3,000,000 options have been granted under the plan at an exercise price of $0.12 per option.





Outstanding Equity Awards as at December 31, 2010





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)
-
-
-
-
-

-
-Michael Nott
-
-
-
-
-
-
-
-Robert Coale
-
-
-
-
-
-
-
-RonDaems
-
-
-
-
-
-
-
-





(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, 2010 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.  On June 30, 2010, Mr. Sandhu resigned as Director, Chairman, President, Chief Executive and Operating Officer, and Secretary and his options were subsequently cancelled.





37





Change of Control Remuneration.





The Company had no plans or arrangements in respect of remuneration received or that may be received by the Executive Officer of the Company in Fiscal 2010 to compensate such officer 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.  As of May 2006, The Company entered into a service contract to pay Mr. Nott CAD $500 per month to serve as a Director of the Company, however the agreement has been amended to $nil due to the company’s inactivity and in order to conserve working capital .  Mr. Nott’s service contract will terminate upon his ceasing to serve as a Director of the Company.





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.





The Company does not have an audit committee, although one may be appointed.  The Board of Directors is currently responsible for the functions of the audit committee.





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.





38





6.E. Share Ownership





The following table lists, as of June  29, 2011 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.





Name of Beneficial Owner

Number of Shares

of common shares

Beneficially Owned *

Percent of

common shares

Beneficially OwnedMichael Nott

14,000,000(1)

30.9%Rob Sandhu

-(2)

-Robert Coale

16,000,000(1)

35.3%Ron Daems

-

-All directors and executive officer as a group  (three persons)

30,000,000

66.3%





*              Based on 45,272,660shares outstanding as of June 29, 2011.





(1)
14,000,000 shares owned by Mr. Nott 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. Nott 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. Nott 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. Nott 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. Nott and/or Mr. Coale.  We may exercise our right of repurchase as to some or all of the shares held (directly or indirectly) by these Directors by delivering a notice of such exercise to Mr. Nott and/or Mr. Coale not less than ten business days prior to the closing of such repurchase.  Messrs. Nott 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. Nott 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.  On June 30, 2010, Mr. Sandhu resigned as Director, Chairman, President, Chief Executive and Operating Officer, and Secretary and his options were subsequently cancelled.


39


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





In April 2011, the Board of Directors reviewed the Company’s records and concluded that the Company requested a stock certificate in October 2010 for 1,500,000 shares from its transfer agent that had previously been issued.  The Board of Directors corrected the error by causing the Company to return the certificate to the transfer agent for cancellation, and return the shares to treasury.





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.





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 Officer, 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;


40





(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 Director’s 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;


(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 29, 2011, Michael Nott and Robert Coaleown an aggregate 30,000,000 shares, or 66.3% 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.





On July 01, 2010, 14,000,000 shares of the common stock of the Company held by Rob Sandhu were gifted by Mr. Sandhu to Michael Nott, pursuant to an assignment, dated September 10, 2008, among Mr. Sandhu, Mr. Nott and the Company.  No consideration was paid by Mr. Nott for the gifting of such shares.  Such assignment was made subsequent to Mr. Sandhu resigning as Director, Chairman, President, Chief Executive and Operating Officer, and Secretary, and terminating his relationship with the Company.





41





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 29, 2011, the Company’s shareholders’ list showed 45,272,660 common shares outstanding which were held by approximately fifty-six (56) registered stockholders of record.  Of the registered stockholders, 20,122,660 shares are held by individuals with Canadian addresses.





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 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.





In July 2010, 14,000,000 shares of the common stock of the Company held by Rob Sandhu were gifted by Mr. Sandhu to Michael Nott, pursuant to an assignment, dated September 10, 2008, among Mr. Sandhu, Mr. Nott and the Company.  No consideration was paid by Mr. Nott for the gifting of such shares.  Such assignment was made subsequent to Mr. Sandhu resigning as Director, Chairman, President, Chief Executive and Operating Officer, and Secretary, and terminating his relationship with the Company.





The common shares beneficially owned by Mr. Nott and Mr. Coale are subject to our right, exercisable at any time, to purchase any or all of these shares from Mr. Nott 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, 2010 and 2009, 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.





42





7.C. Interests of Experts and Counsel





--- Not applicable ---





ITEM 8.  FINANCIAL INFORMATION





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 BDO Canada LLP is included herein immediately preceding the financial statements.





The previous year financial statements have been audited by Smythe Ratcliffe Chartered Accountant, the predecessor auditor, who expressed an unqualified opinion on June 29, 2010.





Audited Financial Statements:





Fiscal period ended December 31, 2010, 2009 and 2008.





