**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**






**FORM 10-QSB**




**(Mark
                one)****ý**
            
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934.**




**For
      the fiscal quarter ended September 30, 2006**




**OR**




**o**
            
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE ACT OF 1934.**




**For
      the transition period
      from                                  to**






**Commission
      File No. 000-50906**






**ETERNAL
      ENERGY CORP.**


(Exact
      Name of Small Business Issuer in its Charter)





**Nevada**
            
            **20-0237026**(State
                or Other Jurisdiction
              of
                Incorporation or
              Organization)
            
            (I.R.S.
                Employer
              Identification
                No.)





**2120
      West Littleton Blvd., Suite 300**


**Littleton,
      Colorado**


(Address
      and telephone number of Principal Executive Offices)





**(303)
      385-1230**


(Issuer’s
      Telephone Number, Including Area Code)










Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the past 12 months (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past 90
      days.





Yes ý No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





Yes o No ý





Number
      of
      shares outstanding as of the close of business on November 15, 2006:





**TITLE
                OF CLASS**
            
            **NUMBER
                OF SHARES**
              **OUTSTANDING**Common
                Stock, $0.001 par value.
            
            42,550,000





Transitional
      Small Business Disclosure Format (Check one):  Yes o No ý








**PART
      I. FINANCIAL INFORMATION**




**Item
                  1. Financial Statements**
              ****
              ****Financial
                  Statements of Eternal Energy Corp. (formerly Golden Hope Resources
                  Corp.)
                  (A Company in the Development Stage):Balance
                  Sheet as of September 30, 2006Statements
                  of Operations For Each of the Three Month Periods Ended September
                  30, 2006
                  and 2005 and for the Period from July 25, 2003 (Inception) to September
                  30, 2006Statements
                  of Cash Flows For Each of the Three-Month Periods Ended September
                  30, 2006
                  and 2005 and for the Period From July 25, 2003 (Inception) to September
                  30, 2006Notes
                  to the Financial Statements**Item
                  2. Mangement’s Discussion and Analysis or Plan of
                  Operation****Item
                  3. Controls and Procedures****PART
                  II. OTHER INFORMATION****Item
                  6. Exhibits****SIGNATURES****CERTIFICATIONS**










**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements**







**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Financial
      Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***










**Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
  **Index
        to the Financial Statements**
  ***As
        of September 30, 2006 and***
 ***For
        Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
        2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to September 30,
        2006***


Financial
                Statements of Eternal Energy Corp. (formerly Golden Hope Resources
                Corp.)
                (A Company in the Development Stage):Balance
                Sheet as of September 30, 2006
            
            1Statements
                of Operations For Each of the Three-Month and Nine-Month Periods
                Ended
                September 30, 2006 and 2005 and for the Period from July 25, 2003
                (Inception) to September 30, 2006
            
            2Statements
                of Cash Flows For Each of the Nine-Month Periods Ended September
                30, 2006
                and 2005 and for the Period From July 25, 2003 (Inception) to September
                30, 2006
            
            3Notes
                to the Financial Statements as of September 30, 2006 and For Each
                of the
                Three-Month and Nine-Month Periods Ended September 30, 2006 and 2005
                and
                for the Period From July 25, 2003 (Inception) to September 30,
                2006
            
            5









**Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
   **Balance
        Sheet**
  ***September
        30, 2006***





*ASSETS*Current
                  assets:Cash
              
              $
              2,395,297Prepaid
                  compensation
              
              
              14,375Total
                  current assets
              
              
              2,409,672Oil
                  and gas properties
              
              
              1,357,067Deposits
              
              
              3,000,000**Total
                  assets**
              
              **$**
              **6,766,739***LIABILITIES
                  AND STOCKHOLDERS' EQUITY*Current
                  liabilities:Accounts
                  payable and accrued liabilities
              
              $
              48,708Accrued
                  officer's payroll
              
              
              34,769Warrant
                  derivative liability
              
              
              2,435,166**Total
                  current liabilities**
              
              
              **2,518,643**Commitments
                  and contingenciesStockholders'
                  equity:Common
                  stock, $.001 par value, 875,000,000 shares authorized, 42,550,000
                  shares
                  issued and outstanding
              
              
              42,550Additional
                  paid-in capital
              
              
              1,409,277Deficit
                  accumulated during the development stage
              
              
              2,796,269**Total
                  stockholders' equity**
              
              
              **4,248,096****Total
                  liabilities and stockholders' equity**
              
              **$**
              **6,766,739**




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




1




**Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
   **Statements
        of Operations**
  ***For
        Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
        2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to September 30,
        2006***


For
                  thePeriod
                  FromJuly
                  26, 2003For
                  the Nin-Month Period Ended
              
              For
                  the Three-Month Period Ended
              
              (Inception)
                  toSeptember
                  30, 2006
              
              September
                  30, 2005
              
              September
                  30, 2006
              
              September
                  30, 2005
              
              September
                  30, 2006Operating
                  expenses:Exploration
                  costs
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              $
              (24,600
              )General
                  and administrative
              
