UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)




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




For the
quarterly period ended December 31, 2008




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





For the
transition period from ____________ to_________________





Commission
file number 000-51108





TOT Energy,
Inc.


(Exact
name of registrant as specified in its charter)




Delaware
                  
                  20-0715816(State or other jurisdiction of incorporation or organization)
                  
                  (IRS Employer Identification
      No.)





19950 W.
Country Club Drive


8th
Floor


Aventura, FL
33180


(Address
of principal executive offices)





(305)
933-3778


(Registrant’s
telephone number, including area code)




201 S.
Biscayne Blvd.


Suite
2868


Miami, FL
33131


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





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





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





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




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




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: At December 31, 2008, the number of
shares outstanding of the issuer’s common stock, $0.001 par value, was
289,885,858 shares.









TOT
ENERGY, INC.


Form
10-Q


For
the Quarter Ended December 31, 2008


INDEX





PageNo.PART
      I — FINANCIAL INFORMATIONItem
      1.
                                          Financial
      StatementsUNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETS – AS OF MARCH 31, 2008 ANDDECEMBER
      31, 2008.
                                          
                                          3UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – FOR THE THREE AND
      NINE MONTHS ENDED DECEMBER 31, 2007 AND 2008.
                                          
                                          4UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – FOR THE NINE MONTHS
      ENDED DECEMBER 31, 2007 AND 2008.
                                          
                                          5Notes
      to Unaudited Condensed Consolidated Financial Statements
                                          
                                          6Item
      2.
                                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                                          
                                          13Item 4T.
                                          Controls
      and Procedures
                                          
                                          18PART
      II — OTHER INFORMATIONItem
      1.
                                          Legal
      Proceedings
                                          
                                          18Item
      2.
                                          Unregistered
      Sales of Equity Securities
                                          
                                          18Item
      6.
                                          Exhibits
                                          
                                          20Signatures
                                          
                                          22References
      in this Form 10-Q to “we”, “us”, “our”, the “Company” and “TOT Energy”
      refers to TOT Energy, Inc. and its consolidated subsidiaries, unless
      otherwise
noted.




2




PART I —
FINANCIAL INFORMATION
 
 Item 1.
Financial Statements.
 
 TOT
ENERGY, INC.
 UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 March 31, 2008
                        
                        
                        December 31, 2008ASSETSCurrent
      assetsCash
                        
                        $
                        88,007
                        
                        
                        $
                        190,042Deposits
                        
                        
                        -
                        
                        
                        
                        6,000Contract
      receivable
                        
                        
                        -
                        
                        
                        
                        161,836Cost
      in excess of related billings on uncompleted contract
                        
                        
                        -
                        
                        
                        
                        136,116Inventory
      of raw materials
                        
                        
                        -
                        
                        
                        
                        35,371Prepaid
      expenses and other assets
                        
                        
                        20,500
                        
                        
                        
                        30,584Total
      current assets
                        
                        
                        108,507
                        
                        
                        
                        559,949Fixed
      assetsBuilding
                        
                        
                        -
                        
                        
                        
                        186,097Machinery
      and equipment
                        
                        
                        -
                        
                        
                        
                        3,535,930Less:
      accumulated depreciation
                        
                        
                        -
                        
                        
                        
                        (180,895
                        )Total
      fixed assets (net)
                        
                        
                        -
                        
                        
                        
                        3,541,132Other
      AssetsAccounting
      software license
                        
                        
                        1,197
                        
                        
                        
                        -Total
      assets
                        
                        $
                        109,704
                        
                        
                        $
                        4,101,081LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIENCY) IN ASSETSCurrent
      liabilitiesAccounts
      payable
                        
                        $
                        15,193
                        
                        
                        $
                        48,108Accrued
      expenses
                        
                        
                        32,641
                        
                        
                        
                        676,433Due
      to related parties
                        
                        
                        500,000
                        
                        
                        -Total
      liabilities
                        
                        
                        547,834
                        
                        
                        
                        724,541Minority
      Interest
                        
                        
                        -
                        
                        
                        
                        5,894COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITY (DEFICIENCY) IN ASSETSPreferred
      stock ($.001 par value, 100,000,000 shares authorized and no shares issued
      and outstanding)
                        
                        
                        -
                        
                        
                        
                        -Common
      stock ($.001 par value, 400,000,000 shares authorized and 214,507,773 and
      289,885,858 shares issued and outstanding)
                        
                        
                        214,508
                        
                        
                        
                        289,886Treasury
      stock, at cost; 250,000 shares
                        
                        
                        (62,500
                        )
                        
                        
                        (62,500
                        )Paid
      in capital
                        
                        
                        5,115,356
                        
                        
                        
                        18,338,095Accumulated
      other comprehensive income
                        
                        
                        -
                        
                        
                        
                        (697,205
                        )Accumulated
      deficit
                        
                        
                        (5,705,494
                        )
                        
                        
                        (14,497,630
                        )Total
      stockholders' equity (deficiency) in assets
                        
                        
                        (438,130
                        )
                        
                        
                        3,370,646Total
      liabilities and stockholders' equity (deficiency) in
assets
                        
                        $
                        109,704
                        
                        
                        $
                        4,101,081
 
 See
accompanying notes.
 
 3
 
 TOT
ENERGY, INC.
 UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months Ended
                      December 31,
      2007
                    
                    
                    Three Months Ended
                      December 31,
      2008
                    
                    
                    Nine Months Ended
                      December 31,
      2007
                    
                    
                    Nine Months Ended
                      December 31,
      2008Sales
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    98
                    
                    
                    $
                    -Cost
      of sales
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Gross
      Profit
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    98
                    
                    
                    
                    -Operating
      ExpensesGeneral
      and administrative
                    
                    
                    21,877
                    
                    
                    
                    6,390,505
                    
                    
                    
                    60,937
                    
                    
                    
                    8,879,536Loss from
      operations
                    
                    
                    (21,877
                    )
                    
                    
                    (6,390,505
                    )
                    
                    
                    (60,839
                    )
                    
                    
                    (8,879,536
                    )Other
      income (expense)Interest
      expense, net
                    
                    
                    (27,734
                    )
                    
                    
                    -
                    
                    
                    
                    (110,464
                    )
                    
                    
                    -Other
      income (expense)
                    
                    
                    -
                    
                    
                    
                    841
                    
                    
                    
                    -
                    
                    
                    
                    532Income
      from settlements
                    
                    
                    735,869
                    
                    
                    
                    -
                    
                    
                    
                    735,869
                    
                    
                    
                    -Income
      (loss) before minority interest
                    
                    
                    686,258
                    
                    
                    
                    (6,389,664
                    )
                    
                    
                    564,566
                    
                    
                    
                    (8,879,004
                    )Minority
      interest in loss of consolidated subsidiary
                    
                    
                    -
                    
                    
                    
                    61,076
                    
                    
                    
                    -
                    
                    
                    
                    86,868Income
      taxes
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      income (loss)
                    
                    $
                    686,258
                    
                    
                    $
                    (6,328,588
                    )
                    
                    $
                    564,566
                    
                    
                    $
                    (8,792,136
                    )Other
      comprehensive incomeForeign
      currency translation loss
                    
                    
                    -
                    
                    
                    
                    (681,285
                    )
                    
                    
                    -
                    
                    
                    
                    (697,205
                    )Comprehensive
      income (loss)
                    
                    $
                    686,258
                    
                    
                    $
                    (7,009,873
                    )
                    
                    $
                    564,566
                    
                    
                    $
                    (9,489,341
                    )Net
      income (loss) per share - basic and diluted
                    
                    $
                    0.01
                    
                    
                    $
                    (0.03
                    )
                    
                    $
                    0.01
                    
                    
                    $
                    (0.04
                    )Weighted
      average shares outstanding - basic and diluted
                    
                    
                    100,757,770
                    
                    
                    
                    223,758,378
                    
                    
                    
                    100,757,770
                    
                    
                    
