UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-K




ANNUAL
REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934




For
the fiscal year ended April 30, 2010




Commission
File Number 000-52522





NORTH
AMERICAN ENERGY RESOURCES, INC.


(Exact
name of registrant as specified in its charter)


Nevada
              98-0550352(State
      or Other Jurisdiction
              (IRS
      Employerof
      Incorporation or Organization)
              Identification
      No.)





11005
      Anderson Mill RoadAustin,
      Texas
              78750(Address
      of Principal Executive Office)
              (Zip
      Code)





Issuer’s
telephone number (512) 944-9115




Securities
registered under Section 12(b) of the Exchange Act: None





Securities
registered under Section 12(g) of the Exchange Act:





COMMON STOCK, $0.001 PAR
VALUE


(Title
of each class)




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





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





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).   Yes o No o




Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained here-in, 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.  o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  (Check one)





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





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




The
aggregate market value of the shares of our common stock, par value $0.001, 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 most recently completed second fiscal
quarter.  $2,662,020.





As of
June 30, 2010, the registrant had outstanding 17,375,539 shares of its common
stock, par value of $0.001.





DOCUMENTS
INCORPORATED BY REFERENCE





No
documents are incorporated by reference into this Report except those Exhibits
so incorporated as set forth in the Exhibit index.








NORTH
AMERICAN ENERGY RESOURCES, INC.





TABLE OF
CONTENTS





FORM
10-K





Part
I





PagePART
      IItem
      1
              
              Business
              3Item
      1A
              
              Risk
      Factors
              10Item
      1B
              
              Unresolved
      Staff Comments
              10Item
      2
              
              Properties
              10Item
      3
              
              Legal
      Proceedings
              16PART
      IIItem
      5
              
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              17Item
      6
              
              Selected
      Financial Data
              19Item
      7
              
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
              19Item
      7A
              
              Quantitative
      and Qualitative Disclosures About Market Risk
              23Item
      8
              
              Financial
      Statements and Supplementary Data
              24Item
      9
              
              Changes
      in and Disagreements with Accountants on Accounting and
      Financial  Disclosure
              49Item
      9AT
              
              Controls
      and Procedures
              49Item
      9B
              
              Other
      Information
              50PART
      IIIItem
      10
              
              Directors,
      Executive Officers and Corporate Governance
              52Item
      11
              
              Executive
      Compensation
              54Item
      12
              
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              56Item
      13
              
              Certain
      Relationships and Related Transactions, and Director
      Independence
              58Item
      14
              
              Principal
      Accountant Fees and Services
              58PART
      IVItem
      15
              
              Exhibits
      and Financial Statement Schedules
              59


2


From time
to time, we may publish forward-looking statements relative to such matters as
anticipated financial results, business prospects, technological developments
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. The following discussion
and analysis should be read in conjunction with the report on the Consolidated
Financial Statements and the accompanying Notes to Consolidated Financial
Statements appearing later in this report. All statements other than statements
of historical fact included in this Annual Report on Form 10-K are, or may be
deemed to be, forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of
1934, as amended. Important factors that could cause actual results to differ
materially from those discussed in such forward-looking statements include, but
are not limited to, the following: our current liquidity needs, as described in
our periodic reports; changes in the economy; our inability to raise additional
capital; our involvement in potential litigation; volatility of our stock price;
the variability and timing of business opportunities; changes in accounting
policies and practices; the effect of internal organizational changes; adverse
state and federal regulation and legislation; and the occurrence of
extraordinary or catastrophic events and terrorist acts. These factors and
others involve certain risks and uncertainties that could cause actual results
or events to differ materially from management’s views and expectations.
Inclusion of any information or statement in this report does not necessarily
imply that such information or statement is material. We do not undertake any
obligation to release publicly revised or updated forward-looking information,
and such information included in this report is based on information currently
available and may not be reliable after this date.




PART
I




ITEM
      1:
            BUSINESS




ORGANIZATION





North
American Energy Resources, Inc. ("NAEY" or the "Company") was originally
organized in Nevada on August 22, 2006 with the name Mar Ked Mineral
Exploration, Inc. ("Mar Ked").  The Company changed its name from Mar
Ked to North American Energy Resources, Inc. on August 11, 2008.





At a
special meeting of shareholders held on April 23, 2009, 63% of our shareholders,
either in person or by proxy, voted to approve a 1:50 reverse split of the
Company's common stock.  This amendment to the Company's Articles of
Incorporation was filed with the Nevada Secretary of State and became effective
on April 27, 2009.  Accordingly, all references to shares of our
common stock included herein have been retroactively restated to give effect to
the reverse split.





On July
28, 2008, the Company acquired 100% of the outstanding stock of North American
Exploration, Inc. ("NAE") (formerly Signature Energy, Inc.) for 420,000 shares
of our common stock pursuant to a Stock Purchase Agreement
("SPA").  Completion of the SPA resulted in the shareholders of NAE
having control of NAEY.  Accordingly, the transaction was recorded for
accounting purposes as the acquisition of NAE by NAEY with NAE as the acquirer
(reverse acquisition).  The financial statements of the Company prior
to July 28, 2008 are those of NAE.  Formerly NAEY used a November 30
year-end.  As a result of the reverse acquisition, the Company will
utilize the April 30 year-end of NAE after April 30, 2008.


3





NAE was
organized in Nevada on August 18, 2006 as Signature Energy, Inc. and changed its
name to North American Exploration, Inc. on June 2, 2008.





The SPA
provided that NAEY was to have $1,500,000 in cash and no liabilities at
closing.  At July 31, 2008, NAEY had $150,000 of the required cash and
on August 28, 2008, the parties to the SPA entered into a Modification Agreement
("MA") which provided an extension until January 27, 2009 for the additional
cash to be contributed to the Company.  At January 27, 2009, the
Company had received an additional $50,000 and was still short $1,300,000 of the
amount agreed.  The MA provided that the Buyer would make contingent
issuances of shares to the Seller equal to 95% of all the outstanding stock
after issuance.  Accordingly, effective April 30, 2009, an additional
13,250,381 shares were issued to the Sellers.  The total purchase
price for NAE was 13,690,381 shares.





Mar Ked
was originally formed to acquire and explore mineral claims, principally in the
Yukon Territory, Canada.  All activity relating to mining activity was
abandoned when NAE was acquired.




Glossary
of Oil and Natural Gas Terms




The
definitions set forth below apply to the indicated terms as used in this report.
All volumes of natural gas referred to herein are stated at the legal
pressure base of the state or area where the reserves exist and at
60 degrees Fahrenheit and in most instances are rounded to the nearest
major multiple.




Bbl. One stock tank barrel,
or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other
liquid hydrocarbons.




Bcf. One billion cubic feet of
natural gas.




Boe. Barrels of oil
equivalent in which six Mcf of natural gas equals one Bbl of oil.




Btu. British thermal unit,
which is the heat required to raise the temperature of a one-pound mass of water
from 58.5 to 59.5 degrees Fahrenheit.




Completion. The installation
of permanent equipment for the production of oil or natural gas or, in the case
of a dry hole, the reporting of abandonment to the appropriate
agency.




Development well. A well
drilled within the proved areas of an oil or natural gas reservoir to the depth
of a stratigraphic horizon known to be productive.




Dry hole or well. A well
found to be incapable of producing hydrocarbons in sufficient quantities such
that proceeds from the sale of such production exceed production expenses and
taxes.




Exploratory well. A well
drilled to find a new field or to find a new reservoir in a field previously
found to be productive of oil or natural gas in another reservoir.




Field. An area consisting of
a single reservoir or multiple reservoirs all grouped on or related to the same
individual geological structural feature and/or stratigraphic
condition.


4




Gross acres or gross wells.
The total acres or wells, as the case may be, in which a working interest is
owned.




MBbls. One thousand barrels
of crude oil or other liquid hydrocarbons.




MBoe. One thousand
Boe.