              $
              (422,652
              )
              $
              (2,315
              )
              $
              (164,694
              )
              $
              (4,630
              )
              
              (572,059
              )Professional
                  fees
              
              
              (216,377
              )
              
              (2,500
              )
              
              (70,807
              )
              
              (5,000
              )
              
              (330,314
              )Gain
                  on derivatives
              
              
              3,708,412
              
              
              -
              
              
              5,496,544
              
              
              -
              
              
              3,717,870Total
                  operating income (loss)
              
              
              3,069,383
              
              
              (4,815
              )
              
              5,261,043
              
              
              (9,630
              )
              
              2,790,897Interest
                  income
              
              
              5,347
              
              
              14
              
              
              5,347
              
              
              -
              
              
              5,372Net
                  income (loss)
              
              **$**
              **3,074,730**
              
              **$**
              (4,801
              )
              **$**
              **5,266,390**
              
              **$**
              (9,630
              )
              **$**
              **2,796,269****Income
                  per common share, net - basic**
              
              **$**
              **0.08**
              
              **$**
              **0.00**
              
              **$**
              **0.13**
              
              **$**
              **0.00**
              
              **$**
              **0.07****Weighted
                  average number of shares outstanding - basic**
              
              
              **37,983,333**
              
              
              **50,750,000**
              
              
              **42,450,000**
              
              
              **45,653,300**
              
              
              **42,706,632**







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




2


**Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
   **Statements
        of Cash Flows**
  ***For
        Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
        2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to September 30,
        2006***


For
                  thePeriod
                  FromJuly
                  25, 2003For
                  the Nine-Month Period Ended,
              
              (Inception)
                  toSeptember
                  30, 2006
              
              September
                  30, 2005
              
              September
                  30, 2006*Cash
                  flows provided by (used in) operating activities:*Net
                  loss
              
              $
              3,074,730
              
              $
              (4,801
              )
              $
              2,796,269Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Non
                  cash transactions:Stock
                  based compensation
              
              
              79,314
              
              
              -
              
              
              79,314Gain
                  on warrant derivative
              
              
              (3,708,412
              )
              
              -
              
              
              (3,717,870
              )Changes
                  in operating assets and liabilities:
              
              
              -
              
              
              -
              
              
              --Decrease
                  (increase) in prepaid compensation
              
              
              61,875
              
              
              -
              
              
              (14,375
              )Increase
                  in accounts receivable - other
              
              
              
              
              
              (1,500
              )
              
              -Increase
                  in accrued payroll-related costs
              
              
              10,727
              
              
              -
              
              
              10,727Increase
                  (decrease) in accounts payable - related party
              
              
              10,321
              
              
              (1,881
              )
              
              48,708**Net
                  cash used in operating activities**
              
              
              **(471,445**
              **)**
              
              **(8,182**
              **)**
              
              **(773,185**
              **)***Cash
                  flows used in investing activities:*Increase
                  in drilling deposits
              
              
              (3,000,000
              )
              
              -
              
              
              (3,000,000
              )Additions
                  to oil and gas properties
              
              
              (600,067
              )
              
              -
              
              
              (1,357,067
              )**Net
                  cash used in investing activities**
              
              
              **(3,600,067**
              **)**
              
              **-**
              
              
              **(4,357,067**
              **)**






3




**Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
   **Statements
        of Cash Flows**
  ***For
        Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
        2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to September 30,
        2006***




For
                thePeriod
                FromJuly
                25, 2003For
                the Nine-Month Period Ended,
            
            (Inception)
                toSeptember
                30, 2006
            
            September
                30, 2005
            
            September
                30, 2006*Cash
                flows provided by financing activities:*Proceeds
                from issuance of common stock and warrants
            
            $
            6,349,550
            
            $
            35,000
            
            $
            7,525,549





**Net
                  cash provided by financing activities**
              
              
              **6,349,550**
              
              
              **35,000**
              
              
              **7,525,549****Net
                  increase in cash**
              
              **$**
              **2,278,038**
              
              **$**
              **26,818**
              
              **$**
              **2,395,297****Cash
                  - beginning of period**
              
              
              **117,259**
              
              
              **2,338**
              
              
              **-****Cash
                  - end of period**
              
              **$**
              **2,395,297**
              
              **$**
              **29,156**
              
              **$**
              **2,395,297**




*Supplemental
        Disclosure of Cash Flow Information*




For
                  thePeriod
                  FromJuly
                  25, 2003For
                  the Nine-Month Period Ended,
              
              (Inception)
                  toSeptember
                  30, 2006
              
              September
                  30, 2005
              
              September
                  30, 2006Cash
                  paid during the three-month and nine-month period for:InterestIncome
                  taxes




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




4




**Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
   **Notes
          to the Financial Statements**
  ***As
          of September 30, 2006 and***
 ***For
          Each of the Three-Month and Nine-Month Periods Ended September 30, 2006
          and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to September 30,
          2006***






**1.**  **Interim
      Presentation**




The
      accompanying condensed interim financial statements as of September 30, 2006
      and
      for the three-month and nine-month periods ended September 30, 2006 and 2005
      and
      for the period from July 25, 2003 (inception) to September 30, 2006 are
      unaudited. In the opinion of management, such condensed financial statements
      include all adjustments consisting only of normal recurring accruals necessary
      for the fair presentation of the financial position and the results of
      operations. The results of operations for the three-month and nine-month periods
      ended September 30, 2006 and 2005 are not necessarily indicative of the results
      to be expected for the full year. The interim financial statements should be
      read in conjunction with the Company's annual report on Form 10-KSB/A as of
      December 31, 2005.




