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EXCEL - IDEA: XBRL DOCUMENT - NORTH AMERICAN ENERGY RESOURCES, INC.Financial_Report.xls

 

 

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

_________________

FORM 10-Q

_________________

þ     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: October 31, 2012

or

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

_________________

North American Energy Resources, Inc.

(Exact name of registrant as specified in its charter)

_________________

Nevada 000-52522 98-0550352
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation or Organization) File Number) Identification No.)

1535 Soniat St., New Orleans, LA 70115
(Address of Principal Executive Offices) (Zip Code)

(504) 561-1151
(Registrant’s telephone number, including area code)

N/A
(Former name or former address and former fiscal year, if changed since last report)

_________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  þ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  o     No  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. There are 21,554,945 shares outstanding as of December 10, 2012.

 

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, 2012.

 

TABLE OF CONTENTS
     
PART I - FINANCIAL INFORMATION (Unaudited)  
  PAGE  
Item 1: Consolidated Financial Statements 1  
  Consolidated Balance Sheets    
  Statements of Consolidated Operations    
  Consolidated Statements of Stockholders’ Deficit    
  Consolidated Statements of CashFlows
   
  Consolidated notes to financial statements    
       
Item 2: Management's Discussion and Analysis of Financial Condition and Results    
    of Operations 14  
Item 3: Quantitative and Qualitative Disclosures About Market Risk 17  
Item 4: Controls and Procedures 17  
       
PART II - OTHER INFORMATION  
Item 1: Legal Proceedings 18  
Item 1A: Risk Factors 18  
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 18  
Item 3: Defaults upon Senior Securities 18  
Item 4: Submission of Matters to a Vote of Security Holders 18  
Item 5: Other Information 18  
Item 6: Exhibits 18  
  Signatures  19  
       

 

 
 

 

PART I - Financial Information

Item 1: Financial Statements

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY     
(Development Stage Company)          
Consolidated Balance Sheets          
October 31, 2012 (Unaudited) and April 30, 2012 (Audited)          
    October 31,    April 30, 
    2012    2012 
ASSETS          
Current assets:          
 Cash and cash equivalents  $371   $316 
 Accounts receivable   219    367 
    Total current assets   590    683 
Properties and equipment, at cost:          
 Proved oil and natural gas properties and equipment   2,358    2,358 
         Accumulated depreciation and amortization   (236)   (182)
              Total properties and equipment   2,122    2,176 
    Total assets  $2,712   $2,859 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities:          
 Accounts payable          
    Trade  $64,592   $97,616 
    Related parties   19,190    18,698 
 Accrued expenses   241,382    223,772 
 Convertible note payable - officer   445,887    392,810 
 Convertible note payable   38,678    38,678 
    Total current liabilities   809,729    771,574 
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 October 31, 2012 and April 30, 2012, respectively   21,555    21,555 
 Additional paid in capital   2,838,197    2,838,197 
 Deficit accumulated during the development stage   (3,666,769)   (3,628,467)
    Total stockholders' deficit   (807,017)   (768,715)
         Total liabilities and stockholders' deficit  $2,712   $2,859 

 

See accompanying notes to consolidated financial statements

1
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY     
(Development Stage Company)          
Statements of Consolidated Operations          
For the three months ended October 31, 2012 and 2011          
           
(Unaudited)          
           
           
           
           
    2012    2011 
           
Oil and natural gas sales  $356   $711 
    Total revenues   356    711 
Costs and expenses          
 Oil and natural gas production taxes   24    51 
 Oil and natural gas production expenses   264    262 
 Depreciation and amortization   27    39 
 General and administrative expense   12,916    136,352 
    Total costs and expenses   13,231    136,704 
Loss from operations   (12,875)   (135,993)
Other income (expense):          
 Other income   —      9,619 
 Interest expense   (9,380)   (390)
    Total other income (expense)   (9,380)   9,229 
    Net loss  $(22,255)  $(126,764)
           
Net loss per common share, basic and diluted  $(0.00)  $(0.01)
           
Weighted average common shares outstanding   21,554,945    21,554,945 

 

 

See accompanying notes to consolidated financial statements. 

