----

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

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

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| Large accelerated filer  ̈ | Accelerated filer  ̈    |
|--------------------------------|-----------------------------|
|                           |                        |
| Non-accelerated filer  ̈   | Smaller reporting company x |

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| A Note About Forward Looking Statements                                                                             | 1        |
|---------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                |     |
| PART I - FINANCIAL INFORMATION                                                                                      |     |
|                                                                                                                |     |
| Item 1 - Consolidated Financial Statements (Unaudited)                                                              | 2   |
|                                                                                                                |     |
| Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31, 2010                                  | F-1      |
|                                                                                                                |     |
| Consolidated Statements of Operations For Each of the Three-Month Periods Ended March 31, 2011 and 2010 (Unaudited) | F-2      |
|                                                                                                                |     |
| Consolidated Statements of Cash Flows For Each of the Three-Month Periods Ended March 31, 2011 and 2010 (Unaudited) | F-3      |
|                                                                                                                |     |
| Notes to the Consolidated Financial Statements (Unaudited)                                                          | F-5      |
|                                                                                                                |     |
| Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations                | 4        |
|                                                                                                                |     |
| Item 4 - Controls and Procedures                                                                                    | 7        |
|                                                                                                                |     |
| PART II - OTHER INFORMATION                                                                                         |     |
|                                                                                                                |     |
| Item 6 - Exhibits                                                                                                   | 8        |
|                                                                                                                |     |
| Signatures                                                                                                          | 10       |

----

----

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| Financial Statements of Eternal Energy Corp.:                                                               |   |
|-------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                        |   |
| Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31, 2010                          | F-1    |
|                                                                                                        |   |
| Consolidated Statements of Operations for the Three-Month Periods Ended March 31, 2011 and 2010 (Unaudited) | F-2    |
|                                                                                                        |   |
| Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 2011 and 2010 (Unaudited)     | F-3    |
|                                                                                                        |   |
| Notes to the Consolidated Financial Statements (Unaudited)                                                  | F-5    |

----

|                                                                                                                          |   | March 31,   |       |   |              |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|-------------|------------|--------|-------------------|--------|
|                                                                                                                          |   | 2011        |       |   | December 31, |   |
|                                                                                                                          |   | (Unaudited) |       |   | 2010              |   |
| Current assets:                                                                                                               |   |        |       |   |              |   |
| Cash                                                                                                                          |   | $           | 2,292,210  |   |              | $      | 2,400,362 |   |
| Trade receivables                                                                                                             |   |        | 136,565    |   |              |   | 248,461 |   |
| Receivable from American Eagle Energy Inc.                                                                                    |   |        | -          |   |              |   | 279,376 |   |
| Prepaid expenses                                                                                                              |   |        | 13,667     |   |              |   | 30,106 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Total current assets                                                                                                          |   |        | 2,442,442  |   |              |   | 2,958,305 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Equipment and leasehold improvements, net of accumulated depreciation and amortization of $151,668 and $149,142, respectively |   |        | 17,221     |   |              |   | 20,693 |   |
| Oil and gas properties – subject to amortization, net of accumulated depletion of $117,383 and $104,350, respectively   |   |        | 411,682    |   |              |   | 340,321 |   |
| Oil and gas properties – not subject to amortization                                                                    |   |        | 1,357,647  |   |              |   | 590,368 |   |
| Marketable securities                                                                                                         |   |        | 1,218,443  |   |              |   | 1,117,716 |   |
| Marketable securities – related party                                                                              |   |        | 170,919    |   |              |   | 197,453 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Deposits                                                                                                                      |   |        | 5,345      |   |              |   | 5,345 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Total assets                                                                                                                  |   | $           | 5,623,699  |   |              | $      | 5,230,201 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Current liabilities:                                                                                                          |   |        |       |   |              |   |   |   |
| Accounts payable and accrued liabilities                                                                                      |   | $           | 998,919    |   |              | $      | 430,699 |   |
| Due to American Eagle Energy Inc.                                                                                             |   |        | 315,282    |   |              |   | - |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Total current liabilities                                                                                                     |   |        | 1,314,201  |   |              |   | 430,699 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Long-term asset retirement obligation, net of discount of $23,298 and $23,647, respectively                                   |   |        | 14,202     |   |              |   | 13,853 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Total liabilities                                                                                                             |   |        | 1,328,403  |   |              |   | 444,552 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Commitments and contingencies                                                                                                 |   |        | -          |   |              |   | - |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Stockholders’ equity:                                                                                                   |   |        |       |   |              |   |   |   |
| Common stock, $.001 par value, 875,000,000 shares authorized, 41,005,822 shares outstanding                              |   |        | 41,006     |   |              |   | 41,006 |   |
| Additional paid-in capital                                                                                                    |   |        | 9,199,305  |   |              |   | 9,199,305 |   |
| Accumulated unrealized gains on marketable securities                                                                         |   |        | 489,656    |   |              |   | 415,463 |   |
| Accumulated deficit                                                                                                           |   |        | (5,434,671 | )      |              |   | (4,870,125 | ) |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Total stockholders’ equity                                                                                              |   |        | 4,295,296  |   |              |   | 4,785,649 |   |
|                                                                                                                          |   |        |       |   |              |   |   |   |
| Total liabilities and stockholders’ equity                                                                              |   | $           | 5,623,699  |   |              | $      | 5,230,201 |   |

----

|                                                 |   | 2011   |       |   | 2010   |   |
|------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                 |   |   |       |   |   |   |
| Oil and gas sales, net of royalty interests          |   | $      | 39,103     |   |   | $      | 71,486 |   |
| Oil and gas operating expenses                       |   |   | 48,183     |   |   |   | - |   |
|                                                 |   |   |       |   |   |   |   |   |
| Gross Profit                                         |   |   | (9,080     | )      |   |   | 71,486 |   |
|                                                 |   |   |       |   |   |   |   |   |
| Administrative expenses:                             |   |   |       |   |   |   |   |   |
|                                                 |   |   |       |   |   |   |   |   |
| General and administrative expenses                  |   |   | 139,253    |   |   |   | 233,412 |   |
| Professional fees                                    |   |   | 416,729    |   |   |   | 151,855 |   |
| Depreciation, depletion and amortization             |   |   | 15,559     |   |   |   | 16,259 |   |
|                                                 |   |   |       |   |   |   |   |   |
| Total administrative expenses                        |   |   | 571,541    |   |   |   | 401,526 |   |
|                                                 |   |   |       |   |   |   |   |   |
| Total operating income (loss)                        |   |   | (580,621   | )      |   |   | (330,040 | ) |
|                                                 |   |   |       |   |   |   |   |   |
| Interest income                                      |   |   | 1,368      |   |   |   | 1,695 |   |
| Dividend income                                      |   |   | 15,056     |   |   |   | - |   |
| Accretion of discount on asset retirement obligation |   |   | (349       | )      |   |   | - |   |
|                                                 |   |   |       |   |   |   |   |   |
| Income (loss) before taxes                           |   |   | (564,546   | )      |   |   | (328,345 | ) |
|                                                 |   |   |       |   |   |   |   |   |
| Provision from income taxes                          |   |   | -          |   |   |   | - |   |
|                                                 |   |   |       |   |   |   |   |   |
| Net income (loss)                                    |   | $      | (564,546   | )      |   | $      | (328,345 | ) |
|                                                 |   |   |       |   |   |   |   |   |
| Net income (loss) per common share:                  |   |   |       |   |   |   |   |   |
| Basic and diluted                                    |   | $      | (0.01      | )      |   | $      | (0.01 | ) |
|                                                 |   |   |       |   |   |   |   |   |
| Weighted average number of shares outstanding:       |   |   |       |   |   |   |   |   |
| Basic and diluted                                    |   |   | 41,005,822 |   |   |   | 44,550,000 |   |