Certain
      quarterly, year-to-date and inception-to-date amounts have been reclassified
      to
      conform to the current period presentation.




**2.**  **Description
      of Business and Development Stage Operations**




Eternal
      Energy Corp. (formerly Golden Hope Resources Corp.) (the "Company") was
      incorporated in the state of Nevada in March 2003. The Company's business plan
      is to develop and engage in the acquisition, exploration and development of
      natural resource properties. At September 30, 2006, the Company has entered
      into
      participation agreements related to oil and gas exploration projects in the
      Big
      Sand Spring Valley Prospect and the Cherry Creek Project, both located in Nye
      County, Nevada and UKCS Quads 14, 41 and 42 located in the North Sea. The
      Company's mining claims in British Columbia lapsed during 2005.




**3.**  **Summary
      of Significant Accounting Policies**




*Basis
      of Presentation*




These
      financial statements are presented in United States dollars and have been
      prepared in accordance with accounting principles generally accepted in the
      United States.




*Development
      Stage Operations*




The
      Company is considered a development stage company in accordance with Financial
      Accounting Standards Board's Statement of Financial Accounting Standards
      ("SFAS") No. 7, *Accounting
      and Reporting by Development Stage Enterprises* .
      Its
      operations have been limited to general administrative operations and a limited
      amount of exploration, and it has incurred losses totaling $921,601 before
      the
      gain on warrant derivatives for the period from July 25, 2003 (inception) to
      September 30, 2006 and has minimum future drilling obligations of $5 million
      as
      of September 30, 2006. The Company has on deposit $3 million to be used against
      these future minimum drilling costs.




5




**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***


**3.**  **Summary
      of Significant Accounting Policies, Continued**




*Concentration
      of Credit Risk*




At
      September 30, 2006, the Company had $2,178,038 on deposit that exceeded United
      States (FDIC) federally insurance limit of $100,000 per bank. The Company
      believes this credit risk is mitigated due to the financial strength of the
      financial institution.




*Oil
      and Gas Properties*




The
      Company follows the full cost method of accounting for its investments in oil
      and gas properties. Accordingly, all costs associated with the acquisition,
      exploration and development of oil and gas reserves are capitalized as incurred.
      The Company has not capitalized any interest or any of its internal costs
      related to its investments in oil and gas properties.




In
      addition, the capitalized costs are subject to a "ceiling test," which basically
      limits such costs to the aggregate of the "estimated present value" of future
      net revenues from proved reserves, discounted at a 10 percent interest rate,
      based on current economic and operating conditions, plus the lower of cost
      or
      fair market value of unproved properties.




At
      September 30, 2006, all of the Company’s investments in oil and gas properties
      are in the exploration stage, and therefore are not subject to the ceiling
      test.




*Fair
      Value of Financial Instruments*




In
      accordance with the requirements of Financial Accounting Standards Board's
      Statement of Financial Accounting Standards ("SFAS") No. 107, *Disclosures
      about Fair Value of Financial Instruments* ,
      the
      Company has determined the estimated fair value of its financial instrument
      using available market information and appropriate valuation methodologies.
      The
      fair value of financial instruments classified as current liabilities
      approximates their carrying values due to their short-term
      maturity.




6





**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***




**3.**  **Summary
      of Significant Accounting Policies, Continued**




*Accounting
      for Stock-Based Employee Compensation*




In
      December 2004, the Financial Accounting Standards Board issued SFAS No. 123(R), *Share-Based
      Payment* .
      This
      pronouncement amends SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      ("SFAS
      No. 123") and supersedes Accounting Principles Board Opinion No. 25, *Accounting
      for Stock Issued to Employees* ("APB
      No. 25"). SFAS No. 123(R) requires that companies account for awards of equity
      instruments issued to employees under the fair value method of accounting and
      recognize such amounts in their statements of operations. The Company adopted
      SFAS No. 123(R) on January 1, 2006, using the modified prospective method and,
      accordingly, has not restated the consolidated statements of operations for
      periods prior to January 1, 2006. Under SFAS No. 123(R), the Company is required
      to measure compensation cost for all stock-based awards at fair value on the
      date of grant and recognize compensation expense in our consolidated statements
      of operations over the service period that the awards are expected to vest.
      As
      permitted under SFAS No. 123(R), the Company has elected to recognize
      compensation cost for all options with graded vesting on a straight-line basis
      over the vesting period of the entire option.




