**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**










**FORM
      10-QSB**




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




**For
      the fiscal quarter ended March 31, 2007**




**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.)





**2549
      West Main Street, Suite 202,** **Littleton,
      Colorado 80120**


(Address
      and telephone number of Principal Executive Offices)





**(303)
      798-5235**


(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 x 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 x





Number
      of
      shares outstanding as of the close of business on August 20, 2007:





**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 x







**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




**Eternal
        Energy Corp.**
  **Condensed
        Financial Statements**
  ***As
        of June 30, 2007,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  2
 **Eternal
          Energy Corp.**
  **Index
          to the Condensed Financial Statements**
  ***As
          of June 30, 2007,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and
          2006***
 Condensed
                  Financial Statements of Eternal Energy Corp.:Condensed
                  Balance Sheet as of June 30, 2007
              
              
              F-1Condensed
                  Statements of Operations For Each of the Three-Month and Six-Month
                  Periods
                  Ended June 30, 2007 and 2006
              
              
              F-2Condensed
                  Statements of Cash Flows For Each of the Six-Month Periods Ended
                  June 30,
                  2007 and 2006
              
              
              F-3Notes
                  to the Condensed Financial Statements
              
              
              F-5  
 **Eternal
            Energy Corp.**
  **Condensed
            Balance Sheet**
  ***June
            30, 2007***
 
 *ASSETS*Current
                  assets:Cash
              
              $
              1,440,714Total
                  current assets
              
              
              1,440,714Equipment
                  and leasehold improvements, net of accumulated depreciation and
                  amortization of $5,208
              
              
              73,110Oil
                  and gas properties
              
              
              2,376,668Deposits
                  - future drilling costs
              
              
              1,531,721**Total
                  assets**
              
              **$**
              **5,422,213***LIABILITIES
                  AND STOCKHOLDERS' EQUITY*Current
                  liabilities:Accounts
                  payable and accrued liabilities
              
              $
              72,500Accrued
                  payroll-related costs
              
              
              13,189**Total
                  current liabilities**
              
              
              **85,689**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
              
              
              7,637,893Accumulated
                  deficit
              
              
              (2,343,919
              )**Total
                  stockholders' equity**
              
              
              **5,336,524****Total
                  liabilities and stockholders' equity**
              
              **$**
              **5,422,213**
 
 The
          accompanying notes are an integral part of the financial
          statements.
  F-1
 **Eternal
              Energy Corp.**
  **Condensed
              Statements of Operations**
  ***For
              Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and
              2006***
 For
                  the Six-Month Period Ended
              
              For
                  the Three-Month Period EndedJune
                  30, 2007
              
              June
                  30, 2006
              
              June
                  30, 2007
              
              June
                  30, 2006Sale
                  of exploration prospect
              
              $
              877,353
              
              
              -
              
              $
              877,353
              
              
              **-**Spud
                  fee revenue
              
              
              249,985
              
              
              -
              
              
              249,985
              
              
              -Total
                  revenue
              
              
              1,127,338
              
              
              -
              
              
              1,127,338
              
              
              -Operating
                  expenses:Costs
                  of prospect sold
              
              
              259,482
              
              
              -
              
              
              259,482
              
              
              -Dry
                  hole costs
              
              
              1,538,416
              
              
              -
              
              
              1,538,416
              
              
              -General
                  and administrative
              
              
              423,737
              
              $
              257,958
              
              
              289,828
              
              $
              170,736Professional
                  fees
              
              
              118,694
              
              
              145,570
              
              
              89,084
              
              
              144,215(Gain)
                  loss on derivatives
              
              
              -
              
              
              1,788,132
              
              
              -
              
              
              (2,130,700
              )Total
                  operating costs
              
              
              2,340,329
              
              
              2,191,660
              
              
              2,176,810
              
              
              (1,815,749
              )Total
                  operating income (loss)
              
              
              (1,212,991
              )
              
              (2,191,660
              )
              
              (1,049,472
              )
              
              1,815,749Interest
                  income
              
              
              33,996
              
              
              -
              
              
              18,711
              
              
              -Income
                  (loss) before cumulative effect of change in accounting
                  principal
              