----

|                                                                                       |   | 2011   |      |   | 2010   |   |
|--------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Cash flows provided by (used for) operating activities:                                    |   |   |      |   |   |   |
| Net loss                                                                                   |   | $      | (564,546  | )      |   | $      | (331,735 | ) |
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: |   |   |      |   |   |   |   |   |
| Non cash transactions:                                                                     |   |   |      |   |   |   |   |   |
| Depreciation, depletion and amortization                                                   |   |   | 15,559    |   |   |   | 16,259 |   |
| Accretion of discount on asset retirement obligations                                      |   |   | 349       |   |   |   | - |   |
| Changes in operating assets and liabilities:                                               |   |   |      |   |   |   |   |   |
| Decrease in prepaid expense                                                                |   |   | 16,439    |   |   |   | 41,039 |   |
| Decrease in spud fees receivable                                                           |   |   | -         |   |   |   | 20,000 |   |
| Decrease in other receivables                                                              |   |   | 111,896   |   |   |   | 72,742 |   |
| Collection of amounts due from American Eagle Energy Inc.                                  |   |   | 279,376   |   |   |   | - |   |
| Increase in amounts due to American Eagle Energy Inc                                       |   |   | 315,282   |   |   |   | - |   |
| Increase in accounts payable and accrued liabilities                                  |   |   | 568,753   |   |   |   | 49,873 |   |
| Net cash provided by (used for) operating activities                                       |   |   | 743,108   |   |   |   | (131,822 | ) |
|                                                                                       |   |   |      |   |   |   |   |   |
| Cash flows provided by (used for) investing activities:                                    |   |   |      |   |   |   |   |   |
| Additions to oil and gas properties                                                        |   |   | (851,673  | )      |   |   | (16,672 | ) |
| Proceeds from the sale of office equipment                                                 |   |   | 700       |   |   |   | - |   |
| Additions to equipment and leasehold improvements                                          |   |   | (287      | )      |   |   | - |   |
| Net cash used for investing activities                                                     |   |   | (851,260  | )      |   |   | (16,672 | ) |
|                                                                                       |   |   |      |   |   |   |   |   |
| Cash flows provided by (used for) financing activities:                                    |   |   |      |   |   |   |   |   |
| Repurchase and retirement of shares                                                        |   |   | -         |   |   |   | (4,557 | ) |
| Net cash used for investing activities                                                     |   |   | -         |   |   |   | (4,557 | ) |
|                                                                                       |   |   |      |   |   |   |   |   |
| Net decrease in cash                                                                       |   |   | (108,152  | )      |   |   | (153,051 | ) |
|                                                                                       |   |   |      |   |   |   |   |   |
| Cash - beginning of period                                                                 |   |   | 2,400,362 |   |   |   | 1,508,754 |   |
|                                                                                       |   |   |      |   |   |   |   |   |
| Cash - end of period                                                                       |   | $      | 2,292,210 |   |   | $      | 1,355,703 |   |

----

|                             |   | 2011   |   |   | 2010   |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|
| Cash paid during the period for: |   |   |   |   |   |   |
| Interest                         |   | $      | -      |   |   | $      | - |   |
| Income taxes                     |   | $      | -      |   |   | $      | - |   |

----

| 1.  | Description of Business |
|----------|-------------------------|

| 2.  | Summary of Significant Accounting Policies |
|----------|--------------------------------------------|

----

----

| Equipment              |   | 3 years                             |
|------------------------|--------|-------------------------------------|
| Leasehold improvements |   | lesser of useful life or lease term |

----

----

----

|                                  |   | Level 1 |      |   | Level 2 |   |    | Level 3 |   |   | Total  |   |
|---------------------------------------|--------|---------|-----------|--------|---------|--------|---------|---------|--------|--------|--------|--------|
| March 31, 2011                        |   |    |      |   |    |   |    |    |   |   |   |   |   |   |   |   |
| Cash & equivalents                |   | $       | 2,292,210 |   |    | $      | -       |    |   | $      | -      |   |   | $ | 2,292,210 |   |
| Marketable securities - related party |   |    | -         |   |    |   | 170,919 |    |   |   | -      |   |   |   | 170,919 |   |
| Marketable securities                 |   |    | 1,218,443 |   |    |   | -       |    |   |   | -      |   |   |   | 1,218,443 |   |
|                                  |   | $       | 3,510,653 |   |    | $      | 170,919 |    |   |   | -      |   |   | $ | 3,681,572 |   |
| December 31, 2010                     |   |    |      |   |    |   |    |    |   |   |   |   |   |   |   |   |
| Cash & equivalents                |   | $       | 2,400,362 |   |    | $      | -       |    |   | $      | -      |   |   | $ | 2,400,362 |   |
| Marketable securities - related party |   |    | -         |   |    |   | 197,453 |    |   |   | -      |   |   |   | 197,453 |   |
| Marketable securities                 |   |    | 1,117,716 |   |    |   | -       |    |   |   | -      |   |   |   | 1,117,716 |   |
|                                  |   | $       | 3,518,078 |   |    | $      | 197,453 |    |   |   | -      |   |   | $ | 3,715,531 |   |