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 May 19, 2009, by way of new letter agreements, the vesting dates were extended from May 20, 2009 to May 20, 2011 with respect to the Class B Warrants and from November 20, 2009 to November 20, 2011 with respect to the Class C Warrants.  In addition, the expiry dates have been extended from May 20, 2010 to May 20, 2012 with respect to the Class A Warrants, from May 20, 2011 to May 20, 2013 with respect to the Class B Warrants and from May 20, 2012 to May 20, 2014 with respect to the Class C Warrants.  All other terms of the Warrant agreements remained unchanged.





On March 11, 2010, the Company entered into an additional P&NG lease with the Province of Alberta.  This lease covers 192 hectares of land in the Highvale area.  The lease was 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 five year lease with the government.  The bid price includes the first year’s minimum annual lease payments.





43





On June 14, 2010, the Company entered into a Property Option Agreement with Risor Energy Exploration Inc. (the “Optionee”), whereas the Company wishes to grant 100% right, title and interest in the Highvale leases in the Central Plains area of Alberta consisting of 18 Petroleum and Natural Gas Leases for a total of approximately 3,316 hectares.  Upon signing the Agreement, the Optionee paid $5,000 and agreed to pay $175,000 on or before June 15, 2011 to earn full right and authority to the property.  Subsequent to this agreement, the Optionee has forwarded payments of $7,500 on August 03, 2010, $6,500 on October 12, 2010 and $5,000 on November 12, 2010. Subsequent to year end, the Company and Risor were in discussions to extend the June 15, 2011 earn in date and agree the option agreement remains in good standing until a decision is reached.





In a series of transactions from May 14, 2010 to August 13, 2010, the Company surrendered its rights and obligations to 6 P&NG leases for the combined annual lease payment amount of $3,975.  This transaction decreased the Company’s total P&NG leases to 45 for an aggregate 8,133 hectares.





On February 06, 2011, the Company surrendered its rights and obligations to 3 P&NG leases for the combined annual lease payment amount of $2,688.  This transaction decreased the Company’s total P&NG leases to 42 for an aggregate 7,365 hectares.





On March 13, 2011, the Company surrendered its rights and obligations to 2 P&NG leases for the combined annual lease payment amount of $1,792.  This transaction decreased the Company’s total P&NG leases to 40 for an aggregate 6,853 hectares.





On April 05, 2011, the Company surrendered its rights and obligations to 1 P&NG lease for the annual lease payment amount of $896.  This transaction decreased the Company’s total P&NG leases to 39 for an aggregate 6,597 hectares.





ITEM 9.  THE OFFER AND LISTING





A.  Offer and Listing Details





1.
Annual high and low market prices for the last five full financial years:





Year
Market PriceHigh Price
Low Price2010
$0.35
$0.062009
$0.51
$0.142008
$3.01
$0.182007
N/A
N/A2006
N/A
N/A





2.           High and low market prices for each full financial quarter during the two most recent full financial years:


Financial Quarter
Market PriceYear
Quarter
High Price
Low Price2010
Fourth Quarter of 2010
$0.16
$0.07Third Quarter of 2010
$0.15
$0.07Second Quarter of 2010
$0.18
$0.06First Quarter of 2010
$0.35
$0.152009
Fourth Quarter of 2009
$0.40
$0.21Third Quarter of 2009
$0.51
$0.18Second Quarter of 2009
$0.39
$0.14First Quarter of 2009
$0.28
$0.14





44





3.           High and low market prices for each of the six most recent months:


Month
Market PriceHigh Price.
Low PriceMay 2011
$0.07
$0.06April 2011
$0.07
$0.06March 2011
$0.07
$0.06February 2011
$0.08
$0.06January 2011
$0.08
$0.07





9.C. Markets





Admission to Quotation on the OTC Markets





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.





In 2010, the new “OTC Markets” quotation tiers began replacing the former OTCBB.  The OTC Markets launched the OTCQB marketplace to help investors easily identify SEC reporting companies and regulated banks that are current with their disclosure obligations.  Issuers on the OTCQB must be fully reporting and current in their reporting obligations with the SEC.  Although, the entire Over the Counter is regulated by the SEC and FINRA, the OTC Markets and the OTCBB are both now privately owned and merely serve as quotation mediums.  The OTC Markets is more user friendly, factually up-to-date and accurate than the website for the OTCBB.  Over the Counter quotes can be found at www.otcmarkets.com and the companies trading on the OTCQB have the exact same standards as the OTCBB.  Effective October 13, 2010, through the progressive changes of the OTC Markets platform, the Company’s stock is now quoted on the OTC:QB.