Prior
      to
      January 1, 2006, the Company accounted for share-based payment, as permitted
      by
      SFAS No. 123 under the intrinsic value method described in APB No. 25. Under
      the
      intrinsic value method, no stock-based employee compensation cost is recorded
      when the exercise price is equal to, or higher than, the market value of the
      underlying common stock on the date of grant.




The
      following table illustrates the effect on net loss and loss per share if the
      Company had applied the fair value recognition provisions of SFAS No. 123(R)
      to
      stock-based employee compensation, using the straight-line method, for the
      following periods.




7





**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***


**3.**  **Summary
      of Significant Accounting Policies, Continued**




*Accounting
      for Stock-Based Employee Compensation, Continued*




For
                  theFor
                  the
              
              For
                  the
              
              Period
                  FromThree-Month
              
              Nine-Month
              
              July
                  25, 2003Period
                  Ended
              
              Period
                  Ended
              
              (Inception)
                  toSeptember
                  30, 2005
              
              September
                  30, 2004
              
              September
                  30, 2005Net
                  income (loss), as reported
              
              $
              3,074,730
              
              $
              (4,801
              )
              $
              2,796,269Total
                  stock-based employee compensation expense determined under fair
                  value
                  based method for all awards, net of related tax effect
              
              
              (15,605
              )
              
              (46,815
              )
              
              (55,974
              )Pro
                  forma net income
              
              $
              5,250,785
              
              $
              3,027,915
              
              $
              2,740,295Loss
                  per share:Basic
                  and diluted - as reported
              
              $
              0.13
              
              $
              0.08
              
              $
              0.07Basic
                  and diluted - pro forma
              
              $
              0.13
              
              $
              0.08
              
              $
              0.07




There
      was
      no effect on net loss or loss per share in the three-month and nine-month
      periods ended September 30, 2006.




*Stock
      Split*




In
      November 2005, the Company forward split its outstanding common shares 35 for
      1.
      All capital accounts, historical share amounts, weighted average share, and
      loss
      per share have been restated as if this forward split occurred at
      inception.




*Basic
      and Diluted Loss Per Share*




Basic
      loss per common share is computed by dividing net loss available to common
      shareholders by the weighted average number of common shares outstanding.
      Diluted loss per common share is computed in the same way as basic 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. As
      of
      September 30, 2006, the Company had outstanding stock options and warrants
      that
      can be converted into 15,925,800 shares of common stock. The exercise price
      of
      the warrants and options is greater than the market price of shares of the
      Company's common stock at September 30, 2006, and therefore, the options and
      warrants would have an anti-dilutive effect and, therefore, are not included
      in
      diluted loss per share.




8


**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***




**3.**  **Summary
      of Significant Accounting Policies, Continued**




*Income
      Taxes*




The
      Company follows the liability method of accounting for income taxes. Under
      this
      method, deferred income tax assets and liabilities are recognized for the future
      tax consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      balances. Deferred income tax assets and liabilities are measured using enacted
      or substantially enacted tax rates expected to apply to the taxable income
      in
      the years in which those differences are expected to be recovered or settled.
      The effect on deferred income tax assets and liabilities of a change in tax
      rates is recognized in income in the period that includes the date of enactment
      or substantive enactment.




*Use
      of Estimates and Assumptions*




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires us to make estimates and
      assumptions that affect the reported amounts of assets, liabilities, revenues
      and expenses and disclosure of contingent obligations in the financial
      statements and accompanying notes. Our most significant assumptions are the
      estimates used in the determination of the deferred income tax asset valuation
      allowance and the determination of the value of the Company’s common shares that
      were issued for obligations. The estimation process requires assumptions to
      be
      made about future events and conditions, and as such, is inherently subjective
      and uncertain. Actual results could differ materially from our
      estimates.




**4.**  **Oil
      and Gas Properties**




The
      Company has entered into participation agreements in three exploratory oil
      and
      gas properties. Two of these agreements were entered into during the year ended
      December 31, 2005 and the third was entered into in January 2006. The agreements
      provide for the Company to have working interests in the wells, if they are
      successful, ranging from 10% to 50%. The Company paid certain amounts upon
      execution of the agreements, and is obligated to share in the drilling costs
      of
      the exploratory wells. In addition, the Company has agreed to issue shares
      of
      its common stock based upon the proven reserves of one of the properties. A
      description of the oil and gas properties follows.




9





**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***




**4.**  **Oil
      and Gas Properties, Continued**




*Big
      Sand Spring Valley and Cherry Creek Prospect*




The
      Company acquired a 50% working interest in these properties for an initial
      payment of $667,000 and the obligation for a future payment of $2,000,000 which
      represents 50% of the initial drilling costs. Subsequently, the Company is
      obligated to pay 50% of additional drilling costs on this property. In addition,
      the Company is obligated to issue one million shares of its common stock for
      each ten million equivalent barrels of net proven oil reserves developed on
      the
      Big Sand Spring Valley Prospect. At September 30, 2006 the Company was not
      obligated to fund any additional drilling costs nor are there any net proven
      oil
      reserves on these properties. This participation agreement has a term of ten
      years.




