As
      filed
      with the Securities and Exchange Commission on August 21, 2006




**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 June 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 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 21, 2006:





**TITLE
                OF CLASS**
            
            **NUMBER
                OF SHARES**
              **OUTSTANDING**Common
                Stock, $0.001 par value.
            
            42,350,000





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









**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 June 30, 2006
              
              
              2Statements
                  of Operations For Each of the Three Month Periods Ended June 30,
                  2006 and
                  2005 and for the Period from July 25, 2003 (Inception) to June
                  30,
                  2006
              
              
              3Statements
                  of Cash Flows For Each of the Three-Month Periods Ended June 30,
                  2006 and
                  2005 and for the Period From July 25, 2003 (Inception) to June
                  30,
                  2006
              
              
              4Notes
                  to the Financial Statements
              
              
              6**Item
                  2. Mangement’s Discussion and Analysis or Plan of
                  Operation**
              
              
              20**Item
                  3. Controls and Procedures**
              
              
              20**PART
                  II. OTHER INFORMATION****Item
                  6. Exhibits**
              
              
              24**SIGNATURES**
              
              
              25**CERTIFICATIONS**







**Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
  **Financial
        Statements**
  ***As
        of June 30, 2006,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to June 30,
        2006***
 
 
 
  **Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
  **Index
        to the Financial Statements**
  ***As
        of June 30, 2006,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to June 30,
        2006***
 
  Financial
                  Statements of Eternal Energy Corp. (formerly Golden Hope
                Resources
                  Corp.) (A Company in the Development Stage):Balance
                  Sheet as of June 30, 2006
              
              
              2Statements
                  of Operations For Each of the Three-Month and
                Six-Month
                  Periods Ended June 30, 2006 and 2005 and for
                the
                  Period from July 25, 2003 (Inception) to June 30, 2006
              
              
              3Statements
                  of Cash Flows For Each of the Six-Month Periods
                Ended
                  June 30, 2006 and 2005 and for the Period From July
                25,
                  2003 (Inception) to June 30, 2006
              
              
              4Notes
                  to the Financial Statements
              
              
              6
 
  
   **Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
  **Balance
        Sheet**
  ***June
        30, 2006***
 
   *ASSETS*Current
                  assets:Cash
              
              $
              2,865,211Prepaid
                  compensation
              
              
              35,000Total
                  current assets
              
              
              2,900,211Oil
                  and gas properties
              
              
              832,000Deposits
                  - future drilling costs
              
              
              3,000,000**Total
                  assets**
              
              **$**
              **6,732,211**
 *LIABILITIES
                  AND STOCKHOLDERS'
                  DEFICIT*Current
                  liabilities:Accounts
                  payable and accrued liabilities
              
              $
              17,539Accrued
                  payroll-related costs
              
              
              34,770Warrant
                  derivative liability
              
              
              8,033,810**Total
                  current liabilities**
              
              
              8,086,119Commitments
                  and contingenciesStockholders'
                  deficitCommon
                  stock, $.001 par value, 875,000,000 shares authorized, 42,350,000
                  shares
                  issued and outstanding
              
              
              42,350Additional
                  paid-in capital
              
              
              1,073,864Deficit
                  accumulated during the development stage
              
              
              (2,470,122
              )**Total
                  stockholders' equity**
              
              
              (1,353,908
              )**Total
                  liabilities and stockholders' equity**
              
              **$**
              **6,732,211**
  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 Operations**
  ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to June 30,
        2006***
 
 
  For
                  thePeriod
                  FromJuly
                  25, 2003For
                  the Six-Month Period Ended
              
              For
                  the Three-Month Period Ended
              
              (Inception)
                  toJune
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006Operating
                  expenses:Exploration
                  costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              (24,600
              )General
                  and administrative
              
              $
              (257,958
              )
              $
              (2,315
              )
              $
              (170,736
              )
              
              (170,736
              )
              
              (407,366
              )Professional
                  fees
              
              
              (145,570
              )
              
              (2,500
              )
              
              (144,215
              )
              
              (2,500
              )
              
              (259,507
              )Gain
                  (loss on) derivatives
              
              
              (1,788,132
              )
              
              -
              
              
              2,130,700
              
              
              -
              
              
              (1,778,585
              )Total
                  operating (loss) income
              
              
              (2,191,660
              )
              
              (4,815
              )
              
              1,815,749
              
              
              (3,803
              )
              