----

----

| 3.  | Marketable Securities |
|----------|-----------------------|

|                                           |   |      |      |   | Gains in      |   |    | Losses in     |   |
|------------------------------------------------|--------|-----------|-----------|--------|---------------|--------|---------|---------------|--------|
|                                           |   |      |      |   | Accumulated   |   |    | Accumulated   |   |
|                                           |   | Estimated |      |   | Other         |   |    | Other         |   |
|                                           |   | Fair      |      |   | Comprehensive |   |    | Comprehensive |   |
|                                           |   | Value     |      |   | Income        |   |    | Income        |   |
| March 31, 2011                                 |   |      |      |   |          |   |    |          |   |
| Noncurrent assets:                             |   |      |      |   |          |   |    |          |   |
| Common stock                                   |   | $         | 1,218,443 |   |          | $      | 343,470 |          |   | $ | - |   |
| Common stock and warrants - related party      |   |      | 170,919   |   |          |   | 146,186 |          |   |   | - |   |
| Total available-for-sale marketable securities |   | $         | 1,389,362 |   |          | $      | 489,656 |          |   | $ | - |   |
|                                           |   |      |      |   |          |   |    |          |   |   |   |   |
| December 31, 2010:                             |   |      |      |   |          |   |    |          |   |   |   |   |
| Noncurrent assets:                             |   |      |      |   |          |   |    |          |   |   |   |   |
| Common stock                                   |   | $         | 1,117,716 |   |          | $      | 242,743 |          |   | $ | - |   |
| Common stock and warrants - related party      |   |      | 197,453   |   |          |   | 172,720 |          |   |   | - |   |
| Total available-for-sale marketable securities |   | $         | 1,315,169 |   |          | $      | 415,463 |          |   | $ | - |   |

| Risk-free interest rate             |   |      | 0.30   | %      |
|-------------------------------------|--------|-----------|--------|--------|
| Expected volatility of common stock |   |      | 193    | %      |
| Dividend yield                      |   | $         | 0.00   |   |
| Expected life of warrants           |   | 1.2 years |   |

----

| 4.  | Sale of Royalty and Property Interests |
|----------|----------------------------------------|

| 5.  | Equipment and Leasehold Improvements |
|----------|--------------------------------------|

|                                            |   | March 31, |     |   | December 31, |   |
|-------------------------------------------------|--------|----------------|----------|--------|-------------------|--------|
|                                            |   | 2011           |     |   | 2010              |   |
| Office equipment                                |   | $              | 121,379  |   |              | $      | 122,325 |   |
| Leasehold improvements                          |   |           | 47,510   |   |              |   | 47,510 |   |
|                                            |   |           |     |   |              |   |   |   |
| Total equipment and improvements                |   |           | 168,889  |   |              |   | 169,835 |   |
| Less: accumulated depreciation and amortization |   |           | (151,668 | )      |              |   | (149,142 | ) |
|                                            |   |           |     |   |              |   |   |   |
| Equipment and improvements, net                 |   |           | 17,221   |   |              |   | 20,693 |   |

----

| 6.  | Oil and Gas Properties |
|----------|------------------------|

|          |   | March 31,2011 |    |   | December 31, 2010 |   |
|---------------|--------|--------------------|---------|--------|-----------------------------|--------|
|          |   | Amortizable        |    |   | Non-Amortizable             |   |   | Amortizable |   |   | Non-Amortizable |   |
| United States |   | $                  | -       |   |                        | $      | 1,357,647 |   |   | $ | - |   |   | $ | 590,368 |   |
| Canada        |   |               | 411,682 |   |                        |   | - |   |   |   | 340,321 |   |   |   | - |   |
| Total         |   | $                  | 411,682 |   |                        | $      | 1,357,647 |   |   | $ | 340,321 |   |   | $ | 590,368 |   |

----

|                 |   | March 31, |     |   | December 31, |   |
|----------------------|--------|----------------|----------|--------|-------------------|--------|
|                 |   | 2011           |     |   | 2010              |   |
| Acquisition costs    |   | $              | 133,774  |   |              | $      | 133,774 |   |
| Development costs    |   |           | 395,291  |   |              |   | 310,897 |   |
|                 |   |           | 529,065  |   |              |   | 444,671 |   |
| Cumulative depletion |   |           | (117,383 | )      |              |   | (104,350 | ) |
| Impairment           |   |           | -        |   |              |   | - |   |
| Net capitalized cost |   | $              | 411,682  |   |              | $      | 340,321 |   |

----

|                                                 |   |      |    |   |   |   |     | Aggregate |   |   |       |   |
|------------------------------------------------------|--------|-----------|---------|--------|--------|--------|----------|-----------|--------|--------|------------|--------|
|                                                 |   | March 31, |    |   |   |   |     | Through   |   |   |       |   |
|                                                 |   | 2011      |    |   | 2010   |   |     | 2009      |   |   | Total      |   |
| United States                                        |   |      |    |   |   |   |     |      |   |   |       |   |
| Acquisition costs                                    |   | $         | 321,353 |   |   | $      | 386,687  |      |   | $      | 1,976,054  |   |   | $ | 2,684,094 |   |
| Exploration costs                                    |   |      | 445,927 |   |   |   | 69,285   |      |   |   | 136,918    |   |   |   | 652,130 |   |
| Development costs                                    |   |      | -       |   |   |   | -        |      |   |   | -          |   |   |   | - |   |
| Disposals                                            |   |      | -       |   |   |   | -        |      |   |   | -          |   |   |   | - |   |
| Impairments and sales                                |   |      | -       |   |   |   | (277,355 | )         |   |   | (1,701,222 | )      |   |   | (1,978,577 | ) |
| United States total                                  |   | $         | 767,280 |   |   | $      | 178,617  |      |   | $      | 411,750    |   |   | $ | 1,357,647 |   |
|                                                 |   |      |    |   |   |   |     |      |   |   |       |   |   |   |   |   |
| Canada                                               |   |      |    |   |   |   |     |      |   |   |       |   |   |   |   |   |
| Acquisition costs                                    |   | $         | -       |   |   | $      | -        |      |   | $      | 1,443      |   |   | $ | 1,443 |   |
| Exploration costs                                    |   |      | -       |   |   |   | -        |      |   |   | -          |   |   |   | - |   |
| Development costs                                    |   |      | -       |   |   |   | -        |      |   |   | -          |   |   |   | - |   |
| Impairments and sales                                |   |      | -       |   |   |   | (1,046   | )         |   |   | (397       | )      |   |   | (1,443 | ) |
| Canada total                                         |   | $         | -       |   |   | $      | 1,046    |      |   | $      | 1,046      |   |   | $ | - |   |
|                                                 |   |      |    |   |   |   |     |      |   |   |       |   |   |   |   |   |
| The North Sea                                        |   |      |    |   |   |   |     |      |   |   |       |   |   |   |   |   |
| Acquisition costs                                    |   | $         | -       |   |   | $      | -        |      |   | $      | 197,988    |   |   | $ | 197,988 |   |
| Exploration costs                                    |   |      | -       |   |   |   | -        |      |   |   | 1,512,205  |   |   |   | 1,512,205 |   |
| Development costs                                    |   |      | -       |   |   |   | -        |      |   |   | -          |   |   |   | - |   |
| Impairments                                          |   |      | -       |   |   |   | -        |      |   |   | (1,546,683 | )      |   |   | (1,546,683 | ) |
| Disposals                                            |   |      | -       |   |   |   | -        |      |   |   | (163,510   | )      |   |   | (163,510 | ) |
| North Sea total                                      |   | $         | -       |   |   | $      | -        |      |   | $      | -          |   |   | $ | - |   |
|                                                 |   |      |    |   |   |   |     |      |   |   |       |   |   |   |   |   |
| Total capitalized costs, not subject to amortization |   |      |    |   |   |   |     |      |   |   |       |   |   | $ | 1,357,647 |   |

