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

FORM 10-Q

(Mark One)

[X]  Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2013; or

[   ]  Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from ___________________ to ___________________.

Commission File Number 0-18956

AMERICAN NATURAL ENERGY CORPORATION
(Exact name of small business issuer as specified in its charter)

(918) 481-1440
(Registrant’s Telephone Number, Including Area Code)

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]     No [   ]

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

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.

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of May 15, 2013, 26,405,085 shares of the Registrant's Common Stock, $0.001 par value, were outstanding.

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AMERICAN NATURAL ENERGY CORPORATION

QUARTERLY REPORT ON FORM 10-Q

INDEX

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PART I – FINANCIAL INFORMATION

Item 1.        Financial Statements

AMERICAN NATURAL ENERGY CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)

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

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AMERICAN NATURAL ENERGY CORPORATION
Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) (Unaudited)
For the three-month periods ended March 31, 2013 and 2012

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

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AMERICAN NATURAL ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the three-month periods ended March 31, 2013 and 2012

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

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AMERICAN NATURAL ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)
For the three-month periods ended March 31, 2013 and 2012

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

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2013 and 2012

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2013 and 2012

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2013 and 2012

As of March 31, 2013 and December 31, 2012, the Company had an outstanding note to TPC Energy with a principal balance of $164,183. On March 31, 2013, the due date of the note was extended to March 31, 2014. Other terms of the note remain unchanged. The company evaluated the extension under FASB ASC 470-50 and FASB ASC 470-60 and concluded the revised term constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring.

As of December 31, 2012, the Company had another outstanding note to TPC Energy with a principal balance of $250,000, along with a related debt discount of $9,994. On March 11, 2013, the due date of the note was extended to March 11, 2014 and TPC Energy will continue to receive the 50% of the company’s interests in its share of the Liquidation Agents account distributions for an extra year until March 11, 2014. The Company evaluated the extension under FASB ASC 470-50 and determined that the modification was substantial and qualified as a debt extinguishment. The additional rights were valued at $39,953 and were recorded as a loss on debt extinguishment. The remaining $9,994 debt discount was also amortized during the three months ended March 31, 2013. The TPC note is included in Notes Payable – Related Parties on the balance sheet as of March 31, 2013.

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2013 and 2012

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Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

            We currently are experiencing a severe shortage of working capital and funds to pay our liabilities. We have no current borrowing capacity with any lender. We incurred a net loss of $496,000 for the three months ended March 31, 2013 and a net loss of $3,318,000 and $906,000 for the years ended December 31, 2012 and 2011. We have a working capital deficiency and an accumulated deficit at March 31, 2013 which leads to substantial doubt concerning our ability to meet our obligations as they come due. We also have a need for substantial funds to develop our oil and gas properties and repay borrowings as well as to meet our other current liabilities.

            The accompanying consolidated financial statements in this Report have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. The independent registered public accounting firm’s report on our consolidated financial statements as of and for the year ended December 31, 2012 includes an explanatory paragraph which states that we have sustained a substantial loss in 2012 and have a working capital deficiency and an accumulated deficit at December 31, 2012 that raise substantial doubt about our ability to continue as a going concern. These matters raise substantial doubt about our ability to continue as a going concern. As a result of our losses incurred and current negative working capital, there is no assurance that the carrying amounts of assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. Our ability to continue as a going concern is dependent upon adequate sources of capital and our ability to sustain positive results of operations and cash flows sufficient to continue to explore for and develop our oil and gas reserves and pay our obligations.

A Comparison of Operating Results For The Three Months Ended March 31, 2013 and March 31, 2012

            We recorded a net loss of $496,000 during the three months ended March 31, 2013 compared to a net loss of $1,201,000 for the three months ended March 31, 2012. During the three months ended March 31, 2013, our revenues were comprised of oil and gas sales totaling $998,000 compared with oil and gas sales of $450,000 during the same period of 2012. Oil and gas prices increased and there was an increase in production for the first quarter of 2013 as compared to the same period of 2012. Our net average daily production for the three month period ended March 31, 2013 increased by 111% over the same period of the prior year, from 46 net barrels of oil equivalent per day to 97 net barrels of oil equivalent per day. Oil and gas prices increased by 6% for the three month period ended March 31, 2013 over the same period of the prior year. The weighted average price increased from $106.59 per barrel of oil equivalent to $113.16 per barrel of oil equivalent. Production from our existing wells is subject to fluctuation based upon which zones of wells are in production.

