U.S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-K





(Mark One)


x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For Fiscal Year Ended: December 31, 2010





OR





 ̈
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from_____ to ________





File No. 333-127813





Majestic Oil & Gas, Inc.


(Name of small business issuer in our charter)





Nevada
1311
20-1673271(State or other jurisdiction ofincorporation ororganization)
(Primary Standard

Industrial Classification

Code Number)
(I.R.S. Employer

Identification Number)





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





Registrant’s telephone 406-873-5580




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ̈  No  x




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes   ̈  No  x




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No   ̈




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




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes  x  No   ̈





Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large Accelerated Filer  ̈
Accelerated Filer
 ̈Non-accelerated Filer     ̈
Smaller Reporting

Company
x(Do not check if a smaller reporting company.)




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




The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant (based upon the closing price of the Registrant’s Common Stock as of December 31, 2010) was approximately $885,600 (based on 4,428,000 shares of common stock outstanding held by non-affiliates on such date). Shares of the Registrant’s Common Stock held by each executive officer and director and by each entity or person that, to the Registrant’s knowledge, owned 5% or more of the Registrant’s outstanding Common Stock as of December 31, 2010 have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.




The number of outstanding shares of the Registrant’s Common Stock, $0.001 par value, was  9,118,000 shares as of December 31, 2010.





DOCUMENTS INCORPORATED BY REFERENCE





None








TABLE OF CONTENTS





Part I
3Item 1. Description of Business
3Item 2. Description of Property
7Item 3. Legal Proceedings
7Item 4. (Removed and Reserved.)
7PART II
8Item 5. Market for Common Equity and Related Stockholder Matters
8Item 6.  Selected Financial Data
9Item 7. Management's Discussion and Analysis or Plan of Operation
9Item 7A.  Quantitative and Qualitative Disclosures about Market Risk
17Item 8. Financial Statements
18Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
20Item 9A(T).  Controls and Procedures
20ITEM 9B. OTHER INFORMATION
22PART III
22Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act
22Item 11. Executive Compensation
26Item 12. Security Ownership of Certain Beneficial Owners and Management
28Item 13. Certain Relationships and Related Transactions
29Item 14. Principal Accounting Fees and Services
31Item 15. Exhibits, Financial Statement Schedules
32


2




Part I




Item 1. Description of Business.





Business Development





We were incorporated in Nevada on April 16, 2002 as M2 Group Energy Corporation. On June 21, 2004, we changed our name to Majestic Oil & Gas, Inc. (Majestic). We are authorized to issue 100,000,000 shares of common stock of which 9,918,000 shares are outstanding at December 31, 2010.





We, through our wholly-owned subsidiary, Grizzly Energy, Inc. (Grizzly Energy), own a 25% working interest in a producing gas well on a state of Montana lease located in Section 36-T29N-R5W, Pondera County, Montana (Ludwig/State #36-1). It currently has gas reserves of 21.90 million cubic feet of Proved Net Producing Reserves, which are reserves established based upon actual production. Net Reserves are gross reserves less taxes, royalties and all expenses.





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





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





Majestic entered into a farm-out agreement with Mountain View Energy on September 1, 2009, outlining parameters for Mountain View Energy to drill a test well in the NWSE-Section 33-T27N-R4W, Teton County, Montana at its sole cost, risk and expense.    In doing so, Mountain View Energy, would acquire 75% of the Working Interest, while Majestic would retain a 25% Working Interest in any well drilled in the 40-acre tract.





Accordingly, on September 9, 2009, drilling commenced on the Donovan #33-3 well located in the West Pondera Field, SWNWSE – Section 33-T27N-R4W, Teton County, Montana.  The well was successfully drilled and completed with an initial production of 15 barrels of oil per day with no water.   The producing interval is the Madison/Sun River Dolomite with 20 feet of pay from 2,125’ to 2,145’.





Due to the success of the Donovan #33-3, a second oil well was drilled in the West Pondera Field.  The Donovan #33-2 is located in the SENWSE - Section 33-T27N-R4W, Teton County, Montana.  This oil well was successfully drilled and completed with initial production of 2 to 4 barrels of oil per day.


3





Majestic entered into a farm-out agreement with Altamont, and subsequently with Hartford Energy, Inc., to conduct the re-entry of the Fields #14-34.  As per the farm-out agreement with Hartford Energy, Inc., the Company retained a 25% Working Interest in this well.  The Fields #14-34 is located in the Loneman Coulee Field, Pondera County, Montana and was completed as a Madison/Sun River oil well with initial production of 5 barrels of oil per day.




Business





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





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





Geologic Data





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





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


4





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





Each Sandstone has its own porosity and permeability characteristics. When comparing the 4th Bow Island in the Williams Gas Field, it is a continuous reservoir over a large area. The 4th Bow Island in the Lake Frances Field has also proved to be a continuous reservoir with the drilling and completion of the Boucher 27-1 well. Every well that has been drilled in the Lake Frances Area has produced from the same 4th Bow Island “C” Sandstone. The drive mechanism for the Bow Island is pressure depletion. The character of Bow Island Gas is 900 to 910 BTU dry sweet methane gas.





The primary objective of the Jody Fields #4-1, a wildcat oil well was the Madison/Sun River Dolomite. Other potential zones of interest are the Bow Island and Sunburst Sandstones. A wildcat well is considered to be a well that is drilled, based on a large element of hope, in a frontier area where very little is known about the subsurface. The drilling of this well determined that the site is located on the upside block of a structural fault, which creates an excellent opportunity for an oil deposit. A study of the logs from offsetting wells show good oil or hydrocarbon shows in the Madison/Sun River Dolomite.





Title to Properties





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





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





Natural Gas Reserves





Information is presented in this document regarding our estimated proved natural gas reserves as of the dates indicated. All of our reserves are located in the United States. We base our estimates relating to our proved natural gas reserves and future net revenues of natural gas reserves upon reports prepared by Citadel Engineering Ltd, Petroleum Consultants. In accordance with SEC guidelines, we make the standardized and Proved Producing Reserves – 10% discount estimates of future net cash flows from proved reserves using a 12-month average of natural gas prices to estimate reserves for SEC disclosure purposes, which price is then held constant throughout the life of the properties. We based our estimates of proved reserves upon the following 12-month average of prices: Year ended December 31, 2010





Natural gas (per Thousand Cubic Feet)

$
2.05


5





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





Natural Gas Sales





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





At March 31, 2011, the weighted net average price of natural gas we produced sold at prices averaging approximately $2.08 per Thousand Cubic Feet.





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


6





Oil Sales





As a result of a farm-out agreement between Majestic and Mountain View Energy, the Company retained a 25% Working Interest in two oil wells drilling during the 4th Quarter 2009.  There were no sales from these wells prior to the year ended December 31, 2010.





As per another farm-out agreement between Majestic Oil & Gas, Inc., and Hartford Energy, Inc., the Company saw revenues from the sale of oil from the Fields #14-34 during 2010.





