UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


x
For the quarterly period ended June 30, 2008
 
¨
For the transition period from _____________________ to ______________

File No. 333-127813

Majestic Oil & Gas, Inc.
(Name of small business issuer in our charter)

Nevada
4600
20-1673271
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)

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

Registrant’s telephone 406-873-5580

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

As of August 8, 2008, there were 7,808,000 shares issued and outstanding of the registrant’s common stock.
 
 
INDEX
 
   
Page
PART I.
FINANCIAL INFORMATION
  
 
 
  
Item 1.
Condensed Consolidated Financial Statements
  
 
Balance Sheets as of December 31, 2007 and June 30, 2008 (unaudited)
3
 
Statements of Operations for the Three and Six Months Ended June 30, 2008 and 2007 (unaudited)
4
 
Statements of Stockholders’ Equity as of December 31, 2007 and June 30, 2008 (unaudited)
5
 
Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007 (unaudited)
6
 
Notes to Unaudited Financial Statements
7 - 10
 
 
  
Item 2.
Management’s Discussion and Analysis or Plan of Operation
11
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
17
Item 4
Controls and Procedures
17
 
 
  
PART II.
OTHER INFORMATION
  
 
 
  
Item 1.
Legal Proceedings
18
Item 1A.
Risk Factors
18
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
18
Item 3.
Defaults Upon Senior Securities
18
Item 4.
Submission of Matters to a Vote of Security Holders
19
Item 5.
Other Information
19
Item 6.
Exhibits
19
 
 
  
Signatures
 
19


2

PART I — FINANCIAL INFORMATION

Item 1.
Financial Statements.
 
MAJESTIC OIL & GAS, INC. (A Development Stage Company) 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
 June 30, 
     
   
 2008 
 
December 31 
 
   
 UNAUDITED 
 
2007 
 
   
ASSETS               
Cash and cash equivalents    $ 178,589   $ 77,329  
Trade receivables      37,297     17,641  
Deposit      10,000     -  
 
Total Current Assets 
    225,886     94,970  
 
OIL AND GAS PROPERTIES               
Oil and gas properties, using the full 
             
cost method of accounting: 
             
Properties being amortized 
    325,702     325,051  
Properties not subject to amortization 
    137,645     124,526  
Less accumulated depletion, amortization and impairment 
    (94,000 )   (68,800 )
 
Net Oil and Gas Properties 
    369,347     380,777  
 
OTHER ASSETS               
Website development costs (less accumulated amortization) 
    1,660     2,080  
 
Total Other Assets 
    1,660     2,080  
 
Total Assets 
  $ 596,893   $ 477,827  
 
LIABILITIES AND STOCKHOLDERS' EQUITY               
 
LIABILITIES               
Accounts payable and accrued liabilities 
  $ 2,883   $ 538  
Production taxes and royalties payable 
    7,243     4,435  
 
Total Current Liabilities 
    10,126     4,973  
 
Asset retirement obligation 
    3,193     3,193  
 
Total Liabilities 
    13,319     8,166  
 
STOCKHOLDERS' EQUITY               
Common stock, no par value- 
             
Authorized Shares - 100,000,000 
             
Issued & Outstanding: 7,808,000 shares at March 31, 2008; 
    1,155,500     1,005,500  
7,508,000 at December 31, 2007 
             
Additional paid in capital 
    21,295     21,295  
Stock subscription receivable 
    (2,000 )   (2,000 )
(Deficit) accumulated during the development stage 
    (591,221 )   (555,134 )
 
Total Stockholders' Equity 
    583,574     469,661  
 
Total Liabilities & Stockholders' Equity 
  $ 596,893   $ 477,827  
 
3
MAJESTIC OIL & GAS, INC. (A Development Stage Company) 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
                       
   
Three Months
  
Three Months
  
Six Months
  
Six Months
  
Inception
  
   
Ended
  
Ended
  
Ended
  
Ended
  
(April 16, 2002)
  
   
June 30,
  
June 30,
  
June 30,
  
June 30,
  
To June 30,
  
   
2008
  
2007
  
2008
  
2007
  
2008
  
   
UNAUDITED 
 
UNAUDITED 
 
UNAUDITED 
 
UNAUDITED 
 
UNAUDITED 
 
                       
                       