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            We had expenses of $1,467,000 for the three months ended March 31, 2013 compared to expenses of $1,665,000 for the three months ended March 31, 2012. Our general and administrative expenses were $488,000 for the three months ended March 31, 2013 compared to $703,000 for the three months ended March 31, 2012. General and administrative expenses were higher for the quarter ended March 31, 2012 due to increased compensation expense related to the issuance of stock.

            Interest and financing costs increased for the three months ended March 31, 2013 compared to the same period in 2012 at $506,000 and $220,000 respectively. Interest and financing costs were higher in the first quarter of 2013 due to higher debt and the amortization of note discounts and deferred financing costs.

            Lease operating expenses of $290,000, production taxes of $75,000 and depletion, depreciation and amortization of $369,000 during the three months ended March 31, 2013 changed from $322,000, $28,000, and $113,000, respectively, during the three months ended March 31, 2012. Lease operating expenses were consistent for the first quarter of 2013 compared to the same period of 2012. Production taxes increased for the first quarter of 2013 as a result of increased production and changes in tax classifications on some producing wells. The increase in depletion, depreciation and amortization for the first quarter of 2013 is a result of increased production and a decrease in reserves.

            During the three months ended March 31, 2013, we had a foreign exchange gain of $260,000, compared to a $279,000 foreign exchange loss for the three months ended March 31, 2012. Our foreign exchange gains and losses arise out of an inter-company indebtedness we owe to our wholly-owned subsidiary, Gothic, which are payable in Canadian dollars. The foreign exchange gain for the three months ended March 31, 2013 was caused by the strengthening of the US dollar against the Canadian dollar.

            During the three months ended March 31, 2013 we also extended the repayment terms and rights on a related party note which qualified as debt extinguishment. The additional rights were valued at $39,953 and were recorded as a loss on debt extinguishment.

Liquidity and Capital Resources

General

            To date, our production has not been sufficient to fund our operations and drilling program. At March 31, 2013, we do not have any available borrowing capacity and have negative working capital of approximately $9.8 million.

            We have substantial need for capital to develop our oil and gas prospects. Since 2001, we have funded our capital expenditures and operating activities through a series of debt and equity capital-raising transactions, drilling participations and through an increase in vendor payables and notes payable. We expect any future capital expenditures for drilling and development to be funded from the sale of drilling participations and equity capital. It is management's plan to raise additional capital through the sale of interests in our drilling activities or other strategic transaction; however, we currently have no firm commitment from any potential investors and such additional capital may not be available to us in the future.

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A Comparison of Cash Flow For The Three Months Ended March 31, 2013 and March 31, 2012

            Our net cash used in operating activities was $92,000 for the three months ended March 31, 2013 as compared to net cash used in operating activities of $720,000 for the three months ended March 31, 2012, an increase of $628,000. The increase in net cash provided by operating activities for the three months ended March 31, 2013 was primarily due to a decrease in net loss of $704,000 offset by a decrease in noncash items of $408,000 and an increase in working capital of $332,000. Changes in working capital items had the effect of decreasing cash flows from operating activities by $45,000 during the three months ended March 31, 2013 mainly due to an increase in accounts payable and accrued liabilities of $59,000 and offset by an increase in accounts receivable and other current assets of $104,000. Changes in working capital items had the effect of decreasing cash flows from operating activities by $377,000 during the three months ended March 31, 2012 due to an increase in accounts receivable and other current assets of $267,000 and a decrease to accounts payable and other accrued liabilities of $110,000.

            We used $56,000 of net cash in investing activities during the three months ended March 31, 2013 compared to net cash used of $27,000 in 2012. The cash used in investing in 2013 and 2012 was for the purchase and development of oil and gas properties.