----

----

|                                   |   | March 31, |      |   | December 31, |   |
|----------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                                   |   | 2011           |      |   | 2010              |   |
|                                   |   |           |      |   |              |   |   |   |
| Balance at the beginning of the period |   | $              | 590,368   |   |              | $      | 412,797 |   |
| Additions to exploratory costs         |   |           | 767,279   |   |              |   | 455,972 |   |
| Impairments / gain allocations         |   |           | -         |   |              |   | (278,401 | ) |
|                                   |   |           |      |   |              |   |   |   |
| Balance at the end of the period       |   | $              | 1,357,647 |   |              | $      | 590,368 |   |

| 7.  | Asset Retirement Obligations |
|----------|------------------------------|

| 8.  | Commitments and Contingencies |
|----------|-------------------------------|

----

|                         |   | Amount |   |
|------------------------------|--------|--------|--------|
| 2011 (remainder of the year) |   | $      | 48,105 |   |
| 2012                         |   |   | -      |   |
| 2013                         |   |   | -      |   |
| 2014                         |   |   | -      |   |
| 2015                         |   |   | -      |   |
|                         |   |   |   |   |
| Total                        |   | $      | 48,105 |   |

| 9.  | Loss Per Share |
|----------|----------------|

----

|                                                                       |   | 2011   |       |   | 2010   |   |
|----------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                                       |   |   |       |   |   |   |
| Net loss                                                                   |   | $      | (564,546   | )      |   | $      | (331,735 | ) |
|                                                                       |   |   |       |   |   |   |   |   |
| Weighted average number of common shares outstanding                       |   |   | 41,005,822 |   |   |   | 44,550,000 |   |
| Incremental shares from the assumed exercise of dilutive stock options (a) |   |   | -          |   |   |   | - |   |
| Diluted common shares outstanding                                          |   |   | 41,005,822 |   |   |   | 44,550,000 |   |
|                                                                       |   |   |       |   |   |   |   |   |
| Net loss per share – basic and diluted                               |   | $      | (0.01      | )      |   | $      | (0.01 | ) |

|          |   | 2011   |      |   | 2010   |   |
|---------------|--------|--------|-----------|--------|--------|--------|
| Stock Options |   |   | 3,692,000 |   |   |   | 6,000,000 |   |

| 10. | Equity Transactions |
|-----|---------------------|

----

|                             |   |    |       |   |     |   |   | Weighted  |   |
|----------------------------------|--------|---------|------------|--------|----------|--------|--------|-----------|--------|
|                             |   |    |       |   | Weighted |   |   | Average   |   |
|                             |   |    |       |   | Average  |   |   | Remaining |   |
|                             |   |    |       |   | Exercise |   |   | Contract  |   |
|                             |   | Options |       |   | Price    |   |   | Term      |   |
|                             |   |    |       |   |     |   |   |      |   |
| Outstanding at December 31, 2009 |   |    | 6,000,000  |   |     | $      | 0.05   |      |   | 3.4 years |   |
|                             |   |    |       |   |     |   |   |      |   |   |   |
| Options granted                  |   |    | -          |   |     |   | -      |      |   |  - |   |
| Options exercised                |   |    | (2,308,000 | )      |     |   | 0.05   |      |   |  - |   |
| Options expired                  |   |    | -          |   |     |   | -      |      |   |  - |   |
| Options forfeited                |   |    | -          |   |     |   | -      |      |   |  - |   |
|                             |   |    |       |   |     |   |   |      |   |   |   |
| Outstanding at December 31, 2010 |   |    | 3,692,000  |   |     | $      | 0.05   |      |   | 2.4 years |
|                             |   |    |       |   |     |   |   |      |   |   |
| Options granted                  |   |    | -          |   |     |   | -      |      |   |  - |   |
| Options exercised                |   |    | -          |   |     |   | -      |      |   |  - |   |
| Options expired                  |   |    | -          |   |     |   | -      |      |   |  - |   |
| Options forfeited                |   |    | -          |   |     |   | -      |      |   |  - |   |
|                             |   |    |       |   |     |   |   |      |   |   |   |   |
| Outstanding at March 31, 2011    |   |    | 3,692,000  |   |     | $      | 0.05   |      |   | 2.2 years |
| Exercisable at March 31, 2011    |   |    | 3,692,000  |   |     | $      | 0.05   |      |   | 2.2 years |   |

| 11. | Related Party Transactions |
|-----|----------------------------|

----

| 13. | Subsequent Events |
|-----|-------------------|

| Financial assets acquired                           |   | $      | 2,248,204  |   |
|-----------------------------------------------------|--------|--------|------------|--------|
| Oil and gas properties, subject to amortization     |   |   | 1,939,053  |   |
| Oil and gas properties, not subject to amortization |   |   | 11,201,700 |   |
| Financial liabilities assumed                       |   |   | (1,006,216 | )      |
| Purchase price                                      |   | $      | 14,382,741 |   |

