**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-K**

 

| x | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|---|------------------------------------------------------------------------------------------|

 

**For the fiscal year ended December 31, 2014**

 

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

 

For the transition period from ___________ to _____________

 

**Commission file number: 333-172896**

 

| **North American Oil & Gas Corp.**                 |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

 

| **Nevada**                                                          |   | **98-087028**                          |
|---------------------------------------------------------------------|--------|----------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | IRS Employer (Identification No.) |

 

| **701 E. Santa Clara Street**            |   |       |
|------------------------------------------|--------|------------|
| **Ventura, CA**                          |   | **93001**  |
| (Address of principal executive offices) |   | (Zip Code) |

 

Registrant’s telephone number, including area code: **(805) 665-6308**

 

**Securities registered pursuant to Section 12(b) of the Act: None**

 

**Securities registered pursuant to Section 12(g) of the Securities Exchange Act:**

 

Common Stock, $.001 par value

 

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

 

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  ̈ No x

 

Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No  ̈

 

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ̈

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer                      |  ̈ | Accelerated filer         |  ̈ |
|----------------------------------------------|--------|---------------------------|--------|
| Non-accelerated filer                        |  ̈ | Smaller reporting company | x      |
| (Do not check if a smaller reportingcompany) |   |                           |

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ̈ No x

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s second fiscal quarter: **$31,025 based on a price of $.001 per share, being the price per share of the last private placement of our company at June 30, 2014.**

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  ̈No    ̈**N/A**

 

**There were****107,076,138 shares of the registrant’s common stock outstanding as of April 28, 2015.**

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

 

 

 

**PART I**

 

**Forward Looking Statements.**

 

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (“1934 Act”) as amended. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these terms or other similar or comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

 

|   | · | business strategy;                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                    |
|   | · | estimated quantities of oil and natural gas reserves;                                                   |
|   |   |                                                                                                    |
|   | · | technology;                                                                                             |
|   |   |                                                                                                    |
|   | · | financial strategy;                                                                                     |
|   |   |                                                                                                    |
|   | · | oil and natural gas realized prices;                                                                    |
|   |   |                                                                                                    |
|   | · | timing and amount of future production of oil and natural gas;                                          |
|   |   |                                                                                                    |
|   | · | the amount, nature and timing of capital expenditures;                                                  |
|   |   |                                                                                                    |
|   | · | drilling of wells;                                                                                      |
|   |   |                                                                                                    |
|   | · | competition and government regulations;                                                                 |
|   |   |                                                                                                    |
|   | · | marketing of oil and natural gas;                                                                       |
|   |   |                                                                                                    |
|   | · | exploitation or property acquisitions;                                                                  |
|   |   |                                                                                                    |
|   | · | costs of exploiting and developing our properties and conducting other operations;                      |
|   |   |                                                                                                    |
|   | · | general economic and business conditions;                                                               |
|   |   |                                                                                                    |
|   | · | cash flow and anticipated liquidity;                                                                    |
|   |   |                                                                                                    |
|   | · | uncertainty regarding our future operating results; and                                                 |
|   |   |                                                                                                    |
|   | · | plans, objectives, expectations and intentions contained in this annual report that are not historical. |

 

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

 

Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to the common shares in our capital stock.

 

As used in this annual report, the terms "we," "us," "our," “Company,” and “NAMG” mean North American Oil & Gas Corp., unless the context clearly requires otherwise.

 

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**Item 1. Business.**

 

**BUSINESS**

 

***Overview of Business***

 

NAMG is an early staged oil and gas exploration and development company. The Company through its subsidiary Lani, LLC was formed on June 20, 2011 to purchase, operate, explore and develop oil and gas properties. NAMG acquired oil and gas leases and began development of a plan for oil and gas exploration and producing operations. Our lease properties are located in the San Joaquin Basin onshore California, where NAMG is pursuing crude oil and natural gas opportunities, with existing foundation assets targeting exploration and exploitation of oil and gas projects located near infrastructure and existing discoveries for quick monetisation.

 

NAMG owns lease interests located in the Southern San Joaquin Basin covering its three prospects. On the Tejon Ranch Main lease the Company holds 290 gross acres and 270 net acres; on the Tejon Ranch Extension lease the Company holds 629 gross acres and 346 net acres; and on the White Wolf leases the Company holds 1,169 gross acres and 741 net acres. The majority of these leaseholds are held for primary terms of five years. The current leaseholds are set to expire over various periods from now until February 26, 2018 if no additional lease terms are negotiated or extended. The Company has impaired its remaining leases as at December 31, 2014 given the current low commodity price environment and intends to hold these leases to maturity on the expectation that oil prices and subsequently access to capital will improve going forward. In the meantime the Company has sold a portion of its working interest in the Tejon Ranch Extension leases post year end to a Colorado based company named Soda Creek Exploration LLC who has agreed to assume the Company’s abandonment liability in relation to its sole well Pass Exploration 77-20 and NAMG retains an overriding royalty of 0.5% of any oil and gas produced in the future and is refunded its security bond with the State of California. 

 

Subject to availability of capital, the Company plans to continue using a combination of capital raising, farm-in and asset sale opportunities to develop NAMG’s remaining lease acreage and where possible to maintain an interest either directly or through an overriding royalty exposure in the leases. Our objective is to build value through astute corporate deals to create long term shareholder wealth, through the acquisition and trading of our leases and continue to build a high impact successful exploration company.

   

***History and Corporate Structure***

 

NAMG was incorporated as Calendar Dragon, Inc. on April 8, 2010 in the State of Nevada. From inception until the completion of the reverse acquisition on November 20, 2012, the Company was in the development stage of creating a new calendaring software application. On October 11, 2012, the Company filed an amendment to its Articles of Incorporation changing its name to North American Oil & Gas Corp. During that time, we had no revenue and our operations were limited to capital formation, organization, and development of our business plan and target customer market. As a result of the merger we ceased prior operations and are now engaged in an exploration stage oil and gas enterprise focused on the acquisition, stimulation, rehabilitation and asset improvement of leased acreage in California. At this stage NAMG has no developed reserves or production, and has not realized any revenues from operations.

 

***Principal Products and Services***

 

Oil & Gas

 

NAMG’s business model is fundamentally exposed to oil and natural gas prices which have been highly volatile over the last twelve months. Since July 2014, the benchmark oil price of West Texas Intermediate crude (WTI) has more than halved from $115.00 a barrel to current levels of $50.00 a barrel. The sudden collapse and volatility in commodity prices is attributable to worldwide supply and demand projections and the instability in regions of high production, which are likely to remain for the forecastable future. At these prices, secondary and tertiary recovery, or the recovery accomplished by injecting chemical, gas or water into a reservoir to replace produced fluids, and thus maintain or increase the reservoir pressure, is financially more challenging and has impacted the Company’s operations and ability to fund its exploration activities in California. Whilst we remain optimistic about the future, the Company is preparing for a prolonged period of low commodity prices for the foreseeable future.

 

***Development***

 

Beginning in June 2011, NAMG has focused on California projects, in proven, prolific hydrocarbon provinces. NAMG specifically has focused on three projects within the San Joaquin Basin because of their proximity to existing production and infrastructure; Tejon Ranch Extension, Tejon Main, and White Wolf, with only activity occurring on the Tejon Ranch Extension leases occurring early 2013. Within these three projects, NAMG initially increased its leasehold acreage to over 5,198 net acres of leasehold properties from 3,209 net acres in June 2011, however due to weaker commodity price markets and restricted capital funding the Company has not renewed leases as they expire, allowing the leases to lapse. NAMG currently has approximately 1,357 net acres under leasehold across its three projects as of December 31, 2014.

 

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The Company’s initial area of development was Tejon Ranch Extension where NAMG drilled and completed a well in during the first quarter of 2013. The exploration drilling and testing of the 77-20 well totalled $1,452,294, with $1,300,000 covered at 100% cap by Avere under an agreed Farm-In agreement, with the remainder allocated per the working interest percentages. The purchase of seismic data in February 2013 allowed the Company to thoroughly analyze its Tejon Main and Tejon Extension assets for exploration and development. In a July 2013 investor presentation made available to the public, the Company identified fourteen low risk and high risk prospects targeting light oil with 24/81 mmboe of gross resource potential and acreage play. The primary objectives are in the Eocene, Olcese and JV sands, near shore and submarine channel.

 

The Company’s initial area of development was Tejon Ranch Extension where NAMG drilled and completed a well in during the first quarter of 2013. The exploration drilling and testing of the 77-20 well totaled $1,452,294, with $1,300,000 covered at 100% cap by Avere under an agreed Farm-In agreement, with the remainder allocated per the working interest percentages. The purchase of seismic data in February 2013 allowed the Company to thoroughly analyze its Tejon Main and Tejon Extension assets for exploration and development. In a July 2013 investor presentation made available to the public, the Company identified fourteen low risk and high risk prospects targeting light oil with 24/81 mmboe of gross resource potential and acreage play. The primary objectives are in the Eocene, Olcese and JV sands, near shore and submarine channel.

 

The Company had plans to permit and explore up to four identified well locations, pending sufficient funding for development, however the collapse in commodity prices has impacted NAMG’s ability to raise funds and further tests and develop its leases. Post year end NAMG sold its working interest in the Tejon Ranch Extension project to Soda Creek Exploration LLC, a Colorado based oil and gas company. In consideration of the sale NAMG was relieved of any future abandonment liabilities associated with the suspended well 77-20, retains an overriding royalty of 0.5% on future production and is refunded its security Bond with the State of California.

 

There can be no assurances that we will be successful in any of these endeavours, that the prices of oil and natural gas will recover to levels that support commercial development of any discovery on our leases or that NAMG will source sufficient funding to at favourable terms to pursue its future plans.

 

***Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts***

 

Royalty agreements relating to oil and gas production are fairly standardized in the industry. However, the percentage and amount of royalties paid by producers vary from lease to lease.

 

***Employees***

 

As of April 28, 2015 NAMG employed 2 full time employees, Mr Robert (Bob) Rosenthal President & Chief Executive Officer and Mr Cosimo Damiano Chief Financial Officer, Treasurer & Director. As our activities increase or decrease we may have to adjust our technical, operational and administrative personnel as appropriate. None of our employees are represented by labor unions or covered by any collective bargaining agreement. We believe that our relations with our employees are good.

 

We also contract for the services of independent consultants involved in land, regulatory, geological, accounting, financial and other disciplines as needed. We believe the use of external third party consultants and service providers may enhance our ability to contain operating and general expenses and capital costs.

 

***Competitive Business Conditions***

 

Our oil and gas exploration activities in California are undertaken in a highly competitive and speculative business environment. In seeking other suitable oil and gas properties for acquisition and associated services, we will be competing with a number of other companies located in California and elsewhere, including large oil and gas companies and other independent operators, the majority of which have greater financial, technical and operating resources than NAMG. These factors manifest into competitive bidding process for competition to acquire the most promising acreage blocks and attracting investment funds to fund capital programs. Due to NAMG’s size and limited balance sheet capacity the company is susceptible to competition risks that may have a significant adverse impact on the profitability of existing and new operations.

 

***Governmental Approval and Regulation***

 

The production and sale of oil and gas are subject to regulation by federal, state and local authorities. None of the products that we expect to offer require governmental approval, although permits are required for the drilling of oil and gas wells. Additionally, testing of well integrity is required on a routine basis. When and if we begin to sell natural gas we will be affected by intrastate and interstate gas transportation regulation. Beginning in 1985, the Federal Energy Regulatory Commission (“FERC”), which sets the rates and charges for the transportation and sale of natural gas, adopted regulatory changes that have significantly altered the transportation and marketing of natural gas. The stated purpose of FERC’s changes is to promote competition among the various sectors of the natural gas industry. In 1995, FERC implemented regulations generally grandfathering all previously approved interstate transportation rates and establishing an indexing system for those rates by which adjustments are made annually based on the rate of inflation, subject to certain conditions and limitations. These regulations may tend to increase the cost of transporting oil and natural gas by pipeline. Every five years, FERC will examine the relationship between the changes in the applicable index and the actual cost changes experienced by the industry. We are not able to predict with certainty what effect, if any, these regulations will have on us.

 

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The state and regulatory burden on the oil and natural gas industry generally increases the cost of doing business and affects profitability. While we believe we are presently in compliance with all applicable federal, state and local laws, rules and regulations, continued compliance (or failure to comply) and future legislation might have an adverse impact on our present and contemplated business operations.

 

In September 2013, California Senate Bill 4, was enacted into law. Senate Bill 4 will require oil and gas companies to apply for a permit to conduct fracking, publicly disclose the fracking chemicals they use, notify neighbors before drilling, and monitor ground water and air quality, among other requirements. DOGGR issued proposed regulations related to Senate Bill 4 in November and is in the processing of finalizing these regulations.

 

Because such federal and state regulation are amended or reinterpreted frequently, we are unable to predict with certainty the future cost or impact of complying with these laws. Additionally various counties and other local governments are reviewing the possibility of enacting other rules and regulations regarding fracking. The consequence of any possible local rules and regulations is unknown at this time.

 

***Environmental Compliance***

 

We are subject to various federal, state and local laws and regulations governing the protection of the environment, such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), and the Federal Water Pollution Control Act of 1972, as amended (the “Clean Water Act”), which affect our operations and costs. In particular, our exploration, development and production operations, our activities in connection with storage and transportation of oil and other hydrocarbons and our use of facilities for treating, similar state legislation. These laws and regulations:

 

|   | · | Restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                    |
|   | · | Limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas; and                                                 |
|   |   |                                                                                                                                                                    |
|   | · | Impose substantial liabilities for pollution resulting from our operations.                                                                                             |

 

Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal fines and penalties or the imposition of injunctive relief. Changes in environmental laws and regulations occur regularly, and any changes that result in more stringent and costly waste handling, storage, transport, disposal or cleanup requirements could materially adversely affect our operations and financial position, as well as those in the oil and natural gas industry in general. While we believe that we are in substantial compliance with current applicable environmental laws and regulations and that continued compliance with existing requirements would not have a material adverse impact on us, there is no assurance that this trend will continue in the future.

 

As with the industry generally, compliance with existing regulations increases our overall cost of business. The areas affected include:

 

|   | · | unit production expenses primarily related to the control and limitation of air emissions and the disposal of produced water; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                          |
|   | · | capital costs to drill exploration and development wells primarily related to the management and disposal of drilling fluids; |
|   |   |                                                                                                                          |
|   | · | other oil and natural gas exploration wastes; and                                                                             |
|   |   |                                                                                                                          |
|   | · | capital costs to construct, maintain and upgrade equipment and facilities.                                                    |

 

CERCLA, also known as “Superfund,” imposes liability for response costs and damages to natural resources, without regard to fault or the legality of the original act, on some classes of persons that contributed to the release of a “hazardous substance” into the environment. These persons include the “owner” or “operator” of a disposal site and entities that disposed or arranged for the disposal of the hazardous substances found at the site. CERCLA also authorizes the Environmental Protection Agency (“EPA”) and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. In the course of our ordinary operations, we may generate waste that may fall within CERCLA’s definition of a “hazardous substance.” We may be jointly and severally liable under CERCLA or comparable state statutes for all or part of the costs required cleaning up sites at which these wastes have been disposed. 

 

The Company has leased properties that for many years have been used for the exploration and production of oil and natural gas. Although we and our predecessors have used operating and disposal practices that were standard in the industry at the time, hydrocarbons or other wastes may have been disposed or released on, under or from the properties owned or leased by us or on, under or from other locations where these wastes have been taken for disposal. In addition, many of these properties have been operated by third parties whose actions with respect to the treatment and disposal or release of hydrocarbons or other wastes were not under our control. These properties and wastes disposed on these properties may be subject to CERCLA and analogous state laws. Under these laws, we could be required:

 

|   | · | to remove or remediate previously disposed wastes, including wastes disposed or released by prior owners or operators;                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                          |
|   | · | to clean up contaminated property, including contaminated groundwater; or to perform remedial operations to prevent future contamination; and |
|   |   |                                                                                                                                          |
|   | · | to clean up contaminated property, including contaminated groundwater; or to perform remedial operations to prevent future contamination.     |

 

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At this time, we do not believe that we are associated with any Superfund site and we have not been notified of any claim, liability or damages under CERCLA.

 

The Resource Conservation and Recovery Act (“RCRA”) is the principal federal statute governing the treatment, storage and disposal of hazardous wastes. RCRA imposes stringent operating requirements and liability for failure to meet such requirements on a person who is either a “generator” or “transporter” of hazardous waste or an “owner” or “operator” of a hazardous waste treatment, storage or disposal facility. At present, RCRA includes a statutory exemption that allows most oil and natural gas exploration and production waste to be classified as nonhazardous waste. A similar exemption is contained in many of the state counterparts to RCRA. As a result, we are not required to comply with a substantial portion of RCRA’s requirements because our operations generate minimal quantities of hazardous wastes. At various times in the past, proposals have been made to amend RCRA to rescind the exemption that excludes oil and natural gas exploration and production wastes from regulation as hazardous waste. Repeal or modification of the exemption by administrative, legislative or judicial process, or modification of similar exemptions in applicable state statutes, would increase the volume of hazardous waste we are required to manage and dispose of and would cause us to incur increased operating expenses.

 

The Clean Water Act imposes restrictions and controls on the discharge of produced waters and other wastes into navigable waters. Permits must be obtained to discharge pollutants into state and federal waters and to conduct construction activities in waters and wetlands. The Clean Water Act requires us to construct a fresh water containment barrier between the surface of each drilling site and the underlying water table. This involves the insertion of a seven-inch diameter steel casing into each well, with cement on the outside of the casing. The cost of compliance with this environmental regulation is approximately $10,000 per well. Certain state regulations and the general permits issued under the Federal National Pollutant Discharge Elimination System program prohibit the discharge of produced waters and sand, drilling fluids, drill cuttings and certain other substances related to the oil and natural gas industry into certain coastal and offshore waters. Further, the EPA has adopted regulations requiring certain oil and natural gas exploration and production facilities to obtain permits for storm water discharges. Costs may be associated with the treatment of wastewater or developing and implementing storm water pollution prevention plans.

 

The Clean Water Act and comparable state statutes provide for civil, criminal and administrative penalties for unauthorized discharges for oil and other pollutants and impose liability on parties responsible for those discharges for the costs of cleaning up any environmental damage caused by the release and for natural resource damages resulting from the release. We believe that our operations comply in all material respects with the requirements of the Clean Water Act and state statutes enacted to control water pollution.

 

Our operations are also subject to laws and regulations requiring removal and cleanup of environmental damages under certain circumstances. Laws and regulations protecting the environment have generally become more stringent in recent years, and may in certain circumstances impose “strict liability,” rendering a corporation liable for environmental damages without regard to negligence or fault on the part of such corporation. Such laws and regulations may expose us to liability for the conduct of operations or conditions caused by others, or for acts, which may have been in compliance with all applicable laws at the time, such acts were performed. The modification of existing laws or regulations or the adoption of new laws or regulations relating to environmental matters could have a material adverse effect on our operations.

 

In addition, our proposed operations could result in liability for fires, blowouts, oil spills, discharge of hazardous materials into surface and subsurface aquifers and other environmental damage, any one of which could result in personal injury, loss of life, property damage or destruction or suspension of operations. We have an Emergency Action and Environmental Response Policy Program in place. This program details the appropriate response to any emergency that management believes to be possible in our area of operations. We believe we are presently in compliance with all applicable federal and state environmental laws, rules and regulations; however, continued compliance (or failure to comply) and future legislation may have an adverse impact on our present and contemplated business operations.

 

The foregoing is only a brief summary of some of the existing environmental laws, rules and regulations to which our business operations are subject, and there are many others, the effects of which could have an adverse impact on our business. Future legislation in this area will no doubt be enacted and revisions will be made in current laws. No assurance can be given as to what affect these present and future laws, rules and regulations will have on our current future operations.

 

***Insurance***

 

Our oil and gas operations are subject to all the risks inherent in the exploration for, and development and production of, oil and gas including blowouts, fires and other casualties. While the Company has planned for these contingencies and has purchased insurance to address potential liabilities associated with the exploration, drilling, testing and development of our exploration wells there can be no guarantee that all potential liabilities will be covered by insurance or that the insurance coverage will be adequate.

