XOTC:AMZG Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

XOTC:AMZG (): Fair Value Estimate
Premium
XOTC:AMZG (): Consider Buying
Premium
XOTC:AMZG (): Consider Selling
Premium
XOTC:AMZG (): Fair Value Uncertainty
Premium
XOTC:AMZG (): Economic Moat
Premium
XOTC:AMZG (): Stewardship
Premium
 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

 

 

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2012

 

¨ 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:  000-50906

  

 

 

AMERICAN EAGLE ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada   20-0237026
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

2549 West Main Street, Suite 202, Littleton, Colorado   80120  
(Address of principal executive offices)   (Zip Code)  

 

(303) 798-5235
(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 Exchange Act 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 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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

45,842,778 shares of common stock issued and outstanding at May 15, 2012.

 

 
 

 

INDEX

 

A Note About Forward Looking Statements 1
   
PART I - FINANCIAL INFORMATION  
   
Item 1 – Condensed Consolidated Financial Statements (Unaudited) 2
   
Condensed Consolidated Balance Sheets as of March 31, 2012 (Unaudited) and December 31, 2011 F-2
   
Condensed Consolidated Statements of Comprehensive Income for the Three-Month Periods Ended March 31, 2012 and 2011 (Unaudited) F-3
   
Condensed Consolidated Statements of Stockholders’ Equity for the Three-Month Period Ended March 31, 2012) and the Year Ended
December 31, 2011 (Unaudited)
F-5
   
Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2012 and 2011 (Unaudited) F-6
   
Notes to the Condensed Consolidated Financial Statements (Unaudited) F-7
   
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations 3
   
Item 4 - Controls and Procedures 14
   
PART II - OTHER INFORMATION  
   
Item 6 – Exhibits 15
   
Signatures 19

 

 
 

 

A Note About Forward Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations.  These statements may be identified by their use of words like “plans,” “expect,” “aim,” “believe,” “projects,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and other expressions that indicate future events and trends.  All statements that address expectations or projections about the future, including statements about our business strategy, expenditures, and financial results, are forward-looking statements.  We believe that the expectations reflected in such forward-looking statements are accurate.  However, we cannot assure you that such expectations will occur.

 

Actual results could differ materially from those in the forward-looking statements due to a number of uncertainties including, but not limited to, those discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations.  Factors that could cause future results to differ from these expectations include general economic conditions; further changes in our business direction or strategy; competitive factors; market uncertainties; and an inability to attract, develop, or retain consulting or managerial agents or independent contractors.  As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment.  To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and accordingly, no opinion is expressed on the achievability of those forward-looking statements.  No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.  You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report.  Except as required by law, we are not obligated to release publicly any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events.

 

1
 

  

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

 

American Eagle Energy Corporation

 

Condensed Consolidated Financial Statements

 

As of March 31, 2012, December 31, 2011 and

For the Three-Month Periods Ended March 31, 2012 and 2011

 

2
 

 

American Eagle Energy Corporation

 

Index to the Condensed Consolidated Financial Statements

 

As of March 31, 2012, December 31, 2011 and

For the Three-Month Periods Ended March 31, 2012 and March 31, 2011

 

Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011(Unaudited) F-2
   
Condensed Consolidated Statements of Income and Comprehensive Income for the Three-Month Periods Ended March 31, 2012 and 2011 (Unaudited) F-3
   
Condensed Consolidated Statements of Stockholders’ Equity for the Three-Month Period Ended March 31, 2012) and the Year Ended December 31, 2011 (Unaudited) F-5
   
Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2012 and 2011 (Unaudited) F-6
   
Notes to the Consolidated Financial Statements (Unaudited) F-7

 

F-1
 

 

American Eagle Energy Corporation

 

Condensed Consolidated Balance Sheets

 

As of March 31, 2012 and December 31, 2011

  

   March 31,   December 31 
   2012   2011 
Current assets:          
Cash  $7,125,082   $12,151,309 
Trade receivables   3,925,224    3,105,079 
Receivables from related parties   274,645    314,521 
Prepaid expenses   89,197    45,690 
           
Total current assets   11,414,148    15,616,599 
           
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $163,066 and $156,744, respectively   112,171    19,823 
Oil and gas properties, under the full cost method – subject to amortization, net of accumulated depletion of $473,714 and $183,238, respectively   23,698,157    15,798,307 
Oil and gas properties, under the full cost method – not subject to amortization   7,663,223    7,295,215 
Marketable securities   1,086,882    1,107,721 
Marketable securities of related party   250,228    146,713 
Restricted cash   51,500    51,500 
Deposits   5,345    5,345 
           
Total assets  $44,281,654   $40,041,223 
           
Current liabilities:          
           
Accounts payable  $11,529,320   $6,002,204 
Amounts due to working interest partners   2,233,267    2,233,267 
Accrued income taxes   375,137    1,460,137 
           
Total current liabilities   14,137,724    9,695,608 
           
Asset retirement obligation   35,500    34,628 
Deferred taxes   4,272,643    4,552,864 
Total liabilities   18,445,867    14,283,100 
           
Commitments and contingencies (Note 8)   -    - 
           
Stockholders’ equity:          
Common stock, $.001 par value, 194,444,444 shares authorized, 45,842,782 and 45,588,948 shares outstanding   45,843    45,589 
Additional paid-in capital   26,258,359    25,948,311 
Accumulated other comprehensive income   306,144    180,447 
Accumulated deficit   (774,559)   (416,224)
           
Total stockholders’ equity   25,835,787    25,758,123 
           
Total liabilities and stockholders’ equity  $44,281,654   $40,041,223 

 

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

 

F-2
 

 

American Eagle Energy Corporation

 

Condensed Consolidated Statements of Income and Comprehensive Income

 

For the Three-Month Periods Ended March 31, 2012 and 2011

 

   2012   2011 
         
Oil and gas sales  $1,225,579   $39,103 
           
Operating expenses:          
Oil and gas operating expenses   406,556    48,532 
General and administrative expenses   1,178,692    555,982 
Depreciation, depletion and amortization   296,797    15,559 
Total operating expenses   1,882,045    620,073 
           
Total operating loss   (656,466)   (580,970)
           
Interest income   3,403    1,368 
Dividend income   17,281    15,056 
Interest expense   (182)   - 
           
Loss before taxes   (635,964)   (564,546)
           
Income tax (expense) benefit   277,629    - 
           
Net loss  $(358,335)  $(564,546)
           
Net loss per common share:          
Basic and diluted  $(0.01)  $(0.06)
           
Weighted average number of shares outstanding:          
Basic and diluted   45,639,327    9,112,405 

 

F-3
 

 

American Eagle Energy Corporation

 

Condensed Consolidated Statements of Income and Comprehensive Income

 

For the Three-Month Periods Ended March 31, 2012 and 2011

 

   2012   2011 
         
Net loss  $(358,335)  $(564,546)
           
Other comprehensive (loss) income:          
Unrealized gains on securities, net of tax   125,697    74,193 
           
Comprehensive loss  $(232,638)  $(490,353)

 

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

 

F-4
 

  

American Eagle Energy Corporation

 

Consolidated Statements of Stockholders’ Equity

 

For the Three-Month Period Ended March 31, 2012 and the Year Ended December 31, 2011

 

               Accumulated         
           Additional   Other       Total 
   Common Stock   Paid-In   Comprehensive   Accumulated   Stockholders 
   Shares   Amount   Capital   Income   Deficit   Equity 
                         
Balance, December 31, 2010   9,112,405   $9,112   $9,231,199   $415,463   $(4,870,125)  $4,785,649 
                               
Shares issued during acquisition   36,476,543    36,477    16,686,498    -    -    16,722,975 
Stock based compensation   -    -    30,614    -    -    30,614 
Unrealized loss on securities, net of tax   -    -    -    (235,016)   -    (235,016)
Net income   -    -    -    -    4,453,901    4,453,901 
                               
Balance, December 31, 2011   45,588,948    45,589    25,948,311    180,447    (416,224)   25,758,123 
                               
Stock based compensation   -    -    165,677    -    -    165,677 
Shares issued in private placement   100,000    100    109,900    -    -    110,000 
Shares issued from exercise of stock options   153,834    154    34,471    -    -    34,625 
Unrealized gains on securities, net of tax   -    -    -    125,697    -    125,697 
Net loss   -    -    -    -    (358,335)   (358,335)
                               
Balance, March 31, 2012   45,842,782   $45,843   $26,258,359   $306,144   $(774,559)  $25,835,787 

 

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

 

F-5
 

 

American Eagle Energy Corporation

 

Condensed Consolidated Statements of Cash Flows

 

For the Three-Month Periods Ended March 31, 2012 and 2011

 

   2012   2011 
         
Cash flows provided by operating activities:          
           
