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EX-32 - NORTH AMERICAN ENERGY RESOURCES, INC.v196501_ex32.htm
EX-31 - NORTH AMERICAN ENERGY RESOURCES, INC.v196501_ex31.htm

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: July 31, 2010

File No. 000-52522

North American Energy Resources, Inc.
(Name of small business issuer in our charter)

Nevada
98-0550352
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
Identification No.)

11005 Anderson Mill Road, Austin, Texas  78750
(Address of principal executive offices) (Zip Code)

Registrant's telephone number:  (512) 944-9115

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

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

Indicate by check mark 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.  (Check one):

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 ¨ No x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 17,375,539 shares of common stock outstanding as of August 31, 2010.

 
 

 

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission ("Commission"). While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto, contained in North American Energy Resources, Inc.’s Form 10-K dated April 30, 2010.

TABLE OF CONTENTS

   
Page
     
PART I – FINANCIAL INFORMATION (Unaudited)
 
     
Item 1:
Condensed Consolidated Financial Statements
3
     
Management's Discussion and Analysis of Financial Condition and Results of Operations
16
     
Item 3:
Quantitative and Qualitative Disclosures About Market Risk
19
     
Controls and Procedures
19
     
PART II - OTHER INFORMATION
20
     
Legal Proceedings
20
     
Item 1A:
Risk Factors
20
     
Unregistered Sales of Equity Securities and Use of Proceeds
20
     
Defaults upon Senior Securities
20
     
Submission of Matters to a Vote of Security Holders
20
     
Other Information
20
     
Exhibits
20

 
2

 


NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Balance Sheets
July 31, 2010 (Unaudited) and April 30, 2010

   
July 31,
   
April 30,
 
   
2010
   
2010
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 649     $ 3,026  
Accounts receivable, net of allowance of $10,000
    10,766       13,150  
Prepaid expenses
    137,106       250,733  
Total current assets
    148,521       266,909  
Properties and equipment, at cost:
               
Proved oil and natural gas properties and equipment
    71,317       68,424  
Accumulated depreciation and amortization
    (16,888 )     (16,174 )
Total properties and equipment
    54,429       52,250  
Deposits and other assets
    1,864       5,864  
Total assets
  $ 204,814     $ 325,023  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
Current liabilities:
               
Accounts payable
               
Trade
  $ 26,144     $ 13,554  
Oil and gas proceeds due others
    5,874       4,990  
Advances received from joint interest participants
    29,880       33,056  
Accrued expenses - other
    10,000       -  
Accrued interest - related parties
    65,059       49,618  
Convertible notes payable - principally related parties
    510,476       510,476  
Total current liabilities
    647,433       611,694  
Commitments and contingencies
               
                 
Stockholders' equity (deficit):
               
Preferred stock:  $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding
    -       -  
Common stock: $0.001 par value; 100,000,000 shares authorized; 17,375,539 shares issued and outstanding at July 31, 2010 and April 30, 2010, respectively
    17,376       17,376  
Additional paid in capital
    2,219,708       2,219,708  
Prepaid officer compensation
    -       (12,129 )
Other comprehensive loss
    (5,000 )     (1,000 )
Deficit accumulated during the exploration stage
    (2,674,703 )     (2,510,626 )
Total stockholders' equity (deficit)
    (442,619 )     (286,671 )
Total liabilities and stockholders' equity (deficit)
  $ 204,814     $ 325,023  

See accompanying notes to financial statements

 
3

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Statements of Condensed Consolidated Operations
For the three months ended July 31, 2010 and 2009
and the period from inception (August 18, 2006) through July 31, 2010
(Unaudited)

               
Inception
 
               
(August 18, 2006)
 
               
through
 
               
January 31,
 
   
2010
   
2009
   
2010
 
                   
Oil and natural gas sales
  $ 1,905     $ 1,614     $ 40,920  
Pipeline fees
    -       -       2,450  
Total revenues
    1,905       1,614       43,370  
Costs and expenses
                       