----

|   | · | An effective date of January 1, 2010 was used to present what the combined entities’ financial position may have been as of March 31, 2011 and December 31, 2010 and what its results of operations may have been for the three-month period ended March 31, 2011. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | No adjustments were made to reflect economies of scale or other potential cost savings that may have been achieved had the merger occurred on January 1, 2010. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | The estimated fair market value of AEE’s oil and gas properties, subject to amortization, is based on the net present value of future cash flows from proven reserves as of December 31, 2010, as calculated by an independent, third-party engineering firm. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The estimated fair market values of AEE’s oil and gas properties, not subject to amortization, were determined by management based on management’s knowledge of prevailing leasing costs associated with acreage located in close proximity to AEE’s properties and/or recent acreage purchase transactions. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | All purchase accounting adjustments and allocations were determined assuming that the business combination occurred on April 8, 2011, the date that the Merger Agreement was executed. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                      |   |    |       |   | American |   |       | Pro         |   |   |      |   |
|-------------------------------------------------------------------------------------------|--------|---------|------------|--------|----------|--------|------------|-------------|--------|--------|-----------|--------|
|                                                                                      |   | Eternal |       |   | Eagle    |   |       | Forma       |   |   | Pro       |   |
|                                                                                      |   | Energy  |       |   | Energy   |   |       | Adjustments |   |   | Forma     |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |
| Cash & equivalents                                                                    |   | $       | 2,292,210  |   |     | $      | 235,156    |        |   | $      | 56,939    | (f)    |   | $ | 2,584,305 |   |
| Trade receivables                                                                         |   |    | 136,565    |   |     |   | 676,500    |        |   |   | -         |   |   |   | 813,065 |   |
| Intercompany receivables                                                                  |   |    | -          |   |     |   | 315,282    |        |   |   | (315,282  | ) (a)  |   |   | - |   |
| Stock subscriptions receivable                                                            |   |    | -          |   |     |   | 833,333    |        |   |   | -         |   |   |   | 833,333 |   |
| Prepaid expenses                                                                          |   |    | 13,667     |   |     |   | 17,014     |        |   |   | -         |   |   |   | 30,681 |   |
| Total current assets                                                                      |   |    | 2,442,442  |   |     |   | 2,077,285  |        |   |   | (258,343  | )      |   |   | 4,261,384 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Equipment and leasehold improvements, net of accumulated depreciation of $151,668         |   |    | 17,221     |   |     |   | -          |        |   |   | -         |   |   |   | 17,221 |   |
| Oil and gas properties, subject to amortization, net of accumulated depletion of $334,456 |   |    | 411,682    |   |     |   | 1,036,037  |        |   |   | 813,743   | (d)    |   |   | 2,261,462 |   |
| Oil and gas properties, not subject to amortization                                       |   |    | 1,357,647  |   |     |   | 3,771,036  |        |   |   | 7,430,664 | (d)    |   |   | 12,559,347 |   |
| Marketable securities                                                                     |   |    | 1,218,443  |   |     |   | -          |        |   |   | -         |   |   |   | 1,218,443 |   |
| Marketable securities - related party                                                     |   |    | 170,919    |   |     |   | 170,919    |        |   |   | -         |   |   |   | 341,838 |   |
| Deposits                                                                                  |   |    | 5,345      |   |     |   | -          |        |   |   | -         |   |   |   | 5,345 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Total assets                                                                              |   | $       | 5,623,699  |   |     | $      | 7,055,277  |        |   | $      | 7,986,064 |   |   | $ | 20,665,040 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Accounts payable and accrued liabilities                                                  |   | $       | 998,919    |   |     | $      | 982,014    |        |   | $      | (20,000   | ) (f)  |   | $ | 1,960,933 |   |
| Intercompany payables                                                                     |   |    | 315,282    |   |     |   | -          |        |   |   | (315,282  | ) (a)  |   |   | - |   |
| Amounts due to related parties                                                            |   |    | -          |   |     |   | 10,000     |        |   |   | -         |   |   |   | 10,000 |   |
| Total current liabilities                                                                 |   |    | 1,314,201  |   |     |   | 992,014    |        |   |   | (335,282  | )      |   |   | 1,970,933 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Convertible debenture, net of debt discount of $694,831                                   |   |    | -          |   |     |   | 305,169    |        |   |   | (305,169  | ) (c)  |   |   | - |   |
| Long-term asset retirement obligation, net of discount of $47,294                         |   |    | 14,202     |   |     |   | 14,202     |        |   |   | -         |   |   |   | 28,404 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Total liabilities                                                                         |   |    | 1,328,403  |   |     |   | 1,311,385  |        |   |   | (640,451  | )      |   |   | 1,999,337 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Common stock                                                                              |   |    | 41,006     |   |     |   | 41,984     |        |   |   | 122,039   | (c,d)  |   |   | 205,029 |   |
| Additional paid in capital                                                                |   |    | 9,199,305  |   |     |   | 7,225,721  |        |   |   | 6,532,317 | (c,d)  |   |   | 22,957,343 |   |
| Unrealized gains on marketable securities                                                 |   |    | 489,656    |   |     |   | 146,284    |        |   |   | (146,284  | ) (d)  |   |   | 489,656 |   |
| Accumulated deficit                                                                       |   |    | (5,434,671 | )      |     |   | (1,670,097 | )           |   |   | 2,118,443 | (c,d)  |   |   | (4,986,325 | ) |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Total stockholders’ equity                                                          |   |    | 4,295,296  |   |     |   | 5,743,892  |        |   |   | 8,626,515 |   |   |   | 18,665,703 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Total stockholders’ equity and liabilities                                          |   | $       | 5,623,699  |   |     | $      | 7,055,277  |        |   | $      | 7,986,064 |   |   | $ | 20,665,040 |   |