Net loss  $(358,335)  $(564,546)
Adjustments to reconcile net loss to net cash provided by operating activities:          
Non-cash transactions:          
Stock-based compensation   165,677    - 
Depreciation, depletion and amortization   296,797    15,559 
Accretion of discount on asset retirement obligation   872    349 
Provision for deferred income taxes   (280,221)   - 
Foreign currency translation losses   43,021    - 
Changes in operating assets and liabilities:          
(Increase) decrease in prepaid expenses   (43,507)   16,439 
(Increase) decrease in trade receivables   (820,144)   111,896 
Increase in accounts payable   5,527,116    568,753 
Decrease in income taxes payable   (1,085,000)   - 
Decrease in receivables from related parties   39,876    594,658 
           
Net cash provided by operating activities   3,486,152    743,108 
           
Cash flows used for investing activities:          
           
Additions to oil and gas properties   (8,558,334)   (851,673)
Additions to office equipment and leasehold improvements   (98,670)   (287)
Proceeds from sale of office equipment   -    700 
           
Net cash used for investing activities   (8,657,004)   (851,260)
           
Cash flows provided by financing activities:          
           
Proceeds from sale of stock to a director   110,000    - 
Proceeds from the exercise of stock options   34,625    - 
           
Net cash provided by financing activities   144,625    - 
           
Net decrease in cash   (5,026,227)   (108,152)
           
Cash - beginning of period   12,151,309    2,400,362 
           
Cash - end of period  $7,125,082   $2,292,210 

 

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

 

F-6
 

  

American Eagle Energy Corporation

 

Notes to the Condensed Consolidated Financial Statements

 

As of March 31, 2012, December 31, 2011 and

For the Three-Month Periods Ended March 31, 2012 and 2011

  

1.Description of Business

 

American Eagle Energy Corporation (the “Company”) was incorporated in the state of Nevada in March 2003 under the name Golden Hope Resources. In July 2005, the Company changed its name to Eternal Energy Corp. In December 2011, the Company changed its name to American Eagle Energy Corporation, in connection with its acquisition of, and merger with, American Eagle Energy Inc. (“AEE Inc.”). See Note 3.

 

The Company engages in the acquisition, exploration, development and producing of oil and gas properties. At March 31, 2012, the Company had entered into participation agreements related to oil and gas exploration projects in the Spyglass Property and West Spyglass Prospect, located in Divide County, North Dakota, and Sheridan County, Montana and the Hardy Property, located in southeastern Saskatchewan, Canada. In addition, the Company owns working interests in mineral leases located in Richland, Roosevelt and Toole Counties in Montana.

 

2.Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, American Eagle Energy Inc., EERG Energy ULC (Canadian) and AEE Canada Inc. (Canadian). All material intercompany accounts, transactions and profits have been eliminated.

 

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 8 of SEC Regulation S-X. The principles for interim financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The consolidated financial statements included herein are unaudited; however, in the opinion of management, they contain all normal recurring adjustments necessary for a fair statement of the condensed results for the interim periods. Operating results for the three-month period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

 

In December 2011, the Company announced a 1.0-for-4.5 reverse stock split. As a result, all share and per share information included in these consolidated financial statements has been presented on a post-reverse-split basis.

 

F-7
 

 

Certain amounts presented in the prior year financial statements have been renamed or reclassified in order to conform to the current period presentation. Such reclassifications had no effect on net loss.

 

Concentration of Credit Risk

 

At March 31, 2012, the Company had $6,877,069 on deposit that exceeded the United States (FDIC) federally insurance limit of $250,000 per bank.

 

Foreign Currency Adjustments

 

The functional currency of the Company’s Canadian subsidiaries is the US Dollar. All transactions are translated using historical exchange rates. Gains and losses resulting from foreign currency transactions are included in the Company’s results of operations. The Company’s wholly-owned subsidiary, EERG Energy ULC, which holds title to the Company’s Canadian assets and operates the Hardy Property wells, routinely, conducts transactions denominated in Canadian Dollars. The Company recognized exchange losses totaling $45,020 and $6,947 for the three-month periods ended March 31, 2012 and 2011, respectively.

 

Restricted Cash

 

At March 31, 2012 and December 31, 2011, the Company had $51,500 of restricted cash. The restricted cash consists of cash bonds required by the State of North Dakota in order to pursue future drilling in the state. The cash is held in custody by the issuing bank in the form of certificates of deposit and is restricted as to withdrawal or use. Interest income earned from the certificates of deposit is paid to the Company upon maturation of the certificates of deposit. The certificates of deposit have six-month terms. However, it is the Company’s intention to renew the certificates of deposit upon maturation and to leave the cash bond in place for the foreseeable future. Accordingly, the restricted cash has been classified as a non-current asset.

 

Receivables

 

At March 31, 2012, the Company has determined that all receivable balances are fully collectible and, accordingly, no allowance for doubtful accounts has been recorded.

 

Stock-Based Compensation

 

The Company measures compensation cost for all stock-based awards at fair value on the date of grant and recognizes compensation expense in its statements of operations over the service period that the awards are expected to vest. The Company has elected to recognize compensation cost for all options with graded vesting on a straight-line basis over the vesting period of the entire option. The Company recognized stock-based compensation expense of $165,677 and $0 for the three-month periods ended March 31, 2012 and 2011, respectively.

 

F-8
 

  

Fair Value of Financial Instruments

 

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Hierarchy Levels 1, 2 or 3 are terms for the priority of inputs to valuation techniques used to measure fair value. Hierarchy Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Hierarchy Level 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability. Hierarchy Level 3 inputs are inputs that are not observable in the market.

 

The fair value measurements of the Company’s financial instruments at March 31, 2012 and December 31, 2011 were as follows:

 

March 31, 2012  Level 1   Level 2   Level 3   Total 
Cash & equivalents  $7,125,082   $-   $-   $7,125,082 
Marketable securities   1,086,882    -    -    1,086,882 
Marketable securities – related party   -    250,228    -    250,228 
Restricted cash   51,500    -    -    51,500 
   $8,263,464   $250,228   $-   $8,513,692 
                     
December 31, 2011                    
Cash & equivalents  $12,151,309   $-   $-   $12,151,309 
Marketable securities   1,107,721    -    -    1,107,721 
Marketable securities - related party   -    146,713    -    146,713 
Restricted cash   51,500    -    -    51,500 
   $13,310,530   $146,713   $-   $13,457,243 

 

The Company uses level 2 inputs to determine the fair value of its marketable securities - related party, which consists of common stock and warrants in an entity which is traded on the Canadian National Stock Exchange. The warrants are valued using the Black Scholes Option Pricing Model which includes a calculation of historical volatility of the stock.

 

Basic and Diluted Loss Per Share

 

Basic loss per common share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed in the same way as basic earnings per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares had been issued that were dilutive. Diluted loss per common share for the three-month periods ended March 31, 2012 and 2011 is computed in the same way as basic loss per common share, as the inclusion of additional common shares that would be outstanding if all potential common shares had been issued would be anti-dilutive. See Note 9 for the calculation of basic and diluted weighted average common shares outstanding for the three-month periods ended March 31, 2012 and 2011.

 

F-9
 

 

3.Acquisition of American Eagle Energy Inc.

 

On December 20, 2011, the Company finalized its merger transaction with AEE Inc. Prior to the transaction, AEE Inc. operated as a publicly traded company with oil and gas holdings in North Dakota, Texas and southeastern Saskatchewan, Canada and was a working interest partner to the Company with respect to its Hardy Property and certain proved oil and gas properties and unproven oil and gas prospects located in North Dakota. The Company acquired AEE Inc. in order to leverage the two companies’ respective oil and gas holdings.

 

Pursuant to the terms of the Merger Agreement, the Company issued 36,476,543 shares of its common stock to acquire 100% of the then-outstanding shares of AEE Inc.’s common stock, which resulted in AEE Inc. becoming a wholly owned subsidiary of the Company. Immediately subsequent to the transaction, legacy AEE Inc. stockholders owned approximately 80% of the shares of the Company’s outstanding common stock, exclusive of outstanding options to purchase shares of the Company’s common stock and shares of AEE Inc.’s common stock. The shares of common stock that were issued in connection with the Company’s acquisition of AEE Inc. were registered with the SEC on November 11, 2011.

 

Despite the fact the AEE Inc.’s legacy stockholders held approximately 80% of the Company’s outstanding shares immediately following the merger, other factors present in the structure of the transaction resulted in the Company being determined to be the legal and acquiring entity. Accordingly, the Company’s historical financial statements have been prepared to give effect to the merger and to represent the historical operations of the Company through the merger date and the consolidated results of operations for the period from the merger date through December 31, 2011. The merger was structured to qualify as a “tax-free” transaction pursuant to Internal Revenue Service regulations.

 

The following table summarizes the consideration paid by the Company to acquire AEE Inc. and the net assets acquired:

 

Consideration given:    
     
36,476,543 shares of the Company’s common stock  $16,722,975 

 

F-10
 

 

Identifiable assets acquired and liabilities assumed:    
     
Financial assets acquired  $6,032,799 
Oil and gas properties acquired (amortizable)   12,781,348 
Oil and gas properties acquired (non-amortizable)   7,290,500 
Financial liabilities assumed   (9,381,672)
Net assets acquired  $16,722,975 

 

The amounts presented above are based on estimated fair market values and are subject to change as additional information becomes available. Because the common stock of both companies is very thinly traded, the Company estimated the fair market value of the shares issued based on an independent valuation.

