XOTC:NAEY Quarterly Report 10-Q Filing - 1/31/2012

Effective Date 1/31/2012

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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: January 31, 2012

 

File No. 000-52522

 

North American Energy Resources, Inc.

(Name of small business issuer in our charter)

 

 

Nevada 98-0550352

(State or other jurisdiction of (IRS Employer

incorporation or organization) Identification No.)

 

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 [ ]

 

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

 

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

 

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ X ]

 

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

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 21,554,945 shares of common stock outstanding as of February 15, 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, 2011.

 

                     
            TABLE OF CONTENTS    
                     
                     
                    Page
PART I - FINANCIAL INFORMATION (UNAUDITED)          
                     
Item 1: Condensed Consolidated Financial Statements         3
                     
Item 2:   Management's Discussion and Analysis of Financial Condition and Results of Operations 17
                     
Item 3:   Quantitative and Qualitative Disclosures About Market Risk     21
                     
Item 4:   Controls and Procedures             21
                     
                     
PART II - OTHER INFORMATION             22
                     
Item 1:   Legal Proceedings                
                     
Item 1A:  Risk Factors                
                     
Item 2:  Unregistered Sales of Equity Securities and Use of Proceeds      
                     
Item 3:   Defaults upon Senior Securities            
                     
Item 4:   Submission of Matters to a Vote of Security Holders        
                     
Item 5:   Other Information                
                     
Item 6:   Exhibits                  

 

 

 

 
 

PART I - Financial Information

Item 1: Financial Statements

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY  
(Development Stage Companies)      
Condensed Consolidated Balance Sheets      
January 31, 2012 (Unaudited) and April 30, 2011      
           January 31,     April 30, 
          2012   2011
ASSETS          
Current assets:        
  Cash and cash equivalents            58,691                 716
  Accounts receivable                 150    - 
  Prepaid expenses  -               8,664
    Total current assets            58,841              9,380
Properties and equipment, at cost:      
  Proved oil and natural gas properties and equipment              2,358              2,358
    Accumulated depreciation and amortization                (141)                  (52)
      Total properties and equipment              2,217              2,306
    Total assets            61,058             11,686
               
LIABILITIES AND STOCKHOLDERS' DEFICIT      
Current liabilities:        
  Accounts payable      
    Trade             118,076             30,860
    Oil and gas proceeds due to others  -                  368
    Related parties            18,427             54,187
  Accrued expenses           214,901                 859
  Convertible note payable - officer           375,181    - 
  Convertible note payable            38,678             38,678
    Total current liabilities           765,263           124,952
  Commitments and contingencies      
               
  Stockholder' 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 issued and outstanding      
      at January 31, 2012 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      (3,563,957)       (2,973,018)
      Total stockholders' deficit         (704,205)         (113,266)
        Total liabilities and stockholders' deficit            61,058             11,686
               
  See accompanying notes to condensed consolidated financial statements    

 

 
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY    
(Development Stage Companies)        
Statements of Condensed Consolidated Operations      
For the three months ended January 31, 2012 and 2011      
(Unaudited)          
               
          2012   2011
               
Oil and natural gas sales                     326                 322
    Total revenues                     326                 322
Costs and Expenses        
  Oil and natural gas production taxes                       23                  23
  Oil and natural gas production expenses                     244                 171
  Depreciation and amortization                       19                  52
  Non-cash compensation    -             53,500
  General and administrative expense, net of      
    operator's overhead fees               354,451            23,672
    Total costs and expenses               354,737            77,418
Loss from operations             (354,411)           (77,096)
Other income (expense):        
  Interest expense                 (4,486)            (5,500)
    Total other income (expense)                 (4,486)            (5,500)
    Net loss             (358,897)           (82,596)
               
Net loss per common share, basic and diluted (0.02)   0.00
               
Weighted average common shares outstanding        21,554,945      20,029,232
               
See accompanying notes to condensed consolidated financial statements      

 

 

 