*North
      Sea Quad 14*




The
      Company acquired a 10% working interest in this property for an initial payment
      of $90,000 which is designated as payment for 3-D seismic costs. In March 2006,
      the Company placed a $1.5 million deposit to serve as a cash bond which
      represents its share of the estimated the $10 million drilling costs of this
      exploratory well. In addition, the Company is obligated to pay 15% of production
      testing, completion, and other costs. The test well has not been completed
      as of
      September 30, 2006.




*North
      Sea Quad 41 and 42*




In
      January 2006 the Company acquired a 10% working interest in this property for
      an
      initial payment of $75,000 which is designated as payment for 3-D seismic costs.
      In March 2006, the Company placed a $1.5 million deposit to serve as a cash
      bond
      which represents its share of the estimated $10 million drilling costs of the
      first exploratory well on this property. In addition, the Company is obligated
      to pay 15% of the production testing, completion, and other costs.




**5.**  **Deferred
      Income Taxes**




There
      is
      no current or deferred income tax provision due to the Company's historical
      losses and valuation allowance. The gain or loss on warrant derivatives is
      not
      included in the determination of taxable income or loss, and therefore no
      deferred taxes have been recorded. The gain or loss on warrant derivatives
      is
      not taxable and therefore no deferred tax has been recorded.




10


**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***




**6.**  **Commitments
      and Contingencies**




*Financial
      Results, Liquidity and Management's Plan*




The
      Company has incurred net losses before the gain on warrant derivatives for
      the
      three-month and nine-month periods ended September 30, 2006 of $230,154, and
      $633,682, respectively; and for the period from July 25, 2003 (inception) to
      September 30, 2006 of $921,601. Despite its negative cash flows from operations
      of $471,445 for the nine-month period ended September 30, 2006 and $773,185
      for
      the period from July 25, 2003 (inception) to September 30, 2006, respectively,
      the Company has been able to obtain additional operating capital through private
      equity funding sources. During the nine-month period ended September 30, 2006,
      the Company was able to raise additional equity funds of $6,349,760. As of
      September 30, 2006, the Company had $2,395,297 in cash on hand, but Management's
      plans include the continued development and implementation of its business
      plan
      including a minimum payment of $2,000,000 for the Company’s portion of future
      drilling costs. The Company has as of yet not recognized any revenue nor have
      any of its planned drilling projects commenced, and it is still in the
      developmental phase. The Company has relied upon equity funding and a loan
      from
      a related party since inception.




*Litigation*




The
      Company is not aware of any litigation matters pending or threatened as of
      September 30, 2006 that will materially affect the Company's financial
      statements. The Company may in the future become involved in matters of
      litigation that the Company considers ordinary routine litigation incidental
      to
      the Company's business. The Company's policy is to accrue during a period,
      as a
      charge to operations, amounts related to legal matters if it is probable that
      a
      liability has been incurred and the amount of loss can be reasonably estimated,
      as required by SFAS No. 5, *Accounting
      for Contingencies* .




*Drilling
      Cost Obligations*




As
      discussed in Note 4, the Company is obligated to fund its share of drilling
      costs related to its participation in three exploratory oil and gas wells.
      The
      minimum obligation on these wells is $5 million, none of which has been expended
      at September 30, 2006. The Company has made deposits of $3 million to be used
      for these future drilling costs.




11


**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***




**6.**  **Commitments
      and Contingencies, Continued**




*Employment
      Agreement*




The
      Company entered into an employment agreement with its president. This agreement
      has a term of two years, provides for annual compensation of $60,000 and a
      signing bonus of $90,000 has been paid at September 30, 2006. In addition,
      the
      Company granted to its president options to purchase 1,443,800 shares of the
      Company’s common stock at an exercise price of $1.00 per share. The employment
      agreement also gives the Company the right to repurchase from the president
      1,250,000 shares he currently owns upon his termination. The repurchase price
      is
      the lesser of the fair market value of the shares on the date the repurchase
      right is exercised by the Company or $.023 per share.




This
      repurchase right lapses as follows:




Number
                  ofDate
              
              SharesMay
                  7, 2007
              
              
              625,000November
                  7, 2007
              
              
              625,000Total
              
              
              1,250,000




**7.**  **Share-Based
      Payment**




In
      November 2005, the Company granted options to purchase 1,443,800 shares of
      its
      common stock to its president. The exercise price of these options is $1.00
      per
      share, which exceeded the market price on the effective date of grant. The
      options vest at the rate of 240,633 shares at the end of each six-month period
      from the effective date of grant, and all become exercisable on November 7,
      2008. Options to purchase 240,633 shares were exercisable at September 30,
      2006.




In
      February 2006, the Company granted options to purchase 500,000 shares of its
      common stock to a director. The exercise price of these options is $1.00 per
      share. The market price on the effective date of grant was $1.19. The Company
      recognized $33,513 and $79,314 as compensation expense during the three month
      and nine-month periods ended September 30, 2006. The options vest at the rate
      of
      83,333 shares at the end of each six-month period from the effective date of
      grant, and all become exercisable on February 27, 2009. Of these options, 83,333
      were exercisable at September 30, 2006.




