UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-K/A




AMENDMENT NO. 2







[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal year ended December 31, 2011.





[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from to





Commission File No:  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)Registrant's telephone number, including area code: (512) 852-7888Securities registered under Section 12(b) of the Act:Title of each class:
Name of each exchange on which registered:None
NoneSecurities registered pursuant to section 12(g) of the Act:Common Stock, Par Value $.001

(Title of Class)





Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  o Yes   x No





Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  o Yes   xNo





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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. 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). oYes    x No





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x





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





The aggregate market value of the registrant's shares of common stock held by non-affiliates of the registrant on June 30, 2011, the last business day of the registrant’s most recently completed second fiscal quarter, based on $0.85 per share, the average bid and asked price of such common equity, is $18,700,000.





As of April 13, 2012, there were 44,000,000 shares of the issuer's $.001 par value common stock issued and outstanding.





Documents incorporated by reference. There are no annual reports to security holders, proxy information statements, or any prospectus filed pursuant to Rule 424 of the Securities Act of 1933 incorporated herein by reference.











1


EXPLANATORY NOTE





United American Petroleum Corp. (the “Registrant”) is filing this Amendment No. 2 on Form 10-K/A (“Amendment No. 2”) to revise disclosuresidentified below in the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, which the Registrant previously filed with theSecurities and Exchange Commission (“SEC”) on April 16, 2012 (the “Original Filing”), and its Amendment No. 1 to the Original Filing, filed with the SEC on April 17, 2012.
  In response to a comment letter received from the SEC, the Registrant is filingAmendment No. 2 to revise the disclosures in Item 2. Properties, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters and Note 2. to the Financial Statements for the Fiscal Year ended December 31, 2011, andincludecopies of the reports of Nova Resources, Inc. and Mire and Associates, Inc. asExhibits 99.1, 99.2 and 99.3. Except as set forth above, the Original Filing has not been amended, updated or otherwise modified.  Accordingly, this Amendment No. 2 should be readin conjunction with the Original Filing and our other filings made with the SEC subsequent to the filing of the Original Filing.





TABLE OF CONTENTS








PART IPageItem 1.
Business
3Item 1A.
Risk Factors
6Item 1B.
Unresolved Staff Comments
14Item 2.
Properties
14Item 3.
Legal Proceedings
18Item 4.
(Removed and Reserved)
19PART IIItem 5.
Market for Registrant’s Common Equity, Related Stockholder Mattersand Issuer Purchases of Equity Securities
19Item 6.
Selected Financial Data
21Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
29Item 8.
Financial Statements and Supplementary Data
29Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
56Item 9A.
Controls and Procedures
56Item 9B.
Other Information
57PART IIIItem 10.
Directors, Executive Officers and Corporate Governance
57Item 11.
Executive Compensation
59Item 12.
Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters
61Item 13.
Certain Relationships and Related Transactions, and Director Independence
62Item 14.
Principal Accounting Fees and Services
62PART IVItem 15.
Exhibits, Financial Statement Schedules
62











2


PART I





Item 1.   Business.





Our Background.United American Petroleum Corp. (“We” or the “Company”), formerly Forgehouse, Inc., was incorporated in the State of Nevada on November 19, 2004.  Pursuant to an Agreement and Plan of Exchange, dated January 31, 2008 (the “Exchange Agreement”), we acquired ForgeHouse LLC, a limited liability company.  Between January 31, 2008 and December 16, 2009, we were solely engaged in the business of developing and selling physical security industry application and software (the “Prior Business”).  On December 16, 2009, we supplemented that business with the acquisition of, our wholly-owned subsidiary, Northern Future Energy Corp., a Nevada corporation (“NFEC”), which is engaged in the oil and gas business. On December 29, 2009, we discontinued the Prior Business and established our principal business of 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.





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.





We have not undergone bankruptcy, receivership, or any similar proceeding.





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.





Our Properties.On December 31, 2010, we completed the acquisition of United pursuant to the Merger Agreement.  As a result of the Merger Transaction and other acquisitions during the fiscal year 2011, we own the following interests in the following oil and gas properties in Texas:





The Marcee 1 Interest.We own a 100% working interest in the Marcee 1 Tract, which is located on approximately 112 acres of land in Gonzalez County, Texas (“Marcee 1 Tract”).  We have recently completed a workover on the well to increase oil production.  We have discovered an abundance of gas being produced with the oil, which is currently being tested for saleable quality.  Provided the gas is of saleable quality, we expect this well should produce 7-8 barrels of oil per day and approximately 30 mcf of gas per day.





The Lozano Interest.  We own a 100% working interest in the Hector Lozano Tract, which is located on approximately 110 acres, located in Frio County, Texas (“Lozano Tract”). The Lozano Tract is a currently producing asset with three wells with proven reserves.  .  The production from the Lozano wells is mature and we believe the wells are likely to continue to produce with slow decline for the foreseeable future.  All three wells are currently producing a total of 4-5 barrels of oil per day.  Historically these wells have produced a total of 10-12 barrels of oil per day.  We are planning a workover on the 3 wells which will include washing out the wells, reperforating the current zones as well as performing an acid job to the wells which we believe should return production to 10-12 barrels a day.





Pursuant to the Merger Agreement, we also acquired all of United’s rights and interests in all operating agreements for all wells for which United it was currently operating. We also acquired all of United’s assets used in the business conducted at the Marcee 1 Tract and the Lozano Tract or at any well that United acts as the operator, including certain furniture and equipment.





3


The Patriot Minerals Interests.  On January 28, 2011, we acquired multiple undivided working interests to certain existing wells and to certain leases located in Texas (“Patriot Interests”) from Patriot Minerals, LLC, a Texas limited liability company (“Patriot”). The Patriot Interests consist of certain undivided working interests including, but not limited to (i) the Welder lease in Duval County, TX; (ii) the Bailey Rogers and Fohn leases in Medina County, TX; (iii) the Walker Smith lease in Wilbarger County, TX; (iv) the Merrick Davis lease in Shackelford County, TX; and (v) the Crouch, Heady and Lane leases in Erath County, TX.





At the time of our acquisition of the Patriot Interests, all wells were shut in due to various factors including, but not limited to, bad weather and Patriot’s insufficient payment of operating expenses to maintain the Patriot Interests.  We have performed minor work on various wells and are in the process of developing plans with the working interest partners for workovers on wells on each of the leases.  We expect the workovers to be performed in 2012.  We expect we will have to expend significant capital to maintain the Patriot Interests.





The Gabriel and Rosser Interests.On January 28, 2011, we acquired certain oil and gas interests located in Bastrop County, Texas, (“Gabriel Interests”) from Gabriel Rosser, LP (“Gabriel”).  The Gabriel Interests  include  Gabriel's undivided 50.83% working interest and 39.131% revenue interest in as the Gabriel 2 SWD Gabriel 3, 4, 5, 9, 15, Rosser #2 and #4 and Koi #1wells .At the time of our acquisition of the Gabriel Interests, all wells were not producing. The Gabriel Interests comprise over 400 acres, with approximately 10 wells that were shut in. The Rosser #4 well was re-entered and re-equipped in March 2011 and production has commenced.  The Gabriel #4 well is currently producing water and we are currently investigating the causes of the water production.  The Gabriel #9 well was re-entered and re-equipped but has not been producing.  We are currently investigating the causes of Gabriel #9 well’s non-production.  Drilling on a new Gabriel #16 well to test an anticipated payzone in the Serpentine formation will require a second completion attempt in order to achieve potential production on this well.





The Mckenzie State Well Interests.On November 30, 2011, we acquired one hundred percent (100%) of McKenzie’s working interest in the McKenzie State Well No. 1, located in Pecos County, Texas from McKenzie Oil Corp. (“McKenzie”)  in exchange for an aggregate cash sum of $550,000 and 50,000 shares of our common stock.The well is currently offline due to the discovery of a hole in the tubing and will require a minor work-over, which is scheduled to commence in the first half of 2012.  The faulty section will be pulled, replaced, and is expected to produce an estimated 8 - 10 bbl per day, which was its most recent production rate prior to developing the hole in the tubing. In addition to the production from this current zone, several additional horizons (which are productive in the area) have been identified in the McKenzie well, which could be tested and potentially produced in the future.





Our Subsidiaries.





Northern Future Energy Corp.  We also own certain oil and gas interests located near Anchorage, Alaska, through our wholly-owned subsidiary, Northern Future Energy Corp.  Northern Future Energy Corp. acquired an oil and gas lease for State of Alaska Oil and Gas Lease ADL 391120 Tract: CI2006-464, which contains approximately 545 acres, pursuant to a Purchase Agreement dated November 2009.  Production on the properties has not commenced and there can be no assurance that any hydrocarbons will be economically recoverable, if at all. We have conducted limited pre-production activities in the past and we intend to conduct additional activities, such as a multi-phase exploration program of trenching, sampling, geophysical surveys and test drilling, as soon as our new management is able to evaluate the interests. We also intend to conduct exploratory activities on the properties in the foreseeable future.  NFEC has not undergone bankruptcy, receivership, or any similar proceeding.





United Operating, LLC.On January 13, 2011, we formed our wholly-owned subsidiary, United Operating, LLC, a Texas limited liability company, for the purpose of operating the Patriot Interests, including, but not limited to: (i) the Merrick Davis #16 & #17 wells in Shackelford County, TX; (ii) the Crouch and Lane Heady wells in Erath County, TX; (iii) the Merrick Davis wells in Shackelford County, TX; (iv) the Walker Smith #22D well in Wilbarger County, TX; and (v) the Walker Smith wells in Wilbarger County, TX.  United Operating, LLC, has not undergone bankruptcy, receivership, or any similar proceeding.





UAP Management, LLC.On January 13, 2011, we formed our wholly-owned subsidiary, UAP Management, LLC, a Texas limited liability company, for the purpose of managing the Gabriel Interests. UAP Management, LLC, has not undergone bankruptcy, receivership, or any similar proceeding.





4


Business Strategy.Our strategy is to increase shareholder value through strategic acquisitions, appraisal drilling and development. We are focused on the acquisition, appraisal development and exploitation of oil properties.  We are also searching for possible joint-ventures and new prospects that fit our strategic focus.





Competition. The oil and gas industry is intensely competitive.  We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial, and operational resources and staffs.  Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations, and necessary drilling equipment, as well as for access to funds.





We will also compete with other junior oil and gas exploration companies for financing from a limited number of investors that are prepared to make investments in junior oil and gas exploration companies. The presence of competing junior oil and gas exploration companies may have an adverse impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the oil and gas properties under investigation and the price of the investment offered to investors.





We also compete with other junior and senior oil and gas companies for available resources, including, but not limited to, professional exploration and production, geological and engineering personnel services and supplies, for the drilling completion and production of hydrocarbon resources.





Intellectual Property.We do not presently own any copyrights, patents or trademarks. We own the Internet domain name www.unitedamericanpetroleum.com.  Under current domain name registration practices, no one else can obtain an identical domain name, but someone might obtain a similar name, or the identical name with a different suffix, such as “.org”, or with a country designation. The regulation of domain names in the United States and in foreign countries is subject to change, and we could be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our domain names.





Government Regulation.  Our oil and gas operations are subject to various federal, state, and local governmental regulations.  Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, and pooling of properties, and taxation.  From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas.  The production, handling, storage, transportation, and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state, provincial, and local laws and regulations relating primarily to the protection of human health and the environment.  To date, our expenditures related to complying with these laws, and for remediation of existing environmental contamination, have not been significant.  The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.





Employees.  As of April 13, 2012, we have three employees.  We expect to utilize independent contractors, consultants, and other personnel from time to time to assist in our business efforts.





Our Facilities.  We maintain our corporate offices for approximately $200 per month on a month to month basis.  We also maintain our operational offices for $1,500 per month on a month to month basis.  We believe our current office space and facilities are sufficient to meet our current and future needs.  We do not anticipate the need to secure additional space.





Internet Website.  Our website is located at www.unitedamericanpetroleum.com. Our website describes each of our oil and gas projects, our management and provides additional information regarding our industry.





Legal Proceedings. We are not a party to any pending legal proceeding.





5


Item 1A. Risk Factors.





In addition to the other information in this prospectus, the following risk factors should be considered carefully in evaluating our business before purchasing any of our shares of common stock. A purchase of our common stock is speculative in nature and involves a lot of risks. No purchase of our common stock should be made by any person who is not in a position to lose the entire amount of his investment.





Risks Related to our Business:





We have a limited history operating in the oil and gas industry.  As a result, it is difficult for potential investors to evaluate our business and prospects.





We entered the oil and gas business in December 2009. Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. Since our formation, we have generated only limited revenues. As an early stage company, we are subject to all the risks inherent in the financing, expenditures, operations, complications and delays inherent in a new business. Accordingly, our business and success faces risks from uncertainties faced by developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.





Because we are an exploration stage company, we have limited revenues to sustain our operations.





We are an exploration stage company that is currently developing our business. To date, we have only generated limited revenues. The success of our business operations will depend upon our ability to further develop our properties and increase our revenues. We are not able to predict whether we will be able to develop our properties and generate more substantial revenues. If we are not able to complete the successful development of our business, generate more substantial revenues and attain sustainable operations, then our business will fail.





We have a history of net losses which will continue and which may negatively impact our ability to achieve our business objectives.





For the period from October 16, 2010 to December 31, 2011, United American Petroleum Corp., which was acquired by us, had revenue of $366,753 and a net loss of $1,151,741. We cannot guarantee that our future operations will result in net income. We may not be able to operate profitability on a quarterly or annual basis in the future and we will likely continue to have net losses for the foreseeable future. If our revenues grow more slowly than we anticipate or our operating expenses exceed our expectations, our operating results will suffer.





We will need additional financing to execute our business plan.





The revenues from our current operations are not sufficient to support our operating costs and anticipated drilling programs. We will need substantial additional funds to:





·
effectuate our business plan;·
fund the acquisition, exploration, development and production of oil and natural gas in the future;·
fund future drilling programs; and·
hire and retain key employees.





We may seek additional funds through public or private equity or debt financing, via strategic transactions, and/or from other sources. There are no assurances that future funding will be available on favorable terms or at all. If additional funding is not obtained, we may need to reduce, defer or cancel drilling programs, planned initiatives, or overhead expenditures to the extent necessary. The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of operations.








6


Our auditors have expressed substantial doubt regarding our ability to continue operations as a “going concern.” Investors may lose all of their investment if we are unable to continue operations and generate revenues, or if we do not raise sufficient funds.





We will seek to raise additional funds to meet our working capital needs principally through the additional sales of our securities.  However, we cannot guaranty that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us.  If we do not raise sufficient funds, we may not be able to continue in business.  As a result, our auditors believe that substantial doubt exists about our ability to continue operations as a going concern.





As many of our properties are in the exploration stage, there can be no assurance that we will establish commercial discoveries on our properties.





