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EX-32.1 - XBRL PRESENTATION FILE - NORTH AMERICAN ENERGY RESOURCES, INC.ex32_1.htm
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EX-31.1 - XBRL PRESENTATION FILE - NORTH AMERICAN ENERGY RESOURCES, INC.ex31_1.htm
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EXCEL - IDEA: XBRL DOCUMENT - NORTH AMERICAN ENERGY RESOURCES, INC.Financial_Report.xls
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, 2011

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 incorporation or organization)   (IRS Employer Identification No.)

228 Saint Charles Ave., Suite 724, New Orleans, LA  70130
(Address of principal executive offices) (Zip Code)
 
 
Registrant's telephone number:  (504) 561-1151

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 o

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 o   No o

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

Large accelerated filer o   Accelerated filer o Non-accelerated filer o    Smaller reporting company x

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 21,554,945 shares of common stock outstanding as of August 31, 2011.

 
 

 
            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, 2011.
 
TABLE OF CONTENTS
 
    Page
PART I – FINANCIAL INFORMATION (Unaudited) 1
     
Item 1:  Condensed Consolidated Financial Statements 1
     
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 13
     
 Item 3: Quantitative and Qualitative Disclosures About Market Risk 16
     
Item 4T: Controls and Procedures   16
     
PART II - OTHER INFORMATION 17
     
Item 1: Legal Proceedings 17
     
Item 1A: Risk Factors 17
     
Item 2:  Unregistered Sales of Equity Securities and Use of Proceeds 17
     
Item 3: Defaults upon Senior Securities 17
     
Item 4:   Submission of Matters to a Vote of Security Holders 17
     
Item 5:  Other Information 17
     
Item 6: Exhibits 17
 
 
 

 

PART I - FINANCIAL INFORMATION
 
ITEM 1:  FINANCIAL STATEMENTS
 
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Condensed Consolidated Balance Sheets
July 31, 2011 (Unaudited) and April 30, 2011

   
July 31,
   
April 30,
 
   
2011
   
2011
 
ASSETS
           
Current assets:
           
     Cash and cash equivalents
  $ 574     $ 716  
     Prepaid expenses
    5,607       8,664  
          Total current assets
    6,181       9,380  
Properties and equipment, at cost:
               
     Proved oil and natural gas properties and equipment
    2,358       2,358  
          Accumulated depreciation and amortization
    (83 )     (52 )
               Total properties and equipment
    2,275       2,306  
     Total assets
  $ 8,456     $ 11,686  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
     Accounts payable
               
          Trade
  $ 62,983     $ 30,860  
          Oil and gas proceeds due others
    368       368  
          Related parties
    93,714       54,187  
     Accrued expenses
    31,255       859  
     Convertible note payable
    38,678       38,678  
          Total current liabilities
    226,998       124,952  
Commitments and contingencies
               
Stockholders' 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; 21,554,945 shares issued and outstanding at July 31, 2011 and April 30, 2011, respectively
    21,555       21,555  
     Additional paid in capital
    2,838,197       2,838,197  
     Deficit accumulated during the development stage
    (3,078,294 )     (2,973,018 )
          Total stockholders' deficit
    (218,542 )     (113,266 )
               Total liabilities and stockholders' deficit
  $ 8,456     $ 11,686  

See accompanying notes to condensed consolidated financial statements.

 
1

 
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Statements of Condensed Consolidated Operations
For the three months ended July 31, 2011 and 2010
and the period from inception (August 18, 2006) through July 31, 2011
(Unaudited)

     
2011
     
2010
     Inception
(August 18, 2006)
through
July 31,
2011
 
                         
Oil and natural gas sales
  $ 536     $ 1,905     $ 44,430  
Pipeline fees
    -       -       2,450  
     Total revenues
    536       1,905       46,880  
Costs and expenses
                       