ITEM 10.  ADDITIONAL INFORMATION





10.A. Share Capital





---Not applicable---





45





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.





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





The Company has entered into the material contracts listed below:





1.
On May 19, 2009, by way of new letter agreements, the vesting dates were extended from May 20, 2009 to May 20, 2011 with respect to the Class B Warrants and from November 20, 2009 to November 20, 2011 with respect to the Class C Warrants.  In addition, the expiry dates have been extended from May 20, 2010 to May 20, 2012 with respect to the Class A Warrants, from May 20, 2011 to May 20, 2013 with respect to the Class B Warrants and from May 20, 2012 to May 20, 2014 with respect to the Class C Warrants.  All other terms of the Warrant agreements remained unchanged.





2.
On March 11, 2010, the Company entered into an additional P&NG lease with the Province of Alberta.  This lease covers 192 hectares of land in the Highvale area.  The lease was 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 five year lease with the government.  The bid price includes the first year’s minimum annual lease payments.





46





3.
On June 14, 2010, the Company entered into a Property Option Agreement      with Risor Energy Exploration Inc. (the “Optionee”), whereas the Company wishes to grant 100% right, title and interest in the Highvale leases in the Central Plains area of Alberta consisting of 18 Petroleum and Natural Gas Leases for a total of approximately 3,316 hectares.  Upon signing the Agreement, the Optionee paid $5,000 and agreed to pay $175,000 on or before June 15, 2011 to earn full right and authority to the property.  Subsequent to this agreement, the Optionee has forwarded payments of $7,500 on August 03, 2010, $6,500 on October 12, 2010, and $5,000 on November 12, 2010. Subsequent to year end, the Company and Risor are in discussions to extend the June 15, 2011 earn in date and agree the option agreement remains in good standing until a decision is reached.





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.





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.





47





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.





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 ---








48





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.






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 33,600,000 common shares. Of these warrants, the 10,800,000 Class A warrants are exercisable at $0.10 per share beginning November 20, 2008 and expiring May 20, 2012, the 11,400,000 Class B warrants are exercisable at $0.50 per share beginning May 20, 2011 and expiring May 20, 2013, and the 11,400,000 Class C warrants are exercisable at $1.10 per share beginning November 20, 2011 and expiring May 20, 2014. 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 ---


49





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, 2010, 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, Mr. Michael Nott.  Based upon that evaluation, our Principal Executive Officer concluded that our disclosure controls and procedures are not effective due to the material weakness noted in the Internal Controls over Financial Reporting below.





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, 2010, 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, 2010 due to the following material weakness:





·
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.





50





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 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, 2010, 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





As of September 2008, the Board of Directors is empowered to appoint an audit committee for the Corporation.  Currently the Board of Directors carries out the functions of the audit committee.





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.





51





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 BDO Canada LLP and Smythe Ratcliffe LLP in 2010 and 2009 respectively, the Company’s auditors. Their pre-approved fees to the Company (including an estimate of year-end audit fees) are set forth below:





Fiscal Year ended December 31, 2010 and 2009

Fiscal Year


Fiscal YearPrincipal Accountant Fees and Services

2010


2009Audit Fees

$
25,000


$
31,400Audit Related Fees

$Nil


$NilTax Fees

$Nil


$
475All Other Fees

$Nil


$NilTotal

$
25,000


$
31,875





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.





ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT




In September 2010, our board of directors approved the appointment of BDO Canada LLP as our independent accountants to audit our financial statements and dismissed Smythe Ratcliffe LLP, Chartered Accountants, as our independent accountants.




During our most recent fiscal year, and any subsequent interim periods preceding the change in accountants, there were no disagreements with Smythe Ratcliffe LLP, Chartered Accountants, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope procedure. The report on the financial statements prepared by Smythe Ratcliffe LLP, Chartered Accountants, for the last fiscal year did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles, except that such report on our financial statements for the year ended December 31, 2009 contained an explanatory paragraph in respect to uncertainty as to our ability to continue as a going concern.  The decision to change independent accountants was based on the determination by our board of directors that such a step was appropriate given the growth of our company and the related growth in our demands, and that such expertise required can be provided by a national accounting firm.




We have engaged the firm of BDO Canada LLP, as of September 2010. During our two most recent fiscal years, and any subsequent interim periods preceding the change in accountants, BDO Canada LLP was not consulted on any matter relating to application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements.