              
              (1,178,995
              )
              
              (2,191,660
              )
              
              (1,030,761
              )
              
              1,815,749Cumulative
                  effect of the change in accounting principal
              
              
              (4,021,112
              )
              
              -
              
              
              -
              
              
              -**Net
                  income (loss)**
              
              **$**
              **(5,200,107**
              **)**
              **$**
              **(2,191,660**
              **)**
              **$**
              **(1,030,761**
              **)**
              **$**
              **1,815,749****Net
                  income (loss) per common share, basic and diluted**
              
              **$**
              **(0.12**
              **)**
              **$**
              **(0.06**
              **)**
              **$**
              **(0.02**
              **)**
              **$**
              **0.04****Weighted
                  average number of shares outstanding, basic and
                  diluted**
              
              
              **42,550,000**
              
              
              **35,750,000**
              
              
              **42,550,000**
              
              
              **41,554,000**
  The
          accompanying notes are an integral part of the financial
          statements.
 F-2
 **Eternal
          Energy Corp.**
  **Condensed
          Statements of Cash Flows**
  ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and
          2006***
 
 For
                  the Six-Month Period EndedJune
                  30, 2007
              
              June
                  30, 2006*Cash
                  flows provided by (used in) operating activities:*Net
                  income (loss) before cumulative effect of change in accounting
                  principal
              
              $
              (1,178,995
              )
              $
              (2,191,660
              )Adjustments
                  to reconcile net income (loss) to net cash used by operating
                  activities:Non
                  cash transactions:Stock-based
                  compensation
              
              
              92,092
              
              
              45,800Loss
                  on derivatives
              
              
              -
              
              
              1,788,132Depreciation
              
              
              5,208
              
              
              -Dry
                  hole costs incurred in prior year
              
              
              1,543,902
              
              
              -Changes
                  in operating assets and liabilities:Decrease
                  in prepaid expenses
              
              
              12,828
              
              
              41,250Increase
                  (decrease) in accounts payable and accrued liabilities
              
              
              (134,931
              )
              
              (20,847
              )Increase
                  (decrease) in accrued payroll-related costs
              
              
              (2,331
              )
              
              10,727**Net
                  cash used in operating activities**
              
              
              **337,773**
              
              
              (326,598
              )*Cash
                  flows provided by (used in) investing activities:*Return
                  of drilling deposits
              
              
              163,510
              
              
              -Increase
                  in drilling deposits
              
              
              -
              
              
              (3,000,000
              )Additions
                  to oil and gas properties
              
              
              (1,366,181
              )
              
              (75,000
              )Additions
                  to equipment and leasehold improvements
              
              
              (61,198
              )
              
              -**Net
                  cash used in investing activities**
              
              
              (1,263,869
              )
              
              (3,075,000
              )*Cash
                  flows provided by financing activities:*Proceeds
                  from issuance of common stock and warrants
              
              
              -
              
              
              6,149,550**Net
                  cash provided by financing activities**
              
              
              **-**
              
              
              **6,149,550****Net
                  increase (decrease) in cash**
              
              
              (926,096
              )
              
              **2,747,952****Cash
                  - beginning of period**
              
              
              **2,366,810**
              
              
              **117,259****Cash
                  - end of period**
              
              **$**
              **1,440,714**
              
              **$**
              **2,865,211**
  The
          accompanying notes are an integral part of the financial
          statements.
 F-3
  **Eternal
        Energy Corp.**
  **Condensed
        Statements of Cash Flows**
  ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and
        2006***
 
 *Supplemental
                  Disclosure of Cash Flow Information*For
                  the Six-Month Period Ended,June
                  30, 2007
              
              June
                  30, 2006Cash
                  paid for:Interest
              
              
              -
              
              
              -Income
                  taxes
              
              
              -
              
              
              -Fair
                  value of common shares issued in connection with oil and gas property
                  acquisitions
              