 

The financial assets acquired included cash and cash equivalents of $5,598,916, trade and other receivables totaling $351,558, prepaid expenses totaling $7,468, marketable securities of a related party totaling $73,357 and restricted cash totaling $1,500.

 

The financial liabilities assumed consisted of trade payables and accrued liabilities totaling $3,300,491, amounts due to the Company totaling $251,081 and long-term asset retirement obligations totaling $17,314 and current income taxes payable totaling $975,000. In addition, the Company recorded a deferred tax liability in the amount of $4,837,786, which represents the future tax effects of the fair market value adjustments applied to the assets of AEE Inc. upon acquisition.

 

Supplemental Pro Forma Information (Unaudited)

 

Had the merger transaction occurred effective January 1, 2011, the Company’s consolidated financial statements for the three-month period ended March 31, 2011 would have been as follows (unaudited):

 

   Revenue   Net Loss 
         
2011 supplemental pro forma information  $75,143   $(961,059)

 

The following assumptions were used to prepare the supplemental pro forma financial information presented above:

 

·No adjustments were made to reflect economies of scale or other potential cost savings that may have been achieved had the merger occurred on January 1, 2011.

 

·No adjustments were made relative to alternative financing strategies that may have been implemented on a combined entity basis.

 

F-11
 

 

·The estimated fair market value of AEE Inc.’s oil and gas properties, subject to amortization, is based on the net present value of future cash flows from proven reserves as of December 31, 2011, as calculated by an independent, third-party engineering firm.

 

·The estimated fair market values of AEE Inc.’s oil and gas properties, not subject to amortization, were determined based on prevailing lease prices associated with acreage located in close proximity to the acquired properties and/or the Company’s recent acreage purchase transactions as of or near to December 20, 2011.

 

4.Marketable Securities

 

Available-for-sale marketable securities at March 31, 2012 and December 31, 2011 consist of the following:

 

       Gains in   Losses in 
       Accumulated   Accumulated 
   Estimated   Other   Other 
   Fair   Comprehensive   Comprehensive 
   Value   Income   Income 
March 31, 2012             
Noncurrent assets:               
Common stock  $1,086,882   $211,909   $- 
Common stock and warrants - related party   250,228    152,138    - 
Total available-for-sale marketable securities  $1,337,110   $364,047   $- 
                
December 31, 2011               
Noncurrent assets:               
Common stock  $1,107,721   $232,748   $- 
Common stock and warrants - related party   146,713    48,623    - 
Total available-for-sale marketable securities  $1,254,434   $281,371   $- 

  

The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market. Warrants to purchase common stock are valued using the Black-Scholes Option Pricing Model, with the following assumptions;

 

F-12
 

 

Risk-free interest rate   0.21%
Expected volatility of common stock   223%
Dividend yield  $0.00 
Expected life of warrants   0.5 years 

 

There were no sales of marketable securities for the years ended December 31, 2011 or 2010.

 

5.Equipment and Leasehold Improvements

 

The following is a summary of equipment and improvements, at cost, as of March 31, 2012 and December 31, 2011:

 

   March 31,   December 31, 
   2012   2012 
Office equipment  $129,700   $129,057 
Computer equipment   98,027      
Leasehold improvements   47,510    47,510 
           
Total equipment and improvements   275,237    176,567 
Less: accumulated depreciation and amortization   (163,066)   (156,744)
Equipment and improvements, net  $112,171   $19,823 

 

Depreciation and amortization expense for the three-month periods ended March 31, 2012 and 2011 was $6,322 and $2,526, respectively.

 

6.Oil and Gas Properties

 

As of March 31, 2012 and December 31, 2011, net costs included in the Company’s full-cost pool cost centers are as follows:

 

   March 31, 2012   December 31, 2011 
   Amortizable   Non-Amortizable   Amortizable   Non-Amortizable 
United States  $12,100,424   $7,663,223   $6,816,654   $7,295,215 
Canada   11,597,733    -    8,981,653    - 
Total  $23,698,157   $7,663,223   $15,798,307   $7,295,215 

 

Hardy Property

 

As of March 31, 2012, the Company owns a 50% working interest in approximately 4,300 net acres held by 6 leases, each of which is scheduled to expire on April 1, 2014.

 

F-13
 

 

The net capitalized cost of the Hardy Property as of March 31, 2012 and December 31, 2011 is summarized below:

 

   March 31,   December 31, 
   2012   2011 
Acquisition costs  $7,012,338   $7,012,338 
Development costs   4,958,852    2,152,553 
    11,971,190    9,164,891 
Cumulative depletion   (373,457)   (183,238)
Net capitalized cost  $11,597,733   $8,981,653 

 

The Company recognized depletion expense totaling $190,218 and $13,033 for the three-month periods ended March 31, 2012 and 2011, respectively, relative to the Hardy Property.

 

Spyglass Property

 

As of March 31, 2012, the Company owns a consolidated 50% working interest in approximately 11,521 net acres within the Spyglass Property, which is held by approximately 438 leases, with expiration dates ranging from August 2012 to February 2017.

 

Benrude Property

 

As of March 31, 2012, the Company owns a 100% working interest in approximately 743 net acres located in Roosevelt County, Montana. The acreage is held by 32 leases, with expiration dates ranging from December 2012 to July 2015. The Company is planning to conduct a 3-D seismic study of the Benrude Property during 2012, the results of which will be used to determine the Company’s strategy for pursuing the proved reserves assigned to the Benrude Property.

 

Exploratory Prospects

 

As of March 31, 2012, the Company has entered into participation agreements in a number of exploratory oil and gas prospects, all which are located within the continental United States. Unproven exploratory prospects are excluded from the amortizable cost pools. Each prospect’s costs are transferred into the amortization base on an ongoing basis as the prospect is evaluated and proved reserves are established or impairment is determined. The Company paid certain amounts upon execution of the agreements and is obligated to share in the drilling costs of certain exploratory wells being drilled in the prospects. The capitalized costs of the exploratory prospects are not subject to amortization because, to date, no proved reserves have been assigned to the individual prospects. The nature of the capitalized costs of the unproven prospects is as follows:

 

F-14
 

 

   YTD       Aggregate     
   March 31,       Through     
   2012   2011   2010   Total 
                 
Acquisition costs  $368,008   $9,442,209   $2,362,741   $12,172,958 
Exploration costs   -    520,967    206,203    727,170 
Reclassifications to the amortizable pool   -    (758,723)   -    (758,723)
Impairments and sales   -    (2,499,605)   (1,978,577)   (4,478,182)
Total capitalized costs of exploratory prospects  $368,008   $6,704,848   $590,367   $7,663,223 

 

Glacier Prospect

 

As of March 31, 2012, the Company owns an undivided 33% working interest in approximately 25,000 net acres located in Toole County, Montana. The acreage is held by approximately 400 leases, with expiration dates ranging from May 2012 to June 2015.

 

Because no proved reserves have yet been identified, the Glacier Prospect has been assigned to the full-cost pool that is not subject to amortization. Management is currently in the process of developing its exploration strategy relative to the Glacier Prospect. The Company is evaluating the results of nearby wells drilled by other companies in order to make a determination on the future of the Glacier Prospect. The Glacier Prospect is evaluated for impairment during each reporting period. There were no impairments evident as of March 31, 2012.

 

Sidney North Prospect

 

As of March 31, 2012, the Company owns a 100% working interest in oil and gas leases on approximately 399 net acres located in Richland County, Montana (the “Sidney North Prospect”). The acreage is held by approximately 14 leases, with expiration dates ranging from July 2013 to October 2015. The Company’s management is currently evaluating this prospect. No formal determination of the ultimate viability of this prospect is expected during the next twelve months. Management has reviewed the carrying value of this property and determined that no impairment exists as of March 31, 2012.

 

West Spyglass Prospect

 

As of March 31, 2012, the Company owns a 25% working interest in approximately 10,593 net acres located within the West Spyglass Prospect. The net acres are held by 283 leases, with expiration dates ranging from April 2012 to February 2017. The Company’s management is currently evaluating this prospect. No formal determination of the ultimate viability of this prospect is expected during the next twelve months. Management has reviewed the carrying value of this property and determined that no impairment exists as of March 31, 2012.

 

F-15
 

 

Exploratory Prospect Cost Summary

 

The following table summarizes the costs of the Company’s aggregate exploratory activities for all unproven prospects for the three-month period ended March 31, 2012 and the year ended December 31, 2011:

 

   March 31,   December 31, 
   2012   2011 
         
Balance at the beginning of the period  $7,295,215   $590,368 
Additions to exploratory costs   368,008    11,407,645 
Disposals   -    (2,499,605)
Reassignments to the amortizable pool   -    (2,203,193)
Balance at the end of the period  $7,663,223   $7,295,215 

 

7.Asset Retirement Obligations

 

The Company has recorded estimated asset retirement obligations for the future plugging and abandonment of wells within the Hardy Property. As of March 31, 2012 and December 31, 2011, the consolidated discounted value of the Hardy Property asset retirement obligations was $35,500 and $34,628, respectively.