----

|                                                                                      |   |    |       |   | American |   |       | Pro         |   |   |      |   |
|-------------------------------------------------------------------------------------------|--------|---------|------------|--------|----------|--------|------------|-------------|--------|--------|-----------|--------|
|                                                                                      |   | Eternal |       |   | Eagle    |   |       | Forma       |   |   | Pro       |   |
|                                                                                      |   | Energy  |       |   | Energy   |   |       | Adjustments |   |   | Forma     |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |
| Cash & equivalents                                                                    |   | $       | 2,400,362  |   |     | $      | 79,768     |        |   | $      | 16,939    | (f)    |   | $ | 2,497,069 |   |
| Trade receivables                                                                         |   |    | 248,461    |   |     |   | -          |        |   |   | -         |   |   |   | 248,461 |   |
| Intercompany receivables                                                                  |   |    | 279,376    |   |     |   | -          |        |   |   | (279,376  | ) (a)  |   |   | - |   |
| Stock subscriptions receivable                                                            |   |    | -          |   |     |   | 2,666,667  |        |   |   | 833,333   | (b)    |   |   | 3,500,000 |   |
| Prepaid expenses                                                                          |   |    | 30,106     |   |     |   | -          |        |   |   | -         |   |   |   | 30,106 |   |
| Total current assets                                                                      |   |    | 2,958,305  |   |     |   | 2,746,435  |        |   |   | 570,896   |   |   |   | 6,275,636 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Equipment and leasehold improvements, net of accumulated depreciation of $149,142         |   |    | 20,693     |   |     |   | -          |        |   |   | -         |   |   |   | 20,693 |   |
| Oil and gas properties, subject to amortization, net of accumulated depletion of $298,767 |   |    | 340,321    |   |     |   | 965,848    |        |   |   | 822,195   | (d)    |   |   | 2,128,364 |   |
| Oil and gas properties, not subject to amortization                                       |   |    | 590,368    |   |     |   | 2,820,301  |        |   |   | 7,430,664 | (d)    |   |   | 10,841,333 |   |
| Marketable securities                                                                     |   |    | 1,117,716  |   |     |   | -          |        |   |   | -         |   |   |   | 1,117,716 |   |
| Marketable securities of related party                                                    |   |    | 197,453    |   |     |   | 197,453    |        |   |   | -         |   |   |   | 394,906 |   |
| Deposits                                                                                  |   |    | 5,345      |   |     |   | -          |        |   |   | -         |   |   |   | 5,345 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Total assets                                                                              |   | $       | 5,230,201  |   |     | $      | 6,730,037  |        |   | $      | 8,823,755 |   |   | $ | 20,783,993 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Accounts payable and accrued liabilities                                                  |   | $       | 430,699    |   |     | $      | 758,032    |        |   | $      | (40,000   | ) (f)  |   | $ | 1,148,731 |   |
| Intercompany payables                                                                     |   |    | -          |   |     |   | 279,376    |        |   |   | (279,376  | ) (a)  |   |   | - |   |
| Amounts due to related parties                                                            |   |    | -          |   |     |   | 20,000     |        |   |   | -         |   |   |   | 20,000 |   |
| Total current liabilities                                                                 |   |    | 430,699    |   |     |   | 1,057,408  |        |   |   | (319,376  | )      |   |   | 1,168,731 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Convertible debenture, net of debt discount of $926,333                                   |   |    | -          |   |     |   | 73,667     |        |   |   | (73,667   | ) (c)  |   |   | - |   |
| Long-term asset retirement obligation, net of discount of $47,294                         |   |    | 13,853     |   |     |   | 13,853     |        |   |   | -         |   |   |   | 27,706 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Total liabilities                                                                         |   |    | 444,552    |   |     |   | 1,144,928  |        |   |   | (393,043  | )      |   |   | 1,196,437 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Common stock                                                                              |   |    | 41,006     |   |     |   | 37,540     |        |   |   | 126,483   | (c,d)  |   |   | 205,029 |   |
| Additional paid in capital                                                                |   |    | 9,199,305  |   |     |   | 7,230,166  |        |   |   | 7,202,422 | (c,d)  |   |   | 23,631,893 |   |
| Stock subscriptions receivable                                                            |   |    | -          |   |     |   | (833,333   | )           |   |   | 833,333   | (b)    |   |   | - |   |
| Unrealized gains on marketable securities                                                 |   |    | 415,463    |   |     |   | 172,818    |        |   |   | (172,818  | ) (d)  |   |   | 415,463 |   |
| Accumulated deficit                                                                       |   |    | (4,870,125 | )      |     |   | (1,022,082 | )           |   |   | 1,227,378 | (c,d)  |   |   | (4,664,829 | ) |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Total stockholders’ equity                                                          |   |    | 4,785,649  |   |     |   | 5,585,109  |        |   |   | 9,216,798 |   |   |   | 19,587,556 |   |
|                                                                                      |   |    |       |   |     |   |       |        |   |   |      |   |   |   |   |   |
| Total stockholders’ equity and liabilities                                          |   | $       | 5,230,201  |   |     | $      | 6,730,037  |        |   | $      | 8,823,755 |   |   | $ | 20,783,993 |   |

----

|                                                   |   |    |     |   | American |   |     | Pro         |   |    |    |   |
|--------------------------------------------------------|--------|---------|----------|--------|----------|--------|----------|-------------|--------|---------|---------|--------|
|                                                   |   | Eternal |     |   | Eagle    |   |     | Forma       |   |    | Pro     |   |
|                                                   |   | Energy  |     |   | Energy   |   |     | Adjustments |   |    | Forma   |   |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |
| Oil and gas sales                                      |   | $       | 39,103   |   |     | $      | 36,040   |        |   | $       | -       |   |   | $ | 75,143 |   |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Oil and gas operating expenses                         |   |    | 48,183   |   |     |   | 46,635   |        |   |    | -       |   |   |   | 94,818 |   |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Gross profit                                           |   |    | (9,080   | )      |     |   | (10,595  | )           |   |    | -       |   |   |   | (19,675 | ) |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| General and administrative expenses                    |   |    | 139,253  |   |     |   | 107,350  |        |   |    | -       |   |   |   | 246,603 |   |
| Professional fees                                      |   |    | 416,729  |   |     |   | 234,015  |        |   |    | -       |   |   |   | 650,744 |   |
| Professional fees – related party                |   |    | -        |   |     |   | 30,000   |        |   |    | -       |   |   |   | 30,000 |   |
| Depreciation, depletion and amortization               |   |    | 15,559   |   |     |   | 14,204   |        |   | 8,452   | (e)     |   |   | 38,215 |   |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Operating loss                                         |   |    | (580,621 | )      |     |   | (396,164 | )           |   |    | (8,452  | )      |   |   | (985,237 | ) |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Interest income                                        |   |    | 1,368    |   |     |   | -        |        |   |    | -       |   |   |   | 1,368 |   |
| Dividend income                                        |   |    | 15,056   |   |     |   | -        |        |   |    | -       |   |   |   | 15,056 |   |
| Interest expense                                       |   |    | -        |   |     |   | (20,000  | )           |   | 20,000  | (f)     |   |   | - |   |
| Accretion of discount on asset retirement obligation   |   |    | (349     | )      |     |   | (349     | )           |   |    | -       |   |   |   | (698 | ) |
| Accretion of discount on convertible debenture         |   |    | -        |   |     |   | (231,502 | )           |   | 231,502 | (c)     |   |   | - |   |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Loss before taxes                                      |   |    | (564,546 | )      |     |   | (648,015 | )           |   |    | 243,050 |   |   |   | (969,511 | ) |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Provision for income taxes                             |   |    | -        |   |     |   | -        |        |   |    | -       |   |   |   | - |   |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Net loss                                               |   | $       | (564,546 | )      |     | $      | (648,015 | )           |   | $       | 243,050 |   |   | $ | (969,511 | ) |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Basic and diluted loss per share                       |   |    |     |   |     |   |     |        |   |    |    |   |   | $ | (0.00 | ) |
|                                                   |   |    |     |   |     |   |     |        |   |    |    |   |   |   |   |   |
| Basic and diluted weighted average shares outstanding: |   |    |     |   |     |   |     |        |   |    |    |   |   |   | 206,486,818 |   |