MMBoe. One million
Boe.




Mcf. One thousand cubic feet
of natural gas.




MMBbls. One million barrels
of crude oil or other liquid hydrocarbons.




MMBtu. One million
Btus.




MMcf. One million cubic feet
of natural gas.




Net acres or net wells. The
sum of the fractional working interests owned in gross acres or gross wells, as
the case may be.




Operator. The individual or
company responsible for the exploration, exploitation and production of an oil
or natural gas well or lease.




PV-10 Value. When used with
respect to oil and natural gas reserves, the estimated future gross revenues to
be generated from the production of proved reserves, net of estimated production
and future development costs, using the prices provided in this report and costs
in effect as of the date indicated, without giving effect to non-property
related expenses such as general and administrative expenses, debt service and
future income tax expenses or to depreciation, depletion and amortization,
discounted using an annual discount rate of 10%.




Productive well. A well that
is found to be capable of producing hydrocarbons in sufficient quantities such
that proceeds from the sale of such production exceed production expenses and
taxes.




Proved developed producing
reserves. Proved developed reserves that are expected to be recovered
from completion intervals currently open in existing wells and capable of
production.




Proved developed reserves.
Proved reserves that are expected to be recovered from existing wellbores,
whether or not currently producing, without drilling additional wells.
Production of such reserves may require a recompletion.




Proved reserves. Those
quantities of oil and natural gas, which, by analysis of geoscience and
engineering data, can be estimated with reasonable certainty to be economically
producible—from a given date forward, from known reservoirs, and under existing
economic conditions, operating methods, and government regulations —prior to the
time at which contracts providing the right to operate expire, unless evidence
indicates that renewal is reasonably certain, regardless of whether
deterministic or probabilistic methods are used for estimation.




Proved undeveloped location.
A site on which a development well can be drilled consistent with spacing rules
for purposes of recovering proved undeveloped reserves.


5




Proved undeveloped reserves.
Proved reserves that are expected to be recovered from new wells on undrilled
acreage or from existing wells where a relatively major expenditure is required
for recompletion.




Recompletion. The completion
for production of an existing wellbore in another formation from that in which
the well has been previously completed.




Reserve life. A ratio
determined by dividing our estimated existing reserves determined as of the
stated measurement date by production from such reserves for the prior twelve
month period.




Reservoir. A porous and
permeable underground formation containing a natural accumulation of producible
oil and/or natural gas that is confined by impermeable rock or water barriers
and is individual and separate from other reservoirs.




3-D seismic. The method by
which a three dimensional image of the earth’s subsurface is created through the
interpretation of reflection seismic data collected over a surface grid. 3-D
seismic surveys allow for a more detailed understanding of the subsurface than
do conventional surveys and contribute significantly to field appraisal,
exploitation and production.




Undeveloped acreage. Lease
acreage on which wells have not been drilled or completed to a point that would
permit the production of commercial quantities of oil and natural gas regardless
of whether such acreage contains proved reserves.




Working interest. The
operating interest that gives the owner the right to drill, produce and conduct
operating activities on the property and a share of production.




Workover. Operations on a
producing well to restore or increase production.





BUSINESS





OIL
AND GAS DRILLING PROSPECTS





Current
natural gas prices have made the Company's natural gas reserves uneconomical to
produce.  Accordingly, in 2009, the Company recorded an impairment of
all of its gas reserves as a result of the low gas prices in effect at the
time.  In 2010, the Company recorded an impairment of an interest in
two oil wells that it had acquired for its common stock in the amount of
$108,000.  It was determined during 2010, as the result of two failed
workover attempts that the unevaluated property costs should be fully impaired
and $126,607 was transferred from unevaluated property costs to the full cost
pool.  The Company recorded an additional impairment of $205,317 at
the end of 2010.  As a result of the gas reserves continuing to be
impaired, the Company wrote off its investment in a pipeline of $132,663 that
was principally used to gather the gas production.





The
Company currently does not plan to begin producing its natural gas reserves
until gas prices improve to at least $5/MCF.


6


EXPLORATION
STAGE COMPANY





We are
considered an exploration or exploratory stage company because we are involved
in the examination and investigation of leases that we believe may contain
commercial oil or gas reserves.  We have made limited evaluations of
our leases, but there is no assurance that commercially viable reserves of oil
or gas exist on our leases.  Additional drilling and development will
be required to adequately evaluate our leasehold position and we will remain an
exploration stage company until that process is completed.





OTHER





The
mailing address of our principal executive office is 11005 Anderson Mill Road,
Austin, Texas  78750 and our telephone number is
512-944-9115.





FINANCIAL
POSITION AND FUTURE FINANCING NEEDS





We are an
exploration stage company.  We have a limited history in the oil and
gas development and production business.





We have
not established sources of revenues sufficient to fund the development of
business, projected operating expenses and commitments for our fiscal year
ending April 30, 2011. We have been in the development stage since our
inception, August 18, 2006, have accumulated a net loss of $2,510,626 through
April 30, 2010, and incurred a loss of $1,382,974 for the year then
ended.





The
Company plans to make sales of its common stock in private transactions or to
borrow funds as needed to raise sufficient capital to fund the development of
business, projected operating expenses and commitments.  However,
there can be no assurance that we will be able to obtain sufficient funding to
develop our current business plan.





COMPETITION





The
Company expects to concentrate the majority of its resources on oil and gas
development and production.  The Company is much smaller than most
participants in this industry and has limited expertise in operating an energy
business.





GOVERNMENTAL
REGULATIONS, APPROVAL, COMPLIANCE





When we
elect to participate directly in development of oil and gas properties, our
operations are subject to various types of regulation at the federal, state and
local levels.  Such regulations includes requiring permits for the
drilling of wells; maintaining bonding requirements in order to drill or operate
wells; implementing spill prevention plans; submitting notification and
receiving permits relating to the presence, use and release of certain materials
incidental to oil and gas operations; and regulating the location of wells, the
method of drilling and casing wells, the use, transportation, storage and
disposal of fluids and materials used in connection with drilling and production
activities, surface usage and the restoration of properties upon which wells
have been drilled, the plugging and abandoning of wells and the transporting of
production. Our operations will also be subject to various conservation matters,
including the regulation of the size of drilling and spacing units or pro-ration
units, the number of wells which may be drilled in a unit, and the unitization
or pooling of oil and gas properties. In this regard, some states allow the
forced pooling or integration of tracts to facilitate exploration while other
states rely on voluntary pooling of lands and leases, which may make it more
difficult to develop oil and gas properties. In addition, state conservation
laws establish maximum rates of production from oil and gas wells, generally
limit the venting or flaring of gas, and impose certain requirements regarding
the ratable purchase of production. The effect of these regulations is to limit
the amounts of oil and gas we may be able to produce from our wells and to limit
the number of wells or the locations at which we may be able to
drill.


7




Our
business is affected by numerous laws and regulations, including energy,
environmental, conservation, tax and other laws and regulations relating to the
oil and gas industry. We plan to develop internal procedures and policies to
ensure that our operations are conducted in full and substantial environmental
regulatory compliance.





Failure
to comply with any laws and regulations may result in the assessment of
administrative, civil and criminal penalties, the imposition of injunctive
relief or both. Moreover, changes in any of these laws and regulations could
have a material adverse effect on business. In view of the many uncertainties
with respect to current and future laws and regulations, including their
applicability to us, we cannot predict the overall effect of such laws and
regulations on our future operations.




We
believe that our operations comply in all material respects with applicable laws
and regulations and that the existence and enforcement of such laws and
regulations have no more restrictive an effect on our operations than on other
similar companies in the energy industry. We do not anticipate any material
capital expenditures to comply with federal and state environmental
requirements.