The
      weighted average estimated fair value of the stock options granted during the
      nine-month period ended September 30, 2006 was $0.80 per share. The amount
      was
      determined using the Black-Scholes option pricing model, which values options
      based on the stock price




12





**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***




**7.**  **Share-Based
      Payment, Continued**




at
      the
      grant date, the expected life of the option, the estimated volatility of the
      stock, the expected dividend payments, and the risk-free interest rate over
      the
      expected life of the option.




The
      assumptions used in the Black-Scholes option pricing model for the stock options
      granted during the nine-month period ended September 30, 2006 and for the period
      from July 25, 2003 (inception) to September 30, 2006 were as
      follows:




For
                  theFor
                  the
              
              Period
                  FromNine
                  Month
              
              July
                  25, 2003Period
                  Ended
              
              (Inception)
                  toSeptember
                  30, 2006
              
              September
                  30, 2006Risk-free
                  interest rate
              
              
              4.6
              %
              
              4.41
              %Expected
                  volatility of common stock
              
              
              101
              %
              
              101
              %Dividend
                  yield
              
              $
              0.00
              
              $
              0.00Expected
                  life of options
              
              
              3
                  years
              
              
              3
                  yearsWeighted
                  average fair market value of options granted
              
              $
              0.80
              
              $
              0.32




**8.**  **Equity
      Transactions**




*Sale
      of Equity Units*




In
      March
      and May 2006, the Company sold 11,876,000 and 1,248,000 equity units,
      respectively, through a private placement offering. Each equity unit consisted
      of one share of the Company’s common stock and one warrant to purchase a share
      of the Company’s common stock at $1.00 per share. The per equity unit price was
      $0.50 with net proceeds of $6,149,760. The equity units have a registration
      rights agreement that require the Company to file a registration statement
      with
      the Securities and Exchange Commission covering the shares and shares to be
      issued upon exercise of the warrants. The registration rights agreement provide
      for liquidated damages equal to one percent of the proceeds of the unit sales
      for each thirty day period in which the registration statement is not filed
      by
      June 29, 2006. The registration statement was filed in June 2006 and is not
      effective at November 14, 2006.




13




**Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
   **Notes
        to the Financial Statements**
  ***As
        of September 30, 2006 and***
 ***For
        Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
        2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to September 30,
        2006***


**8.**  **Equity
      Transactions, Continued**




*Warrant
      Derivative Liability*




The
      holders of the warrants to purchase shares of the Company’s common stock have
      registration rights that require the Company to file a registration statement
      with the Securities and Exchange Commission to register for resale the common
      stock to be issued upon exercise of the warrants. Because the ability to
      register the shares to be issued upon exercise is deemed to be outside the
      control of the Company, the initial fair value of the warrants were recorded
      as
      a financial instrument derivative liability and are marked to market at the
      end
      of each reporting period. At November 14, 2006, the registration statement
      is
      not effective.




The
      Company estimated the fair value of the warrants using the Black-Scholes
      valuation model with the following assumptions:




September
                  30Inception
              
              2006Term
              
              
              24
                  months
              
              
              16
                  monthsRisk-free
                  interest rate
              
              
              4.34
              %
              
              4.82
              %Volatility
              
              
              101
              %
              
              101
              %Dividend
                  yield
              
              
              -0-
              
              
              -0-




*Exercise
      of Warrants*




In
      August
      2006, warrants to purchase 200,000 shares of the Company's common shares were
      exercised, with net proceeds of $200,000.




*Shares
      Reserved for Future Issuance*




Options
              
              
              1,943,800Warrants
              
              
              14,050,000Total
                  at September 30, 2006
              
              
              15,993,800




The
      Company has reserved shares for future issuance upon exercise of outstanding
      options and warrants as follows:




14





**Eternal
      Energy Corp.**


**(Formerly
      Golden Hope Resources Corp.)**


**(A
      Company in the Development Stage)**






**Notes
      to the Financial Statements**




***As
      of September 30, 2006 and***


***For
      Each of the Three-Month and Nine-Month Periods Ended September 30, 2006 and
      2005
      and***


***For
      the Period From July 25, 2003 (Inception) to September 30,
      2006***


**8.**  **Equity
      Transactions, Continued**




*Shares
      Reserved for Future Issuance, Continued*




These
      amounts do not include any shares that may have to be issued upon the discovery
      of net proved reserves in the Nevada oil and gas property.




**9.**  **Subsequent
      Event**




In
      August
      2006, the Company entered into a letter of intent to acquire an oil and gas
      exploration company. In November 2006, the parties agreed to cancel the letter
      of intent and the Company forfeited $125,000 of its $250,000
      deposit.