 

The Company recognized accretion expense of $872 and $349 for the three-month periods ended March 31, 2012 and 2011 associated with the Hardy Property asset retirement obligations. The projected plugging dates for the Hardy 7-9 and Hardy 4-16 wells are December 2020 and June 2036, respectively.

 

8.Commitments and Contingencies

 

Drilling Obligations

 

The Company has the option to participate in the drilling of future exploratory wells related to its working interest in the Spyglass Property, should any such wells be proposed by the other working interest owners. As of March 31, 2012, the Company has elected to participate in 28 wells located within the Spyglass Property. As such, the Company is currently obligated to fund its non-operating working interest portion of the drilling and future operations costs of these wells. The Company’s working interests in the Spyglass wells range from 0.03% to 35.49%. Additional wells could be proposed in the future, at which time the Company may or may not elect to participate in such additional wells.

 

The Company intends to drill and operate a series of horizontal and/or vertical wells to be located within the Spyglass Property and has contracted for the use of a drilling rig for the foreseeable future. The Company is obligated to pay all costs related to the use of the drilling rig in connection with the drilling of four wells, one of which is currently being completed, one that is currently being drilled and two wells that are waiting to be drilled.

 

F-16
 

 

Employment Agreement

 

In January 2012, the Company amended its three-year employment agreements with its President and Chief Operating Officer and entered into new, two-year employment agreements with its Chief Financial Officer. In addition to employment benefits commensurate with their positions, the President, Chief Operating Officer and Chief Financial Officer will receive annual compensation totaling $204,000, $204,000 and $150,000, respectively. The employment agreements contain certain buy-out provisions should the Company experience a change of control prior to the expiration of their respective terms.

 

Lease Obligation

 

The Company currently leases office space pursuant to the terms of a three-year lease agreement. The original lease agreement was scheduled to expire on December 31, 2011. In September 2011, the Company amended the original lease agreement and extended the term of the lease through December 31, 2014. Future lease payments related to the Company’s office and equipment leases as of March 31, 2012 are as follows:

 

  Amount 
2012 (remainder)  $45,700 
2013   64,140 
2014   67,347 
2015   - 
2016   - 
Total  $177,187 

 

Rent expense for the three-month periods ended March 31, 2012 and 2011 totaled $24,838 and $19,418, respectively.

 

9.Loss Per Share

 

Because the Company recognized net losses for three-month periods ended March 31, 2012 and 2011, diluted loss per common share for the periods is computed in the same way as basic loss per common share, as the inclusion of additional common shares that would be outstanding if all potential common shares had been issued would be anti-dilutive. The following is a reconciliation of the number of shares used in the calculation of basic and diluted loss per share for the three-month periods ended March 31, 2012 and 2011:

 

F-17
 

 

   2012   2011 
         
Net income  $(358,335)  $(564,546)
           
Weighted average number of common shares outstanding   45,639,327    9,112,405 
Incremental shares from the assumed exercise of dilutive stock options   -    - 
Diluted common shares outstanding   45,639,327    9,112,405 
           
Earnings per share – basic and diluted  $(0.01)  $(0.06)

 

10.Equity Transactions

 

Reverse Stock Split

 

In December 2011, the Company declared a 1.0-for-4.5 reverse stock split. All historical share and per share information presented below has been restated and presented on a post-reverse-split basis.

 

Stock Issuances

 

In January 2011, the Company issued 100,000 shares of its common stock to one of its directors in exchange for cash consideration totaling $110,000.

 

In March 2011, the Company issued 153,834 shares of its common stock to one of its directors in connection with the exercise of stock options. Cash consideration received upon the exercise of the stock options totaled $36,425.

 

Stock Options

 

In January 2012, the Company granted 175,000 options to purchase shares of its common stock to certain employees. The stock options were valued using the Black-Scholes option pricing model and had a fair market value of $1,325,414 at the time of grant. The assumptions used in the Black-Scholes option pricing model for the stock options granted in January 2012 were as follows:

 

Risk-free interest rate   0.28%
Expected volatility of common stock   101%
Dividend yield  $0.00 
Expected life of options   5 years 
Weighted average fair market value of options granted  $0.79 

 

A summary of stock option activity for the three-month period ended March 31, 2012 and the year ended December 31, 2011 is presented below:

 

F-18
 

 

           Weighted 
       Weighted   Average 
       Average   Remaining 
       Exercise   Contract 
   Options   Price   Term 
             
Outstanding at December 31, 2010   820,444   $0.23    3.8 years 
                
Options granted   975,000    1.18    5.0 years 
Options exercised   -    -    - 
Options expired   -    -    - 
Options forfeited   -    -    - 
                
Outstanding at December 31, 2011   1,795,444   $0.74    4.0 years 
                
Options granted   175,000    1.18    5.0 years 
Options exercised   (153,834)   0.05    3.8 years 
Options expired   -    -    - 
Options forfeited   -    -    - 
                
Outstanding at March 31, 2012   1,816,610   $0.74    3.7 years 
                
Exercisable at March 31, 2012   666,610   $0.23    2.5 years 

 

Options outstanding as of March 31, 2012 and December 31, 2011 that have an exercise price that is lower than the prevailing market price were deemed to have an intrinsic value of $0.73 and $1.08 per share, resulting in an aggregate intrinsic value of $486,625 and $886,080, respectively.

 

The Company recognized stock-based compensation expense of $165,677 and $0 for the three-month periods ended March 31, 2012 and 2011, respectively, related to stock options that were granted during December 2011 and January 2012.

 

Shares Reserved for Future Issuance

 

As of March 31, 2012 and December 31, 2011, the Company had reserved 1,816,610 and 1,795,444 shares, respectively, for future issuance upon exercise of outstanding options.

 

11.Related Party Transactions

 

Passport Energy Ltd. is a working interest partner with the Company in the Hardy 4-16 and Hardy 14-17 wells. As of March 31, 2012, the Company had received a drilling advance from Passport in the amount of $766,035 and had billed Passport $314,521 related to its working interest in the Hardy Property.

 

F-19
 

 

The Company routinely obtains legal services from a firm for whom one of its directors serves as a principal. Fees paid to this firm totaled $5,206 and $1,365 for the three-month periods ended March 31, 2012 and 2011, respectively.

 

Prior to its acquisition by the Company, AEE Inc. entered into an agreement with Synergy Energy Resources LLC (“Synergy”) for it to provide monthly geological consulting services to AEE Inc. One of the Company’s current directors and one current officer own material ownership interests in Synergy. The Company purchased $42,000 and $0 of consulting fees from Synergy during the three-month period ended December 31, 2012 and 2011, respectively

 

12.Subsequent Events

 

In April 2012, we entered into a Carry Agreement with a third-party working interest partner, pursuant to which (i) that partner agreed to fund 100% of our working interest share of the drilling and completion costs of up to six new oil and gas wells within our Spyglass Property and (ii) we will convey, for a limited duration, 50% of our working interest in the pre-payout revenues of each carried well to that partner. If payout has not occurred within two years of the commencement date for such well, then the temporary assignment is to increase to 100% for years three through payout. Once payout has occurred (112% of the costs on a well-by-well basis), our respective working interests in the revenues from each carried well will revert to our original working interests in each such well. The Carry Agreement relieves us of approximately $12 million in what our working interest share of the drilling and completion costs of such six wells would have been. We expect that it will significantly strengthen our working capital position and allow us to pursue our short-term drilling program vigorously.

 

F-20
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   

THE FOLLOWING PRESENTATION OF OUR MANAGEMENT'S DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS REPORT.

 

A Note About Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on current management’s expectations. These statements may be identified by their use of words like “plans,” “expect,” “aim,” “believe,” “projects,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” and other expressions that indicate future events and trends. All statements that address expectations or projections about the future, including statements about our business strategy, expenditures, and financial results are forward-looking statements. We believe that the expectations reflected in such forward-looking statements are accurate. However, we cannot assure you that such expectations will occur.

 

Actual results could differ materially from those in the forward-looking statements due to a number of uncertainties, including, but not limited to, those discussed in this section. Factors that could cause future results to differ from these expectations include general economic conditions, further changes in our business direction or strategy, competitive factors, oil and gas exploration uncertainties, and an inability to attract, develop, or retain technical, consulting, or managerial agents or independent contractors. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report, except as required by law; we are not obligated to release publicly any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report or to reflect the occurrence of unanticipated events.

 

Industry Outlook

 

The petroleum industry is highly competitive and subject to significant volatility due to numerous market forces. Crude oil and natural gas prices are affected by market fundamentals such as weather, inventory levels, competing fuel prices, overall demand, and the availability of supply.