The Company has estimated oil reserves of 6,400 barrels associated with these wells.





Competition





The oil and gas industry is highly competitive in all its phases. Properties in which we have an interest will encounter strong competition from many other oil and gas producers, including many that possess substantial financial resources, in acquiring economically desirable producing properties and exploratory drilling prospects, and in obtaining equipment and labor to operate and maintain their properties.





We are a very small company in our industry. Many of our current and potential competitors have significantly greater name recognition and more established operations and relationships with persons and entities involved in the oil and natural gas drilling and production business. We compete based upon our management’s experience in the industry.





Government Regulation





We have no collective bargaining agreements. We consider our relationship with our employees to be excellent.





Item 2. Description of Property.





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





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




Item 3. Legal Proceedings.




None




Item 4. Submission of Matters to a Vote of Security Holders.





None


7




PART II




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





Market Information





There is no established public trading market for the Company’s shares of common stock. Quotations may be obtained by researching the stock symbol “MJOG.” Various Internet quotation services detail information about daily transaction volume and price. One such service is the OTC Bulletin Board (www.otcbb.com) where a list of market makers is also detailed. The high and low range of actual transactions using the daily ending price, by quarters, for the years 2009 and 2010.





High


LowJanuary 1 – March 31, 2009

$
0.20


$
0.15April 1 – June 30, 2009

$
0.20


$
0.16July 1 – September 30, 2009

$
0.15


$
0.07October 1 – December 31, 2009

$
0.51


$
0.15January 1 – March 31, 2010

$
0.30


$
0.20April 1 – June 30, 2010

$
0.26


$
0.20July 1 – September 30, 2010

$
0.20


$
0.15October 1 – December 31, 2010

$
0.20


$
0.15





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





Options, Warrants, Convertible Securities





We have no outstanding warrants, options or convertible securities as of March 31, 2011.





Recent Sale of Securities





During the year ended December 31, 2010, the Company issued a total of 200,000 shares of its common stock in payment of ongoing legal fees associated with compliance with securities law. We valued these shares at $42,000 aggregate, or $.21 per share, based upon market prices on the dates of issuance.





We issued these shares under Section 4(2) of the Securities Act of 1933.  We believed that Section 4(2) of the Securities Act of 1933 was available because:





 ̈
None of these issuances involved underwriters, underwriting discounts or commissions.


 ̈
Restrictive legends were and will be placed on all certificates issued as described above.


 ̈
The distribution did not involve general solicitation or advertising.


 ̈
The distributions were made only to investors who were sophisticated enough to evaluate the risks of the investment.


8


Penny Stock Considerations





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





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





·
Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commissions relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;


·
Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;


·
Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and


·
Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.





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





Holders





As of the date of this registration statement, we had 37 holders of record of our common stock.





Dividends





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




Item 6.  Selected Financial Data




As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.


9


Item 7. Management's Discussion and Analysis or Plan of Operation.




FORWARD LOOKING STATEMENTS





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





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





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





OVERVIEW





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





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


10


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





Majestic entered into a farm-out agreement with Mountain View Energy on September 1, 2009, outlining parameters for Mountain View Energy to drill a test well in the NWSE-Section 33-T27N-R4W, Teton County, Montana at its sole cost, risk and expense.    In doing so, Mountain View Energy, would acquire 75% of the Working Interest, while Majestic would retain a 25% Working Interest in any well drilled in the 40-acre tract.





Accordingly, on September 9, 2009, drilling commenced on the Donovan #33-3 well located in the West Pondera Field, SWNWSE – Section 33-T27N-R4W, Teton County, Montana.  The well was successfully drilled and completed with an initial production of 15 barrels of oil per day with no water.   The producing interval is the Madison/Sun River Dolomite with 20 feet of pay from 2,125’ to 2,145’.





Due to the success of the Donovan #33-3, a second oil well was drilled in the West Pondera Field.  The Donovan #33-2 is located in the SENWSE - Section 33-T27N-R4W, Teton County, Montana.  This oil well was successfully drilled and completed with initial production of 2 to 4 barrels of oil per day.





Majestic entered into a farm-out agreement with Altamont, and subsequently with Hartford Energy, Inc., to conduct the re-entry of the Fields #14-34.  As per the farm-out agreement with Hartford Energy, Inc., the Company retained a 25% Working Interest in this well.  The Fields #14-34 is located in the Loneman Coulee Field, Pondera County, Montana and was completed as a Madison/Sun River oil well with initial production of 5 barrels of oil per day.





Based upon our Management's experience in the oil and natural gas industry and on recent events, including increasing global demand for energy and energy disruptions caused by natural disasters, we believe the trend in oil and gas prices will remain relatively stable or decrease slightly, but over the long-term are more likely to increase. We expect to generate positive net income from operations in the future, although our revenue and expenses will increase as we expand our drilling and ownership activities.  During the course of 2010, Majestic saw a significant decrease in the price received per MCF at a high of $3.05 and a low of $1.60, as detailed under “Results of Operation.”  To-date in 2011, the Company received a high of $2.15 per MCF and a low of $2.00 per MCF.  The current trend shows a continued decline in pricing.  The price we receive for our production directly affects the amount of revenues we generate, which in turn affects the Company’s liquidity and overall financial position.


11


RESULTS OF OPERATIONS





Year ended December 31, 2010 vs. Year ended December 31, 2009:





Year

Ended

December 31, 2010


Year

Ended

December 31, 2009Revenue

$
46,596


$
28,458Expenses

$
176,265


$
123,335Net Loss

$
(129,669
)

$
(94,877
)





Revenues for the year ended December 31, 2010 were $46,596 compared to $28,458 for the year ended December 31, 2009.  The increase in revenues is a result of oil sales from the Donovan Lease and increase in oil production and higher price per BBL on the Joy Fields well.  Oil sales were offset by a decrease in gas production between the two years.