 

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***Website and available information***

 

We make available copies of our Annual Report, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, amendments to those, and other reports filed with the Securities and Exchange Commission (SEC) under “Investors” on our website, www.namoag.com , as soon as reasonably practical after they are filed. Our website’s content is not intended to be incorporated by reference into this report or any other report we file with the SEC. You may request a paper copy of materials we file with the SEC by calling us at (805) 665-6308 or sending a request by mail to our corporate secretary at our principal office at 701 E. Santa Clara Street, Ventura, CA 93001. You may read and copy materials we file with the SEC on the SEC’s website at www.sec.gov , or the SEC’s Public Reference Room at 100 F. Street, N.E., Washington DC 20549.

 

**Item 1A. Risk Factors.**

 

NAMG is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.

 

**Item 1B. Unresolved Staff Comments.**

 

NAMG is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.

 

**Item 2. Properties**.

 

The Company’s headquarters are located 701 E. Santa Clara Street, Ventura, CA 93001. Our telephone number is (805) 665-6308. Management believes that our current leased property will be sufficient for its current and immediately foreseeable administrative needs.

 

The Company has secured oil and gas leases, which is an essential part of the Company’s operation. We are an oil and gas exploration and production company that uses the history of old fields, geophysical exploration and development techniques to identify oil and gas wells that are now considered to be economically feasible based on the current and predicted future price of oil and gas.

 

We currently have approximately 2,088 gross, and 1,357 net acres of leasehold properties in the San Joaquin Basin Province in Kern County, California. These leasehold properties are held in one to five-year primary lease terms, some extending through March 2018 however, the leases expiring in Tejon Ranch Main and White Wolf are not being renewed subject to access to capital to explore on these leases and as such were fully impaired as of December 31, 2014. The Company holds varying working interest percentages in these leases from 25% to 75%. The properties are listed as follows:

 

| · | Tejon Ranch Main lease – 290 gross, 270 net leased acres      |
|--------|---------------------------------------------------------------------|
|   |                                                                |
| · | Tejon Ranch Extension lease – 629 gross, 346 net leased acres |
|   |                                                                |
| · | White Wolf leases – 1,169 gross, 741 net leased acres         |

  

The Company does not have an in-house land and lease department, and utilizes the services of an outside oil and gas land acquisition company (“Land Company”) to acquire its leaseholds. The Land Company will secure the lease and hold title of the Assignment of Oil, Gas & Mineral Leases in the Land Company’s name. Once the Land Company has acquired sufficient properties (such as a designated number of net acres within a lease prospect), determined by NAMG management, management will request that the Land Company assign title to the Company.

 

NAMG will obtain title opinions on properties, or specific leases, when there is valid consideration of drilling within the prospect, or drill site. It will also obtain specific title opinions when it is requested as part of a joint venture partnership.

 

***Oil and Gas Reserve Analyses***

 

The leases acquired by the Company had not been developed in a way that allowed our petroleum engineers to assign estimated net proved oil and gas reserves and the present value of estimated cash flows from those reserves. As a result, the Company has no proved reserves on the leases owned.

 

**Item 3. Legal Proceedings.**

 

As of April 28, 2015, we were not a party to any legal proceedings that could have a material adverse effect on the Company’s business, financial condition or operating results. Further, to the Company’s knowledge no such proceedings have been threatened against the Company.

 

**Item 4. Mine Safety Disclosures.**

 

Not applicable

 

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**PART II**

 

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

 

***Market Information***

 

Our common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol “NAMG.” Prior to December 27, 2012, our common stock was quoted under symbol “CLDD.”

 

The table below sets forth the high and low closing prices of the Company’s Common Stock during the periods indicated. The quotations reflect inter-dealer prices without retail mark-up, markdown or commission and may not reflect actual transactions. As noted previously in this Form 10-K, the merger transaction between North American Oil & Gas Corp., a Nevada corporation, and Lani Acquisition, LLC, a limited liability company and a wholly-owned subsidiary of the Company, and Lani, LLC, a California limited liability company, closed on November 16, 2012 and the terms of the merger transaction were first announced on or about November 20, 2012. Therefore, the prices below also include prices solely with respect to Calendar Dragon before the merger transaction.

 

|           |   | **2014**        |   |   | **2013**        |   |   | **2012**        |   |
|----------------|--------|-----------------|--------|--------|-----------------|--------|--------|-----------------|--------|
|           |   | **Price Range** |   |   | **Price Range** |   |   | **Price Range** |   |
|           |   | **High**        |   |   | **Low**         |   |   | **High**        |   |
| First Quarter  |   |                 | 0.42   |   |            |        | 0.70   |            |   |  | n/a |   |
| Second Quarter |   |            | 0.14   |   |            |   | 0.60   |            |   |   | n/a |   |
| Third Quarter  |   |            | 0.08   |   |            |   | 0.65   |            |   |   | n/a |   |
| Fourth Quarter |   |            | 0.03   |   |            |   | 0.30   |            |   |   | 1.14 |   |

 

The closing sales price of the Company’s common stock as reported on April 28, 2015, was $0.005 per share.

 

***Holders***

 

As of the date of this report there were approximately 70 holders of record of Company common stock. This does not include an indeterminate number of persons who hold our Common Stock in brokerage accounts and otherwise in “street name.”

 

***Dividends***

 

Holders of common stock are entitled to receive such dividends as may be declared by the Company’s Board of Directors. The Company did not declare or pay dividends during its fiscal year ended December 31, 2014.

 

To the extent NAMG has any earnings, it will likely retain earnings to expand corporate operations and not use such earnings to pay dividends.

 

***Securities Authorized for Issuance Under Equity Compensation Plans***

 

The Company’s 2012 Stock Option Plan (“Plan”) has an aggregate of 2,000,000 shares of the Company’s common stock and is initially reserved for issuance upon exercise of nonqualified and/or incentive stock options, which may be granted under the Plan.

 

**EQUITY COMPENSATION PLAN INFORMATION**

 

| **Plan****category**                                       |   | **Number of securities to be issued upon exercise of outstanding options, warrants and rights** |      |   | **Weighted-average exercise price of outstanding options, warrants and rights** |   |   | **Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))** |   |
|------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|-----------|--------|---------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                       |   | **(a)**                                                                                         |      |   | **(b)**                                                                         |   |   | **(c)**                                                                                                                                         |   |
| Equity compensation plans approved by security holders     |   |                                                                                                 | 1,696,618 |   |                                                                            | $      | 0.56   |                                                                                                                                            |   |  | 303,382 |   |
| Equity compensation plans not approved by security holders |   |                                                                                            | -         |   |                                                                            |   | -      |                                                                                                                                            |   |   | - |   |
| Total                                                      |   |                                                                                            | 1,696,618 |   |                                                                            | $      | 0.56   |                                                                                                                                            |   |   | 303,382 |   |

 

|   |
|--------|
| 8      |
|        |

 

***Other Compensation Arrangements***

 

NAMG has not secured any other compensation arrangements as of December 31, 2014.

 

***Recent Sales of Unregistered Securities***

 

On August 14, 2013 North American Oil & Gas (“NAMG”) entered into a Stock Purchase Agreement with Springhouse Investments Corp, a Canadian Corporation (“Investor”).

 

NAMG agreed to sell and issue to the Investor Two Hundred Eighty-One Thousand, Two Hundred Fifty (281,250) shares of the Common Stock (“Shares”), based on a per share price equal $.80. The issuances of these Shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

On October 16, 2013, the Company finalized a Stock Purchase Agreement (the “Agreement”) with Oel und Erdgazforshung (“OUE”), relating to the sale and issuance of 246,914 Shares, for a purchase price of $200,000, and warrants (“Warrants”) to purchase an aggregate of 96,618 Shares at an exercise price of $1.04 per share.

 

The Warrants are exercisable immediately and expire October 10, 2016. The Warrants are exercisable, at the option of the holder, in whole or in part by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of Shares purchased upon such exercise. The exercise price and the number of Shares purchasable upon the exercise of each Warrant are subject to adjustment in the event of stock dividends, distributions, splits, and reclassifications. The issuances of these Shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

Effective December 1, 2013, the Company entered into a letter Agreement with OUE, relating to the sale and issuance of Shares and Warrants.

 

The Agreement stipulates that OUE will purchase Shares in up to five (5), two hundred thousand dollar ($200,000) tranches, for an aggregate price of one million dollars ($1,000,000) with each tranche being issued in forty-five day intervals (the “Offering”). The quantity of Shares issued, per tranche, will be determined based on a ten percent (10%) discount of the previous day closing price of the Common Stock. With each tranche, 100,000 warrants will be issued based on an exercise price at a premium of fifteen percent (15%) of the previous day closing price of the Common Stock.

 

On December 6, 2013, the Company executed the second tranche of the Agreement OUE, relating to the sale and issuance of 261,438 Shares, for a purchase price of $200,000, and Warrants to purchase an aggregate of 100,000 Shares, at an exercise price of $0.98 per warrant.

 

The Warrants are exercisable immediately and expire December 6, 2016. The Warrants are exercisable, at the option of the holder, in whole or in part by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of Shares purchased upon such exercise. The exercise price and the number of Shares purchasable upon the exercise of each Warrant are subject to adjustment in the event of stock dividends, distributions, splits, and reclassifications. The issuances of these shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

**WHC Capital Promissory Note**

 

On August 12, 2014 the Company entered into a Convertible Promissory Note with WHC Capital, LLC. (“WHC”). The Convertible Promissory Note provides the Company with a note in the principal amount of $210,000. The net proceeds the Company received was $135,000 as $60,000 of Original Issue Discount and a financing fee of $15,000 was netted out from the total principal. The Convertible Promissory Note matured on February 11, 2015, and the Company was obligated to make monthly installments of $25,000, commencing September 11, 2014, with the balance due at maturity. The WHC note was issued with 500,000 warrants, expiring thirty-six months from the execution of the warrant agreement are exercisable into 500,000 common shares of the Company’s Common Stock at $.15 per share.

 

On November 20, 2014 the Company was advised by WHC Capital of an event of default, which NAMG disputed. Following a prolonged period of negotiations between the parties and NAMG’s limited financial capacity to fund legal costs, WHC Capital exercised its right to convert the Promissory Note and has converted the following number of shares:

 

|   | · | On February 17, 2015 the company issued WHC 3,490,000 shares of common stock to the value of $21,987.00 at $0.0063 per share |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                         |
|   | · | On March 24, 2015 the company issued WHC 3,674,000 shares of common stock to the value of $7,274.52 at $0.00198 per share    |
|   |   |                                                                                                                         |
|   | · | On April 7, 2015 the company issued WHC 3,752,800 shares of common stock tot he value of $6,755.04 at $0.0018 per share      |

 

The issuances of these shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

|   |
|--------|
| 9      |
|        |

 

**JMJ Financial**

 

On September 3, 2014 the Company entered into a Convertible Promissory Note with JMJ Financial. (“JMJ”). The Convertible Promissory Note provides the Company with a principal amount up to $300,000. The Company received an initial tranche of gross proceeds of $50,000 and net proceeds of $45,000, the $5,000 being the Original Discount Issue. Under the terms and conditions of the Note which allow JMJ to convert the principal into Common Shares of NAMG, JMJ has exercised its right to convert the and converted the following number of shares:

 

|   | · | On March 3, 2015 the company issued JMJ 1,500,000 shares of common stock to the value of $9,450.00 at $0.0063 per share    |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                       |
|   | · | On March 24, 2015 the company issued JMJ 3,570,000 shares of common stock to the value of $77,068.60 at $0.00198 per share |
|   |   |                                                                                                                       |
|   | · | On April 9, 2015 the company issued JMJ 4,100,000 shares of common stock tot he value of $7,380.00 at $0.0018 per share    |

 

The issuances of these shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

**Item 6. Selected Financial Data.**

 

NAMG is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.

 

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

 

***Introduction***

 

The following discussion is intended to facilitate an understanding of our business and results of operations and includes forward-looking statements that reflect our plans, estimates and beliefs. It should be read in conjunction with our audited consolidated financial statements and the accompanying notes to the consolidated financial statements included herein. Our actual results could differ materially from those discussed in any forward-looking statements contained herein.

 

The Company is in the early stages of exploration, has never earned a profit, and has incurred an accumulated deficit of $3,342,520 as of December 31, 2014. The Company raised $300,000 in the sale of common stock during 2014. The Company has used these funds to pay monthly rental lease costs on its three oil and gas leases and provide for general and administrative expenses. As of December 31, 2014, NAMG had completed the drilling and testing of seven zones in Well 77-20, located on the Tejon Extension lease. The well was suspended in February 2013 and was subsequently sold post period end to Soda Creek Exploration LLC a Colorado oil and gas company. NAMG has retained an overriding royalty of 0.5% of gross revenues in the event of a commercial development proceeding at Tejon Ranch Extension.

 

NAMG has insufficient funds and is relying on proceeds from various convertible notes and equity issuances, to maintain itself as a viable entity and meets its general and administrative operations through December 31, 2015. Capital raising through investors and/or farm-out and asset sale agreements will be required to move forward on capital projects.

 

***Plans for our fiscal year 2014 include the following:***

 

The company has no plans to drill on it leases in 2015.

 

***Results of Operations***

 

**Year Ended December 31, 2014 Compared With Year Ended December 31, 2013**

 

**Revenues from Operations** - There were no revenues generated for the years ended December 31, 2014 and December 31, 2013, respectively.

 

**Expenses from Continuing Operations**- The Company incurred operating expenses of $1,161,979 for the fiscal year ended December 31, 2014; a decrease of $356,199 compared to $1,518,179 for the period ending December 31, 2013. The largest expenditures operationally were increased depreciation and impairment costs of $260,480 due to the impairment of the costs associated with Tejon Main and White Wolfe as management determined that no further development will be conducted in these areas; decrease of $412,136 in exploration and leasehold costs; decrease in general and administrative costs of $187,462 and a decrease of $8,671 in consulting costs all due in large part to the lack of cash flow. Should the Company be able to raise capital these costs are likely to increase in the next fiscal year.

 

|   |
|--------|
| 10     |
|        |

  

**Other Income/Loss –** For the fiscal year ended December 31, 2014, the Company has $251,186 in other expenses, substantially all of which is related to interest expense including the amortization of the original issue discount associated with various notes payable the Company entered into during 2014. For the fiscal year ended December 31, 2014, the Company had $7,310 in other expenses.

 

**Net Loss** - For the fiscal year ended December 31, 2014, the Company incurred a net loss of $1,413,165 compared to a net loss of $1,525,488 for the fiscal year ended December 31, 2013, a loss decrease over the previous year of $112,323. The major reasons for the Company having a lower net loss during the fiscal year ended December 31, 2014 can be attributed to the lower expenses from overall operations due to a strain on cash flows.

 

**Liquidity** - At December 31, 2014, the Company had a cash balance of $51,210. As of December 31, 2013, the Company had a cash balance of $49,563. The Company’s working capital deficit increased $611,497 from $444,823 in 2013 to $1,056,320 in 2014. The increase in the working capital deficit is primarily due to the debt financing the Company entered into during fiscal 2014.

 

Historically the Company has lacked liquidity, a result of insufficient financing alternatives available to the Company and the lack of production to produce significant revenues.

 

Based on current expectations, the Company will need to find additional sources of financing to meet our general corporate needs in 2015 and beyond as well as any large capital requirements necessary for additional oil and gas exploration.

 

***Cash Requirements***

 

The cash requirements of the Company may have a material impact on our liquidity. The reasons for this are:

 

|   | · | the Company has only secured sufficient funds to maintain its current operations through May, 2015;                                                                                                           |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                          |
|   | · | there is an uncertainty as to whether the Company can maintain operations beyond the second quarter of 2015 without securing additional capital through cash raisings, or investor project participation; and |
|   |   |                                                                                                                                                                                                          |
|   | · | there is no certainty that the Company can achieve profitable levels in the oil and gas exploration field, or that it will be able to raise additional capital through any means.                             |

 

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

 

NAMG is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.

  

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|        |

 

**Item 8. Financial Statements and Supplementary Data.**

 

**NORTH AMERICAN OIL & GAS CORP.**

 

**CONSOLIDATED FINANCIAL STATEMENTS - TABLE OF CONTENTS**

 

|                                                                                                                          |   | **Page** |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|
| Report of Independent Registered Public Accounting Firm                                                                       |   |          | F-1    |   |
| **Audited Financial Statements:**                                                                                             |   |     |   |   |
| Consolidated Balance Sheets for the years ended December 31, 2014 and 2013                                                    |   |     | F-2    |   |
| Consolidated Statements of Operations for the years ended December 31, 2014 and 2013                                          |   |     | F-3    |   |
| Consolidated Statements of Changes In Stockholders’ Deficit for the years ended December 31, 2014 and December 31, 2013 |   |     | F-4    |   |
| Consolidated Statements of Cash Flows for the years ended December 31, 2014 and December 31, 2013                             |   |     | F-5    |   |
| Notes to Consolidated Financial Statements                                                                                    |   |     | F-6    |   |

 

|   |
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| 12     |
|        |

 

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

 

None

 

**Item 9A. Controls and Procedures.**

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

  

**Internal Control Over Financial Reporting (GAAP)**

 

***Evaluation of Disclosure Controls and Procedures***

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ending December 31, 2014 covered by this Annual Report on Form 10-K. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15 and 15d of the 1934 Act because of the material weaknesses in our internal control over financial reporting discussed below.

 

***Management’s Report on Internal Control Over Financial Reporting***

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

 

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the internal control criteria set forth in the Internal Control— Integrated Framework, management concluded that the Company’s internal controls over financial reporting were not effective, as of December 31, 2014.

 

|   |
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| 13     |
|        |

 

A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

 

Based on management’s assessment of internal control over financial reporting, as of December 31, 2014, management concluded that the Company did not maintain effective internal control over financial reporting because of the following control deficiencies that constitute material weaknesses:

 

|   | · | Over-reliance on consultants in the financial reporting process.                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                    |
|   | · | Lack of audit committee having appropriate accounting knowledge to adequately provide oversight of the Company’s accounting and reporting functions.                              |
|   |   |                                                                                                                                                                                    |
|   | · | Due the small size of the Company, there is also a lack of segregation of duties that contributes to the inability to maintain effective internal control over the financial reporting. |

 

Because of the material weaknesses identified above, a reasonable possibility exists that a material misstatement in our consolidated financial statements will not be prevented or detected on a timely basis. However, our Chief Executive Officer and Chief Financial Officer believe that the financial statements included in this annual report on form 10-K present in all material respects, our financial position, results of operations and cash flows for the periods presented, in conformity with U.S. GAAP.

 

Malone Bailey LLP, our registered independent public accounting firm, was not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of December 31, 2014.