 

Worldwide oil prices reached historical highs during the last half of 2008, before tumbling amid worldwide economic crisis. Oil prices stabilized during 2009 and remained stable throughout 2010. Since December 31, 2010, oil prices increased rapidly, topping $100 per barrel in mid-March 2011 and again in March 2012.

 

3
 

  

Oil prices cannot be predicted with any certainty and have significantly affected profitability and returns for upstream producers. Historically, crude oil prices have averaged approximately $84 per barrel over the past five years, per the New York Mercantile Exchange (“NYMEX”). However, during that time, oil prices have experienced wide fluctuations in prices, ranging from $37 per barrel to $145 per barrel, with the median price of $82 per barrel. Oil prices averaged approximately $103 and $94 during the three-month periods ended March 31, 2012 and 2011, respectively.

 

While local supply/demand fundamentals are a decisive factor affecting domestic natural gas prices over the long term, day-to-day prices may be more volatile in the futures markets, such as on the NYMEX and other exchanges, making it difficult to forecast prices with any degree of confidence.

 

Company Overview

 

The address of our principal executive office is 2549 W. Main Street, Suite 202, Littleton, Colorado, 80120. Our telephone number is 303-798-5235.

 

Our common stock is quoted on the OTC Bulletin Board and the OTC Markets Group Inc.’s OTCQB under the symbol “AMZG.”

 

Our Company was incorporated in the State of Nevada under the name “Golden Hope Resources Corp.” on July 25, 2003 and is engaged in the acquisition, exploration, and development of natural resource properties of merit. On November 7, 2005, we filed documents with the Nevada Secretary of State to change our name to “Eternal Energy Corp.” by way of a merger with our wholly-owned subsidiary, Eternal Energy Corp., which was formed solely to facilitate the name change. In December 2011, we again filed documents with the Nevada Secretary of state to change our name to “American Eagle Energy Corporation” in conjunction with our acquisition of, and merger with, American Eagle Energy Inc. (“AEE Inc.”).

 

Since our inception, we have entered into participation agreements related to oil and gas exploration projects throughout the continental United States, including Colorado, Montana, Nevada, North Dakota, Texas, and Utah, as well as in the province of Saskatchewan, Canada, and areas located in the North Sea. As of March 31, 2012, we are actively engaged in exploration activities within the Spyglass Property, located in Divide County, North Dakota, within the Benrude Property, located in Roosevelt County, Montana and within the Hardy Property, located in southeastern Saskatchewan, Canada. In addition, we own undeveloped acreage interests in the Glacier Prospect, located in Toole County, Montana, the Sidney North Prospect, located in Richland County, Montana and the West Spyglass Prospect, located in an area adjacent to our Spyglass Property in Divide County, North Dakota and Sheridan County, Montana.

 

Our current operations consist of nine full-time employees and one paid consultant, who provides land management services on a contract basis.

 

4
 

 

Oil & Gas Wells

 

As of March 31, 2012, the Company has elected to participate in the drilling of 28 wells within the Spyglass Property. The Company’s consolidated working interests in these wells ranges from 0.03% to 35.49%. The Spyglass Property is evaluated for impairment annually. There were no impairments evident as of March 31, 2012.

 

A summary of the Company’s working interest in the Spyglass wells and the status of each well as of March 31, 2012 is as follows:

 

 

 

Well Name

 

 

 

Operator

 

 

Working
Interest

    Actual or
Anticipated
Spud Date
 

 

Current

Status

 
Aarestad 4-34H-160N-97W   North Plains Energy, LLC   0.63 %   November 1, 2010   Producing  
Adams 2-18H   SM Energy Company   18.52 %   April 20, 2012   Waiting to spud  
Bagley 4-30H-163N-100W   SM Energy Company   3.87 %   April 3, 2011   Producing  
Blazer 2-11-163N-98W   Samson Resources Company   0.94 %   February 12, 2011   Producing  
Christianson 15-12   American Eagle Energy Corporation   35.49 %   January 11, 2012   Completing  
Cody 16-11   American Eagle Energy Corporation   31.20 %   March 22, 2012   Drilling  
Coplan   American Eagle Energy Corporation   12.86 %   April 25, 2012   Waiting to spud  
Denali 13-21-163N-98W   Samson Resources Company   0.03 %   December 23, 2010   Producing  
Gerhardsen 1-10H-160N-97W   Continental Resources, Inc.   2.37 %   January 12, 2011   Producing  
Gulbranson 2-11H-   SM Energy Company   11.34 %   May 25, 2012   Waiting to spud  

  

5
 

  

 

 

Well Name

 

 

 

Operator

 

 

Working
Interest

   

Actual or

Anticipated

Spud Date

 

 

Current

Status

 
Jurasin 32-29   Crescent Point Energy Corp.   0.61 %   October 15, 2011   Shut-in  
Lancaster 2-1-162N-101W   Crescent Point Energy Corp.   6.23 %   July 1, 2011   Completing  
Legaard 4-25H-163N-101W   SM Energy Company   3.69 %   July 19, 2011   Producing  
Montclair 1-12   Samson Resources Company   1.60 %   November 7, 2011   Producing  
Mustang 7-6-163N-98W   Samson Resources Company   0.32 %   April 25, 2011   Producing  
Nielsen 1-12H-160N-97W   Continental Resources, Inc.   0.46 %   December 21, 2010   Producing  
Nomad 6-7-163N-99W   Samson Resources Company   14.47 %   October 26, 2011   Producing  
Olson 15-22   Baytex Energy USA   0.78 %   August 11, 2011   Producing  
Reistad 1-1-162N-102W   Murex Petroleum Corporation   8.62 %   February 28, 2011   Waiting on completion  
Ridgeway 25-36-163N-101W   Crescent Point Energy Corp.   1.88 %   August 15, 2011   Shut-in  
Riede 4-14H-163N-100W   SM Energy Company   0.34 %   January 30, 2011   Producing  
Thomte 8-5-163N-99W   Samson Resources Company   3.18 %   August 22, 2011   Producing  
Titan 36-25   Samson Resources Company   0.81 %   October 8, 2011   Producing  

  

6
 

  

 

 

Well Name

 

 

 

Operator

 

 

Working
Interest

   

Actual or

Anticipated

Spud Date

 

 

Current

Status

 
Torgeson 1-15H-163N-100W   SM Energy Company   4.38 %   March 6, 2011   Producing  
Wolter 1-28H-163N-100W   SM Energy Company   1.30 %   November 27, 2010   Producing  
Wolter 13-9H-163N-100W   SM Energy Company   5.92 %   June 26, 2011   Producing  
Wolter 15-8   SM Energy Company   1.54 %   November 20, 2011   Producing  
Yukon 12-1-163N-98W   Samson Resources Company   1.25 %   February 28, 2011   Producing

 

Well Summary

 

The following tables summarize the Company’s wells and drilling activity for the three-month period ended March 31, 2012 and the year ended December 31, 2011:

 

   Three-Months Ended   Year Ended 
   March 31, 2012   December 31, 2011 
    U.S.    Canada    U.S.    Canada 
                     
Gross exploratory wells:                    
                     
Beginning of period   -    -    -    - 
Purchased / acquired   -    -    -    - 
Drilled   -    -    -    - 
Abandoned   -    -    -    - 
End of period   -    -    -    - 
                     
Gross development wells:                    
                     
Beginning of period   21.00    2.00    -    1.00 
Purchased / acquired   -    -    -    - 
Drilled   -    -    21.00    1.00 
Abandoned   -    -    -    - 
End of period   21.00    2.00    21.00    2.00 

 

7
 

 

   Three-Months Ended   Year Ended 
   March 31, 2012   December 31, 2011 
   U.S.   Canada   U.S.   Canada 
                 
Net exploratory wells:                 
                     
Beginning of period   -    -    -    - 
Purchased / acquired   -    -    -    - 
Drilled   -    -    -    - 
Abandoned   -    -    -    - 
End of period   -    -    -    - 
                     
Net development wells:                    
                     
Beginning of period   0.50    1.75    -    1.00 
Purchased / acquired   -    -    -    - 
Drilled   -    -    0.50    0.75 
Abandoned   -    -    -    - 
End of period   0.50    1.75    0.50    1.75 

  

The Company did not drill any dry exploratory or developmental wells during the three-month period ended March 31, 2012 or the year ended December 31, 2011.

 

Acquisition of AEE Inc.

 

In December 2011, we finalized our merger with AEE Inc., at which time we formed a wholly-owned subsidiary into which AEE Inc. was merged. On December 20, 2011, the trading of the common stock of the combined company commenced.

 

Results of Operations for the Three-Month Period Ended March 31, 2012 vs. 2011

 

The consolidated results of operations for the three-month period ended March 31, 2012 include the results of operations of both American Eagle Energy Corporation and AEE Inc. and their respective subsidiaries. For financial reporting purposes, the consolidated results of operations for AEE Inc. for the period January 1, 2011 through December 20, 2011, the date of our merger, are excluded from our reportable 2011 results of operations due to accounting rules applicable to business combinations. However, for analysis purposes only, the following discussion includes references, where appropriate, to pro forma amounts, which represent the combined results of operations for the three-month period ended March 31, 2011.