Oil and natural gas production taxes
    137       116       2,947  
Oil and natural gas production expenses
    2,644       4,850       100,947  
Depreciation and amortization
    714       1,599       15,300  
Asset impairment
    -       -       863,820  
Compensation
    123,879       128,701       1,271,416  
Bad debt expense
    -       -       86,000  
General and administrative expense, net of operator's overhead fees
    23,167       26,771       311,994  
      150,541       162,037       2,652,424  
Loss from operations
    (148,636 )     (160,423 )     (2,609,054 )
Other income (expense):
                       
Other income
    -       -       320  
Interest income
    -       300       900  
Interest expense
    (15,441 )     (12,075 )     (66,869 )
Total other income (expense)
    (15,441 )     (11,775 )     (65,649 )
Net loss
    (164,077 )     (172,198 )     (2,674,703 )
Other comprehensive loss
                       
Unrealized loss on available for sale securities
    (4,000 )     -       (5,000 )
Net comprehensive loss
  $ (168,077 )   $ (172,198 )   $ (2,679,703 )
                         
Net loss per common share, basic and diluted
  $ (0.01 )   $ (0.01 )        
                         
Weighted average common shares outstanding
    17,375,539       15,027,713          

See accompanying notes to condensed consolidated financial statements.

 
4

 
  
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Deficit
For the years ended April 30, 2010 and 2009 and the period
from inception (August 18, 2006) through April 30, 2010

                         
Intrinsic
 
                   
Additional
   
Value of
 
       
Common stock
   
Paid in
   
Common
 
   
Date
 
Shares
   
Amount
   
Capital
   
Stock Options
 
                             
BALANCE August 18, 2006
        -     $ -     $ -     $ -  
Common stock issued for net assets
 
9/1/2006
    11,264,485       11,265       88,735       -  
Common stock issued for cash
 
9/7/2006
    1,126,448       1,126       8,874       -  
Common stock issued for cash
 
9/11/2006
    1,126,448       1,126       8,874       -  
Net loss
        -       -               -  
BALANCE April 30, 2007
        13,517,381       13,517       106,483       -  
Net loss
        -       -               -  
BALANCE April 30, 2008
        13,517,381       13,517       106,483       -  
Acquisition of North American Energy Resources, Inc.
 
7/28/2008
    177,000       177       119,653       -  
Conversion of note payable and accrued interest for common stock
 
7/31/2008
    153,000       153       35,377       -  
Common stock options granted for:
                                   
350,000 shares at $1.00 per share
 
8/1/2008
    -       -       178,000       (178,000 )
50,000 shares at $1.25 per share
 
8/1/2008
    -       -       27,096       (27,096 )
Exercise common stock options:
                                   
for $1.25 per share
 
9/22/2008
    100       -       6,250       -  
for $1.00 per share
 
9/22/2008
    1,000       1       49,999       -  
for $1.25 per share
 
10/13/2008
    100       -       6,250       -  
for $1.00 per share
 
10/13/2008
    70       -       3,500       -  
Accounts payable paid with common stock
 
10/14/2008
    90       -       9,016       -  
Amortize intrinsic value of options
 
10/31/2008
    -       -       -       17,091  
Cancel common stock options
 
11/5/2008
    -       -       (188,005 )     188,005  
Common stock issued for compensation
 
11/7/2008
    100       -       6,250       -  
Common stock issued for accounts payable
 
11/7/2008
    60       -       3,000       -  
Common stock issued for consulting service
 
11/12/2008
    3,000       3       310,497       -  
Common stock issued for accounts payable
 
11/17/2008
    400       1       24,999       -  
Capital contribution by shareholder in cash
 
11/30/2008
    -       -       50,000       -  
Common stock issued for:
                                   
Compensation
 
12/9/2008
    338       -       5,000       -  
Accounts payable
 
12/9/2008
    300       -       1,200       -  
Accounts payable
 
12/9/2008
    400       -       6,000       -  
Compensation
 
1/5/2009
    500       1       4,999       -  
Accounts payable
 
1/5/2009
    800       1       3,199       -  
Accounts payable
 
1/5/2009
    400       1       3,999       -  
Accounts payable
 
1/19/2009
    4,000       4       14,996       -  
Compensation
 
1/26/2009
    1,500       2       4,998       -  
Accounts payable
 
2/24/2009
    6,000       6       9,761       -  
Compensation
 
2/24/2009
    1,000       1       1,999       -  
Compensation
 
3/4/2009
    4,000       4       4,996       -  
Compensation
 
4/6/2009
    4,000       4       5,996       -  
Officer compensation
 
4/21/2009
    160,000       160       145,440       -  
Net loss
        -       -       -       -  
BALANCE April 30, 2009
        14,035,539     $ 14,036       960,948       -  
                               
(Continued)
 
See accompanying notes to consolidated financial statements.
 