 

2
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY   
(Development Stage Company)         
Statements of Consolidated Operations         
For the six months ended October 31, 2012 and 2011      
and the period from inception (August 18, 2006) through October 31, 2012   
(Unaudited)         
              Inception 
              (August 18, 2006) 
              through 
              October 31, 
    2012    2011    2012 
                
Oil and natural gas sales  $648   $1,247   $46,636 
Pipeline fees   —      —      2,450 
    Total revenues   648    1,247    49,086 
Costs and expenses               
 Oil and natural gas production taxes   46    90    3,356 
 Oil and natural gas production expenses   586    505    108,696 
 Depreciation and amortization   54    70    16,300 
 Asset impairment   —      —      910,714 
 Non-cash compensation   —      —      1,414,291 
 Bad debt expense   —      —      86,000 
 General and administrative expense   19,681    241,466    1,067,140 
    Total costs and expenses   20,367    242,131    3,606,497 
Loss from operations   (19,719)   (240,884)   (3,557,411)
Other income (expense):               
 Other income   —      9,619    9,939 
 Interest income   —      —      900 
 Interest expense   (18,583)   (776)   (120,197)
    Total other income (expense)   (18,583)   8,843    (109,358)
    Net loss  $(38,302)  $(232,041)  $(3,666,769)
                
Net loss per common share, basic and diluted  $(0.00)  $(0.01)     
                
Weighted average common shares outstanding   21,554,945    21,554,945      
                
           

 

See accompanying notes to consolidated financial statements.

 

3
 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY        
(Development Stage Company)                
Consolidated Statements of Stockholders' Deficit            
For the period from inception (August 18, 2006) through October 31, 2012      
(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 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.

4
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY        
(Development Stage Company)              
Consolidated Statements of Stockholders' Deficit, continued        
For the period from inception (August 18, 2006) through October 31, 2012    
(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 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.

5
 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY        
(Development Stage Company)                
Consolidated Statements of Stockholders' Deficit, continued            
For the period from inception (August 18, 2006) through October 31, 2012        
(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 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                      -
Recission of available-for-sale                
     securities transaction                         -                    -                      -                      -
Amortize officer compensation                         -                    -                      -                      -
Convertible note payable forgiven by related party 12/3/2010                       -                    -   57,920                      -
Common stock issued for:                
  Consulting agreement 12/2/2010 850,000   850   7,650                      -
  Conversion of convertible notes payable 12/5/2010 3,329,406   3,329   552,919                      -
Net loss                         -                    -                      -                      -
BALANCE April 30, 2011   21,554,945   21,555   2,838,197                      -
Net loss                         -                    -                      -                      -
BALANCE April 30, 2012   21,554,945   21,555   2,838,197                      -
Net loss                         -                    -                      -                      -
BALANCE October 31, 2012   21,554,945   $    21,555   $ 2,838,197    $                -
                 
                 (Continued) 
                 
See accompanying notes to consolidated financial statements.            

6
 

 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY   
(Development Stage Company)            
Consolidated Statements of Stockholders' Deficit, continued      
For the period from inception (August 18, 2006) through October 31, 2012   
(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   —      —      (655,449)   (655,449)
BALANCE April 30, 2012   —      —      (3,628,467)   (768,715)
Net loss   —      —      (38,302)   (38,302)
BALANCE October 31, 2012  $—     $—     $(3,666,769)  $(807,017)
                     
                     
                     
See accompanying notes to consolidated financial statements.          

7
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY   
(Development Stage Company)         
Statements of Consolidated Cash Flows         
For the six months ended October 31, 2012 and 2011      
and the period from inception (August 18, 2006) through October 31, 2012
(Unaudited)         
              Inception 
              (August 18, 2006) 
              through 
              October 31, 
    2012    2011    2012 
                
Operating activities               
Net loss  $(38,302)  $(232,041)  $(3,666,769)
Adjustments to reconcile net loss to net cash used in               
    operating activities:               
         Depreciation and amortization   54    70    16,300 
         Non-cash compensation   —      —      1,414,291 
         Bad debt expense   —      —      104,243 
         Asset impairment   —      —      910,714 
         Changes in operating assets and liabilities:               
           Accounts receivable   148    (153)   (96,276)
           Interest accrued on loan to related party   —      —      (900)
           Prepaid expenses and other assets   —      6,116    12,232 
           Accounts payable - increase (decrease)   (33,024)   56,909    332,479 
           Accrued expenses   17,610    90,795    327,497 
           Oil and gas proceeds due others   —      (368)   —   
           Repayments - joint interest owners   —      —      (9,643)
              Net cash used in operating activities   (53,514)   (78,672)   (655,832)
Investing activities               
Payments for oil and natural gas properties and               
    equipment   —      —      (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   —      —      (46,481)
Financing activities               
Loan proceeds   —      —      48,750 
Shareholder contribution   —      —      50,000 
Loans from officers and shareholders   53,077    78,754    576,737 
Related party advances for working capital   492    —      1,197 
Sale of common stock   —      —      26,000 
              Net cash provided by financing activities   53,569    78,754    702,684 
Net increase in cash and cash equivalents   55    82    371 
Cash and cash equivalents, beginning of period   316    716    —   
Cash and cash equivalents, end of period  $371   $798   $371 
               (Continued)  
See accompanying notes to consolidated financial statements.          