ENVIRONMENTAL





Operations
on properties in which we have an interest are subject to extensive federal,
state and local environmental laws that regulate the discharge or disposal of
materials or substances into the environment and otherwise are intended to
protect the environment. Numerous governmental agencies issue rules and
regulations to implement and enforce such laws, which are often difficult and
costly to comply with and which carry substantial administrative, civil and
criminal penalties and in some cases injunctive relief for failure to
comply.





Some
laws, rules and regulations relating to the protection of the environment may,
in certain circumstances, impose “strict liability” for environmental
contamination. These laws render a person or company liable for environmental
and natural resource damages, cleanup costs and, in the case of oil spills in
certain states, consequential damages without regard to negligence or fault.
Other laws, rules and regulations may require the rate of oil and gas production
to be below the economically optimal rate or may even prohibit exploration or
production activities in environmentally sensitive areas. In addition, state
laws often require some form of remedial action, such as closure of inactive
pits and plugging of abandoned wells, to prevent pollution from former or
suspended operations.


8


Legislation
has been proposed in the past and continues to be evaluated in Congress from
time to time that would reclassify certain oil and gas exploration and
production wastes as “hazardous wastes.” This reclassification would make these
wastes subject to much more stringent storage, treatment, disposal and clean-up
requirements, which could have a significant adverse impact on operating costs.
Initiatives to further regulate the disposal of oil and gas wastes are also
proposed in certain states from time to time and may include initiatives at the
county, municipal and local government levels. These various initiatives could
have a similar adverse impact on operating costs.




The
regulatory burden of environmental laws and regulations increases our cost and
risk of doing business and consequently affects our profitability. The federal
Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
also known as the “Superfund” law, imposes liability, without regard to fault,
on certain classes of persons with respect to the release of a “hazardous
substance” into the environment. These persons include the current or prior
owner or operator of the disposal site or sites where the release occurred and
companies that transported, disposed or arranged for the transport or disposal
of the hazardous substances found at the site. Persons who are or were
responsible for releases of hazardous substances under CERCLA may be subject to
joint and several liability for the costs of cleaning up the hazardous
substances that have been released into the environment and for damages to
natural resources, and it is not uncommon for the federal or state government to
pursue such claims.




It is
also not uncommon for neighboring landowners and other third parties to file
claims for personal injury or property or natural resource damages allegedly
caused by the hazardous substances released into the environment. Under CERCLA,
certain oil and gas materials and products are, by definition, excluded from the
term “hazardous substances.” At least two federal courts have held that certain
wastes associated with the production of crude oil may be classified as
hazardous substances under CERCLA. Similarly, under the federal Resource,
Conservation and Recovery Act, or RCRA, which governs the generation, treatment,
storage and disposal of “solid wastes” and “hazardous wastes,” certain oil and
gas materials and wastes are exempt from the definition of “hazardous wastes.”
This exemption continues to be subject to judicial interpretation and
increasingly stringent state interpretation. During the normal course of
operations on properties in which we have an interest, exempt and non-exempt
wastes, including hazardous wastes, that are subject to RCRA and comparable
state statutes and implementing regulations are generated or have been generated
in the past. The federal Environmental Protection Agency and various state
agencies continue to promulgate regulations that limit the disposal and
permitting options for certain hazardous and non-hazardous wastes.




We plan
to establish guidelines and management systems to ensure compliance with
environmental laws, rules and regulations if we participate directly in the
development of oil and gas resources. The existence of these controls cannot,
however, guarantee total compliance with environmental laws, rules and
regulations. We will rely on the operator of the properties in which we
have an interest to be in substantial compliance with applicable laws, rules and
regulations relating to the control of air emissions at all facilities on those
properties. Although we plan to maintain insurance against some, but not all, of
the risks described above, including insuring the costs of clean-up operations,
public liability and physical damage, there is no assurance that our insurance
will be adequate to cover all such costs, that the insurance will continue to be
available in the future or that the insurance will be available at premium
levels that justify our purchase. The occurrence of a significant event not
fully insured or indemnified against could have a material adverse effect on our
financial condition and operations. Compliance with environmental requirements,
including financial assurance requirements and the costs associated with the
cleanup of any spill, could have a material adverse effect on our capital
expenditures, earnings or competitive position. We do believe, however, that our
operators are in substantial compliance with current applicable environmental
laws and regulations. Nevertheless, changes in environmental laws have the
potential to adversely affect operations. At this time, we have no plans to make
any material capital expenditures for environmental control
facilities.


9





EMPLOYEES




It is
anticipated that the only active employees of this business in the near future
will be its President and Executive Vice President.  All other
operative functions, such as acquiring leaseholds, creating joint ventures and
development and production of oil and gas will be handled by the President, the
Executive Vice President or independent contractors and
consultants.





ITEM 1A:
            RISK
      FACTORS




Not
applicable.





ITEM
      1A:
            UNRESOLVED
      STAFF COMMENTS




Not
applicable.





ITEM
      2:
            PROPERTIES




The
Company’s oil and gas business is primarily involved in the development and
production of oil and gas.  As of April 30, 2010, we have 745 acres
under lease in Washington County, Oklahoma which includes 2 producing oil
wells.  All gas wells were shut-in in February 2009 due to low gas
prices.





Proved
Reserves and Estimated Future Net Revenue


The
following table sets forth our estimated proved reserves and the related
estimated pre-tax future net revenues, pre-tax 10% present value and after-tax
standardized measure of discounted future net cash flows as of April 30,
2010.  These estimates correspond with the method used in presenting
the “Supplemental Information on Oil and Gas Operations” in Note 10 to our
consolidated financial statements included herein.  At April 30, 2010,
100% of the proved reserves have been classified as proved developed producing
("PDP").  There are no proved developed non-producing ("PDNP")
reserves.


10





Total
                  
                  
                  Proved
                  
                  
                  ProvedProved
                  
                  
                  Developed
                  
                  
                  UndevelopedReserves
                  
                  
                  Reserves
                  
                  
                  ReservesTotal
      ReservesOil
      (BBLs)
                  
                  
                  2,250
                  
                  
                  
                  2,250
                  
                  
                  
                  -Gas
      (MCF)
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -BOE
      (1)
                  
                  
                  2,250
                  
                  
                  
                  2,250
                  
                  
                  
                  -Pre-tax
      future net revenue (2)
                  
                  $
                  154,220
                  
                  
                  $
                  154,220
                  
                  
                  $
                  -Pre-tax
      10% present value (2)
                  
                  
                  52,250
                  
                  
                  
                  52,250
                  
                  
                  
                  -Standardized
      measure of discounted future net cash flows (2)(3)
                  
                  $
                  52,250
                  
                  
                  $
                  52,250
                  
                  
                  $
                  -





(1)
            Gas
      reserves are converted to barrels of oil equivalent (“BOE”) at the rate of
      six MCF per BBL of oil, based upon the approximate relative energy content
      of natural gas and oil, which rate is not necessarily indicative of the
      relationship of gas and oil prices.





(2)
            Estimated
      pre-tax future net revenue represents estimated future revenue to be
      generated from the production of proved reserves, net of estimated
      production and development costs and site restoration and abandonment
      charges.  The amounts shown do not give effect to depreciation,
      depletion and amortization, or to non-property related expenses such as
      debt service and income tax
expense.





(3)
            See
      Note 10 to the financial statements included in Item
  8.





No
estimates of our proved reserves have previously been filed with or included in
reports to any federal governmental authority or agency except for our Form 10-K
for the year ended April 30, 2009.





The
prices used in calculating the estimated future net revenues attributable to
proved reserves do not necessarily reflect market prices for oil and gas
production subsequent to April 30, 2010.  There can be no assurance
that all of the proved reserves will be produced and sold within the periods
indicated, that the assumed prices will be realized or that existing contracts
will be honored or judicially enforced.





Proved
Reserves Disclosures


Recent SEC Rule-Making
Activity.  In December 2008, the SEC announced that it had
approved revisions to modernize the oil and gas reserve reporting
disclosures.  The new disclosure requirements include provisions
that:





·
            Introduce
      a new definition of oil and gas producing activities.  This new
      definition allows companies to include in their reserve base volumes from
      unconventional resources.  Such unconventional reserves include
      bitumen extracted from oil sands and oil and gas extracted from coal beds
      and shale formations.