              
              -
              
              
              -
 
 The
          accompanying notes are an integral part of the financial
          statements.
  F-4
 **Eternal
          Energy Corp.**
  **Notes
          to the Condensed Financial Statements**
  ***As
          of June 30, 2007,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  **1.**  **Interim
        Presentation**
  The
        accompanying condensed interim financial statements as of June 30, 2007 and
        for
        the three-month and six-month periods ended June 30, 2007 and 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 six-month periods
        ended June 30, 2007 and 2006 are not necessarily indicative of the results
        to be
        expected for the full year. The condensed interim financial statements should
        be
        read in conjunction with the Company's annual report on Form 10-KSB as of
        December 31, 2006.
  **2.**  **Description
        of Business**
  Eternal
        Energy 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, development and sale of natural resource properties. At June
        30,
        2007, 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 and acquired a 45% working interest in West Ranch
        Field
        in Jackson County, Texas.
  In
        June
        2007, the Company sold its interest in the Pebble Beach Prospect, and therefore
        is no longer in the development stage. In addition, the Company has abandoned
        the North Sea Prospects.
  **3.**  **Summary
        of Significant Accounting Policies**
  *Basis
        of Presentation*
  These
        condensed financial statements are presented in United States dollars and
        have
        been prepared in accordance with accounting principles generally accepted
        in the
        United States.
  *Revenue*
  The
        Company records the sale of its interests in prospects in which it has an
        interest when the terms of the transaction are final and the sales price
        is
        determinable. Additional amounts associated with the sale of prospects,
        including spud fees, working interest, royalty, and net profit interests
        are
        recorded as revenue when received.
  *Concentration
        of Credit Risk*
  At
        June
        30, 2007, the Company had $1,340,714 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.
  F-5
 **Eternal
          Energy Corp.**
  **Notes
          to the Condensed Financial Statements**
  ***As
          of June 30, 2007,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  **3.**  **Summary
        of Significant Accounting Policies, Continued**
  *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.
  Costs
        are
        accumulated by specific prospect, or cost center, and if economically viable
        reserves are not discovered in a cost center, the costs incurred are charged
        to
        expense as "dry hole costs."
  At
        June
        30, 2007, 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 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.
  *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, have not restated the consolidated statements of operations
        for
        periods prior to January 1, 2007. 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.
  F-6
  **Eternal
          Energy Corp.**
  **Notes
          to the Condensed Financial Statements**
  ***As
          of June 30, 2007,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  **3.**  **Summary
        of Significant Accounting Policies, Continued**
  *Accounting
        for Stock-Based Employee Compensation, Continued*
  Prior
        to
        January 1, 2007, the Company accounted for stock-based compensation, 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.
  For
                  the Three-Month Period Ended
              
              For
                  the Six-Month Period EndedJune
                  30, 2007
              
              June
                  30, 2006
              
              June
                  30, 2007
              
              June
                  30, 2006Net
                  income (loss), as reported
              
              $
              (1,030,761
              )
              $
              1,815,749
              
              $
              (5,200,107
              )
              $
              (2,191,660
              )Total
                  stock-based employee compensation expense determined under fair
                  value
                  based method for all awards, net of related tax effect
              
              
              (15,605
              )
              
              (15,605
              )
              
              (31,210
              )
              
              (31,210
              )Pro
                  forma net income (loss)
              
              $
              (1,046,366
              )
              $
              1,800,144
              
              $
              (5,231,317
              )
              $
              (2,222,870
              )Income
                  (loss) per share:Basic
                  and diluted - as reported
              
              $
              (0.02
              )
              $
              0.04
              
              $
              (0.12
              )
              $
              (0.06
              )Basic
                  and diluted - pro forma
              
