UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:

For the quarterly period ended June 30, 2012
 
 o
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: 000-51465
 
 United American Petroleum Corp.
 (Exact name of registrant as specified in its charter)
 
 Nevada
20-1904354(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
 
 9600 Great Hills Trail, Suite 150W, Austin, TX 78759(Address of principal executive offices) (Zip Code)
 
 (512) 852-7888(Registrant’s Telephone Number, including area code)
 Indicate by check mark whether the issuer (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. x    Yes    o    No
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes  o No
 
 Indicate by check mark whether the registrant is a large accelerated file, 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.
 
 Large accelerated filer
o

Accelerated filer
oNon-accelerated filer
o
(Do not check if a smaller reporting company)
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).  o    Yes    x    No
 
 As of August 14, 2012, there were 50,034,543 shares of the issuer's $.001 par value common stock issued and outstanding.
 
 
  1
  
 
 TABLE OF CONTENTS
 
 
 PART I



FINANCIAL INFORMATIONPageItem 1.
Financial Statements
3Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
12Item 3.
Quantitative and Qualitative Disclosures about Market Risk
18Item 4.
Controls and Procedures
18
 
 PART II
 
 OTHER INFORMATION
 
 Item 1.
Legal Proceedings
18Item 1A.
Risk Factors
18Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
18Item 3.
Defaults Upon Senior Securities
18Item 4.
Mine Safety Disclosures
18Item 5.
Other Information
18Item 6.
Exhibits
18
 
 
 2
  PART I - FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 UNITED AMERICAN PETROLEUM, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED


JUNE 30,


DECEMBER 31,2012


2011ASSETSCURRENT ASSETCash

$
591,337



593,469Accounts receivable


27,786



35,405Related party receivables


8,784



25,718Prepaid expenses


8,394



-Other receivable


133,626



160,302Total current assets


769,927



814,894Oil and gas properties (full cost method):Evaluated, net of accumulated depletion of $58,437 and $23,135

as of June 30, 2012 and December 31, 2010, respectively


553,536



528,336Unevaluated


822,155



617,630TOTAL ASSETS

$
2,145,618



1,960,860LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIESAccounts payable and accrued liabilities


214,459



217,702Other payable


451,695



431,151Total current liabilities


666,154



648,853Accrued interest


-



141,255Convertible note payable, net of discount of $0 and $1,561,997

as of June 30, 2012 and December 31, 2011, respsectively


-



623,003Embedded derivative liability


-



1,138,989Asset retirement obligation


59,526



56,012TOTAL LIABILITIES


725,680



2,608,112STOCKHOLDERS' DEFICITCommon stock, $0.001 par value, 100,000,000 shares authorized,

47,250,000 shares issued and 50,034,043 and 44,000,000 shares outstanding, respectively


50,035



44,000Additional paid-in capital


8,283,103



487,739Accumulated deficit


(6,913,200
)


(1,178,991
)Total stockholders' deficit


1,419,938



(647,252
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$
2,145,618



1,960,860
 The accompanying notes are an integral part of these unaudited consolidated financial statements.
  3
 UNITED AMERICAN PETROLEUM, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2012 AND 2011 UNAUDITED
  FOR THE THREE


FOR THE THREE


FOR THE SIX


FOR THE SIXMONTHS ENDED


MONTHS ENDED


MONTHS ENDED


MONTHS ENDEDJUNE 30, 2012


JUNE 30, 2011


JUNE 30, 2012


JUNE 30, 2011REVENUEOil and Gas sales

$
142,784


$
16,279


$
181,417


$
23,732Administrative Income


46,619



26,119



98,873



53,554TOTAL REVENUE


189,403



42,398



280,290



77,286OPERATING EXPENSES (INCOME)Lease operating expenses


136,631



7,216



237,704



15,117Accretion expense


1,543



206



3,514



505Depletion expense


21,922



2,545



35,302



4,202General and administrative


265,755



279,318



433,274



560,122TOTAL OPERATING EXPENSES


425,851



289,285



709,794



579,946NET LOSS BEFORE OTHER EXPENSE


(236,448
)


(246,887
)


(429,504
)


(502,660
)OTHER INCOME (EXPENSE)Interest Expense


(2,179,232
)


(73,778
)


(2,274,487
)


(122,771
)Gain (Loss) on embedded derivatives


835,467



503,366



(3,030,218
)


(1,444,781
)Total other expense


(1,343,765
)


429,588



(5,304,705
)


(1,567,552
)NET INCOME (LOSS)

$
(1,580,213
)

$
182,701


$
(5,734,209
)

$
(2,070,212
)INCOME (LOSS) PER SHARE - BASIC


(0.03
)