  

Plan For remediation of Material Weaknesses:

 

The remediation efforts outlined below are intended to address the identified material weaknesses in internal control over financial reporting:

  

|   | · | Establish a Qualified Audit Committee;                                                                                    |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                      |
|   | · | Fund appropriate technical research materials to ensure SEC compliance in financial reporting, and internal controls, and |
|   |   |                                                                                                                      |
|   | · | Improvements to accounting processes to provide adequate documentation of transactions.                                   |

 

***Changes in Internal Control Over Financial Reporting***

 

Except as otherwise noted above, there were no significant changes in the Company’s internal control over financial reporting occurred during the year ended December 31, 2014, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

**Item 9B. Other Information.**

 

None

 

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| 14     |
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**PART III**

 

**Item 10. Directors, Executive Officers and Corporate Governance.**

 

***Identification of Directors and Executive Officers:***

 

As of April 28, 2015, The Company has two Officers, Robert Rosenthal, Chief Executive Officer, and Cosimo Damiano, Chief Financial Officers. Mr. Rosenthal and Mr. Cosimo Damiano both work full-time for the Company, dedicating forty hours per week on an ongoing basis. Mr. Rosenthal is compensated accordingly and currently there is no compensation agreement in place for Mr. Damiano. Mr. Donald Boyd our Operations Manager previously operated under a Consultancy Agreement providing ongoing necessary management requiring approximately ten hours per week, which was terminate don November 30, 2014 as the company scaled back its operating activities. The following information sets forth the names of our officers and directors, their present positions, and some brief information about their background as of the date of this filing:

 

| **Name:**        |   | **Position:**                                                 |   | **Age:** |   |
|------------------|--------|---------------------------------------------------------------|--------|----------|--------|
|                  |        |                                                          |   | ****     |   |
| Robert Rosenthal |   | President and Chief Executive Officer, Secretary and Chairman |   | 62       |   |
| Cosimo Damiano   |   | Director, Chief Financial Officer and Treasurer               |   | 43       |   |
| Donald Boyd      |   | Director, Operations Manager                                  |   | 66       |   |

 

***Robert Rosenthal***

 

***President and Chief Executive Officer, Secretary and Chairman of the Board of Directors***

 

Mr. Rosenthal has extensive experience in the Californian oil and gas industry where he has been directly involved in and responsible for evaluations, leasing and drilled discoveries. His career in California spans over 10 years. Mr. Rosenthal was a founding partner in Orchard Petroleum Ltd an ASX listed Californian company that that was acquired in 2007 by a private consortium. From 2007 to July 2010 Mr. Rosenthal was actively involved in exploration and production ventures in California, Texas and Louisiana through his private partnership ASPS Energy Investments LLP. In July 2010 he became one of the founding partners in Great Bear Petroleum, LLC. As such he was involved with raising the initial capital to fund the company. Mr. Rosenthal was subsequently involved with raising the next round of capital that lead to the leasing of 500,000 acres on the North Slope of Alaska. Mr. Rosenthal left Great Bear, in April 2012, after helping farm-out the acreage to a large industry partner. Mr. Rosenthal became a partner in LANI LLC in May 2012. LANI LLC was a private company focused on exploration in California. Mr. Rosenthal helped in the merger between LANI LLC with Calendar Dragon to form North American Oil & Gas Corp. in November 2012. Mr. Rosenthal has been CEO and President of North American Oil and Gas since the merger.

 

He previously worked as Exploration Geologist and Exploration Project Supervisor for Sohio Petroleum (U.S.), British Petroleum in London as Global Consultant Exploration. In 1995 he left BP to join Novus Petroleum Ltd as its Head of Exploration. From 1999 until present day, Mr. Rosenthal has been actively involved in numerous exploration activities in California, Texas, Louisiana and Alaska where he has made numerous discoveries in both conventional and unconventional plays. Mr. Rosenthal has a Master’s Degree in Geology from the University of Southern California.

   

***Cosimo Damiano – Director and Chief Financial Officer***

 

Mr. Damiano’s experience involves the strategic analysis and financial modeling of oil & gas companies for global Investment banks and commodity trading companies in a principal investment role. This experience has provided Mr. Damiano with a strong understanding and analytical analysis of financing oil and gas assets across various geographic areas. Mr. Damiano has served as an Independent Director of NAMG since November 2012, and assisted with the merger between Lani LLC and Calendar Dragon to form North American Oil & Gas Corp.

 

Mr. Damiano has over 20 years of experience in the finance industry and 15 years in the energy industry, most recently as Managing Director of Blacktip Energy Inc., a position he took on in May 2014. Since April 2014, Mr. Damiano has provided consulting services to Merricks Capital (Hedge Fund. From September 2013 through March 2014 Cosimo worked for CIMB in the capacity of Director of Oil & Gas Equity Research. During the period January 2012 through June 2013 Mr. Damiano provided independent consulting to various oil and gas companies located in North America, Asia, Australia and Africa. From May 2011 through December 2011 Cosimo held the position of Director of Investments for Mocoh SA.

 

|   |
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| 15     |
|        |

 

During the period April 2010 through November 2010 Cosimo was the Director of Upstream Investments for Mercuria Energy Group. Mr. Damiano has wide commercial and investment experience in the oil and gas industry in Australia, Asia, United States, Canada and Argentina. In his previous role with Mercuria, Mr. Damiano’s duties primarily involved private equity investments and included the reporting on Mercuria’s existing oil and gas investments in Canada, U.S and Argentina and sourcing new investments. It involved the reporting and monitoring of ~10,000boepd of production, setting corporate and financing strategies and Board updates monitoring and evaluating the assets’ performance.

 

From July 2008 through March 2010, Mr. Damiano held the position of Energy Analyst for Galena Asset Management (Trafigura Group).

 

In his previous and current roles Mr. Damiano has periodically undertaken advisory roles for several oil and gas companies as well as energy trading companies most notably relating to, M&A advice, capital structure (debt and equity structuring), strategic planning and marketing. Mr. Damiano holds a Bachelor’s degree in Finance and Economics from Victoria University, Australia. Mr. Damiano’s background in investment banking led to our conclusion that he should serve as a director in light of our business and structure.

 

***Donald Boyd - Director***

 

Mr. Boyd is an experienced oil field professional who has assisted many internationally known companies with drilling and infield engineering issues throughout the world. Since 1998 Mr. Boyd has provided consulting services to companies such as Exxon, Phillips Petroleum, Sun Oil and Texaco and most recently smaller independent operators, such as Exploration Inc., Jackson Exploration and Kindee Oil and Gas. In 2005, Mr. Boyd co-founded Sun Resources Texas, Inc. and currently serves as President. As President of Sun Resources Mr. Boyd has been in charge of drilling and evaluating wells in Texas and Louisiana. In July 2011 Don became one of the founders of LANI LLC. LANI LLC was a California focused exploration company. Mr. Boyd was directly responsible for acquiring the key acreage in the Southern San Joaquin for LANI. In November 2012 LANI LLC was merged with Calendar Dragon to form North American Oil & Gas Corp. Mr. Boyd has been an Executive Director since the merger.

 

Prior to January 2005 he served as the manager of all offshore operations for drilling and completion for the U.S. Department of the Interior, Oil & Gas Branch. Mr. Boyd managed employees with various disciplines, engineers and geologists; certified all foreign offshore drilling units before they could drill in US waters; worked with the EPA to help write regulations regarding offshore environmental concerns; and worked with the USSR Oil & Gas Department to help them refine their government leasing programs to improve oil and gas secondary recovery. Prior to that, Mr. Boyd worked as a drilling engineer for Global Marine and a drilling manager for Peter Bowen and Cal Pacific drilling companies. Mr. Boyd received a Bachelor of Science in Petroleum Engineering from Cal State Long Beach in 1973. Among the many awards and honors that Donald received are: The Crosnick Foundation Scholarship for Petroleum Engineers; The Kellps Scholarship Award for Petroleum Engineering; and an Excellence Award from the U.S. Department of the Interior.

 

***Penalties or Sanctions***

 

None of our directors, officers or stockholders holding a sufficient number of securities to affect materially the control of the Company, has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority or been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor making an investment decision.

 

***Personal Bankruptcies***

 

None of our directors, officers or stockholders holding a sufficient number of securities to affect materially the control of the Company, nor any personal holding company of any such person has, within the last ten years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of that person.

 

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| 16     |
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***Employment Agreements***

 

We currently do not have employment agreements with any our directors and executive officers.

 

***Family Relationships***

 

There are no family relationships between any of our directors or executive officers and any other directors or executive officers.

 

***Term of Office***

 

All directors hold office for a one (1) year period, as dictated at the annual meeting, held June 20, 2013 and have been duly elected and qualified. Directors will be elected at the annual meetings to serve for one-year terms. The Company does not know of any agreements with respect to the election of directors. The Company has not compensated its directors for service on the Board of Directors of NAMG or any of its subsidiaries or any committee thereof. Any non-employee director of NAMG or its subsidiaries is reimbursed for expenses incurred for attendance at meetings of the Board of Directors and any committee of the Board of Directors, although no such committee has been established. Each executive officer of NAMG is appointed by and serves at the discretion of the Board of Directors. There was no annual meeting held during 2014, and all directors continued in their roles as agreed to in the June 20, 2013 meeting.

 

None of the officers or directors of NAMG is currently an officer or director of a company required to file reports with the Securities and Exchange Commission, other than NAMG.

 

***Involvement in Certain Legal Proceedings***

 

During the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

***Director independence***

 

Currently, the majority of the board of NAMG is not considered “independent” board members.

 

***Board meetings and committees; annual meeting attendance***

 

On June 20, 2013 the Company held its annual meeting. Proxies were not solicited, as a majority of shareholder votes, 30,200,000, were given approving the following:

 

|   | 1.     | By unanimous vote the shareholders elected Robert Rosenthal, Donald Boyd and Cosimo Damiano as members of the Board of Directors. Each Director will serve for a one-year term. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                            |
|   | 2.     | By unanimous vote the shareholders approved the Executive Officer’s compensation.                                                                                         |
|   |   |                                                                                                                                                                            |
|   | 3.     | By unanimous vote the shareholders approved to vote once every three years for the advisory vote on Executive Compensation.                                                     |
|   |   |                                                                                                                                                                            |
|   | 4.     | By unanimous vote the shareholders ratified the appointment of Independent auditors Malone Baily LLP.                                                                           |

 

Linda Gassaway resigned as Chief Financial Officer of the Company effective as of October 30, 2014. Ms. Gassaway confirmed that she had no disagreements with the Company.

 

The Company does not have a standing audit, nominating and compensation committee of the board of directors, or committees performing similar functions.

 

|   |
|--------|
| 17     |
|        |

 

***Nominating Committee***

 

The Company does not have a separately designated nominating committee. The Company does not have such a committee because we currently believe that given our small size, the fact that a majority of the members of our Board are not currently considered “independent,” and because no Company securities are traded on a stock exchange, that such a committee is not currently necessary. Unless and until the Company establishes a separate nominating committee, when a board vacancy occurs, the remaining board members will participate in deliberations concerning director nominees. In the future the Company may determine that it is appropriate to designate a separate nominating committee of the board of directors comprised solely of independent directors.

 

To date, the Board of Directors has not adopted a formal procedure by which stockholders may recommend nominees to the board of directors.

 

***Audit Committee***

 

The Company does not have a separately designated audit committee. Instead, the entire Board acts as the Company’s audit committee.

 

***Compensation Committee***

 

The Company does not have a standing compensation committee or committee performing similar functions. The Company currently believes that given our small size, a compensation committee is not warranted.

 

***Shareholder communications***

 

The Company does not have a process for security holders to send communications to the board of directors due to the fact that minimal securities are traded on a stock exchange.

 

***Board Leadership structure and role in risk oversight***

 

Mr. Rosenthal, who acts as President and Chief Executive Officer, Secretary and Chairman of the Board of Directors, leads the current board of directors of the company. The Chief Financial Officer, Cosimo Damiano, acts as Treasurer for the Company. Board leadership follows the guidelines in COSO’s Enterprise Risk Management – Integrated Framework model for is risk oversight assessments.

 

**Management Acquisition, Exploration and Appraisal Policy**

 

The Company’s management team is comprised of Robert Rosenthal, Cosimo Damiano and Don Boyd. This team is responsible for overseeing acquisition, exploration, appraisal and development of oil and gas projects in under exploited areas in North America. NAMG partners with leading industry players in North America to develop extensions to existing producing fields and also to establish new development opportunities supported by high quality 3-D seismic analysis. This team dedicates substantially all of their time on this responsibility. However, NAMG does not have a formal policy regarding (i) the amount of time each member of the management team must spend on NAMG business or (ii) granting NAMG a right of first refusal on acquisition opportunities. Nor are these addressed in NAMG’s By-laws. Due to this, it is possible that one, or more, of the management team, from time to time, may be involved in other business activities or dedicate additional time to such ventures.

 

While Robert Rosenthal continues to dedicate 100% of his working time to NAMG business and presents all potential acquisition opportunities to NAMG, Donald Boyd is currently President of Sun Resources, LLC. However, Sun Resources is a small company with three members. Sun Resources manages two small production properties; one located in Texas, the other Louisiana. Sun Resources does not look for new acquisitions, and Mr. Boyd continues to present 100% of any and all potential opportunities to NAMG and now dedicates substantially all of his working time to NAMG. However, based on the lack of formal policies, not only may members of our management spend less working time on NAMG in the future, they may also begin presenting acquisition opportunities to other companies prior to presenting them to NAMG.

 

Each of the Company’s management team observes and undertakes the following in terms of management acquisition, exploration and appraisal:

 

*Objectives*

 

The goal of the management team is to build NAMG’s resources and maintain a balanced portfolio of exploration and development assets.

 

|   |
|--------|
| 18     |
|        |

 

*Strategies process*

 

NAMG's primary strategy is based on the overall objective of generating the highest return to shareholders by building a balanced portfolio of oil and gas assets.

 

|   | · | NAMG takes advantage of their own and other players' experience for carefully selecting proven hydrocarbons basins where the chance of commercial oil discoveries is high. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                       |
|   | · | NAMG shall seek a good risk diversification, both geographically and geologically, and seek farm-out opportunities to capitalize as much as possible on the assets.        |
|   |   |                                                                                                                                                                       |
|   | · | NAMG is planning to run multiple parallel projects in order to create diversification.                                                                                     |
|   |   |                                                                                                                                                                       |
|   | · | NAMG focuses on near term production opportunities producing less than 100 barrels of oil per day.                                                                         |

 

*Screening*

 

NAMG’s management team assesses acquisition opportunities and utilizes outside consultants to independently assess its research and findings. The management team screens opportunities based on the following key criteria:

 

Technical – assess the geological merits of the project based on reviewing existing seismic data, individual well analysis, production history and reviewing nearby analogues from similar fields. Based on the teams experience NAMG's focus is on areas its previously worked such as California, Texas, Louisiana and Alaska.

 

Financial – once the team has approved the project based on its technical merits, NAMG conducts thorough financial analysis of the project based on various financial assumptions and outcomes i.e. sensitivity analysis. Our screening process aims for a minimum return of 15% internal rate of return, assuming various long-term oil price and operating scenarios

 

Commercial and Legal – NAMG determines the commercial and legal aspects of an acceptable transaction that includes title to ownership. At this stage NAMG utilizes outside legal counsel to assist with drafting legal documentation such as Purchase and Sales Agreements and other related agreements (e.g. loan financing agreements).

 

Conflict of Interest - NAMG is, on occasion, involved in offerings or project(s) that pose a conflict of interest between the Company and members of its Board of Directors or management. There is no formal written policy regarding conflicts of interest. However, the Company adheres to the following procedures:

 

Any transactions involving parties with whom a conflicting interest may exist will be undertaken only if all of the following requirements are met:

 

|   | 1.     | The conflicting interest is fully disclosed;                                                                                                                                   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                           |
|   | 2.     | The person with the conflict of interest is excluded from the discussion and approval of such transaction; and                                                                 |
|   |   |                                                                                                                                                                           |
|   | 3.     | The board, absent any member who has a conflict of interest, has determined that the transaction is in the best interest of the organization and is just, fair and reasonable. |

 

The Company’s board (absent any member who has a potential conflict) determines whether a conflict exists and in the case of existing conflicts, whether the contemplated transaction may be authorized as just, fair, and reasonable to the Company. The Company has no contractual rights of first refusal with any members of the Board of Directors regarding potential opportunities. Currently, only one of our directors, Donald Boyd, is employed in a minimally related industry. He has been employed in this position for over a ten (10) year period. Such employment with Sun Resources does not presently present any potential conflicts of interest. However, that may change in the future.

 

The President of NAMG, Robert Rosenthal commits 100% of his working time to NAMG. However, over the years, Mr. Rosenthal has been involved in, and has worked as a consultant for other companies and individuals. Prior to 2012, he held paid positions with other oil and gas firms. But since signing on with NAMG in May 2012, Mr. Rosenthal presents all of the projects of which he becomes aware to the Management Acquisition, Exploration and Appraisal team of NAMG to identify the projects suitability for further investigation from the Company. If the project does not fit the criteria NAMG requires the project is no longer considered a viable consideration by NAMG.

 

NAMG does not have a formal written policy regarding (i) the amount of time each member of the management team must spend on NAMG business nor (ii) the granting of a right of first refusal to NAMG of any potential opportunities. Furthermore, NAMG’s By-laws do not address either of the above. Due to this, it is possible that one, or more, of the management team, from time to time, may provide services to alternate business activities and companies or dedicate some of their time to such ventures. This would allow for less time to be committed to NAMG and may cause us to lose opportunities which may have an adverse effect on our shareholders. Additionally, this could allow management to present potential opportunities elsewhere in the future, thereby causing NAMG to lose out on potential revenue. Finally, the lack of formally addressing these situations could open NAMG up to future litigation.

 

at risk for:

 

|   | 1.     | Potential losses to the Company                                                                                                                                |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                           |
|   | 2.     | Potential litigation.                                                                                                                                          |
|   |   |                                                                                                                                                           |
|   | 3.     | We may lose the services of one or all members of our management team or such members may present potentially profitable opportunities to other companies; and |

 

***Code of Ethics***

 

We have not adopted a Code of Ethics but expect to adopt a Code of Ethics in 2015 and will post such code to our website. The Company did not adopt a Code of Ethics in 2014 due to Board changes, and lack of adequate time to review this process.

 

|   |
|--------|
| 19     |
|        |

  

**Indemnification of Executive Officers and Directors**

 

The Nevada Revised Statutes permits indemnification of directors, officers, and employees of corporations under certain conditions subject to certain limitations. In the event that a claim for indemnification (other than the payment by us of expenses incurred or paid by our directors and officers in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is appropriate and will be governed by the final adjudication of such issue.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

**Item 11. Executive Compensation.**

 

The objective of the Company’s compensation program for its officers is to maintain a level of corporate and operational management within the day-to-day requirements of the Company. Up until the Agreement and Plan of Merger (the “Merger”), by and among the Company, Lani Acquisition, LLC, a Nevada limited liability company on November 16, 2012, the Company had not issued any amount for cash compensation, as it was registered and operated as a shell company. On November 15, 2012, NAMG established salaries and payroll for four salaried employees, and one hourly employee.

 

The salaries for each Officer and Manager was determined by the Chief Executive Officer of the Company, along with advice of Director Cosimo Damiano (prior to becoming the Chief Financial Officer). In yearly reviews, the Officers of the Company have found the compensation to be comparable to other oil and gas companies of similar size.

 

Rob Hoar and Donald Boyd terminated employment March 31, 2013 and signed Consulting Agreements with the Company for $5,000 per month in ongoing consulting services. These agreements ran through November 30, 2014. Any services required by Mr. Hoar and Mr. Boyd will be conducted upon agreement by the Company on an ongoing basis.

 

The material terms of Mr. Hoar's consulting agreement, signed April 5, 2014 is to provide NAMG geological/geophysical consulting on an ongoing basis for all prospects, including new acquisitions, and existing prospects. Mr. Hoar will analyze data, assist in determining drill sites, new acquisition prospects. Mr. Hoar’s monthly set fee is $5,000 per month.

 

The material terms of Mr. Boyd’s consulting agreement, signed April 5, 2014 is to provide NAMG operational management consulting on an ongoing basis for all prospects, including new acquisitions, and existing prospects. Mr. Boyd will oversee any permitting, drilling, plug and abandoning, Division of Oil, Gas and Geothermal Resources reporting, and analysis of new and existing acquisitions in determining drill sites. My. Boyd’s monthly set fee is $5,000 per month. 