     Oil and natural gas production taxes
    39       137       3,198  
     Oil and natural gas production expenses
    243       2,644       107,360  
     Depreciation and amortization
    31       714       16,147  
     Asset impairment
    -       -       910,714  
     Non-cash compensation
    -       123,879       1,414,291  
     Bad debt expense
    -       -       86,000  
     General and administrative expense, net of operator's overhead fees
    105,113       23,167       499,813  
     Total cost and expenses     105,426       150,541       3,037,523  
Loss from operations
    (104,890 )     (148,636 )     (2,990,643 )
Other income (expense):
                       
     Other income
    -       -       320  
     Interest income
    -       -       900  
     Interest expense
    (386 )     (15,441 )     (88,871 )
          Total other income (expense)
    (386 )     (15,441 )     (87,651 )
          Net loss
    (105,276 )     (164,077 )     (3,078,294 )
Other comprehensive loss
                       
          Unrealized loss on available for sale securities
    -       (4,000 )     -  
               Net comprehensive loss
  $ (105,276 )   $ (168,077 )   $ (3,078,294 )
                         
Net loss per common share, basic and diluted
  $ (0.00 )   $ (0.01 )        
                         
Weighted average common shares outstanding
    21,554,945       17,375,539          

See accompanying notes to condensed consolidated financial statements.

 
2

 
 
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Deficit
For the period from inception (August 18, 2006) through July 31, 2011
(Unaudited)
                        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
09/01/06
    11,264,485       11,265       88,735       -  
Common stock issued for cash
09/07/06
    1,126,448       1,126       8,874       -  
Common stock issued for cash
09/11/06
    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.
07/28/08
    177,000       177       119,653       -  
Conversion of note payable and accrued interest for common stock
07/31/08
    153,000       153       35,377       -  
Common stock options granted for:
                                 
          350,000 shares at $ 1.00 per share
08/01/08
    -       -       178,000       (178,000 )
          50,000 shares at $ 1.25 per share
08/01/08
    -       -       27,096       (27,096 )
Exercise common stock options :
                                 
          for $ 1.25 per share
09/22/08
    100       -       6,250       -  
          for $ 1.00 per share
09/22/08
    1,000       1       49,999       -  
          for $ 1.25 per share
10/13/08
    100       -       6,250       -  
          for $ 1.00 per share
10/13/08
    70       -       3,500       -  
Accounts payable paid with common stock
10/14/08
    90       -       9,016       -  
Amortize intrinsic value of options
10/31/08
    -       -       -       17,091  
Cancel common stock options
11/05/08
    -       -       (188,005 )     188,005  
Common stock issued for compensation
11/07/08
    100       -       6,250       -  
Common stock issued for accounts payable
11/07/08
    60       -       3,000       -  
Common stock issued for consulting service
11/12/08
    3,000       3       310,497       -  
Common stock issued for accounts payable
11/17/08
    400       1       24,999       -  
Capital contribution by shareholder in cash
11/30/08
    -       -       50,000       -  
Common stock issued for:
                                 
     Compensation
12/09/08
    338       -       5,000       -  
     Accounts payable
12/09/08
    300       -       1,200       -  
     Accounts payable
12/09/08
    400       -       6,000       -  
     Compensation
01/05/09
    500       1       4,999       -  
     Accounts payable
01/05/09
    800       1       3,199       -  
     Accounts payable
01/05/09
    400       1       3,999       -  
     Accounts payable
01/19/09
    4,000       4       14,996       -  
     Compens ation
01/26/09
    1,500       2       4,998       -  
     Accounts payable
02/24/09
    6,000       6       9,761       -  
     Compens ation
02/24/09
    1,000       1       1,999       -  
     Compens ation
03/04/09
    4,000       4       4,996       -  
     Compens ation
04/06/09
    4,000       4       5,996       -  
     Officer compensation
04/21/09
    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.
 
 
3

 
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Deficit, continued
For the period from inception (August 18, 2006) through July 31, 2011
(Unaudited)
 
                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 servic
    -       -       -       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.