0.00



(0.12
)


(0.05
)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC


48,815,701



43,950,000



48,064,881



43,950,000INCOME (LOSS) PER SHARE - DILUTED


(0.03
)


0.00



(0.12
)


(0.05
)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED


48,815,701



46,370,000



48,064,881



43,950,000
 The accompanying notes are an integral part of these financial statements.
  4
 UNITED AMERICAN PETROLEUM, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOW
 UNAUDITED
 FOR THE


FOR THESIX MONTHS ENDED


SIX MONTHS ENDEDJUNE 30, 2012


JUNE 30,2011CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss)

$
(5,734,209
)

$
(2,070,212
)Adjustments to reconcile net lossto net cash used in operating activities:Depletion expense


35,302



4,202Accretion expense


3,514



505Amortization of debt discount


2,176,996



55,917Loss on embedded derivatives


3,030,218



1,444,781Change in assets and liabilities(Increase) Decrease in  accounts receivable


7,619



(48,284
)Decrease in related party receivable


16,934



-(Increase) in other receivable


26,676



(81,631
)Increse in prepaid expense


(8,394
)Increase (Decrease) in  accounts payable and accrued expenses


72,485



(150,798
)Increase in other payable


20,544



66,805Increase in revenue payable


-



51,068Net cash (used in) operating activities


(352,315
)


(727,647
)CASH FLOWS USED IN INVESTING ACTIVITIES:Acquisition of oil and gas properties


(264,817
)


(5,000
)Net cash used in investing activities


(264,817
)


(5,000
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from convertible notes


615,000



590,000Payment of note payable


-



(250,000
)Payment of related party notes payable


-



(50,000
)Net cash provided by financing activities


615,000



290,000NET INCREASE IN CASH AND CASH EQUIVALENTS


(2,132
)


(442,647
)CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD


593,469



557,344CASH AND CASH EQUIVALENTS - END OF PERIOD

$
591,337


$
114,697SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for:Interest

$
-


$
-Taxes

$
-


$
-NON CASH TRANSACTIONS:Conversion of convertible notes payable

$
2,800,000


$
-Conversion of accrued interest

$
217,272


$
-Stock repurchase and cancellation

$
-


$
-Acquisition of oil and gas properties with payables

$
-


$
84,975Discount from derivative liabilities

$
615,000


$
-Discount to additional paid-in capital from relative fair value of warrants

$
289,520


$
-Settlement of derivative liabilities to additional paid-in capital

$
4,493,669


$
-
  5
 UNITED AMERICAN PETROLEUM CORP.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 1.Nature of Operations and Basis of Presentation
 
 Nature of Operations
 
 4 Phoenix Oil & Gas, LLC, a limited liability company, was formed under the laws of the state of Texas on October 19, 2009 (“Predecessor”).   On August 10, 2010, we formed United American Petroleum Corp. a Company incorporated under the laws of the state of Nevada.  United American Petroleum Corp.’s principal business is the acquisition and management of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases.  In these notes, the terms “United,” “Company,” “we,” “us,” “successor," or “our” mean United American Petroleum Corp.
 
 Basis of Presentation
 
 These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim consolidated 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 consolidated financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements on Form 10-K for the years ended December 31, 2011. The condensed 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 six month period ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. We made certain reclassifications to prior-period amounts to conform to the current presentation.
 
 2.            Going Concern
 
 The Company has incurred a net loss and negative operating cash flows since inception through June 30, 2012. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's management is implementing plans to sustain the Company’s cash flow from operating activities and/or acquire additional capital funding. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
 3.            Related Party Transactions
 
 As of June 30, 2012, the Company had a related party receivable of $8,784.  As of December 31, 2011, the Company had a related party payable in the amount of $25,718 payable.  The June 30, 2012 balance is related to one Company with working interest amounts payable to the Company.  The December 31, 2011 balance is related to two Companies with working interest amounts receivable from the Company.  Our directors are also officers in these Companies.
 6
 UNITED AMERICAN PETROLEUM CORP.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 4.            Embedded Derivative Liabilities
 
 Conversion Option Liability
 
 As described in Note 7, the Company has issued convertible notes with certain reset provisions. The Company accounted for these reset provisions in accordance with ASC 815-40, which requires that the Company bifurcate the embedded conversion option as liability at the grant date and to record changes in fair value relating to the conversion option liability in the statement of operations as of each subsequent balance sheet date.   The debt discount related to the convertible note is amortized over the life of the note using the effective interest method.  See Note 6 for a reconciliation of the changes in fair value of the Company’s embedded derivative.
 