52





Item 16G. Corporate Governance





We are subject to a variety of corporate governance guidelines and requirements enacted by the SEC under its rules and those mandated by the U.S. Sarbanes Oxley Act of 2002. Today, we are in compliance with the corporate governance legal requirements in the United States. We are listed on the NASDAQ and, although we are not required to comply with all of the Exchange’s corporate governance requirements to which we would be subject if we were a U.S. corporation, our governance practices comply with the NASDAQ’s requirements as if we were a U.S. domestic issuer.


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 BDO Cananda LLP, is included herein immediately preceding the audited financial statements.





The previous year financial statements have been audited by Smythe Ratcliffe Chartered Accountant, the predecessor auditor, who expressed an unqualified opinion on June 29, 2010.








ITEM 18.  FINANCIAL STATEMENTS





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




54
  
 
 
 
 
 
 
 
 
 
 
 
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 
 Financial Statements
 December 31, 2010 and 2009
 (Expressed in Canadian Dollars)
 
 
 
 
 
 
 
 Index
PageReport of Independent Registered Public Accounting Firm
56Financial StatementsBalance Sheets
58Statements of Operations and Comprehensive Loss
59Statements of Shareholders’ Equity
60Statements of Cash Flows
61Notes to Financial Statements
62 – 74
 
 
  55
  
 BDO CanadaLLP                                      600 Cathedral Place
 925 West Georgia Street
 Vancouver, BC, Canada V6C 3L2
 Telephone:  (604) 688-5421
 Telefax:  (604) 688-5132
 E-mail:  vancouver@bdo.ca
 www.bdo.ca
 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Directors and Stockholders,
 Giant Oil & Gas Inc.
 (An Exploration Stage Company)
 
 We have audited the accompanying balance sheet of Giant Oil & Gas Inc. (the “Company”) (An Exploration Stage Company) as at December 31, 2010, and the statements of operations and comprehensive loss, cash flows and shareholders’ equity for the year ended December 31, 2010, and a summary of significant accounting policies and other explanatory information.
 
 Management's Responsibility for the Financial Statements
 
 Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
 
 Auditor's Responsibility
 
 Our responsibility is to express an opinion on these financial statements based on our audit. 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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
 
 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the presentation of the financial statements.
 
 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
 Opinion
 
 In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2010 and the results of its operations and its cash flows for each of the year ended December 31, 2010 in accordance with Canadian Generally Accepted Accounting Principles.
 
 
 
 
  56
  Emphasis of Matter
 
 Without qualifying our opinion, we draw attention to Note 1 in the financial statements, which indicates that the Company has an accumulated deficit during the exploration stage of $7,774,713 as at December 31, 2010 and is expected to continue to incur losses in the foreseeable future.  These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that raises substantial doubt upon the Company’s ability to continue as a going concern.
 
 Other Matters
 
 The financial statements of the Company for the year ended December 31, 2009, were audited by another auditor who expressed an unmodified opinion on those statements on June 29, 2010.
 
 
 /s/ BDO Canada LLP





Chartered AccountantsVancouver, CanadaJune 29, 2011
 
  57
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Balance Sheets
 December 31
 (Expressed in Canadian Dollars)
  2010


2009AssetsCurrentCash

$
3,862


$
6,904Goods and services tax receivable


241



3,727Prepaid expenses


1,155



1,1555,258



11,786Oil and Gas Property Interests (note 4)


354,680



334,921$
359,938


$
346,707Liabilities and Shareholders’ EquityCurrent liabilitiesAccounts payable and accrued liabilities (note 8)

$
61,554


$
48,370Shareholders’ EquityCapital StockAuthorizedUnlimited common shares without par value500,000,000 preferred shares without par valueIssued and outstanding - 46,772,660 common shares (2009 – 44,672,660) (notes 5 and 6)


4,456,955



4,396,955Contributed surplus


3,616,142



2,735,830Deficit accumulated during the exploration stage


(7,774,713
)


(6,834,448
)298,384



298,337$
359,938


$
346,707
 
 Nature of Operations and Going Concern (note 1)
 
 Approved on behalf of the Board:
 
 “Michael Nott”
 __________________________________
 Michael Nott, President
 
 “Robert Coale”
 __________________________________
 Robert Coale, Director
 
 
  See notes to financial statements.
 58
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Statements of Operations and Comprehensive Loss
 Years Ended December 31
 (Expressed in Canadian Dollars)
  2010


2009


2008ExpensesStock-based compensation

(note 5)

$
880,312


$
1,310,504


$
1,360,248Audit fees


26,120



31,400



34,760Office and administration


4,731



3,904



30,322Legal and filing fees


1,559



1,218



1,583Directors’ fees (note 8)


-



-



6,000Consulting


-



-



4,148Loss Before Other Item


912,722



1,347,026



1,437,061Other ItemForeign exchange (gain) loss


(37
)