 
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY        
Statements of Condensed Consolidated Operations          
For the nine months ended January 31, 2012 and 2011          
  and the period from inception (August 18, 2006) through January 31, 2012        
(Unaudited)            
                   Inception 
                   (August 18, 2006) 
                   through 
                   January 31, 
          2012   2011   2012
                   
Oil and natural gas sales              1,572                4,366               45,466
Pipeline fees    -     -                  2,450
    Total revenues              1,572                4,366               47,916
Costs and expenses            
  Oil and natural gas production taxes                 113                  312                 3,272
  Oil and natural gas production expenses                 750                8,568             107,867
  Depreciation and amortization                   89                1,530               16,205
  Asset impairment    -               46,894             910,714
  Non-cash compensation    -             266,254           1,414,291
  Bad debt expense    -                 7,828               86,000
  General and administrative expense, net of            
    operator's overhead fees           595,916              51,757             990,616
    Total costs and expenses           596,868            383,143           3,528,965
Loss from operations         (595,296)          (378,777)        (3,481,049)
Other income (expense):            
  Other income              9,619    -                  9,939
  Interest income    -     -                    900
  Interest expense             (5,262)            (36,680)             (93,747)
    Total other income (expense)              4,357            (36,680)             (82,908)
    Net loss         (590,939)          (415,457)        (3,563,957)
                   
Net loss per common share, basic and diluted   (0.03)   (0.02)    
                   
Weighted average common shares outstanding      21,554,945        18,260,104    
                   
See accompanying notes to condensed consolidated financial statements          

 

 
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY        
(Development Stage Companies)                
Consolidated Statements of Stockholders' Deficit              
For the Period from inception (August 18, 2006) through January 31, 2012       Intrinsic
(Unaudited)           Additional   Value of
         Common Stock   Paid in   Common
    Date Shares   Amount   Capital   Stock Options
                   
BALANCE August 18, 2006   -   -   -   -
Common stock 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   1
Accounts payable paid with common stock 10/14/2008 90   -   9,016   -
Amortized intrinsic value of options 10/31/2008 -   -   -   17,091
Cancel common stock options 11/5/2008 -   -   (188,055)   188,055
Common stock issued for compensation 11/7/2008 100   -   6,250   -
Common stock issued for accounts payable 11/7/2008 60   1   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            

 

 
 

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 January 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
Cancle 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          

 

 
 

 

 

 

 

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 January 31, 2012        
(Unaudited)                  
                       
                       Intrinsic 
                   Additional     Value of  
          Common stcok    Pain 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 non-producing property 9/25/2009       350,000           350       192,150    - 
  consulting agreement 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         33,550    - 
  consulting agreement- director fees 2/24/2010       150,000           150         11,850    - 
  consulting agreement- 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 January 31, 2012     21,554,945      21,555    2,838,197    - 
                       
                       (Continued) 
                       
See accompanying notes to consolidated financial statements              

 

 
 

 

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 January 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 non-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 abailable-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 abailable-for-sale                
  securities transaction    -              1,000    -             1,000
Amortize officer compensation          12,129    -     -            12,129
Convertible note payable forgiven by realted 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        -     -        (590,939)       (590,939)
BALANCE January 31, 2012    -     -     (3,563,957)       (704,205)
                       
                       
                       
See accompanying notes to condensed consolidated financial statements        

 

 
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY          
(Development stage Companies)          
Statements of Condensed Consolidated Cash Flows          
  Nine months ended January 31, 2012 and 2011, and the period from inception (August 18, 2006) through January 31, 2012        
(Unaudited)                
                     Inception 
                    18-Aug-06
                     through 
                     January 31, 
            2012   2011   2012
                     