 

|   |
|--------|
| 20     |
|        |

 

The following table sets out the compensation received for the fiscal years ended December 31, 2014, 2013, and 2012 in respect to each of the individuals who served as the Company’s chief executive officer at any time during the last fiscal year, as well as the Company’s most highly compensated executive officers and two individuals not holding an executive officer position:

 

**SUMMARY COMPENSATION TABLE**

**** 

| **Name andPrincipal Position** |   | **Fiscal Year** |   |  | **Salary** |    |        | **Bonus** |   |        | **StockAwards** |   |  | **OptionAwards** |   |  | **Non-EquityIncentive PlanCompensation** |   |        | **Non-Qualified Deferred Plan Compensation** |   |         | **All Other Compensation** |   |  | **Total** | ** ** |
|--------------------------------|--------|-----------------|--------|--|------------|---------|--------|-----------|--------|--------|-----------------|--------|--|------------------|--------|--|------------------------------------------|--------|--------|----------------------------------------------|--------|---------|----------------------------|--------|--|-----------|------------|
|                           |   |            |   |  |            |    |   |           |        |   |            |        |  |             |   |  |                                          |   |   |                                              |        |    |                       |        |  |      |       |  |  |   |   |  |  |   |  |
| Robert Rosenthal (1)           |   | 2014            |   |  | $          | 160,000 |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 160,000 |   |
|                           |   | 2013            |   |  | $          | 160,000 |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 160,000 |   |
|                           |   | 2012            |   |  | $          | 20,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 20,000 |   |
|                           |        |            |        |  |       |    |        |           |        |   |                 |        |  |             |        |  |                                          |   |        |                                              |        |         |                            |        |  |      |            |  |  |   |  |  |   |   |   |
| Linda Gassaway (1)             |   | 2014            |   |  | $          | 90,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 90,000 |   |
|                           |   | 2013            |   |  | $          | 120,000 |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      | 287,625 |  (2)                  |        |  | -         |       |  |  | - |   |  | $ | 407,625 |   |
|                           |   | 2012            |   |  | $          | 15,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 15,000 |   |
|                           |        |            |        |  |       |    |        |           |        |   |                 |        |  |             |        |  |                                          |   |        |                                              |        |         |                            |        |  |      |            |  |  |   |  |  |   |   |   |
| Rob Hoar (1)              |   | 2014            |   |  | $          | 55,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 55,000 |   |
|                           |   | 2013            |   |  | $          | 40,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 40,000 |   |
|                           |   | 2012            |   |  | $          | 20,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 20,000 |   |
|                           |        |            |        |  |       |    |        |           |        |   |                 |        |  |             |        |  |                                          |   |        |                                              |        |         |                            |        |  |      |            |  |  |   |  |  |   |   |   |
| Donald Boyd (1)           |   | 2014            |   |  | $          | 55,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 55,000 |   |
|                           |   | 2013            |   |  | $          | 40,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 40,000 |   |
|                           |   | 2012            |   |  | $          | 20,000  |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  | $ | 20,000 |   |
|                           |        |            |        |  |            |    |        |           |        |   |                 |        |  |             |        |  |                                          |   |        |                                              |        |         |                            |        |  |      |            |  |  |   |  |  |  |   |   |
| Cosimo Damiano (1)             |   | 2014            |   |  |            | -       |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  |  | - |   |
|                           |   | 2013            |   |  |            | -       |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  |  | - |   |
|                           |   | 2012            |   |  |            | -       |   |           |        | -      |            |        |  | -                |   |  |                                          | -      |   |                                              | $      |    |                       |        |  | -         |       |  |  | - |   |  |  | - |   |

_______________

| (1) | Mr. Rosenthal, Ms. Gassaway, Mr. Hoar and Mr. Boyd began employment on November 15, 2012. Cosimo Damiano commenced engagement as the Chief Financial Officer on November 1, 2014 and no fees have been paid to Cosimo Damiano through December 31, 2014.                                                                                            |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The Company awarded Linda Gassaway, Chief Financial Officer, 500,000 shares of stock options on April 1, 2013. The restricted stock options were offered at an exercise price of $.80 per share, with a volatility of 255.02%, risk free interest rate of .78%, and expected term of five years. The options will vest one year from date of grant. |

 

***Equity Compensation Plan Information - Employment Agreements***

 

The Company’s policy is to not establish employment agreements, and no employment agreements were in place on December 31, 2014 or through the date of this report.

 

***Option Exercises and Stock Vested Table***

 

The Company entered into a contract with PacSeis Inc. dated February 26, 2013 to purchase 37 square miles of seismic data covering the Tejon Extension Prospect and the Tejon Main Prospect. The agreement between parties was to license this data for a cash fee of $125,000 and 350,000 restricted stock options at an exercise price of $.70 per share.

 

The fair value of the option grants were estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected volatility of 255.02%, risk free interest rate of 0.78%; and expected term of five years.

 

The Company awarded Linda Gassaway, Chief Financial Officer, 500,000 shares of stock options on April 1, 2013. The restricted stock options were offered at an exercise price of $.80 per share, with a volatility of 255.02%, risk free interest rate of .78%, and expected term of five years. The options will vest one year from date of grant.

 

|   |
|--------|
| 21     |
|        |

 

**NORTH AMERICAN OIL & GAS CORP.**

**Options Outstanding**

**** 

A summary of the Company’s stock option, warrant activity and related information is as follows:

 

|                                        |   | **Number ofShares** |    |   | **Weighted-Average Remaining Life(in years)** |   |   | **Weighted Average Exercise Price** |   |
|---------------------------------------------|--------|---------------------|---------|--------|-----------------------------------------------|--------|--------|-------------------------------------|--------|
| Outstanding at January 1, 2014 (1)          |   |                     | 850,000 |   |                                          |        | 8.80   |                                |   | $ | 0.76 |   |
| Granted Options                             |   |                | -       |   |                                          |   |   |                                |   |   |   |   |
| Exercised                                   |   |                | -       |   |                                          |   |   |                                |   |   |   |   |
| Cancelled/Expired                           |   |                | -       |   |                                          |   |   |                                |   |   |   |   |
| Outstanding at December 31, 2014            |   |                | 850,000 |   |                                          |   |   |                                |   |   |   |   |
|                                             |   |                |    |   |                                          |   |   |                                |   |   |   |   |
| Vested and Exercisable at December 31, 2014 |   |                | 850,000 |   |                                          |   | 7.80   |                                |   | $ | 0.76 |   |

______________

| (1) | Includes 350,000 options granted to PacSeis February 18, 2013 at an exercise price of $.70 per share, and options granted to Linda Gassaway, Chief Financial Officer of NAMG April 1, 2013 for an exercise price of $.80 per share. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   |
|--------|
| 22     |
|        |

 

**NORTH AMERICAN OIL & GAS CORP.** 

**Warrants Outstanding**

 

|                                        |   | **Number ofShares** |    |   | **Weighted-Average Remaining Life(in years)** |   |   | **Weighted Average Exercise Price** |   |
|---------------------------------------------|--------|---------------------|---------|--------|-----------------------------------------------|--------|--------|-------------------------------------|--------|
| Outstanding at January 1, 2014 (1)          |   |                     | 196,618 |   |                                          |        | 3.00   |                                |   | $ | 1.01 |   |
| Granted Warrants (2)                        |   |                | 650,000 |   |                                          |   | 3.00   |                                |   | $ | 0.36 |   |
| Exercised                                   |   |                | -       |   |                                          |   |   |                                |   |   | - |   |
| Cancelled/Expired                           |   |                | -       |   |                                          |   |   |                                |   |   | - |   |
| Outstanding at December 31, 2014            |   |                | 846,618 |   |                                          |   |   |                                |   |   | - |   |
|                                             |   |                |    |   |                                          |   |   |                                |   |   |   |   |
| Vested and Exercisable at December 31, 2014 |   |                | 846,618 |   |                                          |   | 2.35   |                                |   | $ | 0.37 |   |

______________

| (1) | Under a Purchase and Sale Agreement with Oel und Erdgazforshung AG ("OUE"), A Nevis Corp. dated October 16, 2013 the Company issued 246,914 shares of Common Stock, and 96,618 warrants with an exercise price of US $1.04 determined by a formula of a 15% premium to the previous day closing stock price for an aggregate sum of $200,000. Under a Purchase and Sale Agreement with OEG dated December 6, 2013 the Company issued 261,438 shares of Common Stock, and 100,000 warrants with an exercise price of US $.98 for an aggregate sum of $200,000. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| (2) | On January 27, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a German Corporation, for the sale and issuance of 854,701 shares of the Company’s common stock for a purchase price of $200,000, and warrants to purchase an aggregate of 100,000 shares of Common Stock, at an exercise price of $.30 per share. The Warrants are exercisable immediately and expire January 27, 2017. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | On March 28, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a German Corporation, for the sale and issuance of 694,444 shares of the Company’s common stock for a purchase price of $100,000, and warrants to purchase an aggregate of 50,000 shares of Common Stock, at an exercise price of $.18 per share. The Warrants are exercisable immediately and expire March 28, 2017.                                                                                                                                                                                                                                                                                                                                                                             |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (3)    | On August 12, 2014 the Company entered into a Convertible Promissory Note with WHC Capital, LLC. (“WHC”). The Convertible Promissory Note provides the Company with a note in the principal amount of $210,000. The net proceeds the Company received was $135,000 as $60,000 of Original Issue Discount and a financing fee of $15,000 was netted out from the total principal. The Convertible Promissory Note matures on February 11, 2015, and the Company shall make monthly instalments of $25,000, commencing September 11, 2014, with the balance due at maturity. The WHC note was issued with 500,000 warrants, expiring thirty-six months from the execution of the warrant agreement are exercisable into 500,000 common shares of the Company’s Common Stock at $.15 per share. |

 

|   |
|--------|
| 23     |
|        |

 

The following table presents the weighted-average assumptions used to estimate the fair values of the stock options granted in the period presented:

 

|                                                                       |   | **Year EndedDecember 31,2014** |   |   | **Year Ended December 31,2013** |   |
|----------------------------------------------------------------------------|--------|--------------------------------|--------|--------|---------------------------------|--------|
| Risk-free interest rate (1)                                                |   |                                | 1.65   |   |                            |        | 1.75 |   |
| Expected life (in years) (2)                                               |   |                           | 5      |   |                            |   | 3.625 |   |
| Expected volatility (3)                                                    |   |                           | 157.03 |   |                            |   | 225.02 |   |
| Dividend yield                                                             |   |                           | -      |   |                            |   | - |   |
| Weighted-average estimated fair value of options granted during the period |   |                           | 0.76   |   |                            |   | 0.795 |   |

____________

| (1) | The Risk Free Rate is a 5 Year Treasury rate.                                                                                   |
|-----|---------------------------------------------------------------------------------------------------------------------------------|
| (2) | The expected life (in years) is based on the simplified method: Expected term = ((vesting term + original contractual term)/2). |
| (3) | The expected volatility is based on the volatility weighted average of stock options                                            |

 

During the year ended December 31, 2013, the Company recorded stock-based compensation of $276,269 as general and administrative expenses, and G & G Services. At December 31, 2013 the weighted average remaining life of the stock options is 4.25 years. The unamortized amount of stock-based compensation at December 31, 2013 was $92,090. This remaining cost was expensed in the first quarter of 2014.

 

***Warrant Grants During 2014 and 2013 Fiscal Years***

 

On January 27, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a German Corporation, for the sale and issuance of 854,701 shares of the Company’s common stock for a purchase price of $200,000, and warrants to purchase an aggregate of 100,000 shares of Common Stock, at an exercise price of $.30 per share. The Warrants are exercisable immediately and expire January 27, 2017.

 

On March 28, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a German Corporation, for the sale and issuance of 694,444 shares of the Company’s common stock for a purchase price of $100,000, and warrants to purchase an aggregate of 50,000 shares of Common Stock, at an exercise price of $.18 per share. The Warrants are exercisable immediately and expire March 28, 2017.

 

On August 12, 2014 the Company entered into a Convertible Promissory Note with WHC Capital, LLC. (“WHC”). The Convertible Promissory Note provides the Company with a note in the principal amount of $210,000. The net proceeds the Company received was $135,000 as $60,000 of Original Issue Discount and a financing fee of $15,000 was netted out from the total principal. The Convertible Promissory Note matures on February 11, 2015, and the Company shall make monthly installments of $25,000, commencing September 11, 2014, with the balance due at maturity. The WHC note was issued with 500,000 warrants, expiring thirty-six months from the execution of the warrant agreement are exercisable into 500,000 common shares of the Company’s Common Stock at $.15 per share.

 

On October 16, 2013, North American Oil & Gas Corp. (the “Company”) finalized a Stock Purchase Agreement Oel und Erdgazforshung AG (the “Investor”), relating to the sale and issuance of an 246,914 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), for a purchase price of $200,000, and warrants (the “October Warrants”) to purchase an aggregate of 96,618 shares of Common Stock, at an exercise price of $1.04 per share.

 

The October Warrants are exercisable immediately and expire October 10, 2016. The October Warrants are exercisable, at the option of the holder, in whole or in part by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise. The exercise price and the number of shares of Common Stock purchasable upon the exercise of each October Warrant are subject to adjustment in the event of stock dividends, distributions, splits, and reclassifications. The issuances of these shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

Effective December 1, 2013, the Company entered into a letter agreement (the “O&E Agreement”) with Oel und Erdgazforshung AG, a Nevis Corporation (the “Investor”), relating to the sale and issuance of Common Stock, and warrants (the “December 1st Warrants”).

 

The O&E Agreement stipulates that the Investor will purchase the Common Stock in up to five (5), two hundred thousand dollar ($200,000) tranches, for an aggregate price of one million dollars ($1,000,000) with each tranche being issued in forty-five day intervals. The quantity of Common Stock issued, per tranche, will be determined based on a ten percent (10%) discount of the previous day closing price of the Common Stock. With each tranche, 100,000 December 1st Warrants will be issued based on an exercise price at a premium of fifteen percent (15%) of the previous day closing price of the Common Stock. 

 

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The December 1st Warrants will be exercisable immediately upon issuance and expire three (3) years from issuance date. The December 1st Warrants are exercisable, at the option of the holder, in whole or in part by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise. The exercise price and the number of shares of Common Stock purchasable upon the exercise of each December 1st Warrant are subject to adjustment in the event of stock dividends, distributions, splits, and reclassifications.

 

On December 6, 2013, the Company executed the second tranche of the O&E Agreement with the Investor, relating to the sale and issuance of 261,438 shares of the Common Stock, for a purchase price of $200,000, and warrants (the “December 6th Warrants”) to purchase an aggregate of 100,000 shares of Common Stock, at an exercise price of $0.98 per warrant.

 

The December 6th Warrants are exercisable immediately and expire December 6, 2016. The December 6th Warrants are exercisable, at the option of the holder, in whole or in part by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise. The exercise price and the number of shares of Common Stock purchasable upon the exercise of each December 6th Warrant are subject to adjustment in the event of stock dividends, distributions, splits, and reclassifications. The issuances of these shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

***Outstanding Equity Awards At Fiscal year-End***

 

The Company has not issued any equity awards during fiscal years 2014, 2013, and 2012.

 

***Director’s Compensation***

 

On February 1, 2013 the Company entered into a twelve month Consultancy Agreement (“Agreement”) with Cosimo Damiano, Director, to act as a financial adviser for the Company including on a potential merger and acquisition transactions and other matters, along with other services as agreed between the Company and the Mr. Damiano. The Agreement is for $60,000 billed in $5,000 increments over a twelve-month period.

 

On April 5, 2013 the Company entered into an Independent Contractor Agreement (“Agreement”) with Donald Boyd (Director). This Agreement is ongoing and provides for consulting services from Mr. Boyd regarding ongoing operations of the Company. The Agreement provides a fixed monthly fee of $5,000. This Agreement was extended through November 30, 2014 and not renewed.

 

The following table sets forth the Company’s fees and compensation paid or earned by directors for the fiscal years 2014, 2013 and 2012.

 

**DIRECTORS COMPENSATION**

 

| **Name andPrincipal Position** | ** ** | ** ** | **FiscalYear** |   |  | **Salary** |   |   | **Bonus** |   |   | **StockAwards** |   |   | **OptionAwards** |   |   | **Non-Equity IncentivePlanCompensation** |   |   | **Non-Qualified DeferredPlanCompensation** |   |   | **AllOtherCompensation** |   |   | **Total** |   |
|--------------------------------|------------|------------|----------------|--------|--|------------|--------|--------|-----------|--------|--------|-----------------|--------|--------|------------------|--------|--------|------------------------------------------|--------|--------|--------------------------------------------|--------|--------|--------------------------|--------|--------|-----------|--------|
|                           |            |            |           |   |  | ****       |   |   | ****      |   |   | ****            |   |   | ****             |   |   | ****                                     |   |   | ****                                       |   |   | ****                     |   |   | ****      |   |
| Donald Boyd(1)                 |       |       | 2014           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                     | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |
|                           |       |       | 2013           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                          | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |
|                           |       |       | 2012           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                     | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |
|                           |       |       |           |        |  |       |   |        |           |   |   |                 |        |   |             |        |        |                                          |   |        |                                            |   |   |                          |        |   |      |        |  |   |  |  |  |   |   |  |
| Cosimo Damiano(2)              |       |       | 2014           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                          | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |
|                           |       |       | 2013           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                     | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |
|                           |       |       | 2012           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                     | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |
|                           |       |       |           |        |  |       |        |        |           |   |        |                 |        |        |                  |        |        |                                          |   |        |                                            |   |   |                          |        |   |           |        |  |   |  |  |  |   |  |  |
| Robert Rosenthal               |       |       | 2014           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                     | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |
|                           |       |       | 2013           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                     | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |
|                           |       |       | 2012           |   |  | $          | -      |   |      | $      | -      |            |   | $      | -                |   |   |                                     | -      |   |                                       | $      | -      |                     |   | $      | -         |   |   | $ | - |   |   | $ | - |   |

____________

| (1) | Donald Boyd is a Director, and as of April 1, 2013 paid as a consultant for the Company. He earned $40,000 from January 1, 2013 through March 31, 2013 as a salaried employee.                                                                                         |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Cosimo Damiano is a Director, and is paid for his consulting services for NAMG at $5,000 per month per Consultant Agreement dated February 1, 2013 and is effective through December 31, 2013. In 2014, Mr. Damiano became the Chief Financial Officer of the Company. |

 

The Board of Directors has received no compensation for their roles on the Board. They have not earned fees, stock awards, option awards, or non-equity incentive plan compensation.

 

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

 

***Beneficial Ownership of more than 5% of any class of NAMG’s voting securities.***

  

As of April 28, 2015, the Company had 107,076,138 shares of its common stock issued and outstanding. The following table sets forth the beneficial ownership of the Company’s common stock as of April 28, 2015 by each person who is known to have beneficial ownership of more than 5% of any class of NAMG’s voting securities:

 

| **Title of Class** |        | **Name and address of**

**Beneficial Owner (1)** | ****  | **Amount and Nature of Beneficial Ownership** |       | **(A) Sole Voting power, (B)shared voting power (C)sole investment power, (D)shared investment power** |                      | **Percent of CommonStock (1)** | ****  |
|--------------------|--------|---------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|----------------------|--------------------------------|------------|
| Common Stock       |   | ASPS Energy Investments Ltd.(2)                   |       |                                               | 12,967,257 |                                                                                                   | Robert Rosenthal (A) |                           |            | 12.1 | % |
|                    |        | 701 E. Santa Clara Street                         |       |                                          |       |                                                                                                   |                 |                           |       |   |   |
|                    |        | Ventura, CA 93001                                 |       |                                          |       |                                                                                                   |                 |                           |       |   |   |
|               |   |                                              |            |                                               |       |                                                                                                        |                 |                                |            |   |   |
| Common Stock       |   | Donald Boyd                                       |       |                                          | 10,285,605 |                                                                                                   | Donald Boyd (A)      |                           |       | 9.6 | % |
|                    |        | 701 E. Santa Clara Street                         |       |                                          |       |                                                                                                   |                 |                           |       |   |   |
|                    |        | Ventura, CA 93001                                 |       |                                          |       |                                                                                                   |                 |                           |       |   |   |
|               |   |                                              |            |                                               |       |                                                                                                        |                 |                                |            |   |   |
| Common Stock       |   | Robert Kerry Hoar                                 |       |                                          | 19,020,000 |                                                                                                   | Robert K. Hoar (A)   |                           |       | 17.8 | % |
|                    |        | 701 E. Santa Clara Street                         |       |                                          |       |                                                                                                   |                 |                           |       |   |   |
|                    |        | Ventura, CA 93001                                 |       |                                          |       |                                                                                                   |                 |                           |       |   |   |
|               |   |                                              |            |                                               |       |                                                                                                        |                 |                                |            |   |   |
| Common Stock       |   | Robert Rosenthal                                  |       |                                          | 2,791,667  |                                                                                                   | Robert Rosenthal     |                           |       | 2.6 | % |
|                    |        | 701 E. Santa Clara Street                         |       |                                          |       |                                                                                                   |                 |                           |       |   |   |
|                    |        | Ventura, CA 93001                                 |       |                                          |       |                                                                                                   |                 |                           |       |   |   |

_____________

| (1) | NAMG has 107,076,138 shares of common stock issued and outstanding. As of April 28, 2015 no stock is held under warrant or security. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Shares held indirectly in ASPS Energy Investments Ltd., voting and investment control of which is held by Mr. Robert Rosenthal.      |

 

***Security Ownership of Management.***

 

The following table sets forth the beneficial ownership of the Company’s common stock as of April 28, 2015 by each executive officer and director and the directors and executive officers of the Company as a group:

 

| **Title of Class** |  | **Name and address of**

**Beneficial Owner (1)** |        | **Amount and Nature of Beneficial Ownership** |       |        | **Percent ofCommon Stock(1)** |        |
|--------------------|--|--------------------------------------------------------|--------|-----------------------------------------------|------------|--------|-------------------------------|--------|
| Common Stock       |  | Robert Rosenthal (2) (4)                          |        |                                               | 15,758,924 |   |                          |        | 14.7 | % |
| Common Stock       |  | Donald Boyd (3) (4)                               |   |                                          | 10,285,605 |   |                          |   | 9.6 | % |
| Common Stock       |  | Cosimo Damiano                                         |   |                                          | 3,491,667  |   |                          |   | 3.2 | % |
| Common Stock       |  | All Officers and Directors as a Group                  |   |                                          | 29,536,196 |   |                          |   | 27.6 | % |

______________

| (1) | NAMG has 107,076,138 shares of common stock issued and outstanding as of April 28, 2015. No stock is held under warrant, or security.                |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Shares held by ASPS Energy Investments Ltd., voting and investment control of which is held by Mr. Robert Rosenthal. No shares are held as security. |
| (3) | No shares are held as security.                                                                                                                      |
| (4) | 333,333 shares were transferred to a non-related third party in January 2015.                                                                        |

 

***Security Ownership of Certain Beneficial Owners***

 

As of April 28, 2015, the Company is not aware of any persons that beneficially own more than 5% of its outstanding common stock who is not listed in the above referenced tables.