Exploration for economic reserves of oil and gas is subject to a number of risk factors.  Few properties that are explored are ultimately developed into producing oil and/or gas wells.  Our properties are in the exploration stage only and are without proven reserves of oil and gas.  Any profitability in the future from our business will be dependent upon locating and developing economic reserves of oil and gas, which itself is subject to numerous risk factors as set forth herein.  We may not establish commercial discoveries on any of our properties.





Our exploration appraisal and development activities are subject to many risks which may affect our ability to profitably extract oil reserves or achieve targeted returns.  In addition, continued growth requires that we acquire and successfully develop additional oil reserves.





Oil exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may negatively affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity or other geological and mechanical conditions. While diligent well supervision and effective maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field operating conditions cannot be eliminated and can be expected to negatively affect revenue and cash flow levels to varying degrees.





Our ability to successfully market and sell oil is subject to a number of factors that are beyond our control, and that may adversely impact our ability to produce and sell oil, or to achieve profitability.





The marketability and price of oil that may be acquired or discovered by us will be affected by numerous factors beyond our control.  Our ability to market our oil may depend upon our ability to acquire space on pipelines that deliver oil to commercial markets. We may be affected by deliverability uncertainties related to the proximity of our reserves to pipelines and processing facilities, by operational problems with such pipelines and facilities, and by government regulation relating to price, taxes, royalties, land tenure, allowable production, the export of oil and by many other aspects of the oil business.





Our revenues and future growth and the carrying value of our oil properties are substantially dependent on prevailing prices of oil. Our ability to borrow and to obtain additional capital on attractive terms is also substantially dependent upon oil and natural gas prices. Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil, market uncertainty and a variety of additional factors beyond our control. These factors include economic conditions, in the United States and Canada, the actions of the Organization of Petroleum Exporting Countries, governmental regulation, political stability in the Middle East and elsewhere, the foreign supply of oil, the price of foreign imports and the availability of alternative fuel sources. Any substantial and extended decline in the price of oil would have an adverse effect on our borrowing capacity, revenues, profitability and cash flows from operations.





Volatile oil prices make it difficult to estimate the value of producing properties for acquisition and often cause disruption in the market for oil producing properties, as buyers and sellers have difficulty agreeing on such value. Price volatility also makes it difficult to budget for and project the return on acquisitions and development and exploitation projects.








7


Our reserve estimates are subject to numerous uncertainties and may be inaccurate.





We currently have proved reserves in Texas. We rely on independent third party petroleum engineering firms to calculate reserve estimates. There are numerous uncertainties inherent in estimating quantities of oil and natural gas reserves and cash flows to be derived therefrom, including many factors beyond our control. In general, estimates of economically recoverable oil and gas reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability our products, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary from actual results. All such estimates are to some degree speculative, and classifications of reserves are only attempts to define the degree of speculation involved. For those reasons, estimates of the economically recoverable reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues expected therefrom prepared by different engineers, or by the same engineers at different times, may vary. Our actual production, revenues, taxes and development and operating expenditures with respect to our reserves will vary from estimates thereof and such variations could be material.





Estimates of proved or unproved reserves that may be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history and production practices will result in variations in the estimated reserves and such variations could be material.





We cannot guaranty that title to our properties does not contain a defect that may materially affect our interest in those properties.





It is our practice in acquiring significant oil leases or interest in oil leases to retain lawyers to fully examine the title to the interest under the lease.  In the case of minor acquisitions, we rely upon the judgment of oil lease brokers or landmen who do the field work in examining records in the appropriate governmental office before attempting to place under lease a specific interest. We believe that this practice is widely followed in the oil industry. Nevertheless, there may be title defects which affect lands comprising a portion of our properties which may adversely affect us.





Our properties are held in the form of leases and working interests in operating agreements and leases. If the specific requirements of such licenses, leases and working interests are not met, the instrument may terminate or expire.





All of our properties are held under interests in oil and gas leases and working interests in operating agreements and leases. If we fail to meet the specific requirements of each lease or working interest, especially future drilling and production requirements, the lease may be terminated or otherwise expire. We cannot be assured that we will be able to meet our obligations under each lease and working interest. The termination or expiration of our working interest relating to any lease would harm our business, financial condition and results of operations.





Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring properties or leases.





The oil and gas industry is intensely competitive.  We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial, and operational resources and staff.  Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations, and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will be completed.  Desirable acreage may not become available or if it is available for leasing, that we may not be successful in acquiring the leases.





The marketability of natural resources will be affected by numerous factors beyond our control which may result in us not receiving an adequate return on invested capital to be profitable or viable.





The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control.  These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas, and environmental protection regulations.  The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.








8


Oil and gas operations are subject to comprehensive regulation, which may cause substantial delays or require capital outlays in excess of those anticipated, causing an adverse effect on us.





Our operations are subject to regulation at the federal, state and local levels, including regulation relating to matters such as the exploration for and the development, production, marketing, pricing, transmission and storage of oil, as well as environmental and safety matters.  Failure to comply with applicable regulations could result in fines or penalties being owed to third parties or governmental entities, the payment of which could negatively impact our financial condition or results of operations.  Our operations are subject to significant laws and regulations, which may negatively affect our ability to conduct business or increase our costs.  Extensive federal, state and local laws and regulations relating to health and environmental quality in the United States affect nearly all of our operations.  These laws and regulations set various standards regulating various aspects of health and environmental quality, provide for penalties and other liabilities for the violation of these standards, and in some circumstances, establish obligations to remediate current and former facilities and off-site locations.





Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of the applicable regulatory authorities. Compliance with such legislation can require significant expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. The discharge of oil or other pollutants into the air, soil or water may give rise to liabilities to governments and third parties and may require us to incur costs to remedy such discharge. No assurance can be given that environmental laws will not result in a curtailment of production or a material increase in the costs of production, development or exploration activities or otherwise adversely impact our financial condition, results of operations or prospects.  We could incur significant liability for damages, clean-up costs and/or penalties in the event of discharges into the environment, environmental damage caused by us or previous owners of our property or non-compliance with environmental laws or regulations. In addition to actions brought by governmental agencies, we could face actions brought by private parties or citizens groups.





Moreover, we cannot predict what legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered, enforced or made more stringent. Compliance with more stringent laws or regulations, or more vigorous enforcement policies of the regulatory agencies, could require us to make material expenditures for the installation and operation of systems and equipment for remedial measures, all of which could have a material adverse effect on our financial condition or results of operations.





Exploratory drilling involves many risks and we may become liable for pollution or other liabilities, which may have an adverse effect on our financial position.





Drilling operations generally involve a high degree of risk.  Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor, and other risks are involved.  We may become subject to liability for pollution or hazards against which we cannot adequately insure or that we may elect not to insure.  Incurring any such liability may have a material adverse effect on our financial position and operations.





Our exploration and development activities will depend in part on the evaluation of data obtained through geophysical testing and geological analysis, as well as test drilling activity.





The results of geophysical testing and geological analysis are subjective, and we cannot guarantee that the exploration and development activities we conduct based on positive analysis will produce oil or gas in commercial quantities or costs. As we perform developmental and exploratory activities, further data required for evaluation of our oil and gas interests will become available. The exploration and development activities that will be undertaken by us are subject to greater risks than those associated with the acquisition and ownership of producing properties. The drilling of development wells, although generally consisting of drilling to reservoirs believed to be productive, may result in dry holes or a failure to produce oil or gas in commercial quantities. Moreover, any drilling of exploratory wells is subject to significant risk of dry holes.





9


Because we are small and have limited access to additional capital, we may have to limit our exploration activity, which may result in a loss of investment.





We have a small asset base and limited access to additional capital. Accordingly, we must limit our exploration activity. As such, we may not be able to complete an exploration program that is as thorough as our management would like. In that event, existing reserves may go undiscovered. Without finding reserves, we cannot generate revenues and investors may lose their investment.





Seasonal weather conditions and other factors could adversely affect our ability to conduct drilling activities.





Our operations could be adversely affected by seasonal weather conditions and wildlife restrictions on federal leases. In some areas, certain drilling and other oil and gas activities can only be conducted during limited times of the year, typically during the summer months. This would limit our ability to operate in these areas and could intensify competition during those times for drilling rigs, oil field equipment, services, supplies and qualified personnel, which may lead to periodic shortages. These constraints and the resulting shortages or high costs could delay our operations and materially increase our operating and capital costs, which could have a material adverse effect upon us and our results of operations.





We depend on the services of third parties for material aspects of our operations, including drilling operators, and accordingly if we cannot obtain certain third party services, we may not be able to operate.





We rely on third parties to operate some of the assets in which we possess an interest. The success of our oil operations, whether considered on the basis of drilling operations or production operations, will depend largely on whether the operator of the property properly fulfills our obligations.  As a result, our ability to exercise influence over the operation of these assets or their associated costs may be limited.  Our performance will therefore depend upon a number of factors that may be outside of our full control, including the timing and amount of capital expenditures, the operator’s expertise and financial resources, the approval of other participants, the selection of technology, and risk management practices.  The failure of third party operators and their contractors to perform their services in a proper manner could adversely affect our operations.





We will need additional financing to continue and grow our operations, which financing may not be available on acceptable terms or at all.





We will need to raise additional funds to fund our operations or grow our business.  Additional financing may not be available on terms or at times favorable to us, or at all.  If adequate funds are not available when required or on acceptable terms, we may be unable to continue and grow our operations.  In addition, such additional financing transactions, if successful, may result in additional dilution of our stockholders.  They may also result in the issuance of securities with rights, preferences, and other characteristics superior to those of the common stock and, in the case of debt or preferred stock financings, may subject us to covenants that restrict our ability to operate our business freely.





The loss or unavailability of our key personnel for an extended period of time could adversely affect our business operations and prospects.





Our success depends in large measure on certain key personnel, including Michael Carey, our President and Chief Executive Officer and Ryan Hudson, our Secretary and Chief Operating Officer. The loss of the services of Mr. Carey and Mr. Hudson could significantly hinder our operations.  Although we are looking into acquiring key person insurance, we do not currently have such insurance in effect for Mr. Carey or Mr. Hudson. In addition, the competition for qualified personnel in the oil industry is intense and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the development and operation of our business.





The costs and effects of litigation, investigations, or similar matters could adversely affect our financial position and result of operations.





We may be involved from time to time in a variety of litigation, investigations, or similar matters arising out of our business.  Our insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation.  If the ultimate judgments or settlements in any litigation or investigation significantly exceed insurance coverage, they could adversely affect our financial position and results of operations.  In addition, we may be unable to obtain appropriate types or levels of insurance in the future.








10


We are subject to the reporting requirements of federal securities laws, which will be expensive.





We are a public reporting company in the U.S. and, accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders will cause our expenses to be higher than they would be if we remained a privately-held company.





Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls is time consuming, difficult and costly.





We are a reporting company with the SEC and therefore must comply with Sarbanes-Oxley Act and SEC rules concerning internal controls.  It is time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley.  In order to expand our operations, we  will need to hire additional financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with Sarbanes-Oxley’s internal controls requirements, we may not be able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires us to obtain.





Failure to maintain the adequacy of our internal controls could impair our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act, which could cause our stock price to decrease substantially.





We intend to amend certain of our prior periodic reports to include required disclosures that were previously omitted from those periodic reports. The filing of amendments to those periodic reports will necessitate a redetermination of the effectiveness of our internal controls over financial reporting and disclosure controls and procedures for those periods.   We have committed limited personnel and resources to the development of the external reporting and compliance obligations that are required of a public company. We have taken measures to address and improve our financial reporting and compliance capabilities and we are in the process of instituting changes to satisfy our obligations in connection with being a public company. We plan to obtain additional financial and accounting resources to support and enhance our ability to meet the requirements of being a public company. We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls, reporting systems, or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially.





Risks Related to our Common Stock





The issuance of shares upon conversion of the senior secured convertible promissory notes and exercise of outstanding warrants may cause immediate and substantial dilution to our existing stockholders.





If the price per share of our common stock at the time of conversion of our senior secured convertible promissory notes, and exercise of any warrants, options, or any other convertible securities is in excess of the various conversion or exercise prices of these convertible securities, conversion or exercise of these convertible securities would have a dilutive effect on our common stock. As of April 13, 2012, we had (i) outstanding senior secured convertible promissory notes which are convertible into an aggregate of 2,420,000 shares of our common stock at a conversion price of $0.50 per share, (ii) outstanding convertible promissory notes which are convertible into an aggregate of 2,750,000 shares of our common stock at a conversion price of $0.50 per share, and (iii) warrants to purchase up to 2,585,000 shares of our common stock at an exercise price of $1.00 per share. Further, any additional financing that we secure may require the granting of rights, preferences or privileges senior to those of our common stock and which result in additional dilution of the existing ownership interests of our common stockholders.








11


Our common shares are thinly-traded, and you may be unable to sell at or near ask prices or at all if you need to sell your shares or otherwise desire to liquidate such shares.





We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.





The market price for our common stock may be particularly volatile given our status as a relatively small company with a thinly-traded “float” and lack of significant revenues that could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.





The market for our common shares may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, as noted above, our common shares may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us is a speculative or “risky” investment due to our lack of revenues or profits to date and uncertainty of future market acceptance for current and potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.





Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through pre-arranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices could increase the volatility of our share price.





If a trading market for our common shares does develop, trading prices may be volatile.





In the event that an orderly trading market develops and is maintained for our common shares, the market price of such shares may be based on factors that may not be indicative of future market performance.  Consequently, the market price of our shares may vary greatly.  If an orderly market for our shares develops and is maintained, there is a significant risk that our share price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control:





●
variations in our operating results;●
changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;●
changes in operating and stock price performance of other companies in our industry;●
additions or departures of key personnel; and●
future sales of our common stock.





Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, following initial public offerings, the market prices for stocks of companies often reach levels that bear no established relationship to the operating performance of these companies. These market prices are generally not sustainable and could vary widely. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.








12


Volatility in our common stock price may subject us to securities litigation.





The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.





We do not anticipate paying any cash dividends.





We presently do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our Board of Directors. We presently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.





Because we may be subject to the “penny stock” rules, the level of trading activity in our stock may be reduced which may make it difficult for investors to sell their shares.





Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks, like shares of our common stock, generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on NASDAQ. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.





We will need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.





We believe that our current cash and cash equivalents and anticipated cash flow from operations will not be sufficient to meet our anticipated cash needs for the near future. We will require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our resources are insufficient to satisfy our cash requirements, we will seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our stockholders. The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.





We lack a public market for shares of our common stock, which may make it difficult for investors to sell their shares.