Ludwig State 36-1

Share of

Production

Volumes


Price

Per

MCF


Share of

Production

Volumes


Price

Per

MCF2010


2009January


185.83



2.90



231.21



3.09February


157.37



3.05



211.20



2.34March


175.93



2.80



218.83



1.80April


168.92



2.01



194.49



1.56May


150.56



1.81



207.28



1.41June


169.13



1.94



198.83



1.59July


168.51



2.05



211.41



1.39August


167.06



2.00



201.92



1.40September


161.29



1.60



190.58



1.19October


158.40



1.85



188.93



1.37November


144.38



1.80



175.93



2.35December


160.88



2.05



192.02



2.26





Boucher 27-1

Share of

Production

Volumes


Price

Per

MCF


Share of

Production

Volumes


Price

Per

MCF2010


2009January


47.03



2.90



110.14



3.09February


34.86



3.05



71.16



2.34March


43.11



2.80



56.72



1.80April


43.31



2.01



44.76



1.56May


40.01



1.81



47.23



1.41June


38.57



1.94



47.64



1.59July


44.34



2.05



49.50



1.39August


44.14



2.00



47.85



1.40September


43.31



1.60



44.76



1.19October


43.31



1.85



46.41



1.37November


30.82



1.80



47.64



2.35December


36.09



2.05



47.64



2.26


12





B. Ag #25-1

Share of

Production

Volumes


Price

Per

MCF


Share of

Production

Volumes


Price

Per

MCF2010


2009January


35.00



2.90



38.80



3.09February


28.40



3.05



33.80



2.34March


32.80



2.80



36.80



1.80April


32.40



2.01



35.60



1.56May


27.80



1.81



37.80



1.41June


34.60



1.94



38.60



1.59July


33.60



2.05



38.80



1.39August


31.60



2.00



35.20



1.40September


30.80



1.60



33.60



1.19October


30.40



1.85



33.40



1.37November


27.40



1.80



33.80



2.35December


31.20



2.05



31.00



2.26





Vandenbos #19-1

Share of

Production

Volumes


Price

Per

MCF


Share of

Production

Volumes


Price

Per

MCF2010


2009January


348.15



2.90



708.06



3.09February


277.20



3.05



632.57



2.34March


305.66



2.80



683.72



1.80April


298.24



2.01



551.10



1.56May


247.91



1.81



494.59



1.41June


278.03



1.94



451.69



1.59July


265.44



2.05



449.21



1.39August


263.38



2.00



434.36



1.40September


256.99



1.60



388.58



1.19October


246.68



1.85



369.60



1.37November


193.88



1.80



361.56



2.35December


240.28



2.05



352.48



2.26





Boucher #18-1

Share of

Production

Volumes


Price

Per

MCF


Share of

Production

Volumes


Price

Per

MCF2010


2009January


199.50



2.90



413.33



3.09February


148.25



3.05



356.40



2.34March


168.00



2.80



365.48



1.80April


149.75



2.01



299.89



1.56May


130.25



1.81



237.81



1.41June


147.75



1.94



196.76



1.59July


140.75



2.05



187.69



1.39August


138.50



2.00



194.49



1.40September


164.75



1.60



189.75



1.19October


132.00



1.85



185.21



1.37November


118.50



1.80



174.08



2.35December


136.00



2.05



175.11



2.26


13





Stoltz #18-1

Share of

Production

Volumes


Price

Per

MCF


Share of

Production

Volumes


Price

Per

MCF2010


2009January


-



2.90



27.83



3.09February


-



3.05



19.50



2.34March


0.61



2.80



13.41



1.80April


0.41



2.01



8.13



1.56May


2.64



1.81



10.77



1.41June


5.48



1.94



15.03



1.59July


5.28



2.05



12.80



1.39August


4.27



2.00



5.28



1.40September


0.20



1.60



0.41



1.19October


1.22



1.85



0.41



1.37November


0.20



1.80



0.20



2.35December


-



2.05



0.41



2.26





Donovan #33-3

Share of

Production

Volumes


Price

Per

BBL


Share of

Production

Volumes


Price

Per

BBL2010


2009January


-



-



-



-February


39.38



64.98



-



-March


-



-



-



-April


-



-



-



-May


-



-



-



-June


-



-



-



-July


67.02



64.54



-



-August


29.69



65.14



-



-September


-



-



-



-October


47.49



64.54



-



-November


-



-



-



-December


31.30



76.24



-



-





Donovan #33-2

Share of

Production

Volumes


Price

Per

BBL


Share of

Production

Volumes


Price

Per

BBL2010


2009January


-



-



-



-February


-



-



-



-March


-



-



-



-April


-



-



-



-May


-



-



-



-June


-



-



-



-July


22.16



64.54



-



-August


15.17



65.14



-



-September


-



-



-



-OctoberNovemberDecember


13.22



76.24


14





Fields #14-34

Share of

Production

Volumes


Price

Per

BBL


Share of

Production

Volumes


Price

Per

BBL2010


2009January


-



-



-



-February


-



-



-



-March


-



-



-



-April


-



-



-



-May


-



-



-



-June


-



-



-



-July


-



-



-



-August


-



-



-



-September


-



-



-



-October


33.73



68.29



-



-November


-



-



-



-December


35.16



77.05



-



-





Majestic’s Net Share of the production volumes from the Ludwig State #36-1, Boucher #27-1, B. Ag #25-1, Vandenbos #19-1, Boucher #18-1 and Stoltz #18-1 wells for the year ended December 31, 2010 were 7,849 MCF compared to 12,479 MCF for the year ended December 31, 2009. The production decrease is a result of natural decline in production over time.  The Company’s Net Share of production volumes from the Donovan Leases were 226.05 BBL and 68.89 BBL from the Jody Fields well for the year ending December 31, 2010.




The Company’s total expenses increased by $52,910 from $123,355 reported for the year ended December 31, 2009 compared to $176,265 reported for the year ended December 31, 2010. Of those expenses, Production (Lifting) Costs increased by $15,127 from $15,857 for the year ended December 31, 2009 to $30,984 for the year ended December 31, 2010. This increase is directly attributed to the Company’s share of the costs associated with the new Donovan wells, which included a $5,500 increase in production taxes and royalties.  There was an increase in Selling, General & Administrative Expenses of $47,643 from $72,038 reported for the year ended December 31, 2009 compared to $119,681 for the year ended December 31, 2010. The increase is attributed to professional and consulting fees, which are comprised of legal, accounting and auditing fees.  For the year ended December 31, 2010 professional fees include the issuance of 200,000 shares in Company stock for a total expense of $42,000.  During 2010 the Company incurred approximately $4,000 in expense associated with the design and maintenance of a new website and engineering fees increased $4,000.  Depletion, Depreciation and Amortization decreased by $9,840 from $35,440 reported for the year ended December 31, 2009 compared to $25,600 reported for the year ended December 31, 2010.  This decrease is directly attributed to the decrease in gas production volumes, offset by increased oil production volumes, between the two years.





The Company showed a Net Loss of ($129,669) for the year ended December 31, 2010. This compares to the Net Loss of ($94,877) for the year ended December 31, 2009. The variance between the two years is directly related to the decrease in gas production volumes and an increase in selling, general, & administrative expense as discussed above. While it is the Company’s hope that production volumes increase as a result of its planned development and drilling program, the Company’s revenues are subject to the volatility of oil and natural gas prices, which continue to fluctuate dramatically.





The Company also plans to continue its pursuit of oil prospects in the Lake Frances Area, which if successful, could contribute to an increase in future revenues.  The price of crude oil also continues to fluctuate but not to the same extreme as the price of natural gas.  In spite of the fluctuations in the price of oil and natural gas, Management is still confident that we will build the Company through continued drilling of oil and natural gas prospects.