                    218,501,521
 
 See
accompanying notes
  4
 TOT
ENERGY, INC.
 UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 NineMonths
                      Ended
                      December 31, 2007
                    
                    
                    Nine Months
                      Ended
                      December 31, 2008Cash
      flows from operating activities:Net
      income (loss)
                    
                    $
                    564,566
                    
                    
                    $
                    (8,792,136
                    )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Depreciation
                    
                    
                    -
                    
                    
                    
                    176,895Amortization
      of accounting software license
                    
                    
                    -
                    
                    
                    
                    1,197Decrease
      in minority interest
                    
                    
                    -
                    
                    
                    
                    (35,815
                    )Share
      Based Compensation
                    
                    
                    -
                    
                    
                    
                    7,482,075Non
      cash interest expense
                    
                    
                    110,464
                    
                    
                    
                    -Changes
      in assets and liabilities, net of acquistions and the effect of
      consolidation of equity affiliates:
                    
                    
                    
                    
                    
                    
                    -Prepaid
      expenses
                    
                    
                    5,133
                    
                    
                    
                    (10,084
                    )Increase
      in contract receivables
                    
                    
                    
                    
                    
                    
                    (161,836
                    )Cost
      in excess of related billings on uncompleted contract
                    
                    
                    -
                    
                    
                    
                    (136,116
                    )Inventory
      of raw materials
                    
                    
                    -
                    
                    
                    (35,371
                    )Deposits
                    
                    
                    -
                    
                    
                    
                    (6,000
                    )Accounts
      payable
                    
                    
                    (402,336
                    )
                    
                    
                    32,915Accrued
      expenses
                    
                    
                    (463,427
                    )
                    
                    
                    643,792Total
      adjustments
                    
                    
                    (750,166
                    )
                    
                    
                    7,951,652Net
      cash used in operating activities
                    
                    
                    (185,600
                    )
                    
                    
                    (840,484
                    )Cash
      flows from investing activities:Purchase
      of equipment
                    
                    
                    -
                    
                    
                    
                    (8,877
                    )Net
      cash used in investing activities
                    
                    
                    -
                    
                    
                    
                    (8,877
                    )Cash
      flows from financing activities:Contributed
      capital from equity investors
                    
                    
                    -
                    
                    
                    
                    803,152Contributed
      capital for Korlea-TOT joint venture
                    
                    
                    -
                    
                    
                    
                    41,709Increase
      in related party payables
                    
                    
                    -
                    
                    
                    
                    1,472,442Decrease
      in related party payables
                    
                    
                    -
                    
                    
                    
                    (1,343,615
                    )Note
      payable related party
                    
                    
                    558,900
                    
                    
                    
                    -Net
      cash provided by financing activities
                    
                    
                    558,900
                    
                    
                    
                    973,688Effect
      of exchange rate changes on cash
                    
                    
                    -
                    
                    
                    
                    (22,292
                    )Net
      increase in cash
                    
                    
                    373,300
                    
                    
                    
                    102,035Cash
      at beginning of period
                    
                    
                    251
                    
                    
                    
                    88,007Cash
      at end of period
                    
                    $
                    373,551
                    
                    
                    $
                    190,042Supplemental
      Disclosure of Cash Flow InformationCash
      paid during theyear
      for:Interest
                    
                    $
                    -
                    
                    
                    $
                    -Income
      taxes
                    
                    $
                    -
                    
                    
                    $
                    -Non-cash
      investing and financing activities:Related
      party debt and accrued interest to be exchanged for equity
                    
                    $
                    3,771,047
                    
                    
                    $
                    637,410Common
      stock issued to form joint venture TOT-SIBBNS
                    
                    $
                    -
                    
                    
                    $
                    4,375,480Common
      stock issued for services provided in formation of joint venture
      Korlea-TOT
                    
                    $
                    -
                    
                    
                    $
                    45,500Common
      stock issued pursuant to subscription agreement
                    
                    $
                    -
                    
                    
                    $
                    8,877,137
 
 See
accompanying notes.
  5




TOT
ENERGY, INC.





NOTES TO
CONDENSED FINANCIAL STATEMENTS





NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization
and Basis of Presentation





TOT
Energy, Inc. (the “Company”), formerly Splinex Technology, Inc., was organized
on February 6, 2004 under the laws of the State of Delaware as a wholly-owned
subsidiary of Splinex, LLC, a Florida limited liability company, and was the
surviving entity pursuant to a merger with Ener1 Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Ener1, Inc., a Florida corporation.
The Company initially intended to develop advanced technologies in the
three-dimensional or 3D computer graphics industry. Under an agreement effective
April 1, 2004 (the “Contribution Agreement”), Splinex, LLC contributed
substantially all of its assets, liabilities and operations to the Company. The
Company began its development stage activity on October 28, 2003
(“Inception”), the date of formation of Splinex, LLC, and ended development
stage activity on July 16, 2008 when we acquired a 75% interest in the
TOT-SIBBNS joint venture and began operations in the oil and gas service
industry.





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission for reporting on Form 10-Q. Accordingly,
certain information and footnotes required for complete financial statements are
not included herein. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation of
the results for the interim periods presented have been included. These results
have been determined on the basis of generally accepted accounting principles
and practices applied consistently with those used in the preparation of the
Company's Annual Financial Statements for the year ended March 31, 2008.
Operating results for the three and nine months ended December 31, 2008 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2009. It is recommended that the accompanying condensed consolidated
financial statements be read in conjunction with the financial statements and
notes for the year ended March 31, 2008 included in the Company’s Annual Report
on Form 10-KSB filed with the Securities and Exchange Commission.





Reclassification
and Retrospective Adjustment of Second Quarter Results





As a
result of a change in classification methodology during the third quarter of
2008, certain prior period amounts have been reclassified to conform to the
current presentation. In this regard, the Company has revised its results for
the three- and six-month periods ended September 30, 2008 due to its
retrospective change in accounting for its existing contract from the
percentage-of-completion method to the completed contract
method.  This change resulted in adjustments as follows:





As Originally Filed
                    
                    
                    As AdjustedThree Months
                      Ended
                      September 30,
                      2008
                    
                    
                    Six Months
                      Ended
                      September 30,
                      2008
                    
                    
                    Three Months
                      Ended
                      September
                      30, 2008
                    
                    
                    Six Months
                      Ended
                      September
                      30, 2008Cost
      in Excess of Billings – Percentage of Completion
                    
                    
                    176,869
                    
                    
                    
                    176,869
                    
                    
                    
                    -
                    
                    
                    
                    -Cost
      in Excess of Billings -Completed Contract
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    148,928
                    
                    
                    
                    148,928Minority
      Interest
                    
                    
                    72,631
                    
                    
                    
                    72,631
                    
                    
                    
                    65,646
                    
                    
                    
                    65,646Accumulated
      Deficit
                    
                    
                    (8,148,087
                    )
                    
                    
                    (8,148,087
                    )
                    
                    
                    (8,169,043
                    )
                    
                    
                    (8,169,043
                    )Sales
                    
                    
                    309,028
                    
                    
                    
                    309,028
                    
                    
                    
                    -
                    
                    
                    
                    -Cost
      of Sales
                    
                    
                    281,087
                    
                    
                    
                    281,087
                    
                    
                    
                    -
                    
                    
                    
                    -Minority
      Interest in Loss of Subsidiary
                    
                    
                    18,807
                    
                    
                    
                    18,807
                    
                    
                    
                    25,792
                    
                    
                    
                    25,792Net
      Loss
                    
                    
                    (2,139,305
                    )
                    
                    
                    (2,458,513
                    )
                    
                    
                    (2,160,261
                    )
                    
                    
                    (2,479,469
                    )




6





Basis of
Consolidation




The
interim financial statements include the accounts of TOT Energy, Inc., the
accounts of our 75% joint venture, TOT- SIBBNS, a limited liability company
formed under the laws of Russia (also known as the Russian Federation) and the
accounts of our 51% joint venture, Korlea-TOT, a limited liability company
formed under the laws of the Czech Republic. All material intercompany accounts
and transactions have been eliminated in this consolidation.