There is no public market for shares of our common stock. We cannot guaranty that an active public market will develop or be sustained. Therefore, investors may not be able to find purchasers for their shares of our common stock. Should there develop a significant market for our shares, the market price for those shares may be significantly affected by such factors as our financial results and introduction of new products and services.  Factors such as announcements of new services by us or our competitors and quarter-to-quarter variations in our results of operations, as well as market conditions in our sector may have a significant impact on the market price of our shares. Further, the stock market has experienced extreme volatility that has particularly affected the market prices of stock of many companies and that often has been unrelated or disproportionate to the operating performance of those companies.





13


Our board of directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stockholders and may grant voting powers, rights and preference that differ from or may be superior to those of our shares of common stock.





Our articles of incorporation allow us to issue 10,000,000 shares of preferred stock without any vote or further action by our stockholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval, including large blocks of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.





Item 1B. Unresolved Staff Comments.





Not applicable to smaller reporting companies.





Item 2.  Properties.





Our Facilities.We maintain our corporate offices for approximately $200 per month on a month to month basis.  We also maintain our operational offices for $1,500 per month on a month to month basis.  We believe our current office space and facilities are sufficient to meet our current and future needs.  We do not anticipate the need to secure additional space.





Further, we have the following interests in oil and gas properties as detailed below:





The Marcee 1 Interest.We own a 100% working interest in the Marcee 1 Tract, which is located on approximately 112 acres of land in Gonzalez County, Texas (“Marcee 1 Tract”).  We have recently completed a workover on the well to increase oil production.  We have discovered an abundance of gas being produced with the oil, which is currently being tested for saleable quality.  Provided the gas is of saleable quality, we expect this well should produce 7-8 barrels of oil per day and approximately 30 mcf of gas per day.





The Lozano Interest.  We own a 100% working interest in the Hector Lozano Tract, which is located on approximately 110 acres, located in Frio County, Texas (“Lozano Tract”). The Lozano Tract is a currently producing asset with three wells with proven reserves.  The production from the Lozano wells is mature and we believe the wells are likely to continue to produce with slow decline for the foreseeable future.  All three wells are currently producing a total of 4-5 barrels of oil per day.  Historically these wells have produced a total of 10-12 barrels of oil per day.  We are planning a workover on the 3 wells which will include washing out the wells, reperforating the current zones as well as performing an acid job to the wells which we believe should return production to 10-12 barrels a day.





The Patriot Minerals Interests.  On January 28, 2011, we acquired certain oil and gas interests (“Patriot Interests”) from Patriot Minerals, LLC, a Texas limited liability company.   The Patriot Interests we acquired consist of certain undivided working interests including, but not limited to (i) the Welder lease in Duval County, TX; (ii) the Bailey Rogers and Fohn leases in Medina County, TX; (iii) the Walker Smith lease in Wilbarger County, TX; (iv) the Merrick Davis lease in Shackelford County, TX; and (v) the Crouch, Heady and Lane leases in Erath County, TX.





At the time of our acquisition of the Patriot Interests, all wells were shut in due to various factors including, but not limited to, bad weather and Patriot’s insufficient payment of operating expenses to maintain the Patriot Interests.  We have performed minor work on various wells and are in the process of developing plans with the working interest partners for workovers on wells on each of the leases.  We expect the workovers to be performed in 2012.  We expect we will have to expend significant capital to maintain the Patriot Interests.








14


The Gabriel and Rosser Interests.We own an undivided 50.83% working interest and 39.131% revenue interest in as the Gabriel 2 SWD Gabriel 3, 4, 5, 9, 15, Rosser #2 and #4 and Koi #1wells, located in Bastrop County,  Texas (“Gabriel Interests”).  At the time of our acquisition of the Gabriel Interests, all wells were not producing. The Gabriel Interests comprise over 400 acres, with approximately 10 wells that were shut in. The Rosser #4 well was re-entered and re-equipped in March 2011 and production has commenced.  The Gabriel #4 well is currently producing water and we are currently investigating the causes of the water production.  The Gabriel #9 well was re-entered and re-equipped but has not been producing.  We are currently investigating the causes of Gabriel #9 well’s non-production.  Drilling on a new Gabriel #16 well to test an anticipated payzone in the Serpentine formation will require a second completion attempt in order to achieve potential production on this well.





The Mckenzie State Well Interests.We own 100% working interest in the McKenzie State Well No. 1, located in Pecos County, Texas, in exchange for an aggregate cash sum of $550,000 and 50,000 shares of our common stock.The well is currently offline due to the discovery of a hole in the tubing and will require a minor work-over, which is scheduled to commence in the first half of 2012.  The faulty section will be pulled, replaced, and is expected to produce an estimated 8 - 10 bbl per day, which was its most recent production rate prior to developing the hole in the tubing. In addition to the production from this current zone, several additional horizons (which are productive in the area) have been identified in the McKenzie well, which could be tested and potentially produced in the future.





Company Reserve Estimates.





Our proved reserve information as of December 31, 2011 was estimated by Nova Resource, Inc. (“Nova”) and Mire and Associates, Inc. (“Mire”), independent petroleum engineers.  In accordance with SEC guidelines, Nova’s and Mire’s estimates of future net revenues from our properties, and the PV-10 and standardized measure thereof, were determined to be economically producible under existing economic conditions, which requires the use of the 12-month average price for each product, calculated as the unweighted arithmetic average of the first-day-of-the-month price for the period January 1, 2011 through December 31, 2011, except where such guidelines permit alternate treatment, including the use of fixed and determinable contractual price escalations.





The technical persons at Nova and Mire are responsible for preparing the reserves estimates presented herein and meets the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers.





Mireis an independent petroleum engineering firm specializing in the technical and financial evaluation of oil and gas assets. Mire’s report was prepared under the direction of Kurt Mire, principle consultant and owner of Mire.  Mr. Mire earned a B.S. degree in Petroleum Engineering from the University of Louisiana at Lafayette and has more than 25 years of experience in production engineering, field operations and management, reservoir engineering, acquisitions and divestments.  Mire and its employees have no interest in our Company or in our properties, were not employed by our Company on a contingent fee basis and were objective in determining our reserves.




Nova is an independent petroleum engineering firm specializing in the technical and financial evaluation of oil and gas assets.  Nova’s report was prepared under the direction of Joseph V. Rochefort, principle consultant and owner of Nova.  Mr. Rochefortearned a B.S. degree in Physics and Geophysics from Texas Christian University and a Masters degree in Geology from Texas Tech University.  Mr. Rochefort has more than 28 years of practical experience in the estimation and evaluation of petroleum reserves.  Nova and its employees have no interest in our Company or in our properties, were not employed by our Company on a contingent fee basis and were objective in determining our reserves.




Michael Carey, our officer and director, acted as the liaison with the technical persons at Nova and Mire.





15


Reserve Technologies.Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.  If deterministic methods are used, reasonable certainty means a high degree of confidence that the quantities will be recovered.  If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate.  To achieve reasonable certainty, Nova and Mire employed technologies that have been demonstrated to yield results with consistency and repeatability. The technologies and economic data used in the estimation of our proved reserves include, but are not limited to, well logs, geologic maps and available down well and production data, seismic data, well test data.





Oil and Gas Reserve Information.The following reserve quantities and future net cash flow information for our proved reserves located in the State of Texas in the United States have been estimated as of December 31, 2011.  The determination of oil and gas reserves is based on estimates, which are highly complex and interpretive. The estimates are subject to continuing change as additional information becomes available.





Reserve Category

Oil (BBLS)

Natural Gas (MCF)

Present Worth at 10%ProvedDeveloped:United States - Texas


2,274

-

$
63,599Undeveloped:United States - Texas


1,806

-

$
16,089Total Proved – December 31, 2010


4,080

-

$
79,688-Developed:United States - Texas


29,802

46,536

$
948,445Undeveloped:United States - Texas


8,528

2,870

$
182,605Total Proved – December 31, 2011


38,330

49,406

$
1,131,050





Reserved Quantity

Oil (BBLS)


Natural Gas (MCF)Balance, August 10, 2010


-



-Purchases


4,204



-Production


(124
)


-Balance, December 31, 2010


4,080



-Purchases


35,560



49,948Production


(1,310
)


(542
)Balance, December 31, 2011


38,330



49,406





During the period from January 1, 2011 through December 31, 2011, the Company acquired an estimated 11,398 bbls of proved undeveloped net oil and gas reserves in place in connection with the Company’s purchase of the Lozano, Marcee and Patriot leases in Texas.  These properties are located in 7 (seven) fields in the following 6 (six) Texas counties: Erath, Gonzalez, Medina, Navarro, Shackleford and Wilbarger None of the proved undeveloped oil reserves were converted during the period ended December 31, 2011 as the Company is reviewing the production performance and assessment of the remaining recoverable resources.  In addition, there were no proved undeveloped reserves over five (5) years.





The standardized measure of discounted future net cash flows is provided using the 12-month unweighted arithmetic average and were held constant throughout the life of the properties. The oil price used as of December 31, 2011 was $96.19 per bbl of oil and $4.12 per MMbtu of natural gas. Future production costs are based on year-end costs and include severance and ad valorem taxes. Each property that is leased by us is also charged with field-level overhead in the reserve calculation. The present value of future cash inflows is based on a 10% discount rate.





16


Standardized Measure of Future Net Cash Flows:





December 31, 2011


December 31, 2010Future cash flows

$
3,278,186


$
231,430Future production and development costs


(1,377,560
)


(90,258
)Future income taxes


-



-Future net cash flows before discount


1,900,626



141,17210% discount to percent value


(769,576
)


(61,484
)Standardized measure of discounted future net cash flows

$
1,131,050


$
79,688





Changes in the Standard Measure of Discounted Cash Flows:





December 31, 2011


December 31, 2010Standardized measure of discounted future net cash flows beginning of period

$
79,688



-Purchases of reserves in place


1,064,368Extension and discoveries, net of future production and development costs


-



89,901Sales of oil and gas produced, net of production costs


(31,497
)


(10,213
)Accretion of discount


7,969



-Revisions of previous quantity estimates


(68,859
)


-Net change in prices and production costs


26,611



-Net change in income taxes


-



-Changes in timing and other


52,770



-Standardized measure of discounted future net cash flows end of period

$
1,131,050


$
79,688





The information required by Items 1204 to 1208 of Regulation S-K are provided as follows:





Production.





For the year ended December 31, 2010, we only had production from our interest in the Lozano lease located in Frio County, Texas.  The Company produced approximately 124 barrels on a net basis.





For the year ended December 31, 2011, we had production from our Lozano, Marcee, McKinney and Patriot leases located in six Texas counties: Erath, Gonzalez, Medina, Navarro, Shackleford and Wilbarger.  The Company produced approximately 1,310 barrels and 542 mcf on a net basis.





Drilling Activity.During the year ended December 31, 2011, we conducted drilling activity in Texas on a new Gabriel #16 well to test an anticipated payzone in the Serpentine formation.  We anticipate that the new well will require a second completion attempt in order to achieve potential production on the well.





Delivery Commitments.We are not obligated to provide a fixed and determinable quantity of oil or gas in the near future under existing contracts or agreements in Texas.





Gross and Net Productive Wells:





December 31, 2011Oil

GasGross

Net

Gross

NetUnited States -Texas
88

11

2

.588

11

2

.5





Gross and Net Developed Acreage:





December 31, 2011Oil

GasGross

Net

Gross

NetUnited States -Texas
1,553

480

325

1491,553

480

325

149





17


Gross and Net Undeveloped Acreage:





December 31, 2011Oil

GasGross

Net

Gross

NetUnited States -Texas
1,572

344

557

291,572

344

557

29





Gross and Net Productive Wells:





December 31, 2010Oil

GasGross

Net

Gross

NetUnited States -Texas
3

2.25

-

-3

2.25

-

-





Gross and Net Developed Acreage:





December 31, 2010Oil

GasGross

Net

Gross

NetUnited States -Texas
110

83

-

-110

83

-

-





Gross and Net Undeveloped Acreage:





August 10, 2010 (Inception) through December 31, 2010Oil

GasGross

Net

Gross

NetUnited States -Texas
453

91

-

-453

91

-

-





We also own certain oil and gas interests located near Anchorage, Alaska, through our wholly-owned subsidiary, NFEC.  NFEC acquired an oil and gas lease for State of Alaska Oil and Gas Lease ADL 391120 Tract: CI2006-464, which contains approximately 545 acres, pursuant to a Purchase Agreement dated November 2009.  Production on the properties has not commenced and there can be no assurance that any hydrocarbons will be economically recoverable, if at all. We have conducted limited pre-production activities in the past and we intend to conduct additional activities, such as a multi-phase exploration program of trenching, sampling, geophysical surveys and test drilling, as soon as our new management is able to evaluate the interests. We also intend to conduct exploratory activities on the properties in the foreseeable future.  NFEC has not undergone bankruptcy, receivership, or any similar proceeding.





18


Item 3.  Legal Proceedings.





There are no legal actions pending against us nor are any legal actions contemplated by us at this time





Item 4.  Mine Safety Disclosures.





Not applicable.





PART II





Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.





Market Information.  Our common stock, par value $.001, has been quoted on the OTC Bulletin Board and OTCQB under the symbol “UAPC”.   For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.





High ($)


Low ($)Fiscal Year 2011First Quarter

$
1.50


$
0.22Second Quarter

$
1.05



0.80Third Quarter

$
0.95



0.85Fourth Quarter

$
0.85



0.40





High ($)


Low ($)Fiscal Year 2010First Quarter

$
0.03


$
0.15Second Quarter

$
0.11



0.13Third Quarter

$
0.10



0.15Fourth Quarter

$
0.10



0.28





Reports to Security Holders.We are a reporting company with the SEC.  The public may read and copy any materials filed with the Securities and Exchange Commission at the Security and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330.  The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission. The address of that site is http://www.sec.gov.





Holders.On April 13, 2012, we had approximately 15 stockholders of record.  The number of stockholders of record does not include beneficial owners of our common stock, whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.





Dividends.We currently anticipate that we will not declare or pay cash dividends on our common stock in the foreseeable future. We will pay dividends on our common stock only if and when declared by our board of directors.  Our board of directors’ ability to declare a dividend is subject to restrictions imposed by Nevada law.  In determining whether to declare dividends, the board of directors will consider these restrictions as well as our financial condition, results of operations, working capital requirements, future prospects and other factors it considers relevant.





19


Securities Authorized For Issuance Under Equity Compensation Plans.As of December 31, 2011, we had no compensation plans under which our equity securities were authorized for issuance.





Recent Sales of Unregistered Securities.During the year ended December 31, 2011, we had the following sales of unregistered securities:





In connection with the Merger Transaction and on December 31, 2010, we entered into a Note and Warrant Purchase Agreement (“Financing Agreement”) with one investor pursuant to which the investor agreed to lend up to $2,250,000 to us 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.  Pursuant to the Financing Agreement, 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 1, 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 Financing 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. The investor shall have sole discretion in determining whether the proposed use of proceeds meets those requirements. The note and warrants were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act of 1933, which exemption is specified by the provisions of Regulation S promulgated pursuant to that act by the SEC.