 

***Change in Control Arrangements***

 

As of April 28, 2015, there are no arrangements that would result in a change in control of the Company.

 

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***Equity Compensation Plan Information***

 

The following table sets forth all compensation plans including individual compensation arrangements) under which the company’s equity securities may be issued.

 

**EQUITY COMPENSATION PLAN INFORMATION**

 

| **Plan category**                                          |   | **Number of securities to be issued upon exercise of outstanding options, warrantsand rights** |      |   | **Weighted-average exerciseprice ofoutstandingoptions,warrants andrights** |   |   | **Number of securities remainingavailable forfuture issuance under equity compensationplans (excluding securities reflected in column (a))** |   |
|------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|-----------|--------|----------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                       |   | **(a)**                                                                                        |      |   | **(b)**                                                                    |   |   | **(c)**                                                                                                                                      |   |
| Equity compensation plans approved by security holders     |   |                                                                                                | 2,000,000 |   |                                                                       | $      | 0.56   |                                                                                                                                         |   |  | 303,382 |   |
| Equity compensation plans not approved by security holders |   |                                                                                           | -         |   |                                                                       |   |   |                                                                                                                                         |   |   | - |   |
| Total                                                      |   |                                                                                           | 2,000,000 |   |                                                                       | $      | 0.56   |                                                                                                                                         |   |   | 303,382 |   |

______________

| (1) | At December 31, 2014 there were 850,000 stock option shares issued, and 846,618 warrants issued, leaving 303,382 available for issuance. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------|

 

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

 

***Particular Transactions***

 

On July 23, 2014, the Company entered into a short-term promissory note (the “Note”) with ASPS Energy Investments Ltd., a company whose voting and investment control is held by Mr. Robert Rosenthal, the Company’s President and Chief Executive Officer. The Note is for a principal amount of $20,000, bears interest at the rate of 4% per annum, and is payable on or before August 26, 2014. The proceeds from the Note will be used for the Company’s general business purposes. This amount remains outstanding as of December 31, 2014, and the Company has accrued $355 in interest on this note through December 31, 2014. On March 17, 2015 the Company entered into an agreement with ASPS for the conversion of the outstanding principal excluding interest charges to be converted into 5,000,000 Common Shares at $0.004 per share. Separately on March 17, 2015 the Company entered into an agreement with Mr. Rosenthal to convert $11,167 of outstanding Salary fees into 2,791,667 Common Shares based on a conversion price of $0.004 per share.

 

On April 1, 2013 Donald Boyd, Operations Manager, and Robert Skerry Hoar, Managing Geologist, agreed to termination of services as full time employees, and signed Consulting Agreement contracts with the Company this same date. Each individual contract stipulates $5,000 per month fixed compensation for consulting services in the ongoing operations of NAMG. As of December 31, 2014, the Company has $48,500 in accounts payable to Donald Boyd and $46,057 to Robert Skerry Hoar in accounts payable. These agreements have been terminated effective November 30, 2014. On March 17, 2015 the Company entered into an agreement with Mr. Boyd to convert $11,167 of outstanding Consulting fees into 2,791,667 Common Shares based on a conversion price of $0.004 per share. On March 17, 2015 the Company entered into an agreement with Mr. Hoar to convert $45,000 of outstanding Consulting fees into 11,250,000 Common Shares based on a conversion price of $0.004 per share.

 

On February 1, 2013, the Company entered into a consulting contract with a Board Director, Cosimo Damiano. The consulting contract was for twelve months beginning January 2013 at a rate of $5,000 per month, and covers a variety of consulting activities in the management and operations of the Company. For the twelve (12) month period ending December 31, 2013 the Company incurred consulting fees totalling $60,000, $35,000 of which is included in accounts payable as of December 31, 2014. On March 17, 2015 the Company entered into an agreement with Mr. Damiano to convert $11,167 of outstanding Consulting fees into 2,791,667 Common Shares based on a conversion price of $0.004 per share.

 

On November 13, 2012, the Company entered into a Farm-In agreement with Avere Energy Corp (“Avere”), a wholly owned subsidiary of East West Petroleum Corp. According to the provisions of the agreement, Avere was to fund $300,000 for overhead, which was funded at 100% as of May 1, 2013. The Company has repaid through cash and overhead deductions in the amount of $193,390 leaving the debt remaining at December 31, 2014 of $106,610. Additionally, Avere has provided $1,300,000 to finance the drilling of Well 77-20 in exchange for a 25% working interest in the Tejon Extension. Well 77-20 has been drilled, and is currently shut in while reviewing additional testing possibilities. As of December 31, 2014 Avere has contributed $1,337,019 towards Well 77-20, with NAMG’s contribution at $115,275.

 

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The Company entered into a short-term loan with ASPS Energy Investments, Ltd. (“ASPS”), a company whose voting and investment control is held by Mr. Robert Rosenthal, the Company’s President and Chief Executive Officer, on September 7, 2012, for the principal sum of $50,000, with interest rate of 3%. The note was due and payable on September 6, 2013, when the outstanding amount of principal and interest was due in full. On February 3, 2014, the outstanding principal of $50,000 as well as accrued interest of $2,153 was converted into 200,590 shares of common stock at a price of $0.26 per share. An additional $20,000 was funded on July 23, 2014. Accrued interest on this amount through December 31, 2014 is $355. The $20,355 has been converted into shares of common stock in February 2015.

 

***Controlling Persons***

 

The Company is not aware of any agreements or understandings by a person or group of persons that could be construed as a controlling person.

 

***Director Independence***

 

Our board of directors consists of Messrs. Rosenthal, Damiano, and Boyd. The board considers all relevant facts and circumstances in its determination of independence of all members of the board (including any relationships set forth in this Form 10-K under the heading “Certain Related Person Transactions).

 

**Item 14. Principal Accounting Fees and Services.**

 

The following table sets forth the aggregate fees paid during the year ended December 31, 2014 for professional services rendered by Eide Bailly, for the quarter 1 audit review, Malone Bailey for quarter 2 and 3 and the 2014 audit of our annual financial, and Brown Armstrong, the Company’s tax accountants:

 

**Accounting Fees and Services**

 

|               |   | **2014** |   |   | **2013** |   |
|--------------------|--------|----------|--------|--------|----------|--------|
| Audit Fees         |   | $        | 34,650 |   |     | $      | 34,650 |   |
| Audit Related Fees |   |     |   |   |     |   |   |   |
| Tax Fees           |   | $        | 31,247 |   |     | $      | 31,247 |   |
| All Other Fees     |   |     |   |   |     |   |   |   |
| TOTAL              |   | $        | 65,897 |   |     | $      | 65,897 |   |

 

The category of “Audit Fees” includes fees for our annual audit and services rendered in connection with regulatory filings with the SEC, such as the issuance of comfort letters and consents.

 

The category of “Audit-related Fees” includes employee benefit plan audits, internal control reviews and accounting consultation.

 

All above audit services and audit-related services were pre-approved by the Board of Directors, which concluded that the provision of such services by all parties was compatible with the maintenance of the respective firm’s independence in the conduct of its audits.

 

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**PART IV**

 

**Item 15. Exhibits, Financial Statement Schedules. CONFIRM WITH LEGAL**

 

| 2.1  |   | Agreement and Plan of Merger Dated November 16, 2012, by and among North American Oil & Gas Corp., a Nevada corporation, Lani Acquisition, LLC, a Nevada limited liability company, and Lani, LLC, a California limited liability company and incorporated herein by reference |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1  |   | Articles of Incorporation of the registrant and incorporated herein by reference                                                                                                                                                                                                   |
| 3.2  |   | Certificate of Amendment to Articles of Incorporation of Registrant and incorporated herein by reference                                                                                                                                                                           |
| 3.3  |   | By-laws of the Registrant and incorporated herein by reference                                                                                                                                                                                                                     |
| 3.4  |   | Certificate of Change of Registrant and incorporated herein by reference                                                                                                                                                                                                           |
| 4.1  |   | 2012 Stock Option Plan and incorporated herein by reference                                                                                                                                                                                                                        |
| 10.1 |   | Stock Redemption Agreement dated November 16, 2012, by and between Registrant and Bouwe Bekking and incorporated herein by reference                                                                                                                                               |
| 10.2 |   | Farm-in Agreement dated November 3, 2012 by and between Lani, LLC and Avere Energy Corp.                                                                                                                                                                                           |
| 10.3 |   | Amendment to Farm-in Agreement dated March 4, 2013 by and between Lani, LLC and Avere Energy Corp. and incorporated herein by reference                                                                                                                                            |
| 10.4 |   | Consultant Agreement dated April 5, 2013 with Robert Skerry Hoar and incorporated herein be reference                                                                                                                                                                              |
| 10.5 |   | Consultant Agreement dated April 5, 2013 with Donald Boyd and incorporated herein be reference                                                                                                                                                                                     |
| 10.6 |   | Stock Purchase Agreement dated August 14, 2013, filed as an exhibit to the current report on Form 8-K, filed with the Securities Exchange Commission on August 16, 2013.                                                                                                           |
| 10.7 |   | Form of Warrant, issued October 16, 2013, filed as an exhibit to the current report on Form 8-K, filed with the Securities Exchange Commission on October 21, 2013 and incorporated herein by reference.                                                                           |
| 10.8 |   | Stock Purchase Agreement, dated October 16, 2013, filed as an exhibit to the current report on Form 8-K, filed with the securities Exchange Commission on October 21, 2013 and incorporated herein by reference.                                                                   |
| 10.9 |   | Form of Warrant, issued December 6, 2013, filed as an exhibit to the current report on Form 8-K, filed with the Securities Exchange Commission on December 9, 2013. and incorporated herein by reference.                                                                          |
| 11.1 |   | Stock Purchase Agreement, dated December 6, 2013, filed as an exhibit to the current report on Form 8-K, filed with the securities Exchange Commission on December 9, 2013 and incorporated herein by reference.                                                                   |
| 11.2 |   | Form of Warrant, issued January 27, 2014, filed as an exhibit to the current report on Form 8-K, filed with the Securities Exchange Commission on January 27, 2014. and incorporated herein by reference.                                                                          |
| 16.1 |   | Letter dated June 10, 2013 from Eide Bailly Ltd.                                                                                                                                                                                                                                   |
| 17.1 |   | Resignation of Directorship of Nicolaus Petri dated April 5, 2013                                                                                                                                                                                                                  |
| 17.2 |   | Resignation of Directorship of Gregory Renwick dated December 6, 2013, filed as an exhibit to the current report on Form 8-K, filed with the Securities Exchange Commission on December 9, 2013 and incorporated herein by reference.                                              |
| 21.1 |   | List of the Registrant’s Subsidiaries                                                                                                                                                                                                                                        |
| 31.1 |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                 |
| 31.2 |   | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                 |
| 32.1 |   | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002(5)                                                                                                                   |

 

| 101.INS ** |   | XBRL Instance Document                                 |
|------------|--------|--------------------------------------------------------|
| 101.SCH ** |   | XBRL Taxonomy Extension Schema Document                |
| 101.CAL ** |   | XBRL Taxonomy Extension Calculation Linkbase Document  |
| 101.DEF ** |   | XBRL Taxonomy Extension Definition Linkbase Document   |
| 101.LAB ** |   | XBRL Taxonomy Extension Label Linkbase Document        |
| 101.PRE ** |   | XBRL Taxonomy Extension Presentation Linkbase Document |

____________

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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Pursuant to the requirements of Section13or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

| Date: May 14, 2015 | By:    | */s/**Robert Rosenthal*               |   |
|-------------------------|--------|---------------------------------------|--------|
|                    | Name:  | Robert Rosenthal                      |   |
|                    | Title: | President and Chief Executive Officer |   |
|                    |   |                                  |   |
| Date: May 14, 2015 | By:    | */s/ Cosimo Damiano*                  |   |
|                    | Name:  | Cosimo Damiano                        |   |
|                    | Title: | Chief Financial Officer               |   |

 

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**** 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board of Directors and Stockholders 

North American Oil and Gas Corp. 

Ventura, California

 

We have audited the accompanying consolidated balance sheet of North American Oil and Gas Corp. (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

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

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of North American Oil and Gas Corp. as of December 31, 2014 and 2013, and the results of their operations and cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that North American Oil and Gas Corp. will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered losses from operations and negative cash flows which raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

*/s/ MALONEBAILEY, LLP*

www.malone-bailey.com 

Houston, Texas

 

May 13, 2015

 

|   |
|--------|
| F-1    |
|        |

 

| **NORTH AMERICAN OIL & GAS CORP.** |
|----------------------------------------|
| **CONSOLIDATED BALANCE SHEETS**        |
| **DECEMBER 31, 2014 AND 2013**         |
|                                   |

 

|                                                                                                                                                                    |   | **DECEMBER 31,** |       |   | **DECEMBER 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|------------------|--------|
|                                                                                                                                                                    |   | **2014**         |       |   | **2013**         |   |
| **ASSETS**                                                                                                                                                         |
| **CURRENT ASSETS**                                                                                                                                                 |   | ****             |       |   | ****             |   |
| Cash                                                                                                                                                               |   | $                | 51,210     |   |             | $      | 49,563 |   |
| Accounts receivable                                                                                                                                                |   |             | 2,846      |   |             |   | 704 |   |
| **Total current assets**                                                                                                                                           |   |             | 54,056     |   |             |   | 50,267 |   |
|                                                                                                                                                                    |   |             |       |   |             |   |   |   |
| Fixed assets, net                                                                                                                                                  |   |             | 4,334      |   |             |   | 5,876 |   |
|                                                                                                                                                                    |   |             |       |   |             |   |   |   |
| Other Assets                                                                                                                                                       |   |             |       |   |             |   |   |   |
| Restricted cash                                                                                                                                                    |   |             | -          |   |             |   | 1,037 |   |
| Oil and gas properties, successful efforts method                                                                                                                  |   |             | 215,161    |   |             |   | 472,520 |   |
| Deposits                                                                                                                                                           |   |             | 21,300     |   |             |   | 21,300 |   |
| **Total other assets**                                                                                                                                             |   |             | 236,461    |   |             |   | 494,857 |   |
|                                                                                                                                                                    |   |             |       |   |             |   |   |   |
| **TOTAL ASSETS**                                                                                                                                                   |   | $                | 294,851    |   |             | $      | 551,000 |   |
|                                                                                                                                                                    |   |             |       |   |             |   |   |   |
| **LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**                                                                                                                 |
| **CURRENT LIABILITIES**                                                                                                                                            |   |             |       |   |             |   |   |   |
| Accounts payable                                                                                                                                                   |   | $                | 46,130     |   |             | $      | 62,655 |   |
| Accounts payable - related party                                                                                                                                   |   |             | 236,167    |   |             |   | 156,610 |   |
| Advance from working interest owner                                                                                                                                |   |             | -          |   |             |   | 53,090 |   |
| Other current liabilities                                                                                                                                          |   |             | 339,360    |   |             |   | 172,735 |   |
| Current portion of convertible note payable - net of original interest discount of $18,586 and $0, respectively, and debt discount of $54,837 and $0, respectively |   |             | 407,585    |   |             |   | - |   |
| Derivative liability                                                                                                                                               |   |             | 61,134     |   |             |   | - |   |
| Note payable - related party, including accrued interest                                                                                                           |   |             | 20,000     |   |             |   | 50,000 |   |
| **Total current liabilities**                                                                                                                                      |   |             | 1,110,376  |   |             |   | 495,090 |   |
|                                                                                                                                                                    |   |             |       |   |             |   |   |   |
| **LONG TERM LIABILITIES**                                                                                                                                          |   |             |       |   |             |   |   |   |
| Long Term Debt                                                                                                                                                     |   |             | 18,413     |   |             |   |   |   |
| Asset retirement obligation                                                                                                                                        |   |             | 77,415     |   |             |   | 104,100 |   |
|                                                                                                                                                                    |   |             |       |   |             |   |   |   |
| **TOTAL LIABILITIES**                                                                                                                                              |   |             | 1,206,204  |   |             |   | 599,190 |   |
|                                                                                                                                                                    |   |             |       |   |             |   |   |   |
| **STOCKHOLDERS' DEFICIT**                                                                                                                                          |   |             |       |   |             |   |   |   |
| Preferred stock, $0.001 par value, 25,000,000 shares authorized Nil shares issued and outstanding                                                                  |   |             | -          |   |             |   | - |   |
| Common stock, $0.001 par value, 200,000,000 shares authorized 66,164,337 and 61,114,602 shares issued and outstanding, respectively                                |   |             | 66,164     |   |             |   | 61,115 |   |
| Additional paid in capital                                                                                                                                         |   |             | 2,363,342  |   |             |   | 1,818,389 |   |
| Accumulated deficit                                                                                                                                                |   |                  | (3,340,859 | )      |             |        | (1,927,694 | ) |
| **Total stockholders' deficit**                                                                                                                                    |   |                  | (911,353   | )      |             |        | (48,190 | ) |
|                                                                                                                                                                    |   |             |       |   |             |   |   |   |
| **TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT**                                                                                                                    |   | $                | 294,851    |   |             | $      | 551,000 |   |

 

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

 

|   |
|--------|
| F-2    |
|        |

 

| **NORTH AMERICAN OIL & GAS CORP.**             |
|----------------------------------------------------|
| **CONSOLIDATED STATEMENTS OF OPERATIONS**          |
| **FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013** |
|                                               |