15





**Item
      2. Management’s Discussion and Analysis**





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





A
      Note
      About Forward-Looking Statements





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





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




The
        purchasers of the common shares and warrants to purchase shares of our common
        stock have registration rights that require us to file a registration statement
        with the Securities and Exchange Commission to register for resale the common
        stock issued and to be issued upon exercise of the warrants. Because the
        ability
        to register the shares to be issued upon exercise is deemed to be outside
        our
        control, the initial fair value of the warrants were recorded as a financial
        instrument derivative liability and are marked to market at the end of each
        reporting period. This results in the recordation of a warrant derivative
        liability of $2,435,166 at September 30, 2006, and a gain on warrant derivates
        of $5,496,544 and $3,708,412 during the three- and nine-month periods ended
        September 30, 2006, respectively. At November 20, 2006, the registration
        statement is not effective.
 
 There
        is
        no historical financial information about us upon which to base an evaluation
        of
        our performance. We are a development stage company and have not generated
        any
        revenues from our current operations. We cannot guarantee we will be successful
        in our new core business, or in any business operations. Our business is
        subject
        to risks inherent in the establishment of a new business enterprise, including
        limited capital resources and in the exploration of oil and gas
        reserves.
 
 We
        have
        no assurance that future financing will be available on acceptable terms.
        If
        financing is not available on satisfactory terms, we may be unable to continue
        with our current business plan. If equity financing is available to us on
        acceptable terms, it could result in additional dilution to our existing
        stockholders.
 
 Results
        of Operations for the Three and Nine Month Periods Ended September 30, 2006
        and
        2005
 
 From
        inception to September 30, 2006, we had net income of $2,796,269, including
        a
        gain on warrant derivates of $3,717,897.  Our inception to date loss before
        gain on warrant derivatives is $921,601. Of this amount, $633,682, was generated
        in the nine month period ended September 30, 2006 and $204,891 was generated
        during the fourth quarter of 2005.
 
 We
        recognized a gain on warrant derivatives of $5,496,544 and $3,708,412 during
        the
        three and nine month periods ended September 30, 2006. We had no warrant
        derivatives during the same periods in 2005. The dramatic change between
        the
        periods is due to the value of the warrants issued during the first quarter
        of
        this year exceeding the net proceeds of the offering by $4,102,790, partially
        offset by the decrease in the value of the warrants at March 31, 2006. The
        fair
        value of the warrants decreased at June 30, 2006 and September 30, 2006,
        resulting in the gain during the three and nine month periods ended September
        30, 2006. We determine the fair value of these warrants using the Black Scholes
        valuation model, and we believe that the decline in the price of our common
        shares has had a major effect on the fair value of our warrants. We believe
        that
        the warrant value may increase significantly in future periods, due to
        volatility in the trading price of our common shares.
 
 Operating
        expenses increased significantly during the three and nine month periods
        in 2006
        from the comparable periods in 2005, exclusive of the gain and loss on warrant
        derivatives, as we commenced our current oil and gas exploration activities
        after September 30, 2005. We had no activities during the comparable periods
        in
        2005.
 
 The
        increase in general and administrative expenses increased in the three and
        nine
        month periods ended September 30, 2006, include payroll costs related to
        our new
        officer of $ 70,525 and $195,965, including the amortization of the value
        of
        options granted to a director in February 2006 of $33,513 and $79,314 in
        the
        three and nine-month periods in 2006, respectively. We incurred travel costs
        related to our investments in the North Sea exploration programs of $52,842
        during the nine month period in 2006, substantially all of which occurred
        prior
        to the third quarter of 2006. The balance of these expenses relate to office
        related costs. Professional fees were $216,377, of which $70,807 was incurred
        during the three month period ended September 30, 2006. These fees related
        to
        the costs associated with the filing of our registration statement and those
        associated with our investments in oil and gas ventures.
 
 16
  **Liquidity
        and Capital Resources**
 
 As
        of
        September 30, 2006, our total assets were $6,766,739, which included cash
        balances of $2,395,297. Our total liabilities were $2,518,643, including
        warrant
        derivative liability of $2,435,166. All of our liabilities were current.
        However, we do not expect to pay the balance of the warrant derivative
        liability, as we expect that this liability will be transferred to equity
        when
        the registration statement covering the shares to be issued upon exercise
        is
        effective, when the warrants are exercised, or when the warrants lapse. As
        of
        December 31, 2005, our total assets were $950,509, of which $193,509 are
        current, and our total liabilities were $137,871, including the warrant
        derivative liability of $75,442. The increase in total assets is a result
        of an
        increase in cash from the sale of our equity units, $3 million of which was
        deposited to be used for future drilling costs in our North Sea oil and gas
        exploratory projects. During the year ended December 31, 2005, we sold equity
        units with net proceeds of $1,126,000, and during the nine month period ended
        September 30, 2006, we sold equity units with net proceeds of $6,149,760.
        Each
        of these equity unit sales consisted of one share of our common stock and
        a
        warrant to purchase one share of our common stock. The warrant exercise price
        of
        the warrants sold in 2005 was $1.20 per share and the warrant exercise price
        of
        the warrants sold in March 2006 is $1.00 per share. Due to the registration
        rights agreement, the total proceeds of these offerings are recorded as a
        warrant derivative liability.
 