Business
Activity





TOT
Energy, Inc. is working to acquire a portfolio of energy related assets in
Eastern Europe and Central Asia using the Company’s stock, where appropriate, to
fund the majority of acquisition costs. The Company’s activities are expected to
include the exploration, development and marketing of crude oil and natural gas.
Prior to 2008, the Company developed computer software products.





TOT-SIBBNS
provides exploration services to oil exploration and production companies
located in and around Novosibirsk, Russia. TOT-SIBBNS owns and operates four
oil-drilling rigs that generate the majority of the revenues of TOT-SIBBNS.
TOT-SIBBNS uses this equipment for drilling exploratory wells for fees. In
addition, TOT-SIBBNS provides engineering services and well remediation services
on a contract fee basis.





KORLEA-TOT
is our 51% joint venture with Korlea Invest Holding AG of Switzerland (“Korlea”)
who is a provider and trader of electricity in the Czech Republic. Korlea-TOT is
expected to assist in the marketing of oil assets sourced by other TOT-Energy
companies and contacts.


7


Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
balance sheet date and the reported amounts of expenses for the period
presented. Actual results could differ from those estimates.





Cash and
Cash Equivalents





Cash and
cash equivalents include highly liquid money market investments purchased with
an original maturity of three months or less. At December 31, 2008 and March 31,
2008, the Company had no cash equivalents. The Company maintains its U.S.
Dollar-denominated cash in a bank deposit account, the balance of which, at
times, may exceed federally insured limits. Bank accounts in the United States
are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to
$250,000.  At December 31, 2008, and March 31, 2008, the United States
bank balances did not exceed the FDIC limit.  The Company also
maintains bank balances in Russia and the Czech Republic and at December 31,
2008, the balances were $21,928 and $85,120 respectively.  At March
31, 2008, there were no overseas bank balances.  The non-United States
bank balances are not insured and there is risk of loss in the event such banks
should fail.





Foreign
Currency Transactions





The
Company’s primary operations are conducted outside the United States and we use
foreign currencies to operate our consolidated foreign subsidiaries. Quarterly
income and expense items are translated into U.S. dollars using the average
interbank rate for the three-month period. Assets and liabilities are translated
into U.S. dollars using the interbank rate as of the balance sheet date. Equity
items are translated at their historical rate. The Company does not engage in
any currency hedging activities.




Revenue
Recognition





The
Company recognizes revenues from its contract on the completed contract method
due to uncertainty in counterparty performance and collections under its
terms.  Under the completed contract method, revenues and costs are
included in operations when the contract is completed.  Any losses
expected to be incurred are charged to operations in the period that such losses
are probable.





Net Loss
Per Share





Basic net
loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted-average number of common shares outstanding during
the period. Diluted net loss per common share is determined using the
weighted-average number of common shares outstanding during the period, adjusted
for the dilutive effect of common stock equivalents, consisting of shares
issuable upon exercise of common stock options or warrants. In periods when
losses are reported, the weighted-average number of common shares outstanding
excludes common stock equivalents because their inclusion would be
anti-dilutive. At December 31, 2007, the Company had 300,000 stock options
outstanding. The Company did not issue any options or warrants for the three and
nine months ended December 31, 2007. For the three and nine month periods ended
December 31, 2007, the Company had vested stock options to purchase 300,000
shares of common stock that were not included in the calculation of earnings per
share as they were anti-dilutive.  The Company did not issue any new
options for the three months ended December 31, 2008 but recorded $8,519 in
compensation expense for options that vested during the
period.  During the quarter ended December 31, 2008, the Company also
issued 66,870,485 shares of common stock and warrants to purchase 33,434,743
shares of common stock in exchange for $1,337,410 pursuant to the terms of its
subscription agreement with TGR Energy, LLC (see Notes 6, 7 and
8).  At December 31, 2008, the Company had outstanding vested stock
options to purchase 329,630 shares of common stock and warrants to purchase
36,013,543 shares of common stock.  For the three and nine months
ended December 31, 2008, these securities are excluded from the earnings per
share calculation because their inclusion would be
anti-dilutive.


8


Fair
Value of Financial Instruments





The
Company’s financial instruments consist mainly of cash deposits, short-term
payables and borrowings under related party payables. The Company believes that
the carrying amounts of third-party financial instruments approximate fair
value, due to their short-term maturities and the related party payables are
interest bearing and payable on demand.





Impairment
of Long-Lived Assets





The
Company reviews its long-lived assets for impairment whenever events or changes
indicate that the carrying amount of an asset or group of assets may not be
recoverable. No impairment losses were recorded during the three month and nine
month periods ended December 31, 2008 and 2007.





NOTE 2.
GOING CONCERN CONSIDERATIONS




The
Company’s financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company had been in the
development stage until the second quarter of 2008 and has had minimal revenues
since Inception. Management recognizes that the Company must raise capital
sufficient to fund business activities until such time as it can generate
sufficient revenues and net cash flows in amounts necessary to enable it to
continue in existence. These factors include our history of net losses and that
minimal revenues have been earned to date. The Company is dependent upon TGR
Energy, LLC or Mike Zoi to fund its operations. The Company’s independent
auditors’ report on its financial statements for the year ended March 31,
2008 contains an explanatory paragraph about our ability to continue as a going
concern. Management believes that its current operating strategy, as described
herein, provides the opportunity for the Company to continue as a going concern;
however, there is no assurance this will occur.





In
December 2007, a related party structured a transaction that provided funding to
settle existing debts of the Company at a discount to the face amount of the
obligations, restructured certain notes payable in exchange for newly issued
common shares of the Company, and gave TGR Energy, LLC substantial majority of
the outstanding common stock (the “TGR Restructuring”).





NOTE 3.
SEGMENT INFORMATION





The
Company’s sole reportable business segment is the oil and gas service sector.
The Company’s accounting policies for segments are the same as those described
in the summary of significant accounting policies.





NOTE 4.
CONTRACT ACCOUNTING





The
Company accounts for its long-term contracts using the completed contract method
of revenue recognition due to increasing uncertainties relating to its sole
customer’s ability to continue to finance the existing contract to
completion.  The completed contract method recognizes income only when
the contract is substantially complete.  Project costs and related
revenues are accumulated and are reflected in operations only when an estimated
loss is probable.  The contract will be deemed complete when our
customer agrees that each milestone contained in the contract has been
met.





Billed
contract receivables consist of amounts due under our sole contract in
process.    There are no revenues or costs charged to
operations for the periods ended December 31, 2008 under the completed contract
method. For more information, see Note 1 –  “Summary of Significant
Accounting Policies – Revenue Recognition” above.





Cost and
billings on uncompleted contracts at December 31, 2008, are summarized as
follows:





Costs
      incurred on uncompleted contracts
                                      
                                      $
                                      376,766Billings
      to date
                                      
                                      
                                      240,650136,116Included
      in accompanying balance sheet under the following
captions:Cost
      in excess of billings on uncompleted contracts
                                      
                                      $
                                      136,116


9


NOTE 5.
ACCRUED EXPENSES





Accrued
expenses represent expenses that are owed at the end of the period and either
have not been billed by the provider or are expenses that are estimated for
services provided. At March 31, 2008 and December 31, 2008, accrued expenses
consisted of the following:





March 31, 2008
                          
                          
                          December 31, 2008Professional
      Fees
                          
                          $
                          30,000
                          
                          
                          $
                          24,468Taxes
      payable
                          
                          
                          —
                          
                          
                          
                          154,962Accrued
      cost of software license
                          
                          
                          2,392
                          
                          
                          
                          —Accrued
      wages
                          
                          
                          —
                          
                          
                          
                          406,624Other
      accrued expenses
                          
                          
                          249
                          
                          
                          
                          90,379$
                          32,641
                          
                          
                          $
                          676,433





NOTE 6.
STOCKHOLDERS’ EQUITY





The
Company is authorized to issue 400,000,000 shares of common stock, par value of
$0.001 per share. Each holder of common stock is entitled to one vote for each
share held. The Company is authorized to issue 100,000,000 shares of preferred
stock, par value $0.001 per share, which may be divided into series with the
designations, powers, preferences, and relative rights and any qualifications,
limitations or restrictions as determined by the Company’s board of
directors.  On December 22, 2008, the Company’s Board and majority
stockholder approved amendments to the Company’s Certificate of Incorporation to
increase the number of shares of common stock from 400,000,000 to 800,000,000
(see Note 10 – Subsequent Events).





