SurgePays, Inc. - Quarter Report: 2009 January (Form 10-Q)
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, 2009
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.)
|
11005 Anderson Mill Road,
Austin, Texas 78750
(Address
of principal executive offices) (Zip Code)
Registrant's
telephone number: (512) 944-9115
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 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
(Do not
check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes ¨
Nox
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 30,507,667 shares of common stock outstanding
as of January 31, 2009.
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 Mar Ked Mineral
Exploration, Inc.’s Form 10-KSB dated November 30, 2007 and the Form 8-K dated
July 28, 2008 covering the acquisition of North American Exploration, Inc. by
the Company.
TABLE OF
CONTENTS
|
Page
|
||||
|
PART
I – FINANCIAL INFORMATION
|
||||
|
Item
1:
|
Financial
Statements
|
3
|
||
|
Item
2:
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
12
|
||
|
Item
3:
|
Quantitative
and Qualitative Disclosures About Market Risk
|
15
|
||
|
Item
4T:
|
Controls
and Procedures
|
15
|
||
|
PART
II - OTHER INFORMATION
|
16
|
|||
|
Item
1:
|
Legal
Proceedings
|
16
|
||
|
Item
1A:
|
Risk
Factors
|
16
|
||
|
Item
2:
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
16
|
||
|
Item
3:
|
Defaults
upon Senior Securities
|
16
|
||
|
Item
4:
|
Submission
of Matters to a Vote of Security Holders
|
16
|
||
|
Item
5:
|
Other
Information
|
16
|
||
|
Item
6:
|
Exhibits
|
16
|
||
2
PART
I - FINANCIAL INFORMATION
ITEM
1: FINANCIAL STATEMENTS
NORTH
AMERICAN ENERGY RESOURCES, INC.
(An
Exploration Stage Company)
Condensed
Consolidated Balance Sheets
January
31, 2009 (unaudited) and April 30, 2008
|
January
31,
|
April
30,
|
|||||||
|
2009
|
2008
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 4,769 | $ | 185,023 | ||||
|
Accounts
receivable, net
|
14,687 | 56,745 | ||||||
|
Advances
to related parties
|
8,519 | - | ||||||
|
Total
current assets
|
27,975 | 241,768 | ||||||
|
Properties
and equipment, at cost, net
|
594,399 | 523,008 | ||||||
|
Note
receivable
|
- | 76,000 | ||||||
|
Total
assets
|
$ | 622,374 | $ | 840,776 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
||||||||
|
Trade
|
$ | 18,624 | $ | 23,294 | ||||
|
Oil
and gas proceeds due others
|
139 | 571 | ||||||
|
Loans
from related parties
|
389,000 | 501,000 | ||||||
|
Advances
received from joint interest participants
|
- | 189,471 | ||||||
|
Accrued
expenses
|
- | 1,374 | ||||||
|
Notes
payable
|
- | 35,250 | ||||||
|
Total
current liabilities
|
407,763 | 750,960 | ||||||
|
Commitments
and contingencies
|
||||||||
|
Stockholders'
equity:
|
||||||||
|
Preferred
stock: $0.001 par value; authorized 100,000,000 shares; no shares issued
and outstanding
|
- | - | ||||||
|
Common stock: $0.001 par value;
100,000,000 shares authorized; 30,507,667 shares and 21,000,000
issued and outstanding at January 31, 2009 and April 30, 2008,
respectively
|
30,508 | 21,000 | ||||||
|
Additional
paid in capital
|
776,113 | 99,000 | ||||||
|
Deficit
accumulated during the exploration stage
|
(592,010 | ) | (30,184 | ) | ||||
|
Total
stockholders' equity
|
214,611 | 89,816 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 622,374 | $ | 840,776 | ||||
See
accompanying notes to condensed consolidated financial
statements
3
(An
Exploration Stage Company)
Statements
of Condensed Consolidated Operations
(Unaudited)
For
the three months ended January 31, 2009 and 2008
|
2009
|
2008
|
|||||||
|
Oil
and natural gas sales
|
$ | 1,740 | $ | 1,679 | ||||
|
Costs
and expenses
|
||||||||
|
Oil
and natural gas production taxes
|
125 | 121 | ||||||
|
Oil
and natural gas production expenses
|
11,176 | 6,318 | ||||||
|
Depreciation
and amortization
|
1,541 | - | ||||||
|
Non-cash
compensation
|
310,500 | - | ||||||
|
Bad
debt expense
|
76,000 | - | ||||||
|
General
and administrative expense, net of operator's overhead
fees
|
62,033 | 5,662 | ||||||
| 461,375 | 12,101 | |||||||
|
Loss
from operations
|
(459,635 | ) | (10,422 | ) | ||||
|
Other
income (expense):
|
||||||||
|
Interest
expense
|
- | (360 | ) | |||||
|
Total
other income (expense)
|
- | (360 | ) | |||||
|
Loss
before income taxes
|
(459,635 | ) | (10,782 | ) | ||||
|
Provision
for income taxes
|
- | - | ||||||
|
Net
loss
|
$ | (459,635 | ) | $ | (10,782 | ) | ||
|
Net
loss per common share, basic and diluted
|
$ | (0.02 | ) | $ | (0.00 | ) | ||
|
Weighted
average common shares outstanding
|
30,156,080 | 21,000,000 | ||||||
See
accompanying notes to condensed consolidated financial
statements.