 
5

 
 
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Deficit, continued
For the years ended April 30, 2010 and 2009 and the period
from inception (August 18, 2006) through April 30, 2010

               
Deficit
       
         
Accumulated
   
Accumulated
       
   
Prepaid
   
Other
   
During the
       
   
Officer
   
Comprehensive
   
Development
       
   
Compensation
   
Loss
   
Stage
   
Total
 
                         
BALANCE August 18, 2006
  $ -     $ -     $ -     $ -  
Common stock issued for net assets
    -       -       -       100,000  
Common stock issued for cash
    -       -       -       10,000  
Common stock issued for cash
    -       -       -       10,000  
Net loss
    -       -       (5,379 )     (5,379 )
BALANCE April 30, 2007
    -       -       (5,379 )     114,621  
Net loss
    -       -       (24,805 )     (24,805 )
BALANCE April 30, 2008
    -       -       (30,184 )     89,816  
Acquisition of North American Energy Resources, Inc.
    -       -       -       119,830  
Conversion of note payable and accrued interest for common stock
    -       -       -       35,530  
Common stock options granted for:
                               
350,000 shares at $1.00 per share
    -       -       -       -  
50,000 shares at $1.25 per share
    -       -       -       -  
Exercise common stock options:
                               
for $1.25 per share
    -       -       -       6,250  
for $1.00 per share
    -       -       -       50,000  
for $1.25 per share
    -       -       -       6,250  
for $1.00 per share
    -       -       -       3,500  
Accounts payable paid with common stock
    -       -       -       9,016  
Amortize intrinsic value of options
    -       -       -       17,091  
Cancel common stock options
    -       -       -       -  
Common stock issued for compensation
    -       -       -       6,250  
Common stock issued for accounts payable
    -       -       -       3,000  
Common stock issued for consulting service
    -       -       -       310,500  
Common stock issued for accounts payable
    -       -       -       25,000  
Capital contribution by shareholder in cash
    -       -       -       50,000  
Common stock issued for:
                               
Compensation
    -       -       -       5,000  
Accounts payable
    -       -       -       1,200  
Accounts payable
    -       -       -       6,000  
Compensation
    -       -       -       5,000  
Accounts payable
    -       -       -       3,200  
Accounts payable
    -       -       -       4,000  
Accounts payable
    -       -       -       15,000  
Compensation
    -       -       -       5,000  
Accounts payable
    -       -       -       9,767  
Compensation
    -       -       -       2,000  
Compensation
    -       -       -       5,000  
Compensation
    -       -       -       6,000  
Officer compensation
    (84,933 )     -       -       60,667  
Net loss
    -       -       (1,097,468 )     (1,097,468 )
BALANCE April 30, 2009
    (84,933 )     -       (1,127,652 )   $ (237,601 )
                           
(Continued)
 
See accompanying notes to consolidated financial statements.
 
 
6

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Deficit, continued
For the years ended April 30, 2010 and 2009 and the period
from inception (August 18, 2006) through April 30, 2010

                         
Intrinsic
 
                   
Additional
   
Value of
 
       
Common stock
   
Paid in
   
Common
 
   
Date
 
Shares
   
Amount
   
Capital
   
Stock Options
 
                             
BALANCE April 30, 2009
        14,035,539     $ 14,036     $ 960,948     $ -  
Common stock issued for:
                                   
consulting agreement
 
5/1/2009
    400,000       400       419,600       -  
consulting agreement
 
5/1/2009
    200,000       200       209,800       -  
oil and gas non-producing property
 
6/9/2009
    700,000       700       125,300       -  
accounts payable
 
7/27/2009
    10,000       10       4,990       -  
consulting agreement
 
7/27/2009
    30,000       30       14,970       -  
consulting agreement
 
7/27/2009
    30,000       30       14,970       -  
oil and gas producing property
 