              $
              (0.02
              )
              $
              0.04
              
              $
              (0.12
              )
              $
              (0.06
              )
  *Stock
        Split*
  In
        November 2006, 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.
  F-7
  **Eternal
        Energy Corp.**
  **Notes
        to the Condensed Financial Statements**
  ***As
        of June 30, 2007,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  **3.**  **Summary
        of Significant Accounting Policies, Continued**
  *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
        June 30, 2007, the Company had outstanding stock options and warrants that
        can
        be converted into 16,143,800 shares of common stock. The options and warrants
        would have an anti-dilutive effect and, therefore, are not included in diluted
        loss per share.
  *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 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.
  *New
        Accounting Pronouncements*
  In
        June
        2006, the FASB issued Interpretation No. 48 (FIN 48), “Accounting for
        Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” This
        interpretation was effective as of January 1, 2007.
  F-8
  **Eternal
        Energy Corp.**
  **Notes
        to the Condensed Financial Statements**
  ***As
        of June 30, 2007,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  **3.**  **Summary
        of Significant Accounting Policies, Continued**
  *New
        Accounting Pronouncements, Continued*
  In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS
        No. 157 establishes a single definition of fair value and a framework for
        measuring fair value, sets out a fair value hierarchy to be used to classify
        the
        source of information used in fair value measurements, and requires new
        disclosures of assets and liabilities measured at fair value based on their
        level in the hierarchy. SFAS No. 157 is effective for the Company’s year
        beginning January 1, 2008 and is to be applied prospectively. The Company
        is
        currently evaluating the impacts and disclosures of this standard, but would
        not
        expect SFAS No. 157 to have a material impact on its results of operations
        or
        financial condition.
  In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities”. SFAS No. 159 permits an entity to
        choose, at specified election dates, to measure eligible financial instruments
        and certain other items at fair value that are not currently required to
        be
        measured at fair value. An entity shall report unrealized gains and losses
        on
        items for which the fair value option has been elected in earnings at each
        subsequent reporting date. Upfront costs and fees related to items for which
        the
        fair value option is elected shall be recognized in earnings as incurred
        and not
        deferred. SFAS No. 159 also establishes presentation and disclosure requirements
        designed to facilitate comparisons between entities that choose different
        measurement attributes for similar types of assets and liabilities. SFAS
        No. 159
        is effective for financial statements issued for fiscal years beginning after
        November 15, 2007 (January 1, 2008 for 3M) and interim periods within those
        fiscal years. At the effective date, an entity may elect the fair value option
        for eligible items that exist at that date. The entity shall report the effect
        of the first remeasurement to fair value as a cumulative-effect adjustment
        to
        the opening balance of retained earnings. The Company is currently evaluating
        the impacts and disclosures of this standard, but would not expect SFAS No.
        159
        to have a material impact on its results of operations.
  **4.**  **Change
        of Accounting Principal**
  FASB
        Staff Position No. EITF 00-19-2, "Accounting for Registration Rights Payment
        Arrangements", changes the way registration rights arrangements are recorded.
        This Staff Position no longer requires warrants and embedded conversion features
        with registration rights arrangements to be treated as derivative instruments.
        This Staff Position requires that these instruments be recorded as if they
        had
        not been recorded as a derivative instrument at their inception and the
        difference recorded as a cumulative effect of change in accounting principal.
        This Staff Position prohibits retrospective application and was implemented
        by
        the Company in January 2007. On January 1, 2007, the Company recorded a
        cumulative effect of change in accounting principal and increased additional
        paid in capital by $6,091,061, decreased financial instrument derivative
        liability by $2,069,949 and increased net loss for the six month period ended
        June 30, 2007 by $4,021,112.
  F-9
  **Eternal
          Energy Corp.**
  **Notes
          to the Condensed Financial Statements**
  ***As
          of June 30, 2007,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  **5.**  **Oil
        and Gas Properties**
  In
        May
        2007 the Company acquired a 45% working interest in the South West extension
        of
        the West Ranch Field in Jackson County, Texas. The estimated proved undeveloped
        secondary recovery reserves of this property are 900,000 barrels. The Company
        has invested $1,290,733 in the acquisition of the working interest in this
        property and expects to invest an additional $900,000 in the next 12 months
        in
        this project.
  The
        Company has also entered into participation agreements in three exploratory
        oil
        and gas properties. Two of these were properties have been abandoned. The
        Company has a working interest in the wells on the remaining property, if
        they
        are successful, of 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 the property. A description of the oil and
        gas
        properties follows.
  *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 June 30, 2007 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, Quad 41 and Quad 42*
  The
        Company acquired 10% working interests in these prospects with the obligation
        to
        fund 15% of exploratory wells. The Company placed $1.5 million for the Quad
        14
        prospect and $1.5 million for the Quad 41 and 42 prospect on deposit to cover
        its share of these costs. The exploratory wells on both of these prospects
        have
        been completed and no economically viable reserves were discovered.
  The
        Company’s share of the drilling costs of Quad 14 of $1,309,179 was released to
        the operator from the deposit. No amounts have been released to the operator
        for
        the Quad 41 and 42 prospect and the Company has instructed to holder of the
        funds not to make any distributions. The Company is attempting to determine
        what
        amounts, if any, it is obligated to pay related to this prospect.
  In
        May
        2007, the Company sold its interest in the Pebble Beach prospect for $877,353.
        in addition, the Company will receive $250,000 for each of the first eight
        wells
        drilled on the prospect by the purchaser. The Company records these amounts
        as
“spud fees” when received.
  F-10
  **Eternal
        Energy Corp.**
  **Notes
        to the Condensed Financial Statements**
  ***As
        of June 30, 2007,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  **5.**  **Oil
        and Gas Properties, Continued**
  The
        Company recorded dry hole costs related to the North Sea prospects as
        follows:
  Quad
                  14
              