Under an
Exchange Agreement dated December 18, 2007, the Company agreed to issue
113,500,000 newly issued shares of common stock of the Company to TGR Energy,
LLC, of which 8,500,000 shares were issued to Bzinfin, S.A., a British Virgin
Islands limited corporation that is indirectly owned by an affiliate of the
Ener1 Group, and 2,125,000 shares were issued to Alexander Malovik, a principal
of Splinex, LLC, in exchange for the Bzinfin and Ener1 Group notes totaling
$3,688,132.  TGR Energy, LLC owned 98,157,334 shares of common stock
of the Company as of December 17, 2007, and after the completion of the Exchange
Agreement transactions owned an aggregate of 201,032,334 shares of common stock
of the Company as of December 18, 2007. The Company had a total of 100,757,773
shares of common stock outstanding at December 17, 2007 and 214,507,773 shares
of common stock outstanding at December 18, 2007.





On August
7, 2008, the Board of Directors approved a Subscription Agreement dated August
7, 2008 (the “ Subscription Agreement”) with TGR Energy, LLC (“TGR”), wherein
TGR committed to invest up to $2,000,000 in exchange for up to 100,000,000
shares of the Company's common stock for $0.02 per share. In addition, the
Company granted TGR warrants to purchase up to 50,000,000 shares of common stock
for $0.05 per share. These warrants may be exercised within five years from the
date of grant. The shares and warrants are issuable under the Subscription
Agreement upon the funding from time to time by TGR. The valuation date to
determine the appropriate compensation charge is the last day of the quarter
then ended.





For the
quarter ended September 30, 2008, TGR was issued 5,157,600 shares of common
stock of the Company and fully vested warrants to purchase 2,578,800 shares of
common stock of the Company for $0.05 per share in exchange for funding of
$103,152 provided during the quarter under the terms of the Subscription
Agreement. A compensation charge of $1,729,656 was recorded for the quarter
ending September 30, 2008 as an officer of the Company is also a principal of
TGR and the securities issued were below market value.





For the
quarter ended December 31, 2008, TGR was issued 66,870,485 shares of common
stock of the Company and fully vested warrants to purchase 33,434,743 shares of
common stock of the Company at an exercise price of $0.05 per share pursuant to
the terms of the Subscription Agreement.  These issuances were in
exchange for financings under the Subscription Agreement in the aggregate amount
of $1,337,410 of which $700,000 was cash and $637,410 related to refinancing of
previously outstanding notes payable.  A compensation charge of
$5,683,956 was recorded for the quarter ending December 31, 2008 as an officer
of the Company is also a principal of TGR and the securities issued were below
market value.  This amount is calculated as the difference between the
market price of our common stock at the quarter end ($0.07 at December 31, 2008)
and the subscription price of the common shares ($0.02) multiplied by the number
of shares issued plus the Black-Scholes valuation of the 33,434,743 warrants
issued.


10




On August
13, 2008, the Board of Directors approved (i) the issuance of fully vested
options to purchase 100,000 shares of common stock to Curtis Wolfe for his
services as a board member of the Company and (ii) the issuance of options to
purchase 1,000,000 shares of common stock to Jonathan New for his services as
Chief Financial Officer. Mr. Wolfe abstained from discussion of his option
grants. Mr. New’s stock options will vest ratably over three years. Both sets of
options have a life of 7 years from the date of grant and a strike price of
$0.25 per share. Utilizing a Black-Scholes valuation model, at September 30,
2008, the Company recorded compensation expense of $0.10 per share or $10,000
for options granted to Mr. Wolfe and $4,444 for vested options of Mr.
New.   For the quarter ending December 31, 2008, the Company
recorded compensation expense of $0.10 per share or $8,519 for vested options of
Mr. New.





On August
25, 2008, in consideration for activities that resulted in the successful joint
venture with Korlea-TOT, the Company issued 350,000 shares of restricted
TOT-Energy, Inc. common stock to Kaplan Capital, LLC. The stock provided for
services was valued based on the market price per share on date of issuance
($0.13 per share) and the Company recorded compensation expense of
$45,500.





At
December 31, 2008, the Company had options to purchase 1,200,000 shares of
common stock outstanding under its stock option plan, of which options to
purchase 329,630 shares of common stock are vested, with an exercise price of
$0.25 per share and with a remaining weighted average contractual term of 5.79
years. The Company also had warrants to purchase 36,013,543 shares of common
stock outstanding at December 31, 2008 with a strike price of $0.05 per share
and a remaining contractual term of 4.98 years.





NOTE 7.
RELATED PARTY TRANSACTIONS





On August
7, 2008, the Company and TGR, which holds 94% of the Company’s outstanding
common stock, entered into the Subscription Agreement described above pursuant
to which TGR has agreed to provide funding of up to $2,000,000 (the “Investment
Amount”) in exchange for up to 100,000,000 shares of the Company’s common stock
and warrants to purchase up to 50,000,000 shares of the Company’s common stock
at an exercise price of $0.05 per share. Pursuant to the Subscription Agreement,
TGR will fund the Investment Amount as required in the Company’s operational
budget. TGR’s obligation to fund the Investment Amount will be reduced by any
future third party funding or investments in the Company on terms no less
favorable than those contained in the Subscription Agreement.





TGR
provided an aggregate of $103,153 for the period from August 7, 2008 through
September 30, 2008 under the Subscription Agreement and was granted 5,157,600
shares of the Company's common stock and fully vested warrants to purchase
2,578,800 shares of common stock for $0.05 per share. These warrants have a life
of five years. The Company recognized $1,729,656 of compensation expense related
to this issuance of securities for the quarter ended September 30, 2008. This
amount is calculated as the difference between the market price of our common
stock at the quarter end ($0.24 at September 30, 2008) and the subscription
price of the common shares ($0.02) multiplied by the number of shares issued
plus the Black-Scholes valuation of the warrants issued.





During
the quarter ended December 31, 2008, pursuant to the terms of the Subscription
Agreement, TGR advanced $700,000 in cash and refinanced previously outstanding
notes payable in the amount of $637,410 in exchange for 66,870,485 shares of
common stock and fully vested warrants to purchase 33,434,743 shares of common
stock for an exercise price of $0.05.  The Company recognized
$5,683,956 of compensation expense related to this issuance of securities for
the quarter ended December 31, 2008. This amount is calculated as the difference
between the market price of our common stock at the quarter end ($0.07 at
December 31, 2008) and the subscription price of the common shares ($0.02)
multiplied by the number of shares issued plus the Black-Scholes valuation of
the warrants issued.





NOTE 8.
DEBT DUE TO RELATED PARTIES





During
the quarter ended December 31, 2008, using the proceeds from the Subscription
Agreement described above, the Company repaid $637,410 in related party
loans.  As of December 31, 2008, the Company had no outstanding
related party obligations.





NOTE 9.
TGR RESTRUCTURING





In
December 2007, a related party structured a transaction that provided funds to
the Company to settle its existing debts at a discount to the face amount of the
obligations, restructured certain notes payable which was exchanged for newly
issued common shares of the Company, and gave TGR substantial majority of the
outstanding common shares (see Note 6 for more information).