9/25/2009
    350,000       350       192,150       -  
consulting contract
 
9/25/2009
    300,000       300       182,700       -  
cash
 
2/23/2010
    200,000       200       5,800       -  
consulting agreement
 
2/24/2010
    400,000       400       31,600       -  
consulting agreement - director fees
 
2/24/2010
    450,000       450       35,550       -  
consulting agreement - director fees
 
2/24/2010
    150,000       150       11,850       -  
officer compensation - director fees
 
2/24/2010
    120,000       120       9,480       -  
Other comprehensive loss on available-for-sale securities
        -       -       -       -  
Amortize officer compensation
        -       -       -       -  
Net loss
        -       -       -       -  
BALANCE April 30, 2010
        17,375,539       17,376       2,219,708       -  
Other comprehensive loss on available-for-sale securities
        -       -       -       -  
Amortize officer compensation
        -       -       -       -  
Net loss
        -       -       -       -  
BALANCE July 31, 2010
        17,375,539     $ 17,376     $ 2,219,708     $ -  
                                     
                               
(Continued)
 
See accompanying notes to consolidated financial statements.
 
 
7

 
 
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Deficit, continued
For the years ended April 30, 2010 and 2009 and the period
from inception (August 18, 2006) through April 30, 2010

               
Deficit
       
         
Accumulated
   
Accumulated
       
   
Prepaid
   
Other
   
During the
       
   
Officer
   
Comprehensive
   
Development
       
   
Compensation
   
Loss
   
Stage
   
Total
 
                         
BALANCE April 30, 2009
  $ (84,933 )   $ -     $ (1,127,652 )   $ (237,601 )
Common stock issued for:
                               
consulting agreement
    -       -       -       420,000  
consulting agreement
    -       -       -       210,000  
oil and gas non-producing property
    -       -       -       126,000  
accounts payable
    -       -       -       5,000  
consulting agreement
    -       -       -       15,000  
consulting agreement
    -       -       -       15,000  
oil and gas producing property
    -       -       -       192,500  
consulting contract
    -       -       -       183,000  
cash
    -       -       -       6,000  
consulting agreement
    -       -       -       32,000  
consulting agreement - director fees
    -       -       -       36,000  
consulting agreement - director fees
    -       -       -       12,000  
officer compensation - director fees
    -       -       -       9,600  
Other comprehensive loss on available-for-sale securities
    -       (1,000 )     -       (1,000 )
Amortize officer compensation
    72,804       -       -       72,804  
Net loss
    -       -       (1,382,974 )     (1,382,974 )
BALANCE April 30, 2010
    (12,129 )     (1,000 )     (2,510,626 )     (286,671 )
Other comprehensive loss on available-for-sale securities
    -       (4,000 )     -       (4,000 )
Amortize officer compensation
    12,129       -       -       12,129  
Net loss
    -       -       (164,077 )     (164,077 )
BALANCE July 31, 2010
  $ -     $ (5,000 )   $ (2,674,703 )   $ (442,619 )

See accompanying notes to consolidated financial statements.

 
8

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Statements of Condensed Consolidated Cash Flows
For the three months ended July 31, 2010 and 2009
and the period from inception (August 18, 2006) through July 31, 2010
(Unaudited)

               
Inception
 
               
(August 18, 2006)
 
               
through
 
               
July 31,
 
   
2010
   
2009
   
2010
 
                   
Operating activities
                 
Net loss
  $ (164,077 )   $ (172,198 )   $ (2,674,703 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation and amortization
    714       1,599       15,300  
Non-cash compensation
    123,879       128,701       1,271,416  
Bad debt expense
    -       10,000       91,415  
Asset impairment
    -       -       863,820  
Increase (decrease) in:
                       
Accounts receivable
    (30,672 )     (18,086 )     (127,050 )
Interest accrued on loan to related party
    -       (300 )     (900 )
Prepaid expenses and other assets
    1,877       1,717       (3,595 )
Accounts payable
    12,589       5,344       286,643  
Accrued interest - related parties
    15,441       12,075       65,339  
Accrued expenses
    10,000       -       10,000  
Related party advances for working capital
    -       -       2,000  
Oil and gas proceeds due others
    884       -       5,874  
Advances from joint interest owners
    29,881       38,382       21,464  
Net cash from (used in) operating activities
    516       7,234       (172,977 )
Investing activities
                       