REVENUE    $ 37,297   $ 7,582   $ 70,654   $ 16,377   $ 367,250  
 
 
PRODUCTION (LIFTING) COSTS      7,632     3,844     16,384     7,004     108,335  
EXPLORATION EXPENSES      -     -     -     -     3,862  
DEPLETION, DEPRECIATION                                 
AND AMORTIZATION 
    11,710     3,100     25,620     6,600     94,840  
 
INCOME FROM OIL & GAS                                 
PRODUCING ACTIVITIES 
    17,955     638     28,650     2,773     160,213  
 
SELLING, GENERAL &                                 
ADMINISTRATIVE EXPENSES 
    33,690     20,659     64,737     40,489     751,434  
 
NET (LOSS)    $ (15,735 ) $ (20,021 ) $ (36,087 ) $ (37,716 ) $ (591,221 )
 
 
EARNINGS PER SHARE                                 
 
Net Income, basic and diluted    $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )      
 
Weighted average number of                                 
shares outstanding 
    7,597,011     6,251,470     7,552,751     6,251,470        
Diluted potential shares -                                 
stock warrants 
    -     -     -     -        
 
Adjusted weighted average shares      7,597,011     6,251,470     7,552,751     6,251,470        
 
4
 
MAJESTIC OIL & GAS, INC. (A Development Stage Company) 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                   
(Deficit)
      
                   
Accumulated
      
           
Additional
  
Stock
  
During
      
   
Common Stock
  
Paid In
  
Subscription
  
Development
      
   
Shares
  
Amount
  
Capital
  
Receivable
  
Stage
  
Total
  
                           
BEGINNING BALANCE, INCEPTION                                
(APRIL 16, 2002) TO 
                              
DECEMBER 31, 2004 
    -   $ -   $ -   $ -   $ -   $ -  
Common stock issued 
    6,240,000     624,000     -     -     -     624,000  
Net (loss) 
    -     -     -     -     (346,422 )   (346,422 )
 
BALANCE, DECEMBER 31, 2004      6,240,000     624,000     -     -     (346,422 )   277,578  
Common stock issued 
    -     -     -     -     -     -  
Net income 
    -     -     -     -     66,381     66,381  
 
BALANCE, DECEMBER 31, 2005      6,240,000     624,000     -     -     (280,041 )   343,959  
Common stock issued 
    -     -     -     -     -     -  
Net (loss) 
    -     -     -     -     (20,068 )   (20,068 )
 
BALANCE, DECEMBER 31, 2006      6,240,000     624,000     -     -     (300,109 )   323,891  
 
Common stock issued for services 
    330,000     147,000     -     -     -     147,000  
Common stock warrants exercised 
    938,000     234,500     -     (2,000 )   -     232,500  
Common stock options issued 
    -     -     21,295     -     -     21,295  
Net (loss) 
    -     -     -     -     (255,025 )   (255,025 )
 
BALANCE, DECEMBER 31, 2007      7,508,000     1,005,500     21,295     (2,000 )   (555,134 )   469,661  
 
Common stock issued 
    300,000     150,000     -     -     -     150,000  
Net (loss) for the six months 
                                     
ended June 30, 2008 (UNAUDITED) 
    -     -     -     -     (36,087 )   (36,087 )
 
BALANCE, JUNE 30, 2008      7,808,000   $ 1,155,500   $ 21,295   $ (2,000 ) $ (591,221 ) $ 583,574  
 
5
 
MAJESTIC OIL & GAS, INC. (A Development Stage Company) 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
  
      
Inception 
 
   
 Six Months 
 
 Six Months 
 
(April 16, 2002) 
 
   
 Ended 
 
 Ended 
 
Through 
 
   
 June 30, 2008 
 
 June 30, 2007 
 
June 30, 2008 
 
   
 UNAUDITED 
 
 UNAUDITED 
 
UNAUDITED 
 
   
OPERATING ACTIVITIES                     
Net (loss) 
  $ (36,087 ) $ (37,716 ) $ (591,221 )
Changes and credits to net (loss) 
                   
not affecting cash 
                   
Depletion and amortization 
    25,620     6,600     94,840  
Organizational expenses paid with 
                   
stock 
    -     -     300,000  
Legal fees paid with stock 
    -     -     172,000  
Stock compensation expense 
    -     -     21,295  
Changes in assets and liabilities 
                   