On October 14, 2011, we entered into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) 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 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. Pursuant to the Financing Agreement, we issued the following Notes and Warrants to the investor on the following dates:





Date of Note
Amount of Note
Number of WarrantsOctober 13, 2011
$400,000
400,000November 29, 2011
$550,000
550,000December 19, 2011
$25,000
25,000TOTAL
$975,000
975,000





The Purchase 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. The investor shall have sole discretion in determining whether the proposed use of proceeds meets those requirements. The note and warrants were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act of 1933, which exemption is specified by the provisions of Regulation S promulgated pursuant to that act by the SEC.





On November 30, 2011, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with McKenzie Oil Corp. (“McKenzie”), pursuant to which we acquired one hundred percent (100%) of McKenzie’s working interest in what is designated as the McKenzie State Well No. 1, located in Pecos County, Texas, in exchange for an aggregate cash sum of Five Hundred Fifty Thousand Dollars ($550,000) and fifty thousand (50,000) shares of our common stock (the “Shares”).  The Shares were issued to McKenzie in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated pursuant to the Securities Act by the Securities and Exchange Commission.





20


Use of Proceeds of Registered Securities.There were no sales of registered securities during the year ended December 31, 2011.





Penny Stock Regulation.  Trading of our securities will be in the over-the-counter markets which are commonly referred to as the “pink sheets” or on the OTC Bulletin Board. As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the price of the securities offered.





Shares of our common stock will probably be subject to rules adopted the Securities and Exchange Commission that regulate broker-dealer practices in connection with transactions in “penny stocks”.  Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system).  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission, which contains the following:





·
a description of the nature and level of risk in the market for penny stocks in both public offerings and

secondary trading;·
a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to

the customer with respect to violation to such duties or other requirements of securities’ laws;·
a brief, clear, narrative description of a dealer market, including "bid" and "ask” prices for penny stocks

and the significance of the spread between the "bid" and "ask" price;·
a toll-free telephone number for inquiries on disciplinary actions;


·
definitions of significant terms in the disclosure document or in the conduct of  trading in penny

stocks;  and·
such other information and is in such form (including language, type, size and format), as the Securities

and Exchange Commission shall require by rule or regulation.





Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:





·
the bid and offer quotations for the penny stock;·
the compensation of the broker-dealer and its salesperson in the transaction;·
the number of shares to which such bid and ask prices apply, or other comparable information relating to

the depth and liquidity of the market for such stock; and·
monthly account statements showing the market value of each penny stock held in the customer’s account.





In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.  These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules.  Holders of shares of our common stock may have difficulty selling those shares because our common stock will probably be subject to the penny stock rules.


Purchases of Equity Securities.None during the period covered by this Annual Report.





21


Item 6. Selected Financial Data.





Not applicable.





Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.





Forward Looking Statements





This Annual Report of United American Petroleum Corp. on Form 10-K 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 Annual Report on Form 10-K. 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, guaranty, 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.





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.





22


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.





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 December 31, 2011, 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.





23


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.





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. On December 31, 2010,  Forgehouse, Inc.  (“Forgehouse,” “We” or the “Company”) entered into and closed an Agreement and Plan of Merger (the “Merger Agreement”) by and among, the Company, United American Petroleum Corp., a Nevada corporation (“United”), and our newly formed wholly-owned subsidiary, United PC Acquisition Corp., a Nevada corporation (“Merger Sub”)(the “Merger Transaction”).  The transaction contemplated under the Merger Agreement was deemed to be a reverse acquisition, where Forgehouse, Inc. (the legal acquirer) is considered the accounting acquiree and United (the legal acquiree) is considered the accounting acquirer.  Forgehouse is deemed a continuation of the business of United, and the historical financial statements of United became the historical financial statements of Forgehouse.





On October 15, 2010, United purchased the Lozano working interest from 4 Phoenix Oil and Gas, LLC (“Phoenix” or “Predecessor”). As a result of correspondence from the staff at the SEC, we have determined that Phoenix is our Predecessor thereby triggering predecessor accounting and financial statement presentation.  Predecessor company references herein relate to Phoenix. Successor company references herein are referring to consolidated information pertaining to the Company and its wholly owned subsidiaries.





The following discussion of our financial condition and results of operations should be read in conjunction with (i) the Predecessor’s statement of operations, cash flows and changes in members’ equity for the period from January 1, 2010 to October 15, 2010 and (ii)our financial statements for the period of October 16, 2010 through December 31, 2011, together with notes thereto as included in this Annual Report on Form 10-K.





For the Predecessor’s period from January 1, 2010 through October 15, 2010.





Results of Operations.





Revenues.  The Predecessor had oil revenues of$39,800 for the Predecessor’s period from January 1, 2010 through October 15, 2010. Those revenues were generated from the Predecessor’s interest in the Lozano lease in Frio County, Texas.





Operating Expenses.  The Predecessor’stotal operating costs and expenses for the Predecessor period from January 1, 2010 through October 15, 2010 were, $55,659, which was comprised of lease operating costs of $22,217, depletion expense of $13,665, accretion expense of $781 related to the Predecessor’s asset retirement obligation liability, and general and administrative expenses of $83,196.  Lease operating costs relate to operating costs associated with the Predecessor’s oil and gas properties.  General and administrative expenses relate to wages, corporate maintenance costs and administrative expenses associated with the Predecessor’s leases.





Net Loss.  For the Predecessor’s periodfrom January 1, 2010 throughOctober 15, 2010, the Predecessor’s net loss was $15,859.





For the Successor year ended December 31, 2011 as compared to the Successor period from October 16, 2010 through December 31, 2010.





Results of Operations.





Revenues.  We had total revenues of $356,540 for the year ended December 31, 2011. Those revenues were generated from oil sales of $139,692, gas sales of $1,670 and administrative income of $215,178. The oil sales were generated from our interest in the Lozano, McKinney, Walker Smith, Welder, Bailey Rogers and Fohn leases. Our natural gas sales of $1,670  resulted from our Crouch and Lane Heady leases. Our administrative income was a result of income derived from oil and gas administrative 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 implement our business plan during the next twelve months, we need to generate increased revenues from our oil and gas properties. Our failure to do so will hinder our ability to increase the size of our operations and to generate additional revenues. If we are not able to generate additional revenues to cover our operating costs, we may not be able to expand our operations.





24


Operating Expenses.For the year ended December 31, 2011, our total operating costs and expenses were $1,054,310, which is primarily comprised of lease operating costs of $109,865, depletion expense of $19,225, accretion expense of $2,592 related to our asset retirement obligation liability, and general and administrative expenses of $922,628.  By comparison, our total operating costs and expenses were $68,818 for theSuccessorperiod from October 16, 2010 through December 31, 2010, which was primarily comprised of lease operating costs of $4,020, depletion expense of $3,910, accretion expense of $207 related to its asset retirement obligation liability, general and administrative expenses of $60,681.  The increases in total operating costs and expenses from 2010 to 2011 was directly related to increases in production costs, wage related expenses and general administrative expenses for theSuccessoryear ended December 31, 2011.Our lease operating costs relate to operating costs associated with our oil and gas properties.  General and administrative expenses relate to wages, corporate maintenance costs and administrative expenses associated with our leases.





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.  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 year ended December 31, 2011, we accrued interest expense in the amount of $289,291 related to outstanding note payables and a loss on embedded derivatives of $96,280, as compared to accrued interest expense in the amount of $9,795 related to a $250,000 note payable for theSuccessorperiod from October 16, 2010 through December 31, 2010.





Net Loss.For the year ended December 31, 2011, our net loss was $1,083,341, as compared to a net loss of $68,400 for the period from October 16, 2010 through December 31, 2010.  The significant increase in our net loss between the comparable periods was directly related to the increase in operating expenses and net other expense for the year ended December 31, 2011.We hope to generate additional revenues from our projects to cover out 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 December 31, 2011, our current assets were $814,894, which consisted of cash of $593,469, accounts receivable of $35,405, related party receivables of $25,718 and other receivable of $160,302. Our current assets of $814,894 together with our evaluated oil and gas properties of $528,336, net of accumulated depletion of $23,135, and our unevaluated oil and gas properties of $617,630, represent our total assets of 1,960,860 as of December 31, 2011.





On December 31, 2010, we entered into a credit facility with VP Bank (Switzerland) Ltd. (“VP Bank”), whereby VP Bank 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 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 notes are due on December 31, 2013, or upon default, whichever is earlier, and bear interest at the annual rate of 10%. Pursuant to thecredit facility, we issued the following notes and warrants to VP Bank on the following dates:





Date of Note
Amount of Note
Number of WarrantsDecember 31, 2010
$620,000
620,000January 1, 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





25


The agreement provides that VP Bank 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 VP Bank pursuant to VP Bank’s election to convert the outstanding principal amount of $620,000 due on its note dated December 31, 2010 at a conversion price of $0.50 per share as previously disclosed in our Current Report on Form 8-K filed with the Commission on April 19, 2012.  On June 1, 2012, we issued 1,180,000 shares of our common stock to VP Bank pursuant to VP Bank’s election to convert the outstanding principal amount of $590,000 due on its notesdated January 1, 2011, March 9, 2011, June 20, 2011 and June 30, 2011 at a conversion price of $0.50 per share as previously disclosed in our Current Report on Form 8-K filed with the Commission on June 6, 2012.  On June 11, 2012, we issued 300,481 shares of our common stock to VP Bank pursuant to VP Bank’s election to convert all of the accrued interest due on its notes dated December 31, 2010, January 20, 2011, March 9, 2011, June 20, 2011 and June 30, 2011 at a conversion price of $0.50 per share as previously disclosed in our Current Report on Form 8-K filed with the Commission on June 13, 2012.As of the date of this Amendment No. 2, there are no outstanding notes held by VP Bank and VP Bank is the holder of 1,210,000 warrants at an exercise price of $1.00 per share.





On October 14, 2011, we entered into a credit facility with Yaksha Industries Inc. (“Yaksha”) pursuant to which Yaksha 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 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.On June 4, 2012, Yaksha agreed to increase the total amount of the facility to $1,590,000 . Pursuant to the credit facility, we issued the following notes and warrants to Yaksha 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





The agreement provides that Yaksha 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 pursuant to Yaksha’s election to convert the outstanding principal amount of $1,590,000 and all accrued interest due on its notes dated October 14, 2011, November 29, 2011, December 19, 2011, February 10, 2012, March 30, 2012, and June 4, 2012at a conversion price of $0.50 per share as previously disclosed in our Current Report on Form 8-K filed with the Commission on June 13, 2012.  As of the date of this Amendment No. 2, there are no outstanding notes held by Yaksha and Yaksha is the holder a total of 1,590,000 warrants at an exercise price of $1.00 per share.




On November 30, 2011, we acquired one hundred percent (100%) of McKenzie’s working interest in the McKenzie State Well No. 1, located in Pecos County, Texas, in exchange for $550,000 and 50,000 shares of our common stock.





As of December 31, 2011, we had current liabilities in the amount of $648,853, of which $217,702 were represented by accounts payable and accrued expenses and a $431,151 payable.  As of December 31, 2011 we had long-term liabilities of $623,003 related to our convertible note net of discount, an embedded derivative liability of $1,138,989 and an asset retirement obligation of $37,955.





We had no other liabilities and no other long term commitments or contingencies as of December 31, 2011.





26


As of December 31, 2011, we had cash of $593,469.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. 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.





In order to implement our business plan in the manner we envision, we need to raise additional capital. We cannot guarantee that we will be able to raise additional funds. Moreover, in the event that we can raise additional funds, we cannot guarantee that additional funding will be available on favorable terms.





We are in the exploration stage, have limited revenue and have incurred a net loss of $1,151,741 since October 16, 2010.  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 at December 31, 2011.





Item 7A. Quantitative and Qualitative Disclosures About Market Risk.





Not applicable.





27


Item 8. Financial Statements and Supplementary Data.





The financial statements required by Item 8 are presented in the following order:





TABLE OF CONTENTS





PageReport of Independent Registered Public Accounting Firm
30Balance Sheets
31Statement of Operations
32Statement of Stockholders' Deficit
33Statement of Cash Flow
34Notes to Financial Statements
35




















28


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors


United American Petroleum Corp.


Austin, Texas





We have audited the accompanying consolidated balance sheets of United American Petroleum Corp. and its subsidiaries (the “Company” or “Successor”) as of December 31, 2011 and 2010 and the related consolidated statements of operations, stockholders' deficit and cash flows for year ended December 31, 2011 and the period from October 16, 2010 through December 31, 2010.  We have also audited the accompanying statements of operations, changes in members’ equity and cash flows of 4 Phoenix Oil & Gas, LLC  (“Predecessor”) for the period from January 1, 2010 through October 15, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Successor as of December 31, 2011 and 2010 and the consolidated results of their operations and their cash flows year ended December 31, 2011 and for the period from October 16, 2010 through December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.  Further, in our opinion, the Predecessor financial statements referred to above present fairly, in all material respects, the results of its operations and its cash flows for the period from January 1, 2010 through October 15, 2010 in conformity with accounting principles generally accepted in the United States of America.





The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered losses from operations and has a working capital deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.





/s/ MaloneBailey, LLP


www.malonebailey.com


Houston, Texas





April 16, 2012














29





UNITED AMERICAN PETROLEUM CORP.


CONSOLIDATED BALANCE SHEETS


DECEMBER 31, 2011 AND 2010





SUCCESSOR


SUCCESSORDECEMBER 31,


DECEMBER 31,2011


2010ASSETSCURRENT ASSETCash

$
593,469


$
557,344Accounts receivable


35,405



3,570Related party receivables


25,718



-Other receivable


160,302



-Total current assets


814,894



560,914Oil and gas properties (full cost method):Evaluated, net of accumulated depletion of $23,135 and $3,910as of December 31, 2011 and 2010, respectively


528,336



81,328Unevaluated


617,630



205,433TOTAL ASSETS

$
1,960,860


$
847,675LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIESAccounts payable and accrued liabilities


217,702



155,323Related party payable


-



25,000Note payable - related party


-



50,000Note payable


-



250,000Other payable


431,151



-Total current liabilities


648,853



480,323Accrued interest


141,255



20,925Convertible note payable, net of discount of $1,561,997 and $165,932

as of December 31, 2011 and 2010, respectively


623,003



454,068Embedded derivative liability


1,138,989



165,932Asset retirement obligation


56,012



15,465TOTAL LIABILITIES


2,608,112



1,136,713STOCKHOLDERS' DEFICITCommon stock, $0.001 par value, 100,000,000 shares authorized,47,250,000 shares issued and

44,000,000 and 43,950,000 shares outstanding, respectively


44,000



43,950Additional paid-in capital


487,739



(237,338
)Accumulated deficit


(1,178,991
)


(95,650
)Total stockholders' deficit


(647,252
)


(289,038
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$
1,960,860


$
847,675








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











30


UNITED AMERICAN PETROLEUM CORP.