Payments for oil and natural gas properties and equipment
    (2,893 )     (95 )     (164,311 )
Cash received in excess of cash paid in reverse acquisition of North American Energy Resources, Inc.
    -       -       119,830  
Loan to related party
    -       -       (19,993 )
Proceeds from sale of oil and gas properties
    -       -       7,500  
Payments for pipeline
    -       -       (7,500 )
Net cash used in investing activities
    (2,893 )     (95 )     (64,474 )
Financing activities
                       
Loan proceeds
    -       -       48,750  
Shareholder contribution
    -       -       50,000  
Loans from related parties
    -       -       113,350  
Sale of common stock
    -       -       26,000  
Net cash provided by financing activities
    -       -       238,100  
Net increase in cash and cash equivalents
    (2,377 )     7,139       649  
Cash and cash equivalents, beginning of period
    3,026       27,966       -  
Cash and cash equivalents, end of period
  $ 649     $ 35,105     $ 649  
                   
(Continued)
 
See accompanying notes to condensed consolidated financial statements.

 
9

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Statements of Condensed Consolidated Cash Flows, Continued
For the three months ended July 31, 2010 and 2009
and the period from inception (August 18, 2006) through July 31, 2010
(Unaudited)

               
Inception
 
               
(August 18, 2006)
 
               
through
 
               
July 31,
 
   
2010
   
2009
   
2010
 
                   
Supplemental cash flow information
                 
Cash paid for interest and income taxes:
                 
Interest
  $ -     $ -     $ 1,094  
Income taxes
    -       -       -  
Non-cash investing and financing activities:
                       
Common stock issued for:
                       
Notes receivable
                  $ 76,000  
Oil and gas properties
                    303,670  
Interest in pipeline
                    100,000  
Loans to shareholders assumed
                    (371,000 )
Advance from joint interest participant assumed
                    (8,670 )
                    $ 100,000  
Acquisition of North American Energy Resources, Inc. in reverse acquisition:
                       
Assets acquired, other than cash
                  $ -  
Liabilities assumed
                    (30,170 )
                      (30,170 )
Common stock issued
                    150,000  
Cash received in excess of cash paid
                  $ 119,830  
                         
Exchange of joint interest receivable for oil and natural gas properties
  $ -       -     $ 53,068  
Convertible note payable and accrued interest exchanged for 1,000 shares of North American Exploration, Inc. common stock
    -       -       35,530  
Common stock options granted
    -       -       205,096  
Common stock options cancelled
    -       -       188,005  
Common stock issued for:
                       
Consulting agreements
    -       630,000       902,600  
Unevaluated oil and natural gas properties
    -       126,000       126,000  
Proven oil and natural gas properties
    -       -       192,500  
Accounts payable
    -       -       106,183  
Chief executive officer compensation
    -       -       155,200  
Credit balance transferred from accounts receivable to accounts payable
    -       -       1,068  
Accounts receivable applied as payment on note payable to related party
    -       -       4,572  
Option exercises paid by reducing note payable related party
    -       -       75,250  
Advance from shareholder converted to note
    -       -       2,000  

See accompanying notes to condensed consolidated financial statements.

 
10

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
 (An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements

NOTE 1:
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization
 
The consolidated financial statements include the accounts of North American Energy Resources, Inc. (“NAER”) and its wholly owned subsidiary, North American Exploration, Inc. (“NAE”) (collectively the “Company”).

NAER was incorporated in Nevada on August 22, 2006 as Mar Ked Mineral Exploration, Inc. and changed its name to North American Energy Resources, Inc. on August 11, 2008.  NAE was incorporated in Nevada on August 18, 2006 as Signature Energy, Inc. and changed its name to North American Exploration, Inc. on June 2, 2008.