Trade receivables 
    (19,656 )   863     (37,297 )
Deposits 
    (10,000 )   -     (10,000 )
Production taxes and royalties payable 
    2,808     (9,702 )   7,243  
Accounts payable 
    2,345     7,327     2,883  
 
NET CASH FROM (USED FOR)                     
OPERATING ACTIVITIES 
    (34,970 )   (32,628 )   (40,257 )
 
INVESTING ACTIVITIES                     
Website development 
    -     (2,500 )   (2,500 )
Additions to oil and gas properties 
    (13,770 )   (47,088 )   (300,154 )
 
NET CASH (USED FOR) INVESTING                     
ACTIVITIES 
    (13,770 )   (49,588 )   (302,654 )
 
FINANCING ACTIVITIES                     
Proceeds from sale of common stock 
    150,000     33,000     150,000  
Proceeds from exercise of warrants 
    -     -     371,500  
 
NET CASH PROVIDED BY FINANCING                     
ACTIVITIES 
    150,000     33,000     521,500  
 
NET CHANGE IN CASH AND CASH                     
EQUIVALENTS 
    101,260     (49,216 )   178,589  
 
CASH AND CASH EQUIVALENTS AT                     
BEGINNING OF PERIOD 
    77,329     189,304     -  
 
CASH AND CASH EQUIVALENTS AT                     
END OF PERIOD 
  $ 178,589   $ 140,088   $ 178,589  
 
 
6
 
  MAJESTIC OIL & GAS, INC. (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
Note 1 - Business Activity and Basis of Presentation

Principal Business Activity
 
Majestic Oil & Gas, Inc. (Company) is a development stage enterprise and its operations consist of oil and natural gas development and production in the Rocky Mountain region. The financial statements and notes to the financial statements are the representation of the Company's management, who is responsible for their integrity and objectivity. The accounting policies of the Company are in accordance with generally accepted accounting principles and conform to the standards applicable to development stage enterprises.
 
Basis of Presentation
 
The accompanying interim financial statements of the Company are unaudited. In the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the results for the interim period. The results of operations for the six months ended June 30, 2008 are not necessarily indicative of the operating results for the entire year. These interim financial statements contain certain reclassification of prior period amounts to be consistent with the current period presentation with no effect on net income or loss.
 
We have prepared the financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. We believe the disclosures made are adequate to make the information not misleading and recommend that these condensed financial statements be read in conjunction with the financial statements and notes included in our Form 10-KSB for the year ended December 31, 2007.
 
Note 2 - Basis of Accounting
 
The accompanying financial statements have been prepared using accounting principles applicable to a going concern, which contemplates the realization of assets and extinguishment of liabilities in the normal course of business. As shown in the accompanying condensed balance sheet the Company has an accumulated deficit of ($591,221) through June 30, 2008. This and other factors may indicate that the Company may be unable to continue in existence. The Company's financial statements do not include any adjustments related to the realization of the carrying value of assets or the amounts and classification of liabilities that might be considered necessary should the Company be unable to continue in existence. The Company's ability to establish itself as a going concern is dependent upon its ability to obtain additional financing in order to fund exploration and development activities of oil and gas interests and, ultimately, to achieve profitable operations. Management believes that it can be successful in obtaining either debt or equity financing that will enable the Company to continue in existence and establish itself as a going concern.
 
These interim financial statements are prepared using the significant accounting policies disclosed in the Company's December 31, 2007 annual audited financial statements, except that certain significant accounting policies were adopted during the six months ended June 30, 2008:
 
Adopted prior to the six months ended June 30, 2008 -
Oil and Gas Interests
 
The Company utilizes the full cost method of accounting for oil and gas activities. Under this method, subject to a limitation based on estimated value, all costs associated with property acquisition, exploration and development, including costs of unsuccessful exploration, are capitalized within a cost center. No gain or loss is recognized upon the sale or abandonment of undeveloped or producing oil and gas interests unless the sale represents a significant portion of oil and gas interests and the gain significantly alters the relationship between capitalized costs and proved oil and gas reserves of the cost center. Depreciation, depletion and amortization of oil and gas interests is computed on the units of production method based on proved reserves, or upon reasonable estimates where proved reserves have not yet been established due to the recent commencement of production. Amortizable costs include estimates of future development costs of proved undeveloped reserves.
 