·
            Report
      oil and gas reserves using an unweighted average price using the prior
      12-month period, based on the closing prices on the first day of each
      month, rather than year-end
prices.


11





·
            Permit
      companies to disclose their probable and possible reserves on a voluntary
      basis.  In the past, proved reserves were the only reserves
      allowed in the disclosures.  We have chosen not to make
      disclosure under these categories.


·
            Requires
      companies to provide additional disclosure regarding the aging of proved
      undeveloped reserves.


·
            Permit
      the use of reliable technologies to determine proved reserves if those
      technologies have been demonstrated empirically to lead to reliable
      conclusions about reserve volumes.


·
            Replace
      the existing "certainty" test for areas beyond one offsetting drilling
      unit from a productive well with a "reasonable certainty"
      test.


·
            Require
      additional disclosures regarding the qualifications of the chief technical
      person who oversees the company's overall reserve estimation
      process.  Additionally, disclosures regarding internal controls
      over reserve estimation, as well as a report addressing the independence
      and qualifications of its reserves preparer or auditor will be
      mandatory.





We
adopted the rules effective April 30, 2010.





The new
rule does not allow for prior-year reserve information to be restated, so all
information related to periods prior to 2010 is presented consistent with prior
SEC rules for the estimation of proved reserves.





Internal Controls Over Reserve
Estimates.Our reserve estimates are prepared by an
independent petroleum consulting firm who was engaged to audit our
reserves.  There were no changes to the contents of our
reserves.  We updated our reserves using the new pricing guidelines
required by the SEC.





Production


All of
our production was from our leases in Washington, County
Oklahoma.  The gas gathering system used for selling gas to the market
was shut-in during February 2009, and accordingly we had no gas production from
that date through April 30, 2010.  Our oil production averaged
approximately 2.5 BBLs/day during the fourth quarter of 2010 and approximately
0.60 BBLs/day during the year ended April 30, 2010.  The wells were
shut-in during the majority of the third quarter for repairs.  We do
not expect the gas gathering system to re-open until gas prices
improve.





Project
Summary


The
Company had encountered three different oil zones during its recent development
activities, however, attempts to rework two wells was unsuccessful in obtaining
any new commercial production.  The Company intends to continue to
evaluate its position in Washington County, Oklahoma, but is also evaluating
other investment opportunities.


12


Acreage


The
following table summarizes gross and net developed acreage at April 30,
2010.





Developed
      AcreageGross
                  
                  
                  NetWashington
      County, Oklahoma
                  
                  
                  745
                  
                  
                  
                  686





Production
History


The
following table presents the historical information about our natural gas and
oil production volumes.




Year
      ended April 30,2010
                  
                  
                  2009Oil
      production (BBLs)
                  
                  
                  220
                  
                  
                  
                  46Gas
      production (MCF)
                  
                  
                  -
                  
                  
                  
                  1,215Total
      production (BOE)
                  
                  
                  220
                  
                  
                  
                  249Daily
      production (BOE/d)
                  
                  
                  0.60
                  
                  
                  
                  0.68Average
      sales price:Oil
      (per BBL)
                  
                  $
                  65.33
                  
                  
                  $
                  37.49Gas
      (per MCF)
                  
                  $
                  -
                  
                  
                  $
                  3.99Total
      (per BOE)
                  
                  $
                  65.33
                  
                  
                  $
                  26.34Average
      production cost (per BOE)
                  
                  $
                  102.64
                  
                  
                  $
                  148.12Average
      production taxes (per BOE)
                  
                  $
                  4.69
                  
                  
                  $
                  1.90





The
average oil sales price amounts above are calculated by dividing revenue from
oil sales by the volume of oil sold in BBLs.  The average gas price
amounts above are calculated by dividing revenue from gas sales by the volume of
gas sold in MCF.  The total average sales price amounts above are
calculated by dividing total revenues by total volume sold in
BOE.  The average production costs and average production taxes above
are calculated by dividing production costs by total production in
BOE.





Productive
wells


The
following table presents our ownership at April 30, 2010, in oil and natural gas
wells (a net well is our percentage ownership of a gross
well).  Natural gas wells are not included since no reserves were
attributed to natural gas at April 30, 2010 or 2009.





Oil
      wells
                              
                              
                              Gas
      wells
                              
                              
                              Total
      wellsYear
                              
                              
                              
                              Gross
                              
                              
                              Net
                              
                              
                              Gross
                              
                              
                              Net
                              
                              
                              Gross
                              
                              
                              Net2010
                              
                              Oklahoma
                              
                              
                              2.0
                              
                              
                              
                              1.0
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              2.0
                              
                              
                              
                              1.02009
                              
                              Oklahoma
                              
                              
                              2.0
                              
                              
                              
                              0.5
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              2.0
                              
                              
                              
                              0.5


13


Drilling
Activities


During
2009, we completed the drilling of 2 oil wells.  Our drilling activity
was discontinued pending other financing when the agreed capitalization of
$1,500,000 was limited to $200,000.  We participated in two workovers
during 2010 in which we had a carried interest.  Both reworks were
unsuccessful.





Cost
information


We
conduct our oil and natural gas activities entirely in the United States and to
date only in Washington County, Oklahoma.  Costs incurred for property
acquisition, exploration and development activities during the years ended April
30, 2010 and 2009 are shown below.





For
      the years ended April 30,2010
                        
                        
                        2009Acquisition
      of proved properties
                        
                        $
                        207,645
                        
                        
                        $
                        37,316Acquisition
      on non-producing properties
                        
                        
                        126,607
                        
                        
                        
                        -Development
      costs
                        
                        
                        95
                        
                        
                        
                        3,066Total
      costs incurred
                        
                        $
                        334,347
                        
                        
                        $
                        40,382





The
acquisition of proved properties and the acquisition of non-producing properties
were made primarily through issue of our common stock in 2010.





Reserve
Quantity Information


Our
estimates of proved reserves and valuation were prepared by an independent
petroleum consultant, Christopher Energy.  The estimates of proved
reserves are inherently imprecise and continually subject to revision based on
production history, results of additional exploration and development, price
changes and other factors.  Our oil and natural gas reserves are
attributed solely to properties within the United States.  A summary
of the changes in quantities of proved developed oil and natural gas reserves is
shown below.





Natural
      GasOil (BBLs)
                          
                          
                          (MCF)Balance,
      April 30, 2008
                          
                          
                          -
                          
                          
                          
                          1,603,895Extensions
      and discoveries
                          
                          
                          7,334
                          
                          
                          
                          -Production
                          
                          
                          (46
                          )
                          
                          
                          (1,215
                          )Revisions
      of estimates
                          
                          
                          -
                          
                          
                          
                          (1,602,680
                          )Balance,
      April 30, 2009
                          
                          
                          7,288
                          
                          
                          
                          -Acquisition
      of minerals in place
                          
                          
                          7,222
                          
                          
                          
                          -Production
                          
                          
                          (220
                          )
                          
                          
                          -Revisions
      of estimates
                          
                          
                          (12,040
                          )
                          
                          
                          -Balance,
      April 30, 2010
                          
                          
                          2,250
                          
                          
                          
                          -





Standardized
Measure of Discounted Future Net Cash Flows


Our
standardized measure of discounted future net cash flows relating to proved oil
and natural gas reserves and changes in the standardized measure as described
below were prepared in accordance with generally accepted accounting
principles.


14





Future
income tax expenses are calculated by applying appropriate year-end tax rates to
future pre-tax net cash flows relating to proved oil and natural gas reserves,
less the tax basis of properties involved.  Future income tax expenses
give effect to permanent differences, tax credits and loss carryforwards
relating to the proved oil and natural gas reserves.  Future net cash
flows are discounted at a rate of 10% annually to derive the standardized
measure of discounted future net cash flows.  This calculation
procedure does not necessarily result in an estimate of the fair market value or
the present value of our oil and natural gas properties.  Future
income tax expenses were not included due to the Company's net operating loss
carryforwards.