15





Drilling Activity





The following table sets forth the results of our drilling activities during the year ended December 31, 2010 and 2009:





Drilling ActivityGross Wells


Net WellsYears ended December 31,

Total


Producing


Dry


Total


Producing


Dry2010


0



0



0



0



0



02009


2



2



0



0.50



0.50



0





Net Production, Average Sales Price and Average Production Costs (Lifting)





The table below sets forth the net quantities of oil and gas production (net of all royalties, overriding royalties and production due to others) attributable to the Company for the years ended December 31, 2010 and 2009, and the average sales price, and average production costs (including depreciation, depletion and amortization, lease operating costs and all associated taxes) on a per unit of production basis:





Years Ended December 31,

2010


2009Net Production:Oil (Bbls)


334.32



40.06Gas (Mcf)


7,849



12,479Average Sales Prices:Oil (per Bbl)

$
68.76


$
53.08Gas (per Mcf)

$
2.10


$
1.99Average Production Cost Per MCF

$
5.88


$
4.03





LIQUIDITY AND RESOURCE CAPITAL





We are still a development stage company. From our inception to December 31, 2010, we incurred an accumulated deficit of ($848,360). This deficit is primarily the result of approximately $300,000 in expenses associated with stock issuances during fiscal Year Ended December 31, 2002, and $406,000 in legal, accounting and filing fees incurred since inception associated with being a publicly traded company. As of December 31, 2010, we had $23,200 of current cash available. Our cash resources of $23,200 are not sufficient to satisfy our cash requirements over the next 12 months.





We need an additional minimum of $1,000,000 to finance our planned expansion in the next 12 months, which funds will be used for drilling of development oil and natural gas wells in the Lake Frances, Williams, Fields, and Donovan prospects. We hope to be able to raise additional funds from an offering of our stock in the future. However, this offering may not occur, or if it occurs, may not raise the required funding. We may also consider securing debt financing. We may not raise other equity or debt financing sufficient to fund this amount. If we don't raise or generate these funds, the implementation of our short-term business plan will be delayed or eliminated.


16





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





COMMITMENTS AND CONTINGENCIES





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





Beginning in 2007, the Company has acquired leases covering approximately 3,963 net acres of undeveloped land for the purpose of future oil and gas development. This acreage is located in Pondera County, Montana in the vicinity of the Williams and Lake Frances Gas Fields. These leases remain in good standing with the term of the leases being for periods of 3 or 5 years. Management considers the value of the properties to be as much or more than for what they were acquired.





Majestic entered into a farm-out agreement with Mountain View Energy on September 1, 2009, outlining parameters for Mountain View Energy to drill a test well in the NWSE-Section 33-T27N-R4W, Teton County, Montana at its sole cost, risk and expense.    In doing so, Mountain View Energy would acquire 75% of the Working Interest, while Majestic would retain a 25% Working Interest in any well drilled in the 40-acre tract.




Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.





As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.


17




Item 8. Financial Statements.




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)





CONSOLIDATED FINANCIAL STATEMENTS


YEARS ENDED DECEMBER 31, 2010 AND 2009,


AND


INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2010


18





MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)





Table of Contents








PageINDEPENDENT AUDITORS’ REPORT

F-1CONSOLIDATED FINANCIAL STATEMENTSBalance Sheets

F-2Operations

F-3Changes in Stockholders’ Equity

F-4Cash Flows

F-5Notes to Consolidated Financial Statements

F-6 through F-13SUPPLEMENTAL INFORMATIONDisclosures about Oil and Gas Producing Activities and Properties - Unaudited

F-14 through F-18


19







Report of Independent Registered Public Accounting Firm
  
 To the Board of Directors and Stockholders
 Majestic Oil and Gas, Inc.
 (A development stage enterprise)
 Cut Bank, Montana
 
 We have audited the consolidated balance sheets of Majestic Oil and Gas, Inc. (a development stage enterprise - the “Company”) as of December 31, 2010 and 2009 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the period from Inception (April 16, 2002) to December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Majestic Oil and Gas Inc. as of December 31, 2010 and 2009, and the consolidated results of their operations and cash flows for the years then ended and the period from Inception (April 16, 2002) to December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
 
 As discussed in Note 1 to the consolidated financial statements, the Company changed its method of oil and gas reserve estimation and related required disclosures in 2009 with the implementation of new accounting guidance.
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1, the Company has incurred losses since inception and has only recently commenced principal operations.  These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 /s/ Richey, May & Co., LLP
 
 Englewood, Colorado
 April 15, 2011




F-1




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


CONSOLIDATED BALANCE SHEETS


DECEMBER 31, 2010 AND 2009







2010


2009ASSETSCash and cash equivalents

$
23,200


$
110,701Trade receivables


19,780



5,823Total current assets


42,980



116,524PROPERTY AND EQUIPMENTOil and gas properties, using the full cost pool method of accounting:Properties being amortized


455,894



455,894Properties not subject to amortization


213,852



202,531Less accumulated depletion, amortization and impairment


(189,200
)


(164,000
)Net property and equipment


480,546



494,425OTHER ASSETSWebsite development costs (less accumulated amortization)


-



400Total other assets


-



400Total assets

$
523,526


$
611,349LIABILITIESAccounts payable

$
475


$
5,028Production taxes and royalties payable


5,818



1,379Well settlement payable


22,919



22,959Total current liabilities


29,212



29,366Asset retirement obligation


8,879



8,879Total liabilities


38,091



38,245STOCKHOLDERS' EQUITYCommon stock, no par value-Authorized, 100,000,000 sharesIssued and outstanding, 9,118,000 in 2010 and 8,918,000 shares in 2009


1,314,500



1,272,500Additional paid in capital


19,295



19,295Deficit accumulated during the development stage


(848,360
)


(718,691
)485,435



573,104Total liabilities and stockholders' equity

$
523,526


$
611,349





See notes to consolidated financial statements.


F-2


MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


CONSOLIDATED STATEMENTS OF OPERATIONS


YEARS ENDED DECEMBER 31, 2010 AND 2009,


AND THE PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2010









InceptionYear Ended


Year Ended


(April 16, 2002)December 31,


December 31,


to December 31,2010


2009


2010REVENUE

$
46,596


$
28,458


$
502,273PRODUCTION (LIFTING) COSTS


30,984



15,857



170,947EXPLORATION EXPENSES


-



-



3,862DEPLETION, DEPRECIATION, AMORTIZATION & IMPAIRMENT


25,600



35,440



191,700INCOME FROM OIL & GAS PRODUCING ACTIVITIES


(9,988
)


(22,839
)


135,764SELLING, GENERAL & ADMINISTRATIVE EXPENSES


119,681



72,038



984,124NET LOSS

$
(129,669
)

$
(94,877
)

$
(848,360
)EARNINGS PER SHARENet loss, basic and diluted

$
(0.01
)

$
(0.01
)Weighted average number of shares outstanding


9,036,082



7,952,959Adjusted weighted average shares


9,036,082



7,952,959





See notes to consolidated financial statements.




