form10qsb.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-QSB
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 
 
For the First Quarter ended September 30, 2007
 
Commission File Number: 0-30891
 
Turner Valley Oil & Gas, Inc. 
 
(Exact name of Registrant as specified in its charter)
 
 
Nevada
  
91-1980526
  
 
(Jurisdiction of Incorporation)
  
(I.R.S. Employer Identification No.)
  
         
 
604-700 West Pender Street, Vancouver, BC
  
V6C 1G8
  
 
(Address of principal executive offices)
  
(Zip Code)
  
 
 
Registrant's telephone number, including area code: (604) 602-1650
 
Securities registered pursuant to Section 12(g) of the Act: Common Stock
 
60,035,584 shares off common stock were outstanding as of September 30, 2007.
 
Transitional Small Business Disclosure Format (check one): yes o no T
 
 
INTRODUCTION
 
This Registrant (Reporting Company) has elected to refer to itself, whenever possible, by normal English pronouns, such as "We", "Us" and "Our". This Form 8-K may contain forward-looking statements. Such statements include statements concerning plans, objectives, goals, strategies, future events, results or performances, and underlying assumptions that are not statements of historical fact. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements which reflect our current views, with respect to future events or results and future financial performance. Certain words indicate forward-looking statements, words like "believe", "expect", "anticipate", "intends", "estimates", "forecast", "projects", and similar expressions.
 
Page -1
 
PART I: FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
The financial statements, for the three months ended September 30, 2007, included herein have been prepared by the us, without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnotes disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information not misleading.
 
The Remainder of this Page is Intentionally left Blank

Page -2

TURNER VALLEY OIL & GAS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Page -3

 
(A Development Stage Company)
  
Consolidated Balance Sheets
  
             
ASSETS
  
   
September 30,
    
December 31,
  
   
2006
    
2005
  
   
Unaudited
        
CURRENT ASSETS
            
             
Cash
   $
2,052
     $
78,848
  
Accounts receivable
    
1,252
      
2,546
  
                 
Total Current Assets
    
3,304
      
81,394
  
                 
OIL AND GAS PROPERTIES USING FULL COST ACCOUNTING
                
                 
Properties subject to amortization
    
674,486
      
212,996
  
Accumulated amortization
     (18,267 )     (10,767 )
                 
Net Oil and Gas Properties
    
656,219
      
202,229
  
                 
OTHER ASSETS
                
                 
Investments
    
1,013,053
      
155,651
  
                 
Total Other Assets
    
1,013,053
      
155,651
  
                 
TOTAL ASSETS
   $
1,672,576
     $
439,274
  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY       
  
                 
CURRENT LIABILITIES
                
                 
Accounts payable
   $
114,449
     $
5,958
  
Notes payable, related party
    
23,658
      
23,658
  
                 
Total Current Liabilities
    
138,107
      
29,616
  
                 
Total Liabilities
    
138,107
      
29,616
  
                 
STOCKHOLDERS' EQUITY
                
                 
Common stock, 100,000,000 shares authorized of $0.001par value, 56,985,984 and 53,385,984 shares issued and outstanding, respectively
    
56,987
      
53,387
  
Capital in excess of par value
    
4,569,723
      
4,185,323
  
Subscription receivable
    
-
      
-
  
Accumulated other comprehensive income
     (4,085 )     (4,810 )
Deficit accumulated during the development stage
     (3,088,156 )     (3,824,242 )
                 
Total Stockholders' Equity
    
1,534,469
      
409,658
  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   $
1,672,576
     $
439,274
  

The accompanying notes are an integral part of these consolidated financial statements.

Page -4
 
TURNER VALLEY OIL & GAS, INC.
  