4
NORTH
AMERICAN ENERGY RESOURCES, INC.
(An
Exploration Stage Company)
Statements
of Condensed Consolidated Operations
(Unaudited)
For
the nine months ended January 31, 2009 and 2008
and
the period from inception (August 18, 2006) through January 31,
2009
|
Inception
|
||||||||||||
|
(August
18, 2006)
|
||||||||||||
|
through
|
||||||||||||
|
January
31,
|
||||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Oil
and natural gas sales
|
$ | 4,712 | $ | 4,109 | $ | 22,824 | ||||||
|
Costs
and expenses
|
||||||||||||
|
Oil
and natural gas production taxes
|
339 | 296 | 1,644 | |||||||||
|
Oil
and natural gas production expenses
|
32,038 | 20,531 | 70,879 | |||||||||
|
Depreciation
and amortization
|
4,200 | - | 6,044 | |||||||||
|
Non-cash
compensation
|
327,591 | - | 327,591 | |||||||||
|
Bad
debt expense
|
76,000 | - | 76,000 | |||||||||
|
General
and administrative expense, net of operator's overhead
fees
|
125,945 | 4,362 | 130,932 | |||||||||
| 566,113 | 25,189 | 613,090 | ||||||||||
|
Loss
from operations
|
(561,401 | ) | (21,080 | ) | (590,266 | ) | ||||||
|
Other
income (expense):
|
||||||||||||
|
Other
income
|
- | - | 54 | |||||||||
|
Interest
expense
|
(425 | ) | (653 | ) | (1,798 | ) | ||||||
|
Total
other income (expense)
|
(425 | ) | (653 | ) | (1,744 | ) | ||||||
|
Loss
before income taxes
|
(561,826 | ) | (21,733 | ) | (592,010 | ) | ||||||
|
Provision
for income taxes
|
- | - | - | |||||||||
|
Net
loss
|
$ | (561,826 | ) | $ | (21,733 | ) | $ | (592,010 | ) | |||
|
Net
loss per common share, basic and diluted
|
$ | (0.02 | ) | $ | (0.00 | ) | $ | (0.03 | ) | |||
|
Weighted
average common shares outstanding
|
27,106,826 | 21,000,000 | 22,879,023 | |||||||||
See
accompanying notes to condensed consolidated financial
statements.
5
NORTH
AMERICAN ENERGY RESOURCES, INC.
(An
Exploration Stage Company)
Statements
of Condensed Consolidated Cash Flows
(Unaudited)
For
the nine months ended January 31, 2009 and 2008
and
the period from inception (August 18, 2006) through January 31,
2009
|
Inception
|
||||||||||||
|
(August
18, 2006)
|
||||||||||||
|
through
|
||||||||||||
|
January
31,
|
||||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Operating
activities
|
||||||||||||
|
Net
loss
|
$ | (561,826 | ) | $ | (21,733 | ) | $ | (592,010 | ) | |||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Depreciation
and amortization
|
4,200 | - | 6,044 | |||||||||
|
Non-cash
compensation
|
327,591 | - | 327,591 | |||||||||
|
Bad
debt expense
|
76,000 | - | 76,000 | |||||||||
|
Increase
(decrease) in:
|
||||||||||||
|
Accounts
receivable
|
4,743 | (12,339 | ) | (52,002 | ) | |||||||
|
Accounts
payable
|
73,317 | 4,035 | 97,182 | |||||||||
|
Accrued
expenses
|
(1,094 | ) | 653 | 280 | ||||||||
|
Advances
to related parties
|
(8,519 | ) | - | (8,519 | ) | |||||||
|
Advances
from joint interest owners
|
(189,471 | ) | (8,359 | ) | (8,670 | ) | ||||||
|
Net
cash used in operating activities
|
(275,059 | ) | (37,743 | ) | (154,104 | ) | ||||||
|
Investing
activities
|
||||||||||||
|
Payments
for oil and natural gas properties and equipment
|
(38,275 | ) | (40,326 | ) | (166,957 | ) | ||||||
|
Cash
received in excess of cash paid in reverse acquisition of North American
Energy Resources, Inc.