F-3




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


YEARS ENDED DECEMBER 31, 2010 AND 2009,


AND THE PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2010





DeficitAccumulatedAdditional


Stock


DuringCommon Stock


Paid In


Subscription


DevelopmentShares


Amount


Capital


Receivable


Stage


TotalBEGINNING BALANCE, INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2007


6,240,000


$
624,000


$
-


$
-


$
(300,109
)

$
323,891Common stock issued for services


330,000



147,000



-



-



-



147,000Common stock issued


300,000



150,000



-



-



-



150,000Warrants exercised


938,000



234,500



-



(2,000
)


-



232,500Common stock options issued


-



-



21,295



-



-



21,295Net loss


-



-



-



-



(323,705
)


(323,705
)BALANCE, DECEMBER 31, 2008


7,808,000



1,155,500



21,295



(2,000
)


(623,814
)


550,981Common stock issued for services


100,000



16,000



-



-



-



16,000Common stock issued


1,010,000



101,000



-



-



-



101,000Elimination of subscription receivable


-



-



(2,000
)


2,000



-



-Net loss


-



-



-



-



(94,877
)


(94,877
)BALANCE, DECEMBER 31, 2009


8,918,000



1,272,500



19,295



-



(718,691
)


573,104Common stock issued for services


200,000



42,000



-



-



-



42,000Net loss


-



-



-



-



(129,669
)


(129,669
)BALANCE, DECEMBER 31, 2010


9,118,000


$
1,314,500


$
19,295


$
-


$
(848,360
)

$
485,435





See notes to consolidated financial statements.




F-4




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


CONSOLIDATED STATEMENTS OF CASH FLOWS


YEARS ENDED DECEMBER 31, 2010 AND 2009,


AND THE PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2010





Inception(April 16, 2002)Year Ended


Year Ended


toDecember 31,


December 31,


December 31,2010


2009


2009OPERATING ACTIVITIESNet loss

$
(129,669
)

$
(94,877
)

$
(848,360
)Charges and credits to net loss not affecting cashDepletion and amortization


25,600



35,440



191,700Organizational expenses paid with stock


-



-



300,000Legal fees paid with stock


42,000



16,000



230,000Stock compensation expense


-



-



21,295Changes in assets and liabilitiesTrade receivables


(13,957
)


18,247



(19,780
)Accounts payable and well settlement payable


(4,593
)


22,279



23,394Production taxes and royalties payable


4,439



(3,030
)


5,818NET CASH USED IN OPERATING ACTIVITIES


(76,180
)


(5,941
)


(95,933
)INVESTING ACTIVITIESWebsite development


-



-



(2,500
)Additions to property and equipment


(11,321
)


(64,148
)


(500,867
)NET CASH USED IN INVESTING ACTIVITIES


(11,321
)


(64,148
)


(503,367
)FINANCING ACTIVITIESProceeds from issuance of common stock and warrants


-



101,000



622,500NET CASH PROVIDED BY FINANCING ACTIVITIES


-



101,000



622,500NET CHANGE IN CASH AND CASH EQUIVALENTS


(87,501
)


30,911



23,200CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD


110,701



79,790



-CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
23,200


$
110,701


$
23,200





See notes to consolidated financial statements.


F-5




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009





NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES





Principal Business Activity and Principles of Consolidation





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





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





Going Concern





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





Estimates





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





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




See notes to consolidated financial statements.


F-6




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009









Income Taxes





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





Cash Equivalents





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





Trade Receivables





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





Concentrations of Credit Risk





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





Fair Value of Financial Instruments





The Company’s financial instruments consist of primarily of trade receivables, accounts payable and accrued production taxes and royalties. The carrying amount of trade receivables, accounts payable and accrued production taxes and royalties approximates its fair value because of the short-term maturity of such instruments





Impairment of Long-Lived Assets





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


F-7




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009











Earnings per Share of Common Stock





Basic earnings per share is determined using net income divided by the weighted average shares outstanding during the period.  Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued.  There were no outstanding common stock warrants and options in 2010 and 2009, that would create dilution.





Oil and Gas Properties





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





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





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





Gains or losses are not recognized upon the sale or other disposition of oil and gas properties, unless the sale represents a significant portion of oil and gas interests and the gain significantly alters the relationship between capitalized costs and proved oil and gas reserves of the cost center.





Website Development Costs





The Company has capitalized the costs associated with development of its website, and amortized the cost over a three year period.  Website development costs were fully amortized during 2010.





Asset Retirement Obligations





The Company recognizes the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. The liability is capitalized as part of the related asset’s carrying amount. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. The Company’s retirement obligations are related to plugging, dismantlement, removal, site reclamation and similar activities of its oil and gas exploration activities.


F-8




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009









Revenue Recognition





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





Stock Based Compensation





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





During the years ended December 31, 2010 and 2009, the Company did not make any stock option awards.





NOTE 2 - ORGANIZATION AND DEVELOPMENT OF THE COMPANY





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





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





NOTE 3 - NON-CASH TRANSACTIONS





During the year ended December 31, 2010, the Company issued a total of 200,000 shares of its common stock in payment of ongoing legal fees associated with compliance with securities law. This resulted in a $42,000 charge to legal expense during the year ended December 31, 2010.  Payment of ongoing legal fees with Company common stock resulted in charges to legal expense of $16,000 and $230,000 during the year ended December 31, 2009 and the period from inception (April 16, 2002) through December 31, 2010, respectively.





NOTE 4 - COMMON STOCK WARRANTS





The Company has in the past issued common stock warrants to stockholders that purchased common stock from the Company for cash. These warrants entitle the holders to purchase additional shares of common stock from the Company. During the years ended December 31, 2010 and 2009 no warrants were issued, and during the period from inception (April 16, 2002) through December 31, 2010 a total of 1,390,000 warrants were issued.


F-9




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009











NOTE 5 - RELATED PARTY TRANSACTIONS





Altamont Oil & Gas, Inc. (Altamont), an entity related through common ownership, is the operator of the wells in which the Company owns its working interests.  As the operator of the wells, Altamont is responsible for remitting production taxes to the taxing authorities and royalty payments to the royalty interest owners. Currently, all revenue earned by the Company is received from Altamont. As of December 31, 2010 and 2009, the Company had an outstanding receivable from Altamont of $19,780 and $5,823, respectively, for oil and gas sales, and payables to Altamont of $5,818 and $1,379, respectively, for production taxes and royalties, and $22,919 and $22,959, respectively, for well settlement charges.





During 2007, the Company entered into a Farm-out Agreement with Altamont to conduct a 10-well natural gas development program.  This development program is still pending and will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana.