(A Development Stage Company)
  
Consolidated Statements of Operations
  
                               
   
For the Three Months Ended September 30,
    
For the Nine Months Ended September 30,
    
From Inception on April 21, 1999 Through September 30,
  
   
2006
    
2005
    
2006
    
2005
    
2006
  
REVENUE
                              
                               
Royalties received
   $
784
     $
-
     $
9,612
     $
1,640
     $
19,889
  
                                         
EXPENSES
                                        
                                         
Cost of production
    
-
      
-
      
-
      
2,565
      
51,753
  
Depletion
    
2,500
      
2,500
      
7,500
      
7,500
      
15,767
  
General and administrative
    
230,335
      
1,012
      
565,739
      
543,989
      
4,317,240
  
                                         
Total Expenses
    
232,835
      
3,512
      
573,239
      
554,054
      
4,384,760
  
                                         
NET OPERATING LOSS
     (232,051 )     (3,512 )     (563,627 )     (552,414 )     (4,364,871 )
                                         
OTHER INCOME (EXPENSE)
                                        
                                         
Other income
    
336,702
      
237,825
      
396,863
      
237,825
      
272,505
  
Unrealised Gain on WIN Investment
    
902,851
      
-
      
902,851
      
-
      
902,851
  
Interest expense
    
-
      
-
      
-
      
-
       (3,292 )
                                         
Total Other Income (Expense)
    
1,239,553
      
237,825
      
1,299,714
      
237,825
      
1,172,064
  
                                         
NET PROFIT/(LOSS) BEFORE INCOME TAX
   $
1,007,502
     $
234,313
     $
736,088
     $ (314,589 )   $ (3,192,807 )
                                         
Income tax
   $
-
     $
-
     $
-
     $
-
     $
-
  
                                         
NET PROFIT/(LOSS)
   $
1,007,502
     $
234,313
     $
736,088
     $ (314,589 )   $ (3,192,807 )
                                         
BASIC LOSS PER COMMON SHARE
   $
0.02
     $
0.00
     $
0.01
     $ (0.01 )        
                                         
WEIGHTED AVERAGE NUMBER OF
                                        
COMMON SHARES OUTSTANDING
    
55,078,292
      
49,694,775
      
55,078,292
      
49,882,687
          
                                         
COMPREHENSIVE INCOME (LOSS)
                                        
                                         
NET LOSS
   $
1,007,502
     $
234,313
     $
736,088
     $ (314,589 )   $ (3,192,807 )
                                         
OTHER COMPREHENSIVE INCOME (LOSS)
                                        
Foreign Currency Translation
    
-
      
-
       (725 )    
2,367
       (4,085 )
                                         
COMPREHENSIVE INCOME (LOSS)
   $
1,007,502
     $
234,313
     $
735,363
     $ (312,222 )   $ (3,196,892 )
 
The accompanying notes are an integral part of these consolidated financial statements.

Page -5


Turner Valley Oil & Gas Corporation
  
(A Development Stage Company)
  
Statement of Stockholders' Equity and Comprehensive Income
  
September 30, 2006
  
                                     
                                     
   
Shares
    
Amount
    
Additional Paid-in-Capital
    
Comprehensive Income/(Loss)
    
Retained Earnings
    
Subscription Receivable
  
                                     
Balance at inception April 21, 1999
    
0
      
0
      
0
                    
                                           
Shares issued for services during 1999
    
41,080
      
41
      
5,094
                    
                                           
Shares issued for cash during 1999
    
16,000
      
16
      
99,984
                    
                                           
Net Loss for the period ended December 31, 1999
                          
 
       (96,935 )      
                                             
Balance at December 31, 1999
    
57,080
      
57
      
105,078
      
0
       (96,935 )    
0
  
                                                 
Net Loss for the period ended December 31, 2000
                                     (27,242 )        
                                                 
Balance at December 31, 2000
    
57,080
      
57
      
105,078
      
0
       (124,177 )    
0
  
                                                 
Net Loss for the period ended December 31, 2001
                                     (65,380 )        
                                                 
Balance at December 31, 2001
    
57,080
      
57
      
105,078
      
0
       (189,557 )    
0
  
                                                 
Shares issued for debt reduction during 2002
    
8,000
      
8
      
99,992
                          
                                                 
Shares issued for services during 2002
    
2,190,150
      
2,190
      
1,092,885
                          
                                                 
Net Loss for the period ended December 31, 2002
                                     (1,240,008 )        
                                                 