7
 
     MAJESTIC OIL & GAS, INC. (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
Capitalized costs of oil and gas interests may not exceed an amount equal to the present value, discounted at 10%, of the estimated future net cash flows from proved reserves plus the cost, or estimated fair market value if lower, of unproved interests. Should capitalized costs exceed this ceiling, an impairment is recognized. The present value of estimated future net cash flows is computed by applying year end prices of oil and gas to estimated future production of proved oil and gas reserves as of year end, less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions.
 
Revenue Recognition
 
The Company recognizes oil and gas revenues from its interests in producing wells as oil and gas is produced and sold from the wells and when ultimate collection is reasonably assured.
 
Website Development Costs
 
The Company has capitalized the costs associated with development of its website, and is amortizing the cost over a three year period.
 
Stock Based Compensation
 
The Company accounts for stock based compensation in accordance with Statement of Financial Accounting Standard (SFAS) No.123(R), “Share-Based Payment,” which specifies the revised accounting alternative requirements for pre-2006 stock based compensation grants existing at January 1, 2006 and the required accounting for new grants starting January 1, 2006. The Company had no stock based compensation grants made before year 2007.
 
Accordingly, the provisions of SFAS No.123(R) pertaining to pre-2006 grants do not apply. The Company values its stock options awarded on or after January 1, 2006 at the fair value at grant date using the Black-Scholes option pricing model. Compensation expense for stock options is recorded over the vesting period on a straight line basis. Compensation paid in vested stock is valued at the fair value at the applicable measurement date and charged to expense at that date.
 
Income Taxes
 
Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109.” FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with SFAS No. 109. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. Upon the adoption of FIN 48, the Company had no unrecognized tax benefits. During 2007 and during the first six months of 2008, the Company recognized no adjustments for uncertain tax benefits.
 
Deferred income tax assets, if any, are adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, it is more likely than not such benefits will be realized. The Company would recognize interest and penalties, if any, related to uncertain tax positions in general and administrative expenses. No interest and penalties related to uncertain tax positions were accrued at June 30, 2008. The Company expects no material changes to unrecognized tax positions within the next twelve months.
 
Earnings per Share of Common Stock
 
Basic earnings per share is determined in accordance with SFAS No. 128 using net income divided by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. The effect of outstanding common stock warrants was anti-dilutive for the three and six months ended June 30, 2008 and 2007.
 
Adopted during the six months ended June 30, 2008 -
Fair Value Measurement
 
Effective January 1, 2008, the Company adopted SFAS No. 157 Fair Value Measurement, which provides a framework for measuring fair value under generally accepted accounting principles. SFAS No. 157 would apply to all financial instruments that are being measured and reported on a fair value basis. Currently, the Company has no financial instruments to which this statement would apply.
 
8
 
    MAJESTIC OIL & GAS, INC. (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
Recent Accounting Pronouncements
 
In March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 gives financial statement users better information about the reporting entity’s hedges by providing for qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit–risk–related contingent features in their hedged positions. SFAS No. 161 is effective for the Company as of January 1, 2009 with early application encouraged. The adoption of this new standard had no effect on the financial and reporting disclosures of the Company.
 
In May 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS No. 162). The objective of SFAS No. 162 is to identify the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). SFAS No. 162 will go into effect 60 days following the SEC's approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles . Management is assessing the impact of the adoption of SFAS No. 162 on the Company.
 
Note 3 - Organization and Development of the Company
 
The Company was formed on April 16, 2002 as a corporation. The Company is considered a development stage enterprise as defined by SFAS No. 7. The accompanying interim financial statements reflect limited oil and gas development and production activities and they are not necessarily indicative of what the financial statements will reflect once the intended operations of the Company are fully underway.
 
Note 4 - Asset Retirement Obligations
 
The Company follows SFAS No. 143 "Accounting for Asset Retirement Obligations". SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires recognition of the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. As of June 30, 2008, the estimated future cost to plug and abandon the Company's gas wells was estimated to be $3,193. The estimated liability is based on historical experience in plugging and abandoning wells, estimated cost to plug and abandon wells in the future and federal and state regulatory requirements.
 