              $
              1,430,428Quad
                  41 and 42
              
              
              107,988Total
              
              $
              1,538,416
  **6.**  **Commitments
        and Contingencies**
  *Financial
        Results, Liquidity and Management's Plan*
  The
        Company has incurred net losses for the six-month period ended June 30, 2007
        of
        $(5,200,107). The Company has been able to obtain additional operating capital
        through private equity funding sources. As of June 30, 2007, the Company
        had
        $1,440,714 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 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
        June
        30, 2007 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 5, the Company is obligated to fund its share of drilling
        costs related to its participation in exploratory oil and gas wells. The
        minimum
        obligation on the wells on this property is $2 million, none of which has
        been
        expended at June 30, 2007.
  F-11
  **Eternal
        Energy Corp.**
  **Notes
        to the Condensed Financial Statements**
  ***As
        of June 30, 2007,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 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 $90,000 and
        a
        signing bonus of $165,000 of which $90,000 has been paid at June 30, 2007.
        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 2,625,000 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
              
              
              SharesNovember
                  7, 2007
              
              
              1,375,000May
                  7, 2008
              
              
              625,000November
                  7, 2008
              
              
              625,000Total
              
              
              2,625,000
  **7.**  **Stock
        Based Compensation**
  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 721,899 were exercisable at June 30,
        2007.
  In
        February 2006, the Company granted options to purchase 500,000 shares of
        its
        common stock to a director. In December 2006 the Company exchanged the option
        to
        500,000 common shares for a new option to purchase 350,000 shares of common
        stock. In addition, this director was granted an option to purchase an
        additional 300,000 shares of common stock. The exercise price of these options
        is $0.78 per share, which was the market price on the effective date of grant.
        The Company recognized $46,046 and $92,091 as compensation expense during
        the
        three and six month periods ended June 30, 2007. The options vest at the
        rate of
        116,667 shares at the date of grant, and 133,333 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, 250,000 were exercisable at June 30,
        2007.
  F-12
  **Eternal
        Energy Corp.**
  **Notes
        to the Condensed Financial Statements**
  ***As
        of June 30, 2007,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2007 and 2006***
  **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 $6,562,000. The Company paid $440,240 as finders
        fees
        related to this offering. The equity units have a registration rights agreement
        that required 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 provides for
        liquidated damages equal to $72,500, which is included in accrued liabilities
        at
        June 30, 2007. The registration became effective and no additional penalties
        will be due.
  *Warrants*
  2007
              
              2006Weighted
              
              
              
              WeightedAverage
              
              
              
              AverageNumber
                  of
              
              Exercise
              
              Number
                  of
              
              ExerciseWarrants
              
              Price
              
              Warrants
              
              PricesOutstanding,
                  beginning of period
              
              
              14,050,000
              
              $
              1.16
              
              
              1,126,000
              
              $
              1.20Issued
              
              
              -
              
              
              -
              
              
              13,124,000Exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              -Outstanding,
                  June 30
              