Balance at December 31, 2002
    
2,255,230
      
2,255
      
1,297,955
      
0
       (1,429,565 )    
0
  
                                                 
Shares issued for services at $.02 per share
    
1,500,000
      
1,500
      
298,500
                          
                                                 
Rounding of shares from reverse split
    
2,000
      
2
       (2 )                        
                                                 
Shares issued for accounts payable at $.05 Per share
    
8,000,000
      
8,000
      
392,000
                          
                                                 
Shares issued for services at $.015 per share
    
31,729,200
      
31,729
      
444,209
                          
                                                 
Shares issued for services at $.015 per share
    
9,487,504
      
9,488
      
132,825
                          
                                                 
Shares issued pursuant to S-8 registration at $.05 per share
    
2,000,000
      
2,000
      
98,000
                          
                                                 
Shares issued pursuant to S-8 registration at $.05 per share
    
650,000
      
650
      
31,850
                          
                                                 
Cancellation of Common Stock
     (16,691,520 )     (16,692 )     (220,459 )                        
                                                 
Shares issued for cash at $.05 per share
    
3,000,000
      
3,000
      
147,000
                          
                                                 
Shares issued for cash at $.30 per share
    
100,000
      
100
      
29,900
                          
                                                 
Shares issued for cash at $.35 per share
    
528,570
      
529
      
184,471
                          
                                                 
Foreign Currency Translation
                             (1,718 )                
                                                 
Net Loss for the period ended December 31, 2003
    
0
      
0
      
0
               (1,137,760 )        
                                                 
Balance at December 31, 2003
    
42,560,984
      
42,561
      
2,836,249
       (1,718 )     (2,567,325 )    
0
  
                                                 
Shares issued pursuant to S-8 registration at $.20 per share
    
932,500
      
933
      
185,567
                          
                                                 
Shares issued pursuant to S-8 registration at $.08 per share
    
1,597,500
      
1,598
      
126,202
                          
                                                 
Shares issued pursuant to S-8 registration at $.08 per share
    
1,000,000
      
1,000
      
79,000
                          
                                                 
Shares issued pursuant to S-8 registration at $.11 per share
    
85,000
      
85
      
9,265
                          
9/30/2004
                                                
Shares issued pursuant to S-8 registration at $.20 per share
    
1,385,000
      
1,385
      
275,615
                          
                                                 
Shares issued for Cash at $.05 per share
    
975,000
      
975
      
47,775
                          
                                                 
Subscription Recievable
                                             (48,750 )
                                                 
Foreign Currency Translation
                             (2,367 )                
                                                 
Net Loss for the period ended December 31, 2004
    
0
      
0
      
0
      
0
       (784,001 )        
                                                 
Balance at December 31, 2004
    
48,535,984
      
48,537
      
3,559,673
       (4,085 )     (3,351,326 )     (48,750 )
                                                 
Shares issued pursuant to S-8 registration at $.13 per share
    
2,850,000
      
2,850
      
367,650
                          
                                                 
Shares issued pursuant to S-8 registration at $.13 per share
    
2,000,000
      
2,000
      
258,000
                          
                                                 
Foreign Currency Translation
                             (725 )                
                                                 
Subscription Recievable
                                            
48,750
  
                                                 
Net Loss for the period ended December 31, 2005
                                     (472,917 )        
                                                 
                                                 
Balance at December 31, 2005
    
53,385,984
      
53,387
      
4,185,323
       (4,810 )     (3,824,244 )    
0
  
                                                 
Shares issued pursuant to S-8 registration at $.13 per share
    
2,000,000
      
2,000
      
258,000
                          
                                                 
Shares issued pursuant to S-8 registration at $.08 per share
    
1,600,000
      
1,600
      
126400
                          
                                                 
Net Income for the period ended September 30, 2006
                            
725
      
736,088
          
                                                 
                                                 
Balance as at September 30, 2006
    
56,985,984
      
56,987
      
4,569,723
       (4,085 )     (3,088,156 )    
0
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
Page -6
 
TURNER VALLEY OIL & GAS, INC.
  