8
 

 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY      
(Development Stage Company)         
Statements of Condensed Consolidated Cash Flows, Continued      
For the six months ended October 31, 2012 and 2011         
and the period from inception (August 18, 2006) through October 31, 2012   
(Unaudited)         
              Inception 
              (August 18, 2006) 
              through 
              October 31, 
    2012    2011    2012 
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.          

9
 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY

(Development Stage Company)

Notes to Consolidated Financial Statements

October 31, 2012

 

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 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 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, 2012, which is included in the Company’s Form 10-K dated April 30, 2012. 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 has a non-operated interest in a gas well in Texas County, Oklahoma and is continuing to seek additional acquisition possibilities.

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 operations of the Companies are presented as those of a development stage enterprise, from their inception (August 18, 2006).

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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 October 31, 2012 and April 30, 2012 the Company had a working capital deficit of $809,139 and $770,891, respectively. The Company has an accumulated deficit of $3,666,769 which includes a loss of $38,302 during the six months ended October 31, 2012. In January 2011, the Company exchanged $38,678 in accounts payable for a convertible note payable due in January 2013 with interest accruing at 4% per annum. The note is convertible into common stock at $0.10 per share. Beginning in November 2011, the Company’s CEO loaned the Company funds for due diligence and operating expenses pursuant to a Convertible Bridge Loan Note approved by the Board of Directors and executed on November 3, 2011. The majority of these expenses were incurred while attempting to complete an oil and gas property acquisition. The acquisition agreement was terminated in December 2011 and the acquisition was not completed. At October 31, 2012, the Company’s CEO had loaned the Company $445,887 which is due April 30, 2013.

The Company invested in its first non-operated gas well in October 2010 and plans to continue this course as funds become available. The Company has limited business activities which are not capable of supporting current operating requirements.

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

2013 refers to periods ending during the fiscal year ending April 30, 2013 and 2012 refers to periods ended during the fiscal year ended April 30, 2012.

Reclassification

Certain reclassifications have been made in the financial statements at July 31, 2011 and for the periods then ended to conform to the July 31, 2012 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, 2012 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 October 31, 2012 and April 30, 2012. Amounts due include reimbursements for D&O insurance, rent, travel, legal and cash advances for payment of other administrative expenses.

   October 31,2012  April 30, 2012
       
Alan G. Massara, Chief Financial Officer  $19,190   $18,698 
   $19,190   $18,698 
           

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 October 31, 2011, accrued expenses included $90,000 accrued for compensation. Beginning effective November 1, 2011, the compensation rate for Mr. Coldren increased to $20,833 per month and for Mr. Massara increased to $18,750 per month. Both agreed to discontinue accruing their salary effective January 31, 2012 until conditions improve.

 

11
 

Accrued expenses include the following:

   October 31,2012   April 30, 2012 
         
Accrued compensation due officers $208,750  $208,750 
Accrued interest due CEO  29,390   11,583 
 Amount due related parties  238,140   220,333 
Other accrued expenses  —     994 
Accrued interest - other  2,805   2,029 
Asset retirement obligation  437   416 
  $241,382  $223,772 
         

Convertible note payable – officer

Interim financing for due diligence expenses and operations is being funded pursuant to a $500,000 multiple advance bridge loan provided to the Company by Clinton W. Coldren, CEO. In evidence of the loan, on November 3, 2011, the Company issued to Clinton W. Coldren that certain 8% Convertible Note in the principal amount of $500,000. The Convertible Note had a term of one year and is convertible into shares of common stock of the Company, in whole or in part at any time, at an initial conversion price equal to 130% of the volume-weighted average price of the common stock for the 50 trading days following October 31, 2011, subject to adjustment for distributions to shareholders, stock splits, reclassification of shares and tender or exchange offers. The Company does not have the right to prepay all or any portion of the Note prior to the Maturity Date. The loan balance was $445,887 and $392,810 at October 31, 2012 and April 30, 2012, respectively. Mr. Coldren has agreed to extend the maturity date to April 30, 2013.