 
4

 
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Deficit, continued
For the period from inception (August 18, 2006) through July 31, 2011
(Unaudited)
 
                        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
05/01/09
    400,000       400       419,600       -  
     consulting agreement
05/01/09
    200,000       200       209,800       -  
     oil and gas non-producing property
06/09/09
    700,000       700       125,300       -  
     accounts payable
07/27/09
    10,000       10       4,990       -  
     consulting agreement
07/27/09
    30,000       30       14,970       -  
     consulting agreement
07/27/09
    30,000       30       14,970       -  
     oil and gas producing property
09/25/09
    350,000       350       192,150       -  
     consulting contract
09/25/09
    300,000       300       182,700       -  
     cash
02/23/10
    200,000       200       5,800       -  
     consulting agreement
02/24/10
    400,000       400       31,600       -  
     consulting agreement - director fees
02/24/10
    450,000       450       35,550       -  
     consulting agreement - director fees
02/24/10
    150,000       150       11,850       -  
     officer compensation - director fees
02/24/10
    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       -  
Recission of available-for-sale securities transaction
      -       -       -       -  
Amortize officer compensation
      -       -       -       -  
Convertible note payable forgiven by related party
12/03/10
    -       -       57,920       -  
Common stock issued for:
                                 
     Consulting agreement
12/02/10
    850,000       850       7,650       -  
     Conversion of convertible notes payable
12/05/10
    3,329,406       3,329       552,919       -  
Net loss
      -       -       -       -  
BALANCE April 30, 2011
      21,554,945       21,555       2,838,197       -  
Net loss
      -       -       -       -  
BALANCE July 31, 2011
      21,554,945     $ 21,555     $ 2,838,197     $ -  
 
(Continued)
 
See accompanying notes to consolidated financial statements.
 
 
5

 
NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Deficit, continued
For the period from inception (August 18, 2006) through July 31, 2011
(Unaudited)
 
                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 )
Recission of available-for-sale securities transaction
    -       1,000       -       1,000  
Amortize officer compensation
    12,129       -       -       12,129  
Convertible note payable forgiven by related party
    -       -       -       57,920  
Common stock issued for:
                               
     Consulting agreement
    -       -       -       8,500  
     Conversion of convertible notes payable
    -       -       -       556,248  
Net loss
    -       -       (462,392 )     (462,392 )
BALANCE April 30, 2011
    -       -       (2,973,018 )     (113,266 )
Net loss
    -       -       (105,276 )     (105,276 )
BALANCE July 31, 2011
  $ -     $ -     $ (3,078,294 )   $ (218,542 )
 
See accompanying notes to condensed consolidated financial statements.

 
6

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Statements of Condensed Consolidated Cash Flows
For the three months ended July 31, 2011 and 2010
and the period from inception (August 18, 2006) through July 31, 2011
(Unaudited)
 
                Inception  
                (August 18, 2006)  
                through  
                July 31,  
   
2011
    2010     2011  
Operating activities
                 
Net loss
  $ (105,276 )   $ (164,077 )   $ (3,078,294 )
Adjustments to reconcile net loss to net cash used in
                       
     operating activities:
                       
          Depreciation and amortization
    31       714       16,147  
          Non-cash compensation
    -       123,879       1,414,291  
          Bad debt expense
    -       -       104,243  
          Asset impairment
    -       -       910,714  
          Changes in operating assets and liabilities:
                       
          Accounts receivable
    -       (30,672 )     (96,057 )
          Interest accrued on loan to related party
    -       -       (900 )
          Prepaid expenses and other assets
    3,057       1,877       6,625  
          Accounts payable
    32,123       12,589       330,870      
          Accrued expenses
    30,396       25,441       117,370  
          Related party advances for working capital
    39,527       -       75,721  
          Oil and gas proceeds due others
    -       884       368  
          Advances (repayments) - joint interest owners
    -       29,881       (9,643 )
               Net cash from (used in) operating activities
    (142 )     516       (208,545 )
Investing activities
                       