(A Development Stage Company)
  
Consolidated Statements of Cash Flows
  
(Unaudited)
  
                   
   
For the 9 months Ended September 30,
    
From Inception on April 21, 1999Through September 30,
  
   
2007
    
2006
    
2007
  
                   
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
                   
Net Income/(Loss)
   $ (65,210 )   $ (166,764 )   $ (4,176,690 )
Adjustments to reconcile net loss to net cash used in operating activities:
                        
Depletion
    
7,500
      
7,500
      
28,267
  
Loss on abandonment of property
    
-
      
-
      
25,481
  
Gain on sale of Investment
     (97,799 )     (336,701 )     (801,314 )
Common stock issued for services rendered
    
15,000
      
388,000
      
4,256,960
  
Non-cash Effect from Foreign Currency Translation
    
-
      
725
       (4,080 )
Non-cash effect of revaluing Marketable Securities
                        
Changes in operating assets and liabilities:
                        
Increase (Decrease) in bank Overdraft
            
-
      
-
  
Increase (Decrease) in accounts receivable
    
1,394
      
1,294
      
722
  
Increase (Decrease) in accounts payable - related Party
            
-
      
23,659
  
Increase in accounts payable and accrued expenses
    
11,977
      
108,489
      
313,166
  
                         
Net Cash Used in Operating Activities
     (127,138 )    
2,543
       (333,829 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                        
                         
Proceeds from sale of investments
    
141,640
      
382,151
      
972,839
  
Investing in new Oil & Gas working interests
    
-
       (461,490 )     (425,544 )
Expenditures for oil and gas property development
            
-
       (712,714 )
                         
Net Cash Used in Investing Activities
    
141,640
       (79,339 )     (165,419 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                        
                         
Proceeds from issuance of common stock
            
-
      
465,000
  
Receipt of subscription receivable
    
-
      
-
      
48,750
  
                         
                         
Net Cash Provided by Financing Activities
    
-
      
-
      
513,750
  
                         
NET INCREASE (DECREASE) IN CASH
    
14,502
       (76,796 )    
14,502
  
                         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
-
      
78,848
       -   
                         
CASH AND CASH EQUIVALENTS AT END OF PERIOD
   $
14,502
     $
2,052
     $
14,502
  
                         
SUPPLEMENTAL CASH FLOW INFORMATION
                        
                         
CASH PAID FOR:
                        
                         
Interest
   $
-
     $
-
     $
-
  
Income taxes
   $
-
     $
-
     $
-
  
                         
NON-CASH FINANCING ACTIVITIES
                        
                         
Common stock issued for services rendered
   $
15,000
     $
260,000
     $
3,724,460
  
Common stock issued for retirement of payables
   $
-
     $
-
     $
532,500
  
Transfer of working Interest for payment of Debt
   $
400,000
             $
400,000
  
 
The accompanying notes are an integral part of these consolidated financial statements.

Page -7

Item 2. Discussion and Analysis or Plan of Operation.
 
(A)  PLAN OF OPERATION.
 
The Company’s sole focus is on the exploration for, development drilling for, and transmission facilities for the production and sale of oil and gas.  The Company has incorporated a wholly owned Canadian subsidiary named T.V Oil & Gas Canada Limited. This Company is a Federal Canadian Registered Company and complies with all applicable laws within Canada.

 Our financial statements contain the following additional material notes:

(Note 6-Going Concern)  The Company’s financial statements have been prepared assuming that the Company will continue as a going concern. The Company is dependent upon raising capital to execute its business plan.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  It is management's plan to raise capital in order to execute their business plan, thus creating necessary operating revenues.