1,627



(3,187
)Surrendered oil and gas property interests (note 4)


27,580



-



-Net Loss and Comprehensive Loss for Year

$
(940,265
)

$
(1,348,653
)

$
(1,433,874
)Basic and Diluted Loss Per Share

$
(0.02
)

$
(0.03
)

$
(0.03
)Weighted Average Number of

Common Shares Outstanding


45,170,742



44,672,660



44,639,722
 
 
 
  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, 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(d))


-



-



1,360,248



-



1,360,248Balance, December 31, 2008


44,672,660


$
4,396,955


$
1,425,326


$
(5,485,795
)

$
336,486Net loss for year


-



-



-



(1,348,653
)


(1,348,653
)Stock-based compensation (note 5(d))


-



-



1,310,504



-



1,310,504Balance, December 31, 2009


44,672,660


$
4,396,955


$
2,735,830


$
(6,834,448
)

$
298,337Warrant Exercise


600,000



60,000



-



-



60,000Share issuance (note  5(a))


1,500,000



-



-



-



-Net loss for year


-



-



-



(940,265
)


(940,265
)Stock-based compensation

(note 5(d))


-



-



880,312



-



880,312Balance, December 31, 2010


46,772,660


$
4,456,955


$
3,616,142


$
(7,774,713
)

$
298,384
 
 
 
 
  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)
  2010


2009


2008Operating ActivitiesNet loss for the year

$
(940,265
)

$
(1,348,653
)

$
(1,433,874
)Adjustment to reconcile net loss to

net cash used in operating activitiesStock-based compensation


880,312



1,310,504



1,360,248Surrendered oil and gas property


27,580



-



-Good and services tax receivable


3,486



2,758



(2,088
)Prepaid expenses


-



-



1,501Accounts payable and accrued liabilities


(10,165
)


31,822



(38,882
)Cash Used in Operating Activities


(40,052
)


(3,569
)


(113,095
)Investing ActivitiesAcquisition of oil and gas property interests


(46,990
)


(36,779
)


(58,748
)Proceeds from assignment of oil and gas property interests


24,000



-



30,331Cash Used in Investing Activities


(22,900
)


(36,779
)


(28,417
)Financing ActivityShares issued for cash


60,000



-



101,365Cash Provided by Financing Activity


60,000



-



101,365Outflow of Cash


(3,042
)


(40,348
)


(40,147
)Cash, Beginning of Year


6,904



47,252



87,399Cash, End of Year

$
3,862


$
6,904


$
47,252Supplementary InformationInvestment in oil and gas property

interest included in accounts payable

$
349


$
-


$
-
 
 No taxes or interest paid in 2010, 2009 or 2008.
  See notes to financial statements.
 61
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (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, 2010, the Company had a working capital deficiency of $56,296 (2009 - $36,584) and an accumulated deficit of $7,774,713 (2009 - $6,834,448).  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 2011.
 
 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 no 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, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  2.
SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 (b)
Use of 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 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, estimates 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 initially measured at fair value.  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.  All other financial instruments which are classified as loans and receivables, held-to-maturity investments and other financial liabilities are measured at amortized cost.
 
 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.
 
 In order to measure changes in fair value, the fair value hierarchy under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels and adjustments to fair value must be based on one of the following measures:
 
 ·
Level one – Quoted market prices in active markets for identical assets or liabilities;
 ·
Level two – Inputs other than level one inputs that are either directly or indirectly observable, and;
 ·
Level three – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
 
 (d)
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.
  63
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 (d)
Oil and gas property interests (continued)
 
 The Company defers expenditures related to the acquisition, exploration and development of its exploration properties. If an exploration property is abandoned, continued exploration is not planned in the foreseeable future or when other events and circumstances indicate that the carrying amount may not be recovered, the accumulated costs and expenditures are written down. Deferred expenditures relating to exploration projects represent costs to be charged to operations in the future and do not necessarily reflect the present or future values of the particular projects. Development projects include those projects where development alternatives are in progress and/or studies have been completed suggesting that the properties are economically viable. The Company reviews the carrying amount of development projects when events or circumstances suggest that the carrying amount may not be recoverable.  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.
 
 (e)
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 enacted under certain circumstances.  .  The amount of future income tax assets is limited to the amount of the benefit that is more likely than not to be realized.
 
 (f)
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 option 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 option 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.
 
 (g)
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 proceeds that could be obtained upon exercise of options, warrants and similar instruments is assumed to 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.
  64
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 (g)
Loss per share (continued)
 
 Diluted loss per share as at December 31, 2010 did not include 33,600,000 warrants as they were determined to be anti-dilutive.
 