Payments for oil and natural gas properties and equipment
    -       (2,893 )     (166,311 )
Cash received in excess of cash paid in reverse acquisition of North American Energy Resources, Inc.
    -       -       119,830  
Proceeds from sale of oil and gas properties
    -       -       7,500  
Payments for pipeline
    -       -       (7,500 )
               Net cash used in investing activities
    -       (2,893 )     (46,481 )
Financing activities
                       
Loan proceeds
    -       -       48,750  
Shareholder contribution
    -       -       50,000  
Loans from related parties
    -       -       130,850  
Sale of common stock
    -       -       26,000  
               Net cash provided by financing activities
    -       -       255,600  
Net increase (decrease) in cash and cash equivalents
    (142 )     (2,377 )     574  
Cash and cash equivalents, beginning of period
    716       3,026       -  
Cash and cash equivalents, end of period
  $ 574     $ 649     $ 574  
 
(Continued)
 
See accompanying notes to condensed consolidated financial statements.

 
7

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Statements of Condensed Consolidated Cash Flows, Continued
For the three months ended July 31, 2011 and 2010
and the period from inception (August 18, 2006) through July 31, 2011
(Unaudited)
 
                Inception  
                (August 18, 2006)  
                through  
                July 31,  
    2011     2010     2011  
 
                 
Supplemental cash flow information Cash paid for interest and income taxes:
                 
     Interest
  $ -     $ -     $ 437  
     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  
                         
     Exchange of joint interest receivable for oil and natural gas properties
  $ -       -     $ 53,068  
     Common stock options granted
    -       -       205,096  
     Common stock options cancelled
    -       -       188,005  
     Common stock issued for:
                       
          Convertible notes payable
    -       -       591,778  
          Consulting agreements
    -       -       911,100  
          Unevaluated oil and natural gas properties
    -       -       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  
     Participant advance converted to accounts payable
    -       -       31,829  
     Accounts payable converted to convertible note payable
    -       -       38,678  
     Covertible note payable and accrued interest forgiven by related party
    -       -       57,920  

See accompanying notes to condensed consolidated financial statements.

 
8

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to Condensed Consolidated Financial Statements
July 31, 2011

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”).  All significant intercompany balances and transactions have been eliminated in consolidation.

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, 2011, which is included in the Company’s Form 10-K dated April 30, 2011.  The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year.

  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 which includes the drilling, completion and operation of oil and gas wells.  The Company has an interest in a pipeline in Oklahoma which is currently shut-in, but has been used to gather natural gas production.  The Company's gas production was shut-in due to low prices in February 2009 in Washington County, Oklahoma and was sold effective October 1, 2010.  The Company has acquired a non-operated interest in a gas well in Texas County, Oklahoma and is continuing to seek additional acquisition possibilities.
 
 
9

 

On December 15, 2010, the Company introduced a new Executive Team.  Clinton W. Coldren became the new Chairman and Chief Executive Officer and Alan G. Massara became Director, President and Chief Financial Officer.  The new Executive Team is actively reviewing opportunities to acquire additional oil and gas production, development and exploration properties.  The initial focus is on properties that are currently producing, but which contain upside drilling and workover potential.  If successful, any acquisition will require significant new external financings which could materially change the existing capital structure of the Company.  There can be no guarantee that the Company will successfully conclude an acquisition.

Development stage
The Companies are  in the development stage and have realized only nominal revenue to date.  The decline in gas prices and limited reserves caused the Company's original gas development plans  in Washington County, Oklahoma to be cancelled and these properties were sold effective October 1, 2010.  Accordingly, the operation of the Companies are presented as those of a development stage enterprise, from their 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, 2011 and April 30, 2011 the Company had a working capital deficit of $220,817 and $115,572, respectively.  The Company has an accumulated deficit of $3,078,294  which includes a loss of $105,276 during the three months ended July 31, 2011.  By December 5, 2010, the Company had exchanged 3,329,406 shares of common stock for convertible notes payable principal of $474,358 and $81,890 in accrued interest.  In January 2011, the Company exchanged $38,678 in accounts payable for a convertible note payable due in January 2012 with interest accruing at 4% per annum.  The note is convertible into common stock at $0.10 per share.