 

We recognized a net loss of $358,335 for the three-month period ended March 31, 2012, compared to a net loss of $564,546 for the three-month period ended March 31, 2011. Our basic and diluted loss per share for the three-month period ended March 31, 2012 was ($0.01), compared to ($0.06) for the three-month period ended March 31, 2011. The 2011 earnings per share figures have been adjusted to reflect the effects of the 1.0-to-4.5 reverse stock split that occurred in December 2011. A discussion of the key components of our statements of operations and material fluctuations for the three-month periods ended March 31, 2012 and 2011 is provided below.

 

8
 

 

Revenues associated with the sale of oil and gas totaled $1,225,579 for the three-month period ended March 31, 2012, compared to $39,103 for the three-month period ended March 31, 2011. Oil sales consist of our working interests in sales from our Hardy wells (Canadian), which we operate, as well as sales from various US wells in which we own non-operating, working interests. A comparison of the 2012 and 2011 oil sales is as follows:

  

·Sales from our Hardy 4-16 well totaled $534,078 for the three-month period ended March 31, 2012. The Hardy 4-16 well was drilled and cased in May 2011 and put on production in September 2011. Accordingly, we did not recognize any oil sales from the Hardy 4-16 well during the three-month period ended March 31, 2011.

 

·Sales from our Hardy 7-9 well totaled $89,788 and $39,103 for the three-month periods ended March 31, 2012 and 2011, respectively. Due to various mechanical issues, the Hardy 7-9 well produced on and off during 2011. In January 2011, the well encountered mechanical problems and was taken off of production due to a parted rod string. The well was repaired and returned to production in March 2011. The well went off of production in mid-April due to mechanical issues. The well bore was repaired in May 2011; but, the well remained shut-in through June 30, 2011 due to inclement weather conditions and widespread flooding in the area. The Hardy 7-9 was returned to production in July 2011 and produced oil during five of the last six months of 2011 and the first three months of 2012.

 

·Beginning in April 2011, we began recognizing revenues from our various working interests in a number of non-operated wells located within the Spyglass Property. Revenues related to Spyglass non-operated wells totaled $601,713 for the three-month period ended March 31, 2012. No such revenue was recognized during the three-month period ended March 31, 2011. The majority of our 2012 Spyglass oil sales is attributable to the Wolter 13-9 ($251,866), the Legaard 4-25 ($154,594), the Torgeson 1-15 ($102,459), the Bagley 4-30 ($44,190) and the Gerhardsen 1-10 ($29,271). The Wolter 13-9, Legaard 4-25, Torgeson 1-15 and Bagley 4-30 wells are operated by SM Energy Company. The Gerhadsen 1-10 well is operated by Continental Resources, Inc.

 

·On a pro forma basis, oil and gas sales for the three-month period ended March 31, 2011 would have totaled $75,143.

 

Oil and gas operating expenses totaled $406,556 for the three-month period ended March 31, 2012 compared to $48,532 for the same period in 2011. Oil sales consist of our working interests in sales from our Hardy wells (Canadian), which we operate, as well as sales from various US wells in which we own non-operating, working interests. A comparison of the 2012 and 2011 oil and gas operating expense is as follows:

 

·Lease operating expenses associated with our Hardy 4-16 well totaled $149,086 for the three-month period ended March 31, 2012. Because the well had not yet been completed at the time, we did not recognize any lease operating expenses for the Hardy 4-16 for the three-month period ended March 31, 2011.

 

9
 

  

·Lease operating expenses associated with our Hardy 7-9 well totaled $151,852 and $48,532 for the three-month periods ended March 31, 2012 and 2011, respectively. The Hardy 7-9 well operated sporadically throughout 2011 due to various mechanical issues (which resulted in the increased level of expenditures) and weather related conditions.

 

·Lease operating expenses associated with our non-operating working interests in the various Spyglass wells totaled $105,618 and $0 for the three-month periods ended March 31, 2012 and 2011, respectively. None of the Spyglass wells produced during the three-month period ended March 31, 2011.

 

·On a pro forma basis, oil and gas operating expenses would have totaled $95,167 for the three-month period ended March 31, 2011.

 

General and administrative expenses totaled $1,178,692 for the three-month period ended March 31, 2012, compared to $555,982 for the three-month period ended March 31, 2011. While the merger with AEE Inc. has led to increases in our general and administrative costs, such increases are primarily limited to payroll and employee benefit related expenses, as well as increased professional fees, such as legal, accounting and consulting fees. A discussion of the key components of our general and administrative expenses for the three-month periods ended March 31, 2012 and 2011 is as follows:

 

·Salaries and related payroll expenses totaled $317,591 for the three-month period ended March 31, 2012, compared to $46,193 for the same period in 2011. We employed 9 full-time employees during the first quarter of 2012, compared to two full-time employees during the first quarter of 2011. Pro-forma payroll expense for the three-month period ended March 31, 2011 would have been $87,262.

 

·We incurred legal fees totaling $122,101 during the three-month period ended March 31, 2012, compared to $236,817 for the same period in 2011. The majority of our 2011 legal fees related to the then-proposed merger with AEE Inc., which closed in December 2011. Pro-forma legal fees for the three-month period ended March 31, 2011 would have been $403,669.

 

·We incurred consulting fees totaling $97,382 during the three-month period ended March 31, 2012, compared to $133,910 for the same period in 2011. Included in the 2011 consulting fees were costs associated with obtaining a fairness opinion related to our then-proposed merger with AEE Inc., totaling $126,051. Pro-forma consulting fees for the three-month period ended March 31, 2011 would have been $146,876.

 

·During the three-month period ended March 31, 2012, we paid consulting fees to a related party (Synergy Resources LLC) totaling $42,000. We incurred no such costs during the same period in 2011. Our consulting arrangement with Synergy Resources is a legacy arrangement from AEE Inc., which was entered into prior the merger of the two companies. Pro-forma consulting fees paid to Synergy Resources for the three-month period ended March 31, 2011 totaled $30,000.

 

10
 

  

·We incurred accounting fees totaling $54,495 during the three-month period ended March 31, 2012, compared to $46,002 for the same period in 2011. Pro-forma accounting fees for the three-month period ended March 31, 2012 would have been $100,199.

 

·In December 2011, we granted 975,000 stock options to members of our management and operational teams, as well as two directors and one independent contractor. During the three-month period ended March 31, 2012, we granted 375,000 stock options to a director and other employees. As a result, we recognized stock-based compensation expense of $165,677 for the three-month period ended March 31, 2012. We did not recognize any stock-based compensation expense during the three-month period ended March 31, 2011, as all outstanding options during that period had fully vested previously.

 

·We incurred insurance expenses totaling $108,304 during the three-month period ended March 31, 2012, compared to $29,261 for the same period in 2011. The increase is primarily due to obtaining tail coverage for our Directors & Officers insurance for the three-year period prior to the merger with AEE Inc., as well as obtaining well insurance for the wells that we are operating or anticipate drilling in the coming year.

 

·The majority of our transactions related to our Hardy Property are transacted in Canadian Dollars. During the three-month periods ended March 31, 2012 and 2011, we recognized foreign exchange losses totaling $45,020 and $6,947, respectively, relating to currency fluctuations between the US Dollar and the Canadian Dollar.

 

·We incurred travel and entertainment related expenses totaling $42,335 during the three-month period ended March 31, 2012, compared to $4,069 for the same period in 2011. During March 2012, our Chairman and President traveled to various financial centers within the US to raise public awareness of our Company. Pro-forma travel and entertainment expenses for the three-month period ended March 31, 2011 would have been $13,727.

 

·We incurred computer related expenses totaling $51,838 for the three-month period ended March 31, 2012, compared to $4,205 for the same period in 2011. The increase is largely due to various computer software licenses that were obtained, as well as access to various oil and gas production and investor relations information services.

 

·We incurred land management fees totaling $46,397 for the three-month period ended March 31, 2012, compared to $17,364 for the same period in 2011. Pro-forma land management fees for the three-month period ended March 31, 2011 would have been $54,771.

 

·On a pro-forma basis, aggregate general and administrative expenses would have been $927,347 for the three-month period ended March 31, 2011.

 

11
 

  

Depletion expense related to our Canadian oil and gas properties totaled $190,218 for the three-month period ended March 31, 2012, compared to $104,350 for the same period in 2011. Depletion expense related to our US oil and gas properties totaled $100,257 for the three-month period ended March 31, 2012. We did not recognize any US depletion expense during the three-month period ended March 31, 2011, as none of our non-operated wells were producing materially at that time.

 

We routinely receive dividends from our equity investment in shares of Crescent Point Energy Corp.’s common stock. Dividend income totaled $17,281 for the three-month period ended March 31, 2012, compared to $15,056 for the same period in 2011.