 December 31, 2010 Convertible Notes (First Financing)
 
 On April 13, 2012, the Company converted a $620,000 convertible note into 1,240,000 shares of common stock.  On the conversion date, the Company determined a fair value of $1,280,115 for the conversion option liability for this convertible note using the Black Scholes Option Pricing Model based upon the following:  dividend yield of -0-%, volatility of 108.17%, risk free rate of 0.27% and an expected term of approximately 1.72 years.  The Company recognized a non-cash loss included in other expense of $982,960 preceding conversion for the period ended June 30, 2012.
 
 On June 1, 2012, the Company converted $590,000 of its convertible notes into 1,180,000 shares of common stock.  On the conversion date, the Company determined a fair value of $955,179 for these convertible notes using the Black Scholes Option Pricing Model based upon the following: dividend yield of -0-%, volatility of 111.24%, risk free rate of 0.25% and an expected term of approximately 1.58 years.  The Company recognized a non-cash loss included in other expense of $668,692 preceding conversion for the period ended June 30, 2012.
 
 For the period ended June 30, 2012, the Company recognized a reduction of embedded derivative from the first installment of its convertible notes in the amount of $2,235,294.  This amount was recorded to additional paid-in capital.
 
 October 14, 2011 Convertible Notes (Second Financing)
 
 On June 7, 2012, the Company converted $1,590,000 of its convertible notes into 3,180,000 shares of common stock.  On the conversion date, the Company determined a fair value of $2,258,375 for these convertible notes using the Black Scholes Option Pricing Model based upon the following: dividend yield of -0-%, volatility of 102.93%, risk free rate of 0.27% and an expected term of approximately 2.35 years.  The Company recognized a non-cash loss included in other expense of $674,380 preceding conversion for the period ended June 30, 2012.
 
 For the period ended June 30, 2012, the Company recognized a reduction of embedded derivative from the second installment of its convertible notes in the amount of $2,258,375.  This amount was recorded to additional paid-in capital.
 7
 UNITED AMERICAN PETROLEUM CORP.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 5.           Detachable Warrants
 
 As described in Note 7, the Company issued a convertible note with detachable warrants. The Company accounted for these detachable warrants in accordance with ASC 470-20, which requires that the Company calculate the relative fair value of the warrants at the grant date and record the relative fair value as a discount to the related note payable with an offset to additional paid-in capital. The Company amortizes the debt discount associated with the warrants over the life of the convertible notes using the effective interest method.
 
 On February 10, 2012, the Company determined a relative fair value of $61,354 for the detachable warrants for the fourth installment of the convertible notes. In calculating the relative fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 110.77%, risk free rate of 1.04% and an expected term of approximately 5 years.
 
 On March 30, 2012, the Company determined a relative fair value of $130,853 for the detachable warrants for the fifth installment of the convertible notes. In calculating the relative fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 110.64%, risk free rate of 1.04% and an expected term of approximately 5 years.
 
 On June 4, 2012, the Company determined a relative fair value of $97,313 for the detachable warrants for the fifth installment of the convertible notes. In calculating the relative fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 112.94%%, risk free rate of 0.27% and an expected term of approximately 4.69 years.
 
 A summary of warrant activity for the period from December 31, 2011 through June 30, 2012 is presented below:
 Number of

Warrants


Weighted

Average

Exercise

Price

Weighted

Average

Remaining

Contract TermOutstanding December 31, 2011


2,185,000


$
1.00

4.20 yearsIssued


615,000


$
1.00

4.50 yearsExercised


-



-

-Outstanding June 30, 2012


2,800,000


$
1.00

4.01 yearsExercisable, June  30, 2012


2,800,000


$
1.00

4.01 years
 Shares Reserved for Future Issuance
 
 The Company has reserved shares for future issuance upon of its warrants as follows:
 Warrants
2,800,000Reserved shares at June 30, 2012
2,800,000
 
 8
 UNITED AMERICAN PETROLEUM CORP.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  6.Fair Value
 The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
 Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;Level 2
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; andLevel 3
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
 The following is a reconciliation of the conversion option liability and detachable warrant liability for which Level 3 inputs were used in determining fair value:
 Beginning balance January 1, 2012
$
1,138,989Initial recognition of debt derivative from issuance of

February 10, 2012, $150,000 convertible note

189,052Initial recognition of debt derivative from issuance of

March 30, 2012, $250,000 convertible note

514,784Initial recognition of debt derivative from issuance of

June 4, 2012, $215,000 convertible note

325,831Mark to market of debt derivative

2,325,015Other

1,017Total debt derivative preceding conversion

4,494,688Reduction of debt derivative from conversion

(4,494,688)Debt derivative as of June 30, 2012
$
-
 9
 UNITED AMERICAN PETROLEUM CORP.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 6.Fair Value (Continued)
 
 During the period ended June 30, 2012, the loss on embedded derivatives of in the condensed consolidated statement of operations consisted of a loss on the change in fair value of 1,942,650 noted above and a loss of $704,186 which was the amount by which the embedded derivative liabilities exceeded the principal of the related notes payable on the date the notes were issued.
 