Effective October 1, 2010, the Company sold all of its shut-in gas properties and its producing oil properties in Washington County, Oklahoma.  The Company invested in its first non-operated gas well in October 2010 and plans to continue this course as funds become available.

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
2012 refers to periods ending during the fiscal year ending April 30, 2012 and 2011 refers to periods ended during the fiscal year ended April 30, 2011.
 
 
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  Reclassification
Certain reclassifications have been made in the financial statements at July 31, 2010 and for the periods then ended to conform to the July 31, 2011 presentation.  The reclassifications had no effect on net loss.

Recent adopted and pending accounting pronouncements
 We have evaluated all recent accounting pronouncements as issued by the Financial Accounting Standards Board ("FASB") in the form of Accounting Standards Updates ("ASU") through August 31, 2011 and find none that would have a material impact on the financial statements of the Company.


NOTE 2:               RELATED PARTY TRANSACTIONS

Accounts payable - related parties includes the following expense reimbursements due to related parties at July 31, 2011 and April 30, 2011.  Amounts due include reimbursements for D&O insurance, rent, travel, legal and cash advances for payment of other administrative expenses.
 
   
July 31, 2011
   
April 30, 2011
 
             
Clinton W. Coldren, Chief Executive Officer
  $ 87,343     $ 50,769  
Alan G. Massara, Chief Financial Officer
    6,371       3,418  
    $ 93,714     $ 54,187  
 
Effective June 15, 2011, the Board of Directors approved compensation to begin accruing at the rate of $10,000 per month for each of the two listed executive officers.  At July 31, 2011, accrued expenses included $30,000 accrued for compensation.
 
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, 2011 and April 30, 2011, 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, 2011 and April 30, 2011 the Company has 21,554,945 shares issued and outstanding, respectively.

WARRANTS

As a part of their initial compensation, the new Executive Team was granted Warrants with the following primary terms and conditions.  The strike price exceeded the market price when the Warrants were granted.
 
 
11

 

a)      Each Warrant shall entitle the owner to purchase one share of common stock of the Company.  The warrants will contain price protection should shares be used for an acquisition at a price lower than the conversion price in force.  The anti dilution provision will not apply to financings done below the strike price.
b)      The Executive Team is granted three Warrant Certificates as follows:
1.  
Certificate #1 for 10,000,000 warrants with a strike price of $0.025 per share must be exercised within one year of the date Executive Team begins collecting salaries from the Company,
2.  
Certificate #2 for 10,000,000 warrants with a strike price of $0.04 per share and a Term of 5 years from the vesting date, and
3.  
Certificate #3 for 10,000,000 warrants with a strike price of $0.055 per share and a Term of 5 years from the vesting date.
c)      Other warrant terms are as follows:
1.  
Certificate #1 vests immediately, Certificate #2 shall vest upon execution of Certificate #1 and Certificate #3 shall vest upon execution of Certificate #1.
2.  
All Warrants may vest early if the Company has revenue of $12,500,000 total for two consecutive quarters and records a pre-tax net profit for the two quarters and other conditions including change in control, termination, etc.
3.  
The Warrant Certificates may be allocated among the Executive Team as they so determine.
4.  
The Warrants shall be registered in the first registration statement the Company files, subject to legal counsel approval.

COMMON STOCK OPTIONS

The North American Energy Resources, Inc. 2008 Stock Option Plan ("Plan") was filed on September 11, 2008 and reserved 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, 2011.  At July 31, 2011, there are 1,242,333 shares available for grant.

NOTE 4:          CONVERTIBLE NOTES PAYABLE

The Company has a convertible note payable in the amount of $38,678 which is due January 6, 2012 with interest accruing at 4% per annum.  The note is convertible into the Company's common stock at $0.10 per share.

 
12

 

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.