The
standardized measure of discounted future net cash flows relating to the proved
oil and natural gas reserves are shown below.





For
      the years ended April 30,2010
                        
                        
                        2009Future
      cash flows
                        
                        $
                        154,220
                        
                        
                        $
                        207,103Future
      production costs
                        
                        
                        (87,530
                        )
                        
                        
                        (126,000
                        )Future
      income taxes
                        
                        
                        -
                        
                        
                        
                        -Future
      net cash flows
                        
                        
                        66,690
                        
                        
                        
                        81,10310%
      annual discount for estimated timing of cash flows
                        
                        
                        (14,440
                        )
                        
                        
                        (42,724
                        )Standardized
      Measure of Discounted Cash Flows
                        
                        $
                        52,250
                        
                        
                        $
                        38,379





The
changes in the standardized measure of discounted future net cash flows relating
to the proved oil and natural gas reserves are shown below.





For
      the years ended April 30,2010
                      
                      
                      2009Beginning
      of year
                      
                      $
                      38,379
                      
                      
                      $
                      1,923,078Purchase
      of minerals in place
                      
                      
                      207,645
                      
                      
                      
                      37,316Extensions,
      discoveries and improved recovery, less related costs
                      
                      
                      -
                      
                      
                      
                      1,900Development
      costs incurred during the year
                      
                      
                      95
                      
                      
                      
                      3,066Sales
      of oil and gas produced, net of production costs
                      
                      
                      9,270
                      
                      
                      
                      30,795Unevaluated
      costs transferred to full cost pool
                      
                      
                      126,607
                      
                      
                      
                      -Impairments
                      
                      
                      (313,317
                      )
                      
                      
                      (417,840
                      )Net
      changes in price and production costs
                      
                      
                      48,325
                      
                      
                      
                      (1,533,970
                      )Revision
      of previous quantity estimates
                      
                      
                      (64,754
                      )
                      
                      
                      (5,966
                      )End
      of year
                      
                      $
                      52,250
                      
                      
                      $
                      38,379





Management's
Business Strategy Related to Properties


Our goal
is to increase stockholder value by investing in oil and gas projects with
attractive rates of return on capital employed.  We plan to achieve
this goal primarily by pursuing acquisitions of additional properties and
secondarily by exploiting and developing our existing oil and natural gas
properties in Washington County, Oklahoma.


15


Title
to Properties


Title to
properties is subject to contractual arrangements customary in the oil and gas
industry, liens for current taxes not yet due and, in some instances, other
encumbrances.  We believe that such burdens do not materially detract
from the value of such properties or from the respective interests therein or
materially interfere with their use in the operation of the
business.





As is
customary in the industry, other than a preliminary review of local records,
little investigation of record title is made at the time of acquisitions of
undeveloped properties.  Investigations, which generally include a
title opinion of outside counsel, are made prior to the consummation of an
acquisition of producing properties and before commencement of drilling
operations on undeveloped properties.





IMPAIRMENTS


In 2009,
the Company recorded an impairment of all of its gas reserves as a result of the
low gas prices in effect at the time.  In 2010, the Company recorded
an impairment of an interest in two oil wells that it had acquired for its
common stock in the amount of $108,000.  It was determined during
2010, as the result of two failed workover attempts that the unevaluated
property costs should be fully impaired and $126,607 was transferred from
unevaluated property costs to the full cost pool.  The Company
recorded an additional impairment of $205,317 at the end of 2010.  As
a result of the gas reserves continuing to be impaired, the Company wrote off
its investment in a pipeline of $132,663 that was principally used to gather the
gas production.





OTHER


The Chief
Executive Officer currently provides the Company's corporate office at no charge
to the Company.





ITEM
      3:
            LEGAL
      PROCEEDINGS





There are
no pending or threatened lawsuits against us.


16


PART
II




ITEM
      5:
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES




(a)           MARKET
INFORMATION





Our
$0.001 par value per share common stock is traded in the over-the-counter market
and is quoted on the National Association of Securities Dealers (“NASD”)
Over-The Counter Bulletin Board (“OTCBB”) under the symbol
“NAEY.OB.”  Until we began trading on July 24, 2007, there was no
public market for our common stock.  Previously we traded under the
symbol NAEN.OB.





The
following table sets forth the quarterly high and low daily close for our common
stock as reported by the OTCBB for the two years ended April 30, 2010 and
2009.  The bids reflect inter dealer prices without adjustments for
retail mark-ups, mark-downs or commissions and may not represent actual
transactions.





Period (Quarter ended)
                    
                    High
                    
                    
                    Low2010April
      30, 2010
                    
                    $
                    0.09
                    
                    
                    $
                    0.04January
      31, 2010
                    
                    $
                    0.20
                    
                    
                    $
                    0.06October
      31, 2009
                    
                    $
                    0.79
                    
                    
                    $
                    0.20July
      31, 2009
                    
                    $
                    2.00
                    
                    
                    $
                    0.132009April
      30, 2009
                    
                    $
                    10.35
                    
                    
                    $
                    0.80January
      31, 2009
                    
                    $
                    121.50
                    
                    
                    $
                    10.50October
      31, 2008
                    
                    $
                    112.50
                    
                    
                    $
                    50.00July
      31, 2008
                    
                    $
                    45.00
                    
                    
                    $
                    18.33





The OTCBB
is a quotation service sponsored by the NASD that displays real-time quotes and
volume information in over-the-counter (“OTC”) equity securities. The OTCBB does
not impose listing standards or requirements, does not provide automatic trade
executions and does not maintain relationships with quoted issuers. A company
traded on the OTCBB may face loss of market makers and lack of readily available
bid and ask prices for its stock and may experience a greater spread between the
bid and ask price of its stock and a general loss of liquidity with its stock.
In addition, certain investors have policies against purchasing or holding OTCBB
securities. Both trading volume and the market value of our securities have
been, and will continue to be, materially affected by the trading on the
OTCBB.





PENNY
STOCK CONSIDERATIONS





Our
shares will be “penny stocks” as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00.  Our shares thus will be subject to rules that impose
sales practice and disclosure requirements on broker-dealers who engage in
certain transactions involving a penny stock.


17





Under the
penny stock regulations, a broker-dealer selling a penny stock to anyone other
than an established customer or accredited investor must make a special
suitability determination regarding the purchaser and must receive the
purchaser’s written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt.  Generally, an individual with a
net worth in excess of $1,000,000, or annual income exceeding $100,000
individually or $300,000 together with his or her spouse, is considered an
accredited investor.  In addition, under the penny stock regulations
the broker-dealer is required to:


·
            Deliver,
      prior to any transaction involving a penny stock, a disclosure schedule
      prepared by the Securities and Exchange Commission relating to the penny
      stock market, unless the broker-dealer or the transaction is otherwise
      exempt;


·
            Disclose
      commissions payable to the broker-dealer and our registered
      representatives and current bid and offer quotations for the
      securities;


·
            Send
      monthly statements disclosing recent price information pertaining to the
      penny stock held in a customer’s account, the account’s value and
      information regarding the limited market in penny stocks;
    and


·
            Make
      a special written determination that the penny stock is a suitable
      investment for the purchaser and receive the purchaser’s written agreement
      to the transaction, prior to conducting any penny stock transaction in the
      customer’s account.





Because
of these regulations, broker-dealers may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling
shareholders or other holders to sell their shares in the secondary market and
have the effect of reducing the level of trading activity in the secondary
market.  These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly
traded.  In addition, the liquidity for our securities may be
decrease, with a corresponding decrease in the price of our
securities.  Our shares in all probability will be subject to such
penny stock rules and our shareholders will, in all likelihood, find it
difficult to sell their securities.