Our net cash provided by financing activities was $245,000 for the three months ended March 31, 2013 compared to net cash provided of $806,000 for the same period in 2012. For the three months ended March 31, 2013, net cash inflows from financing activities were a result of the issuance of notes, net of fees, of $966,000, of which $500,000 was to related parties, offset by payments against outstanding notes of $696,000, of which $42,000 was to related parties, and payments of deferred financing costs of $25,000. For the three months ended March 31, 2012, net cash inflows from financing activities were a result of the issuance of notes, net of fees, of $1,191,000, of which $250,000 was to related parties, offset by payments against outstanding notes of $320,000, and payments of deferred financing costs of $65,000.

            We have no other commitments to expend additional funds for drilling activities for the rest of 2013.

How We Have Financed Our Activities

            We entered into a financing agreement with TCA Global Credit Master Fund, LP during the first quarter of 2012. Proceeds of the financing were used for the drilling and completion of wells included in the Company’s inventory of proved undeveloped reserves (“PUD”). We have a commitment for a total amount of $3.0 million, before fees and expenses, through the issuance of a series of $1.0 million debentures. The debenture is secured by a first priority, perfected security interest and mortgage in oil and gas leases and properties. At no time shall the investor funds advanced exceed 65% of the drilling and completion cost of the PUD’s with the balance provided by our generated funds. During the year ended December 31, 2012, three tranches of TCA debt totaling $3 million were issued. The total note principal balance of TCA debts and related unamortized debt discounts on December 31, 2012 are $1,608,973 and $186,791, respectively.

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            In March 2013, the fourth tranche TCA debt of $1 million was issued. The debt is due on March 1, 2014 and is payable monthly with a mandatory redemption fee equal to 7% and interest of 5%. Out of $1 million debt proceeds, $500,000 was withheld for the future development of wells, $34,050 was paid to TCA for various fees, and net proceeds of $465,950 were received by the Company. The Company will also pay TCA $100,000 in cash in lieu of a stock bonus related to the issuance of the note. Fees paid and to be paid in cash totaling $134,050 to TCA Global Credit Master Fund, LP were recorded as a debt discount.

            On July 31, 2012, we received final approval from the TSX Venture Exchange for the issuance of 7,000,000 shares of our common stock in a private placement. All such shares were sold at $0.06 in the private placement, resulting in gross proceeds of $420,000.

            On August 13, 2012, we entered into a Securities Purchase Agreement with Palo Verde Acquisitions, LLC (“Palo Verde”), pursuant to which we sold to Palo Verde (1) a $2,000,000 12% unsecured Convertible Debenture due August 13, 2014 (the “First Palo Verde Debenture”) and (2) warrants to purchase up to 20,000,000 shares of our common stock at a purchase price of $0.23 per share and expiring on August 13, 2014. The aggregate consideration received by us from Palo Verde for the First Palo Verde Debenture and the 20 million warrants was $2,000,000.

            On December 31, 2012, we sold to Palo Verde (1) a $1,000,000 12% unsecured Convertible Debenture due December 31, 2014 (the “Second Palo Verde Debenture”) and (2) warrants to purchase up to 10,000,000 shares of our common stock at a purchase price of $0.23 per share and expiring on December 31, 2014. The aggregate consideration received by us from Palo Verde for the Second Palo Verde Debenture and the 10 million warrants was $1,000,000.

Future Capital Requirements and Resources

            At March 31, 2013, we do not have any available borrowing capacity under existing credit facilities and our current assets are $1,106,000 compared with current liabilities of $10.9 million. Our current liabilities include accounts payable, revenues payable, notes payable (a portion of which is past due), and other current obligations. We have substantial needs for funds to pay our outstanding payables and debt due during 2013. In addition, we have substantial need for capital to develop our oil and gas prospects. At March 31, 2013, we have no commitments for additional capital to fund drilling activities in 2013.

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            Since 2001, we have funded our capital expenditures and operating activities through a series of debt and equity capital-raising transactions, drilling participations and, during the last two quarters of 2004 and all of 2005 and 2006, through an increase in vendor payables and notes payable. It is our intention to raise additional capital through the sale of interests in our drilling activities or other strategic transaction; however, we currently have no firm commitment from any potential investors and such additional capital may not be available to us in the future. We expect that any capital expenditures for drilling purposes during 2013 will be funded from the sale of drilling participations and equity capital.