 (h)
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 unit of production basis based upon proven oil and gas reserves.  The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to operations 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.
 
 (i)
Foreign currency transactions
 
 Amounts held or transacted 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.
 
 (j)
Future accounting changes
 
 International Financial Reporting Standards (“IFRS”)
 
 In 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the transition to IFRS from Canadian GAAP will be effective for fiscal years beginning on or after January 1, 2011 for publicly accountable enterprises.  The effective date will require the restatement for comparative purposes of amounts reported by the Company for the interim periods and for the year ended December 31, 2010 and earlier where applicable.  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.
 
 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.
  65
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  3.
FINANCIAL INSTRUMENTS(Continued)
 
 (b)
Foreign currency risk
 
 The Company is not exposed to significant foreign currency risk.
 
 (c)
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.
 
 (d)
Other price risk
 
 Other price risk is the risk that the fair value 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 foreign currency risk. The Company is not exposed to significant other price risk on its financial instruments.
 
 (e)
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 investing and financing activities. At December 31, 2010, the Company had $19,554 in accounts payable (2009 - $28,370), which were due within 30 days. The Company does not have sufficient cash as at December 31, 2010 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 2011. There is no assurance that management’s strategy will be successful.
 
 (f)
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.
 
  66
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  4.
OIL AND GAS PROPERTY INTERESTS
 
 The cumulative costs of the Company’s oil and gas interests are as follows:
 
 2010


2009Balance, beginning of the year

$
334,921


$
298,142Lease and acquisition costs


39,810



31,768Geological and geophysical


7,529



5,011Total costs for the year


47,339



36,779Surrendered oil and gas property interest


(27,580
)Balance, end of the year

$
354,680


$
334,921
 
 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. The majority of leases are set to expire in 2012, with the remaining leases expiring 2013 and 2014.
 
 
 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, located in the Cooking Lake region of Alberta, 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.
 
 
  67
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  4.           OIL AND GAS PROPERTY INTERESTS(Continued)
 
 On June 14, 2010, the Company entered into a Property Option Agreement with Risor Energy Exploration Inc. (the “Optionee”), whereas the Company wishes to grant 100% right, title and interest in the Highvale leases in the Central Plains area of Alberta consisting of eighteen petroleum and natural gas leases for a total of approximately 3,316 hectares.  Upon signing the Agreement, the Optionee paid $5,000 and agreed to pay $175,000 on or before June 15, 2011 to earn full right and authority to the property. Subsequent to this agreement, the Optionee has forwarded payments of $7,500 on August 03, 2010, $6,500 on October 12, 2010 and $5,000 on November 12, 2010. The obligation of the Optionee to fulfill the option agreement terms is subject to a condition precedent including physical and environmental inspection, review of all leases and other examination. Any amounts paid are fully refundable until the optionee waives such conditions. As at December 31, 2010, the condition was not waived and therefore the $24,000 was included in accounts payable and accrued liabilities. (See note 8). Subsequent to year end, the Company and Risor are in discussions to extend the June 15, 2011 earn-in date and agree the option agreement remains in good standing until a formal decision is reached.
 
 In a series of transactions from March 31, 2010 to August 20, 2010, the Company surrendered its rights and obligations to seven Alberta Crown Petroleum and Natural Gas Leases for the combined annual lease payment amount of $3,976. The total accumulated oil and property interests surrendered amounted to $27,580.  As at December 31, 2010, the Company has 45 leases requiring total annual lease payments of $28,016 to 2012.
 
 5.           CAPITAL STOCK
 
 (a)
Common shares
 
 On April 18, 2008, the Company issued 112,360 common shares at $0.90 per common share for gross proceeds of $101,365.
 
 On March 3, 2010, the Company issued 600,000 common shares upon exercise of share 600,000 purchase warrants at $0.10 per common share for gross proceeds of $60,000.
 
 On November 29, 2010, 1,500,000 common shares were issued in an administrative error. Subsequent to year end, these shares were cancelled. The issuance of these shares did not impact the weighted average number of common shares outstanding.
 
 (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 2010, 2009 or 2008. During 2007, 3,200,000 options were granted to consultants, which vest over a four-year period with the related stock-based compensation expense amortized over the same period.
 