CONSOLIDATED STATEMENTS OF OPERATIONS


FOR THE YEAR ENDED DECEMBER 31, 2011, THE PERIOD FROM OCTOBER 16, 2010 THROUGH DECEMBER 31, 2010


AND PREDECESSOR STATEMENT OF OPERATIONS FOR THE PERIOD FROM JANUARY 1, 2010 THROUGH OCTOBER 15, 2010


SUCCESSOR

FOR THE YEAR

ENDED


SUCCESSOR

OCTOBER 16, 2010 THROUGH


PREDECESSOR

JANUARY 1, 2010

THROUGHDECEMBER 31, 2011


DECEMBER 31, 2010


OCTOBER 15, 2010REVENUEOil sales

$
139,692


$
10,213


$
39,800Gas sales


1,670



-



-Well operator income


215,178



-



-TOTAL REVENUE


356,540



10,213



39,800OPERATING EXPENSES (INCOME)Lease operating expenses


109,865



4,020



22,217Accretion expense


2,592



207



781Depletion expense


19,225



3,910



13,665Gain on sale of property and equipment


-



-



(64,200
)General and administrative


922,628



60,681



83,196TOTAL OPERATING EXPENSES


1,054,310



68,818



55,659NET LOSS BEFORE OTHER EXPENSE


(697,770
)


(58,605
)


(15,859
)OTHER INCOME (EXPENSE)Interest Expense


(289,291
)


(9,795
)


-Loss on embedded derivatives


(96,280
)


-



-Total other expense


(385,571
)


(9,795
)


-NET INCOME (LOSS)

$
(1,083,341
)

$
(68,400
)

$
(15,859
)INCOME (LOSS) PER SHARE - BASIC


(0.02
)


(0.00
)

NAWEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC


43,954,258



37,026,923



N/A








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








31


UNITED AMERICAN PETROLEUM CORP.


STATEMENT OF CHANGES IN MEMBERS' EQUITY


FOR THE PERIOD FROM JANUARY 1, 2010 THROUGH OCTOBER 15, 2010


PREDECESSOR





Members’Member A


Member B


EquityBalance, December 31, 2009


38,625



38,624



77,249Withdrawals


(21,250
)


(21,250
)


(42,500
)Share of net loss


(7,929
)


(7,930
)


(15,859
)Balance, October 15, 2010

$
9,446


$
9,444


$
18,890








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











32


UNITED AMERICAN PETROLEUM CORP.


CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT


FOR THE PERIOD FROM OCTOBER 16, 2010 THROUGH DECEMBER 31, 2010 AND THE YEAR ENDED DECEMBER 31, 2011


SUCCESSOR





Common Stock


Additional Paid-in


Accumulated


Stockholders’Shares


Par Value


Capital


Deficit


DeficitBalance, October 16, 2010


15,750,000


$
15,750


$
-


$
(27,250
)

$
(11,500
)Recapitalization


31,500,000



31,500



(198,088
)


-



(166,588
)Cancellation of shares issued


(750,000
)


(750
)


(39,250
)


-



(40,000
)Cancellation of shares issued


(2,550,000
)


(2,550
)


-



-



(2,550
)Net loss for the period


-



-



-



(68,400
)


(68,400
)Balance - December 31, 2010


43,950,000


$
43,950


$
(237,338
)

$
(95,650
)

$
(289,038
)Discount on convertible notes


-



-



684,627



-



684,627Shares issued for oil and gas property


50,000



50



40,450



-



40,500Net loss for the period


-



-



-



(1,083,341
)


(1,083,341
)Balance - December 31, 2011


44,000,000


$
44,000


$
487,739


$
(1,178,991
)

$
(647,252
)





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











33


UNITED AMERICAN PETROLEUM CORP.


CONSOLIDATED STATEMENTS OF CASH FLOW





SUCCESSOR

YEAR ENDED


SUCCESSOR

OCTOBER 16, 2010 THROUGH


PREDECESSOR

JANUARY 1, 2010

THROUGHDECEMBER 31, 2011


DECEMBER 31, 2010


OCTOBER 15, 2010CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss)

$
(1,083,341
)

$
(68,400
)

$
(15,859
)Adjustments to reconcile net lossto net cash used in operating activities:Depreciation expense


-



-



1,383Depletion expense


19,225



3,910



13,665Accretion expense


2,592



207



781Gain on sale of fixed assets


-



-



(64,200
)Amortization of debt discount


168,935



-



-Loss on embedded derivatives


96,280



-



-Change in assets and liabilitiesAccounts receivable


(31,835
)


(3,570
)


1,891Other assets


-



-



(25,000
)Related party receivable


(44,362
)


-



-Other receivable


(141,658
)


-



-Accounts payable and accrued expenses


(26,192
)


7,220



34,379Accrued interest


120,330



-



-Other payable


431,151



-



-Net cash (used in) operating activities


(488,875
)


(60,633
)


(52,960
)CASH FLOWS USED IN INVESTING ACTIVITIES:Purchase of furniture and equipment


-



-



(45,500
)Sale of fixed assets


-



-



64,200Earnest deposit received for working interest


-



-



75,000Acquisition of oil and gas properties


(715,000
)


(2,623
)


-Net cash used in investing activities


(715,000
)


(2,623
)


93,700CASH FLOWS FROM FINANCING ACTIVITIES:Distributions paid to members'


-



-



(42,500
)Cash assumed from reverse merger


-



600



-Proceeds from convertible notes


1,565,000



620,000



-Payment of note payable


(250,000
)


-



-Payment of related party payable


(25,000
)


-



-Payment of related party notes payable


(50,000
)


-



-Net cash provided by financing activities


1,240,000



620,600



(42,500
)NET INCREASE IN CASH AND CASH EQUIVALENTS


36,125



557,344



(1,760
)CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD


557,344



-



10,862CASH AND CASH EQUIVALENTS - END OF PERIOD

$
593,469


$
557,344


$
9,102SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for:Interest

$
-


$
-


$
-Taxes

$
-


$
-


$
-NON CASH TRANSACTIONS:Asset retirement liability incurred

$
37,955


$
-


$
-Stock repurchase and cancellation

$
-


$
40,000


$
-Common stock issued for oil and gas property

$
40,500


$
-


$
-Acquisition of oil and gas properties with payables

$
84,975


$
-


$
-Discount from derivative liabilities

$
880,373


$
-


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

$
684,627


$
-


$
-





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








34


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





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.





On October 15, 2010, United American Petroleum Corp. purchased the Lozano and Marcee working interests from 4 Phoenix Oil and Gas, LLC, triggering predecessor accounting and financial statement presentation.





Successor company references herein are referring to consolidated information pertaining to United American Petroleum Corp. and our wholly owned subsidiaries.





Predecessor company references herein relate to 4 Phoenix Oil & Gas, LLC a former working interest owner of the Lozano lease.





On December 31, 2010, the Company entered into a Plan of Merger (the “Merger”) with Forgehouse, Inc. and their newly formed wholly-owned subsidiary United PC Acquisition Corp. Following the closing and pursuant to the Plan of Merger, effective as of December 31, 2010, the Company merged with and into United PC Acquisition Corp. with the Company surviving (the “Reverse Merger”). The Company, as a wholly-owned subsidiary of Forgehouse, Inc. was then merged with and into Forgehouse, Inc. and Forgehouse, Inc. changed its name to United American Petroleum Corp. For accounting purposes, the Merger was treated as a reverse merger and a recapitalization of United American Petroleum Corp.





On January 13, 2011, the Company formed a wholly owned subsidiary, UAP Management, LLC, a Texas limited liability company, for the purpose of managing the Gabriel Rosser, LP (see Note 8).





On January 13, 2011, the Company formed a wholly owned subsidiary, United Operating, LLC, a Texas limited liability company, for the purpose of operating and managing the various interests acquired from Patriot Minerals, LLC (see Note 8).





Basis of Presentation – Predecessor





We acquired the Lozano working interest from 4 Phoenix Oil & Gas, LLC (our predecessor company) and at the time of the acquisition, we had minimal assets and no operations.  Accordingly, we have included the predecessor financial statements of Phoenix in the accompanying financial statements for purposes of complying with the rules and regulations of the Securities and Exchange Commission as required by S-X Rule 8-02.








35


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





2.            Summary of Significant Accounting Policies





Basis of Presentation





The accompanying consolidated financial statements include United American Petroleum Corp. and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. The accompanying financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in the United States of America ("GAAP"). We made certain reclassifications to prior-period amounts to conform to the current presentation.





Use of Estimates





The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods.  Actual results could materially differ from those estimates.





Cash and Cash Equivalents





All highly liquid investments purchased with an original maturity of three months or less at the time of acquisition are considered to be cash equivalents.





Fair Value of Financial Instruments





The Company is required to estimate the fair value of all financial instruments included on its balance sheet.  The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short period to maturity of these instruments.





Concentration of Credit Risk





The Company collects its receivables on its working interests in oil and gas properties from well operators. As such, the Company generally has relatively few customers. These receivables are unsecured and the Company performs ongoing credit evaluations of the well operators’ financial condition whenever necessary. Bad debt is recognized on an account-by-account review after all means of collection have been exhausted and recovery is not probable. There has been no bad debt expense for the period ended December 31, 2011 and 2010, respectively.





Revenue Recognition- Oil and Gas





The Company recognizes oil and gas revenue from interests in producing wells using the “sales method.” Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which we are entitled based on our working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under–produced owner(s) to recoup its entitled share through future production. Under the sales method, no receivables are recorded where we have taken less than our share of production. Our net imbalance position at December 31, 2011 and December 31, 2010, was immaterial.











36


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





2.   Summary of Significant Accounting Policies (Continued)





Revenue Recognition – Administrative Income





The Company will record revenue for administrative income in accordance with ASC 605. The criteria for recognition are as follows:





1)
Persuasive evidence of an arrangement exists;2)
Delivery has occurred or services have been rendered;3)
The seller’s price to the buyer is fixed or determinable, and4)
Collectability is reasonably assured.





Determination of criteria (3) and (4) will be based on management's judgments regarding the fixed nature of the selling prices of the services performed and the collectability of those amounts.





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.





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.





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.








37


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





2.    Summary of Significant Accounting Policies (Continued)





Asset Retirement Obligations





ASC 410, Asset Retirement and Environmental Obligations addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Specifically, ASC 410 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. In addition, the asset retirement cost is capitalized as part of the asset’s carrying value and subsequently allocated to expense over the asset’s useful life.





Fair Value of Financial Instruments





Unless otherwise indicated, the fair value of all reported assets and liabilities which represent financial instruments approximate the carrying values of such instruments due to their short-term maturity.





Recoverability of Long-Lived Assets





The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.





Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets would be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.





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 December 31, 2011, there were no outstanding employee stock options.








38


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





2.    Summary of Significant Accounting Policies (Continued)





Income Taxes





The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”). ASC 740-10 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be realized.





Basic and Diluted Earnings (Loss) Per Share





Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed in the same way as basic earnings (loss) 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 and if the additional common shares were dilutive.





Property and Equipment





Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.


The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follow:





Asset Category

Depreciation PeriodFurniture and Fixtures

5 YearsAutomobiles

5 YearsEquipment

10 Years





Recent Accounting Pronouncements





In September 2011, the FASB issued Accounting Standards Update No. 2011-08,Intangibles - Goodwill and Other (Topic 350) - Testing Goodwill for Impairment(ASU 2011-08), to allow entities to use a qualitative approach to test goodwill for impairment. ASU 2011-08 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. ASU 2011-08 is effective for us in fiscal 2012 and earlier adoption is permitted. The Company is currently evaluating the impact of our pending adoption of ASU 2011-08 on our consolidated financial statements.





Management does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, consolidated financial position or cash flow.








39


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





3.            Going Concern





The Company has incurred a net loss and negative operating cash flows since inception through December 31, 2011. 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.





4.            Related Party Receivable





As of December 31, 2011, the Company had a related party receivable in the amount of $25,718 due from two Companies with working interest amounts payable.  Our directors are also officers in these two Companies.





5.            Embedded Derivative Liabilities





Conversion Option Liability





As described in Note 13, the Company issued a convertible note 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 7 for a reconciliation of the changes in fair value of the Company’s embedded derivative.





December 31, 2010 Convertible Note Installments (First Financing)





On December 31, 2010, the Company determined a fair value of $116,905 for the conversion option liability for the first installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of: -0-%, volatility of 117.5%, risk free rate of 1.02% and an expected term of 3 years.





On January 20, 2011, the Company determined a fair value of $333,652 for the conversion option liability for the second installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 116.06%, risk free rate of 1.07% and an expected term of approximately 3 years.





On March 9, 2011, the Company determined a fair value of $376,698 for the conversion option liability for the third installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 116.48%, risk free rate of 1.21% and an expected term of approximately 3 years.





On June 20, 2011, the Company determined a fair value of $95,155 for the conversion option liability for the fourth installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 109.87%, risk free rate of 0.68% and an expected term of approximately 3 years.








40


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





5.   Embedded Derivative Liabilities (Continued)





On June 30, 2011, the Company determined a fair value of $142,246 for the conversion option liability for the fifth installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 103.96%, risk free rate of 0.81% and an expected term of approximately 3 years.





On December 31, 2011, the Company determined a fair value of $583,319 for the conversion option liability for its convertible notes using the Black Scholes Option Pricing Model based upon the following: dividend yield of -0-%, volatility of 102.66%, risk free rate of 0.45% and an expected term of approximately 2 years.





October 14, 2011 Convertible Note Installments (Second Financing)





On October 14, 2011, the Company determined a fair value of $504,896 for the conversion option liability for the first installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 109.29%, risk free rate of 0.24% and an expected term of approximately 3 years.





On November 29, 2011, the Company determined a fair value of $655,150 for the conversion option liability for the second installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 108.60%, risk free rate of 0.75% and an expected term of approximately 3 years.





On December 19, 2011, the Company determined a fair value of $29,690 for the conversion option liability for the third installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 107.94%, risk free rate of 0.75 % and an expected term of approximately 3 years.





As of December 31, 2011, the Company determined a fair value of $555,670 for the conversion option liability for its convertible notes using the Black Scholes Option Pricing Model based upon the following: dividend yield of -0-%, volatility of 105.15%, risk free rate of 0.75% and an expected term of approximately 2.75 years.





Based upon the decrease in the fair value of the conversion option liability, the Company recognized a non-cash gain included in other expense of $1,115,403 for the year ended December 31, 2011.





6.           Detachable Warrants





As described in Note 13, 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 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.








41





UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





6.           Detachable Warrants (Continued)





December 31, 2010 – Convertible Note Installments (First Financing)





On December 31, 2010, the Company determined a relative fair value of $45,434 for the detachable warrants for the first 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 94.1%, risk free rate: 2.01% and an expected term of 5 years.