            Our business strategy requires us to obtain additional financing and our failure to do so can be expected to adversely affect our ability to grow our revenues, oil and gas reserves and achieve and maintain a significant level of revenues and profitability. There can be no assurance we will obtain this additional funding. Such funding may be obtained through the sale of drilling participations, joint ventures, equity securities or by incurring additional indebtedness. Without such funding, our revenues will continue to be limited and it can be expected that our operations will not be profitable. In addition, any additional equity funding that we obtain may result in material dilution to the current holders of our common stock.

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

            With the exception of historical matters, the matters we discussed below and elsewhere in this Report are “forward-looking statements” as defined under the Securities Exchange Act of 1934, as amended that involve risks and uncertainties. The forward-looking statements appear in various places including under the headings Item 1. Financial Statements and Item 2. Management’s Discussion and Analysis or Plan of Operation. These risks and uncertainties relate to

•        our ability to raise capital and fund our oil and gas well drilling and development plans,

•        our ability to fund the repayment of our current liabilities, and

•        our ability to negotiate and enter into any agreement relating to a merger or sale of all or substantially all our assets.

            These risks and uncertainties also relate to our ability to attain and maintain profitability and cash flow and continue as a going concern, our ability to increase our reserves of oil and gas through successful drilling activities and acquisitions, our ability to enhance and maintain production from existing wells and successfully develop additional producing wells, our access to debt and equity capital and the availability of joint venture development arrangements, our ability to remain in compliance with the terms of any agreements pursuant to which we borrow money and to repay the principal and interest when due, our estimates as to our needs for additional capital and the times at which additional capital will be required, our expectations as to our sources for this capital and funds, our ability to successfully implement our business strategy, our ability to maintain compliance with covenants of our loan documents and other agreements pursuant to which we issue securities or borrow funds and to obtain waivers and amendments when and as required, our ability to borrow funds or maintain levels of borrowing availability under our borrowing arrangements, our ability to meet our intended capital expenditures, our statements and estimates about quantities of production of oil and gas as it implies continuing production rates at those levels, proved reserves or borrowing availability based on proved reserves and our future net cash flows and their present value.

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            Readers are cautioned that the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2012 and other reports filed with the Commission, as well as those described elsewhere in this Report, in some cases have affected, and in the future could affect, our business plans and actual results of operations and could cause our actual consolidated results during 2013 and beyond, to differ materially from those expressed in any forward-looking statements made by or on our behalf.

            Our common shares have no trading market in the United States, and there can be no assurance as to the liquidity of any markets that may develop for our common shares, the ability of the holders of common shares to sell their common shares in the United States or the price at which holders would be able to sell their common shares. Any future trading prices of the common shares will depend on many factors, including, among others, our operating results and the market for similar securities.

ITEM 4.        CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

            As of the end of the period covered by this report on Form 10-Q, our Chief Executive Officer and our Chief Financial Officer performed an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

             Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of the end of the period covered by this report on Form 10-Q that our disclosure controls and procedures are not effective to provide reasonable assurance that: (i) information required to be disclosed by us in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure by us; and (ii) information required to be disclosed by us in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In our evaluation of disclosure controls and procedures as of December 31, 2012, we concluded there were material weaknesses in our internal controls over financial reporting which we viewed as an integral part of our disclosure controls and procedures. See our discussion at "Item 9A (T) - Controls and Procedures" on Form 10-K for the year ended December 31, 2012.

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            In order to mitigate these material weaknesses to the fullest extent possible, all financial reports are reviewed by the CEO and CFO. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient staff and implement appropriate procedures to address the segregation of duties and improve the closing process.

            There were no significant changes in our internal control over financial reporting identified in connection with the evaluation that occurred during the last fiscal quarter that have materially affected or that are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 6.        Exhibits

____________________________
⁽¹⁾ Filed or furnished herewith.

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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.

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