              
              14,050,000
              
              $
              1.16
              
              
              14,250,000
              
              $
              1.16Exercisable,
                  June 30
              
              
              14,050,000
              
              $
              1.16
              
              
              14,250,000
              
              $
              1.20
  *Shares
        Reserved for Future Issuance*
  The
        Company has reserved shares for future issuance upon exercise of outstanding
        options and warrants as follows:
  Options
              
              
              2,093,800Warrants
              
              
              14,050,000**Total
                  at June 30, 2007**
              
              
              **16,143,800**
  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.
  F-13
  **Item
      2. Management’s Discussion and Analysis or Plan of
      Operation**




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
      Quarterly 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.




*Results
      of Operations for the Three- and Six-Month Periods Ended June 30, 2007 and
      2006*




In
        June
        2007 we sold our equity interest in Pebble Petroleum, Inc. , and, therefore,
        are
        no longer in the development stage. This transaction represents the first
        revenue that we have generated. We received $877,353 for our interest in
        this
        prospect, which we had acquired earlier in 2007. In addition to the initial
        payment, we will receive $250,000 for each of the first eight wells drilled
        on
        the property. The first well was commenced in June 2007 and we recorded “spud
        fees” of $249,985 in June 2007. A second well was commenced in August 2007 at
        which time we recorded additional spud fee revenue of $250,000. We do not
        know
        at this time when or if any additional wells will be drilled on this property.
        Also during the three-month period ended June 30, 2007 we abandoned our
        interests in the North Sea Quad 14, 41 and 42 activities. Two test wells
        were
        completed and no economical reserves we discovered. Our share of the cost
        of the
        test well on Quad 14 was $1,430,429, which is included in “dry hole costs”
during the three-month period ended June 30, 2007. Also included in dry hole
        costs is $107,988 related to costs we incurred on the Quad 41 and 42 prospect.
        We made a deposit of $1,500,000 to cover our share of the drilling costs
        of the
        test well on this prospect. No amounts of this deposit have been released
        to the
        operator and we have instructed the holder of the funds not to release any
        funds. We are currently attempting to determine what amount, if any, will
        be
        released to the operator. We recorded no revenue prior to June 2007 and we
        recorded no dry hole costs prior to the three-month period ended June 30,
        2007.


In
      2006,
      we privately sold certain of our securities. We provided the holders of those
      securities with certain registration rights that require us to file a
      registration statement with the Securities and Exchange Commission to register
      for resale the common stock and the common stock to be issued upon exercise
      of
      the warrants. Because the ability to register those securities 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 were marked to
      market at the end of each reporting period. We filed the registration statement
      during 2006 and it became effective in the first quarter of 2007.




3




In
      December 2006 the Financial Accounting Standards Board (“FASB”) issued FASB
      Staff Position No. EITF 00-19-2 “Accounting for Registration Rights Payment
      Arrangements.” This Staff Position changes the way registration rights
      arrangements are recorded. This Staff Position no longer requires warrants
      and
      embedded conversion features with registration rights arrangements to be treated
      as derivative instruments. This Staff Position requires that these instruments
      be recorded as if they had not been recorded as a derivative instrument at
      their
      inception and the difference recorded as a cumulative effect of change in
      accounting principal. This Staff Position could not be implemented by the
      Company until 2007 and does not allow retrospective application. On January
      1,
      2007 the Company recorded a cumulative effect of change in accounting principal
      and increased net loss during the three-month period ended March 31, 2007 by
      $4,021,112, increased additional paid-in capital by $6,091,061 and decreased
      financial instrument derivative liability by $2,069,949.




The
      fair
      value of these warrants increased during the three-month period ended March
      31,
      2006 and, therefore, we recorded a loss of warrant derivatives of $3,918,832
      during that period. The loss on warrant derivative liability does not affect
      current or future cash flow, and, therefore, the following discussion reflects
      the results of our operations before considering the gain or loss on warrant
      derivative liability during the three- and six-month periods ended June 30,
      2006.