Note 5 - Related Party Transactions
 
Altamont Oil & Gas, Inc. (Altamont), an entity related through common ownership and management, is the operator of the wells in which the Company owns its working interests. As the operator of the wells, Altamont is responsible for remitting production taxes to the taxing authorities and royalty payments to the royalty interest owners. As of June 30, 2008, the Company had an outstanding receivable from Altamont of $37,297 for gas sales, and a payable to Altamont of $7,243 for production taxes and royalties. The Company also purchased oil and gas leases from Altamont during the six months ended June 30, 2008 for a total of $12,260. This was the same amount originally paid by Altamont to acquire the leases.
 
Note 6 - Farm Out Agreement
 
During 2007 the Company entered into a Farm-out Agreement with Altamont and Numbers, Inc., an entity whose owner is a member of the Board of Directors of the Company, to drill a 10-well natural gas development program. This development program will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana. The Lake Frances Field is located south of Valier, Montana just offsetting the Lake Frances reservoir. The Williams Field is located 7 miles east of the town of Valier, Montana. The locations for the development program were determined from information gathered from a geological and engineering study. The surveying of each location and the permitting of each drill site with the Montana Board of Oil & Gas is currently being completed. The Company will receive 100% of the revenues until the drilling and completion costs have been recovered, at which time the Company's interest will revert to 50%.
 
9
 
MAJESTIC OIL & GAS, INC. (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
Note 7 - Subsequent Event
 
Subsequent to June 30, 2008, the Company opted to invest in the drilling and completion of two new natural gas wells located in Pondera County, Montana. In order to obtain a 25% working interest in the wells, the Company paid one third of the drilling and completion costs for the Boucher #18-1 well and the Stoltz #18-1 well. The amounts paid by the Company toward drilling and completion were $54,238 for the Boucher #18-1 and $54,085 for the Stoltz #18-1.
 
10
 
Item 2.
 
FORWARD LOOKING STATEMENTS

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

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

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

OVERVIEW

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

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

Based upon our Management's experience in the oil and natural gas industry and on recent events, including increasing global demand for energy and energy disruptions caused by natural disasters, we believe the trend in oil and gas prices will remain relatively stable or decrease slightly, but over the long-term are more likely to increase. We expect to continue to generate positive net income from operations in the future, although our revenue and expenses will increase as we expand our drilling and ownership activities.
 
11
 
Majestic Oil & Gas, Inc participated in a drilling program in the Lake Frances Field during the Fourth Quarter 2007. Two successful gas wells were drilled; the B Ag, Inc #25-1 and the Vandenbos #19-1. Majestic Oil & Gas, Inc holds a 25% Working Interest in these two wells and the Company has seen an increase in production volumes, as a result of these two wells. In addition, Majestic Oil & Gas, Inc participated in the drilling of the Vandenbos #19-2 and the Jody Fields #4-1. The Vandenbos #19-2 well was subsequently plugged and abandoned. The Jody Fields #4-1 well, is a wildcat oil well, which is yet to be completed.
 
RESULTS OF OPERATIONS

Three months ended June 30, 2008 vs. Three months ended June 30, 2007
 
Revenues for the three-month period ending June 30, 2008 were $37,297 compared to $7,582 for the three-month period ending June 30, 2007. The reason for the major increase in the revenues between these two periods is a direct result of the two new wells brought on production during the 4th Quarter of 2007, which increased production/sales volumes, as shown in the chart below and the price received per MCF.(MCF stands for the price per thousand cubic feet of natural gas)

 
Ludwig State 36-1
Share of
Production Volumes
Price Per MCF
Share of
Production Volumes
Price Per MCF
 
2008
2007
April
255.96
5.36
378.47
3.50
May
255.54
6.33
370.22
3.67
June
246.06
6.75
339.08
3.80
         
 
Boucher #27-1
Share of
Production Volumes
Price Per MCF
Share of
Production Volumes
Price Per MCF
 
2008
2007
April
67.44
5.36
238.84
3.50
May
67.03
6.33
222.13
3.67
June
68.06
6.75
166.24
3.80
         