 

|                                                                          | ****   | **YEARS ENDED******  |       |
|--------------------------------------------------------------------------|--------|----------------------|------------|
|                                                                          | ****   | **DECEMBER 31,****** |       |
|                                                                          |   | **2014**             |       |   | **2013** |   |
| ** **                                                               |        |                      |            |  |  |  |
| **OPERATING EXPENSES**                                                   |   | ****                 |       |   | **** |   |
| Exploration and leasehold costs                                          |   |                      | 45,365     |   |   |  | 457,501 |   |
| Management and consulting expenses                                       |   |                 | 110,809    |   |   |   | 119,480 |   |
| General and administrative expenses                                      |   |                 | 744,145    |   |   |   | 931,607 |   |
| Impairment expense                                                       |   |                 | 259,092    |   |   |   | - |   |
| Depreciation                                                             |   |                 | 1,542      |   |   |   | 154 |   |
| Accretion on asset retirement obligation                                 |   |                 | 1,026      |   |   |   | 9,436 |   |
| **Total operating expenses**                                             |   |                 | 1,161,979  |   |   |   | 1,518,178 |   |
|                                                                          |   |                 |       |   |   |   |   |   |
| **OTHER INCOME (EXPENSE)**                                               |   |                 |       |   |   |   |   |   |
| Interest expense, including amortization of original issue discount, net |   |                      | (241,295   | ) |   |   | - |   |
| Loss on embedded derivative                                              |   |                      | (11,134    | ) |   |   | - |   |
| Other income (expense)                                                   |   |                 | 1,243      |   |   |  | (7,310 | ) |
| **Total other (income) expense**                                         |   |                      | (251,186   | ) |   |  | (7,310 | ) |
|                                                                          |   |                 |       |   |   |   |   |   |
| Net loss before provision for income taxes                               |   |                      | (1,413,165 | ) |   |  | (1,525,488 | ) |
|                                                                          |   |                 |       |   |   |   |   |   |
| Provision for income taxes                                               |   |                 | -          |   |   |   | - |   |
|                                                                          |   |                 |       |   |   |   |   |   |
| **NET LOSS**                                                             |   | $                    | (1,413,165 | ) |   | $ | (1,525,488 | ) |
|                                                                          |   |                 |       |   |   |   |   |   |
| **WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING**                        |   |                 | 62,814,163 |   |   |   | 61,114,602 |   |
|                                                                          |   |                 |       |   |   |   |   |   |
| **BASIC AND DILUTED NET LOSS PER SHARE**                                 |   | $                    | (0.02      | ) |   | $ | (0.02 | ) |

 

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

 

|   |
|--------|
| F-3    |
|        |

 

| **NORTH AMERICAN OIL & GAS CORP.**                                  |
|-------------------------------------------------------------------------|
| **CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)** |
| **FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013**                      |

 

|                                                               |   | **Preferred Stock********** |   |   | **Common Stock********** |   |   | **AdditionalPaid-In** |   |   | **Accumulated** |   |   | ****        |   |
|---------------------------------------------------------------|--------|-----------------------------|--------|--------|--------------------------|--------|--------|-----------------------|--------|--------|-----------------|--------|--------|-------------|--------|
|                                                               |   | **Shares**                  |   |   | **Amount**               |   |   | **Shares**            |   |   | **Amount**      |   |   | **Capital** |   |   | **Deficit** |   |   | **Total** |   |
|                                                               |   | ****                        |   |   | ****                     |   |   | ****                  |   |   | ****            |   |   | ****        |   |   | **** |   |   | **** |   |
| Balance - December 31, 2012                                   |   |                             | -      |   |                     | $      | -      |                  |   |        | 60,125,000      |   |   | $           | 60,125 |   |   | $ | 654,155 |   |   | $ | (402,206 | ) |   | $ | 312,074 |   |
|                                                               |   |                        |   |   |                     |   |   |                  |   |   |            |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for cash                                        |   |                        | -      |   |                     |   | -      |                  |   |   | 989,602         |   |   |        | 990    |   |   |   | 624,030 |   |   |   | - |   |   |   | 625,020 |   |
| Stock based compensation                                      |   |                        | -      |   |                     |   | -      |                  |   |   | -               |   |   |        | -      |   |   |   | 540,204 |   |   |   | - |   |   |   | 540,204 |   |
| Net loss for the year                                         |   |                        | -      |   |                     |   | -      |                  |   |   | -               |   |   |        | -      |   |   |   | - |   |   |  | (1,525,488 | ) |   |  | (1,525,488 | ) |
|                                                               |   |                        |   |   |                     |   |   |                  |   |   |            |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2013                                   |   |                        | -      |   |                     |   | -      |                  |   |   | 61,114,602      |   |   |        | 61,115 |   |   |   | 1,818,389 |   |   |  | (1,927,694 | ) |   |  | (48,190 | ) |
|                                                               |   |                        |   |   |                     |   |   |                  |   |   |            |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for cash                                        |   |                        | -      |   |                     |   | -      |                  |   |   | 1,549,145       |   |   |        | 1,549  |   |   |   | 298,451 |   |   |   | - |   |   |   | 300,000 |   |
| Shares issued for conversion of notes payable - related party |   |                        | -      |   |                     |   | -      |                  |   |   | 200,590         |   |   |        | 200    |   |   |   | 51,953 |   |   |   | - |   |   |   | 52,153 |   |
| Shares issued for services                                    |   |                        | -      |   |                     |   | -      |                  |   |   | 3,600,000       |   |   |        | 3,600  |   |   |   | 77,700 |   |   |   | - |   |   |   | 81,300 |   |
| Stock based compensation                                      |   |                        | -      |   |                     |   | -      |                  |   |   | -               |   |   |        | -      |   |   |   | 92,089 |   |   |   | - |   |   |   | 92,089 |   |
| Warrants issued in connection with convertible note payable   |   |                        | -      |   |                     |   | -      |                  |   |   | -               |   |   |        | -      |   |   |   | 24,760 |   |   |   | - |   |   |   | 24,760 |   |
| Net loss for the year                                         |   |                        | -      |   |                     |   | -      |                  |   |   | -               |   |   |        | -      |   |   |   | - |   |   |  | (1,413,165 | ) |   |  | (1,413,165 | ) |
|                                                               |   |                        |   |   |                     |   |   |                  |   |   |            |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2014                                   |   |                        | -      |   |                     | $      | -      |                  |   |   | 66,464,337      |   |   | $           | 66,464 |   |   | $ | 2,363,342 |   |   | $ | (3,340,859 | ) |   | $ | (911,053 | ) |

 

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

 

|   |
|--------|
| F-4    |
|        |

 

| **NORTH AMERICAN OIL & GAS CORP.**             |
|----------------------------------------------------|
| **CONSOLIDATED STATEMENTS OF CASH FLOW**           |
| **FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013** |

 

|                                                                                |   | **YEARS ENDED**  |       |
|-------------------------------------------------------------------------------------|--------|------------------|------------|
|                                                                                |   | **DECEMBER 31,** |       |
|                                                                                |   | **2014**         |       |   | **2013** |   |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                           |   |             |       |   |   |   |
| Net loss for the period                                                             |   | $                | (1,413,165 | ) |   | $ | (1,525,488 | ) |
|                                                                                |   |             |       |   |   |   |   |   |
| **Adjustments to reconcile net (loss) to net cash (used in) operating activities:** |   |             |       |   |   |   |   |   |
| Depreciation expense                                                                |   |             | 1,542      |   |   |   | 154 |   |
| impairment expense                                                                  |   |             | 259,092    |   |   |   | - |   |
| Amortization of original issue discount                                             |   |             | 54,414     |   |   |   | - |   |
| Amortization of debt discount                                                       |   |             | 18,426     |   |   |   | - |   |
| Accretion expense                                                                   |   |             | 1,026      |   |   |   | 9,436 |   |
| Stock based compensation                                                            |   |             | 92,089     |   |   |   | 540,204 |   |
| Loss on embedded derivative                                                         |   |             | 11,134     |   |   |   | - |   |
| Default interest added to note payable                                              |   |             | 170,418    |   |   |   | - |   |
| Common shares issued for services                                                   |   |             | 81,000     |   |   |   | - |   |
|                                                                                |   |             |       |   |   |   |   |   |
| **Change in assets and liabilities**                                                |   |             |       |   |   |   |   |   |
| (Increase) decrease in accounts receivable                                          |   |             | (2,142     | ) |   |   | 4,066 |   |
| (Increase) decrease in prepaid expenses and other assets                            |   |             | -          |   |   |   | 4,140 |   |
| Increase (decrease) in accounts payable                                             |   |             | (16,527    | ) |   |   | (545,895 | ) |
| Increase (decrease) in accrued expenses                                             |   |             | 168,779    |   |   |   | 172,735 |   |
| Increase (decrease) in accounts payable - related party                             |   |             | 79,557     |   |   |   | (143,390 | ) |
| **Total adjustments**                                                               |   |             | 918,808    |   |   |   | 41,450 |   |
| **Net cash (used in) operating activities**                                         |   |             | (494,357   | ) |   |   | (1,484,038 | ) |
|                                                                                |   |             |       |   |   |   |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                           |   |             |       |   |   |   |   |   |
| Acquisition of fixed assets                                                         |   |             | -          |   |   |   | (1,346 | ) |
| Acquisition of oil and gas properties                                               |   |             | (82,533    | ) |   |   | (845,031 | ) |
| Decrease in restricted cash                                                         |   |             | 1,037      |   |   |   | 936,030 |   |
| **Net cash provided by (used in) investing activities**                             |   |             | (81,496    | ) |   |   | 89,653 |   |
|                                                                                |   |             |       |   |   |   |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                           |   |             |       |   |   |   |   |   |
| Proceeds received from the sale of common stock                                     |   |             | 300,000    |   |   |   | 625,020 |   |
| Proceeds from the issuance of short-term convertible debt, net                      |   |             | 240,000    |   |   |   | - |   |
| Proceeds from the issuance of long-term convertible debt, net                       |   |             | 67,500     |   |   |   |   |   |
| Proceeds from the issuance of notes payable - related party                         |   |             | 20,000     |   |   |   | 240,000 |   |
| Repayment of principal on convertible notes payable                                 |   |             | (50,000    | ) |   |   | - |   |
| **Net cash provided by financing activities**                                       |   |             | 577,500    |   |   |   | 865,020 |   |
|                                                                                |   |             |       |   |   |   |   |   |
| **NET INCREASE (DECREASE) IN CASH**                                                 |   |             | 1,647      |   |   |   | (529,365 | ) |
|                                                                                |   |             |       |   |   |   |   |   |
| **CASH  - BEGINNING OF YEAR**                                                  |   |             | 49,563     |   |   |   | 578,928 |   |
|                                                                                |   |             |       |   |   |   |   |   |
| **CASH  - END OF YEAR**                                                        |   | $                | 51,210     |   |   | $ | 49,563 |   |
|                                                                                |   |             |       |   |   |   |   |   |
| **SUPPLEMENTAL CASH FLOW INFORMATION:**                                             |   |             |       |   |   |   |   |   |
| Cash paid during the year for:                                                      |   |             |       |   |   |   |   |   |
| Interest                                                                            |   |             | -          |   |   |   | - |   |
| Income taxes                                                                        |   |             | -          |   |   |   | - |   |
|                                                                                |   |             |       |   |   |   |   |   |
| **SUPPLEMENTAL NON-CASH ACTIVITY:**                                                 |   |             |       |   |   |   |   |   |
| Common stock issued for conversion of note payable - related party                  |   |             | 52,154     |   |   |   | - |   |
| Warrants issued with convertible debt                                               |   |             | 24,760     |   |   |   | - |   |
| Original issue discount                                                             |   |             | 67,500     |   |   |   | - |   |
| Recovery of oil and gas property                                                    |   |             | -          |   |   |   | 75,117 |   |
| Asset retirement obligation                                                         |   |             | 27,711     |   |   |   | 32,635 |   |
| Debt discount from derivative                                                       |   |             | 50,000     |   |   |   | - |   |

 

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

 

|   |
|--------|
| F-5    |
|        |

 

**NORTH AMERICAN OIL & GAS CORP.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE 1 – NATURE OF BUSINESS**

 

Organization

 

North American Oil & Gas Corp. and its subsidiary (the “Company” or “NAMG”) was originally incorporated under the name Calendar Dragon Inc. as a Nevada corporation on April 7, 2010. On October 11, 2012, the Company changed its name under Nevada law from Calendar Dragon Inc. to North American Oil & Gas Corp.

 

On November 20, 2012 NAMG entered into an Agreement and Plan of Merger (the “Merger”), by and among the Company, Lani Acquisition, LLC, a Nevada limited liability company and a wholly-owned subsidiary of the Company (“Lani Acquisition”), and Lani, LLC, a California limited liability company. NAMG is primarily engaged in the business of acquiring, exploring, and developing oil and natural gas properties.

 

The Company is in the early stages of exploration and its planned future principal business is the acquisition and development of mineral interest in the San Joaquin Basin region of California, with no operating revenue during the period presented.

 

The Company’s working capital has been generated from the sales of common stock, warrant options and from advances pursuant to the Farm-In Agreement with Avere Energy Corp as well as from proceeds received from convertible promissory notes and other notes payable.

 

The consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The preparation of financial statements in conformity with United States (U.S.) generally accepted accounting principles requires management to make estimates and assumptions that affect reported assets, liabilities, revenues and expenses, as well as disclosure of contingent assets and liabilities.

 

Going concern

 

The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs, which indicates a substantial doubt of its ability to continue as a going concern. The Company has accumulated deficits since Inception of $3,340,859 and has a working capital deficit at December 31, 2014 of $1,056,320. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.

 

Management is currently involved in raising capital to continue the operations and financial requirements the Company foresees. These steps include, but are not limited to:

 

|   | 1)     | capital raisings                   |
|--------|--------|------------------------------------|
|   |   |                               |
|   | 2)     | farm-in agreements and asset sales |
|   |   |                               |
|   | 3)     | Other investor related interests   |

 

These steps may not be sufficient to provide the Company with the ability to continue as a going concern. Management cannot provide any assurances that the Company will be successful in its operation.

 

Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. If the Company is unable to make it profitable, the Company could be forced to discontinue operations.

 

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

|   |
|--------|
| F-6    |
|        |

 

**NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

Basis of presentation and principles of consolidation

 

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements of the Company as of December 31, 2014.

 

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Lani, LLC. All inter-company accounts and transactions have been eliminated. These consolidated financial statements present the net assets and operations of NAMG for the years ended December 31, 2014 and 2013. 

 

Use of Estimates

 

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the useful life of fixed assets, amounts and timing of closure obligations, accretion of asset retirement obligations, the assumptions used to calculate fair value of options and warrants granted, beneficial conversion of convertible notes payable, asset valuations, common stock issued for services, and common stock issued for conversion of notes.

 

Oil and Natural Gas Properties

 

The Company’s oil and gas exploration and production activities are accounted for using the successful efforts method. Under this method, all property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether the well has found proved reserves. If an exploratory well does not find proved reserves, the costs of drilling the well are charged to expense and included within cash flows from investing activities. The costs of development wells are capitalized whether productive or nonproductive. Oil and gas lease acquisition costs are also capitalized. Interest cost is capitalized as a component of property cost for significant exploration and development projects that require greater than six months to be readied for their intended use. Leasehold impairment is recognized based on exploratory experience and management’s judgment. Upon achievement of all conditions necessary for the classification of reserves as proved the associated leasehold costs are reclassified to proved properties.

 

Depreciation, depletion and amortization of the cost of proved oil and gas properties is calculated using the unit-of-production method. The reserve base used to calculate depreciation, depletion and amortization for leasehold acquisition costs and the cost to acquire proved properties is the sum of proved developed reserves and proved undeveloped reserves. With respect to lease and well equipment costs, which include development costs and successful exploration drilling costs, the reserve base includes only proved developed reserves. Estimated future dismantlement, restoration and abandonment costs, net of salvage values, are taken into account.

 

When circumstances indicate that an asset may be impaired, we compare expected undiscounted future cash flows at a producing field level to the unamortized capitalized cost of the asset. If the future undiscounted cash flows, based on our estimate of future natural gas and crude oil prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is calculated by discounting the future cash flows at an appropriate risk-adjusted discount rate.

 

Unproved oil and gas properties are assessed periodically for impairment based on remaining lease terms, drilling results, commodity price outlooks, future plans to develop acreage and other relevant matters. During the years ended December 31, 2014 and 2013, the Company recognized no impairment charges.

 

Proceeds from the assignment of partial interests in unproved leases are deferred until such time the assignment occurs. The proceeds are accounted for as a recovery of cost without recognizing any gain or loss unless the proceeds exceed the carrying amount. Proceeds received prior to the assignment of partial interests in unproved leases are accounted for as a current liability in the accompanying consolidated balance sheets.

 

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| F-7    |
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Cash and Cash Equivalents

 

The Company considers all short-term, highly liquid investments, generally with maturity of three months or less at time of purchase, to be cash equivalents. As of December 31, 2014 and 2013, there are no cash equivalents.

 

Restricted Cash

 

Restricted cash consists of advances from working interest owners designated to be used for the acquisition of leaseholds and other oil and gas exploration and development activities, and general and administrative expenses.

 

Concentrations

 

The Company’s cash, restricted cash and accounts receivable are exposed to concentrations of credit risk. The Company manages the risk associated with the cash by depositing these funds with major financial institutions thereby minimizing exposure for deposits in excess of federally insured amounts. On occasion, the Company may have cash in banks in excess of federally insured amounts. We believe that credit risk associated with cash is remote.

 

Included in the Company’s consolidated balance sheets at December 31, 2014 and 2013, are the net assets of the entity’s oil and gas operations, all of which are located in San Joaquin Basin region of California and which total $215,161 and $472,520, respectively.

 

The majority of the Company’s working capital as of December 31, 2014 and 2013 is from three separate Purchase and Sales Agreements that totaled $625,000. Two of these agreements included the issuance of 346,618 warrants.

 

Income Taxes

 

The Company accounts for income taxes required by the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

 

The Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Position. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.

 

Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

 

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The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed.

 

As of December 31, 2014, the Company had Federal net operating loss carry forwards of approximately $1,114,602 to reduce future taxable income, which expire after 2034. Interest and penalties on tax deficiencies are classified as income taxes in accordance with ASC Topic 740.

 

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management cannot conclude it is more likely than not that the Company will realize the benefits of these deductible differences. As such, a valuation allowance has been recorded for 100% of the estimated deferred tax assets.

 

Allowance for Bad Debts

 

Management reviews accounts receivable on a regular basis to determine if any receivables will potentially be uncollectible.

 

As of December 31, 2014 all but $2,846 in Company receivables has been fully collected, and, accordingly, no allowance for doubtful accounts has been recorded.

 

Deposits

 

Deposits consist of a $20,000 bond held by the State of California for plugging and abandonment expenses, and an office lease deposit of $1,300.

 

Fixed Assets

 

Fixed assets consist of furniture, fixtures, and equipment and these fixed assets are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from five to seven years. Depreciation expense for the years ended December 31, 2014 and 2013 are $1,542 and $155, respectively.

 

Leases

 

The Company conducts its operations from leased facilities. Normally, the Company records rental expense on its operating leases over the lease term as it becomes payable. If rental payments are not made on a straight-line basis, per terms of the agreement, the Company records a deferred rent expense and recognizes the rental expense on a straight-line basis throughout the lease term. Rent expense was $14,400 and $14,400 for the years ended December 31, 2014 and 2013, respectively.

 

Asset Retirement Obligation

 

The Company follows the provisions of ASC 410-10, “Asset Retirement and Environmental Obligations,” at such time as it acquires or drills oil and gas wells. The estimated fair value of the future costs associated with the dismantlement, abandonment, and restoration of oil and gas properties is recorded when incurred, generally upon acquisition or commencement of drilling of a well. The estimated costs are discounted to present values using a credit adjusted risk free rate over the estimated economic life of the oil and gas properties. Such costs are capitalized as part of the related asset. The asset will be depleted on the units-of-production method. The associated liability is classified in other long-term liabilities in the accompanying consolidated balance sheets. The liability will be periodically adjusted to reflect (1) new liabilities incurred, (2) liabilities settled during the period, (3) accretion expense, and (4) revisions to estimated future cash flow requirements. Accretion expense of $1,026 and $9,436 is recorded as a component of leasehold costs in the accompanying consolidated statements of operations for the years ended December 31, 2014 and 2013, respectively.

 

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Stock-based Compensation

 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation”, which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Pursuant to ASC Topic 505-50, “Equity Based Payments to Non-employees”, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

 

Stock-Based Compensation Employees

 

The Company accounts for share-based awards issued to employees in accordance with FASB ASC 718. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. Additionally, share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value. The Company applies ASC 505-50, “Equity Based Payments to Non-Employees”, with respect to options and warrants issued to non-employees.