 

We recognized an estimated income tax benefit in the amount of $277,629 for the three-month period ended March 31, 2012 relating to the our net losses for the period and the effect of such losses on our deferred tax liabilities. We did not recognize any income tax expense or benefit during the three-month period ended March 31, 2011, as we had no such deferred tax liabilities at that time. Our deferred tax liabilities relate primarily to our merger with AEE Inc., which occurred in December 2011.

 

Liquidity and Capital Resources

 

As of March 31, 2012, our assets totaled $44,281,654, which included, among other items, cash balances totaling $7,125,082, trade receivables totaling $3,925,224, amounts due from our working interest partner, Passport Energy Ltd., totaling $274,645, and marketable securities valued at $1,337,110. As of March 31, 2012, we had a working capital deficit of $2,723,576, exclusive of our marketable securities, which, due to their nature, are presented as non-cash assets on our March 31, 2012 balance sheet.

 

In April 2012, we entered into a Carry Agreement with a third-party working interest partner, pursuant to which (i) that partner agreed to fund 100% of our working interest share of the drilling and completion costs of up to six new oil and gas wells within our Spyglass Property and (ii) we will convey, for a limited duration, 50% of our working interest in the pre-payout revenues of each carried well to that partner. If payout has not occurred within two years of the commencement date for such well, then the temporary assignment is to increase to 100% for years three through payout. Once payout has occurred (112% of the costs on a well-by-well basis), our respective working interests in the revenues from each carried well will revert to our original working interests in each such well. The Carry Agreement relieves us of approximately $12 million in what our working interest share of the drilling and completion costs of such six wells would have been. We expect that it will significantly strengthen our working capital position and allow us to pursue our short-term drilling program vigorously.

 

Historically, we have successfully raised additional operating capital through private equity funding sources and from the sale of various oil and gas prospects and properties. However, no assurances can be given that we will be able to obtain sufficient operating capital through the sale of common stock and/or borrowing or that the development and implementation of our business plan will generate sufficient future revenues to sustain ongoing operations.

 

12
 

 

Litigation

 

As of March 31, 2012, we are not subject to any known or threatened litigation.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

13
 

   

ITEM 4. CONTROLS AND PROCEDURES

 

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Principal Accounting Officer, evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and the Principal Accounting Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2012.  There has been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2012, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

14
 

 

PART II – OTHER INFORMATION

 

ITEM 6. EXHIBITS.

 

Exhibit   Description of Exhibit
2.1   Agreement and Plan of Merger among Eternal Energy Corp., Eternal Sub Corp. and American Eagle Energy Inc., dated April 8, 2011. (Incorporated by reference to Exhibit 2.1 of our Registration Statement on Form S-4 filed May 4, 2011.)
2.1(a)   First Amendment to Agreement and Plan of Merger among Eternal Energy Corp., Eternal Sub Corp. and American Eagle Energy Inc., dated September 28, 2011. (Incorporated by reference to Exhibit 2.1(a) of our Current Report on Form 8-K filed September 28, 2011.)
3(i).1   Articles of Incorporation filed with the Nevada Secretary of State on July 25, 2003. (Incorporated by reference to Exhibit 3.1 of our Form 10-SB filed August 18, 2004.)
3(i).2   Certificate of Change filed with the Nevada Secretary of State effective November 7, 2005. (Incorporated by reference to Exhibit 3(i).2 of our Current Report on Form 8-K filed November 9, 2005.)
3(i).3   Articles of Merger filed with the Nevada Secretary of State effective November 7, 2005. (Incorporated by reference to Exhibit 3(i).3 of our Current Report on Form 8-K filed November 9, 2005.)
3(i).4   Articles of Merger filed with the Nevada Secretary of State effective November 30, 2011. (Incorporated by reference to Exhibit 3(i).4 of our Current Report on Form 8-K filed December 20, 2011.)
3(i).5   Articles of Merger filed with the Nevada Secretary of State effective November 30, 2011. (Incorporated by reference to Exhibit 3(i).5 of our Current Report on Form 8-K filed December 20, 2011.)
3(i).6   Certificate of Change filed with the Nevada Secretary of State effective November 30, 2011. (Incorporated by reference to Exhibit 3(i).6 of our Current Report on Form 8-K filed December 20, 2011.)
3(ii).1   Bylaws, adopted July 18, 2003. (Incorporated by reference to Exhibit 3.2 of our Form 10-SB filed August 18, 2004.)
3(ii).2   Amendment No. 1 to Bylaws, adopted November 4, 2005. (Incorporated by reference to Exhibit 3(ii) of our Current Report on Form 8-K filed November 9, 2005.)
3(ii).3   Amendment No. 2 to Bylaws, adopted February 22, 2011. (Incorporated by reference to Exhibit 3(ii).3 of our Current Report on Form 8-K filed February 23, 2011.)
4.1   American Eagle Energy Corporation 2012 Equity Incentive Plan. (Incorporated by reference to Exhibit 4.1 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.2   Non-qualified Stock Option Agreement, dated as of October 30, 2009, by and between the Registrant and Bradley M. Colby. (Incorporated by reference to Exhibit 4.2 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.3   Non-qualified Stock Option Agreement, dated as of October 30, 2009, by and between the Registrant and John Anderson. (Incorporated by reference to Exhibit 4.3 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.4   Non-qualified Stock Option Agreement, dated as of October 30, 2009, by and between the Registrant and Paul E. Rumler. (Incorporated by reference to Exhibit 4.4 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.5   Non-qualified Stock Option Agreement, dated as of December 30, 2010, by and between the Registrant and Bradley M. Colby. (Incorporated by reference to Exhibit 4.5 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.6   Non-qualified Stock Option Agreement, dated as of December 30, 2010, by and between the Registrant and Thomas G. Lantz. (Incorporated by reference to Exhibit 4.6 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.7   Reserved for future use.
4.8   Non-qualified Stock Option Agreement, dated as of December 30, 2010, by and between the Registrant and Richard Findley. (Incorporated by reference to Exhibit 4.8 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.9   Non-qualified Stock Option Agreement, dated as of December 28, 2011, by and between the Registrant and Paul E. Rumler. (Incorporated by reference to Exhibit 4.9 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.10   Non-qualified Stock Option Agreement, dated as of December 28, 2011, by and between the Registrant and John Anderson. (Incorporated by reference to Exhibit 4.10 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.11   Reserved for future use.
4.12   Non-qualified Stock Option Agreement, dated as of December 28, 2011, by and between the Registrant and Kirk Stingley. (Incorporated by reference to Exhibit 4.12 of our Registration Statement on Form S-8 filed February 28, 2012.)
4.13   Reserved for future use.
4.14   Reserved for future use.

 

15
 

 

4.15   Reserved for future use.
4.16   Reserved for future use.
4.17   Reserved for future use.
4.18   Reserved for future use.
4.19   Non-qualified Stock Option Agreement, dated as of February 21, 2012, by and between the Registrant and Andrew P. Calerich. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed February 21, 2012.)
4.20   Reserved for future use.
10.1   Agreement and Plan of Merger between Golden Hope Resources Corp. (renamed Eternal Energy Corp.) and Eternal Energy Corp., filed with the Nevada Secretary of State effective November 7, 2005. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed November 9, 2005.)
10.2   Purchase and Sale Agreement by and between Eternal Energy Corp., PNP Petroleum I, LP., Cibolo Energy Operating, Inc. and Century Assets Corporation, dated June 25, 2010.  (Incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q filed August 16, 2010.)
10.3   Purchase and Sale Agreement between Eternal Energy Corp. and American Eagle Energy Inc. dated June 18, 2010.  (Incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-Q filed August 16, 2010.)
10.4   Reserved for future use.
10.5   Reserved for future use.
10.6   Letter Agreement by and between Eternal Energy Corp. and International Frontier Resources Corporation. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed December 5, 2005.)
10.7   Reserved for future use.
10.8   Reserved for future use.
10.9   Letter Agreement by and between Eternal Energy Corp. and International Frontier Resources Corporation Relating to Quad 41 and Quad 42 dated January 30, 2006. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed February 3, 2006.)
10.10   Amended and Restated Letter Agreement by and between Eternal Energy Corp. and International Frontier Resources Corporation Relating to Quad 14 dated January 30, 2006. (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed February 3, 2006.)
10.11   Amended and Restated Employment Agreement by and between the Registrant and Bradley M. Colby effective July 1, 2011.
10.12   Employment Agreement by and between the Registrant and Thomas G. Lantz, effective November 30, 2011.
10.13   Employment Agreement by and between the Registrant and Kirk Stingley, effective January 1, 2012.
10.14   Consulting Agreement by and between the Registrant and Richard Findley, effective November 30, 2011.
10.15   Reserved for future use.
10.16   Letter Agreement effective as of May 19, 2006, by and among Eternal Energy Corp., International Frontier Resources Corporation, Palace Exploration Company Limited, Oilexco Incorporated, and Challenger Minerals (North Sea) Limited. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed May 23, 2006).
10.17   Letter Agreement dated October 15, 2006, by and among Eternal Energy Corp., Fairway Exploration, LLC, Prospector Oil, Inc., and 0770890 B.C. Ltd. (Incorporated by reference to Exhibit 10.17 of our Annual Report on Form 10-KSB filed April 16, 2007).
10.18   Letter Agreement dated October 26, 2006, by and among Eternal Energy Corp., Fairway Exploration, LLC, Prospector Oil, Inc., 0770890 B.C. Ltd., and Rover Resources Inc. (Incorporated by reference to Exhibit 10.18 of our Annual Report on Form 10-KSB filed April 16, 2007).
10.19   Letter Agreement dated February 28, 2007, by and among Eternal Energy Corp., Pebble Petroleum Inc., Emerald Bay Holdings Ltd., and Heartland Resources Inc. (Incorporated by reference to Exhibit 10.19 of our Annual Report on Form 10-KSB filed April 16, 2007).
10.20   Agreement To Terminate DGWS Option (Incorporated by reference to Exhibit 10.20 of our Quarterly Report on Form 10-Q filed May 15, 2009.
10.21   Employment Agreement by and between Eternal Energy Corp. and Craig Phelps dated August 1, 2007. (Incorporated by reference to Exhibit 10.21 of our Quarterly Report on Form 10-Q filed May 15, 2009).
10.22   Employment Agreement by and between Eternal Energy Corp. and Kirk A. Stingley dated June 2, 2008. (Incorporated by reference to Exhibit 10.22 of our Quarterly Report on Form 10-Q filed May 15, 2009).
10.23   Amended and Restated Employment Agreement by and between Eternal Energy Corp. and Bradley M. Colby dated November 1, 2009. (Incorporated by reference to Exhibit 10.23 of our Quarterly Report on Form 10-Q filed November 23, 2009).
10.24   First Amendment to the Amended and Restated Employment Agreement by and between Eternal Energy Corp. and Craig H. Phelps dated August 1, 2009. (Incorporated by reference to Exhibit 10.24 of our Quarterly Report on Form 10-Q filed November 23, 2009).
10.25   First Amendment to the Employment Agreement by and between Eternal Energy Corp. and Kirk A. Stingley dated October 30, 2009. (Incorporated by reference to Exhibit 10.25 of our Quarterly Report on Form 10-Q filed November 23, 2009).