 The Company’s conversion option liabilities are valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These consolidated financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy. See Note 4 for Black Scholes Option Pricing Model inputs.
 
 7.Convertible Note Payable
 
 Credit Facility – October 14, 2011
 
 On October 14, 2011, we entered into a Note and Warrant Purchase Agreement with an investor pursuant to which the investor agreed to lend up to $1,500,000 in multiple installments in exchange for a senior secured convertible promissory note with a conversion price of $0.50 per share and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share in the amount of each installment. The first installment of $400,000 was delivered on the date of the Purchase Agreement and we issued 400,000 warrants to the investor in connection with the first installment. The notes matures on October 14, 2014, or upon default, whichever is earlier and bear interest at an annual rate of 10%.
 
 The fourth installment of $150,000 was delivered on February 10, 2012 and we issued 150,000 warrants in connection with the fourth installment.
 
 The fifth installment of $250,000 was delivered on March 30, 2012 and we issued 250,000 warrants in connection with the fifth installment.
 
 The sixth installment of $215,000 was delivered on June 30, 2012 and we issued 430,000 warrants in connection with the sixth installment.
 
 Using a pro rata contribution, the Company allocated the proceeds of the February 10, 2012, March 30, 2012 and June 4, 2012, convertible notes first to the relative fair value of the warrants and the remainder to the fair value of the embedded derivative on the date of grant as follows:
 
 10
 UNITED AMERICAN PETROLEUM CORP.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 7.Convertible Note Payable (Continued)
 
 Notes issued in 2012
 February 10,

2012


March 30,

2012


June4,

2012


TotalTotal Proceeds

$
150,000


$
250,000


$
215,000


$
615,000Allocated to:Conversion Option Liability


189,052



514,783



325,831



1,029,666Relative Fair Value of Warrants


61,354



130,853



97,313



289,520250,406



645,636



423,144



1,319,186Debt Discount


(150,000
)


(250,000
)


(215,000
)


(615,000
)Loss on debt derivative

$
100,406


$
395,636


$
208,144


$
704,186
 During the six months ended June 30, 2012 and 2011, the Company amortized $2,176,996 and $55,917 of the debt discount to interest expense.  The debt discount from the convertible notes was immediately expensed upon the conversion of the convertible notes during the period ended June 30, 2012.
 
 Conversion of Convertible Notes
 
 December 31, 2010 Convertible Note Installments (First Financing)
 
 On April 13, 2012, the Company issued 1,240,000 shares of common stock to one investor who elected to convert the outstanding principal amount of $620,000 due on its convertible promissory note date December 31, 2010 at a conversion price of $0.50 per share as provided in the note agreement.
 
 On June 1, 2012, the Company issued 1,180,000 shares of common stock to one investor who elected to convert the outstanding principal amount of $590,000 due on its convertible promissory notes dated January 1, 2011, March 9, 2011, June 20, 2011 and June 30, 2011 at a conversion price of $0.50 per share as provided in the note agreement.
 
 On June 11, 2012, the Company issued 300,481 shares of common stock to one investor who elected to convert all of their accrued interest in the amount of $150,240 on its convertible notes from its first financing at a conversion price of $0.50 per share as provided in the note agreement.
 
 October 14, 2011 Convertible Note Installments (Second Financing)
 
 On June 7, 2012, the Company issued 3,314,062 shares of common stock to one investor who elected to convert the outstanding principal amount of $1,590,000 and all of the accrued interest due on its convertible promissory notes dated October 14, 2011, November 29, 2011, December 19, 2011, February 10, 2012, March 30, 2012 and June 4, 2012 at a conversion price of $0.50 per share as provided in the note agreement.
 
 11
 Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
 Forward Looking Statements
 
 This Quarterly Report of United American Petroleum Corp. on Form 10-Q contains forward-looking statements, particularly those identified with the words “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives” and similar expressions. These statements reflect management's best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management's Discussion and Analysis and Plan of Operations,” generally, and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Quarterly Report on Form 10-Q. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guarantee, or warranty is to be inferred from those forward-looking statements.
 
 The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. 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 require 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.
 
 Critical Accounting Policy and Estimates. Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.  In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in this Quarterly Report on Form 10-Q for the period ended June 30, 2012.
 