----

|   | (a) | Elimination of intercompany amounts owed to/from the Company and AEE. |
|--------|-----|-----------------------------------------------------------------------|

|   | (b) | Business combination adjustment to record $833,333 of stock subscriptions collected by AEE prior to the business combination. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Adjustment to record the conversion of the debenture as a condition precedent to the completion of the business combination, which results in a $1,000,000 increase to equity, a reduction of accretion expense of $231,502 for the three-months ended March 31, 2011 and a reduction of accumulated deficit of $539,320 as of March 31, 2011 and $770,822 as of December 31, 2010. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Purchase accounting entry to record the issuance of 164,023,288 shares of the Company’s common stock, to eliminate the historical equity accounts of AEE, and to adjust the value of oil and gas properties acquired. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Adjustment to reflect depletion expense as if the business combination (and purchase accounting adjustments) had occurred on January 1, 2010. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Adjustment to reverse interest expense associated with the convertible debenture as if the conversion had occurred on January 1, 2010. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|   | · | The 2011 sales relate to our 50% working interest in the Hardy 7-9 well, which was acquired in June 2010 and placed on production in September 2010.  In January 2011, the well encountered mechanical problems and was taken off of production due to a parted rod string.  The well was repaired and returned to production in March 2011.  Prior to encountering the mechanical difficulties, the Hardy 7-9 well was producing approximately 58 barrels of oil per day.  During March 2011, the well produced an average of 40 barrels of oil per day. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The 2010 sales relate to revenues received from our 5% overriding royalty interests in certain properties located in Saskatchewan, Canada.  We sold our overriding royalty interests to Ryland Oil Corporation (“Ryland”) in June 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We incurred legal fees totaling $236,817 during the three-month period ended March 31, 2011, primarily related to our proposed merger with American Eagle Energy Inc. (“AEE”).  Legal fees for the three-month period ended March 31, 2010 totaled $76,655. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We also incurred consulting fees totaling $133,910 during the first quarter of 2010, primarily related to business valuation services obtained in connection with our proposed merger with AEE.  Consulting fees for the three-month period ended March 31, 2010 totaled $52,550 and consisted of fees associated with the obtaining of a fairness opinion related to our contemplated merger with Ryland in March 2010.  The Ryland merger transaction was never completed. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Accounting fees for the three-month period ended March 31, 2011 increased by $20,802 from the same period in 2010 as a result of engaging a third-party individual to perform all accounting functions.  These functions were previously performed by our former Chief Financial Officer. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| Exhibit     |   | Description of Exhibit                                                                                                                                                                                                                                                                                                                  |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                                                                                                                                    |
| 2.1         |   | Agreement and Plan of Merger, dated April 8, 2011, by and among Eternal Energy Corp., Eternal Sub Corp., and American Eagle Energy Inc. (Incorporated by reference to Exhibit 2.1 of our Registration Statement on form S-4 filed May 4, 2011, and attached as Annex A to the prospectus that is part of such Registration Statement.)  |
|        |   |                                                                                                                                                                                                                                                                                                                                    |
| 3(i).1      |   | Articles of Incorporation filed with the Nevada Secretary of State on July 25, 2003. (Incorporated by reference to Exhibit 3.1 of our Form 10-SB filed August 18, 2004.)                                                                                                                                                                |
| 3(i).2      |   | Certificate of Change filed with the Nevada Secretary of State effective November 7, 2005. (Incorporated by reference to Exhibit 3(i).2 of our Current Report on Form 8-K filed November 9, 2005.)                                                                                                                                      |
| 3(i).3      |   | Articles of Merger filed with the Nevada Secretary of State effective November 7, 2005. (Incorporated by reference to Exhibit 3(i).3 of our Current Report on Form 8-K filed November 9, 2005.)                                                                                                                                         |
| 3(ii).1     |   | Bylaws, adopted July 18, 2003. (Incorporated by reference to Exhibit 3.2 of our Form 10-SB filed August 18, 2004.)                                                                                                                                                                                                                      |
| 3(ii).2     |   | Amendment No. 1 to Bylaws, adopted November 4, 2005. (Incorporated by reference to Exhibit 3(ii) of our Current Report on Form 8-K filed November 9, 2005.)                                                                                                                                                                             |
| 10.1        |   | Agreement and Plan of Merger between Golden Hope Resources Corp. (renamed Eternal Energy Corp.) and Eternal Energy Corp., filed with the Nevada Secretary of State effective November 7, 2005. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed November 9, 2005.)                                    |
| 10.2        |   | Purchase and Sale Agreement by and between Eternal Energy Corp., PNP Petroleum I, LP, Cibolo Energy Operating, Inc. and Century Assets Corporation, dated June 25, 2010.  (Incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q filed August 16, 2010.)                                             |
| 10.3        |   | Purchase and Sale Agreement between Eternal Energy Corp. and American Eagle Energy Inc. dated June 18, 2010.  (Incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-Q filed August 16, 2010.)                                                                                                         |
| 10.4        |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.5        |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.6        |   | Letter Agreement by and between Eternal Energy Corp. and International Frontier Resources Corporation. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed December 5, 2005.)                                                                                                                            |
| 10.7        |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.8        |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.9        |   | Letter Agreement by and between Eternal Energy Corp. and International Frontier Resources Corporation Relating to Quad 41 and Quad 42 dated January 30, 2006. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed February 3, 2006.)                                                                     |
| 10.10       |   | Amended and Restated Letter Agreement by and between Eternal Energy Corp. and International Frontier Resources Corporation Relating to Quad 14 dated January 30, 2006. (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed February 3, 2006.)                                                            |
| 10.11       |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.12       |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.13       |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.14       |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.15       |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                |
| 10.16       |   | Letter Agreement effective as of May 19, 2006, by and among Eternal Energy Corp., International Frontier Resources Corporation, Palace Exploration Company Limited, Oilexco Incorporated, and Challenger Minerals (North Sea) Limited (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed May 23, 2006). |
| 10.17       |   | Letter Agreement dated October 15, 2006, by and among Eternal Energy Corp., Fairway Exploration, LLC, Prospector Oil, Inc., and 0770890 B.C. Ltd. (Incorporated by reference to Exhibit 10.17 of our Annual Report on Form 10-KSB filed April 16, 2007).                                                                                |
| 10.18       |   | Letter Agreement dated October 26, 2006, by and among Eternal Energy Corp., Fairway Exploration, LLC, Prospector Oil, Inc., 0770890 B.C. Ltd., and Rover Resources Inc. (Incorporated by reference to Exhibit 10.18 of our Annual Report on Form 10-KSB filed April 16, 2007).                                                          |
| 10.19  |   | Letter Agreement dated February 28, 2007, by and among Eternal Energy Corp., Pebble Petroleum Inc., Emerald Bay Holdings Ltd., and Heartland Resources Inc. (Incorporated by reference to Exhibit 10.19 of our Annual Report on Form 10-KSB filed April 16, 2007).                                                                      |
| 10.20       |   | Agreement To Terminate DGWS Option (Incorporated by reference to Exhibit 10.20 of our Quarterly Report on Form 10-Q filed May 15, 2009.                                                                                                                                                                                                 |