COMPARISON OF THREE MONTHS ENDED JULY 31, 2011 AND 2010

Revenues during the three months ended July 31, 2011 and 2010 were as follows:
 
   
2011
   
2010
 
             
Oil production
  $     $ 1,905  
Gas production
    536        
       Total revenue
  $ 536     $ 1,905  
 
Gas production included 177 MCF sold in 2011.  Oil revenues included 31 net barrels sold in 2010.  As a result of continuing high operating costs, the Company sold all of its producing oil properties and its non-producing gas properties effective October 1, 2010 and acquired one new gas property in a different geographic area.

Costs and expenses during the three months ended July 31, 2011 and 2010 were as follows:
 
   
2011
   
2010
 
             
Oil and natural gas production taxes
  $ 39     $ 137  
Oil and natural gas production expenses
    243       2,644  
Depreciation and amortization
    31       714  
Non-cash compensation
          123,879  
Other general and administrative expense, net of operator's overhead fee
    105,113       23,167  
         Total
  $ 105,426     $ 150,541  
 
The decline in direct oil and natural gas costs is a result of the sale of the high maintenance oil properties effective October 1, 2010 and the simultaneous purchase of an interest in a producing gas well.  The gas well has produced a small profit whereas the operating costs of the oil production always exceeded its revenue.
 
Non-cash compensation declined primarily due to completion of the amortization of consulting agreements in 2010.
 
 
13

 

Other general and administrative expense, net of operator's overhead fee increased in the 2011 period primarily due to new costs associated with the expanding staff and the new office location.  Rent increased $17,342; officer compensation increased $30,000; legal costs increased $32,474; travel and entertainment increased $5,500; and other costs associated with maintaining a separate office also increased.

Other income (expense) during the three months ended July 31, 2011 and 2010 is as follows:
 
   
2011
   
2010
 
             
Interest expense
  $ (386 )   $ (15,441 )
        Total
  $ (386 )   $ (15,441 )
 
The interest bearing debt decreased during the 2011 period as compared to the 2010 period primarily due to the exchange of common stock for convertible notes payable in December 2010.
 
LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2011, we had $574 in cash and a working capital deficit of $220,817.  Comparatively, we had cash of $716 and a working capital deficit of $115,572 at April 30, 2011.

We estimate that our total planned cash expenditures over the next twelve months will be approximately $100,000 for basic corporate overhead, assuming no increased operations.  We are actively seeking other acquisitions which will require significant new external financing which could materially change the existing capital structure of the Company.

The Company will plan to meet its capital requirements for the next year principally with 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 used in operating activities was $142 for the three-month period ended July 31, 2011 and cash provided by operations was $516 for the comparable 2010 period.  There has been only nominal activity with a significant portion of the operating loss being paid with advances from related parties or common stock.

CASH USED IN FINANCING ACTIVITIES

We incurred capital costs of $2,893 in the three months ended July 31, 2010 and none in the 2011 period.

 
14

 

GOING CONCERN

We have not attained profitable operations and are dependent upon obtaining a replacement for the related party loans 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.

 
15

 

ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


ITEM 4T:               CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under the PCAOB standards, a control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.  A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit the attention by those responsible for oversight of the company's financial reporting.  A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of July 31, 2011.  Our management has determined that, as of July 31, 2011, the Company's disclosure controls and procedures are effective.

Changes in internal control over financial reporting

There have been no significant changes in internal controls or in other factors that could significantly affect these controls during the quarter ended July 31, 2011, including any corrective actions with regard to significant deficiencies and material weaknesses.

 
16

 
 
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

None.


ITEM 3:                 DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4:                 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

ITEM 5:                 OTHER INFORMATION.

None

ITEM 6:                 EXHIBITS

 
Exhibit 31.1
Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer

 
Exhibit 31.1
Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer

 
Exhibit 32.1
Certification pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer

 
Exhibit 32.1
Certification pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer
 
 
17

 

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 14, 2011
By:
/s/ Alan G. Massara  
    President and Chief Financial Officer  
       
       
 
 
18