 Oil and Gas Properties
 
 The Company follows the full cost method of accounting for its investments in oil and gas properties. Under the full cost method, all costs associated with the exploration of properties are capitalized into appropriate cost centers within the full cost pool.  Internal costs that are capitalized are limited to those costs that can be directly identified with acquisition, exploration, and development activities undertaken and do not include any costs related to production, general corporate overhead, or similar activities.  Cost centers are established on a country-by-country basis.
 
 Capitalized costs within the cost centers are amortized on the unit-of-production basis using proved oil and gas reserves. The cost of investments in unproved properties and major development projects are excluded from capitalized costs to be amortized until it is determined whether or not proved reserves can be assigned to the properties. Until such a determination is made, the properties are assessed annually to ascertain whether impairment has occurred.  The costs of drilling exploratory dry holes are included in the amortization base immediately upon determination that the well is dry.
 
 12
 For each cost center, capitalized costs are subject to an annual ceiling test, in which the costs shall not exceed the cost center ceiling.  The cost center ceiling is equal to i) the present value of estimated future net revenues computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions;  plus ii) the cost of properties not being amortized; plus iii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less iv) income tax effects related to differences between the book and tax basis of the properties.  If unamortized costs capitalized within a cost center, less related deferred income taxes, exceed the cost center ceiling, the excess is charged to expense and separately disclosed during the period in which the excess occurs.
 
 Share-Based Compensation
 
 The Company accounts for share-based compensation in accordance with Accounting Standards Codification subtopic 718-10, Stock Compensation (“ASC 718-10”).  This requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
 
 As of June 30, 2012, there were no outstanding employee stock options.
 
 Recent Accounting Pronouncements
 
 In December 2008, the SEC issued Release No. 33-8995, Modernization of Oil and Gas Reporting  (ASC 2010-3), which amended the oil and gas disclosures for oil and gas producers contained in Regulations S-K and S-X, and added a section to Regulation S-K (Subpart 1200) to codify the revised disclosure requirements in Securities Act Industry Guide 2, which was eliminated. The goal of Release No. 33-8995 is to provide investors with a more meaningful and comprehensive understanding of oil and gas reserves. Energy companies affected by Release No. 33-8995 are now required to price proved oil and gas reserves using the unweighted arithmetic average of the price on the first day of each month within the 12-month period prior to the end of the reporting period, unless prices are defined by contractual arrangements, excluding escalations based on future conditions. SEC Release No. 33-8995 is effective beginning for financial statements for fiscal years ending on or after December 31, 2009. The Company adopted SEC Release No. 33-8995 effective December 31, 2009. The impact on the Company's operating results, financial position and cash flows has been recorded in the financial statements and additional disclosures were added to the accompanying notes to the consolidated financial statements for the Company's supplemental oil and gas disclosure.
 
 In January 2010, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update (ASU) No. 2010-03  Oil and Gas Estimation and Disclosures  (ASU 2010-03). This update aligns the current oil and natural gas reserve estimation and disclosure requirements of the Extractive Industries Oil and Gas topic of the FASB Accounting Standards Codification (ASC Topic 932) with the changes required by the SEC final rule ASC 2010-3. As discussed above, ASU 2010-03 expands the disclosures required for equity method investments, revises the definition of oil- and natural gas-producing activities to include nontraditional resources in reserves unless not intended to be upgraded into synthetic oil or natural gas, amends the definition of proved oil and natural gas reserves to require 12-month average pricing in estimating reserves, amends and adds definitions in the Master Glossary that is used in estimating proved oil and natural gas quantities and provides guidance on geographic area with respect to disclosure of information about significant reserves. ASU 2010-03 must be applied prospectively as a change in accounting principle that is inseparable from a change in accounting estimate and is effective for entities with annual reporting periods ending on or after a change in accounting estimate and is effective for entities with annual reporting periods ending on or after December 31, 2009. The Company adopted ASU 2010-03 effective December 31, 2009.
 
 In April 2010, the FASB issued ASU 2010-17, Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 13
 There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.
 
 Overview.United American Petroleum Corp. (“We” or the “Company”), formerly Forgehouse, Inc., was incorporated in the State of Nevada on November 19, 2004. On December 31, 2010, we entered into and closed an Agreement and Plan of Merger (“Merger Agreement”) with our newly formed wholly-owned subsidiary, United PC Acquisition Corp., a Nevada corporation (“Merger Sub”), and United American Petroleum Corp., a Nevada Corporation (“United”) (the “Merger Transaction”), pursuant to which Merger Sub merged with and into United with United surviving, making United our new wholly-owned subsidiary. Immediately thereafter and pursuant to the Merger Agreement, United merged with and into the Company, with the Company surviving and we changed our name to “United American Petroleum Corp.” In connection with the Merger Transaction, we assumed all of United’s contractual obligations and acquired certain oil and gas properties of United in Texas.The Merger Transaction was deemed to be a reverse acquisition, where the Company (the legal acquirer) is considered the accounting acquiree and United (the legal acquiree) is considered the accounting acquirer. The Company is deemed a continuation of the business of United, and the historical financial statements of United became the historical financial statements of the Company.
 