General
      and administrative expenses increased from $170,736 and $257,958 for the three-
      and six month periods ended June 30, 2006 to $289,828 and $423,737 for the
      same
      periods in 2007. An analysis of the increases in general and administrative
      expenses and the relevant components follows:




·
            Consulting
                fees decreased $9,139 and $2,112 to $24,374 and $33,488, as we our
                activities, both in evaluating possible energy prospects and in developing
                our infrastructure necessary to support our activities remained consistent
                during the periods.




·
            We
                commenced investor relation activities in June 2006. We incurred
                $13,880
                and $26,255of these costs during the three- and six-month period
                in 2007
                compared to $4,714 in the six-month period in
                2006.




·
            We
                occupied new office space during the first quarter of 2007 and, in
                the
                second quarter of 2007, subleased a portion of our space. Net rent
                expense
                was $4,890 (net of sublease receipts of $11,000)and $23,718 during
                the
                three- and six- month periods in 2007 compared to $3,000 and $6,000
                during
                the same periods in 2006.




·
            Stock
                based compensation was $46,046 and $92,092 during the three- and
                six-
                month periods in 2007 compared to $33,513 and $45,800 during the
                same
                periods in 2006.




·
            Professional
                fees decreased $25,131 and $26,876 to $89,084 and $118,694 during
                the
                three- and six- month periods in 2007 from the same periods in 2006,
                primarily due to legal and accounting fees related to the change
                in
                accounting principal described above and the Registration Statement
                that
                became effective in 2007.




·
            We
                realized $18,711 and $33,996 in interest income during the three-
                and
                six-month periods in 2007 which resulted from the amounts earned
                on the
                proceeds of our private offering in the second quarter of
                2006.




·
            Travel
                costs increased $49,158 and $57,488 during the three- and six-month
                periods in 2007 to $83,000 and $101,000 related to our sale of the
                Pebble
                Beach prospect and our unsuccessful efforts in the North Sea.




·
            During
                the three-month period in 2007, we incurred $72,500 in settlement
                costs
                related to our untimely filing of the registration statement required
                by
                the private offering of our securities in
                2006.




*Liquidity
      and Capital Resources*




As
      of
      June 30, 2007, our total assets were $5,422,213, including cash balances of
      $1,440,714. We have invested $2,376,668 in oil and gas prospects. In addition,
      we have on deposit $1.5 million for our share, if any, related to the
      unsuccessful test well on the Quad 41 and 42 North Sea prospect.. We have
      commitments for future drilling costs totaling at least $2.0 million. During
      the
      year ended December 31, 2005, we sold equity units with net proceeds of
      $1,126,000, and in 2006, we sold equity units with net proceeds of $6,124,760.
      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 is $1.20 per share and the warrant exercise price
      of
      the warrants sold in March 2006 is $1.00 per share.




4




Despite
      our positive cash flows from operation of $332,287 for the six-month period
      ended June 30, 2007, our minimum drilling costs associated with our oil and
      gas
      exploration participations of $2.0 million and our on going administrative
      costs
      exceed our current cash resources. We have been able to obtain additional
      operating capital through private equity funding sources to fund our activities
      to date. Management’s plan includes the continued development and implementation
      of our business plan. We have relied upon equity funding since
      inception.




No
      assurances can be given that we will be able to obtain sufficient working
      capital through the sale of our common stock and borrowing or that the
      development and implementation of our business plan will generate sufficient
      revenues in the future to sustain ongoing operations. These factors raise
      substantial doubt with our auditor about our ability to continue as a going
      concern.




*Plan
      of Operation for the Next 12 Months*




Since
      inception, we have 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 June 30, 2007.




**Item
      3. Controls and Procedures**




We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our Exchange Act reports is recorded,
      processed, summarized and reported within the time periods specified under
      the
      Securities and Exchange Commission’s rules and forms, and that such information
      is accumulated and communicated to our management, including our Principal
      Executive Officer and our Principal Financial Officer, as appropriate, to allow
      timely decisions regarding required disclosures. Our management, including
      our
      Principal Executive Officer and our Principal Financial Officer, does not expect
      that our disclosure controls or procedures will prevent all error and all fraud.
      A control system, no matter how well conceived and operated, can provide only
      reasonable, not absolute assurance that the objectives of the control system
      are
      met. Further, the benefits of controls must be considered relative to their
      costs. Because of the inherent limitations in all control systems, no evaluation
      of controls can provide absolute assurance that all control issues and instances
      of fraud, if any, within us have been detected.