              (2,470,058
              )Interest
                  income
              
              
              -
              
              
              14
              
              
              -
              
              
              2
              
              
              25**Net
                  (loss) income**
              
              **$**
              **(2,191,660**
              **)**
              **$**
              **(4,801**
              **)**
              **$**
              **1,815,749**
              
              **$**
              **(3,801**
              **)**
              **$**
              **(2,470,083**
              **)****Net
                  loss per common share - basic and diluted**
              
              **$**
              **(0.07**
              **)**
              **$**
              **0.00**
              
              **$**
              **0.05**
              
              **$**
              **0.00**
              
              **$**
              **(0.07**
              **)****Weighted
                  average number of shares outstanding - basic and
                  diluted**
              
              
              **35,750,000**
              
              
              **50,750,000**
              
              
              **41,554,000**
              
              
              **50,750,000**
              
              
              **36,478,914**
 The
          accompanying notes are an integral part of the financial
          statements.
 
  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 Six-Month Periods Ended June 30, 2006 and 2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to June 30,
        2006***
 
  
 For
                  theFor
                  the
              
              For
                  the
              
              Period
                  FromSix-Month
              
              Three-Month
              
              July
                  25, 2003Period
                  Ended
              
              Period
                  Ended
              
              (Inception)
                  toJune
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006*Cash
                  flows provided by (used in) operating activities:*Net
                  loss
              
              $
              (2,191,660
              )
              $
              (4,801
              )
              $
              (2,470,122
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Non
                  cash transactions:Stock-based
                  compensation
              
              
              45,800
              
              
              -
              
              
              45,800Loss
                  on derivatives
              
              
              1,788,132
              
              
              -
              
              
              1,778,674Changes
                  in operating assets and liabilities:Decrease
                  (increase) in prepaid compensation
              
              
              41,250
              
              
              -
              
              
              (35,000
              )(Decrease)
                  increase in accounts payable and accrued liabilities
              
              
              (20,847
              )
              
              1,000
              
              
              17,539Increase
                  in accrued payroll-related costs
              
              
              10,727
              
              
              -
              
              
              34,770**Net
                  cash used in operating activities**
              
              
              **(326,598**
              **)**
              
              **(3,801**
              **)**
              
              **(628,339**
              **)***Cash
                  flows used in investing activities:*Increase
                  in drilling deposits
              
              
              (3,000,000
              )
              
              -
              
              
              (3,000,000
              )Additions
                  to oil and gas properties
              
              
              (75,000
              )
              
              -
              
              
              (832,000
              )**Net
                  cash used in investing activities**
              
              
              **(3,075,000**
              **)**
              
              **-**
              
              
              **(3,832,000**
              **)***Cash
                  flows provided by financing activities:*Proceeds
                  from issuance of common stock and warrants
              
              
              6,149,550
              
              
              -
              
              
              7,325,550**Net
                  cash provided by financing activities**
              
              
              **6,149,550**
              
              
              **-**
              
              
              **7,325,550****Net
                  increase in cash**
              
              
              **2,747,952**
              
              
              **(3,801**
              **)**
              
              **2,865,211****Cash
                  - beginning of period**
              
              
              **117,259**
              
              
              **-**
              
              
              **-****Cash
                  - end of period**
              
              **$**
              **2,865,211**
              
              **$**
              **(3,801**
              **)**
              **$**
              **2,865,211**
  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)**
  **Statements
        of Cash Flows**
  ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to June 30,
        2006***
 
 
 *Supplemental
        Disclosure of Cash Flow Information*
 
 For
                  theFor
                  the
              
              For
                  the
              
              Period
                  FromSix-Month
              
              Three-Month
              
              July
                  25, 2003Period
                  Ended
              
              Period
                  Ended
              
              (Inception)
                  toJune
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006Cash
                  paid during the three-month and six month period for:
              
              
              -
              
              
              -
              
              
              -Interest
              
              
              -
              
              
              -
              
              
              -Income
                  taxes
  The
        accompanying notes are an integral part of the financial
        statements.
   5
  **Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
  **Notes
        to the Financial Statements**
  ***As
        of June 30, 2006,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to June 30,
        2006***
 