The condensed consolidated financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation.  These condensed consolidated financial statements have not been audited.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations for interim reporting.  The Company believes that the disclosures contained herein are adequate to make the information presented not misleading.  However, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report for the year ended April 30, 2010, which is included in the Company’s Form 10-K dated April 30, 2010.  The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year.

Acquisition
 
On July 28, 2008, the shareholders of NAE entered into a stock purchase agreement with NAER.  NAER issued 420,000 restricted shares of its common stock to the shareholders of NAE in exchange for 100% of the issued and outstanding stock of NAE.  Completion of the stock purchase agreement resulted in the shareholders of NAE having control of NAER.  Accordingly, the transaction was recorded for accounting purposes as the acquisition of NAE by NAER with NAE as the acquirer (reverse acquisition).  The financial statements of the Company prior to July 28, 2008 are those of NAE.

 
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Business
 
NAE is an independent oil and natural gas company engaged in the acquisition, exploration and development of oil and natural gas properties and the production of oil and natural gas.  The Company operates in the upstream segment of the oil and gas industry with activities, including the drilling, completion and operation of oil and gas wells in Oklahoma.  The Company also has an interest in a pipeline in its area of operations which could be used for gathering its gas and the gas production of other producers.  The Company's gas production has been shut-in due to low prices since February 2009.

Exploration stage
The Company is in the exploration stage and has realized only nominal revenue to date.  The decline in gas prices has placed the Company's original gas development plans  in Washington County, Oklahoma on hold.  The Company has plans to raise funds in order to develop or acquire additional oil leases.  Accordingly, the operation of the Company is presented as those of a development stage enterprise, from its inception (August 18, 2006).

Going concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  The Company commenced operations in September 2006.

At July 31, 2010 and April 30, 2010 the Company had a working capital deficit of $511,040 and $344,785, respectively.  The Company has an accumulated deficit of $2,674,702  which includes a loss of $164,077 during the three months ended July 31, 2010, which includes stock compensation in the amount of $123,879.  The Company's note payable to a shareholder with a balance of $384,428 at July 31, 2010, was due May 1, 2010 and remains unpaid.  The Company expects to extend the note or convert it to common stock.

The Company had relied on receiving an additional $1,300,000 from the prior shareholders to fund its planned drilling and development program.  As discussed in Note 3, the prior shareholders defaulted on their agreement.  Accordingly, the Company will plan to meet its capital requirements for the next year with private placements of its common stock or advances from related parties.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Fiscal year
2011 refers to periods ending during the fiscal year ending April 30, 2011 and 2010 refers to periods ended during the fiscal year ended April 30, 2010.

Reclassification
Certain reclassifications have been made in the financial statements at July 31, 2009 and for the periods then ended to conform to the July 31, 2010 presentation.  The reclassifications had no effect on net loss.

 
12

 

Recent adopted and pending accounting pronouncements
 
Below is a listing of the most recent accounting standards and their effect on the Company, as issued by the Financial Accounting Standards Board ("FASB") in the form of Accounting Standards Updates ("ASU").  We have evaluated all recent accounting pronouncements through August 23, 2010 and find none that would have a material impact on the financial statements of the Company, except for those detailed below.

In February 2010, the FASB issued ASU 2010-09, "Subsequent Events (Topic 855)."  The amendments remove the requirements for an SEC filer to disclose a date, in both issued and revised financial statements through which subsequent events have been reviewed.  Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP.  ASU 2010-09 is effective for interim or annual financial periods ending after June 15, 2010.  The Company adopted ASU 2010-09 with no effect on its financial position or results of operation at July 31, 2010.

NOTE 2:
RELATED PARTY TRANSACTIONS

The Company sells its gas pursuant to a contract with a gathering system principally owned by a related party.  The Company receives a price equal to 70% of the posted price, which is the same rate charged to third parties.  The related party retains the other 30% of the posted price for gathering fees and marketing fees.  The gathering system is currently inactive due to low gas prices.

Convertible notes payable includes convertible notes payable to shareholders and others in the total amount of $510,476 at January 31, 2010 April 30, 2010.  One note with a balance of $384,428 at July 31, 2010 and April 30, 2010 was due May 1, 2010 and remains past due.  The note is convertible into the Company's common stock at a price of $1.50 per share.  The remaining notes in the total amount of $126,048 are due in March and April 2011, including interest at 12% and are convertible into the Company's common stock at a price ranging from $0.03 to $1.00 per share.