 

Note 3: Stockholder’s equity

PREFERRED STOCK

The Company has 100,000,000 shares of its $0.001 par value preferred stock authorized. At October 31, 2012 and April 30, 2012 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 October 31, 2012 and April 30, 2012 the Company had 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.

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, among other events, 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.

 

12
 

The Board of Directors issued a warrant to acquire 500,000 shares of the Company’s common stock at $0.18 per share to its new director, Larry D. Hall, on November 10, 2011. The strike price exceeded the market price when the warrants were granted.

The strike price exceeded the market price when the warrants were granted resulting in no intrinsic value to these warrants.  The Company also used the Black Scholes valuation model using a 3.65% risk free rate and a historical volatility of 244% for this calculation.  The resulting fair value was lower than the strike price and no cost was therefore recognized. The Company has re-evaluated the fair value of these warrants as of October 31, 2012 and no adjustment is required.

 

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 were outstanding at October 31, 2012. At October 31, 2012, 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, 2013 with interest accruing at 4% per annum. The note is convertible into the Company's common stock at $0.10 per share.

 

13
 

 

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 OCTOBER 31, 2012 AND 2011

Revenues

Revenues during the three months ended October 31, 2012 and 2011 were $356 and $711, respectively. The decline is primarily due to substantially lower gas prices during the current year period.

Costs and expenses during the three months ended October 31, 2012 and 2011 were as follows:

    2012    2011 
           
Oil and natural gas production taxes  $24   $51 
Oil and natural gas production expenses   264    262 
Depreciation and amortization   27    39 
Other general and administrative expense   12,916    136,352 
    Total  $13,231   $136,704 
           

Other general and administrative expense decreased in the current year period from $136,352 in 2011 to $12,916 in 2012, primarily due to a reduction in costs associated with the due diligence and planned property acquisition and the new office location. Rent decreased $16,610; officer compensation decreased $60,000; legal and professional costs decreased $37,712; travel and entertainment decreased $4,207; and other costs associated with maintaining a separate office also decreased.

Other income (expense) during the three months ended October 31, 2012 and 2011 is as follows:

    2012    2011 
           
Other income  $—     $9,619 
Interest expense   (9,380)   (390)
    Total  $(9,380)  $9,229 
           

Other income was the result of a gain realized from a debt settlement. The increase in interest expense is the result of the convertible note payable to an officer which did not begin funding until after the second quarter of last year.

COMPARISON OF SIX MONTHS ENDED OCTOBER 31, 2012 AND 2011

Revenues

Revenues during the six months ended October 31, 2012 and 2011 were $648 and $1,247, respectively. The decline is primarily due to substantially lower gas prices during the current year period.

Costs and expenses during the six months ended October 31, 2012 and 2011 were as follows:

    2012    2011 
           
Oil and natural gas production taxes  $46   $90 
Oil and natural gas production expenses   586    505 
Depreciation and amortization   54    70 
Other general and administrative expense   19,681    241,466 
    Total  $20,367   $242,131 
           

Other general and administrative expense decreased in the current year period from $241,466 in 2011 to $19,681 in 2012, primarily due to a reduction in costs associated with the due diligence and planned property acquisition and the new office location. Rent decreased $31,465; officer compensation decreased $90,000; legal and professional costs decreased $75,106; travel and entertainment decreased $8,670; and other costs associated with maintaining a separate office also decreased.

14
 

Other income (expense) during the six months ended October 31, 2012 and 2011 is as follows:

    2012    2011 
           
Other income  $—     $9,619 
Interest expense   (18,583)   (776)
    Total  $(18,583)  $8,843 
           

Other income was the result of a gain realized from a debt settlement. The increase in interest expense is the result of the convertible note payable to an officer which did not begin funding until after the second quarter of last year.

LIQUIDITY AND CAPITAL RESOURCES

Historical information

At October 31, 2012, we had $371 in cash, $219 in accounts receivable and a working capital deficit of $809,139. Comparatively, we had cash of $316 and a working capital deficit of $770,891 at April 30, 2012.

We entered into an Asset Purchase Agreement which expired in December 2011. The majority of our decreased administrative cost during the three-month period ended July 31, 2012 was a result of preliminary due diligence costs and preliminary financing costs associated with the planned purchase in the year earlier period.