 
B. Ag #25-1
Share of
Production Volumes
Price Per MCF
Share of
Production Volumes
Price Per MCF
 
2008
2007
April
42.40
5.36
0
  
May
41.00
6.33
0
  
June
39.80
6.75
0
  
         
 
Vandenbos #19-1
Share of
Production Volumes
Price Per MCF
Share of
Production Volumes
Price Per MCF
April
1390.95
5.36
0
  
May
1328.66
6.33
0
  
June
1219.14
6.75
0
  
 
12
Majestic Oil & Gas, Inc’s Net Share of the production volumes from the Ludwig State #36-1 and Boucher #27-1 wells for the period ending June 30, 2008 were 960.09 MCF compared to 1,714.98 MCF for the period ending June 30, 2007, due to the natural decline in production. However, production volumes significantly increased during the period as a result of the added production from the new natural gas wells, B. Ag #25-1 and Vandenbos #19-1. Second quarter production of 4,061.95 MCF for the new wells, brings the Company’s total share of production to 5,022.04 MCF for the period ending June 30, 2008.
 
The Company’s expenses of $53,032 for the three-months ended June 30, 2008 increased by $25,429 compared to the $27,603 reported for expenses during the three-month period ending June 30, 2007. This increase is due in part to our legal, accounting and filing fees. The majority of the legal and accounting fees are a result of fees paid to our accountants and corporate auditor for financial statement preparation and review for the 1st Quarter 2007. In addition, the Company reported an increase of $8,610 in depletion, a non-cash item, from the $3,100 reported for the period ending June 30, 2007 to the $11,710 reported for the period ending June 30, 2008.

The Company saw an increase in the expense for taxes and royalties of $4,651 from the $1,906 reported for the three-month period ending June 30, 2007 compared to the $6,557 for the three-month period ending June 30, 2008. This was due to the increase in production volumes and price.

The Company showed a Net Loss of $15,735 for the three-month period ending June 30, 2008 compared to a Net Loss of $20,021 for the same period in 2007. The variance between these to periods is directly related to the increase in revenues due to an increase in production volumes.

The Company expects to continue to see steady revenues through the end of 2008, as a result of the volumes expected from the two new wells. The Company continues to see a steady trend in natural gas pricing as of the date of this report.

The Company also plans to continue its pursuit of oil prospects in the Lake Frances Area, which if successful could contribute to an increase in future revenues due to the price per barrel of oil. With the price of crude oil at prices well above $100 per barrel and natural gas pricing at or around $7.00 per MCF, management continues to be committed to building the Company through drilling oil and natural gas prospects.

Six months ended June 30, 2008 vs. Six months ended June 30, 2007
 
Revenues for the six-month period ending June 30, 2008 were $70,654 compared to $16,377 for the six-month period ending June 30, 2007. The reason for the major increase in the revenues between these two periods is a direct result of the two new wells brought on production during the 4th Quarter of 2007, which increased production/sales volumes, as shown in the chart below. The Company also reported a steady increase in the price received per MCF. (MCF stands for the price per thousand cubic feet of natural gas)
 
13

 
Ludwig State 36-1
Share of
Production Volumes
Price Per MCF
Share of
Production Volumes
Price Per MCF
 
2008
2007
January
284.63
3.91
426.94
3.57
February
265.65
4.45
365.06
3.53
March
261.73
4.98
397.24
3.83
April
255.96
5.36
378.47
3.50
May
255.54
6.33
370.22
3.67
June
246.06
6.75
339.08
3.80
         
Boucher 27-1
Share of
Production Volumes
Price Per MCF
Share of
Production Volumes
Price Per MCF
 
2008
2007
January
89.10
3.91
297.83
3.57
February
85.39
4.45
242.14
3.53
March
73.22
4.98
262.14
3.83
April
67.44
5.36
238.84
3.50
May
67.03
6.33
222.13
3.67
June
68.06
6.75
166.24
3.80
         
 
B. Ag #25-1
Share of
Production Volumes
Price Per MCF
Share of
Production Volumes
Price Per MCF
 
2008
2007
January
40.80
3.91
0
  
February
41.80
4.45
0
  
March
42.20
4.98
0
  
April
42.40
5.36
0
  
May
41.00
6.33
0
  
June
39.80
6.75
0
  
         
 