NOTE 3:
STOCKHOLDER’S EQUITY

PREFERRED STOCK

The Company has 100,000,000 shares of its $0.001 par value preferred stock authorized.  At July 31, 2010 and April 30, 2010, the Company had no shares issued and outstanding.

COMMON STOCK

The Company has 100,000,000 shares of its $0.001 par value common stock authorized.  At July 31, 2010 and April 30, 2010 the Company has 17,375,539 shares issued and outstanding.

 
13

 

REVERSE SPLIT

At a special meeting of shareholders held on April 23, 2009, 63% of our shareholders, either in person or by proxy, voted to approve a 1:50 reverse split of the Company's common stock.  This amendment to the Company's Articles of Incorporation was filed with the Nevada Secretary of State and became effective on April 27, 2009.  Accordingly, all references to shares of our common stock included herein have been retroactively restated to give effect to the reverse split.

CONTINGENT SHARES

On July 28, 2008, the Company acquired 100% of the outstanding stock of NAE for 420,000 shares of our common stock pursuant to a Stock Purchase Agreement ("SPA").  Completion of the SPA resulted in the shareholders of NAE having control of NAEY.

The SPA provided that NAEY was to have $1,500,000 in cash and no liabilities at closing.  At July 28, 2008, the closing date, NAEY had $150,000 of the required cash and on August 28, 2008, the parties to the SPA entered into a Modification Agreement ("MA") which provided an extension until January 27, 2009 for the additional cash to be contributed to the Company.  At January 27, 2009, the Company had received an additional $50,000 and was still short $1,300,000 of the agreed amount.  The MA provided that the Buyer would make contingent issuances of shares to the Seller equal to 95% of all the outstanding stock after issuance.  Accordingly, effective April 30, 2009, an additional 13,250,381 shares were issued to the Sellers.

COMMON STOCK OPTIONS

The North American Energy Resources, Inc. 2008 Stock Option Plan ("Plan") was filed on September 11, 2008 and reserves 2,500,000 shares for awards under the Plan.  The Company's Board of Directors is designated to administer the Plan and may form a Compensation Committee for this purpose.  The Plan terminates on July 23, 2013.

Options granted under the Plan may be either "incentive stock options" intended to qualify as such under the Internal Revenue Code, or "non-qualified stock options."  Options outstanding under the Plan have a maximum term of up to ten years, as designated in the option agreements.  No options are outstanding at July 31, 2010.  At July 31, 2010, there are 1,242,333 shares available for grant.

NOTE 4:
PREPAID EXPENSES

The Company recorded prepaid expenses from the issue of its common stock for consulting services.  The cost, based on the trading price of the stock at the time of the transaction, is amortized to expense over the term of the contracts.  The unamortized balances at July 31, 2010 and April 30, 2010 are as follows:

 
14

 

   
July 31,
   
April 30,
 
   
2010
   
2009
 
Current asset
           
Stockholder relations firm
  $ 105,000     $ 168,000  
Consulting firm assisting with listing common stock on the Frankfort Exchange
    22,875       68,625  
Administrative management
    6,500       9,500  
Other prepaid expense
    2,731       4,608  
    $ 137,106     $ 250,733  
Component of stockholders' deficit
               
Chief executive officer compensation
  $ -     $ 12,129  

 
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ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This statement contains forward-looking statements within the meaning of the Securities Act.  Discussions containing such forward-looking statements may be found throughout this statement.  Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including the matters set forth in this statement.

Our plan of operation for the next twelve months is to obtain funding from private placements of our common stock and acquire additional leases.

COMPARISON OF THREE MONTHS ENDED JULY 31, 2010 AND 2009

Revenues during the three months ended July 31, 2010 and 2009 were as follows:

   
2010
   
2009
 
             
Oil production
  $ 1,905     $ 1,614  

Oil revenues included 31 net barrels sold in 2010 and 32 net barrels of oil sold in 2009.  Due to low prices, the Company shut-in its gas production during January 2009.  The Company's oil prices per barrel averaged $61.94 during 2010 and $49.74 during 2009.