Evaluation of the amounts and certainty of cash flows

Our current cash flow is nominal and insufficient to pay current expenses. We continue to seek other acquisition possibilities, which will require some form of debt and equity financing.

Cash requirements and capital expenditures

We have made arrangement with our CEO to loan us up to $500,000 to meet the initial operating expenses during the due diligence phase of a potential acquisition. At October 31, 2012, our CEO has loaned $445,887 for this purpose. The note is due April 30, 2013. If a potential acquisition is identified additional capital may be required to be raised in the form of equity or debt.

Known trends and uncertainties

The Company is in a very competitive business. The economy has been very uncertain over the past two to three years and may make it very difficult to raise the capital required to complete any asset purchase agreement.

Expected changes in the mix and relative cost of capital resources

The Company is now seeking another acquisition candidate. If identified, the initial phase for the Company will be due diligence and raising the purchase price for the acquisition. In order to take advantage of any undeveloped properties, the Company may require additional financing to continue development plans. The actual amounts required and the timing of the requirements has not been determined.

What balance sheet, income or cash flow items should be considered in assessing liquidity

The Company does not have sufficient revenues from operations to cover ongoing costs. As such it must rely upon continued funding from the Company’s CEO or as yet undetermined external sources. In addition, the Company does not have sufficient capital to pay existing debt, accounts payable and other obligations.

If a potential acquisition matures we will need to seek funding to finance due diligence and the cost of an as yet unidentified acquisition, which may require significant new external financing and which may materially change the existing capital structure of the Company.

Our prospective sources for and uses of cash

Our current significant issue is identifying a new acquisition candidate, financing the due diligence and raising the funds to complete the acquisition. If successful, the Company expects to use a combination of debt and equity.

15
 

CASH FROM OPERATING ACTIVITIES

Cash used in operating activities was $53,514 for the six-month period ended October 31, 2012 and cash used in operations was $78,672 for the comparable 2011 period. Losses incurred arose primarily from due diligence costs and the initial cost of raising funds for the planned acquisition which expired in December 2011.

CASH USED IN FINANCING ACTIVITIES

We incurred no capital costs in the six-month periods ended October 31, 2012 and 2011.

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 October 31, 2012 and April 30, 2012 the Company had a working capital deficit of $809,139 and $770,891, respectively. The Company has an accumulated deficit of $3,666,769 which includes a loss of $38,302 during the six months ended October 31, 2012. In January 2011, the Company exchanged $38,678 in accounts payable for a convertible note payable due in January 2013 with interest accruing at 4% per annum. The note is convertible into common stock at $0.10 per share. Beginning in November 2011, the Company’s CEO loaned the Company funds for due diligence and operating expenses pursuant to a Convertible Bridge Loan Note approved by the Board of Directors and executed on November 3, 2011. The majority of these expenses were incurred while attempting to complete an oil and gas property acquisition. The acquisition agreement was terminated in December 2011 and the acquisition was not completed. At October 31, 2012, the Company’s CEO had loaned the Company $445,887.

The Company invested in its first non-operated gas well in October 2010 and plans to continue this course as funds become available. The Company has limited business activities which are not capable of supporting current operating requirements.

 

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.

OFF-BALANCE SHEET ARRANGEMENTS

None.

16
 

Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

 

Item 4: 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 October 31, 2012. Our management has determined that, as of October 31, 2012, 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 October 31, 2012, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

17
 

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 No. Description
31.1 Chief Executive Officer-- Certification pursuant to Rule 13a-14 (a) of the Exchange Act of 1934, as adopted pursuant to 
  Section 302 of the Sarbanes-Oxley Act of 2002.  
   
31.2 Chief Financial Officer-- Certification pursuant to Rule 13a-14 (a) of the Exchange Act of  193,4 as adopted pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002. 
   
32.1 Chief Executive Officer-- Certification pursuant to Rule 13a-14(b) of the Exchange Act of 1934 and 18 U.S.C. Section 
  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2 Chief Financial Officer-- Certification pursuant to Rule 13a-14(b) of the Exchange Act of 1934 and 18 U.S.C. Section 
  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

 

 

 

 

18
 

SIGNATURES

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

 Date: December 14, 2012 North American Energy Resources, Inc.
  By: /s/ Alan Massara
  Alan Massara
President and CFO

 

 

 

19