Vandenbos #19-1
Share of
Production Volumes
Price Per MCF
Share of
Production Volumes
Price Per MCF
January
1792.93
3.91
0
  
February
1658.87
4.45
0
  
March
1578.84
4.98
0
  
April
1390.95
5.36
0
  
May
1328.66
6.33
0
  
June
1219.14
6.75
0
  
 
14
 
Majestic Oil & Gas, Inc’s Net Share of the production volumes from the Ludwig State #36-1 and Boucher #27-1 wells for the six-month period ending June 30, 2008 were 2,019.81 MCF compared to 3,706.33 for the six-month period ending June 30, 2007, due to the natural decline in production. However, production volumes significantly increased during the period as a result of the added production from the new natural gas wells, B. Ag #25-1 and Vandenbos #19-1. Production of 9,217.39 MCF for the two new wells brings the Company’s total share of production to 11,237.20 MCF for the six months ended June 30, 2008.
 
The Company’s expenses of $106,741 increased significantly during the six-month period ending June 30, 2008 compared to the $54,093 reported for the same period in 2007. This increase is due in part to an increase in depletion, depreciation and amortization of $19,020, a non-cash item, from $6,600 reported for the period ending June 30, 2007 to the $25,620 reported for the period ending June 30, 2008. The Company also saw an increase in the expense for taxes and royalties of $9,588 from the $4,117 reported for the six-month period ending June 30, 2007 compared to the $13,705 for the six-month period ending June 30, 2008. This was due to the increase in production volumes and price.

The Company showed a Net Loss of $36,087 for the six-month period ending June 30, 2008 compared to a Net Loss of $37,716 for the same period in 2007. The variance between these to periods is directly related increase in sales volumes and price, as detailed above. The Company expects to continue to see steady revenues through the end of 2008, as a result of the volumes expected from the two new wells. The Company continues to see an a steady trend in natural gas pricing as of the date of this report.

The Company also plans to continue its pursuit of oil prospects in the Lake Frances Area, which if successful could contribute to an increase in future revenues due to the price per barrel of oil. With the price of crude oil well above $100 per barrel and natural gas staying at or around $7.00 per MCF, Management is confident that we will build the Company through drilling oil and natural gas prospects.

Subsequent to the three-month and six-month period ended June 30, 2008, Majestic Oil & Gas, Inc., opted to invest in the drilling and completion of two new natural gas wells located in Pondera County, Montana. In order to obtain a 25% Working Interest, the Company paid 1/3 of the drilling and completion costs for the following wells:
 
Boucher #18-1: Government Lot 4 (SWSW) - Section 18-T29N-R5W - $54,238.14
Stoltz #18-1: CSWSE-Section 18-T29N-R5W - $54,084.81

15

LIQUIDITY AND CAPITAL RESOURCES

We are still a development stage company. From our inception to June 30, 2008, we incurred an accumulated deficit of ($591,221). This deficit is primarily the result of approximately $300,000 in expenses associated with stock issuances during fiscal period ended December 31, 2002, and $301,264 in legal, accounting and filing fees incurred since inception which are associated with a publicly traded company.

In addition, as of June 30, 2008, we had $178,589 of current cash available. This increase in cash is due to a financing conducted during the three-month period ended June 30, 2008 in which 300,000 shares of Majestic Oil & Gas, Inc stock were issued at a price of $0.50 per share for a total of $150,000. The Company plans to use this cash influx for drilling and completing new oil and/or natural gas wells. Our cash resources of $178,589 are not sufficient to satisfy our cash requirements over the next 12 months. We need an additional minimum of $1,000,000 to finance our planned expansion in the next 12 months, which funds will be used for drilling of development oil and natural gas wells in the Lake Frances and Williams Fields. We hope to be able to raise additional funds from an offering of our stock in the future. However, this offering may not occur, or if it occurs, may not raise the required funding. We may also consider securing debt financing. We may not raise other equity or debt financing sufficient to fund this amount. If we don't raise or generate these funds, the implementation of our short-term business plan will be delayed or eliminated.