   **1.**
              **Interim
                  Presentation**
  The
        accompanying condensed interim financial statements as of June 30, 2006 and
        for
        the three-month and six-month periods ended June 30, 2006 and 2005 and for
        the
        period from July 25, 2003 (inception) to June 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 six-month periods ended June
        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 as of December 31,
        2005.
  **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 June 30, 2005, 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 $(2,470,083) for
        the
        period from July 25, 2003 (inception) to June 30, 2006 and has minimum future
        drilling obligations of $5 million as of June 30, 2006. The Company has on
        deposit $3 million to be used against these future minimum drilling costs.
   6
  **Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
  **Notes
        to the Financial Statements**
  ***As
        of June 30, 2006,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to June 30,
        2006***
 
   **3.**
              **Summary
                  of Significant Accounting Policies,
                  Continued**
  *Concentration
        of Credit Risk*
  At
        June
        31, 2006, the Company had $2,730,498 on deposit that exceeded United States
        (FDIC) federally insurance limit of $100,000 per bank. At June 30, 2006,
        $34,712
        was held in the trust account of the Company's legal counsel, and therefore
        may
        not be subject to FDIC insurance. The Company believes this credit risk is
        mitigated due to the financial strength of the financial institution and
        of the
        law firm and the restrictions placed upon the trust account balances by the
        California State Bar Association. These funds are available to the Company
        at
        June 30, 2006.
  *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
        June
        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 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.
  7
  **Eternal
        Energy Corp.**
 **(Formerly
        Golden Hope Resources Corp.)**
 **(A
        Company in the Development Stage)**
  **Notes
        to the Financial Statements**
  ***As
        of June 30, 2006,***
 ***For
        Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
        and***
 ***For
        the Period From July 25, 2003 (Inception) to June 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, have 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 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.
   8
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 30,
          2006***
 **3.**
              **Summary
                  of Significant Accounting Policies,
                  Continued**
  *Accounting
        for Stock-Based Employee Compensation, Continued*
  For
                  theFor
                  the
              
              For
                  the
              
              Period
                  FromSix-Month
              
              Six-Month
              
              July
                  25, 2003Period
                  Ended
              
              Period
                  Ended
              
              (Inception)
                  toJune
                  30, 2006
              
              June
                  30, 2006
              
              June
                  30, 2006Net
                  income (loss), as reported
              
              $
              1,815,749
              
              $
              (2,191,660
              )
              $
              (2,470,083
              )Total
                  stock-based employee compensation expense determined under fair
                  value
                  based method for all awards, net of related tax effect
              
              
              (15,605
              )
              
              (31,210
              )
              
              (40,369
              )Pro
                  forma net (loss) income
              
              $
              1,800,144
              
              $
              (2,222,870
              )
              $
              (2,429,714
              )Loss
                  per share:Basic
                  and diluted - as reported
              
              $
              0.05
              
              $
              (0.07
              )
              $
              (0.07
              )Basic
                  and diluted - pro forma
              
              $
              0.05
              
              $
              0.07
              
              $
              (0.07
              )
 
 There
        was
        no effect on net loss or loss per share in the three-month and six-month
        periods
        ended June 30, 2005
  *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
        June 30, 2006, the Company had outstanding stock options and warrants that
        can
        be converted into 15,625,800 shares of common stock. The options and warrants
        would have an anti-dilutive effect and, therefore, are not included in diluted
        loss per share.
   9
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 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 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.
 
  10
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 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 June 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
        June 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.
   11
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 30,
          2006***
 **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, 2006
        of
        $(2,191,660) and for the period from July 25, 2003 (inception) to June 30,
        2006
        of $(2,470,122). Despite its negative cash flows from operations of $(326,598)
        for the six-month periods ended June 30, 2006 and for the period from July
        25,
        2003 (inception) to June 30, 2006 of $(628,339), the Company has been able
        to
        obtain additional operating capital through private equity funding sources.
        During the six-month period ended June 30, 2006, the Company was able to
        raise
        additional equity funds of $5,937,975. As of June 30, 2006, the Company had
        $2,865,211 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
        June
        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 June 30, 2006. The Company has made deposits of $3 million to be used
        for
        these future drilling costs.
   12
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 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 June 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
        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, 2006
              
              
              1,375,000May
                  7, 2007
              
              
              625,000November
                  7, 2007
              
              
              625,000Total
              
              
              2,625,000
 
  13
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 30,
          2006***
 **7.**
              **Loss
                  Per Share**
  The
        following is a reconciliation of the number of shares used in the calculation
        of
        basic loss per share and diluted loss per share for each of the three-month
        and
        six-month periods ended June 30, 2006 and 2005 and for the period from July
        25,
        2003 (inception) to June 30, 2006:
 