 Our Business. We are an exploration company engaged in the acquisition, exploration, development and production of oil and gas properties.  Our principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases.  Our primary focus is to develop our properties that have potential for near-term production. We also provide operational expertise for several third-party well owners out of our operation base in Austin, Texas. We currently have proved reserves in the State of Texas.
 
 The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements for the period ended June 30, 2012, together with notes thereto, which are included in this Quarterly Report.
 
 For the three months ended June 30, 2012, as compared to the three months ended June 30, 2011.
 
 Results of Operations.
 
 Revenues.  We had total revenues of $189,403 for the three months ended June 30, 2012, which were generated from oil and gas sales of $142,784 and well operator income of $46,619.  This is in comparison to revenues of $42,398 for the three months ended June 30, 2011, which were generated from oil and gas sales of $16,279 and well operator income of $26,119.  The increase in oil and gas sales between the comparable periods is due to an increase in the number of wells that are now producing. Our well operator income was a result of income derived from oil and gas operating fees charged by United Operating, LLC to well owners for managing and accounting for the development and production of their oil and gas property interests.
 
 To expand our operations during the next twelve months, we need to generate increased revenues from our existing oil and natural gas leases. Our failure to do so will hinder our ability to increase the size of our operations and to generate additional revenues.
 
 Operating Expenses.   For the three months ended June 30, 2012, our total operating expenses were $425,851, which consisted of lease operating expenses of $136,631, accretion expense of $1,543, depletion expense of $21,922, and general and administrative expenses of $265,755.  By comparison, for the three months ended June 30, 2011, our total operating expenses were $289,285, which consisted of lease operating expenses of $7,216, accretion expense of $206, depletion expense of $2,545, and general and administrative expenses of $279,318. The increase in lease operating expenses between the comparable periods is due to workovers that we conducted on our wells.
 
 We expect that our future monthly operating expenses for fiscal year 2012 will be similar to our current expense levels, plus additional direct costs relating to newly acquired interests and any additional costs related to maintenance of our wells.  We will continue to incur significant general and administrative expenses, but expect to generate increased revenues after further developing our business.
 
 14
 Other Income (Expense).   For the three months ended June 30, 2012, we accrued interest expense in the amount of $2,179,232 related to outstanding note payables and a gain on embedded derivatives of $1,218,849.  This is in comparison to accrued interest expense in the amount of $73,778 and a gain on embedded derivatives of $503,366 for the three months ended June 30, 2011.
 
 Net Income (Loss).   For the three months ended June 30, 2012, our net loss was $1,580,213, as compared to a net income of $182,701 for the three months ended June 30, 2011.  The significant increase in our net loss between the comparable periods was directly related to the increase in interest expense for the three months ended June 30, 2012. We hope to generate additional revenues from our projects to cover our operating costs, which will reduce our net loss in the future.  We cannot guarantee that we will be able to generate additional revenues or, if that we do generate additional revenues, that such increased revenues will reduce our net loss in future periods.
 
 For the six months ended June 30, 2012, as compared to the six months ended June 30, 2011.
 
 Results of Operations.
 
 Revenues.  We had total revenues of $280,290 for the six months ended June 30, 2012, which were generated from oil and gas sales of $181,417 and well operator income of $98,873.  This is in comparison to revenues of $77,286 for the six months ended June 30, 2011, which were generated from oil and gas sales of $23,732 and well operator income of $53,554.  The increase in oil and gas sales between the comparable periods is due to an increase in the number of wells that are now producing. Our well operator income was a result of income derived from oil and gas operating fees charged by United Operating, LLC to well owners for managing and accounting for the development and production of their oil and gas property interests.
 
 To expand our operations during the next twelve months, we need to generate increased revenues from our existing oil and natural gas leases. Our failure to do so will hinder our ability to increase the size of our operations and to generate additional revenues.
 
 Operating Expenses.   For the six months ended June 30, 2012, our total operating expenses were $709,794, which consisted of lease operating expenses of $237,704, accretion expense of $3,514, depletion expense of $35,302, and general and administrative expenses of $433,274.  By comparison, for the six months ended June 30, 2011, our total operating expenses were $579,946, which consisted of lease operating expenses of $15,117, accretion expense of $505, depletion expense of $4,202, and general and administrative expenses of $560,122. The increase in lease operating expenses between the comparable periods is due to workovers that we conducted on our wells.
 