  

Revenue Recognition

 

The Company has not had any revenue recognized to date.

 

Related party transactions

 

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties that control or can significantly influence the management or operating policies of the Company. The Company discloses all related party transactions.

 

Fair Value Measurements

 

The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures,” which defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The statement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

 

Level 1: Quoted prices are available in active markets for identical assets or liabilities;

 

Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; or

 

Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations.

 

ASC 820 requires financial assets and liabilities to be classified based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

 

The Company’s financial instruments consist of cash, accounts receivable, prepaid expenditures, and short-term liabilities. The fair value of these financial instruments approximates the book value due to the short-term nature of these balances.

 

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| F-10   |
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Stock Option Plan

 

On December 12, 2012, the Board of Directors of the Company approved and adopted the terms and provisions of a 2012 Stock Option Plan (“Plan”) for the Company. An aggregate of 2,000,000 shares of the Company’s common stock are initially reserved for issuance upon exercise of nonqualified and/or stock options which may be granted under the 2012 Stock Option Plan. A total of 850,000 options were issued in 2013.

 

Commitments and Contingent Liabilities

 

The Company is engaged in oil and gas exploration and production and may become subject to certain liabilities as they relate to environmental cleanup of well sites or other environmental restoration procedures as they relate to the drilling of oil and gas wells and the operations. In the Company’s acquisition of existing or previously drilled well bores, the Company may not be aware of what environmental safeguards were taken at the time such wells were drilled or during such time the wells were operated. Should it be determined that a liability exists with respect to any environmental clean-up or restoration, the liability to cure such a violation could fall upon the Company. Management believes its properties are operated in conformity with local, state, and federal regulations. No claim has been made, nor is the Company aware of any uninsured liability which the Company may have, as it relates to any environmental cleanup, restoration, or the violation of any rules or regulations.

 

The Company is contingently liable for all of the asset retirement costs associated with the Pass Exploration 77-20 well, as opposed to its 75% working interest share of such costs. The asset retirement obligation has been calculated using the Company’s share of 75% of the working interest in the leased property. Pursuant to the Farm-In, the Company is contingently liable for 100% of the asset retirement obligation related to the Pass Exploration 77-20 well if the well proves to be incapable of producing oil or gas in commercial quantities. This well was in the drilling process as of December 31, 2014 and 2013. Post period the company has sold its working interest in the 77-20 well and no longer will be recording an asset retirement obligation for well 77-20. The sale with an overriding royalty has reduced the company’s commitments and continent liabilities while also ensuring the company recovers its $20,000 bond with the State of California.

 

Earnings (Loss) Per Share

 

Earnings per share is calculated in accordance with FASB ASC No. 260, Earnings Per Share, for the period presented. Basic net loss per share is based upon the weighted average number of common shares outstanding, which were 62,814,163 for the year ended December 31, 2014. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Due to the reported losses, inclusion of common stock equivalents would be anti-dilutive. The Company has 39,947,766 of common stock equivalents as of December 31, 2014 representing common shares issuable for the exercise of stock option, warrants and the conversion of convertible notes payable.

 

Reclassifications

 

Certain reclassifications of amounts previously reported have been made to the accompanying financial statements to maintain consistency between periods presented. The reclassifications had no impact on net (loss) or stockholders’ equity (deficit).

 

Recent Accounting Pronouncements

 

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements”. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 are effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods; however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 for the interim reporting period ended June 30, 2014. 

 

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In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern.” The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of ASU No. 2014-15 on the Company’s consolidated financial statements.

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact of the Company’s financial condition or results of its operations. Various accounting standards and interpretations were issued in. The Company has evaluated the recently issued accounting pronouncements that are effective in 2014 and believe that no other recent pronouncements or updates will have a material effect on the Company’s consolidated financial position, results or operations, or cash flows when adopted.

 

**NOTE 3 – OIL AND GAS PROPERTIES**

 

The Company signed a prospect agreement with Solimar Energy LLC (Solimar) in June 2011, granting Solimar the option to acquire 35% of the Company’s 40% working interest in Tejon Footwall Proper as well as 50% working interest in any and all acquisitions in the Tejon Extension area. In exchange, Solimar agreed to pay a $200,000 prospect fee and was to commence drilling on an exploratory well no later than March 31, 2012. This agreement was voided on August 6, 2012, resulting in a Modified Agreement described below.

 

In August 2012, the Company signed a Purchase and Sale Agreement with Neon Energy assigning the Company Neon Energy’s 20% interest in the Tejon Footwall Proper, along with operatorship. The cost of this exchange to the Company was $60,000.

 

On August 6, 2012, the Company signed a Modified Agreement with Solimar to assign 17.5% interest in the Tejon Footwall Proper to Solimar. This agreement provides the Company with operatorship of shallow drilling on the leasehold, while allowing Solimar operatorship on deep drilling on this same leasehold. Under the original agreement, Solimar paid the Company a $200,000 prospect fee, which was recorded at $76,524 of cost recovery of the Company’s capitalized undeveloped leasehold costs related to the Tejon Footwall Proper prospect, and $123,476 gain on conveyance of working interests.

 

On November 13, 2012, NAMG entered into a Farm-In Agreement (“Farm-In”) with Avere Energy Corp, a Delaware corporation (“Avere”) to develop leaseholds in the San Joaquin Basin. Avere was assigned a 25% working interest in the Tejon Ranch Extension leases, a 21.25% interest in the Tejon Main Area leases, and a 50% working interest in the White Wolf lease. Pursuant to the Farm-In, Avere’s obligation was to transfer $2,200,000 for use in NAMG’s operations. These operations include 100% of the working interest costs associated with drilling and testing one (1) exploration well in the Tejon Extension area (in an amount up to a maximum of $1,300,000), $347,500 to secure additional leaseholds in the White Wolf prospect area, and $552,500 to drill a well in the Tejon Main lease area.

 

The Farm-In was amended on March 4, 2013. The amendment corrected an administrative error in Section 1.3(d)(ii) of the Farm-in to provide that Avere shall provide NAMG with $347,500 to be used for delay rentals or leasing new acreage in White Wolf.

 

On August 1, 2013 the Company and Avere entered into a Purchase and Sale Agreement with Solimar to purchase an additional interest in the Tejon Main leaseholds. This Agreement resulted in the Company retaining 40% working interest in the Tejon Main Lease, with Avere holding a 50% working interest, and Solimar holding a 10% working interest.

 

Combined, the Company at December 31, 2014 has over 174 leaseholds in the San Joaquin Basin with one to three (3) year terms that expire through December 2017. During the fourth quarter of 2014, the Company strategically decided to have the leases in Tejon Main and White Wolf lapse as they expire, keeping the Tejon Extension leases which was sold post year end. As a result, the Company impaired $259,093 in oil and gas properties during 2014.

 

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Oil and gas properties consist of the following:

 

|                         |   | **December 31,2014** |    |   | **December 31,2013** |   |
|------------------------------|--------|----------------------|---------|--------|----------------------|--------|
|                         |   | ****                 |    |   | ****                 |   |
| Oil and Gas Property         |   | ****                 |    |   | ****                 |   |
| Unproved Leaseholds          |   | $                    | 148,829 |   |                 | $      | 378,478 |   |
| Asset Retirement Obligation  |   | $                    | 66,332  |   |                 | $      | 94,042 |   |
|                              |   |                 |    |   |                 |   |   |   |
| Total Oil and Gas Properties |   | $                    | 215,161 |   |                 | $      | 472,520 |   |

 

**NOTE 4 – RELATED PARTY TRANSACTIONS**

 

The Company entered into a short-term loan with ASPS Energy Investments, Ltd. (“ASPS”), a company whose voting and investment control is held by Mr. Robert Rosenthal, the Company’s President and Chief Executive Officer, on September 7, 2012, for the principal sum of $50,000, with interest rate of 3%. The note was due and payable on September 6, 2013, when the outstanding amount of principal and interest was due in full. On February 3, 2014, the outstanding principal of $50,000 as well as accrued interest of $2,153 was converted into 200,590 shares of common stock at a price of $0.26 per share. The balance of this accounts payable at December 31, 2014 is $0.

 

On November 13, 2012, the Company entered into a Farm-In agreement with Avere Energy Corp (“Avere”), a wholly owned subsidiary of East West Petroleum Corp, a company with common ownership to NAOMG. According to the provisions of the agreement, Avere was to fund $300,000 for overhead, which was funded at 100% as of May 1, 2013. The Company has repaid through cash and overhead deductions in the amount of $193,390 leaving the debt remaining at December 31, 2014 of $106,610. Additionally, Avere has provided $1,300,000 to finance the drilling of Well 77-20 in exchange for a 25% working interest in the Tejon Extension. Well 77-20 has been drilled, and is currently shut in while reviewing additional testing possibilities. As of December 31, 2014 Avere has contributed $1,337,019 towards Well 77-20, with NAMG’s contribution at $115,275.

 

On February 1, 2013, the Company entered into a consulting contract with a Board Director, Cosimo Damiano. The consulting contract is for twelve months beginning January 2013 at a rate of $5,000 per month, and covers a variety of consulting activities in the management and operations of the Company. For the twelve (12) month period ending December 31, 2013 the Company incurred consulting fees totaling $60,000, $35,000 of which is included in accounts payable as of December 31, 2014.

 

On April 1, 2013 Donald Boyd, Operations Manager, and Robert Skerry Hoar, Managing Geologist, agreed to termination of services as full time employees, and signed Consulting Agreement contracts with the Company this same date. Each individual contract stipulates $5,000 per month fixed compensation for consulting services in the ongoing operations of NAMG. As of December 31, 2014, the Company has $48,500 in accounts payable to Donald Boyd and $46,057 to Robert Skerry Hoar in accounts payable. These agreements have been terminated effective November 30, 2014.

 

On July 23, 2014, the Company entered into a short-term promissory note (the “Note”) with ASPS Energy Investments Ltd., a company whose voting and investment control is held by Mr. Robert Rosenthal, the Company’s President and Chief Executive Officer. The Note is for a principal amount of $20,000, bears interest at the rate of 4% per annum, and is payable on or before August 26, 2014. The proceeds from the Note were used for the Company’s general business purposes. This amount remains outstanding as of December 31, 2014, and the Company has accrued $355 in interest on this note through December 31, 2014. The note was amended to have the note to either be paid in the form of cash or converted into shares at 60% of the lowest trading price over the last 20 trading days. On March 17, 2015, the outstanding principal of $20,000 excluding the accrued interest was converted into 5,000,000 shares of common stock at a price of $0.004 per share. The balance of this accounts payable at December 31, 2014 is $0.

 

Total outstanding related party accounts payable to Avere, Cosimo Damiano, Donald Boyd, Robert Skerry Hoar at December 31, 2014 is $236,167.

 

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**NOTE 5 – ASSET RETIREMENT OBLIGATION**

 

Changes in the Company’s asset retirement obligations were as follows:

 

|                                             |   | **December 31,2014** |    |   | **December 31,2013** |   |
|--------------------------------------------------|--------|----------------------|---------|--------|----------------------|--------|
|                                             |   | ****                 |    |   | ****                 |   |
| Asset retirement obligation, beginning of period |   | $                    | 104,100 |   |                 | $      | 62,029 |   |
| Abandonment costs                                |   |                 | -       |   |                 |   | - |   |
| Loss(gain) on settlement of liabilities          |   |                 | -       |   |                 |   | - |   |
| Revisions in estimated liabilities               |   | $                    | (27,711 | )      |                 | $      | 32,635 |   |
| Liabilities incurred from new drilling           |   |                 | -       |   |                 |   | - |   |
| Accretion expenses                               |   | $                    | 1,026   |   |                 | $      | 9,436 |   |
|                                                  |   |                 |    |   |                 |   |   |   |
| Asset retirement obligation, end of period       |   | $                    | 77,415  |   |                 | $      | 104,100 |   |

 

**NOTE 6 – INCOME TAXES**

 

As of December 31, 2014 and 2013 the Company had deferred tax assets amounting to approximately $997,715 and $813,669, respectively. These tax assets are a result of net operating losses and differences between the book and tax basis in oil and gas properties. A valuation allowance has been established due to the uncertainty of the utilization of the operating losses in future periods. As a result, in both years the deferred tax asset was reduced to zero and no income tax benefit was recorded. The net operating loss carry forwards will begin to expire in 2034.

 

The income tax effect of temporary differences comprising the deferred tax assets and deferred tax liabilities on the accompanying balance sheets is the result of the following:

 

|                                 |   | **2014** |     |   | **2013** |   |
|--------------------------------------|--------|----------|----------|--------|----------|--------|
| Deferred Tax Assets, Net             |   | ****     |     |   | ****     |   |
| Net Operating Loss Carry forward     |   | $        | 742,297  |   |     | $      | 635,240 |   |
| Basis of Property & Equipment    |   | $        | 255,418  |   |     | $      | 178,429 |   |
| (Less: Valuation Allowance)          |   | $        | (997,715 | )      |     | $      | (813,669 | ) |
|                                      |   |     |     |   |     |   |   |   |
| Total Deferred Income tax asset, Net |   |     | -        |   |     |   | - |   |

 

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The provision for income taxes consists of the following components:

 

|                 |   | **2014** |     |   | **2013** |   |
|----------------------|--------|----------|----------|--------|----------|--------|
| Current Tax Benefit  |   | ****     |     |   | ****     |   |
| Federal              |   |          | -        |   |     |        | - |   |
| State                |   |     | -        |   |     |   | - |   |
|                      |   |     |     |   |     |   |   |   |
|                      |   |     | -        |   |     |   | - |   |
|                      |   |     |     |   |     |   |   |   |
| Deferred Tax Benefit |   |     |     |   |     |   |   |   |
| Federal              |   |          | (823,986 | )      |     |   | 646,638 |   |
| State                |   |          | (173,729 | )      |     |   | 167,031 |   |
|                      |   |     |     |   |     |   |   |   |
|                      |   |          | (997,715 | )      |     |   | 813,669 |   |
|                      |   |     |     |   |     |   |   |   |
| Valuation Allowance  |   |     | -        |   |     |   |   |   |
| Federal              |   |          | (823,986 | )      |     |        | (646,638 | ) |
| State                |   |          | (173,729 | )      |     |        | (167,031 | ) |
|                      |   |     |     |   |     |   |   |   |
|                      |   |          | (997,715 | )      |     |        | (813,669 | ) |
|                      |   |     |     |   |     |   |   |   |
| Total                |   |     |     |   |     |   | - |   |

 

**NOTE 7 – EQUITY**

 

*Common Stock*

 

During the year ended December 31, 2013, the Company sold 989,602 shares of common stock for cash. The shares had an aggregate fair value of $625,020 and were sold for between $0.10 and $0.81 per share.

 

On January 27, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a Nevis Corporation, for the sale and issuance of 854,701 shares of the Company’s common stock for a purchase price of $200,000, and warrants to purchase an aggregate of 100,000 shares of Common Stock, at an exercise price of $.30 per share. The Warrants are exercisable immediately and expire January 27, 2017.

 

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On February 3, 2014, ASPS elected to convert its $50,000 loan plus interest to date (totaling $52,153) to Two Hundred-thousand, Five Hundred-ninety (200,590) common shares based on the previous day’s close (Friday, January 31, 2014) of $0.26 per share.

 

On March 24, 2014, the Company issued 300,000 shares of common stock to a consultant for services rendered valued at $21,000 ($0.07 per share).

 

On March 28, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a Nevis Corporation, for the sale and issuance of 694,444 shares of the Company’s common stock for a purchase price of $100,000, and warrants to purchase an aggregate of 50,000 shares of Common Stock, at an exercise price of $.18 per share. The Warrants are exercisable immediately and expire March 28, 2017.

 

On December 26, 2014, the Company issued 3,000,000 shares of common stock under an S-8 to a consultant for services rendered at $60,000.

 

On December 30, 2014 the Company issued 300,000 share of common stock to Beaufort Capital as compensation for terminating the S1.

 

As of December 31, 2014, the Company has 66,464,337 shares issued and outstanding.

 

NAMG

 

*Option Activity*

 

In February 2013, the Company’s board of directors approved a stock option grant to purchase an aggregate of 350,000 shares of common stock to two non-employee consultants. The options are exercisable for a term of ten years at $.70 per share and vest on the date of grant. The grant date value of the options was $368,955. The options were valued using the Black-Scholes model with the following assumptions: 255.02% volatility; 5.00 year estimated life; zero dividends; 0.78% discount rate; and, quoted stock price and exercise price of $.70.

 

In April 2013, the Company’s board of directors approved a stock option grant to purchase an aggregate of 500,000 shares of common stock to one executive employee. The options are exercisable for a term of ten years at $.80 per share and vest one year from grant date, April 2014. The grant date value of the options was $243,955. The options were valued using the Black-Scholes model with the following assumptions: 255.02% volatility; 5.00 year estimated life; zero dividends; 0.76% discount rate; and, quoted stock price and exercise price of $.80.

 

During the year ended December 31, 2013, the Company recorded stock-based compensation of $276,269 and $243,955, respectively, as general and administrative expenses, and G & G Services. At December 31, 2013 the weighted average remaining life of the stock options is 4.25 years. The unamortized amount of stock-based compensation at December 31, 2013 was $92,089. This remaining cost was expensed in the first quarter of 2014.

 

At December 31, 2014 the weighted average remaining life of the stock options is 8 years. All options had been fully amortized as of December 31, 2014.

 

| **Outstanding as of December 31, 2014** |   | **Number ofOptions/Shares** |    |   | **Range ofExercise Prices** |   |        | **Weighted-AverageExercise Price** |   |
|-----------------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|-------------|------------------------------------|--------|
| Outstanding as of December 31, 2013     |   |                             | 850,000 |   |                        | $      | 0.70-$ 0.80 |                               |   | $ | 0.76 |   |
| Options granted                         |   |                        | -       |   |                        |        | -           |                               |   |   | - |   |
| Options exercised                       |   |                        | -       |   |                        |   | -           |                               |   |   | - |   |
| Options forfeited/expired/cancelled     |   |                        | -       |   |                        |   | -           |                               |   |   | - |   |
| Outstanding as of December 31, 2014     |   |                        | 850,000 |   |                        | $      | 0.70-$0.80  |                               |   | $ | 0.76 |   |
| Exercisable as of December 31, 2014     |   |                        | 850,000 |   |                        | $      | 0.70-$0.80  |                               |   | $ | 0.76 |   |
| Exercisable as of December 31, 2013     |   |                        | 350,000 |   |                        | $      | 0.70        |                               |   | $ | 0.70 |   |

 

|   |
|--------|
| F-16   |
|        |

 

Information about stock options outstanding as of December 31, 2014 is as follow:

 

| **Exercise Price** |   |        | **Number ofOptions Outstanding** |        |   | **Weighted-Average RemainingContractual Life (years)** |   |   | **Number ofOptions Exercisable** |   |
|--------------------|--------|--------|----------------------------------|--------|--------|--------------------------------------------------------|--------|--------|----------------------------------|--------|
| $                  | 0.70   |   |                                  |   |        |                                                   |        | 7.20   |                             |   |  | 350,000 |   |
| $                  | 0.80   |   |                                  |   |        |                                                   |   | 8.30   |                             |   |   | 500,000 |   |
|               |   |   |                                  |   |        |                                                   |   | 7.80   |                             |   |   | 850,000 |   |

 

The following table presents the weighted-average assumptions used to estimate the fair values of the stock options granted in the period presented:

 

|                                                                       |   | **Year Ended December 31,2014** |   |   | **Year Ended December 31,2013** |   |
|----------------------------------------------------------------------------|--------|---------------------------------|--------|--------|---------------------------------|--------|
|                                                                       |   | ****                            |   |   | ****                            |   |
| Risk-free interest rate(1)                                                 |   |                                 | -      |   |                            |        | 1.75 |   |
| Expected life (in years)(2)                                                |   |                            | -      |   |                            |   | 3.625 |   |
| Expected volatility(3)                                                     |   |                            | -      |   |                            |   | 225.02 |   |
| Dividend yield                                                             |   |                            | -      |   |                            |   | - |   |
| Weighted-average estimated fair value of options granted during the period |   |                            | -      |   |                            |   | 0.795 |   |

_____________

| (1) | The Risk Free Rate is a 5 Year Treasury rate.                                                                                   |
|-----|---------------------------------------------------------------------------------------------------------------------------------|
| (2) | The expected life (in years) is based on the simplified method: Expected term = ((vesting term + original contractual term)/2). |
| (3) | The expected volatility is based on the volatility weighted average of stock options                                            |

 

*Warrant Activity*

 

On January 27, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a German Corporation, for the sale and issuance of 854,701 shares of the Company’s common stock for a purchase price of $200,000, and warrants to purchase an aggregate of 100,000 shares of Common Stock, at an exercise price of $.30 per share. The Warrants are exercisable immediately and expire January 27, 2017.