RECENT
SALES OF UNREGISTERED SECURITIES





During
the quarter ended April 30, 2010, we sold 200,000 shares of our common stock in
a private transaction for $6,000 in cash and issued 1,120,000 shares pursuant to
consulting agreements valued at $89,600.





These
shares were sold pursuant to an exemption from registration under Section 4(2)
promulgated under the Securities Act of 1933, as amended.





(b)
            HOLDERS





There are
41 shareholders of record of the Company’s common stock at June 30,
2010.





(c)
            DIVIDENDS





The
Company has not paid dividends to date and has no plans to do so in the
foreseeable future.


18





(d)
            SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
  PLANS





The
following table summarizes certain information as of April 30, 2010, with
respect to compensation plans (including individual compensation arrangements)
under which our common stock is authorized for issuance:





Number of securities to beissued upon exercise of
                              
                              Weighted average exercise
                              
                              Number of securitiesoutstanding options,
                              
                              price of outstanding
                              
                              remaining availablePlan category
                              
                              warrants and rights
                              
                              options, warrants and rights
                              
                              for future issuanceEquity
      compensation plans approved by security holders:2008
      Plan
                              
                              
                              -
                              
                              
                              
                              
                              1,242,333-
                              
                              
                              
                              
                              1,242,333





The North
American Energy Resources, Inc. 2008 Stock Option Plan (“Plan”) was filed on
September 11, 2008 and reserves 2,500,000 shares for Awards under the
Plan.  The Company’s Board of Directors is designated to administer
the Plan and may designate a Compensation Committee for this
purpose.





ITEM 6:
            SELECTED
      FINANCIAL DATA





Not
applicable.





ITEM 7:
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





This
statement contains forward-looking statements within the meaning of the
Securities Act. Discussions containing such forward-looking statements may be
found throughout this statement.  Actual events or results may differ
materially from those discussed in the forward-looking statements as a result of
various factors, including, without limitation, the matters set forth in this
statement.





Revenues
for the years ended April 30, 2010 and 2009 consisted of the
following.





2010
                    
                    
                    2009Oil
      and natural gas sales
                    
                    $
                    14,343
                    
                    
                    $
                    6,560Pipeline
      fees
                    
                    
                    -
                    
                    
                    
                    2,450$
                    14,343
                    
                    
                    $
                    9,010


19


In 2010,
the Company had oil sales of 220 BBL at an average price of
$65.20.  In 2009, the Company had oil sales of 46 BBL at an average
price of $37.49 and gas sales of 1,215 MCF at an average price of
$3.99.  As a result of the substantial price decline for natural gas,
the gathering system supporting our gas production was shut-in in February 2009
and the Company has not had gas sales since that time.  Gas sales may
resume when gas prices improve.





Costs and
expenses consisted of the following for the years ended April 30, 2010 and
2009.





2010
                        
                        
                        2009Oil
      and natural gas production taxes
                        
                        $
                        1,033
                        
                        
                        $
                        472Oil
      and natural gas production expenses
                        
                        
                        22,580
                        
                        
                        
                        36,882Depreciation
      and amortization
                        
                        
                        6,943
                        
                        
                        
                        5,799Non-cash
      compensation
                        
                        
                        759,279
                        
                        
                        
                        388,258Asset
      impairment
                        
                        
                        445,980
                        
                        
                        
                        417,840General
      and administrative expenses, netof operator's overhead
      fees
                        
                        
                        112,784
                        
                        
                        
                        257,056$
                        1,348,599
                        
                        
                        $
                        1,106,307




Production
taxes are a percentage of revenue and vary directly with
revenue.  Production expenses have decreased due to substantially
eliminating production expenses on gas wells which were shut-in.  The
Company had $9,670 and $8,948 in unrecovered expenses associated with our salt
water disposal well in 2010 and 2009, respectively.  Non-cash
compensation primarily includes the cost of stock grants for consultants in 2010
and 2009.  The increase in 2010 is also related to the lack of cash
available to compensate consultants.





Asset
impairment amounted to $445,980 and $417,840 in 2010 and 2009,
respectively.  The amount in 2010 includes the transfer to the full
cost pool of property costs not previously evaluated of $126,607 due to
unsuccessful workover attempts, a total of $313,317 due to ceiling test
limitations and $132,663 for the Company's interest in a pipeline which has
limited future viability with gas production shut-in.





General
and administrative expenses, net of operator's overhead fees is summarized as
follows for the two years ended April 30, 2010 and 2009.





2010
                        
                        
                        2009Accounting
      and auditing
                        
                        $
                        46,790
                        
                        
                        $
                        44,120Legal
      and professional
                        
                        
                        34,161
                        
                        
                        
                        37,091Consulting
      services
                        
                        
                        1,650
                        
                        
                        
                        85,000Bad
      debt expense
                        
                        
                        15,415
                        
                        
                        
                        76,000Office
      expenses
                        
                        
                        11,623
                        
                        
                        
                        12,630Shareholder
      communications
                        
                        
                        10,345
                        
                        
                        
                        14,515Operator
      overhead fees
                        
                        
                        (7,200
                        )
                        
                        
                        (12,300
                        )$
                        112,784
                        
                        
                        $
                        257,056





During
2009, the Company had more cash available and paid some consulting services with
cash, whereas, in 2010, the Company had little cash available and paid for most
consulting services with common stock.  We recognized a bad debt
expense for a note with a balance of $76,000 during 2009, due to the
determination that it was unlikely that we would be able to collect the
balance.  During 2010, we recorded a bad debt allowance of $10,000 and
wrote off a note receivable balance of $5,415.  Operator overhead fees
are the fees charged to wells that the Company operates, which are reimbursed by
other owners of the wells.  This declined in 2010 due to operating
fewer wells.


20




Other
income (expense) consisted of the following for the years ended April 30, 2010
and 2009.





2010
                    
                    
                    2009Other
      income
                    
                    $
                    -
                    
                    
                    $
                    266Interest
      income - related party
                    
                    
                    900
                    
                    
                    
                    -Interest
      expense - related party
                    
                    
                    (49,618
                    )
                    
                    
                    (437
                    )$
                    (48,718
                    )
                    
                    $
                    (171
                    )





The
Company incurred interest expense in 2010 with related parties primarily due to
converting non-interest bearing advances at April 30, 2009 into a 12%
convertible note payable effective May 1, 2009.





GOING
CONCERN FACTORS—LIQUIDITY




The
accompanying financial statements are prepared assuming the company will
continue as a going concern.  As of April 30, 2010, the Company’s
current liabilities exceed its current assets by $332,656 and its total
liabilities exceed its total assets by 274,542.  The company has also
incurred net losses since its inception.  These factors, among others,
raise substantial doubt as to the Company’s ability to continue as a going
concern.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





The
Company expects to raise capital with private placements of common stock and
borrow funds as necessary to implement its business plan.





NEW
ACCOUNTING STANDARDS





There are
several new accounting pronouncements issued by the Financial Accounting
Standards Board (“FASB”) which are not yet effective.  Each of these
pronouncements, as applicable, has been or will be adopted by the
Company.  Management does not believe any of these accounting
pronouncements has had or will have a material impact on the Company’s financial
position or operating results.  See Note 1 to the financial
statements.





CRITICAL
ACCOUNTING POLICIES




Our
discussion of financial condition and results of operations is based upon the
information reported in our financial statements.  The preparation of
these statements requires us to make assumptions and estimates that affect the
reported amounts of assets, liabilities, revenues and expenses as well as the
disclosure of contingent assets and liabilities at the date of our financial
statements.  We base our assumptions and estimates on historical
experience and other sources that we believe to be reasonable at the
time.  Actual results may vary from our estimates due to changes in
circumstances, weather, politics, global economics, mechanical problems, general
business conditions and other factors.  Our significant accounting
policies are detailed in Note 1 to our financial statements included in this
Annual Report.  We have outlined below certain of these policies as
being of particular importance to the portrayal of our financial position and
results of operations and which require the application of significant judgment
by our management.