 During the year ended December 31, 2010, the Company recognized stock-based compensation (recovery) of ($2,152) (2009 - $67,380; 2008 - $167,172) related to these options. At December 31, 2010 there is $Nil (2009 - $18,268; 2008 - $85,648) in unrecognized stock-based compensation which will be recognized in 2011 as the options vest.
  68
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  5.           CAPITAL STOCK (Continued)
 
 (b)
Stock options (continued)
 
 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:
 
 2010
2009
2008Risk-free interest rate
2.11%
4.12%
4.12%Dividend yield
Nil
Nil
NilExpected volatility
134%
133%
133%Expected option life (remaining (yrs))
7
8
9Forfeiture rate
0%
0%
0%Weighted average fair value
$1.27
$1.21
$1.21
 
 
 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, 2008 and 2009
200,000
$   1.65Options granted
-
$        -Options cancelled
(200,000)
$   1.65Balance, December 31, 2010
-
$        -
 
 The following table summarizes information concerning outstanding and exercisable common stock options under the 2006 Plan at December 31, 2010:
 
 Exercise

Price
Options

Outstanding
Expiry date
Number of Options Currently Exercisable
Weighted Average Remaining Contractual Life$ -
-
-
-
-
 
 At December 31, 2010, the intrinsic value of the Company’s stock options was $Nil (2009 - $Nil).
  69
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  5.           CAPITAL STOCK (Continued)
 
 (c)
Share purchase warrants
 
 As at December 31, 2010, the Company has share purchase warrants outstanding entitling the holders to acquire common shares as follows:
 
 Class
Exercise

Price
Expiry

Date
Outstanding at

December 31, 2008 and 2009
Issued
Exercised
Expired
Outstanding at

December 31, 2010A
$ 0.10
May 20, 2012
11,400,000
-
(600,000)
-
10,800,000B
$ 0.50
May 20, 2013
11,400,000
-
-
-
11,400,000C
$ 1.10
May 20, 2014
11,400,000
-
-
-
11,400,000$ 0.57

34,200,000
-
-
-
33,600,000
 
 
 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, on May 19, 2009, the expiry dates were extended from May 20, 2010 to May 20, 2012 with respect to the Class A Warrants, from May 20, 2011 to May 20, 2013 with respect to the Class B Warrants, and from May 20, 2012 to May 20, 2014 with respect to the Class C Warrants.  Also, the vesting dates were extended from May 20, 2009 to May 20, 2011 with respect to the Class B Warrants, and from November 20, 2009 to November 20, 2011 with respect to the Class C Warrants.
 
 All other terms of the Warrant agreements remained unchanged. For fiscal year 2009 the aggregate fair value of the modification to the warrants determined using the Black-Scholes pricing model was $1,881,048 (2008 - $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 weighted-average assumptions: risk-free interest rate of 1.51% (2008 - 2.00%), dividend yield of 0.00% (2008 - 0.00%), volatility of 143.83% (2008 - 125.27%), expected life of 3 years (2008 - 3.29 years), and fair-value of $0.16 (2008 - $2.24). During the year ended December 31, 2010, the Company recognized stock-based compensation of $882,464 (2009 - $1,243,124; 2008 - $1,193,076) related to the modification of these warrants. At December 31, 2010, there is $622,364 (2009 - $1,504,828; 2008 - $866,904) in unrecognized stock-based compensation which will be recognized in future periods as the warrants vest.
 
 On March 3, 2010, the Company issued 600,000 common shares upon exercise of share purchase warrants at $0.10 per common share for gross proceeds of $60,000.
 
 
 
  70
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  5.           CAPITAL STOCK (Continued)
 
 (c)
Share purchase warrants - continued
 
 All of the remaining warrants are unexercised and outstanding as at December 31, 2010.  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, 2010, the Company has recognized stock-based compensation as follows:
 
 2010
2009
2008Management services (note 5(b))
$      (2,152)
$        67,380
$      167,172Modification cost (note 5(c))
882,464
1,243,124
1,193,076$     880,312
$   1,310,504
$   1,360,248
 
 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.
 
 7.
INCOME TAXES
 
 The reconciliation of income tax provision computed at Canadian statutory rates of 28% (2009 - 30%; 2008 - 31%) to the reported income tax provision is as follows:
 
 2010


2009


2008Income tax benefit computed at Canadian statutory rates

$
263,300


$
404,600


$
444,500Stock-based compensation


(246,500
)


(393,200
)


(421,700
)16,800



11,400



22,800Change in future income taxes resulting from enacted tax rate reduction


(1,800
)


(4,300
)


(12,200
)Change in valuation allowance


(15,000
)


(7,100
)


(10,600
)Income tax provision

$
-


$
-


$
-
 
  71
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  7.           INCOME TAXES(Continued)
 
 The components of the future income tax assets are as follows:
 