 For
                  thePeriod
                  FromJuly
                  25, 2003For
                  the Six-Month Period Ended
              
              For
                  the Three-Month Period Ended
              
              (Inception)
                  toJune
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006Net
                  (loss) income
              
              $
              (2,191,660
              )
              $
              (4,801
              )
              $
              1,815,749
              
              $
              (3,801
              )
              $
              (2,470,083
              )Weighted-average
                  number of common shares outstanding
              
              
              35,750,000
              
              
              50,750,000
              
              
              41,554,000
              
              
              50,750,000
              
              
              36,478,914Incremental
                  shares from the assumed exercise of dilutive stock options and
                  warrants
              
              
              -
              
              
              -
              
              
              16,747,800
              
              
              -
              
              
              -Diluted
                  common shares outstanding
              
              
              35,750,000
              
              
              50,750,000
              
              
              58,301,800
              
              
              50,750,000
              
              
              36,478,914Net
                  loss per share:Basic
              
              $
              (0.06
              )
              $
              0.00
              
              $
              0.05
              
              $
              0.00
              
              $
              (0.07
              )Diluted
              
              $
              (0.06
              )
              $
              0.00
              
              $
              0.03
              
              $
              0.00
              
              $
              (0.07
              )
 
  14
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 30,
          2006***
 **7.**
              **Loss
                  Per Share, Continued****,**
  The
        following securities were not included in the computation of diluted net
        loss
        per share as their effect would have been anti-dilutive:
  For
                  thePeriod
                  FromJuly
                  25, 2003For
                  the Three-Month Period Ended
              
              For
                  the Six-Month Period Ended
              
              (Inception)
                  toJune
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006Options
                  to purchase common stock
              
              
              
              
              
              
              
              
              1,943,800
              
              
              
              
              
              1,943,800Warrants
                  to purchase common stock
              
              
              
              
              
              
              
              
              14,250,000
              
              
              
              
              
              14,250,000
 
  15
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 30,
          2006***
 **8.**
              **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. None of these options were exercisable at June 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 $45,800 as compensation expense during the three month
        and six-month periods ended June 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,
        240,633 were exercisable at June 30, 2006.
  The
        weighted average estimated fair value of the stock options granted during
        the
        six-month period ended June 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 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.
   16
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 30,
          2006***
 **8.**
              **Stock
                  Based Compensation
                  Continued**
  The
        assumptions used in the Black-Scholes option pricing model for the stock
        options
        granted during the six-month period ended June 30, 2006 and for the period
        from
        July 25, 2003 (inception) to June 30, 2006 were as follows:
  For
                  thePeriod
                  FromJuly
                  25, 2003For
                  the Three-Month Period Ended
              
              For
                  the Six-Month Period Ended
              
              (Inception)
                  toJune
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006Risk-free
                  interest rate
              
              
              4.60
              %
              
              -
              %
              
              -
              %
              
              -
              %
              
              4.41%
                  - 4.60
              %Expected
                  volatility of common stock
              
              
              1.01
              
              
              -
              
              
              -
              
              
              -
              
              
              1.01Dividend
                  yield
              
              $
              0.00
              
              $
              0.00
              
              $
              0.00
              
              $
              0.00
              
              $
              0.00Expected
                  life of options
              
              
              3
                  years
              
              
              
              
              
              
              
              
              
              
              
              3
                  yearsWeighted
                  average fair market value of options granted
              
              $
              0.804
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              0.303
 
  17
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 30,
          2006***
 **9.**
              **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.
  *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 August 21, 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:
  December
                  31,Inception
              
              2005Term
              
              
              24
                  months
              
              
              22
                  monthsRisk
                  free interest rate
              
              
              4.34
              %
              
              4.34
              %Volatility
              
              
              101
              %
              
              101
              %Dividend
              
              
              0
              
              
              0
   18
 **Eternal
          Energy Corp.**
 **(Formerly
          Golden Hope Resources Corp.)**
 **(A
          Company in the Development Stage)**
  **Notes
          to the Financial Statements**
  ***As
          of June 30, 2006,***
 ***For
          Each of the Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
          and***
 ***For
          the Period From July 25, 2003 (Inception) to June 30,
          2006***
 **9.**
              **Equity
                  Transactions,
                  Continued**
  *Shares
        Reserved for Future Issuance*
  The
        Company has reserved shares for future issuance upon exercise of outstanding
        options and warrants as follows:
  Options
              
              
              1,943,800Warrants
              
              
              14,259,000Total
                  at June 30, 2006
              
              
              16,202,800
  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.