 (Note 3-Development Stage Company)  The Company is a development stage company as defined in Financial Accounting Standards Board Statement 7. It is concentrating substantially all of its efforts in raising capital and developing its business operations in order to generate operating revenues.

(B) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
During the three months ended September 30, 2007 the Company had $1,121 of royalty revenues from its working interest in the Strachan property as compared to $784 for the corresponding period ending September 30, 2006.  For the nine months ended September 30, 2007 the Company had $1,522 of royalty revenues from its working interest as compared to $9,612 for the corresponding period ending September 30, 2006.  The reduction in royalty revenue was due to the special assessment during the nine months ended September 30, 2006 which resulted in additional revenue for the period.

The Company’s Operator has indicated that completion and testing of the Strachan Leduc well has commenced and the Company is awaiting the outcome of the completion and testing of this well.  The Company has paid all authorizations for expenditure that was presented by the Operator on this project.  All the Company’s properties are geologically and physically independent of one another.  They are all located in the Western Canadian Geologic Basin centred in Alberta, Canada.

The Strachan Property

On August 20, 2003, the Company entered into a purchase agreement to acquire 1% interest in a producing gas well, located at 2-2-38-9W5 Red Deer, Alberta, Canada.  The gas production rate at the time of the acquisition fluctuated between 1.5 and 2 MMCF/Day (million cubic feet of gas per day).  The Company’s senior management has set out a rework program for this well.  The rework program calls for an acid wash and acid stimulation of the producing formation.  The Company has agreed to participate in the program.  The program was completed on October 15, 2003 and as of October 20, 2003, the new production rates have stabilized at 2.66 MMCF/Day, representing a 40% increase over initial production rates.

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In addition to the preceding acquisition, the Company entered into a purchase agreement to acquire 0.5% interest in 10 Sections (6,400 acres) of drilling rights offsetting Sct. 22-38-9W-5.  These offsetting sections have identified seismic anomalies in multiple cretaceous pay zones.  The purchase price of the property was $45,114

The Strachan Property – Leduc region

On September 23, 2005 Turner Valley Oil and Gas Inc. through its wholly owned subsidiary TV Oil and Gas Canada Limited, has entered into a farm-out agreement with Odin Capital Inc. of Calgary, Alberta.

The terms of the Farm-Out agreement are as follows:

In exchange for our paying 3.00%  of all costs associated with drilling, testing and completing the test well (expected drilling cost – approx. $6.3 million Canadian to the 100% interest) on the property that is referred to as the Leduc Formation test well, we will have earned;

 
1)
In the spacing unit for the Earning Well, a 1.500% interest in the petroleum and natural gas below the base of the Mannville excluding natural gas in the Leduc formation, and a 3.00% interest in the natural gas in the Leduc formation before payout subject to payment of an Overriding Royalty which is convertible upon payout at the Royalty Owners option to 50% of our interest.
 
2)
A 1.200% interest in the rights below the base line of the Shunda formation in Section 10,Township 38, Range 9W5M
 
3)
A 0.966% interest in the rights below the base of the Shunda formation in sections 15 & 16,Township 38,Range 9W5M, down to the base of the deepest formation penetrated.

On July 6th, 2006, the Company purchased an additional 2% from its Chairman & CEO for a total cost of $190,882.  This transaction was completed on a dollar paid for dollar spent.

Additionally, the Company incurred $44,405 of further costs associated with the exploration of the well during the quarter.

The total costs are to date are $525,544 for our interest, under the terms of our agreement.

The Strachan Prospect is located 80 miles NW of Calgary, Alberta.

Page -9

Mississippi Prospect

On August 23rd, 2006, the Company entered into a joint venture agreement with Griffin & Griffin Exploration, LLC. to acquire an interest in a drilling program comprising 50 natural gas and/or oil wells.  The area in which the proposed wells are to be drilled is comprised of approximately 300,000 gross acres of land located between Southwest Mississippi and North East Louisiana. The proposed wells will be targeting the Frio and Wilcox Geological formations. The first 20 proposed wells are located within tie-in range of existing pipeline infrastructures.  Turner Valley has agreed to pay 10% of all prospect fees, mineral leases, surface leases and drilling and completion costs to earn a net 8% share of all production zones to the base of the Frio formation and 7.5% of all production to the base of the Wilcox formation.  Total Costs to date are $400,000.