Operating activities            
Net loss                (590,939)        (415,457)     (3,563,957)
Adjustments to reconcile net loss to net cash used in          
  operating activities:          
    Depreciation and amortization                  89             1,530           16,205
    Non-cash compensation  -          266,254       1,414,291
    Bad debt expense  -              7,828         104,243
    Asset impairment  -            46,894         910,714
    Changes in operating assets and liabilities:          
      Accounts receivable              (150)               321          (96,207)
      Interest accrued on loan to related party  -     -               (900)
      Prepaid expenses and other asstes             8,664             5,982           12,232
      Accounts payable            87,216           41,060         385,963
      Accrued expenses          214,042           36,689         301,016
      Realted party advances for working capital          (35,760)    -                 434
      Oil and gas proceeds due others              (368)          (4,622)    - 
      Advances (repayments) - joint interest owners  -           (1,226)            (9,643)
        Net cash from (used in) operating activities        (317,206)         (14,747)        (525,609)
Investing activities            
Payments for oil and natural gas properties and          
  equipment      -           (4,893)        (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  -           (4,893)          (46,481)
Financing activities            
Loan proceeds      -            17,500           48,750
Shareholder contribution  -     -            50,000
Loans from related parties          375,181    -          506,031
Sale of common stock    -     -            26,000
        Net cash provided by financing activities          375,181           17,500         630,781
Net increase (decrease) in cash and cash ewuibalents            57,975          (2,140)           58,691
Cash and cash equivalents, beginning of period                716             3,026    - 
Cash and cash equivalents, end of period            58,691               886           58,691
                     (Continued) 
See accompanying notes to condensed consolidated financial statements          

 

 
 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY        
(Development stage Companies)          
Statements of Condensed Consolidated Cash Flows, Continued          
  Nine months ended January 31, 2012 and 2011, and the period from inception (August 18, 2006) through January 31, 2012        
(Unaudited)              
                     Inception 
                     (August 18, 2006) 
                     through 
                     January 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 eceivable  -     -          76,000
      Oil and gas properties  -     -         303,670
      Interest in pipeling  -     -         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  -     556,248        591,778
      Consulting agreements  -     -         911,100
      Un-evaluated 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         38,678
    Convertible note payable and accrued interest forgiven by related party  -       57,920         57,920
                     
See accompanying notes to condensed consolidated financial statements          

 

 
 

 

 

 

NORTH AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY

(Development Stage Companies)

Notes to Condensed Consolidated Financial Statements

January 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 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.

 

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).

 

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 January 31, 2012 and April 30, 2011 the Company had a working capital deficit of $706,422 and $115,572, respectively. The Company has an accumulated deficit of $3,563,957 which includes a loss of $590,939 during the nine months ended January 31, 2012. 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. 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 January 31, 2012, the Company’s CEO had loaned the Company $375,181.

 

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.

 

Reclassification

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

 

 

          January 31, 2012   April 30, 2011
               
Clinton W. Coldren, Chief Executive Officer $      -   $50,769
Alan G. Massara, Chief Financial Officer 18,427   3,418
          18,427   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 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.

 

Accrued expenses include the following:

 

      January 31, 2012   April 30, 2011
Accrued Compensation 208,750   -
Accrued interest due CEO 4,096   -
Amount due related parties 212,846   -
Accrued interest - other 1,649   483
Asset retirement obligation 406   376
      214,901   859

 

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 has 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.

 

 

Note 3: Stockholder’s equity

 

PREFERRED STOCK

 

The Company has 100,000,000 shares of its $0.001 par value preferred stock authorized. At January 31, 2012 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 January 31, 2012 and April 30, 2011 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 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 January 31, 2012. At January 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 July 6, 2012 with interest accruing at 4% per annum. The note is convertible into the Company's common stock at $0.10 per share.

 

 

 

 

 

 

 
 

 

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 JANUARY 31, 2012 AND 2011

 

Revenues during the three months ended January 31, 2012 and 2011 were as follows:

 

      2012   2011
Oil production -   -
Gas production $326   $322
  Total revenue $326   $322
           

 

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. The revenue for each period is from this new property.