11





NOTE 10.
SUBSEQUENT EVENTS





On
December 22, 2008, the Company’s Board of Directors and majority stockholder
approved amendments to the Company’s Certificate of Incorporation to increase
the number of shares of common stock from 400,000,000 to 800,000,000 to give the
Board of Directors flexibility to use the Company’s common stock as
consideration in connection with the potential acquisition of companies or
assets in furtherance of its business objectives.  Pursuant to the
Delaware General Corporation Law, this action will become effective no earlier
than 20 calendar days after an Information Statement is sent or given to all
persons who were holders of record of the Company’s common stock on December 31,
2008.  The Company mailed an Information Statement on February 17,
2008 and expects the share increase to become effective upon the filing in
Delaware of the amended certificate of incorporation in early March
2009.





On
February 3, 2009, TGR advanced $80,000 to the Company under the terms of the
Subscription Agreement.  Pursuant to the terms of the Subscription
Agreement, the Company will issue 4,000,000 shares of the Company’s common stock
and fully vested warrants to purchase 2,000,000 shares of common stock at $0.05
per share.  A compensation charge relating to the stock and warrants
will be calculated based on the difference between the fair value of the
Company’s stock and the subscription price at March 31, 2009 plus the
Black-Scholes valuation of the warrants.


12


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





This Quarterly Report on Form 10-Q contains forward
-looking statements. These statements relate to our expectations, hopes,
beliefs, intentions or strategies regarding future events or future financial
performance.  Any statements contained in this report that are not
statements of historical fact may be deemed forward-looking statements. In some
cases, forward-looking statements can be identified by terminology such as
“may,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,”
“estimate,” “predict,” “potential” or “continue,” or the negative of such terms
or other comparable terminology. Forward-looking statements include but are not
limited to statements regarding: our future business plans; future sales of our
product and services; introduction of new products and services; expected hiring
levels; marketing plans; increases of selling, general and administrative costs;
financing requirements and capital raising plans; successful integration and
development of acquired businesses; regulatory and economic factors affecting
the oil and gas business and other factors that may impact our acquisition and
development strategy, some of which are beyond our control and difficult to
predict.  These statements are only predictions and are subject to a number
of assumptions, risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in the forward-looking
statements. The following important factors, in addition to those discussed in
our other filings with the Securities and Exchange Commission (the “Commission”)
from time to time, and other unforeseen events or circumstances, could affect
our future results and could cause those results or other outcomes to differ
materially from those expressed or implied in our forward-looking statements:
general economic conditions; competition; weather; our ability to raise capital;
our ability to control costs; changes within our industries; new and upgraded
products and services by us or our competitors; employee retention; sovereign
risk; legal and regulatory issues; changes in accounting policies or practices;
currency translation and exchange risks; and the market price of
oil.




All forward-looking
statements are based on
information available to us on the date of this filing, and we assume no obligation to update such statements, although we will
continue to comply with our obligations under the securities
laws.




The following discussion should be
read in conjunction with our audited financial statements and
notes contained in our Annual Report on Form 10-KSB for the fiscal year ended
March 31, 2008 filed with the Securities and Exchange Commission and the
consolidated interim financial statements and related
notes included in this Quarterly
Report.




Plan
of Operation




We are
working to build a diversified portfolio of energy assets through acquisition,
joint venture and other business arrangements. Our activities are expected to
include the exploration, development, production and marketing of crude oil and
natural gas in Russia and other oil producing regions primarily in Eastern
Europe and Central Asia.





In
December 2007, our president structured a loan transaction that provided funds
for to settle our then existing debts at a discount to the face amount of the
obligations, restructured certain notes payable in exchange for newly issued
common stock, and gave TGR Energy, LLC substantial majority of our outstanding
common stock (the “TGR Restructuring”). For more information, see Notes 6,
7 and 9 to the Unaudited Condensed Consolidated Financial
Statements.





Short
term financing is provided by TGR Energy, LLC (“TGR”) as we require additional
working capital, pursuant to a Subscription Agreement dated August 7, 2008 (the
“Subscription Agreement”). TGR has agreed to provide up to $2,000,000 (the
“Investment Amount”) in exchange for up to 100,000,000 shares of common stock
and warrants to purchase up to 50,000,000 shares of common stock at an exercise
price of $0.05 per share. Pursuant to the Subscription Agreement, TGR will fund
the Investment Amount as required in our operational budget. TGR’s obligation to
fund the Investment Amount will be reduced by any future third party funding or
investment on terms no less favorable than those contained in the Subscription
Agreement.





TGR
provided an aggregate of $103,152 for the period from August 7, 2008 through
September 30, 2008 under the Subscription Agreement and was issued 5,157,600
shares of common stock and fully vested warrants to purchase 2,578,800
shares of common stock for $0.05 per share. These warrants have a life of five
years. We recognized $1,729,656 of compensation expense related to this issuance
of securities to a related party. Compensation expense was recorded based on a
Black-Scholes valuation of the warrants and the difference between the issue
price of $0.02 per share of common stock and the market price of the common
stock ($0.24 per share) quoted as of September 30, 2008.





For the
period from October 1, 2008 through December 31, 2008, TGR advanced $700,000 and
refinanced previously outstanding notes payable in the aggregate amount of
$637,410 under the Subscription Agreement and was issued 66,870,485 shares of
common stock and fully vested warrants to purchase 33,434,743 shares of common
stock for an exercise price of $0.05.  We recognized $5,683,956 of
compensation expense related to this issuance of securities for the quarter
ended December 31, 2008. This amount is calculated as the difference between the
market price of our common stock at the quarter end ($0.07 at December 31, 2008)
and the subscription price of the common shares ($0.02) multiplied by the number
of securities issued plus the Black-Scholes valuation of the warrants
issued.


13




On July
16, 2008, we entered into a Joint Venture Agreement (the “JV
Agreement”) with Evgeny Bogorad (“Bogorad”), owner of Sibburnefteservis, Ltd. of
Novosibirsk, Russia, an oil services company (“SIBBNS”). Pursuant to the JV
Agreement, Bogorad has contributed certain of SIBBNS assets and personnel to a
joint venture company named TOT-SIBBNS, Ltd., a Russian corporation
(“TOT-SIBBNS”). An independent appraisal company has appraised the contributed
assets at US$6,221,881.




At the
closing on July 16, 2008, we issued to Bogorad 3,000,000 shares of our common
stock in exchange for a 75% interest in TOT-SIBBNS. We are obligated to issue to
Bogorad 2,000,000 additional shares of common stock upon TOT-SIBBNS obtaining
US$10,000,000 in gross revenue during the three-year period following the
closing. If TOT-SIBBNS achieves this gross revenue target and Bogorad continues
to hold the shares issued pursuant to the JV Agreement on the third anniversary
of the closing and the stock price is less than US$1.00 per share, then we, in
our sole discretion, must either make an additional payment in cash or
additional shares of stock to Bogorad in an amount equal to the difference in
the value per share and US$1.00 multiplied by the total number of shares held by
Bogorad, or, if we decline to make such payment, Bogorad may require us to
return our interest in TOT-SIBBNS in exchange for a payment to us of the fair
market value of any assets acquired directly by TOT-SIBBNS (other than the
assets initially contributed to the Joint Venture by Bogorad pursuant to the JV
Agreement) and 75% of the retained earnings, accounts receivable and cash of
TOT-SIBBNS. Bogorad will act as the manager of TOT-SIBBNS. We have the ability
to appoint a majority of the Board of Directors of TOT-SIBBNS.




TOT-SIBBNS
provides exploration services to oil exploration and production companies
located in and around Novosibirsk, Russia. TOT-SIBBNS owns and operates four oil
drilling rigs that generate the majority of the revenues of TOT-SIBBNS.
TOT-SIBBNS uses this equipment for drilling exploratory wells for fees. In
addition, TOT-SIBBNS provides engineering services and well remediation services
on a contract fee basis.





KORLEA-TOT
is our 51% joint venture with Korlea Invest Holding AG of Switzerland (“Korlea”)
who is a provider and trader of energy assets in the Czech Republic. The new
joint venture, Korlea-TOT, established as of July 17, 2008, is expected to
assist in the marketing of oil assets sourced by other TOT-Energy companies and
contacts.  There has been no activity to date with this joint
venture.