After evaluating the Company’s future interest in this project, the Company has decided to assign all of its working interest to third parties for $400,000.  From the outset, the Company’s intention was to fully participate in this project; however, the diminution in value of the Company’s investment in Win Energy determined that the Company could not continue in the Mississippi project.

General & Administrative Costs

General and administrative costs for the three months ended September 30, 2007 decreased to $57,212, when compared to $230,335 for the corresponding period last year.  The decrease was caused by costs relating to common stock issued for services of $15,000 for the period ended September 30, 2007, while the charge for stock issued in the corresponding period ended September 30, 2006 was $128,000.   The total costs including depletion for the three months ended September 30, 2007 was $59,712 (September 30, 2006: $232,835).

Net Loss for the three months ended September 30, 2007 was $(15,168) as compared to a Net Income of $104,651 for the corresponding period ending September 30, 2006.  The increase in Net Loss was caused by the decrease in the Company’s investment in Win Energy Corp. (‘WIN”).

General and Administrative expenses for the 9 months ended September 30, 2007 was $157,031 (September 30, 2006: $565,739).  The decrease in General and Administrative expenses was related to a reduction in charge for common stock issued for services in the corresponding quarter ended September 30, 2006.

Net Loss for the nine months ended September 30, 2007 was $(65,210) as compared to a Net Loss of $(166,764) for the corresponding period ended September 30, 2006.  The reduction in Net Loss was caused by reduction is charge for common stock issued for services which was partially offset by an increase in revenue resulted from a special assessment by the Operator.

Liquidity

The Company’s net working capital deficit for the quarter ended September 30, 2007 decreased to $(14,025), from a deficit for the year ended December 31, 2006 of $(418,555).  The decrease in working capital deficit was caused by reductions in general overhead and the assignment of the Mississippi prospect which reduced current liabilities by $400,000.

To date, we have not invested in derivative securities or any other financial instruments that involve a high level of complexity or risk. We expect that in the future, any excess cash will continue to be invested in high credit quality, interest-bearing securities. We believe cash from operating activities, and our existing cash resources may not be sufficient to meet our working capital requirements for the next 12 months. We will likely require additional funds to support the Company’s business plan.  Management intends to raise additional working capital through debt and equity financing. There can be no assurance that additional financing will be available on acceptable terms, if at all. If adequate funds are not available, we may be unable to take advantage of future opportunities, respond to competitive pressures, and may have to curtail operations.

There are no legal or practical restrictions on the ability to transfer funds between parent and subsidiary companies. There are no known trends or uncertainties excepting those herein disclosed, that will have a material impact on revenues.
 
Page -10
  
PART II: OTHER INFORMATION
 
Item 1. Legal Proceedings. None.
 
Item 2. Changes in Securities. None.
 
Item 3. Defaults on Senior Securities. None
 
Item 4. Submission of Matters to Vote of Security Holders. None.
 
Item 5. Other Information. None.
 
Item 6. Exhibits and Reports on Form 8-K. 
 
Exhibit 31. Section 302 Certification
 
Exhibit 32. Certification Pursuant TO 18 USC Section 1350
 
The Remainder of this Page is Intentionally left Blank

Page -11
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-Q Report for the Second Quarter ended June 30, 2007, has been signed below by the following persons on behalf of the Registrant and in the capacity and on the date indicated.
 
Turner Valley Oil and Gas, Inc. 
 
Dated: November 13, 2007
 
by
 
/s/Kulwant Sandher
  
/s/Donald Jackson Wells
  
/s/Joseph Kane
Kulwant Sandher President / CFO
  
Donald Jackson Wells director
  
Joseph Kane director
 
 
Page - 12