 

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

 

        2012   2011
Oil and natural gas production taxes $23   $23
Oil and natural gas production expenses $244   $171
Depreciation and amortization  $19   $52
Non-cash compensation   -   $53,500
Other general and administrative expense,    
  net of operator's overhead fee $354,451   $23,672
  Total     $354,737   $77,418
             

 

The gas well has produced a small profit whereas the operating costs of the oil production, which was sold effective October 1, 2010, always exceeded its revenue.

 

Non-cash compensation declined primarily due to completion of the amortization of consulting agreements in 2011.

 

Other general and administrative expense, net of operator's overhead fee increased in the 2012 period from $23,672 in 2011 to $354,451 in 2012, primarily due to new costs associated with the due diligence and planned property acquisition and the new office location. Rent increased $23,544; officer compensation increased $118,750; legal and professional costs increased $176,706; travel and entertainment increased $25,278; and other costs associated with maintaining a separate office also increased.

 

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

 

        2012   2011
Other income     -   -
Interest expense     ($4,486)   ($5,500)
  Total     ($4,486)   ($5,500)
             

 

COMPARISON OF NINE MONTHS ENDED JANUARY 31, 2012 AND 2011

 

Revenues during the nine months ended January 31, 2012 and 2011 were as follows:

 

        2012   2011
Oil production     -   $4,044
Gas production     $1,572   $332
  Total revenue   $1,572   $4,366
             

 

 

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. The gas production is from this well.

 

Costs and expenses during the nine months ended January 31, 2012 and 2011 were as follows:

 

        2012   2011
Oil and natural gas production taxes $113   $312
Oil and natural gas production expenses $750   $8,568
Depreciation and amortization $89   $1,530
Asset impairment     -   $46,894
Non-cash compensation   -   $266,254
Bad debt expense     -   $7,828
Other general and administrative expenses,    
  net of operator's overhead fee $595,916   $51,757
  Total     $596,868   $383,143
             

 

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.

 

The Company recorded an asset impairment charge of $46,894 for the difference between the sales price of its remaining assets in 2011 and the carrying value of the assets at the time of the sale.

 

Non-cash compensation declined primarily due to completion of the amortization of consulting agreements in 2011.

 

Other general and administrative expense, net of operator's overhead fee increased in the 2012 period from $51,757 in 2011 to $595,916 in 2012, primarily due to new costs associated with the due diligence costs and preliminary financing costs associated with the planned purchase. Rent increased $51,267; officer compensation increased $208,750; legal and professional costs increased $251,141; travel and entertainment increased $34,985; and other costs associated with maintaining a separate office also increased.

 

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

 

        2012   2011
Other income     $9,619   -
Interest expense     -$5,262   ($36,680)
  Total      $4,357   ($36,680)
             

 

 

The interest bearing debt decreased during the 2012 period as compared to the 2011 period primarily due to the exchange of common stock for convertible notes payable in December 2010.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Historical information

At January 31, 2012, we had $58,691 in cash, $150 in accounts receivable and a working capital deficit of $706,422. Comparatively, we had cash of $716 and a working capital deficit of $115,572 at April 30, 2011.

 

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

 

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 January 31, 2012, our CEO has loaned $375,181 for this purpose. 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

We will 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.

 

CASH FROM OPERATING ACTIVITIES

 

Cash used in operating activities was $317,206 for the nine-month period ended January 31, 2012 and cash used in operations was $14,747 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 capital costs of $4,893 in the nine-month period ended January 31, 2011 and none in the 2012 period.

 

GOING CONCERN

 

We have not attained profitable operations and are dependent upon obtaining substantial debt and equity financing to complete an acquisition, which we have not yet identified. 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. The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

None.

 

 
 

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

 

 
 

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

 

 

 
 

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: March 5, 2012

 

 

By: /s/ Alan G. Massara

President and Chief Financial Officer

 

 

XOTC:NAEY Quarterly Report 10-Q Filling

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XOTC:NAEY Quarterly Report 10-Q Filing - 1/31/2012
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Title |  Date |  Author |  Collection |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Popularity |  Our Choices Title |  Date |  Company |  Symbol |  Interest |  Popularity

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