21





REVENUE
RECOGNITION – We have derived our revenue primarily from the sale of produced
crude oil and natural gas.  Revenue is recorded in the month the
product is delivered to the purchaser.  We receive payment from one to
three months after delivery.  At the end of each month, we estimate
the amount of production delivered to purchasers and the price we will
receive.  Variances between our estimated revenue and actual payment
are recorded in the month the payment is received; however, the differences
should be insignificant.





FULL COST
METHOD OF ACCOUNTING – We account for our oil and natural gas operations using
the full cost method of accounting.  Under this method, all costs
associated with property acquisition, exploration and development of oil and gas
reserves are capitalized.  Costs capitalized include acquisition
costs, geological and geophysical expenditures, lease rentals on undeveloped
properties and cost of drilling and equipping productive and non-productive
wells.  Drilling costs include directly related overhead
costs.  All of our properties are currently located within the
continental United States.





OIL AND
NATURAL GAS RESERVE QUANTITIES – Reserve quantities and the related estimates of
future net cash flows affect our periodic calculations of depletion and
impairment of our oil and natural gas properties.  Proved oil and
natural gas reserves are the estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future periods from known reservoirs
under existing economic and operating conditions.  Reserve quantities
and future cash flows included in this Annual Report are prepared in accordance
with guidelines established by the SEC and FASB.  The accuracy of our
reserve estimates is a function of:


·      The
quality and quantity of available data;


·      The
interpretation of that data;


·      The
accuracy of various mandated economic assumptions; and


·      The
judgments of the person preparing the estimates.





Our
proved reserve information included in this Annual Report is based on estimates
prepared by an independent petroleum consultant, Christopher
Energy.  Because these estimates depend on many assumptions, all of
which may differ substantially from actual results, reserve estimates may be
different from the quantities of oil and natural gas that are ultimately
recovered.  We will make changes to depletion rates and impairment
calculations in the same period that changes in reserve estimates are
made.





All
capitalized costs of oil and gas properties, including estimated future costs to
develop proved reserves and estimated future costs of site restoration, are
amortized on the unit-of-production method using our estimate of proved
reserves.  Investments in unproved properties and major development
projects are not amortized until proved reserves associated with the projects
can be determined.





22


IMPAIRMENT
OF OIL AND NATURAL GAS PROPERTIES – We review the value of our oil and natural
gas properties whenever management judges that events and circumstances indicate
that the recorded carrying value of properties may not be
recoverable.  We provide for impairments on undeveloped property when
we determine that the property will not be developed or a permanent impairment
in value has occurred.  Under the full cost method the net book value
of oil and natural gas properties, less related deferred income taxes, may not
exceed the estimated after-tax future net revenues from proved oil and natural
gas properties, discounted at 10% (the “Ceiling Limitation”).  In
arriving at estimated future net revenues, estimated lease operating expenses,
development costs, and certain production-related taxes are
deducted.  In calculating future net revenues, prices and costs in
effect at the time of the calculation are held constant indefinitely, except for
changes that are fixed and determinable by existing contracts.  The
net book value is compared to the ceiling limitation on a quarterly and yearly
basis.  The excess, if any, of the net book value above the ceiling
limitation is charged to expense in the period in which it occurs and is not
subsequently reinstated.





OFF-BALANCE
SHEET ARRANGEMENTS





We do not
have any material off-balance sheet arrangements.





TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS





None.





ITEM 7A:
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.




23




ITEM 8:
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





The
consolidated financial statements of North American Energy Resources, Inc. and
Subsidiary together with the report thereon of Paritz & Company, P.A. for
the years ended April 30, 2010 and 2009 and the period from inception (August
18, 2006) through April 30, 2010, is set forth as follows:





INDEX
TO FINANCIAL STATEMENTS





PageReport
      of Independent Registered Public Accounting Firm:Paritz
      & Company, P. A.
                    25Consolidated
      Balance Sheet
                    26Consolidated
      Statements of Operations
                    27Consolidated
      Statements of Stockholders’ Deficit
                    28Consolidated
      Statements of Cash Flows
                    32Notes
      to Consolidated Financial Statements
                    34


24


Paritz
& Company, P.A.





REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





To
the Board of Directors


North
American Energy Resources, Inc. and Subsidiary


(An
Exploration Stage Company)





We have
audited the accompanying consolidated balance sheets of North American Energy
Resources, Inc. and Subsidiary (An Exploration Stage Company) as of April 30,
2010 and 2009, and the related consolidated statements of operations,
stockholders’ deficit and cash flows for the years ended April 30, 2010 and 2009
and from inception (August 18, 2006) through April 30, 2010. These consolidated
financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.





We
conduct our audits in accordance with standards of the Public Company Accounting
Oversight Board (United States).  Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the Consolidated financial position of North American Energy
Resources, Inc., and subsidiary (An Exploration Stage Company) as of April 30,
2010 and 2009, and the consolidated results of its operations and its cash flows
for the years then ended and for the period from inception (August 18, 2006 to
April 30, 2010, in conformity with accounting principles generally accepted in
the United States of America.





The
accompanying financial statements are prepared assuming the company will
continue as a going concern.  As discussed in note 8, as of April 30,
2010, the Company’s current liabilities exceed its current assets by $332,656
and its total liabilities exceed its total assets by 274,542.  The
company has also incurred net losses since its inception.  These
factors, among others, raise substantial doubt as to the Company’s ability to
continue as a going concern.  Managements’ plans concerning these
matters are also described in note 8.  The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.





/s/
Paritz & Company, P.A.





Paritz
& Company, P.A.


Hackensack,
New Jersey


July 29,
2010


25





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Consolidated
Balance Sheets


April
30, 2010 and 2009





2010
                          
                          
                          2009ASSETSCurrent
      assets:Cash
      and cash equivalents
                          
                          $
                          3,026
                          
                          
                          $
                          27,966Accounts
      receivable
                          
                          
                          13,150
                          
                          
                          
                          53,628Due
      from related party
                          
                          
                          -
                          
                          
                          
                          19,993Prepaid
      expenses
                          
                          
                          250,733
                          
                          
                          
                          -Total
      current assets
                          
                          
                          266,909
                          
                          
                          
                          101,587Properties
      and equipment, at cost:Proved
      oil and natural gas properties and equipment using full cost
      accounting
                          
                          
                          68,424
                          
                          
                          
                          47,394Pipeline
                          
                          
                          -
                          
                          
                          
                          144,57568,424
                          
                          
                          
                          191,969Accumulated
      depreciation and amortization
                          
                          
                          (16,174
                          )
                          
                          
                          (15,143
                          )Total
      properties and equipment
                          
                          
                          52,250
                          
                          
                          
                          176,826Other
      assets
                          
                          
                          5,000
                          
                          
                          
                          -Deposits
                          
                          
                          864
                          
                          
                          
                          -Total
      assets
                          
                          $
                          325,023
                          
                          
                          $
                          278,413LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payableTrade
                          
                          $
                          13,554
                          
                          
                          $
                          47,756Oil
      and gas proceeds due others
                          
                          
                          4,990
                          
                          
                          
                          956Due
      to related parties
                          
                          
                          -
                          
                          
                          
                          2,000Advances
      received from joint interest participants
                          
                          
                          33,056
                          
                          
                          
                          62,802Accrued
      interest
                          
                          
                          49,618
                          
                          
                          
                          -Convertible
      notes payable
                          
                          
                          510,476
                          
                          
                          
                          -Total
      current liabilities
                          
                          
                          611,694
                          
                          
                          
                          113,514Long-term
      debt
                          
                          
                          -
                          
                          
                          
                          402,500Total
      liabilities
                          
                          
                          611,694
                          
                          
                          