As of
December 31, 2008, we were working to lease and furnish approximately 5,000
square feet of permanent office space in Miami, Florida. Our lease on existing
temporary space terminates in April 2009 but may be extended by mutual agreement
with the landlord.





From time
to time, we may be engaged in various discussions to acquire businesses or
formulate joint venture or other arrangements with energy companies located
around the world. Our policy is not to disclose discussions or potential
transactions until definitive agreements have been executed. Where appropriate,
acquisitions will be financed with equity shares and this may result in
substantial dilution to existing stockholders.





Several
factors raise significant doubt as to our ability to continue operating as a
going concern. These factors include our history of net losses and that we have
recently commenced operations and, until the second quarter of 2008, have earned
minimal revenues. We are dependent upon TGR Energy, LLC or Mike Zoi to fund our
operations. Our independent auditors’ report on our financial statements for the
year ended March 31, 2008 contains an explanatory paragraph about our
ability to continue as a going concern. Management believes that our current
operating strategy, as described in the preceding paragraphs, provides the
opportunity for us to continue as a going concern; however, there is no
assurance this will occur.




Results
of Operations for the Three Month Period Ended December 31, 2008 and
2007





We
reported a net loss of  $6,328,588 or $(0.03) per share for the three
months ended December 31, 2008, compared to net income of $686,258 or $0.01 per
share for the quarter ended December 30, 2007. Weighted average shares
outstanding were 223,758,378 and 100,757,770 for the quarters ending December
31, 2008, and 2007 respectively.





The net
loss for the three month period ended December 31, 2008 was negatively impacted
by the non-cash compensation expense of $5,683,956 related to shares and
warrants issued pursuant to the Subscription Agreement with TGR as described
above.  For the quarter ended December 31, 2007, there were no
operations and income from settlements with creditors was $735,869 offset by
interest expense of $21,877 and administrative expense of $21,877.





Operations
reported for the quarter ended December 31, 2008 include the expense associated
with TOT-SIBBNS. Given the uncertainty of finishing our sole contract and
collecting the associated accounts receivable, we changed accounting methods
from percentage-of-completion to completed contract method during the
quarter.  Under the completed contract method, all costs are
capitalized on the balance sheet as Project Costs.  Contract billings
are recorded as a reduction to Project Costs and revenue will only be recognized
once amounts collected exceed costs incurred.  We reported
no revenue from this contract during the three months ended December 31,
2008 and we had no revenue for the three months ended December 31, 2007.
Additionally, pursuant to the completed contract method, there were no costs
relating to this contract for the quarter ended December 31,
2008.


14





General
and administrative expenses for the three months ended December 31, 2008, were
$6,390,505 consisting primarily of compensation charges totaling $5,683,956
relating to fundings under the Subscription Agreement with TGR, TOT-SIBBNS
expenses of $244,343 and an additional non-cash expense of $8,519 in
compensation expense for options that vested during the period.  There
was no activity in the Korlea-TOT joint venture for the period. General and
administrative expenses for the three months ended December 31, 2007 were
$21,877, as we had no business and minimal administrative expenses during this
time.





The
following table provides a summary of general and administrative expense by
category and entity for the three months ended December 31, 2008.




TOT USA
                              
                              
                              TOT-SIBBNSCompensation
      expense for TGR Energy, LLC Subscription Agreement
    (non-cash)
                              
                              $
                              5,683,956
                              
                              
                              $
                              -Payroll
                              
                              
                              235,659
                              
                              
                              
                              159,621Professional
      fees, consulting fees and services from other companies
                              
                              
                              88,580
                              
                              
                              
                              13,585Travel
                              
                              
                              61,056
                              
                              
                              
                              12,464Taxes
                              
                              
                              -
                              
                              
                              
                              34,065Rent
                              
                              
                              23,448
                              
                              
                              
                              -Other
                              
                              
                              17,688
                              
                              
                              
                              16,405Investor
      relations
                              
                              
                              18,765
                              
                              
                              
                              -Costs
      associated with public filings
                              
                              
                              8,236
                              
                              
                              
                              4,360Compensation
      expense recorded for options vested during period
    (non-cash)
                              
                              
                              8,519
                              
                              
                              
                              -Depreciation
      expense (non-cash)
                              
                              
                              255
                              
                              
                              
                              3,843TOTAL
                              
                              $
                              6,146,162
                              
                              
                              $
                              244,343





Other
income was $841 for the three months ended December 31, 2008 as compared with
$708,135 for the three months ended December 31, 2007. The 2007 amount consists
of $735,869 from settlement of debts offset, in part, by $27,734 in interest
expense from borrowings under related party agreements.





Interest
expense was $0 for the three months ended December 31, 2008.  During
the three months ended December 31, 2008, we obtained an aggregate of $1,337,410
under the Subscription Agreement with TGR and recognized $5,683,956 of non-cash
compensation expense recorded as general and administrative expense. This charge
is the result of an intrinsic value calculation that measures the difference
between fair value on date of issuance and the purchase price per
share under the Subscription Agreement, which amounted to $3,343,524 of
compensation expense for the common stock issued. Additionally, the warrants to
purchase 33,434,743 shares of common stock issued in connection with these
fundings resulted in a corresponding compensation expense of $2,340,432 based on
a Black-Scholes valuation model.





The
minority interest relating to the TOT-SIBBNS joint venture was $61,076 for the
three months ended December 31, 2008 as compared with $0 for the three months
ended December 31, 2007. The joint venture minority interest reflects the
minority partner’s twenty-five percent of the TOT-SIBBNS net loss of $244,304
for the quarter ended December 31, 2008.


15





Contract
work for TOT-SIBBNS is seasonal. Generally, the seasonal work starts in October
and ends in April as dictated by weather and ground conditions. Contracts for
the season are generally secured between October and December. Contract work
normally occurs between November and April.  TOT-SIBBNS has secured
one contract for drilling as of February 16, 2009.  Most drilling in
the region has stopped due to a decrease in the cost per barrel of oil and it is
possible we will not secure any further contracts this
season.  However, our current customer is being pressured to continue
to drill or risk losing the oilfield license, which has been extended to allow
for drilling through March 17, 2009, provided that the customer commences
drilling a second well.  TOT-SIBBNS is bidding on this new well, which
is dependent on the ability of the lessee to obtain necessary
financing.  As a result of the uncertainty relating to the
recommencement of drilling operations, this project is accounted for using the
completed contract method.





TOT-SIBBNS
employed approximated 140 people at December 31, 2008.





Results
of Operations for the Nine-Month Period Ended December 31, 2008





We
reported a net loss of $8,792,136 or $(0.04) per share for the nine months ended
December 31, 2008, compared to net income of $564,566 or $0.01 per share for
the nine months ended December 31, 2007. Weighted-average shares
outstanding were 218,501,521 and 100,757,770 for the nine months ended December
31, 2008 and 2007, respectively.  During the nine months ended
December 31, 2008, we issued 3,000,000 shares in forming the TOT-SIBBNS joint
venture. We issued an additional 350,000 shares for services leading to the
formation of the Korlea-TOT joint venture and recorded an expense for services
of $45,500 based on $0.13 per share, which was the fair value of the stock on
the date of issuance (August 25, 2008). Pursuant to the Subscription Agreement
with TGR, we issued 72,028,085 shares of common stock to TGR in exchange for an
aggregate Investment Amount of $1,440,562. Additionally, TGR received five-year,
fully vested, warrants to purchase 36,013,543 shares of common stock at an
exercise price of $0.05 per share.  We recorded a compensation expense
of $7,413,612 in connection with shares and warrants issued under the
Subscription Agreement.  This amount included a charge for the common
stock issued of $4,478,196 calculated as the difference between fair value of
$0.07 (as of the date of issuance) and the subscription price
of  $0.02 multiplied by the number of shares
issued.  Additionally, we recorded compensation expense of $2,935,416
calculated based on the Black-Scholes valuation of the warrants
issued.