|
119,830 | - | 119,830 | |||||||||
|
Proceeds
from sale of oil and gas properties
|
- | - | 7,500 | |||||||||
|
Net
cash used in investing activities
|
81,555 | (40,326 | ) | (39,627 | ) | |||||||
|
Financing
activities
|
||||||||||||
|
Loan
proceeds
|
- | 30,250 | 35,250 | |||||||||
|
Shareholder
contribution
|
50,000 | - | 50,000 | |||||||||
|
Loans
from related parties
|
- | 46,000 | 130,000 | |||||||||
|
Repayment
of loans from related parties
|
(36,750 | ) | - | (36,750 | ) | |||||||
|
Bank
overdraft
|
- | 1,054 | - | |||||||||
|
Sale
of common stock
|
- | - | 20,000 | |||||||||
|
Net
cash provided by financing activities
|
13,250 | 77,304 | 198,500 | |||||||||
|
Net
increase in cash and cash equivalents
|
(180,254 | ) | (765 | ) | 4,769 | |||||||
|
Cash
and cash equivalents, beginning of period
|
185,023 | 765 | - | |||||||||
|
Cash
and cash equivalents, end of period
|
$ | 4,769 | $ | - | $ | 4,769 | ||||||
See
accompanying notes to condensed consolidated financial
statements.
6
NORTH
AMERICAN ENERGY RESOURCES, INC.
(An
Exploration Stage Company)
Statements
of Condensed Consolidated Cash Flows, Continued
(Unaudited)
For
the nine months ended January 31, 2009 and 2008
and
the period from inception (August 18, 2006) through January 31,
2009
|
Inception
|
||||||||||||
|
(August
18, 2006)
|
||||||||||||
|
through
|
||||||||||||
|
January
31,
|
||||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Supplemental
cash flow information
|
||||||||||||
|
Cash
paid for interest and income taxes:
|
||||||||||||
|
Interest
|
$ | - | $ | - | $ | - | ||||||
|
Income
taxes
|
- | - | - | |||||||||
|
Non-cash
investing and financing activities:
|
||||||||||||
|
Common
stock issued for:
|
||||||||||||
|
Notes
receivable
|
$ | 76,000 | $ | - | $ | 76,000 | ||||||
|
Oil
and gas properties
|
303,670 | - | 303,670 | |||||||||
|
Interest
in pipeline
|
100,000 | - | 100,000 | |||||||||
|
Loans
to shareholders assumed
|
(371,000 | ) | - | (371,000 | ) | |||||||
|
Advance
from joint interest participant assumed
|
(8,670 | ) | - | (8,670 | ) | |||||||
| $ | 100,000 | $ | 100,000 | |||||||||
|
Acquisition
of North American Energy Resources, Inc. in reverse
acquisition:
|
||||||||||||
|
Assets
acquired, other than cash
|
$ | - | $ | - | $ | - | ||||||
|
Liabilities
assumed
|
(30,170 | ) | - | (30,170 | ) | |||||||
| (30,170 | ) | (30,170 | ) | |||||||||
|
Common
stock issued
|
(150,000 | ) | - | (150,000 | ) | |||||||
|
Cash
received in excess of cash paid
|
$ | 119,830 | $ | 119,830 | ||||||||
|
Exchange
of joint interest receivable for oil and natural gas
properties
|
$ | 37,316 | - | $ | 37,316 | |||||||
|
Convertible
note payable and accrued interest exchanged for 1,000 shares of North
American Exploration, Inc. common stock
|
35,530 | - | 35,530 | |||||||||
|
Common
stock options cancelled
|
188,005 | - | 188,005 | |||||||||
See
accompanying notes to condensed consolidated financial
statements.