 We expect that our future monthly operating expenses for fiscal year 2012 will be similar to our current expense levels, plus additional direct costs relating to newly acquired interests and any additional costs related to maintenance of our wells.  We will continue to incur significant general and administrative expenses, but expect to generate increased revenues after further developing our business.
 
 Other Expenses.   For the six months ended June 30, 2012, we accrued interest expense in the amount of $2,274,487 related to outstanding note payables and a loss on embedded derivatives of $3,030,218.  This is in comparison to accrued interest expense in the amount of $122,771 and a loss on embedded derivatives of $1,444,781 for the six months ended June 30, 2011.
 
 Net Loss.   For the six months ended June 30, 2012, our net loss was $5,734,209, as compared to a net loss of $2,070,212 for the six months ended June 30, 2011.  The significant increase in our net loss between the comparable periods was directly related to the increase in interest expense for the six months ended June 30, 2012. We hope to generate additional revenues from our projects to cover our operating costs, which will reduce our net loss in the future.  We cannot guarantee that we will be able to generate additional revenues or, if that we do generate additional revenues, that such increased revenues will reduce our net loss in future periods.
 
 Liquidity and Capital Resources.  As of June 30, 2012, our current assets were $769,927, which consisted of cash of $591,337, accounts receivable of $27,786, related party receivables of $8,784, prepaid expenses of $8,394 and other receivable of $133,626.  Our current assets of $769,927, together with our evaluated oil and gas properties of $553,536, net of accumulated depletion of $58,437, and our unevaluated oil and gas properties of $822,155, represent our total assets of $2,145,618 as of June 30, 2012.
 
 15
 First Note and Warrants.   On December 31, 2010, we entered into a credit facility with one investor, whereby the investor agreed to lend up to $2,250,000 to us in multiple installments in exchange for senior secured convertible promissory notes with a conversion price of $0.50 per share (the “First Notes”) and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share in the amount of each installment (the “First Warrants”). The notes are due on December 31, 2013, or upon default, whichever is earlier, and bear interest at the annual rate of 10%. Pursuant to the credit facility, we issued the following notes and warrants to the investor on the following dates:
 
 Date of Note
Amount of Note
Number of WarrantsDecember 31, 2010
$620,000
620,000January 20 , 2011
$150,000
150,000March 9, 2011
$250,000
250,000June 20, 2011
$75,000
75,000June 30, 2011
$115,000
115,000TOTAL
$1,210,000
1,210,000
 
 The agreement provides that the investor will lend additional installments to us in amounts as requested by us; provided however, that we provide the proposed use of proceeds for each requested amount.
 
 On April 13, 2012, we issued 1,240,000 shares of our common stock to the investor who elected to convert the outstanding principal amount of $620,000 due on its First Note dated December 31, 2010 at a conversion price of $0.50 per share.
 
 On June 1, 2012, we issued an additional 1,180,000 shares of our common stock to the investor who elected to convert the remaining outstanding principal amount of $590,000 due on its First Notes dated January 20, 2011, March 9, 2011, June 20, 2011 and June 30, 2011 at a conversion price of $0.50 per share.
 
 On June 11, 2012, we issued 300,481 shares of our common stock to the investor who elected to convert all of the accrued interest due on its First Notes dated December 31, 2010, January 20, 2011, March 9, 2011, June 20, 2011 and June 30, 2011 at a conversion price $0.50 per share. Following such consummation, the First Notes are no longer outstanding and we extinguished $1,210,000 in principal and $150,240.11 in accrued and unpaid interest due under the First Notes.
 
 Second Note and Warrants.  On October 14, 2011, we entered into a credit facility with an investor unrelated to the investor described above pursuant to which the investor agreed to lend up to $1,500,000 to us in multiple installments in exchange for a convertible promissory note with a conversion price of $0.50 per share (the “Second Notes”)and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share in the amount of each installment (the “Second Warrants”). On June 4, 2012, we and the investor agreed to increase the total amount of the credit facility to $1,590,000.  Pursuant to the credit facility, we issued the following notes and warrants to the investor on the following dates:
 
 Date of Note
Amount of Note
Number of WarrantsOctober 14, 2011
$400,000
400,000November 29, 2011
$550,000
550,000December 19, 2011
$25,000
25,000February 10, 2012
$150,000
150,000March 30, 2012
$250,000
250,000June 4, 2012
$215,000
215,000TOTAL
$1,590,000
1,590,000
 
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 The agreement provides that the investor will lend additional installments to us in amounts as requested by us; provided however, that we provide the proposed use of proceeds for each requested amount.
 