Costs and expenses during the three months ended July 31, 2010 and 2009 were as follows:

   
2010
   
2009
 
             
Oil and natural gas production taxes
  $ 137     $ 116  
Oil and natural gas production expenses
    2,644       4,850  
Depreciation and amortization
    714       1,599  
Non-cash compensation
    123,879       128,701  
Other general and administrative expense, net of operator's overhead fee
    23,167       26,771  
Total
  $ 150,541     $ 162,037  

Oil and natural gas production expenses were $2,644 in 2010, principally on the Company's producing oil wells.  In 2009, the cost was $4,850 and included repair costs associated with corrosive water damage.

Non-cash compensation in 2010 and 2009 represents the current period charge for stock which has been issued for consulting contracts.

 
16

 

Other income (expense) during the three months ended July 31, 2010 and 2009 is as follows:

   
2010
   
2009
 
             
Interest income
  $ -     $ 300  
Interest expense
    (15,441 )     (12,075 )
Total
  $ (15,441 )   $ (11,775 )

The interest bearing debt increased as of the end of the 2010 period as compared to the 2009 period.

LIQUIDITY, CAPITAL RESOURCES AND PLAN OF OPERATIONS

At July 31, 2010, we had $649 in cash and a working capital deficit of $511,040.  Comparatively, we had cash of $3,026 and a working capital deficit of $344,785 at April 30, 2010.  The principal element of the change in working capital was an increase in prepaid consulting contracts of $113,627 and other losses incurred during the period.

We estimate that our total planned cash expenditures over the next twelve months will be approximately $120,000 for corporate overhead.  We expect to utilize excess funds, when available, to acquire additional acreage for future drilling operations and plan to issue our common stock for certain services when possible.  The Company's note payable to a shareholder with a balance of $384,428 at July 31, 2010, was due May 1, 2010 and remains unpaid.  The Company expects to extend the note or convert it to common stock.

The Company will plan to meet its capital requirements for the next year with private placements of its common stock or advances from related parties.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

CASH FROM OPERATING ACTIVITIES

Cash from operating activities was $516 for the three-month period ended July 31, 2010 and cash from operations was $7,234 for the comparable 2009 period.  There has been only nominal activity with a significant portion of the operating loss being paid with common stock.

CASH USED IN FINANCING ACTIVITIES

We incurred capital costs of $2,893 and $95 in the three months ended July 31, 2010 and 2009, respectively.

 
17

 

CASH FROM FINANCING ACTIVITIES

No activity during the three months ended July 31, 2010 and 2009.

GOING CONCERN

We have not attained profitable operations and are dependent upon obtaining a replacement for the shareholder contributions to pursue our business plan.  For these reasons, there is substantial doubt we will be able to continue as a going concern, since we are dependent upon an as yet unknown source to provide sufficient funds to finance future operations until our revenues are adequate to fund our cost of operations.

OFF-BALANCE SHEET ARRANGEMENTS

None.

 
18

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4T:
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of July 31, 2010.  Based on that review and evaluation, which included inquiries made to certain other consultants of the Company, the CEO and CFO concluded that the Company’s current disclosure controls and procedures, as designed and implemented, are not effective, due to a lack of segregation of duties, in ensuring that information relating to the Company required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including insuring that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

(b)  Changes in Internal Controls

There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described above, including any corrective actions with regard to significant deficiencies and material weaknesses.

 
19

 

PART II - OTHER INFORMATION

ITEM 1:
LEGAL PROCEEDINGS

None

ITEM 1A:
RISK FACTORS


ITEM 2:
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None during the quarter ended July 31, 2010.

ITEM 3:
DEFAULTS UPON SENIOR SECURITIES.

None

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

OTHER INFORMATION.

None

ITEM 6:
EXHIBITS


 
Exhibit 31 
Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002

 
Exhibit 32 
Certification pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002

 
20

 
  
SIGNATURE

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.

    NORTH AMERICAN ENERGY RESOURCES, INC. 
     
Date:  September 9, 2010
   
     
 
By:  /s/ 
Ross E. Silvey
   
President, Chief Executive Officer and
   
Acting Chief Financial Officer

 
21