7
NORTH
AMERICAN ENERGY RESOURCES, INC.
(An
Exploration Stage Company)
Notes
to Condensed Consolidated Financial Statements
|
NOTE
1:
|
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
Organization
The
financial statements include the accounts of North American Energy Resources,
Inc. (formerly Mar Ked Mineral Exploration, Inc.) (“NAEN”) and its wholly owned
subsidiary, North American Exploration, Inc. (“NAE”) (formerly Signature Energy,
Inc.) (collectively the “Company”).
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 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,
2008, which is included in the Company’s Form 8-K/A dated July 28, 2008 and
filed on September 12, 2008. The financial data for the interim
periods presented may not necessarily reflect the results to be anticipated for
the complete year.
Acquisition
On July
28, 2008, the shareholders of NAE entered into a stock purchase agreement with
NAER. NAER issued 21,000,000 restricted shares of its common stock to
the shareholders of NAE in exchange for 100% of the issued and outstanding stock
of NAE. Completion of the stock purchase agreement resulted in the
shareholders of NAE having control of NAER. Accordingly, the
transaction is recorded for accounting purposes as the acquisition of NAE by
NAER with NAE as the acquirer (reverse acquisition). The financial
statements of the Company prior to July 28, 2008 are those of
NAE. Formerly, NAER used a November 30 year-end. As a
result of the reverse acquisition, the Company will utilize the April 30
year-end of NAE in the future.
8
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 with activities, including the drilling, completion and
operation of oil and gas wells in Oklahoma. The Company also has an
interest in a pipeline in its area of operations which is used for gathering its
gas and the gas production of other producers.
Exploration
stage
The
Company is in the exploration stage and has realized only nominal revenue to
date. The Company is now beginning to develop leasehold which it owns
in Washington County, Oklahoma. Accordingly, the operation of the
Company is presented as those of a development stage enterprise, from its
inception (August 18, 2006) as prescribed by Statement of Financial Accounting
Standards (SFAS) No. 7, “Accounting and Reporting by Development Stage
Enterprises.”
Going
concern
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. The Company commenced operations in
September 2006.
At
January 31, 2009 and April 30, 2008 the Company had negative working capital of
$379,788 and $509,192, respectively, which includes $407,000 and $501,000 in
non-interest bearing loans from related parties, respectively.
The
Company had relied on receiving an additional $1,300,000 from the prior
shareholders to fund its planned drilling and development program. As
discussed in Note 4, the prior shareholders have decided to default on their
agreement. Accordingly, the Company will plan to meet its capital
requirements for the next year with private placements of its common
stock.
In
addition, the Company expects to sell all of its interest in its existing
developmental drilling prospects on a 1/3 for 1/4 basis and be carried to the
tanks, thus having no additional up-front capital costs on existing
properties. This method of operations allows the company to
participate in a larger number of prospects with a relatively low capital
outlay.
These
conditions raise 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.
Prior
operations
Prior to
the acquisition of NAE, NAER was an exploration stage company engaged in the
acquisition, exploration and development of resource properties, principally
gold, in the Province of British Columbia, Canada. Since the
acquisition of NAE, NAER has abandoned its plans to develop gold leases and will
concentrate future resources in acquiring, exploring and developing oil and
natural gas properties.
9
|
NOTE
2:
|
RELATED
PARTY TRANSACTIONS
|
The
Company has non-interest bearing obligations to related parties at January 31,
2009 and April 30, 2008, as follows:
|
January
31,
|
April
30,
|
|||||||
|
2009
|
2008
|
|||||||
|
Assets
acquired from shareholders
|
$ | 371,000 | $ | 371,000 | ||||
|
Cash
received
|
130,000 | 130,000 | ||||||
|
Cash
repayment
|
(36,750 | ) | - | |||||
|
Options
exercised with amounts due shareholders
|
(75,250 | ) | - | |||||
| $ | 389,000 | $ | 501,000 | |||||
The
Company acquired the following assets from its shareholders and assumed the
liability to its shareholders in August 2006:
|
2007
|
||||
|
Note
receivable
|
$ | 76,000 | ||
|
Oil
and gas properties
|
303,670 | |||
|
Interest
in pipeline
|
100,000 | |||
|
Assets
acquired
|
479,670 | |||
|
Advance
from joint interest participant assumed
|
(8,670 | ) | ||
|
Common
stock issued
|
(100,000 | ) | ||
|
Liability
to shareholders
|
$ | 371,000 | ||
The
Company sells its gas pursuant to a contract with a gathering system principally
owned by a related party. The Company receives a price equal to 70%
of the posted price. The related party retains the other 30% of the
posted price for gathering fees and marketing fees.