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

COMMITMENTS AND CONTINGENCIES

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

The Company acquired leases covering approximately 3,962.56 net acres of undeveloped land during 2007, for the purposes of future oil and gas development. This acreage is located in Pondera County, Montana in the vicinity of the Williams and Lake Frances Gas Fields. These leases remain in good standing with the term of the leases set for periods of 3 or 5 years. Management considers the value of the properties to be as much or more than for what they were acquired.

During the Second Quarter 2007, the Company entered into a Farm-out Agreement with Altamont Oil & Gas, Inc and Numbers, Inc to conduct a 10-well natural gas development program. This development program is still pending and will involve the drilling of 5 wells in the Lake Frances Gas Field and 5 wells in the Williams Gas Field, located in Pondera County, Montana. The Lake Frances Field is located south of Valier, Montana just offsetting the Lake Frances reservoir. The Williams Field is located 7 miles east of the town of Valier, Montana.

16
 
Item 3.
Quantitative and Qualitative Disclosure about Market Risk

Not applicable
 
Item 4.
Controls and Procedures. 

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission. Furthermore, due to our financial situation, we will be implementing further internal controls as we become operative so as to fully comply with the standards set by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s Chief Executive Officer/Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ending June 30, 2008 covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer/Chief Financial Officer has concluded that, as of the end of such period, the Company’s disclosure controls and procedures have been identified, but the Company has not yet tested their effectiveness. Because of this lack of testing, we cannot assure the effectiveness of the controls and procedures. There have been no significant changes in our internal controls over financial reporting during the six months ended June 30, 2008 that have materially affected or are reasonably likely to materially affect such controls. This conclusion by the Company’s Chief Executive Officer/Chief Financial Officer does not relate to reporting periods after June 30, 2008.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including our CEO/CFO, has identified the critical disclosure controls and procedures associated with the Company’s internal control over financial reporting, but has not yet tested the effectiveness of these disclosure controls and procedures and, therefore, cannot yet deem these controls to be effective.  Therefore, management has determined that our internal controls and not effective and a material weakness exists related to the lack of testing of disclosure controls and procedures associated with the Company’s internal control over financial reporting for the period ended June 30, 2008. This material weakness could materially affect the Company’s control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s quarterly or interim financial statements will not be prevented or detected on a timely basis.

17
This quarterly report does not include an attestation report of the Company s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the quarter ended June 30, 2008, that materially affected, or is reasonably likely to materially affect, the Company s internal control over financial reporting.

 
PART II — OTHER INFORMATION
 
Item 1.
Legal Proceedings.
 
None.

Item 1A.
Risk Factors

Not applicable.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.

(a)
Unregistered Sales of Equity Securities.
 
The Registrant sold 300,000 shares of unregistered securities during the three months ended June 30, 2008 at a price of $0.50 per share for a total of $150,000. We relied upon Section 4(2) of the Securities Act of 1933, as amended, for the above issuance.

We believed that Section 3(a)(9) of the Securities Act was available because we issued the Exchange Shares solely in exchange for the Warrants and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

We believed that Section 4(2) of the Securities Act was available because:

 
·
The issuance did not involve underwriters, underwriting discounts or commissions.
 
·
Restrictive legends were placed on all certificates issued as described above.
 
·
The issuance did not involve general solicitation or advertising.
 
·
The issuance was made solely to Accredited Investors (as defined in Section 501(a) of the Securities Act).

(b)
Use of Proceeds.
 
The proceeds from the sale of Majestic Oil & Gas, Inc shares will be used for drilling and completing new oil and/or natural gas wells.

Item 3.
 
None.
 
18
 
Item 4.
Submission of Matters to a Vote of Security Holders.
 
The Registrant did not submit any matters to a vote of its security holders during the three-months ended June 30, 2008.
 
Item 5.
Other Information.
 
Not applicable.
 
Item 6.
Exhibits.
 
(a) Exhibits.
 
Exhibit
 
Item
31.1
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
________________
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
MAJESTIC OIL & GAS, INC.
 
 
 
 
 
 
Date: August 13, 2008
By:  
/s/ Patrick Montalban
 
 
(Authorized Officer and Principal Executive Officer)
 
 
 

 
19

EXHIBIT INDEX
 
 
Exhibit
 
Item
31.1
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
________________
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general
 

20