On January 20, 2011, the Company determined a relative fair value of $78,062 for the detachable warrants for the second 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 104.65%, risk free rate: 2.06% and an expected term of 5 years.





On March 9, 2011, the Company determined a relative fair value of $106,132 for the detachable warrants for the third 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 105.22% , risk free rate of 2.16% and an expected term of approximately 5 years.





On June 20, 2011, the Company determined a relative fair value of $29,276 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 105.87%, risk free rate of 1.55% and an expected term of approximately 5 years.





On June 30, 2011, the Company determined a relative fair value of $45,233 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 107.39%, risk free rate of 1.76% and an expected term of approximately 5 years.





October 14, 2011 – Convertible Note Installments (Second Financing)





On October 14, 2011, the Company determined a relative fair value of $157,388 for the detachable warrants for the first 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 108.61%, risk free rate of 1.12% and an expected term of approximately 5 years.





On November 29, 2011, the Company determined a relative fair value of $209,317 for the detachable warrants for the second 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 109.19%, risk free rate of .93% and an expected term of approximately 5 years.





On December 19, 2011, the Company determined a relative fair value of $13,788 for the detachable warrants for the third 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 109.32%, risk free rate of .82% and an expected term of approximately 5 years.











42


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





7.    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 table sets forth the Company's consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.





Total


Level 1


Level 2


Level 3LIABILITIES:Conversion option liability


1,138,989



-



-



1,138,989





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, 2011
$
116,905Initial recognition of debt derivative from issuance of

January 20, 2011, $150,000 convertible note

333,652Initial recognition of debt derivative from issuance of

March 9, 2011, $250,000 convertible note

376,698Initial recognition of debt derivative from issuance of

June 20, 2011, $75,000 convertible note

95,155Initial recognition of debt derivative from issuance of

June 30, 2011, $115,000 convertible note

142,246Initial recognition of debt derivative from issuance of

October 14, 2011, $400,000 convertible note

504,896Initial recognition of debt derivative from issuance of

November 29, 2011, $550,000 convertible note

655,150Initial recognition of debt derivative from issuance of

December 19, 2011, $25,000 convertible note

29,690Decrease in fair value of debt derivative

(1,115,403)Ending balance as of December  31, 2011
$
1,138,989





43


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





7.   Fair Value (Continued)





During the year ended December 31, 2011, the loss on embedded derivatives of $96,280 in the consolidated statement of operations consisted of a gain on the change in fair value of $1,115,403 noted above and a loss of $1,211,683 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.





8.    Oil and Gas Properties





Predecessor





On October 19, 2009, the Company’s founders contributed proved oil and gas properties valued at $68,134.  These properties were received by our Companies’ founders as consideration for their services in brokering the sale of the 75% interest to Alamo Energy, Inc. on behalf of an unrelated third party.  As a result of the consideration, we own a twenty-five percent (25%) working interest in the Lozano lease, which is a currently producing asset with three wells.  The property was valued based upon the Company’s future net revenues in the wells discounted at a present value of 10%.  The Lozano lease covers approximately 110 gross acres and is located in Frio County, Texas.   The Company also owns a one hundred percent interest (100%) working interest in the Marcee lease located in Gonzales County Texas.  The Marcee lease contains one well and was being developed for production as of October 15, 2010.  In conjunction with the contribution, we recorded an asset retirement obligation of $14,705.  See Note 10.





Successor





On October 15, 2010, the Company paid $250,000 to acquire oil, gas and mineral leases on the Lozano and Marcee properties. As a result of the asset purchase, we own a twenty-five percent (25%) working interest in the Lozano lease, which is a currently producing asset with three wells. The Lozano lease covers approximately 110 gross acres and is located in Frio County, Texas.  The Company has a one hundred percent interest (100%) working interest in the Marcee lease located in Gonzales County Texas. The Marcee lease contains one well, is being developed for production and has proved reserves.





As part of the Reverse Merger, the Company acquired an oil and gas lease in Anchorage, Alaska. Production on the properties has not commenced and there can be no assurance that any hydrocarbons will be economically recoverable; however, pre-production activities, such as a multi-phase exploration program of trenching, sampling, geophysical surveys and test drilling have commenced.








44


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010


8.           Oil and Gas Properties





On January 28, 2011, United American Petroleum Corp. entered and closed a purchase and sale agreement with Patriot Minerals, LLC, a Texas limited liability company for a $5,000 payment to a consultant. The Purchase Agreement provides, among other things, that United American Petroleum Corp. shall purchase multiple undivided working interests to certain existing wells and to certain leases located in Texas. In connection with the Purchase Agreement, United American Petroleum Corp. formed a wholly owned subsidiary, United Operating, LLC, a Texas limited liability company, for the purpose of operating the various interests set forth in the Purchase Agreement. The properties purchased from Patriot Minerals by United American Petroleum Corp. are producing at December 31, 2011. The Company is currently undergoing various reserve studies to assess potential production and to continue the development of the wells purchased.





On January 28, 2011, United American Petroleum Corp. entered and closed a purchase, sale and participation agreement with Gabriel Rosser, LP (“Gabriel”). The purchase agreement provides that the Company shall purchase Gabriel's undivided 50.83% working interest and 39.131% revenue interest in the Gabriel 2 SWD Gabriel 3, 4, 5, 9, 15, Rosser #2 and #4 and Koi #1wells in exchange for consideration of $10 and the assumed and paid $84,975 of liabilities, which were owed to certain vendors of Gabriel. The properties purchased from Gabriel Rosser, LP by United American Petroleum Corp. are unevaluated and non-producing as of December 31, 2011, and the Company is currently undergoing various reserve studies to assess potential production and develop the wells purchased.





On November 4, 2011, United American Petroleum Corp. entered into and closed an Agreement with Alamo Energy Corp., a Nevada corporation pursuant to which United American acquired a 75% working interest in an oil and gas lease totaling approximately 110 gross acres located in Frio County, Texas and all wellbores and personal property related thereto for the total purchase price of $160,000. The Company currently has a 100% working interest in the Lozano lease, which is a producing property with three wells.





On November 30, 2011, the Company entered into and closed an agreement with McKenzie Oil Corp. pursuant to which United American acquired a 100% working interest in what is designated as the McKenzie State Well No. 1, located in Pecos County, Texas, in exchange for an aggregate cash sum of $550,000 and 50,000 shares of the Company’s common stock valued at $40,500. The McKenzie well currently has one producing well valued at $80,655. The remaining wells are classified as unproved.





Presented below are unaudited pro-forma consolidated statements of operations for the year ended December 31, 2011, when considering the operating results of the Lozano and McKenzie working interest if acquired on October 15, 2010.





United American Petroleum Corp.

Lozano

Pro Forma

CombinedOil Sales

$
10,213

40,171

$ 50,384Net income (loss)


(95,650
)
17,760

(77,890)Net income (loss) per share basic and diluted






$ 0.00Weighted average number of shares






37,026,923











45


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





8.   Oil and Gas Properties (Continued)





Presented below are unaudited pro-forma consolidated statements of operations for the year ended December 31, 2011, when considering the operating results of the Lozano and McKenzie working interest if acquired on January 1, 2011.





United American Petroleum Corp.

Lozano

McKenzie

Pro Forma

CombinedOil Sales

$
139,692

80,819

67,101

$
287,612Net income (loss)


(1,083,341
)
47,463

(168,277
)

(1,204,155
)Net income (loss) per share basic and diluted

$






$
(0.03
)Weighted average number of shares









43,954,258





9.            Related Party Payable





As part of the Reverse Merger, the Company assumed a related party payable owed to an individual who is a shareholder of the Company.  The related party payable was fully paid in December 2011.





10.          Note Payable – Related Party





As part of the Reverse Merger, the Company assumed two notes payable owed to an individual who is a shareholder of the Company. The notes payable are unsecured and each has a face value of $25,000 with a fixed interest rate of 10% per annum. The notes payable are due on demand and were fully paid in January 2011.





11.          Note Payable





On August 10, 2010, the Company issued a promissory note to an individual in the amount of $250,000. The note matures on August 10, 2011 and is subject to an annual interest of 10%. The note was fully paid in January 2011.





12.         Other Payable





As of December 31, 2011, United Operating, LLC received cash in the amount of $431,151 to perform work on behalf of various working interest owners including repairs, drilling and production related costs.





13.         Convertible Note Payable





Credit Facility – December 31, 2010





On December 31, 2010, the Company entered into a credit facility with one investor pursuant to which the investor agreed to lend up to $2,250,000 to us 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 credit facility 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. The investor shall have sole discretion in determining whether the proposed use of proceeds meets those requirements. The notes mature on December 31, 2013, or upon default, whichever is earlier and bear interest at an annual rate of 10%.





46


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





13.    Convertible Note Payable (Continued)





The first installment of $620,000 was delivered on December 31, 2010 and we issued 620,000 warrants in connection with the first installment.





The second installment of $150,000 was delivered to us on January 20, 2011 and we issued 150,000 warrants in connections with the second installment.





The third installment of $250,000 was delivered to us on March 9, 2011 and we issued 250,000 warrants in connection with the third installment.





The fourth installment of $75,000 was delivered to us on June 20, 2011 and we issued 75,000 warrants in connection with the fourth installment.





The fifth installment of $115,000 was delivered to us on June 30, 2011 and we issued 115,000 warrants in connection with the fifth installment.





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 first installment of $400,000 was delivered on October 14, 2011 and we issued 400,000 warrants in connection with the first installment.





The second installment of $550,000 was delivered on November 29, 2011 and we issued 550,000 warrants in connection with the second installment.





The third installment of $25,000 was delivered on December 19, 2011 and we issued 25,000 warrants in connection with the third installment.





Using a pro rata contribution, the Company allocated the proceeds of the January 20, 2011, March 9, 2011, June 20, 2011, June 30, 2011, October 14, 2011, November 29, 2011 and December 19, 2011 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:





January 20, 2011

Note


March 9, 2011

Note


June 20, 2011

Note


June 30, 2011

Note


October 14, 2011

Note


November 29, 2011

Note


December 19, 2011

Note


TotalTotal Proceeds

$
150,000


$
250,000


$
75,000


$
115,000


$
400,000


$
550,000


$
25,000


$
1,565,000Allocated to:Conversion Option Liability


333,652



376,698



95,155



142,246



504,896



665,150



29,690



2,254,392Relative Fair Value of Warrants


78,062



106,132



29,276



45,233



157,388



209,317



13,788



639,196411,714



482,830



124,431



187,479



662,284



864,467



43,478



2,1,37,487Debt Discount


(150,000
)


(250,000
)


(75,000
)


(115,000
)


(400,000
)


(550,000
)


(25,000
)


(1,565,000
)Loss on debt derivative

$
261,714


$
232,830


$
49,431


$
72,479


$
262,284


$
314,467


$
18,478


$
1,211,683





During the year ended December 31, 2011, the Company amortized $168,935 of the debt discounts resulting from the transactions above to interest expense.





47


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





14.          Asset Retirement Obligation





The Company accounts for its future asset retirement obligations by recording the fair value of the liability during the period in which it was incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset.  The Company depletes the amount added to proved oil and gas property costs and gathering assets using the units-of-production method.  The Company’s asset retirement obligation consists of costs related to the plugging of wells, removal of facilities and equipment and site restoration on its oil and gas properties and gathering assets. The asset retirement liability is allocated to operating expense using a systematic and rational method. The information below reconciles the value of the asset retirement obligation for the periods presented.





Successor





Year ended

December 31,

2011


October 16, 2010 through

December 31, 2010Beginning of the period

$
15,465


$
-Liabilities incurred


37,955



15,258Accretion expense


2,592



207Balance at end of the period

$
56,012


$
15,465





15.          Equity





Predecessor – Members’ Equity





From the period from January 1, 2010 through October 15, 2010, the Members’ made withdrawals in the amount of $42,500.





Successor





On August 10, 2010 the Company issued 750,000 shares of common stock to the Company’s founder at a value of $500 ($.001 per share) for services rendered, which included preparing the articles of incorporation and identifying strategic business partners.





On October 15, 2010, the Company issued 7,500,000 shares to retain the services of a Chief Executive Officer at a value of $7,500 ($.001 per share).  The Company has expensed these shares in full for services performed for the acquisitions of the oil and gas properties.





On December 27, 2010 the Company repurchased and cancelled 750,000 shares of common stock from a former director for $40,000 which is included in accounts payable and accrued liabilities in the balance sheet.





On December 31, 2010, the Company cancelled 2,550,000 shares of common stock received from a director of the Company for $0.








48


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





15.         Equity (Continued)





On November 29, 2011, the Company issued 50,000 shares of common stock as consideration for the McKenzie working interest for $40,500 (0.81 per share).





As of December 31, 2011, the Company has 44,000,000 shares of common stock issued and outstanding.





16.          Warrants





Warrant Activity





As described in Note 9, the Company issued a convertible note with detachable warrants.  A summary of warrant activity for the period from December 31, 2010 through December 31, 2011 is presented below:





Number of

Warrants


Weighted

Average

Exercise

Price

Weighted

Average

Remaining

Contract TermOutstanding December 31, 2010


620,000


$
1.00

5 yearsIssued


1,565,000


$
1.00

5 yearsExercised


-



-

-Outstanding December 31, 2011


2,185,000


$
1.00

4.45 yearsExercisable, December 31, 2011


2,185,000


$
1.00

4.45 years





Shares Reserved for Future Issuance





The Company has reserved shares for future issuance upon conversion of convertible notes payable and warrants as follows:





Conversion of notes payable
4,370,000Warrants
2,185,000Reserved shares at December 31, 2011
6,555,000





49


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010








17.   Income taxes





As of December 31, 2011, our deferred tax asset amounting to $335,813 primarily related to our net operating losses of $1,099,282.  A 100% valuation allowance has been established using an effective tax rate of 35% due to the uncertainty of the utilization of the operating losses in future periods.  As a result, the deferred tax asset was reduced to zero and no income tax benefit was recorded. The net operating loss carryforward will begin to expire in 2031.





Section 382 of the Internal Code allows post-change corporations to use pre-change net operating losses, but limit the amount of losses that may be used annually to a percentage of the entity value of the corporation at the date of the ownership change.  The applicable percentage is the federal long-term tax-exempt rate for the month during which the change in ownership occurs.





18.          Supplemental Oil and Gas Reserve Information (Unaudited)





Company Reserve Estimates.





Our proved reserve information as of December 31, 2011 was estimated by Nova Resource, Inc. (“Nova”) and Mire and Associates, Inc. (“Mire”), independent petroleum engineers.  In accordance with SEC guidelines, Nova’s and Mire’s estimates of future net revenues from our properties, and the PV-10 and standardized measure thereof, were determined to be economically producible under existing economic conditions, which requires the use of the 12-month average price for each product, calculated as the unweighted arithmetic average of the first-day-of-the-month price for the period January 1, 2011 through December 31, 2011, except where such guidelines permit alternate treatment, including the use of fixed and determinable contractual price escalations.