During
the three months ended October 31, 2008, options to acquire 400,000 shares of
common stock were granted to two shareholders at prices ranging from $1.00 to
$1.25 per share. A total of 63,500 shares were exercised during the
quarter and paid with a $66,000 reduction in the amount due
shareholders. These options were cancelled effective November 1,
2008.
During
the three months ended January 31, 2009, the Company granted options for 384,667
shares to shareholders which were exchanged for shareholder advances of $9,250
and accounts payable assumed of $65,000.
During
the nine months ended January 31, 2009, the Company loaned a related party
$8,519 as an advance of consulting fees.
10
|
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, 2009 and April 30, 2008, 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, 2009 and April 30, 2008 the Company has
30,507,667 and 21,000,000 shares issued and outstanding,
respectively.
During
the three months ended October 31, 2008, options to acquire 404,500 shares of
common stock were granted to two shareholders and one consultant at prices
ranging from $1.00 to $2.00 per share. A total of 66,000 shares were
exercised during the quarter and paid with a $66,000 reduction in the amount due
shareholders and a reduction in accounts payable of $9,020.
During
the three months ended January 31, 2009, the Company granted options to acquire
589,667 shares of its common stock which were exchanged for a consulting
contract valued at $310,500, advances due shareholders of $9,250 and accounts
payable assumed of $69,400.
|
NOTE
4:
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company currently maintains its corporate office in the office of its accountant
at no charge.
The
shareholders of NAER prior to the acquisition of NAE agreed to contribute a
total of $1,500,000 to NAER as an inducement to the shareholders of NAE to close
the acquisition in July 2008. Of this amount, $200,000 was
contributed as of January 31, 2009. The Company received confirmation
in early February 2009 that the shareholders of NAER before the acquisition of
NAE advised NAER of the decision to default on their agreement to contribute a
$1,500,000 to the Company. The Company’s plans for drilling and
developing its acreage have been delayed pending obtaining a new source of
financing.
|
NOTE
5:
|
SUBSEQUENT
EVENT
|
On
February 12, 2009, the Company filed a Preliminary Information Statement
pursuant to Section 14C of the Securities Exchange Act of 1934 to announce the
approval by the holders of a majority of the common stock of the Company of a
reverse stock split of one share for each 50 currently
outstanding. This action should become effective at least 20 days
after filing a Definitive 14C. The share disclosures in this filing
have not been adjusted to take into account this reverse split.
11
|
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.
Our plan
of operation for the next twelve months is to obtain funding from private
placements of our common stock, continue to develop our existing leases, and
acquire additional leases.
COMPARISON
OF THREE MONTHS ENDED JANUARY 31, 2009 AND 2008
During
the three-month periods ended January 31, 2009 and 2008, we had oil and natural
gas sales of $1,740 and $1,679, respectively. In the 2008 period, the
Company’s field came back on line after being shut-in due to flooding
experienced earlier in the year. Sales re-commenced after substantial
repairs had been completed. In the 2009 period, the Company had
several wells which were scheduled for work-over to commence in the quarter
ended January 31, 2009. The scheduled work-overs were delayed until
the quarter ending April 30, 2009.
Non-cash
compensation includes the calculated value of options granted for consulting
contracts during the quarter.
At
January 31, 2009, the Company wrote off a note receivable in the amount of
$76,000 to bad debt expense as it was determined to be
uncollectible.
During
the three-month periods ended January 31, 2009 and 2008, general and
administrative expenses, amounted to $62,033 and $5,662,
respectively. Consulting and professional services, accounting, field
supervision and software costs in 2009 account for the majority of the
increase. The accounting was brought up to date during the 2009
period, an audit was completed and new oil and gas software was used for the
first time.
COMPARISON
OF NINE MONTHS ENDED JANUARY 31, 2009 AND 2008
During
the nine-month periods ended January 31, 2009 and 2008, we had oil and natural
gas sales of $4,712 and $4,109, respectively. In the 2008 period, the
Company’s field was shut-in due to flooding experienced earlier in the year
until August 2007. During 2009, several wells are being re-completed
commencing in February 2009.