NOTE 6 - INCOME TAXES





The effective income tax rate differs from the U.S. Federal statutory income tax rate due to the following:





2010


2009Federal statutory income tax rate


34.00
%


34.00
%State income tax rate


6.75
%


6.75
%Valuation allowance


-40.75
%


-40.75
%Effective tax rate


0.00
%


0.00
%





The sources of temporary differences resulting in deferred tax assets and deferred tax liabilities are as follows:





2010


2009Deferred tax assetsFederal and state net operating loss carry-forwards

$
262,000


$
218,100Organizational costs


-



2,300Total deferred tax assets


262,000



220,400Deferred tax liabilitiesOil and gas properties and related equipment


(99,000
)


(95,000
)Total deferred tax liabilities


(99,000
)


(95,000
)Net deferred tax asset


163,000



125,400Less: valuation allowance


(163,000
)


(125,400
)Deferred tax liability

$
-


$
-


F-10




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009









During the years ended December 31, 2010 and 2009, the Company recorded valuation allowances that reduced the total deferred tax assets to zero. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that the carry-forwards are expected to be available to reduce taxable income. Because the Company is in the development stage, and may not achieve its desired level of profitability in its intended area of operation, a valuation allowance has been established that reduces the deferred tax asset to zero in all periods presented. There was no other activity in the valuation allowance during the years ended December 31, 2010 and 2009, or during the period from inception (April 16, 2002) to December 31, 2010.





Operating loss carry-forwards totaled approximately $786,000 as of December 31, 2010 and for tax purposes expire in the years 2027 through 2030.




NOTE 7 - STOCK OPTIONS





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





The Company granted a non-qualified stock option to buy 125,000 shares at $0.38 per share to a member of the Company’s Board of Directors on August 9, 2007.  These options expired on August 9, 2008, without being exercised. The Company recorded a total of $21,295 for stock compensation expense.  There are no outstanding or exercisable shares as of December 31, 2010 and 2009





NOTE 8 - COMMITMENTS AND CONTINGENCIES





On July 1, 2004, the Company entered into an operating agreement with Altamont, through which Altamont will operate the wells in which the Company has acquired a working interest. The payments received, from Altamont, by the Company for its share of monthly production revenue are net of its share of monthly operating costs and production royalty payments.





NOTE 9 - OIL AND GAS PROPERTY ACQUISITIONS





During the year ended December 31, 2007, the Company entered into a Farm-out Agreement with Altamont and Numbers, Inc., an entity whose owner is a member of the Board of Directors of the Company, to drill a 10-well natural gas development program.  This development program will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana.  The locations for the development program were determined from information gathered from a geological and engineering study.  The surveying of each location and the permitting of each drill site with the Montana Board of Oil & Gas is currently being completed.  The Company will receive 100% of the revenues until the drilling and completion costs have been recovered, at which time the Company's interest will revert to 50%. No wells have yet been drilled under this agreement.




F-11




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009









The Company participated in a drilling program during late 2007 and early 2008. As part of this drilling program, the Company has a 25% working interest in the B. Ag 25-1 well, a 25% working interest in the Vandenbos 19-1 well, a 12.5% working interest in the Vandenbos 19-2 well, a 25% working interest in the Jody Fields 4-1 well, a 25% working interest in the Boucher 18-1 well, and a 25% working interest in the Stoltz 18-1 well, all of which are in Pondera County, Montana. The B. Ag 25-1 well, the Vandenbos 19-1 well, the Boucher 18-1 and the Stoltz 18-1 well are producing gas wells. The Vandenbos 19-2 well and the Jody Fields 4-1 well were dry holes.





The Company acquired a variety of oil and gas leases during the years ended December 31, 2010 and 2009, both from unrelated third parties and from Altamont. These leases are for future oil and gas development and are not part of any current drilling program. The amount paid to Altamont was the same amount originally paid by Altamont to acquire the leases.





Net capitalized costs related to the Company’s oil and gas producing activities are summarized as follows as of December 31:




2010


2009Proved properties:Capitalized costs

$
455,894


$
455,894Less accumulated depletion, depreciation, amortization and impairment


(189,200
)


(164,000
)Net capitalized costs - proved properties

$
266,694


$
291,894Unproved propertiesCapitalized costs


213,852



202,531Net capitalized costs

$
480,546


$
494,425





Under the full cost method, depletion is computed on the units of production method based on proved reserves, or upon reasonable estimates where proved reserves have not been established due to the recent commencement of production. Depletion expense recognized was $25,200 and $34,600 for the years ended December 31, 2010 and 2009, respectively, and $190,440 for the period from inception (April 16, 2002) through December 31, 2010.





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




F-12




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009









The Company recognizes the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. As of December 31, 2010 and 2009, an asset retirement obligation of $8,879 was recorded, and a corresponding amount was included in the full cost pool. No accretion expense was recorded during the years ended December 31, 2010 and 2009, as it was not considered to be significant. The estimated liability is based on historical experience in plugging and abandoning wells, estimated cost to plug and abandon wells in the future and federal and state regulatory requirements.





The following table presents the Company’s current asset retirement obligation activity in 2010:


Asset retirement obligations at December 31, 2009

$
8,879Liabilities incurred during the yearLiabilities settled during the year


-Accretion expense


-Asset retirement obligations at December 31, 2010

$
8,879





The Company’s results of operations from oil and gas producing activities (excluding corporate overhead and financing costs) are presented below for the years ended December 31, 2010, 2009 and the period from inception (April 16, 2002) to December 31, 2010:


Period FromYear


Year


InceptionEnded


Ended


(April 16, 2002)December 31,


December 31,


to2010


2009


December 31, 2010Oil and gas sales

$
46,596


$
28,458


$
502,273Production costs


(30,984
)


(15,857
)


(170,947
)Exploration expenses


-



-



(3,862
)Depletion, depreciation and amortization


(25,600
)


(35,440
)


(190,440
)$
(9,988
)

$
(22,839
)

$
137,024


F-13





MAJESTIC OIL & GAS, INC. AND SUBSIDIARY





SUPPLEMENTARY INFORMATION




F-14




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


SUPPLEMENTARY INFORMATION


DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES -


UNAUDITED


DECEMBER 31, 2010 AND 2009





OIL AND GAS PRODUCING ACTIVITIES AND PROPERTIES





Net capitalized costs related to the Company’s oil and gas producing activities are summarized as follows as of December 31:




2010


2009Proved properties:Capitalized costs

$
455,894


$
455,894Less accumulated depletion, depreciation, amortization and impairment


(189,200
)


(164,000
)Net capitalized costs - proved properties

$
266,694


$
291,894Unproved propertiesCapitalized costs


213,852



202,531Net capitalized costs

$
480,546


$
494,425





Costs incurred in oil and gas property acquisition, exploration and development activities, including capital expenditures are summarized as follows for the years ended December 31, 2010, 2009, and the period from inception (April 16, 2002) to December 31, 2010:





Period FromYear


Year


InceptionEnded


Ended


(April 16, 2002)December 31,


December 31,


to2010


2009


December 31, 2010Property acquisition costs:Proved

$
-


$
-


$
192,187Unproved


11,321



64,148



213,852Exploration costs


-



-



13,335Development costs


-



-



241,493Asset retirement obligation


-



-



8,879$
11,321


$
64,148


$
669,746


F-15




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


SUPPLEMENTARY INFORMATION


DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES -


UNAUDITED


DECEMBER 31, 2010 AND 2009





The Company’s results of operations from oil and gas producing activities (excluding corporate overhead and financing costs) are presented below for the years ended December 31, 2010 and 2009, and the period from inception (April 16, 2002) to December 31, 2010:





Period FromYear


Year


InceptionEnded


Ended


(April 16, 2002)December 31,


December 31,


to2010


2009


December 31, 2010Oil and gas sales

$
46,596


$
28,458


$
502,273Production costs


(30,984
)


(15,857
)


(170,947
)Exploration expenses


-



-



(3,862
)Depletion, depreciation and amortization


(25,600
)


(35,440
)


(190,440
)$
(9,988
)

$
(22,839
)

$
137,024





Estimated Quantities of Proved Oil and Gas Reserves (Unaudited)





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





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





The standardized measure of discounted future net cash flows is computed by applying year-end prices of oil and gas to the estimated future production of proved oil and gas reserves, less estimated future expenditures to be incurred in developing and producing the proved reserves, less estimated future income tax expenses to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions. The estimated future net cash flows are then discounted using a rate of 10 percent a year to reflect the estimated timing of the future cash flows.


F-16




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


SUPPLEMENTARY INFORMATION


DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES -


UNAUDITED


DECEMBER 31, 2010 AND 2009









Presented below is a summary of the changes in estimated proved reserves of the Company for the years ended December 31:





2010


2009Oil


Gas


Oil


Gas(Bbls)


(Mcf)


(Bbls)


(Mcf)Proved reserves:Beginning of the year


6,518



69,204



-



109,448Revisions of previous estimates


192



7,772



-



(27,805
)Improved recovery


-



-



-



-Purchases of reserves in place


-



-



-



-Extensions and discoveries


-



-



6,558



-Production


(334
)


(7,849
)


(40
)


(12,439
)Sales of reserves in place


-



-



-



-End of the year


6,376



69,127



6,518



69,204





All of the proved reserves currently owned by the Company are proved developed reserves. Proved developed reserves are those expected to be recovered through existing wells, equipment, and operating methods.





2010


2009Standardized Measure of Discounted FutureNet Cash Flows:Future cash inflows

$
628,000


$
549,000Future production costs


(80,000
)


(87,000
)Future development costs


(6,000
)


(6,000
)Future income tax expenses


(58,000
)


(51,000
)Future net cash flows


484,000



405,00010% annual discount for estimated timing of cash flows


(166,000
)


(154,000
)Standardized measures of discounted future net cash flows relating to proved oil and gas reserves

$
318,000


$
251,000


F-17




MAJESTIC OIL & GAS, INC. AND SUBSIDIARY


(A Development Stage Company)


SUPPLEMENTARY INFORMATION


DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES -


UNAUDITED


DECEMBER 31, 2010 AND 2009





The following reconciles the standardized measure of discounted future net cash flow during 2010 and 2009:


2010


2009Beginning of the year

$
251,000


$
274,000Net change in prices and production costs


59,000



(127,000
)Extensions and discoveries


-



200,000Revision of previous estimates


24,000



(81,000
)Net change in estimated future development costs


-



(2,000
)Sales of oil and gas produced, net of production costs


(16,000
)


(13,000
)End of the year

$
318,000


$
251,000


F-18





Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.





None





Item 9A(T).Controls and Procedures





Evaluation of Disclosure Controls and Procedures





The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.





The Company’s management, with the participation of the Company’s Chief Executive Officer/Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer/Chief Financial Officer has concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.





Management’s Report on Internal Control over Financial Reporting





Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended.  Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.  We have identified the following material weaknesses: The material weakness relates to the lack of segregation of duties in that our CEO and CFO are the same person.  In the preparation of audited financial statements, footnotes and financial data all of our financial reporting is carried out by our Chief Financial Officer, and we do not have an audit committee or independent CEO to monitor or review the work performed. The lack of segregation of duties results from lack of a separate Chief Financial Officer with accounting technical expertise necessary for an effective system of internal control.  We are, in fact, a small, relatively simple operation from a financial point of view. In order to mitigate this material weakness to the fullest extent possible, all financial reports are reviewed by an outside accounting firm that is not our audit firm. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. To mitigate further this material weakness to the fullest extent possible, although our CEO/CFO has identified the financial reporting risks and the controls and address and monitors the controls on an ongoing basis, our outside accounting firm that is not our audit firm performed direct tests of our internal controls and procedures in place during the year ended December 31, 2010 to identify material weaknesses that in its opinion need to be addressed. No material weaknesses, other than the material weakness identified above, were identified as a result of this testing. Finally, as soon as our finances allow, we will hire an independent Chief Financial Officer.


20





Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2010, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.





Change In Internal Control Over Financial Reporting





There were no changes in our internal control over financial reporting that occurred during our last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





Attestation Report of the Registered Public Accounting Firm





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


21





ITEM 9B. OTHER INFORMATION





None—Not Applicable





PART III




Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.




Name

Age

PositionPatrick M. Montalban

53

President, CEO and DirectorDanny M. Mitchell

82

Corporate Secretary and DirectorBruce D. Hirsche

62

Director





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




As a member of the Board, Mr. Montalban contributes his expertise gained through his many years of experience in the Industry.   Mr. Montalban also brings his executive leadership, management and financial experience to the Board.   In addition to being a member of the Board, Mr. Montalban also acts as President & CEO of the Company, lending his extensive knowledge of all aspects of the Oil and Gas Industry to develop corporate strategy and guide business operations.


22





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





As a Director, Mr. Mitchell brings his many years of experience in the Industry to the Board, having drilled and operated numerous wells over the course of his career.   In addition, he contributes his knowledge and management experience gained through his many years as a business owner and operator.





Bruce D. Hirsche, Barrister & Solicitor was appointed to the Board of Directors on December 13, 2006. Mr. Hirsche is a partner with Parlee McLaws, a law firm, specializing in Securities Law. He received his Bachelor of Law (L.L.B.) Degree in 1974 from the University of Alberta and his Masters Degree (L.L.M.) in 2003 from York University, Osgoode Hall Law School. Mr. Hirsche is currently a member of the Law Society of Alberta, the Canadian Bar Association and the Edmonton Bar Association. Mr. Hirsche is currently a Director and Officer of several public and private companies, as follows:  Mr. Hirsche was a Director and Officer of MSR Exploration Ltd, now Quicksilver Resources, Inc. from July 1991 to September 1997. Other Directorship and Officer positions include Global Tree Technologies from January 1991 to present, Shelton Canada Corp from June 1997 to present, Rock Resources, Inc. from February 2000 to July 2003, EquiTech Corporation from June 2000 to February 2004, Innovotech Inc. from January 2001 to present, AltaRex Corp (now Twin Butte Energy) from May 2003 to February 2004, AltaRex Medical Corp from December 2003 to present, ViRexx Medical Corp from December 2003 to Present, Arrow Energy Ltd from September 2008 to present.