Revenues
deferred under the completed contract method for the nine months ended December
31, 2008 was $240,650 as compared with $0 for the nine
months ended December 31, 2007. During 2007, we were not engaged in revenue
generating activities. Revenue during the nine months ended December 31, 2008
was $0 as the Company changed accounting methods to Completed Contract
Method.





Project
costs incurred were $376,766 for the nine months ended December 31, 2008, which
is solely attributable to TOT-SIBBNS ’ first contract.  Under the
completed contract method, project costs are capitalized and billings are
deferred.  Operations are not affected until the contract is
substantially complete.  The Company was not engaged in any revenue
generating activities during 2007. As a result of a change in classification
methodology during the third quarter of 2008, certain prior period amounts have
been reclassified to conform to the current presentation. In this regard, the
Company has revised its results for the three- and six-month periods ended
September 30, 2008 due to its retrospective change in accounting for its
existing contract from the percentage-of-completion method to the completed
contract method. For more information, see Note 1 – Summary of Significant
Accounting Policies – Reclassification and Retrospective Adjustment of Second
Quarter Results. This change resulted in adjustments as follows:





As Originally Filed
                    
                    
                    As AdjustedThree Months
                      Ended
                      September 30,
                      2008
                    
                    
                    Six Months
                      Ended
                      September 30,
                      2008
                    
                    
                    Three Months
                      Ended
                      September
                      30, 2008
                    
                    
                    Six Months
                      Ended
                      September
                      30, 2008Cost
      in Excess of Billings – Percentage of Completion
                    
                    
                    176,869
                    
                    
                    
                    176,869
                    
                    
                    
                    -
                    
                    
                    
                    -Cost
      in Excess of Billings – Completed Contract
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    148,928
                    
                    
                    
                    148,928Minority
      Interest
                    
                    
                    72,631
                    
                    
                    
                    72,631
                    
                    
                    
                    65,646
                    
                    
                    
                    65,646Accumulated
      Deficit
                    
                    
                    (8,148,087
                    )
                    
                    
                    (8,148,087
                    )
                    
                    
                    (8,169,043
                    )
                    
                    
                    (8,169,043
                    )Sales
                    
                    
                    309,028
                    
                    
                    
                    309,028
                    
                    
                    
                    -
                    
                    
                    
                    -Cost
      of Sales
                    
                    
                    281,087
                    
                    
                    
                    281,087
                    
                    
                    
                    -
                    
                    
                    
                    -Minority
      Interest in Loss of Subsidiary
                    
                    
                    18,807
                    
                    
                    
                    18,807
                    
                    
                    
                    25,792
                    
                    
                    
                    25,792Net
      Loss
                    
                    
                    (2,139,305
                    )
                    
                    
                    (2,458,513
                    )
                    
                    
                    (2,160,261
                    )
                    
                    
                    (2,479,469
                    )




16





General
and administrative expenses were $8,879,536 for the nine months ended December
31, 2008 as compared with $60,937 for the nine months ended December 31, 2007
when we had minimal administrative services and no revenue generating
operations. The total non-cash expense for warrants, options and stock issued
during the nine months ended December 31, 2008 was $7,413,612.  The
following table details the components of general and administrative expense for
the nine months ended December 31, 2008:





Compensation
      expense for TGR Energy, LLC Subscription Agreements
    (non-cash)
                      
                      $
                      7,413,612Salaries
      and benefits
                      
                      
                      739,992Professional
      Fees (accounting, legal, consulting and other)
                      
                      
                      221,706Travel
                      
                      
                      115,843Consulting
      fees paid in stock re Korlea-TOT formation (non-cash)
                      
                      
                      45,500Investor
      relations
                      
                      
                      55,033Rent
                      
                      
                      57,841Compensation
      expense recorded for options issued (non-cash)
                      
                      
                      22,963Costs
      associated with public filings
                      
                      
                      15,831Services
      from other companies to TOT-SIBBNS
                      
                      
                      13,130Directors
      and officers insurance
                      
                      
                      11,388All
      other general and administrative costs
                      
                      
                      166,697Total
      General and Administrative Expenses
                      
                      $
                      8,879,536





The
minority interest relating to the TOT-SIBBNS joint venture was $86,868 for the
nine months ended December 31, 2008 as compared with $0 for the nine months
ended December 31, 2007. The joint venture minority interest reflects the
minority partner’s twenty-five percent of the TOT-SIBBNS net loss of $347,472
for the nine months ended December 31, 2008.





Liquidity and capital
resources





At
December 31, 2008, we had an accumulated deficit of $14,497,630 and cash of
$190,042. We are dependent upon receiving funds from our controlling
stockholder, TGR Energy, LLC, which is controlled by our president, Mike Zoi.
Pursuant to the Subscription Agreement, TGR is obligated to invest up to
$2,000,000 to fund short term working capital requirements in exchange for up to
100,000,000 shares of our common stock and warrants to purchase up to 50,000,000
shares of common stock with an exercise price of $0.05. The shares and warrants
will be issued quarterly and we will record an appropriate compensation expense
as necessary based on the fair value of the securities on the last day of
each fiscal quarter (the date of issuance). For the nine months ended
December 31, 2008, TGR provided an aggregate Investment Amount of $1,440,562 in
exchange for 72,028,085 shares of our common stock and five-year, fully vested,
warrants to purchase 36,013,543 shares of common stock at an exercise price of
$0.05 per share.





Our goal
is to acquire energy related assets or create joint ventures primarily using our
stock, where appropriate, to fund a majority of acquisition costs.





We do not
have material exposure to market risks associated with changes in interest rates
related to cash equivalent securities held at December 31, 2008.





Off-balance
sheet arrangements





At
December 31, 2008, we did not have any off-balance sheet arrangements as defined
in item 303(a)(4) of Regulation S-K.





Recently
Issued Accounting Pronouncements




On March
19, 2008, the Financial Accounting Standards Board released Statement No. 161, Disclosures about
Derivative Instruments and Hedging Activities.  The new standard
requires enhanced disclosure about a company’s derivatives and hedging to help
investors understand their impact on a company’s financial position, financial
performance and cash flows.  SFAS 161 is effective for periods beginning
after November 15, 2008, with early application encouraged. We do not hedge and
we currently do not deal with derivative instruments. Management does not see an
impact from this standard at this time.


17


On May 9,
2008, the FASB issued Statement No. 162, Hierarchy of Generally Accepted
Accounting Principles , which simply moves the requirements related to
which authoritative literature to look to first from the audit standards to
GAAP.  SFAS 162 is effective 60 days following the SEC's approval of the
PCAOB’s amendments to AU Section 411, The Meaning of   Present Fairly in Conformity with
Generally Accepted Accounting Principles.




In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations” and SFAS No. 160, “Non-controlling Interest in Consolidated
Financial Statements.” These Statements replace FASB Statement No. 141,
“Business Combinations,” and requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree at the acquisition date, measured at their fair values as of that date.
SFAS No. 141(R) also makes significant amendments to other Statements and
other authoritative guidance. The Statement is effective for years
beginning on or after December 15, 2008.  Adoption of SFAS 141(R)
is not expected to have a significant impact on our existing financial condition
and results of operations.





Item 4.
Controls and Procedures.





Our
disclosure controls and procedures are designed to provide reasonable assurance
that information required to be disclosed in our reports filed or submitted
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and
that such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate, to allow for timely decisions regarding required disclosure . In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.





As of
December 31, 2008, we continue to develop our core activities and focus our
resources on the acquisition of assets in the energy sector. Our disclosure
controls and procedures are currently inadequate because there are a limited
number of personnel employed and we cannot have an adequate segregation of
duties. Management works to mitigate this risk by being personally involved in
all substantive transactions. We are in the process of reviewing and, where
necessary, modifying controls and procedures throughout the Company. We expect
this process to continue through the remainder of 2009.




During
the quarter ended December 31, 2008, there were no changes in internal controls
over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.





PART II —
OTHER INFORMATION





Item 1.
Legal proceedings





We are
not currently a party to any such proceedings the outcome of which would have a
material effect on our financial condition or results of
operations.