The technical persons at Nova and Mire are responsible for preparing the reserves estimates presented herein and meets the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. Michael Carey, our officer and director, acted as the liaison with the technical persons at Nova and Mire.





Reserve Technologies.Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. If deterministic methods are used, reasonable certainty means a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate. To achieve reasonable certainty, Nova and Mire employed technologies that have been demonstrated to yield results with consistency and repeatability. The technologies and economic data used in the estimation of our proved reserves include, but are not limited to, well logs, geologic maps and available down well and production data, seismic data, well test data.








50


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





18.          Supplemental Oil and Gas Reserve Information (Continued)








Oil and Gas Reserve Information.The following reserve quantities and future net cash flow information for our proved reserves located in the State of Texas in the United States have been estimated as of December 31, 2011.  The determination of oil and gas reserves is based on estimates, which are highly complex and interpretive. The estimates are subject to continuing change as additional information becomes available.





Reserve Category

Oil (BBLS)

Natural Gas (MCF)

Present Worth at 10%ProvedDeveloped:United States - Texas


2,274

-

$
63,599Undeveloped:United States - Texas


1,806

-

$
16,089Total Proved – December 31, 2010


4,080

-

$
79,688-Developed:United States - Texas


29,802

46,536

$
948,445Undeveloped:United States - Texas


8,528

2,870

$
182,605Total Proved – December 31, 2011


38,330

49,406

$
1,131,050





Reserved Quantity

Oil (BBLS)


Natural Gas (MCF)Balance, August 10, 2010


-



-Purchases


4,204



-Production


(124
)


-Balance, December 31, 2010


4,080



-Purchases


35,560



49,948Production


(1,310
)


(542)Balance, December 31, 2011


38,330



49,406








51


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





18.          Supplemental Oil and Gas Reserve Information (Continued)





During the period from January 1, 2011 through December 31, 2011, the Company acquired an estimated 11,398 bbls of proved undeveloped net oil and gas reserves in place in connection with the Company’s purchase of the Lozano, Marcee and Patriot leases in Texas.  These properties are located in 7 (seven) fields in the following 6 (six) Texas counties: Erath, Gonzalez, Medina, Navarro, Shackleford and Wilbarger None of the proved undeveloped oil reserves were converted during the period ended December 31, 2011 as the Company is reviewing the production performance and assessment of the remaining recoverable resources.  In addition, there were no proved undeveloped reserves over five (5) years.





The standardized measure of discounted future net cash flows is provided using the 12-month unweighted arithmetic average and were held constant throughout the life of the properties. The oil price used as of December 31, 2011 was $96.19 per bbl of oil and $4.12 per MMbtu of natural gas. Future production costs are based on year-end costs and include severance and ad valorem taxes. Each property that is leased by us is also charged with field-level overhead in the reserve calculation. The present value of future cash inflows is based on a 10% discount rate.





Standardized Measure of Future Net Cash Flows:





December 31, 2011


December 31, 2010Future cash flows

$
3,278,186


$
231,430Future production and development costs


(1,377,560
)


(90,258
)Future income taxes


-



-Future net cash flows before discount


1,900,626



141,17210% discount to percent value


(769,576)



(61,484
)Standardized measure of discounted future net cash flows

$
1,131,050


$
79,688





Changes in the Standard Measure of Discounted Cash Flows:





December 31, 2011


December 31, 2010Standardized measure of discounted future net cash flows beginning of period

$
79,688



-Purchases of reserves in place


1,064,368Extension and discoveries, net of future production and development costs


-



89,901Sales of oil and gas produced, net of production costs


(31,497
)


(10,213
)Accretion of discount


7,969



-Revisions of previous quantity estimates


(68,859
)


-Net change in prices and production costs


26,611



-Net change in income taxes


-



-Changes in timing and other


52,770



-Standardized measure of discounted future net cash flows end of period

$
1,131,050


$
79,688





The information required by Items 1204 to 1208 of Regulation S-K are provided as follows:





52


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





18.           Supplemental Oil and Gas Reserve Information (Continued)





Production.





For the year ended December 31, 2010, we only had production from our interest in the Lozano lease located in Frio County, Texas.  The Company produced approximately 124 barrels on a net basis.





For the year ended December 31, 2011, we had production from our Lozano, Marcee, McKinney and Patriot leases located in six Texas counties: Erath, Gonzalez, Medina, Navarro, Shackleford and Wilbarger.  The Company produced approximately 1,310 barrels and 542 mcf on a net basis.





Drilling Activity.During the year ended December 31, 2011, we conducted drilling activity in Texas on a new Gabriel #16 well to test an anticipated payzone in the Serpentine formation.  We anticipate that the new well will require a second completion attempt in order to achieve potential production on the well.





Delivery Commitments.We are not obligated to provide a fixed and determinable quantity of oil or gas in the near future under existing contracts or agreements in Texas.





Gross and Net Productive Wells:





December 31, 2011Oil

GasGross

Net

Gross

NetUnited States -Texas
88

11

2

.588

11

2

.5





Gross and Net Developed Acreage:





December 31, 2011Oil

GasGross

Net

Gross

NetUnited States -Texas
1,553

480

325

1491,553

480

325

149











53


UNITED AMERICAN PETROLEUM CORP.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010





18.           Supplemental Oil and Gas Reserve Information (Continued)





Gross and Net Undeveloped Acreage:





December 31, 2011Oil

GasGross

Net

Gross

NetUnited States -Texas
1,572

344

557

291,572

344

557

29





Gross and Net Productive Wells:





December 31, 2010Oil

GasGross

Net

Gross

NetUnited States -Texas
3

2.25

-

-3

2.25

-

-





Gross and Net Developed Acreage:





December 31, 2010Oil

GasGross

Net

Gross

NetUnited States -Texas
110

83

-

-110

83

-

-





Gross and Net Undeveloped Acreage:





August 10, 2010 (Inception) through December 31, 2010Oil

GasGross

Net

Gross

NetUnited States -Texas
453

91

-

-453

91

-

-





19.          Subsequent Events.





On April 13, 2012, the Company received a notice of conversion from an investor to convert their convertible note in the amount of $620,000 dated December 31, 2010 for 1,240,000 shares (.50 per share).








54


Item 9.  Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.





There have been no changes in or disagreements with our accountants since our formation required to be disclosed pursuant to Item 304 of Regulation S-K, except for the following:





On August 4, 2010, we dismissed Kelly & Company (“Kelly”) as our principal accountant effective on such date. The reports of Kelly on our financial statements for fiscal years 2009 and 2008 did not contain an adverse opinion or a disclaimer of opinion, were not qualified or modified as to uncertainty, audit scope, or accounting principles, with the exception of a qualification with respect to uncertainty as to our ability to continue as a going concern. We engaged Malone Bailey LLP (“Malone”) as our new principal accountant effective as of August 4, 2010. The decision to change accountants was recommended and approved by our Board of Directors.





During fiscal years 2009 and 2008, and the subsequent interim period through August 4, 2010, the date of dismissal, there were no disagreements with Kelly on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreement(s), if not resolved to the satisfaction of Kelly, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its report, nor were there any reportable events as defined in Item 304(a)(1)(iv) of Regulation S-K.





We engaged Malone as our new independent accountant as of August 4, 2010.  During fiscal years 2009 and 2008, and the subsequent interim period through August 4, 2010, we nor anyone on our behalf engaged Malone regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or any matter that was either the subject of a “disagreement” or a “reportable event,” both as such terms are defined in Item 304 of Regulation S-K.





Item 9A. 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.





Deficiencies in Our Control Environment.





Our control environment did not sufficiently promote effective internal control over financial reporting throughout the organization. This material weakness exists because of the aggregate effect of multiple deficiencies in internal control which affect our control environment, including: a) the lack of an effective risk assessment process for the identification of fraud risks; b) the lack of an internal audit function or other effective mechanism for ongoing monitoring of the effectiveness of internal controls; c) deficiencies in our accounting system and controls; d) and insufficient documentation and communication of our accounting policies and procedures as of December 31, 2011.





55


Annual report on internal control over financial reporting.





Mr. Michael Carey, our Principal Executive and Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:





·
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;·
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.





Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





Our Principal Executive and Financial Officer assessed the effectiveness of our internal control over financial reporting as of December 31, 2011.   In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework.





Based on our assessment, our Principal Executive and Financial Officer believes that, as of December 31, 2011, our internal control over financial reporting is not effective based on those criteria, due to the following:





●
Deficiencies in Segregation of Duties.  Lack of proper segregation of functions, duties and responsibilities with respect to our cash and control over the disbursements related thereto due to our very limited staff, including our accounting personnel.●
Deficiencies in Our Control Environment. Our control environment did not sufficiently promote effective internal control over financial reporting throughout the organization. This material weakness exists because of the aggregate effect of multiple deficiencies in internal control which affect our control environment, including: a) the lack of an effective risk assessment process for the identification of fraud risks; b) the lack of an internal audit function or other effective mechanism for ongoing monitoring of the effectiveness of internal controls; c) deficiencies in our accounting system and controls; d) and insufficient documentation and communication of our accounting policies and procedures as of December 31, 2011.●
Deficiencies in the staffing of our financial accounting department. The number of qualified accounting personnel with experience in public company SEC reporting and GAAP is limited. This weakness does not enable us to maintain adequate controls over our financial accounting and reporting processes regarding the accounting for non-routine and non-systematic transactions. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, by this shortage of qualified resources.





In light of this conclusion and as part of the preparation of this report, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (1) this report does not contain any untrue statement of a material fact or omit to state a material face necessary to make the statements made not misleading with respect to the period covered by this report, and (2) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows for the years and periods then ended.





This report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this report.





Changes in Internal Control over Financial Reporting





There were no significant changes in our internal control over financial reporting during the fourth quarter of the year ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





Item 9B. Other Information.





None.








56


PART III





Item 10.  Directors, Executive Officers and Corporate Governance.





Executive Officers and Directors.Each of our officers is elected by the board of directors for a term of one year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. Our directors and principal executive officers are as specified on the following table:





Name
Age
PositionMichael Carey
31
Chief Executive Officer, Chief Financial Officer, President, Treasurer, DirectorRyan Hudson
35
Chief Operating Officer, Secretary, Director





Michael Carey.  Michael Carey was appointed as our Chief Executive Officer, President and a Director in December 2010 and was appointed as our Chief Financial Officer and Treasurer in February 2012.  From October 15, 2010 to December 31, 2010, the date the Merger Transaction closed, Mr. Carey was the Chief Executive Officer of United.  Prior to joining United, Mr. Carey previously worked for Trius Operations, LLC, and 4 Phoenix Oil & Gas LLC, doing business as Phoenix Oil & Gas LLC. From 2002 to 2004, Mr. Carey served as senior vice president at Richman Oil. Mr. Carey also previously served as junior vice president for CKG Energy.  Mr. Carey is not an officer or director of any other reporting company.





Ryan Hudson.Ryan Hudson was appointed as our Chief Operating Officer and Secretary in December 2010.  Mr. Hudson was appointed as a Director in March 2011.  From October 15, 2010 to December 31, 2010, the date the Merger Transaction closed, Mr. Hudson was the Chief Operating Officer of United.  Prior to joining United, Mr. Hudson worked for Trius Operations, LLC, and 4 Phoenix Oil & Gas, doing business as Phoenix Oil & Gas LLC. From 2001 to 2004, Mr. Hudson served as senior vice president at Richman Oil.  Mr. Hudson is also a certified firefighter and received his firefighter certification from the Texas Commission on Fire Protection. Mr. Hudson is not an officer or director of any other reporting company.





There have been no family relationships among our directors or executive officers. For the past ten years, there have been no orders, judgments, or decrees of any governmental agency or administrator, or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining any of our officers or directors from engaging in or continuing any conduct, practice or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security, or any aspect of the securities business or of theft or of any felony.





Corporate Governance





Compensation Committee. The board of directors has no compensation committee.





Nominating Committee.Our entire board of directors participates in consideration of director nominees. The board of directors will consider candidates who have experience as a board member or senior officer of a company or who are generally recognized in a relevant field as a well-regarded practitioner, faculty member or senior government officer.  The board of directors will also evaluate whether the candidates' skills and experience are complementary to the existing Board's skills and experience as well as the board of directors' need for operational, management, financial, international, technological or other expertise. The board of directors will interview candidates that meet the criteria and then select nominees that board of directors believes best suit our needs.





The board of directors will consider qualified candidates suggested by stockholders for director nominations. Stockholders can suggest qualified candidates for director nominations by writing to our Corporate Secretary, at 9600 Great Hills Trail, Suite 150W, Austin, TX 78759. Submissions that are received that meet the criteria described above will be forwarded to the board of directors for further review and consideration. The board of directors will not evaluate candidates proposed by stockholders any differently than other candidates. There have been no material changes to the procedures by which our stockholders may recommend nominees to the Board of Directors.


Audit Committee and Audit Committee Financial Expert.Presently, the board of directors acts as the audit committee. The board of directors does not have an audit committee financial expert. The board of directors has not yet recruited an audit committee financial expert to join the board of directors because we have only recently commenced a significant level of financial operations.


57


Code of Ethics.We do not currently have a Code of Ethics that applies to all employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.





Director Independence.Our directors are not deemed independent as they also hold positions as officers.





Item 11. Executive Compensation.





Summary Compensation Table.The table set forth below summarizes the annual and long-term compensation for services in all capacities to us payable to our principal executive officers for the fiscal years ending December 31, 2011 and 2010.





SUMMARY COMPENSATION TABLE


Name and Principal Position
Year Ended
Salary

$
Bonus

$
Stock Awards

$
Option Awards

$
Non-Equity Incentive Plan Compensation

$
Nonqualified Deferred Compensation Earnings $
All Other Compensation

$
Total

$Michael Carey, Chief Executive Officer, President
2011
77,704
None
None
None
None
None
None
77,7042010
None
None
None
None
None
None
None
NoneRyan Hudson, Chief Operating Officer, Secretary
2011
76,954
None
None
None
None
None
None
76,9542010
None
None
None
None
None
None
None
NoneChristian Negri, Former Treasurer*
2011
59,538
None
None
None
None
None
None
59,5382010
9,500
None
None
None
None
None
None
9,500


*On December 31, 2010, Christian Negri resigned his positions as President and Secretary.  On February 28, 2012, Christian Negri resigned his positions as Treasurer and a Director.