 2010


2009Non-capital losses

$
314,717


$
282,344Oil and gas property interests


27,580



-342,297



282,344Appropriate tax rate


25
%


25
%Income tax asset


85,600



70,600Valuation allowance


(85,600
)


(70,600
)$
-


$
-
 
 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 $314,717.  The losses expire as follows:
 
 2014

$
5,1472015


56,8702026


35,1622027


73,3912028


73,6252029


38,1492030


32,373$
314,717
 
 
 8.
RELATED PARTY TRANSACTIONS
 
 During the year ended December 31, 2010, directors’ fees of $Nil (2009 - $Nil, 2008 - $6,000) were paid to the Directors of the Company.  These transactions were measured at the exchange amount agreed upon by the related parties, except as noted in note 4.  As of January 2009, the directors’ fees were reduced as a result of decrease activity in the Company and in order to conserve working capital.
 
 As at December 31, 2010, included in accounts payable and accrued liabilities was $24,000 (2009 - $nil) owing to Risor Energy Exploration Inc., a company related by a common director. Risor Energy Exploration Inc. was an unrelated party at the time of the signing of the Property Option Agreement. (See note 4)
 
 
  72
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  9.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GAAP
 
 (a)  Recent US accounting pronouncements:
 
 (i)
In February 2010, FASB issued ASU 2010-09, “Subsequent Event (Topic 855) Amendments to Certain Recognition and Disclosure Requirements”. ASU 2010-09 removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of GAAP. The amendments in ASU 2010-09 are effective upon issuance of the final ASU. The adoption of ASU 2010-09 has been reflected in the Company’s financial statements.
 
 (ii)
In January 2010, the FASB issued ASU. 2010-06, “Fair Value Measurements and Disclosures (ASC 820): Improving Disclosures about Fair Value Measurements” which amends the disclosure requirements related to recurring and nonrecurring fair value measurements. This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3. This update also requires a reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, this update clarifies certain existing disclosure requirements. For example, this update clarifies that reporting entities are required to provide fair value measurement disclosures for each class of assets and liabilities rather than each major category of assets and liabilities. This update also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements.  The adoption of ASU 2010-06 has been reflected in the Company’s financial statements.
 
 (b)  Impact between Canadian GAAP and US GAAP
 
 The Company currently has no reconciling items to its financial statements prepared in accordance with Canadian GAAP to comply with US GAAP.
 
  73
 GIANT OIL & GAS INC.
 (An Exploration Stage Company)
 Notes to Financial Statements
 Years Ended December 31, 2010, 2009 and 2008
 (Expressed in Canadian Dollars)
  10.
PRIOR YEAR’S BALANCES
 
 Certain of the prior years’ balances have been reclassified to be consistent with the current year’s presentation.
 
 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, 2010. The Company is not subject to externally imposed capital requirements. Annual lease payments on exploration projects are paid based on Company’s decision whether to continue with certain projects
 
 12.
SUBSEQUENT EVENTS
 
 a)
On February 06, 2011, the Company surrendered its rights and obligations to three Alberta Crown and Natural Gas leases for the combined annual lease payment amount of $2,688.
 
 b)
On March 13, 2011, the Company surrendered its rights and obligations to two Alberta Crown and Natural Gas leases for the combined annual lease payment amount of $1,792.
 
 c)
On April 05, 2011, the Company surrendered its rights and obligations to one Alberta Crown and Natural Gas lease for the annual lease payment amount of $896.
 
 d)
On May 9, 2011, the Company entered into a $50,000 Convertible Note Agreement with Risor Energy Exploration Inc. a related party by common directors.  The loan bears interest at the Bank of Canada Prime Rate plus 1%.  The Company may repay the entire loan including the outstanding interest at anytime by advising the lender of such intent to repay 15 days prior to the anticipated date of repayment. The loan may be converted to common shares of the Company at the discretion of the Company or the lender with terms yet to be determined.
 
  74





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.





(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 form 6-K submitted to the SEC on March 23, 2007.





(3)
Previously filed with the Company’s form 6-K submitted to the SEC on April 7, 2008.








(4)
Previously filed with the Company’s form 6-K submitted to the SEC on April 28, 2008.





(5)
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.





(6)
Previously filed with the Company’s registration statement on Form 20-F, Registration No. 333-125381, submitted to the SEC on June 30, 2006.





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 30, 2011





Signed: /s/ Michael Nott


Michael Nott


Director, Chairman, President,


Chief Executive and Operating


Officer and Secretary








Dated: June 30, 2011





Signed: /s/ Robert Coale


Robert Coale


Director








Dated: June 30, 2011





Signed: /s/ Ron Daems


Ron Daems


Director