 

16
 

 

10.26   Reserved for future use.
10.27   Lease Agreement dated January 1, 2009 by and between Eternal Energy Corp. and Oakley Ventures, LLC.  (Incorporated by reference to Exhibit 10.27 of our Annual Report on Form 10-K filed March 23, 2010.)
10.27a   Lease Addendum, dated October 1, 2011 by and between Eternal Energy Corp. and Oakley Ventures, LLC, and Exhibit A thereto.
10.28   Purchase and Sale Agreement by and between Eternal Energy Corp. and Ryland Oil Corporation dated March 26, 2010.  (Incorporated by reference to Exhibit 10.28 of our Current Report on Form 8-K filed March 29, 2010.)
10.29   Purchase of Royalty Agreement by and between Eternal Energy Corp. and Ryland Oil Corporation dated March 26, 2010. (Incorporated by reference to Exhibit 10.29 of our Current Report on Form 8-K filed March 29, 2010.)
10.29a   Amending Agreement to the Ryland / Eternal Royalty Purchase Agreement by and between Eternal Energy Corp. and Ryland Oil Corporation dated April 20, 2010.  (Incorporated by reference to Exhibit 10.29a of our Current Report on Form 8-K filed March 29, 2010.)
10.30   Termination Agreement (of the US Pebble Acquisition Agreement) by and between Eternal Energy Corp., Fairway Exploration LLC, Prospector Oil, Inc. Pebble Petroleum Inc. and Rover Resources Inc. dated April 29, 2010.  (Incorporated by reference to Exhibit 10.30 of our Quarterly Report on form 10-Q filed May 17, 2010.)
10.31   Termination Agreement (of the Canadian Pebble Acquisition Agreement) by and between Eternal Energy Corp., Fairway Exploration LLC, Prospector Oil, Inc. and Pebble Petroleum Inc. dated April 29, 2010.  (Incorporated by reference to Exhibit 10.31 of our Quarterly Report on form 10-Q filed May 17, 2010.)
10.32   Termination Agreement (of the US Prospect Acquisition Agreement) by and between Eternal Energy Corp., Fairway Exploration LLC, Prospector Oil, Inc., Pebble Petroleum Inc., Rover Resources Inc., Steven Swanson, Richard L. Findley, Thomas G. Lantz and Ryland Oil Corporation dated May 11, 2010. (Incorporated by reference to Exhibit 10.33 of our Quarterly Report on Form 10-Q filed May 17, 2010.)
10.33   Termination Agreement (of the Canadian Prospect Acquisition Agreement) by and between Eternal Energy Corp., Fairway Exploration LLC, Prospector Oil, Inc., Pebble Petroleum Inc., Rover Resources Inc., Steven Swanson, Richard L. Findley, Thomas G. Lantz and Ryland Oil Corporation dated May 11, 2010.  (Incorporated by reference to Exhibit 10.33 of our Quarterly Report on form 10-Q filed May 17, 2010.)
10.34   Termination of Management Services Agreement by and between Eternal Energy Corp., Ryland Oil Corporation and Brad Colby dated December 1, 2009.  (Incorporated by reference to Exhibit 10.34 of our Quarterly Report on form 10-Q filed May 17, 2010.)
10.35   Amendment to the Consulting Agreement by and between Eternal Energy Corp., Rover Resources Inc., and Brad Colby dated April 1, 2010.  (Incorporated by reference to Exhibit 10.35 of our Quarterly Report on form 10-Q filed May 17, 2010.)
10.36   Letter of Intent between Eternal Energy Corp. and American Eagle Energy Inc. dated February 22, 2011. (Incorporated by reference to Exhibit 10.36 of our Annual Report on Form 10-K filed March 23, 2011.)
10.37   Engagement Letter for Professional Services between Eternal Energy Corp. and C.K. Cooper & Company, dated February 25, 2011. (Incorporated by reference to Exhibit 10.37 of our Annual Report on Form 10-K filed March 23, 2011.)
10.38   Participation and Operating Agreement among Eternal Energy Corp., AEE Canada Inc. and Passport Energy Inc., dated April 15, 2011. (Incorporated by reference to Exhibit 10.38 of our Registration Statement on Form S-4 filed May 4, 2011.)
10.38a   Amendment to the participation and operating agreement among Eerg Energy Ulc, Aee Canada Inc and Passport Energy Inc., dated February 1, 2012
10.39^   Purchase and Sale Agreement among Eternal Energy Corp., American Eagle Energy Inc. and NextEra Energy Gas Producing, LLC, dated May 17, 2011. (Incorporated by reference to Exhibit 10.39 of our Amended Quarterly Report on Form 10-Q/A filed October 11, 2011.)
10.40^   Purchase and Sale Agreement among Eternal Energy Corp., American Eagle Energy Inc. and NextEra Energy Gas Producing, LLC, dated May 17, 2011. (Incorporated by reference to Exhibit 10.40 of our Amended Quarterly Report on Form 10-Q/A filed October 11, 2011.)
10.40a   First Amendment to Purchase and Sale Agreement among Eternal Energy Corp., American Eagle Energy Inc. and NextEra Energy Gas Producing, LLC, dated June 14, 2011. (Incorporated by reference to Exhibit 10.40a of our Quarterly Report on Form 10-Q filed August 18, 2011.)
10.40b   Second Amendment to Purchase and Sale Agreement among Eternal Energy Corp., American Eagle Energy Inc. and NextEra Energy Gas Producing, LLC, dated July 25, 2011. (Incorporated by reference to Exhibit 10.40b of our Quarterly Report on Form 10-Q filed August 18, 2011.)
10.41^   Purchase and Sale Agreement among Eternal Energy Corp., American Eagle Energy Inc. and NextEra Energy Gas Producing, LLC, dated November 15, 2011. (Incorporated by reference to Exhibit 10.41 of our Annual Report on Form 10-K filed April 16, 2012.)
21.1   List of Subsidiaries. (Incorporated by reference to Exhibit 21.1 of our Annual Report on Form 10-K filed April 16, 2012.)
31.1*   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

17
 

 

31.2*   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*   Certification of Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*   Certification of Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

*Filed herewith.
^Portions omitted pursuant to a request for confidential treatment.

 

18
 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

AMERICAN EAGLE ENERGY CORPORATION    
     
(Registrant)    
     
May 21, 2012 /s/ Bradley M. Colby  
  Bradley M. Colby  
  President and Chief Executive Officer  
  (Principal Executive, Financial and Accounting Officer)  

  

19

XOTC:AMZG Quarterly Report 10-Q Filling

XOTC:AMZG Stock - Get Quarterly Report SEC Filing of XOTC:AMZG stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XOTC:AMZG Quarterly Report 10-Q Filing - 3/31/2012
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

Previous: XOTC:AMZG Insider Activity 4 Filing - 6/25/2012  |  Next: XOTC:AMZG Quarterly Report 10-Q Filing - 6/30/2012