 

On March 28, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a German Corporation, for the sale and issuance of 694,444 shares of the Company’s common stock for a purchase price of $100,000, and warrants to purchase an aggregate of 50,000 shares of Common Stock, at an exercise price of $.18 per share. The Warrants are exercisable immediately and expire March 28, 2017.

 

On August 12, 2014 the Company entered into a Convertible Promissory Note with WHC Capital, LLC. (“WHC”). The Convertible Promissory Note provides the Company with a note in the principal amount of $210,000. The net proceeds the Company received was $135,000 as $60,000 of Original Issue Discount and a financing fee of $15,000 was netted out from the total principal. The Convertible Promissory Note matures on February 11, 2015, and the Company shall make monthly installments of $25,000, commencing September 11, 2014, with the balance due at maturity. The WHC note was issued with 500,000 warrants, expiring thirty-six months from the execution of the warrant agreement are exercisable into 500,000 common shares of the Company’s Common Stock at $.15 per share.

 

On October 16, 2013, North American Oil & Gas Corp. (the “Company”) finalized a Stock Purchase Agreement Oel und Erdgazforshung AG (the “Investor”), relating to the sale and issuance of an 246,914 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), for a purchase price of $200,000, and warrants (the “October Warrants”) to purchase an aggregate of 96,618 shares of Common Stock, at an exercise price of $1.04 per share.

 

The October Warrants are exercisable immediately and expire October 10, 2016. The October Warrants are exercisable, at the option of the holder, in whole or in part by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise. The exercise price and the number of shares of Common Stock purchasable upon the exercise of each October Warrant are subject to adjustment in the event of stock dividends, distributions, splits, and reclassifications. The issuances of these shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

Effective December 1, 2013, the Company entered into a letter agreement (the “O&E Agreement”) with Oel und Erdgazforshung AG, a Nevis Corporation (the “Investor”), relating to the sale and issuance of Common Stock, and warrants (the “December 1st Warrants”). 

 

|   |
|--------|
| F-17   |
|        |

 

The O&E Agreement stipulates that the Investor will purchase the Common Stock in up to five (5), two hundred thousand dollar ($200,000) tranches, for an aggregate price of one million dollars ($1,000,000) with each tranche being issued in forty-five day intervals. The quantity of Common Stock issued, per tranche, will be determined based on a ten percent (10%) discount of the previous day closing price of the Common Stock. With each tranche, 100,000 December 1st Warrants will be issued based on an exercise price at a premium of fifteen percent (15%) of the previous day closing price of the Common Stock. 

 

The December 1st Warrants will be exercisable immediately upon issuance and expire three (3) years from issuance date. The December 1st Warrants are exercisable, at the option of the holder, in whole or in part by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise. The exercise price and the number of shares of Common Stock purchasable upon the exercise of each December 1st Warrant are subject to adjustment in the event of stock dividends, distributions, splits, and reclassifications.

 

On December 6, 2013, the Company executed the second tranche of the O&E Agreement with the Investor, relating to the sale and issuance of 261,438 shares of the Common Stock, for a purchase price of $200,000, and warrants (the “December 6th Warrants”) to purchase an aggregate of 100,000 shares of Common Stock, at an exercise price of $0.98 per warrant.

 

The December 6th Warrants are exercisable immediately and expire December 6, 2016. The December 6th Warrants are exercisable, at the option of the holder, in whole or in part by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise. The exercise price and the number of shares of Common Stock purchasable upon the exercise of each December 6th Warrant are subject to adjustment in the event of stock dividends, distributions, splits, and reclassifications. The issuances of these shares were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales of securities not involving any public offering.

 

A summary of the Company’s warrant activity and related information is as follows:

 

|                                        |   | **Number of Shares** |    |   | **Weighted-Average Remaining Life (in years)** |   |   | **Weighted Average Exercise Price** |   |
|---------------------------------------------|--------|----------------------|---------|--------|------------------------------------------------|--------|--------|-------------------------------------|--------|
| Outstanding at January 1, 2014 (1)          |   |                      | 196,618 |   |                                           |        | 3.00   |                                |   | $ | 1.01 |   |
| Granted Warrants (2)                        |   |                 | 650,000 |   |                                           |   | 3.00   |                                |   | $ | 0.36 |   |
| Exercised                                   |   |                 | -       |   |                                           |   |   |                                |   |   |   |   |
| Cancelled/Expired                           |   |                 | -       |   |                                           |   |   |                                |   |   |   |   |
| Outstanding at December 31, 2014            |   |                 | 846,618 |   |                                           |   | 2.35   |                                |   |   |   |   |
|                                             |   |                 |    |   |                                           |   |   |                                |   |   |   |   |
| Vested and Exercisable at December 31, 2014 |   |                 | 846,618 |   |                                           |   | 2.35   |                                |   | $ | 0.37 |   |

________________

| (1) | Under a Purchase and Sale Agreement with Oel und Erdgazforshung AG ("OUE"), A Nevis Corp. dated October 16, 2013 the Company issued 246,914 shares of Common Stock, and 96,618 warrants with an exercise price of US $1.04 determined by a formula of a 15% premium to the previous day closing stock price for an aggregate sum of $200,000. Under a Purchase and Sale Agreement with OEG dated December 6, 2013 the Company issued 261,438 shares of Common Stock, and 100,000 warrants with an exercise price of US $.98 for an aggregate sum of $200,000. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| (2) | On January 27, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a German Corporation, for the sale and issuance of 854,701 shares of the Company’s common stock for a purchase price of $200,000, and warrants to purchase an aggregate of 100,000 shares of Common Stock, at an exercise price of $.30 per share. The Warrants are exercisable immediately and expire January 27, 2017. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | On March 28, 2014, the Company entered into a Stock Purchase Agreement with Oel und Erdgazforshung AG, a German Corporation, for the sale and issuance of 694,444 shares of the Company’s common stock for a purchase price of $100,000, and warrants to purchase an aggregate of 50,000 shares of Common Stock, at an exercise price of $.18 per share. The Warrants are exercisable immediately and expire March 28, 2017.                                                                                                                                                                                                                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (3)    | On August 12, 2014 the Company entered into a Convertible Promissory Note with WHC Capital, LLC. (“WHC”). The Convertible Promissory Note provides the Company with a note in the principal amount of $210,000. The net proceeds the Company received was $135,000 as $60,000 of Original Issue Discount and a financing fee of $15,000 was netted out from the total principal. The Convertible Promissory Note matures on February 11, 2015, and the Company shall make monthly installments of $25,000, commencing September 11, 2014, with the balance due at maturity. The WHC note was issued with 500,000 warrants, expiring thirty-six months from the execution of the warrant agreement are exercisable into 500,000 common shares of the Company’s Common Stock at $.15 per share. |

 

|   |
|--------|
| F-18   |
|        |

 

**NOTE 8 – CONVERTIBLE NOTES PAYABLE**

 

***WHC Capital, LLC***

 

On August 12, 2014 the Company entered into a Convertible Promissory Note with WHC Capital, LLC. (“WHC”). The Convertible Promissory Note provides the Company with a note in the principal amount of $210,000. The net proceeds the Company received was $135,000 as $60,000 of Original Issue Discount and a financing fee of $15,000 was netted out from the total principal. The Convertible Promissory Note matures on February 11, 2015, and the Company shall make monthly installments of $25,000, commencing September 11, 2014, with the balance due at maturity. As of December 31, 2014, payments in the amount of $50,000 have been made and the balance remaining at December 31, 2014 is $160,000. As the Company failed to make their required $25,000 installment (and subsequent installments), on November 10, 2014, they have defaulted on the WHC Convertible Promissory Note. As a result of the default, pursuant to the terms of WHC Convertible Promissory Note, the November 10, 2014 installment of $25,000 is increased by 30%, and bears interest at 22%. Additionally, the default leads to acceleration and then the full note is increased by 150% to total $330,581. The Company is in process of negotiating a settlement with WHC. As of December 31, 2014, the Company recorded $170,418 in default interest and penalties.

 

The Convertible Promissory Note may not be prepaid in whole or in any part except as otherwise explicitly set forth in the agreement. Any amount of principal or interest on this Convertible Promissory Note which is not paid when due shall bear interest at the rate of twenty-two percent (22%) per annum from the due date thereof until the same is paid (see above).

 

WHC shall have the right and at any time after February 11, 2015 to convert all or any part of the outstanding and unpaid principal amount of the Convertible Promissory Note into shares of the Company’s common stock at a conversion price of a thirty-percent (30%) discount off the average of the three (3) lowest intra-day trading prices during the twenty (20) trading days immediately preceding a conversion date, as reported by NASDAQ.

 

In accordance with the Convertible Promissory Note agreement, if at any time when the note is outstanding, the Company issues or sells, any common shares for no consideration or for consideration per share less than the conversion price in effect on the date of such issuance of such shares of common stock, then immediately upon that issuance, the conversion price will be reduced to the amount of the consideration per share received by the Company.

 

In addition, the Company has recognized an original issue discount in the amount of $60,000. This amount will be amortized using the effective interest method over the life of the Convertible Promissory Note. For the period ended December 31, 2014, the Company has amortized $48,001, with $11,999 remaining as of December 31, 2014.

 

The WHC note was issued with 500,000 warrants, expiring thirty-six months from the execution of the warrant agreement are exercisable into 500,000 common shares of the Company’s Common Stock at $.15 per share. The fair value of the warrants were estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected volatility of 128.14%, risk free interest rate of 1.00%; and expected term of three years. The fair value of the warrants on the date of issuance is reflected as a debt discount in the amount of $24,760 and an increase to additional paid-in capital. Through the period ended December 31, 2014, there was amortization of the debt discount of $18,426 to bring the debt discount to $6,334 as of December 31, 2014.

 

***JMJ Financial***

 

On September 3, 2014 the Company entered into a Convertible Note with JMJ Financial (“JMJ”). The Convertible Note provides the Company with a note in the principal amount up to $300,000. The Company received an initial tranche of gross proceeds of $50,000, and net proceeds of $45,000, the $5,000 being Original Issue Discount. The term of the Convertible Note is two years. There is no interest due if the Company repays the note in the first three months. If the Company fails to repay the note within the 90 day period, a one-time interest charge of twelve percent (12%) shall be applied to the principal. A second tranche with similar terms of $25,000 gross proceeds and $22,500 net proceeds was received on December 18, 2014.

 

JMJ has the right after the 90th day, at its election, to convert all or part of the outstanding and unpaid principal and accrued interest into shares of common stock at a conversion price of 60% of the lowest trade price in the 20 trading days previous to the conversion. On December 3, 2014, when the first tranche of the JMJ Note became convertible, the Company recognized a derivative liability in the amount of $66,204. The Company recognized a fair value adjustment of $5,070 through December 31, 2014 bringing the derivative liability balance down to $61,134 at December 31, 2014. There was amortization of the debt discount of $1,497 to bring the unamortized debt discount down to $48,503 from $50,000.

 

In addition, the Company has recognized an original issue discount in the amount of $5,000. This amount will be amortized using the effective interest method over the life of the Convertible Promissory Note. For the period ended December 31, 2014, the Company has amortized $913, with $6,587 remaining as of December 31, 2014.

 

|   |
|--------|
| F-19   |
|        |

 

***KBM Worldwide, Inc.***

 

On November 7, 2014 the Company entered into a Convertible Promissory Note with KBM Worldwide, Inc. (“KBM”). The Convertible Promissory Note in the principal amount of $53,500 accrues interest at the rate of 8% per annum and matures August 7, 2015. Any amount of principal or interest on this Convertible Promissory Note which is not paid when due shall bear interest at the rate of 22% per annum (“Default Rate”). The Company received net proceeds of $50,000 for this note, paying $3,500 of fees related to the note out of closing.

 

KBM shall have the right to convert this note into shares of the Company’s common stock after 180 days at a conversion price equal to 61% (39% discount) of the average of the three lowest trading prices during the ten trading day period ending on the latest complete trading day prior to conversion. Upon becoming convertible, the conversion feature will be accounted for as an embedded derivative liability.

 

There has been no payments made on this note through December 31, 2014, and the Company has accrued $633 in interest for the period ended December 31, 2014.

 

***LG Capital Funding, LLC***

 

On November 18, 2014 the Company entered into a Convertible Redeemable Note with LG Capital Funding, LLC. (“LG”). The Convertible Redeemable Note in the principal amount of $42,000 accrues interest at the rate of 8% per annum and matures November 18, 2015. The note may be prepaid at any time up to the 180th day at a prepayment penalty as stipulated in the note agreement. The Company received net proceeds of $40,000 for this note, paying $2,000 of fees related to the note out of closing.

 

LG shall have the right to convert this note into shares of the Company’s common stock after 180 days at a conversion price equal to 65% (35% discount) of the lowest trading prices during the twenty trading day period ending on the latest complete trading day prior to conversion. Upon becoming convertible, the conversion feature will be accounted for as an embedded derivative liability.

 

There has been no payments made on this note through December 31, 2014, and the Company has accrued $396 in interest for the period ended December 31, 2014.

 

| **Long-term Debt Summary - December 31, 2014**         |   | **WHC Capital** |     |   | **JMJ Financial** |   |    | **KBM Worldwide** |   |   | **LG Capital** |   |   | **Total** |    |
|--------------------------------------------------------|--------|-----------------|----------|--------|-------------------|--------|---------|-------------------|--------|--------|----------------|--------|--------|-----------|---------|
| **Principal Amount**                                   |   | $               | 210,000  |   |              | $      | 75,000  |              |   | $      | 53,500         |   |   | $         | 42,000  |   |   | $ | 380,500 |   |
| **Original Issue Discount**                            |   |                 | (11,999  | )      |              |        | (6,587  | )                 |   |   | -              |   |   |      | -       |   |   |  | (18,586 | ) |
| **Debt Discount**                                      |   |                 | (6,334   | )      |              |        | (48,503 | )                 |   |   | -              |   |   |      | -       |   |   |  | (54,837 | ) |
| **Default Interest Added**                             |   |            | 170,581  |   |              |   | -       |              |   |   | -              |   |   |      | -       |   |   |   | 170,581 |   |
| **Principal Repayments**                               |   |                 | (50,000  | )      |              |   | -       |              |   |   | -              |   |   |      | -       |   |   |  | (50,000 | ) |
| **Total - December 31, 2014**                          |   |            | 312,248  |   |              |   | 19,910  |              |   |   | 53,500         |   |   |      | 42,000  |   |   |   | 427,658 |   |
| **Less: Current portion of convertible notes payable** |   |                 | (312,248 | )      |              |        | (19,910 | )                 |   |        | (53,500        | )      |   |           | (42,000 | ) |   |  | (427,658 | ) |
| **Long-term portion of convertible notes payable**     |   | $               | -        |   |              | $      | -       |              |   | $      | -              |   |   | $         | -       |   |   | $ | - |   |

 

**NOTE 9 – FAIR VALUE MEASUREMENT**

 

The Company records its financial assets and liabilities at fair value, which is defined as the price that would be received to sell the asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The fair value measurement of these liabilities is consistent with ASC 820, "Fair Value Measurements", whereby the Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

 

|   | Level 1: | Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.                                                                                                                                                                                                             |
|--------|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |     |                                                                                                                                                                                                                                                                                                                            |
|   | Level 2: | Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|   |     |                                                                                                                                                                                                                                                                                                                            |
|   | Level 3: | Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.                                                                                 |

 

|   |
|--------|
| F-20   |
|        |

 

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2014:

 

|                   |   | **Level 1** |   |   | **Level 2** |   |   | **Level 3** |   |   | **Total** |   |
|------------------------|--------|-------------|--------|--------|-------------|--------|--------|-------------|--------|--------|-----------|--------|
|                   |   | ****        |   |   | ****        |   |   | ****        |   |   | ****      |   |
| Derivative liabilities |   |             | -      |   |        |        | -      |        |   |        | 61,134    |   |   |  | 61,134 |   |

 

There were no such derivatives at December 31, 2013

 

The estimated fair values of the Company’s derivative liabilities are as follows:

 

|                                        |        | **ConvertibleNotes(1)** |         |        | **DerivativeLiability(****2)** |        |        | **Notes Payable(3)** |        |
|---------------------------------------------|--------|-------------------------|---------|--------|--------------------------------|--------|--------|----------------------|--------|
|                                        |   | ****                    |    |   | ****                           |   |   | ****                 |   |
| Liabilities Measured at Fair Value          |   | ****                    |    |   | ****                           |   |   | ****                 |   |
| Beginning balance as of December 31, 2012   |   | $                       | -       |   |                           | $      | -      |                 |   | $ | - |   |
| Revaluation (gain)/loss in interest expense |   |                    | -       |   |                           |   | -      |                 |   |   | - |   |
| Issuances, net of discount                  |   |                    | -       |   |                           |   | -      |                 |   |   | 50,000 |   |
| Amortization of discount                    |   |                    | -       |   |                           |   | -      |                 |   |   | - |   |
| Balance as of December 31, 2013             |   | $                       | -       |   |                           | $      | -      |                 |   | $ | 50,000 |   |
| Derivative expense                          |   |                    | -       |   |                           |   | 66,204 |                 |   |   | - |   |
| Revaluation (gain)/loss in interest expense |   |                    | -       |   |                           |        | (5,070 | )                    |   |   | - |   |
| Issuances, net of discount and repayemnts   |   |                    | 361,490 |   |                           |   | -      |                 |   |  | (30,000 | ) |
| Amortization of discount                    |   |                    | 72,010  |   |                           |   | -      |                 |   |   | - |   |
| Ending balance as of December 31, 2014      |   | $                       | 433,500 |   |                           | $      | 61,134 |                 |   | $ | 20,000 |   |

 

Total (gain)/loss from revaluation of derivatives included in earnings for the period and reported as an adjustment to interest is as follows:

 

| For fiscal 2013 |   | $      | - |   |   | $ | -      |     |   | $      | - |   |
|-----------------|--------|--------|---|--------|--------|---|--------|-----|--------|--------|---|--------|
| For fiscal 2014 |   |   | - |   |   |   | 11,134 | (4) |   |   | - |   |

________________

| (1) | The balance as of December 31, 2014 and 2013, includes gross proceeds received, net of repayments.      |
|-----|---------------------------------------------------------------------------------------------------------|
| (2) | Represents the derivative liability on the convertible notes.                                           |
| (3) | The balance represents the gross amounts outstanding for December 31, 2014 and 2013, net of repayments. |
| (4) | Includes a day 1 loss on embedded derivative of $16,204                                                 |

 

**NOTE 10 – SUBSEQUENT EVENTS**

 

On March 25, 2015, the Company issued 19,625,001 shares of stock for a value of $78,500 ($0.004 per share) in conversion of various accounts payable and accrued expenses to officers and directors of the Company.

 

On February 17, 2015, March 24, 2015 and April 7, 2015, the Company converted a total of $36,017 in the WHC Capital convertible notes for 10,916,800 shares of common stock in accordance with the note agreement.

 

On March 4, 2015, March 25, 2015 and April 10, 2015 the Company converted a total of $23,899 in JMJ Financial convertible notes for 9,170,000 shares of common stock in accordance with the note agreement.

 

On March 1, 2015, the Company entered into a Purchase and Sale Agreement with Soda Creek Exploration, LLC (“SCE”) to farm-in to the Tejon agreements in the Pass Exploration 77-20 well. In addition, all ARO costs and liabilities associated with this drilling is transferred to SCE and NAMG retains an overriding royalty of 0.5% of future production.

 

 

F-21

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