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our Principal Executive Officer and our Principal
      Financial Officer, of the effectiveness of the design and operation of our
      disclosure controls and procedures as of the end of the period covered by this
      report. Based on the foregoing, our Principal Executive Officer and our
      Principal Financial Officer concluded that our disclosure controls and
      procedures were effective at the reasonable assurance level.




There
      has
      been no change in our internal controls over financial reporting during our
      most
      recent fiscal quarter that has materially affected, or is reasonably likely
      to
      materially affect, our internal controls over financial reporting.




5


**PART
      II. OTHER INFORMATION**




**Item
      6. Exhibits**




**Exhibit**
              
              **Description
                  of Exhibit**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 between Eternal Energy Corp. and Merganser Limited,
                  dated November 7, 2005. (Incorporated by reference to Exhibit 10.2
                  of our
                  Current Report on Form 8-K filed November 9, 2005.)10.3
              
              Form
                  of Subscription Agreement for November 2005 private placement.
                  (Incorporated by reference to Exhibit 10.3 of our Current Report
                  on Form
                  8-K filed November 9, 2005.)10.4
              
              Form
                  of Common Stock Purchase Warrant for November 2005 private placement.
                  (Incorporated by reference to Exhibit 10.4 of our Current Report
                  on Form
                  8-K filed November 9, 2005.)10.5
              
              Registration
                  Rights Agreement for November 2005 private placement. (Incorporated
                  by
                  reference to Exhibit 10.5 of our Current Report on Form 8-K filed
                  November
                  9, 2005.)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
              
              Employment
                  Agreement by and between Eternal Energy Corp. and Bradley M. Colby.
                  (Incorporated by reference to Exhibit 10.1 of our Amended Current
                  Report
                  on Form 8-K/A filed June 29, 2006).10.8
              
              First
                  Amendment to Employment Agreement by and between Eternal Energy
                  Corp. and
                  Bradley M. Colby (Incorporated by reference to Exhibit 10.1(a)
                  of our
                  Current Report on Form 8-K filed December 8, 2006).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.)
  6
  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
              
              Finder’s
                  Fee Agreement by and between Eternal Energy Corp. and Taverham
                  Company
                  Ltd. dated January 30, 2006. (Incorporated by reference to Exhibit
                  10.3 of
                  our Current Report on Form 8-K filed February 3, 2006.)10.12
              
              Form
                  of Subscription Agreement for March 2006 private placement. (Incorporated
                  by reference to Exhibit 10.1 of our Current Report on Form 8-K
                  filed March
                  8, 2006.)10.13
              
              Form
                  of Common Stock Purchase Warrant for March 2006 private placement.
                  (Incorporated by reference to Exhibit 10.2 of our Current Report
                  on Form
                  8-K filed March 8, 2006.)10.14
              
              Form
                  of Registration Rights Agreement for March 2006 private placement.
                  (Incorporated by reference to Exhibit 10.1 of our Amended Current
                  Report
                  on Form 8-K/A filed March 29, 2006.)10.15
              
              Letter
                  Agreement between us and Eden Energy Corp. dated April 14, 2006
                  (Incorporated by reference to Exhibit 10.1 our Current Report on
                  Form 8-K
                  filed April 21, 2006).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 Registration
                  Statement
                  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
                  Registration Statement 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 Registration
                  Statement on Form 10-KSB filed April 16, 2007).31.1*
              
              Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act31.2*
              
              Certification
                  pursuant to Section 906 of the Sarbanes-Oxley
                  Act







*
      Filed
      with this report.


7


**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)August
                20, 2007
            
            /s/
                BRADLEY M.
                COLBYBradley
                M. ColbyPresident,
                Chief Executive Officer, Secretary,
              Treasurer,
                and Chief Financial Officer


8