Employment Contracts and Termination of Employment.On December 31, 2010, pursuant to the terms of the Merger Agreement, we assumed United’s employment agreement with Mr. Carey, dated October 15, 2010 (“Carey Employment Agreement”).  Under the terms of the Carey Employment Agreement, Mr. Carey will receive a salary of $6,000 per month with incremental raises on a quarterly basis.   Mr. Carey is not expected to receive any compensation from us for his service as a director.





On December 31, 2010, pursuant to the terms of the Merger Agreement, we assumed United’s employment agreement with Mr. Hudson, dated October 15, 2010 (“Hudson Employment Agreement”).  Under the terms of the Hudson Employment Agreement, Mr. Hudson will receive a salary of $6,000 per month with incremental raises on a quarterly basis.





Any compensation received by our officers, directors, and management personnel will be determined from time to time by our Board of Directors.  As of December 31, 2011, our directors are not paid any compensation for their service as directors. They are nevertheless reimbursed for their reasonable expenses incurred upon presentation of the appropriate documentary evidence.





Outstanding Equity Awards.As of December 31, 2011, the following named executive officers had the following unexercised options, stock that has not vested, and equity incentive plan awards:





Option  Awards
Stock AwardsName
Number of Securities Underlying Unexercised Options

# Exercisable
# Un-exercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options
Option Exercise Price
Option Expiration Date
Number of Shares or Units of Stock Not Vested
Market Value of Shares or Units  Not Vested
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights Not Nested
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights Not VestedMichael Carey

Chief Executive Officer, President,  Director
0
0
0
0
0
0
0
0
0Ryan Hudson

Chief Operating Officer, Secretary,

Director
0
0
0
0
0
0
0
0
0Christian Negri

Former Treasurer, Director*
0
0
0
0
0
0
0
0
0


* On February 28, 2012, Christian Negri resigned his positions as Treasurer and a Director.





No Equity Compensation Plan.We do not have any securities authorized for issuance under any equity compensation plan.  We also do not have an equity compensation plan and do not plan to implement such a plan.





Stock Options/SAR Grants. No grants of stock options or stock appreciation rights were made during the fiscal year ended December 31, 2011.





Long-Term Incentive Plans. There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.





Director Compensation.Our directors received the following compensation for their service as directors during the fiscal year ended December 31, 2011:





Name
Fees Earned or Paid in Cash
Stock Awards



$
Option Awards



$
Non-Equity Incentive Plan Compensation

$
Non-Qualified Deferred Compensation Earnings

$
All Other Compensation



$
Total



$Michael Carey
0
0
0
0
0
0
0Ryan Hudson
0
0
0
0
0
0
0Christian Negri*
0
0
0
0
0
0
0


*   On February 28, 2012, Christian Negri resigned his positions as Treasurer and a Director.





58


Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.





The following table sets forth certain information regarding the beneficial ownership of our common stock as of October 19, 2012 , by (i) each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, (ii) each of our directors, (iii) our executive officers, and (iv) all of our   directors and executive officers as a group.





Title of Class
Name and Address

of Beneficial Owner
Amount and Nature

of Beneficial Owner
Percent of Class(1)Common Stock
Michael Carey

9600 Great Hills Trail, Suite 150W

Austin, TX 78759
7,500,000 shares (2)

Chief Executive Officer,

President and director
14.99%Common Stock
Ryan Hudson

9600 Great Hills Trail, Suite 150W

Austin, TX 78759
7,500,000 shares (3)

Chief Operating Officer, Secretary

and director
14.99%Common Stock
Mighty Falcon Ltd. (4)

Room 1004, Harvest Building

29-37 Wing Kut Street

Central K3, Hong Kong
6,950,000 shares

5% shareholder
13.89%Common Stock
VP Bank (Switzerland) Ltd. (5)

Bahnofstrasse 3

CH-8022

Zurich, Switzerland
2,720,481 shares (5)

5% shareholder
5.44%Common Stock
Yaksha Industries Inc. (6)

Hunkins Waterfront Plaza

Main Street

PO Box 556

Charlestown, Nevis, West Indies
3,314,062 shares (6)

5% shareholder
6.62 %Common Stock
All directors and named executive officers

as a group
15,000,000 shares
29.98%




(1)
Percentage of beneficial ownership of our common stock is based on 50,034,543 shares of common stock outstanding as of the date of the table.(2)
The shares were issued to Michael Carey as consideration for our acquisition of United American Petroleum Corp. as previously disclosed in our Current Report on Form 8-K filed with the Commission on January 5, 2011 and the Schedule 13D filed with the Commission on January 10, 2011.(3)
The shares were issued to Ryan Hudson as consideration for our acquisition of United American Petroleum Corp. as previously disclosed in our Current Report on Form 8-K filed with the Commission on January 5, 2011 and the Schedule 13D filed with the Commission on January 10, 2011.(4)
Bill Cheung holds voting and dispositive power over the shares of Mighty Falcon Ltd.  Mighty Falcon Ltd. purchased its shares of our common stock in a private transaction with a former officer of the Company as previously disclosed in the Schedule 13D filed with the Commission on February 15, 2011.(5)
The information for VP Bank (Switzerland) Ltd. is based on the list of record holders maintained by our stock transfer agent.  Such shareholder has not filed a Schedule 13D with the SEC disclosing it has greater than five percent ownership. The shares were issued to VP Bank (Switzerland) Ltd. pursuant to the conversion of the outstanding principal amount of $1,210,000 due on its notes dated December 31, 2010, January 1, 2011, March 9, 2011, June 20, 2011 and June 30, 2011 and all accrued interest due on the notes, as previously disclosed in our Current Reports on Form 8-K filed with the Commission on April 19, 2012, June 6, 2012 and June 13, 2012.  Does not include 1,210,000 shares of common stock issuable upon exercise of warrants issued to VP Bank (Switzerland) Ltd. in connection with the aforementioned notes because the warrants are not exercisable within 60 days of the date of the table.(6)
The information for Yaksha Industries Inc. is based on the list of record holders maintained by our stock transfer agent. Such shareholder has not filed a Schedule 13D with the SEC disclosing it has greater than five percent ownership. The shares were issued to Yaksha Industries Inc. pursuant to the conversion of the outstanding principal amount of $1,590,000 due on its notes dated October 14, 2011, November 29, 2011, December 19, 2011, February 10, 2012, March 30, 2012, and June 4, 2012 and all accrued interest due on the notes, as previously disclosed in our Current Report on Form 8-K filed with the Commission on June 13, 2012.  Does not include 1,590,000 shares of common stock issuable upon exercise of warrants issued to Yaksha Industries Inc. in connection with the aforementioned notes because the warrants are not exercisable within 60 days of the date of the table.




Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  In accordance with Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.




59


Changes in Control.Ourmanagement is not aware of any arrangements which may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.





Item 13.  Certain Relationships and Related Transactions, and Director Independence.





Related Party Transactions.





As part of the Merger Transaction, we also assumed two notes payable owed to an individual who is a shareholder.  The notes payable are unsecured and each has a face value of $25,000 with a fixed interest rate of 10.00% per annum.  The notes payable are due on demand and there is a total of $11,130 of accrued and unpaid interest owed as of December 31, 2010. Both of these notes were repaid in full on January 7, 2011.





As of December 31, 2011, we had a related party receivable in the amount of $25,718 due from two companies with working interest amounts payable.  Our directors are also officers in these two companies.





Michael Carey, our Chief Executive Officer and President, and Ryan Hudson, our Chief Operating Officer and Secretary,  are members of 4 Phoenix Oil and Gas, LLC (“Phoenix”), which pays for fuel, meals, and other onsite location expenses, and field equipment to facilitate field activities. The Company reimburses Phoenix for such expenses and services on an ongoing basis.





There have been no other related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.





Director Independence.We do not have any independent directors.





Item 14. Principal Accountant Fees and Services.





Audit Fees.The aggregate fees billed in the fiscal year ended December 31, 2011 (including the Predecessor period ended October 15, 2010) and 2010 for professional services rendered by the principal accountant for the audit of our annual financial statements and quarterly review of the financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was $40,000and $10,000 respectively.





Audit-Related Fees. For the fiscal years ended December 31, 2011 (including the Predecessor period ended October 15, 2010) and 2010, our principal accountants did not render any services reasonably related to the performance of the audit or review of our financial statements.  For the fiscal year ended December 31, 2011 and 2010, respectively, we were billed a total of $0 and $4,000 by a separate accountant for consulting services in preparation for the annual audit and quarterly reviews of the financial statements.





Tax Fees.For the fiscal years ended December 31, 2011 and 2010, our principal accountants did not renderany services for tax compliance, tax advice, and tax planning work.





All Other Fees.None.





Pre-Approval Policies and Procedures.Prior to engaging our accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed. All of the services described above were approved by the board of directors in accordance with its procedures.





60


PART IV





Item 15.  Exhibits, Financial Statement Schedules.





(a) Financial Statements.





Included in Item 8.





(b) Exhibits required by Item 601.





Exhibit                   Description of Exhibit





2.1
Agreement and Plan of Exchange by and between Northern Future Energy Corp. and NFE Acquisition Corp., dated December 16, 2009 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed February 7, 2008).


2.2
Asset Purchase Agreement by and between Enforce Global Solutions, LLC and the Company, dated as of December 29, 2009 (incorporated by reference to Exhibit 2.5 of the Company's Annual Report on Form 10-K, filed May 14, 2010).


2.3
Membership Interest Purchase Agreement by and between the Company and John Britchford-Steel, dated as of December 31, 2009 (incorporated by reference to Exhibit 2.6 of the Company's Annual Report on Form 10-K, filed May 14, 2010.2.4
Agreement and Plan of Merger, by and among the Company, United American Petroleum Corp. and United PC Acquisition Corp., dated December 31, 2010. (1)2.5
Agreement and Plan of Merger and Reorganization dated December 31, 2010, by and between the Company and United American Petroleum Corp. (1)


3.1
Amended and Restated Articles of Incorporation, as filed with the Secretary of State of the State of Nevada, effective January 31, 2008 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed February 7, 2008).


3.2
Bylaws (incorporated by reference to Exhibit 3(ii) of the Company’s Registration Statement on Form SB-2, filed on April 15, 2005).


3.3
Certificate of Designation of Series A Convertible Preferred Stock, as filed with the Secretary of State of the State of Nevada, effective January 31, 2008 (incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form 8-K, filed February 7, 2008).


3.4
Articles of Exchange, as filed with the Secretary of State of the State of Nevada, effective January 31, 2008 (incorporated by reference to Exhibit 3.4 of the Company’s Current Report on Form 8-K, filed February 7, 2008).


3.5
Articles of Merger, as filed with the Secretary of State of the State of Nevada, effective December 16, 2009.


3.6
Certificate of Correction to Articles of Merger, as filed with the Secretary of State of the State of Nevada, effective January 29, 2010 (incorporated by reference to Exhibit 3.6 of the Company’s Annual Report on Form 10-K, as amended, filed January 21, 2011).3.7
Articles of Merger between United PC Acquisition Corp. and United American Petroleum Corp.(1)3.8
Articles of Merger between United American Petroleum Corp. and Forgehouse, Inc. (1)4.1
Form of Registration Rights Agreement. (1)


4.2
Form of Registration Rights Agreement.  (3)


10.1
2008 Incentive Plan (incorporated by reference to Exhibit B of the Company’s definitive Information Statement on Schedule 14-C, filed January 2, 2008).10.2
Form of Note and Warrant Purchase Agreement. (1)10.3
Form of Senior Secured Convertible Promissory Note. (1)10.4
Form of Warrant. (1)10.5
Form of Security Agreement.  (1)10.6
Stock Cancellation Agreement by and among the Company and Christian Negri, dated as of December 31, 2010. (1)10.7
Stock Vesting Agreement by and among the Company and Michael Carey, dated as of December 31, 2010. (1)10.8
Stock Vesting Agreement by and among the Company and Ryan Hudson, dated as of December 31, 2010. (1)10.9
Form of Lock-Up Agreement. (1)10.10
Employment Agreement of Michael Carey. (1)10.11
Employment Agreement of Ryan Hudson. (1)10.12
Purchase Agreement by and between the Registrant and Patriot Minerals, LLC, dated January 28, 2011. (2)10.13
Sale and Participation Agreements by and between the Registrant and Gabriel Rosser, LP, dated January 28, 2011. (2)


10.14
Form of Note and Warrant Purchase Agreement.  (3)10.15
Form of Convertible Promissory Note.  (3)10.16
Form of Warrant.  (3)10.17
Purchase and Sale Agreement by and between the Registrant and Alamo Energy Corp. dated October 28, 2011.  (4)10.18
Purchase and Sale Agreement by and between the Registrant and McKenzie Corp. dated November 30, 2011.  (5)


21
List of Subsidiaries (6)23.1
Consent of Nova Resources, Inc. (8)23.2
Consent of Nova Resources, Inc. (8)


23.3
Consent of Mire and Associates, Inc. (8)31.1
Certification of Principal Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  (8)


32.1
Certification of Principal Executive and Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  (8)99.1
Certified SEC Reserves Report and Economic Evaluation of McKenzie State Lease located in Pecos County, Texas. (8)99.2
Certified SEC Reserves Analysis and Valuation Study and Report of Lozano Lease located in Frio County, Texas. (8)99.3
Reserves Report of Properties located in Erath, Gonzalez, Medina, Navarro, Shackleford and Wilbarger Counties, Texas. (8)101.INS
XBRL Instance Document (7)101.SCH
XBRL Taxonomy Schema (7)101.CAL
XBRL Taxonomy Calculation Linkbase (7)101.DEF
XBRL Taxonomy Definition Linkbase (7)101.LAB
XBRL Taxonomy Label Linkbase (7)101.PRE
XBRL Taxonomy Presentation Linkbase (7)





(1)  Incorporated by reference to the Registrant's Current Report on Form 8-K filed on January 5, 2011.


(2)  Incorporated by reference to the Registrant's Current Report on Form 8-K filed on February 3, 2011.


(3)  Incorporated by reference to the Registrant's Current Report on Form 8-K filed on October 18, 2011.


(4)  Incorporated by reference to the Registrant's Current Report on Form 8-K filed on November 8, 2011.


(5)  Incorporated by reference to the Registrant's Current Report on Form 8-K filed on December 5, 2011.


(6)  Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed on April 16, 2012.


(7)  Incorporated by reference to the Registrant’s Amendment No. 1 to the Annual Report on Form 10-K/A filed on April 17, 2012


(8)  Filed herewith.





61





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 corporationOctober 19, 2012
By:
/s/ Michael CareyMichael CareyIts:
Chief Executive Officer, Chief Financial Officer, President, Treasurer and a director(Principal Executive, Financial and Accounting Officer)











In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.








By:
/s/ Michael Carey

October 19, 2012Michael CareyIts:
Chief Executive Officer, Chief Financial Officer, President, Treasurer and a director











By:
/s/ Ryan Hudson

October 19, 2012Ryan HudsonIts:
Chief Operating Officer, Secretary and a director

















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