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| 10.21       |   | Employment Agreement by and between Eternal Energy Corp. and Craig Phelps dated August 1, 2007 (Incorporated by reference to Exhibit 10.21 of our Quarterly Report on Form 10-Q filed May 15, 2009).                                                                                                                                                                                                                        |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.22       |   | Employment Agreement by and between Eternal Energy Corp. and Kirk A. Stingley dated June 2, 2008 (Incorporated by reference to Exhibit 10.22 of our Quarterly Report on Form 10-Q filed May 15, 2009).                                                                                                                                                                                                                      |
| 10.23       |   | Amended and Restated Employment Agreement by and between Eternal Energy Corp. and Bradley M. Colby dated November 1, 2009 (Incorporated by reference to Exhibit 10.23 of our Quarterly Report on form 10-Q filed November 23, 2009).                                                                                                                                                                                        |
| 10.24       |   | First Amendment to the Amended and Restated Employment Agreement by and between Eternal Energy Corp. and Craig H. Phelps dated August 1, 2009 (Incorporated by reference to Exhibit 10.24 of our Quarterly Report on form 10-Q filed November 23, 2009).                                                                                                                                                                    |
| 10.25       |   | First Amendment to the Employment Agreement by and between Eternal Energy Corp. and Kirk A. Stingley dated October 30, 2009 (Incorporated by reference to Exhibit 10.25 of our Quarterly Report on form 10-Q filed November 23, 2009).                                                                                                                                                                                      |
| 10.26       |   | Reserved for future use.                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.27       |   | Lease Agreement dated January 1, 2009 by and between Eternal Energy Corp. and Oakley Ventures, LLC.  (Incorporated by reference to Exhibit 10.27 of our Annual Report on Form 10-K filed March 23, 2010.)                                                                                                                                                                                                         |
| 10.28       |   | Purchase and Sale Agreement by and between Eternal Energy Corp. and Ryland Oil Corporation dated March 26, 2010.  (Incorporated by reference to Exhibit 10.28 of our Current Report on Form 8-K filed March 29, 2010.)                                                                                                                                                                                            |
| 10.29       |   | Purchase of Royalty Agreement by and between Eternal energy corp. and Ryland Oil Corporation dated March 26, 2010.  (Incorporated by reference to Exhibit 10.29 of our Current Report on Form 8-K filed March 29, 2010.)                                                                                                                                                                                          |
| 10.29a      |   | Amending Agreement to the Ryland / Eternal Royalty Purchase Agreement by and between Eternal Energy Corp. and Ryland Oil Corporation dated April 20, 2010.  (Incorporated by reference to Exhibit 10.29a of our Current Report on Form 8-K filed March 29, 2010.)                                                                                                                                                 |
| 10.30       |   | Termination Agreement (of the US Pebble Acquisition Agreement) by and between Eternal Energy Corp., Fairway Exploration LLC, Prospector Oil, Inc. Pebble Petroleum Inc. and Rover Resources Inc. dated April 29, 2010.  (Incorporated by reference to Exhibit 10.30 of our Quarterly Report on form 10-Q filed May 17, 2010.)                                                                                     |
| 10.31       |   | Termination Agreement (of the Canadian Pebble Acquisition Agreement) by and between Eternal Energy Corp., Fairway Exploration LLC, Prospector Oil, Inc. and Pebble Petroleum Inc. dated April 29, 2010.  (Incorporated by reference to Exhibit 10.31 of our Quarterly Report on form 10-Q filed May 17, 2010.)                                                                                                    |
| 10.32       |   | Termination Agreement (of the US Prospect Acquisition Agreement) by and between Eternal Energy Corp., Fairway Exploration LLC, Prospector Oil, Inc., Pebble Petroleum Inc., Rover Resources Inc., Steven Swanson, Richard L. Findley, Thomas G. Lantz and Ryland Oil Corporation dated May 11, 2010.  (Incorporated by reference to Exhibit 10.31 of our Quarterly Report on form 10-Q filed May 17, 2010.)       |
| 10.33       |   | Termination Agreement (of the Canadian Prospect Acquisition Agreement) by and between Eternal Energy Corp., Fairway Exploration LLC, Prospector Oil, Inc., Pebble Petroleum Inc., Rover Resources Inc., Steven Swanson, Richard L. Findley, Thomas G. Lantz and Ryland Oil Corporation dated May 11, 2010.  (Incorporated by reference to Exhibit 10.33 of our Quarterly Report on form 10-Q filed May 17, 2010.) |
| 10.34       |   | Termination of Management Services Agreement by and between Eternal Energy Corp., Ryland Oil Corporation and Brad Colby dated December 1, 2009.  (Incorporated by reference to Exhibit 10.34 of our Quarterly Report on form 10-Q filed May 17, 2010.)                                                                                                                                                            |
| 10.35       |   | Amendment to the consulting Agreement by and between Eternal Energy Corp., Rover Resources Inc, and Brad Colby dated April 1, 2010.  (Incorporated by reference to Exhibit 10.35 of our Quarterly Report on form 10-Q filed May 17, 2010.)                                                                                                                                                                        |
| 10.36       |   | Letter of Intent between Eternal Energy Corp. and American Eagle Energy Inc. dated February 22, 2011. (Incorporated by reference to Exhibit 10.36 of our Annual Report on form 10-K filed March 23, 2011.)                                                                                                                                                                                                                  |
| 10.37       |   | Engagement Letter for Professional Services between Eternal Energy Corp. and C.K. Cooper & Company, dated February 25, 2011.  (Incorporated by reference to Exhibit 10.37 of our Annual Report on form 10-K filed March 23, 2011.)                                                                                                                                                                            |
| 10.38       |   | Participation and Operating Agreement by and among Eternal Energy Corp., AEE Canada Inc., and Passport Energy Inc. dated April 15, 2011.  (Incorporated by reference to Exhibit 10.38 of our Registration Statement on Form S-4 filed May 4, 2011.)                                                                                                                                                               |
| 21.1        |   | List of Subsidiaries (incorporated by reference to Exhibit 21.1 of our Annual report on Form 10-K filed April 8, 2008)                                                                                                                                                                                                                                                                                                      |
| 31.1*       |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                         |
| 32.1*  |   | Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                           |

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| ETERNAL ENERGY CORP. |                                                                                         |   |
|----------------------|----------------------------------------------------------------------------------------------|--------|
|                 |                                                                                         |   |
| (Registrant)         |                                                                                         |   |
|                 |                                                                                         |   |
| May 13, 2011         | /s/ Bradley M. Colby                                                                         |   |
|                 | Bradley M. Colby                                                                             |   |
|                 | President and Chief Executive Officer(Principal Executive, Financial and Accounting Officer) |   |

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