 On June 7, 2012, we issued 3,314,062 shares of our common stock to the investor who elected to convert the outstanding principal amount of $1,590,000 and all of the accrued interest due on its convertible promissory notes dated October 14, 2011, November 29, 2011, December 19, 2011, February 10, 2012, March 30, 2012, and June 4, 2012 at a conversion price $0.50 per share.Following such consummation, the Second Notes are no longer outstanding and we extinguished $1,590,000 in principal and $67,030.56 in accrued and unpaid interest due under the Second Notes.
 
 As of June 30, 2012, we had current liabilities in the amount of $666,154, of which $214,459 were represented by accounts payable and accrued liabilities and $451,695 represented by other payable.  As of June 30, 2012, we had long-term liabilities consisting of an asset retirement obligation of $59,526.
 
 We had no other liabilities and no other long term commitments or contingencies as of June 30, 2012.
 
 As of June 30, 2012, we had cash of $591,337.  In the opinion of management, available funds will not satisfy our working capital requirements to operate at our current level of activity for the next twelve months. If we do not raise additional capital, then we may not be able to conduct oil and gas exploration and development activities and expand our operations. Our forecast for the period for which our financial resources will be adequate to support our operations involves risks and uncertainties and actual results could differ as a result of a number of factors. In addition to generating revenues from our current operations, we will need to raise additional capital to expand our operations to the point at which we are able to operate profitably.
 
 We have been, and intend to continue, working toward identifying and obtaining new sources of financing. No assurances can be given that we will be successful in obtaining additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing stockholders. Moreover, in the event that we can raise additional funds, we cannot guarantee that additional funding will be available on favorable terms. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a negative impact on our business, prospects, financial condition, results of operations and cash flows.
 
 If adequate funds are not available, we may be required to delay, scale back or eliminate portions of our operations or to obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our assets and could also adversely affect our ability to fund our continued operations and our expansion efforts with respect to our properties.
 
 During 2012, we expect that the following will continue to impact our liquidity: (i) legal and accounting costs of being a public company; (ii) expected expenses related to the exploration and development of our properties; (iii) expected expenses related to repair and maintenance costs on wells that are currently producing and (iv) anticipated increases in overhead and the use of independent contractors for services to be provided to us. We will need to obtain funds to pay those expenses. Other than those items specified above, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity.
 
 We are in the exploration stage, have limited revenue and have incurred net losses.  These factors raise substantial doubt about our ability to continue as a going concern.  Our management is implementing plans to sustain our cash flow from operating activities and/or acquire additional capital funding (see Note 1).   No assurances can be given that we will obtain sufficient working capital to sustain ongoing operations. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
 
 We are not currently conducting any research and development activities. We do not anticipate conducting such activities in the near future. In the event that we expand our operations, then we may need to hire additional employees or independent contractors as well as purchase or lease additional equipment. Our management believes that we do not require the services of independent contractors to operate at our current level of activity. However, if our level of operations increases beyond the level that our current staff can provide, then we may need to supplement our staff in this manner.
 
 Off-Balance Sheet Arrangements.   We have no off-balance sheet arrangements as of June 30, 2012.
 
 17
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
 
 Not applicable.
 
 Item 4. Controls and Procedures.
 
 Evaluation of disclosure controls and procedures. We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective due to our over reliance on consultants in our accounting and financial statement closing processes.
 
 Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 PART II — OTHER INFORMATION
 
 Item 1. Legal Proceedings.
 
 From time to time, we may be party to various legal proceedings. We do not currently expect that any currently pending legal proceedings will have a material adverse effect on our business, results of operations or financial condition.
 Item 1A. Risk Factors.
 
 Not applicable.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
 None.
 
 Item 3.  Defaults Upon Senior Securities.
 
 None.
 
 Item 4.  Mine Safety Disclosures.
 
 Not applicable.
 
 Item 5.  Other Information.
 
 None.
 
 Item 6.  Exhibits.
 
 31.1
Certification of Principal Executive and Financial Officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934 (1)32.1
Certification of Principal Executive and Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)101.ins
XBRL Instance Document (2)101.sch
XBRL Taxonomy Schema Document (2)101.cal
XBRL Taxonomy Calculation Linkbase Document (2)101.lab
XBRL Taxonomy Label Linkbase Document (2)101.pre
XBRL Taxonomy Presentation Linkbase Document (2)
 
 
 
 18
 
 
 
 SIGNATURES
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 United American Petroleum Corp.,

a Nevada corporationDate: August 14, 2012
By:
/s/ Michael CareyMichael CareyChief Executive Officer, Chief Financial Officer, President, Treasurer and a director

(Principal Executive and Financial Officer)