Item 2.
Unregistered Sales of Equity Securities





Pursuant
to the Subscription Agreement, TGR Energy, LLC is obligated to invest up to
$2,000,000 to fund short term working capital requirements in exchange for up to
100,000,000 shares of our common stock and warrants to purchase up to 50,000,000
shares of common stock with an exercise price of $0.05. The shares and warrants
will be issued quarterly and we will record an appropriate compensation expense
based on the intrinsic value of the instruments on the last day of each fiscal
quarter (the date of issuance). For the three months ended December 31, 2008,
TGR Energy, LLC provided $1,337,410 to us and was issued 66,870,485 shares of
common stock and five-year, fully vested warrants to purchase 33,434,743 shares
of common stock at an exercise price of $0.05.  For the previous
quarter, TGR Energy advanced $103,152 and was issued 5,157,600 shares of common
stock and five-year, fully vested warrants to purchase 2,578,800 shares of
common stock at an exercise price of $0.05.




During
the nine months ended December 31, 2008, we issued 3,000,000 shares of
common stock in connection with the formation of  the TOT-SIBBNS joint
venture. At the closing on July 16, 2008, we issued to Bogorad 3,000,000 shares
of common stock in exchange for a 75% interest in TOT-SIBBNS. We are obligated
to issue to Bogorad 2,000,000 additional shares of common stock upon TOT-SIBBNS
obtaining US$10,000,000 in gross revenue during the three-year period following
the closing. If TOT-SIBBNS achieves this gross revenue target and Bogorad
continues to hold the shares issued pursuant to the JV Agreement on the third
anniversary of the closing and the stock price is less than US$1.00 per share,
then we, in our sole discretion, must either make an additional payment in cash
or additional shares of common stock to Bogorad in an amount equal to the
difference in the value per share and US$1.00 multiplied by the total number of
shares of common stock held by Bogorad, or, if we decline to make such payment,
Bogorad may require us to return our interest in TOT-SIBBNS in exchange for a
payment to us of the fair market value of any assets acquired directly by
TOT-SIBBNS (other than the assets initially contributed to the Joint Venture by
Bogorad pursuant to the JV Agreement) and 75% of the retained earnings, accounts
receivable and cash of TOT-SIBBNS.


18


In
consideration for activities that resulted in the Korlea-TOT joint venture,
Kaplan Capital, LLC was issued 350,000 shares of restricted common stock on
August 25, 2008 and a charge of $45,500 was recorded relating to consulting
fees based on the intrinsic value of this issuance using the market price
of $0.13 per share.




On
February 6, 2008, the Board of Directors approved the issuance of fully vested
options to purchase 100,000 shares of common stock to Stuart Murdoch for his
services as a board member. The options have a term of five years from the date
of grant and a strike price of $0.25 per share. A compensation charge of $8,000
was recorded at that time.





On August
13, 2008, the Board of Directors approved (i) the issuance of fully vested
options to purchase 100,000 shares of common stock to Curtis Wolfe for his
services as a board member and (ii) the issuance of options to purchase
1,000,000 shares of common stock to Jonathan New for his services as Chief
Financial Officer. Mr. Wolfe abstained from discussion of his option grants. Mr.
New’s stock options will vest ratably over three years. Both sets of options
will have a term of 7 years from date of grant and a strike price of $0.25 per
share. A compensation charge of $22,963 was recorded for the period based on a
Black-Scholes valuation of the vested options.





We
believe that each of the foregoing securities transactions were exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, by virtue of Section 4(2) of the Securities Act which exempts
transactions by an issuer not involving any public offering.


19


Item 6.
Exhibits





Exhibit
                Number
              
              Description2.1
              
              Agreement
      and Plan of Merger among Ener1 Acquisition Corp., Registrant and Ener1,
      Inc., dated as of June 9, 2004, incorporated herein by reference to
      Exhibit 2.1 to Splinex’s Registration Statement on Form S-1 filed with the
      Commission on June 24, 2004 (Registration No.
  333-116817)2.2
              
              First
      Amendment to Agreement and Plan of Merger among Ener1 Acquisition Corp.,
      Registrant and Ener1, Inc., dated as of October 13, 2004,
      incorporated herein by reference to Exhibit 2.2 to Amendment No, 1 to
      Splinex’s Registration Statement on Form S-1 filed with the Commission on
      October 15, 2004 (Registration No. 333-116817)2.3
              
              Second
      Amendment to Agreement and Plan of Merger among Ener1 Acquisition Corp.,
      Splinex and Ener1, Inc., dated as of December 23, 2004, incorporated
      herein by reference to Exhibit 2.3 to Amendment No. 3 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on December
      27, 2004 (Registration No. 333-116817)3.1
              
              Certificate
      of Incorporation of Splinex, incorporated herein by reference to Exhibit
      3.1 to Splinex’s Registration Statement on Form S-1 filed with the
      Commission on June 24, 2004 (Registration No.
  333-116817)3.2
              
              Certificate
      of Merger of Splinex, incorporated herein by reference to Exhibit 3.2 to
      Amendment No. 3 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on December 27, 2004 (Registration No.
      333-116817)3.3
              
              Bylaws
      of Splinex, incorporated herein by reference to Exhibit 3.3 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on June 24,
      2004 (Registration No. 333-116817)3.4
              
              Certificate
      of Amendment of Articles of Incorporation, incorporated herein by
      reference to Exhibit 3.4 to our Annual Report on Form 10-KSB filed with
      the Commission on June 19, 200810.5
              
              2004
      Stock Option Plan of Registrant, incorporated herein by reference to
      Exhibit 10.2 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on June 24, 2004 (Registration No.
    333-116817)10.6
              
              Form of
      Stock Option Agreement of Registrant, incorporated herein by reference to
      Exhibit 10.3 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on June 24, 2004 (Registration No.
    333-116817)10.13
              
              Form
      of Employee Innovations and Proprietary Rights Assignment Agreement,
      incorporated herein by reference to Exhibit 10.10 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on June 24,
      2004 (Registration No.
333-116817)




20




10.14
              
              Form
      of Indemnification Agreement, incorporated herein by reference to Exhibit
      10.11 to Amendment No. 3 to Splinex’s Registration Statement on Form S-1
      filed with the Commission on December 27, 2004 (Registration No.
      333-116817)10.17
              
              Severance
      Agreement dated November 21, 2005, by and between Splinex and Michael
      Stojda, incorporated by reference to Exhibit 10.1 to Splinex’s Current
      Report on Form 8-K, filed with the Commission on November 21,
      200510.18
              
              Joint
      Venture Agreement with Evgeny Bogorad and TOT Energy, Inc dated July 16,
      2008, incorporated herein by reference to Exhibit 10.1 to our Current
      Report on Form 8-K filed with the Commission on July 23,
    200810.19
              
              Notarial
      Deed dated July 17, 2008 by and between TOT Energy, Inc. and Korlea Invest
      Holding, incorporated herein by reference to Exhibit 10.19 to our
      Quarterly Report on Form 10-Q filed with the Commission on November 18,
      200810.20
              
              Subscription
      Agreement, dated August 7, 2008 by and between TOT Energy, Inc. and TGR
      Energy, LLC, incorporated herein by reference to Exhibit 10.20 to our
      Quarterly Report on Form 10-Q filed with the Commission on November 18,
      200810.21
              
              Certificate
      of Amendment of Certificate of Incorporation of TOT Energy, Inc. dated
      December 22, 200814
              
              Code
      of Ethics, incorporated by reference to Exhibit 10.2 to Splinex’s Annual
      Report on Form 10-K for the year ended March 31, 2005, filed with the
      Commission on June 30, 200531.1
              
              Certification
      of Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
              
              Certification
      of Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
              
              Certification
      of Principal Executive Officer and Principal Financial Officer pursuant to
      18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002




21




SIGNATURES





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





TOT
      Energy, Inc.RegistrantDate:
      February 16, 2009
                    By:
                    /s/
      Jonathan NewName:
      Jonathan NewTitle:
      Chief Financial
Officer


22