Non-cash
compensation represents the amortization of the intrinsic value of common stock
options which began in the October 2008 quarter of $17,091 and the calculated
value of options issued for consulting contracts of $310,500. The
options granted in the prior quarter were cancelled effective November 1,
2008.
At
January 31, 2009, the Company wrote off a note receivable in the amount of
$76,000 to bad debt expense as it was determined to be
uncollectible.
12
During
the nine-month periods ended January 31, 2009 and 2008, general and
administrative expenses, amounted to $125,945 and $4,362,
respectively. Consulting and professional services, accounting and
software costs in 2009 account for the majority of the increase. The
accounting was brought up to date during the 2009 period, an audit was completed
and new oil and gas software was used for the first time.
LIQUIDITY,
CAPITAL RESOURCES AND PLAN OF OPERATIONS
At
January 31, 2009, we had $4,769 in cash and a working capital deficit of
$379,788. Comparatively, we had cash of $185,023 and a working
capital deficit of $509,192 at April 30, 2008.
Pursuant
to the stock purchase agreement between NAER and the shareholders of NAE, the
shareholders of NAER prior to the acquisition of NAE agreed to contribute
$1,500,000 for the working capital needs of NAER. As of January 31,
2009, the Company had received $200,000 from the shareholders. The
Company received confirmation in early February 2009 that the shareholders of
NAER before the acquisition of NAE advised NAER o the decision to default on
their agreement to contribute a $1,500,000 to the Company. The
Company’s plans for drilling and developing its acreage have been delayed
pending obtaining a new source of financing.
We
estimate that our total planned expenditures over the next twelve months will be
approximately $120,000 for corporate overhead. We expect to utilize
excess funds when available to acquire additional acreage for future drilling
operations.
CASH
USED IN OPERATING ACTIVITIES
Cash used
for operating activities was $275,059 for the nine-month period ended January
31, 2009 and $37,743 for the nine-month period ended January 31,
2008. The majority of the increase is attributed to using the funds
received from joint interest participants to pay drilling and development costs
incurred during the period. The majority of the funds required for
drilling and developing existing acreage will come from prepayments from joint
interest participants. Aside from overhead, we expect to utilize the
majority of our excess capital, if any, to acquire additional
leases.
CASH
FROM FINANCING ACTIVITIES
We
received $50,000 in cash from shareholder contributions during the nine-month
period ended January 31, 2009, after the acquisition of NAE by
NAEN. Of this amount, $36,750 was used to repay a portion of
shareholder loans. As noted above, there will be no future
shareholder contributions from the former shareholders of NAEN.
13
GOING
CONCERN
We have
not attained profitable operations and are dependent upon obtaining a
replacement for the shareholder contributions discussed above to pursue our
business plan. For these reasons, there is doubt we will be able to
continue as a going concern, since we are dependent upon an as yet unknown
source to provide sufficient funds to finance future operations until our
revenues are adequate to fund our cost of operations.
OFF-BALANCE
SHEET ARRANGEMENTS
None.
14
|
ITEM
3:
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not
applicable.
|
ITEM
4T:
|
CONTROLS
AND PROCEDURES
|
(a) Evaluation of Disclosure
Controls and Procedures
The
Company’s Chief Executive Officer has reviewed and evaluated the effectiveness
of the Company’s disclosure controls and procedures (as defined in Rules
240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of
1934) as of January 31, 2009. Based on that review and evaluation,
which included inquiries made to certain other employees of the Company, the CEO
concluded that the Company’s current disclosure controls and procedures, as
designed and implemented, are effective in ensuring that information relating to
the Company required to be disclosed in the reports the Company files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, including insuring that such information is
accumulated and communicated to the Company’s management, including the CEO, as
appropriate to allow timely decisions regarding required
disclosure.
(b) Changes in
Internal Controls
There
have been no significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to the date of the
evaluation described above, including any corrective actions with regard to
significant deficiencies and material weaknesses.
15
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
|
During
the three months ended January 31, 2009, the Company granted options to acquire
589,667 shares of its common stock pursuant to an S-8 registration statement
which were exchanged for a consulting contract valued at $310,500, advances due
shareholders of $9,250 and accounts payable assumed of $69,400.
|
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
|
Certification
pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
Exhibit
32
|
Certification
pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act
of 2002
|
16
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
20, 2009
|
||
|
By: /s/
|
Ross E. Silvey
|
|
|
President,
Chief Executive Officer and
|
||
|
Acting
Chief Financial Officer
|
17