 Despite
        our negative cash flows from operation of $471,445  and
        $773,185 for the nine month period ended September 30, 2006 and the period
        from
        July 25, 2003 (inception) to September 30, 2006, respectively, and our minimum
        drilling costs associated with our oil and gas exploration participations
        of $2
        million, net of the $3 million we currently have on deposit, we have been
        able
        to obtain additional operating capital through private equity funding sources.
        Management's plan includes the continued development and eventual implementation
        of our business plan. We have relied upon equity funding since
        inception.
 
 As
        of the
        date of this Quarterly Report, we have yet to generate any revenues from
        our
        business operations.
 
 **Plan
        of Operation for the Next Twelve Months**
 
 Since
        inception, we had funded our operations from the private placement of common
        stock and warrants. Although we expect that, during the next 12 months, our
        operating capital needs will be met by our current economic resources and,
        if
        required, by additional private capital stock transactions, there can be
        no
        assurance that funds required will be available on terms acceptable to us
        or at
        all. If we are unable to raise sufficient funds on terms acceptable to us,
        we
        may be unable to complete our business plan. If equity financing is available
        to
        us on acceptable terms, it could result in additional dilution to our existing
        stockholders.
 
 **Off-Balance
        Sheet Arrangements**.
 
 We
        have
        no off balance sheet arrangements at September 30, 2006.
 
 **Current
        Conditions**
 
 In
        November 2005, we entered an oil and gas exploration participation agreement
        related to the drilling of exploratory wells on two sites in Nevada. Our
        initial
        payment on the agreement was $667,000, and we are obligated to participate
        in
        future drilling costs on these projects of at least $2 million. We are obligated
        to issue one million shares of our common stock for each ten million equivalent
        net barrels of proved reserves developed on one of these sites.
  In
        December 2005, we entered into a participation agreement related to the drilling
        of an exploratory well on a prospect site in the North Sea. Our initial payment
        was $90,000, and our share of future minimum drilling costs on this site
        is $1.5
        million.
 
 In
        January 2006, we entered into a participation agreement related to the drilling
        of an exploratory well on a second prospect site in the North Sea. Our initial
        payment was $75,000, and our share of future minimum drilling costs on this
        site
        is $1.5 million.
  17
  **Item
        3. Controls and Procedures**





Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and the principal financial officer, we have
      conducted an evaluation of the effectiveness of the design and operation
      of


our
      disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
      under the Securities Exchange Act of 1934, as of the end of the period covered
      by this report. Based on this evaluation, our principal executive officer and
      principal financial officer concluded as of the evaluation date that our
      disclosure controls and procedures were effective such that the material
      information required to be included in our Securities and Exchange Commission
      reports is recorded, processed, summarized and reported within the time periods
      specified in SEC rules and forms relating to our company, including any
      consolidating subsidiaries, and was made known to us by others within those
      entities, particularly during the period when this report
      was being prepared.





Additionally,
      there were no significant changes in our internal controls or in other factors
      that could significantly affect these controls subsequent to the evaluation
      date. We have not identified any significant deficiencies or material weaknesses
      in our internal controls, and therefore there were no corrective actions
      taken.


18





**PART
      II OTHER INFORMATION**





**Item
      6. Exhibits**





**Exhibit
                Number**
            
            **Description
                of Document**10.1
            
            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 the Company’s Current
                Report on Form 8-K filed on February 3, 2006).10.2
            
            Amended
                and Restated Letter Agreement by and between Eternal Energy Corp.
                and
                Internatioanl Frontier Resources Corporation Relating to Quad 14
                dated
                January 30, 2006 (Incorporated by reference to Exhibit 10.2 of the
                Company’s Current Report on Form 8-K filed on February 3,
                2006).10.3
            
            Finder’s
                Fee Agreement by and between Eternal Energy Corp. and Taverham Company
                Ltd. Dated January 30, 2006 (Incorporated by reference to Exhbiit
                10.3 of
                the Company’s Current Report on Form 8-K filed on February 3,
                2006).10.4
            
            Form
                of Subscription Agreement (Incorporated by refernce to Exhibit 10.1
                of the
                Company’s Current Report on Form 8-K filed on March 8,
                2006).10.5
            
            Form
                of Common Stock Purchase Warrant (Incoroprated by reference to Exhibit
                10.2 of the Company’s Current Report on Form 8-K filed on March 8,
                2006).10.6
            
            Form
                of Registration Rights Agreement (Incorporated by reference to Exhibit
                10.3 of the Company’s Current Report on Form 8-K filed on March 8,
                2006).31.1
            *
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act32.1
            *
            Certification
                pursuant to Section 906 of the Sarbanes-Oxley Act


*Filed
      with this report.


19


**SIGNATURES**





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





ETERNAL
                ENERGY CORP.(Registrant)November
                17, 2006
            /s/Bradley
                M. ColbyBradley
                M. ColbyPresident,
                Chief Executive Officer, Secretary, Treasurer, and Chief Financial
                Officer








20