19


**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 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.
 
 Overview
        of the Company
 
 We
        are a
        start-up, development stage company and have not yet generated or realized
        any
        revenues from our business operations. During the fourth quarter 2005, we
        amended our name from Golden Hope Resources, Inc. to Eternal Energy Corp.
        and
        changed our business plan to focus on the exploration for oil and gas resources.
        Since then, we have altered our management, raised $7,275.760 through June
        30,
        2006 via the private placement of shares of our common stock and warrants
        to
        purchase shares of common stock and invested in three oil and gas exploration
        ventures.
 
 The
        purchasers of the common shares and 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 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 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. This results in
        the
        recordation of a warrant derivative liability of $8,033,810 at June 30, 2006,
        a
        gain on warrant derivatives of $2,130,700 during the three month period ended
        June 30, 2006 and a loss on warrant derivatives of $1,788,132 for the six
        month
        period ended June 30, 2006. At August 21, 2006, the registration statement
        is
        not effective.
  20
  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,
        specifically in the exploration of oil and gas reserves, including limited
        capital resources.
 
 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 Six Month Periods Ended June 30, 2006 and
        2005
 
 From
        inception to June 30, 2006, we had a loss of $2,470,121, including loss on
        warrant derivates of $1,778,585.  Of this amount, $2,191,660, including
        loss on warrant derivatives of $1,788,132, was generated in the six month
        period
        ended June 30, 2006 and $195,433, including gain on warrant derivatives of
        $9,458, was generated during the fourth quarter of 2005.
 
 We
        recognized a gain on warrant derivatives of $2,130,700 during the three month
        period ended June 30, 2006, compared to a loss on these derivatives of
        $3,918,832 during the prior three month period. The dramatic change between
        the
        periods is because the value of the warrants issued during the prior three
        month
        period exceeded the net proceeds of the offering by $4,102,790, which was
        partially offset by the decrease in the value of the warrants at March 31,
        2006.
        The fair value of the warrants decreased in fair value at June 30, 2006,
        resulting in the gain during the three month period ended June 30, 2006.
        We
        determined 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 the volatility in
        the
        trading price of our common shares. We had no derivative instruments during
        the
        three and six month periods in 2005.
 
 Operating
        expenses increased significantly during the three and six 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 June 30, 2005. We had no activities during the comparable periods in
        2005.
 
 The
        increase in general and administrative expenses in the three and six month
        periods ended June 30, 2006 include payroll costs related to our new officer
        of
        $ 76,043 and $125,440, including the amortization of the value of options
        granted to a director in February 2006 of $33,513 and $45,800 in the three
        and
        six month periods in 2006, respectively. We incurred travel costs related
        to our
        investments in the North Sea exploration programs of $25,512 and $51,842
        during
        the three and six month periods in 2006, respectively. The balance of these
        expenses relate to office-related costs. Professional fees were $1145,570,
        substantially all of which were incurred during the three month period ended
        March 31, 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.
 
 21
  Liquidity
        and Capital Resources
 
 As
        of
        June 30, 2006, our total assets were $6,732,211, which included cash balances
        of
        $2,865,211. Our total liabilities were $8,086,118 including warrant derivative
        liability of $8,033,810. 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. All
        of our
        liabilities are current. 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, the Company sold equity
        units
        with net proceeds of $1,126,000; and during the six month period ended June
        30,
        2006, the Company 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 warrant
        derivative liability.
 
 Despite
        our negative cash flows from operation of $326,598 and $628,339 for the six
        month period ended June 30, 2006 and the period from July 25, 2003 (inception)
        to June 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 June 30, 2006.
  22
  Current
        Conditions
 
 In
        November 2005, we entered an oil and gas exploration participation agreement
        related to the drilling of an 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.




**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.





23







**PART
      II OTHER INFORMATION**





**Item
      6. Exhibits**





**Exhibit
                Number**
            
            **Description
                of Document**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.




24


**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
                21, 2006
            /s/Bradley
                M. ColbyBradley
                M. ColbyPresident,
                Chief Executive Officer, Secretary, Treasurer, and Chief Financial
                Officer




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