As a Director, Mr. Hirsche brings an extensive knowledge of securities and corporate law to the Board.  He has also served as a Director on a number of Boards, gaining knowledge and expertise in corporate development and business operations.





Directors serve for a one-yearterm. Our bylaws currently provide for a Board of Directors comprised of a minimum of one director.


23





Board Committees





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





Family Relationships





There are no family relationships among our officers or directors.





Legal matters





No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:





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





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





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





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





·
Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.


24






·
Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.·





·
Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.





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





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





Code of Ethics





The Company does not have a code of ethics for our principal executive and financial officers. The Company's management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations





Nominating Committee





We have not adopted any procedures by which security holders may recommend nominees to our Board of Directors.





Audit Committee




The Board of Directors acts as the audit committee. The Company does not have a qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert.  The Company intends to continue to search for a qualified individual for hire.


25





Item 11. Executive Compensation.





Summary Compensation Table





The table below summarizes all compensation awarded to, earned by, or paid to our Principal Executive Officer for the years ended December 31, 2010 and 2009.





Name

Title

Year

Salary


Bonus


Stock

awards


Option

Awards

*


Non-

equity

Incentive

plan

compensation


Non

qualified

deferred

compensation


All other

Compensation


TotalPatrick Montalban

President

2009


0



0



0



0



0



0



0



0Patrick Montalban

President

2010


0



0



0



0



0



0



0



0




Summary Equity Awards Table





The following table sets forth certain information for our executive officers concerning unexercised options, stock that has not vested, and equity incentive plan awards as of December 31, 2010.





OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END December 31, 2010Name

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable


Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable


Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options (#)


Option

Exercise

Price

Option

Expiration

Date

None

Number

of Shares

or Units

of Stock

That

Have

Not

Vested

(#)


Market

Value of

Shares or

Units of

Stock

That

Have

Not

Vested


Equity

Incentive

Plan

Awards:

Number

Of

Unearned

Shares,

Units or

Other

Rights

That

Have Not

Vested

(#)


Equity

Incentive

Plan

Awards:

Market

or Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That

Have Not

VestedPatrick

Montalban


0



0



0



0

None


0



0



0



0


26





Narrative disclosure to summary compensation and option tables





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





At no time during the last fiscal year with respect to any person listed in the Table above was there:




·
any outstanding option or other equity-based award repriced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined;


·
any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;


·
any option or equity grant;


·
any non-equity incentive plan award made to a named executive officer;


·
any nonqualified deferred compensation plans including nonqualified defined contribution plans; or


·
any payment for any item to be included under All Other Compensation in the Summary Compensation Table.




Board of Directors




Director Compensation




Name

Year

ended

December

31, 2010


Fees

earned

or

paid

in

cash

($)


Stock

awards

($)


Option

awards

($)


Non-equity

incentive

plan

compensation

($)


Nonqualified

deferred

compensation

earnings

($)


All other

compensation

($)


Total

($)Patrick M. Montalban


0



0



0



0



0



0



0



0Dan Mitchell


0



0



0



0



0



0



0



0Bruce D. Hirsche


0



0



0



0



0



0



0



0


27





Narrative to Director Compensation Table





We have no compensation arrangements (such as fees for retainer, committee service, service as chairman of the board or a committee, and meeting attendance) with directors.





Item 12. Security Ownership of Certain Beneficial Owners and Management.




The following table sets forth the ownership, as of the date of this annual report, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group. There are not any pending or anticipated arrangements that may cause a change in control.





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


28






Name and Address

Number of

Shares of

Common

Stock


PercentagePatrick M. Montalban [1]

P.O Box 488 Cut Bank, Montana 59427


4,600,000



51.6Danny Mitchell

P.O Box 488 Cut Bank, Montana 59427


90,000



1.0All officers and directors as a group [three persons]


4,690,000



52.6





This table is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Except as set forth above, applicable percentages are based upon 9,118,000 shares of common stock outstanding as of December 31, 2010.




Item 13. Certain Relationships and Related Transactions.




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




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


29





Majestic Oil & Gas, Inc. entered into a farm-out agreement with Mountain View Energy, Inc. on September 1, 2009, outlining parameters for Mountain View Energy, Inc., a Canadian publicly traded company affiliated through common management and ownership, to drill a test well in Teton County, MT at its sole cost, risk and expense. In doing so, Mountain View Energy, Inc., would acquire 75% of the Working Interest, while Majestic Oil & Gas, Inc. would retain a 25% Working Interest in any well drilled in the 40-acre tract.





Altamont Oil & Gas, Inc. (Altamont), an entity related through common ownership, is the operator of the wells in which the Company owns its working interests. As the operator of the wells, Altamont is responsible for remitting production taxes to the taxing authorities and royalty payments to the royalty interest owners. Currently, all revenue earned by the Company is received from Altamont. As of December 31, 2010 and 2009, the Company had an outstanding receivable from Altamont of $19,780 and $5,823, respectively, for oil and gas sales, and payables to Altamont of $5,818 and $1,379, respectively, for production taxes and royalties, and $22,919 and $22,959, respectively, for well settlement charges.





During 2007, the Company entered into a Farm-out Agreement with Altamont to conduct a 10-well natural gas development program. This development program is still pending and will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana.





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





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





Director Independence





We are not subject to the listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.” Currently, we have three director and we believe that none of these directors currently meets the definition of "independent" as promulgated by the rules and regulations of NASDAQ.


30





Audit Fees





Audit fees paid during:The year ended December 31, 2010:

$
24,272The year ended December 31, 2009:

$
23,760





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


31





Item 15. Exhibits, Financial Statement Schedules





Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.





31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer, Patrick Montalban





32.1 Section 1350 Certification, Patrick Montalban





Signatures





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




Majestic Oil & Gas, Inc.





Title

Name

Date

SignaturePrincipal ExecutiveOfficer

Patrick Montalban

April 15, 2011

/s/ Patrick MontalbanPrincipal Accounting

Patrick Montalban

April 15, 2011

/s/ Patrick MontalbanOfficerPrincipal FinancialOfficer

Patrick Montalban

April 15, 2011

/s/ Patrick Montalban


32





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




SIGNATURE

NAME

TITLE

DATE/s/ Patrick Montalban

Patrick Montalban

Director

April 15, 2011/s/ Bruce Hirsche

Bruce Hirsche

Director

April 15, 2011/s/ Danny Mitchell

Danny Mitchell

Director

April 15, 2011




33