                          516,014Commitments
      and contingenciesStockholders'
      deficit:Preferred
      stock:  $0.001 par value; 100,000,000 shares authorized; no
      shares issued and outstanding
                          
                          
                          -
                          
                          
                          
                          -Common
      stock: $0.001 par value; 100,000,000 shares  authorized;
      17,375,539 and 14,035,539 shares issued and outstanding at April 30, 2010
      and 2009, respectively
                          
                          
                          17,376
                          
                          
                          
                          14,036Additional
      paid in capital
                          
                          
                          2,219,708
                          
                          
                          
                          960,948Prepaid
      officer compensation
                          
                          
                          (12,129
                          )
                          
                          
                          (84,933
                          )Other
      comprehensive loss
                          
                          
                          (1,000
                          )
                          
                          
                          -Deficit
      accumulated during the exploration stage
                          
                          
                          (2,510,626
                          )
                          
                          
                          (1,127,652
                          )Total
      stockholders' deficit
                          
                          
                          (286,671
                          )
                          
                          
                          (237,601
                          )Total
      liabilities and stockholders' deficit
                          
                          $
                          325,023
                          
                          
                          $
                          278,413





See
accompanying notes to consolidated financial statements


26





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Consolidated
Statements of Operations


For
the years ended April 30, 2010 and April 30, 2009  and the
period


from
inception (August 18, 2006) through April 30, 2010





Inception(August
      18, 2006)throughApril
      30,2010
                                      
                                      
                                      2009
                                      
                                      
                                      2010Oil
      and natural gas sales
                                      
                                      $
                                      14,343
                                      
                                      
                                      $
                                      6,560
                                      
                                      
                                      $
                                      39,015Pipeline
      fees
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,450
                                      
                                      
                                      
                                      2,450Total
      revenues
                                      
                                      
                                      14,343
                                      
                                      
                                      
                                      9,010
                                      
                                      
                                      
                                      41,465Costs
      and expensesOil
      and natural gas production taxes
                                      
                                      
                                      1,033
                                      
                                      
                                      
                                      472
                                      
                                      
                                      
                                      2,810Oil
      and natural gas production expenses
                                      
                                      
                                      22,580
                                      
                                      
                                      
                                      36,882
                                      
                                      
                                      
                                      98,303Depreciation
      and amortization
                                      
                                      
                                      6,943
                                      
                                      
                                      
                                      5,799
                                      
                                      
                                      
                                      14,586Compensation
                                      
                                      
                                      759,279
                                      
                                      
                                      
                                      388,258
                                      
                                      
                                      
                                      1,147,537Asset
      impairment
                                      
                                      
                                      445,980
                                      
                                      
                                      
                                      417,840
                                      
                                      
                                      
                                      863,820General
      and administrative expense, net ofoperator's overhead
      fees
                                      
                                      
                                      112,784
                                      
                                      
                                      
                                      257,056
                                      
                                      
                                      
                                      374,8271,348,599
                                      
                                      
                                      
                                      1,106,307
                                      
                                      
                                      
                                      2,501,883Loss
      from operations
                                      
                                      
                                      (1,334,256
                                      )
                                      
                                      
                                      (1,097,297
                                      )
                                      
                                      
                                      (2,460,418
                                      )Other
      income (expense):Other
      income
                                      
                                      
                                      -
                                      
                                      
                                      
                                      266
                                      
                                      
                                      
                                      320Interest
      income - related party
                                      
                                      
                                      900
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      900Interest
      expense - related party
                                      
                                      
                                      (49,618
                                      )
                                      
                                      
                                      (437
                                      )
                                      
                                      
                                      (51,428
                                      )Total
      other income (expense)
                                      
                                      
                                      (48,718
                                      )
                                      
                                      
                                      (171
                                      )
                                      
                                      
                                      (50,208
                                      )Net
      loss
                                      
                                      
                                      (1,382,974
                                      )
                                      
                                      
                                      (1,097,468
                                      )
                                      
                                      
                                      (2,510,626
                                      )Other
      comprehensive lossUnrealized
      loss on available-for-sale securities
                                      
                                      
                                      (1,000
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,000
                                      )Net
      comprehensive loss
                                      
                                      $
                                      (1,383,974
                                      )
                                      
                                      $
                                      (1,097,468
                                      )
                                      
                                      $
                                      (2,511,626
                                      )Net
      loss per common share, basic and diluted
                                      
                                      $
                                      (0.09
                                      )
                                      
                                      $
                                      (0.08
                                      )Weighted
      average common shares outstanding
                                      
                                      
                                      15,850,041
                                      
                                      
                                      
                                      13,815,339





See
accompanying notes to consolidated financial statements.


27





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Consolidated
Statements of Stockholders' Deficit


For
the years ended April 30, 2010 and 2009 and the period


from
inception (August 18, 2006) through April 30, 2010





IntrinsicAdditional
                                        
                                        
                                        Value
      ofCommon
      stock
                                        
                                        
                                        Paid
      in
                                        
                                        
                                        CommonDate
                                        
                                        Shares
                                        
                                        
                                        Amount
                                        
                                        
                                        Capital
                                        
                                        
                                        Stock
      OptionsBALANCE
      August 18, 2006
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Common
      stock issued for net assets
                                        
                                        09/01/06
                                        
                                        
                                        11,264,485
                                        
                                        
                                        
                                        11,265
                                        
                                        
                                        
                                        88,735
                                        
                                        
                                        
                                        -Common
      stock issued for cash
                                        
                                        09/07/06
                                        
                                        
                                        1,126,448
                                        
                                        
                                        
                                        1,126
                                        
                                        
                                        
                                        8,874
                                        
                                        
                                        
                                        -Common
      stock issued for cash
                                        
                                        09/11/06
                                        
                                        
                                        1,126,448
                                        
                                        
                                        
                                        1,126
                                        
                                        
                                        
                                        8,874
                                        
                                        
                                        
                                        -Net
      loss
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -BALANCE
      April 30, 2007
                                        
                                        
                                        
                                        
                                        13,517,381
                                        
                                        
                                        
                                        13,517
                                        
                                        
                                        
                                        106,483
                                        
                                        
                                        
                                        -Net
      loss
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -BALANCE
      April 30, 2008
                                        
                                        
                                        
                                        
                                        13,517,381
                                        
                                        
                                        
                                        13,517
                                        
                                        
                                        
                                        106,483
                                        
                                        
                                        
                                        -Acquisition
      of North American Energy  Resources, Inc.
                                        
                                        07/28/08
                                        
                                        
                                        177,000
                                        
                                        
                                        
                                        177
                                        
                                        
                                        
                                        119,653
                                        
                                        
                                        
                                        -Conversion
      of note payable and accrued interest for common stock
                                        
                                        07/31/08
                                        
                                        
                                        153,000
                                        
                                        
                                        
                                        153
                                        
                                        
                                        
                                        35,377
                                        
                                        
                                        
                                        -Common
      stock options granted for:350,000
      shares at $1.00 per share
                                        
                                        08/01/08
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        178,000
                                        
                                        
                                        
                                        (178,000
                                        )50,000
      shares at $1.25 per share
                                        
                                        08/01/08
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        27,096
                                        
                                        
                                        
                                        (27,096
                                        )Exercise
      common stock options:for
      $1.25 per share
                                        
                                        09/22/08
                                        
                                        
                                        100
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,250
                                        
                                        
                                        
                                        -for
      $1.00 per share
                                        
                                        09/22/08
                                        
                                        
                                        1,000
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        49,999
                                        
                                        
                                        
                                        -for
      $1.25 per share
                                        
                                        10/13/08
                                        
                                        
                                        100
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,250
                                        
                                        
                                        
                                        -for
      $1.00 per share
                                        
                                        10/13/08
                                        
                                        
                                        70
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,500
                                        
                                        
                                        
                                        -Accounts
      payable paid with common stock
                                        
                                        10/14/08
                                        
                                        
                                        90
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        9,016
                                        
                                        
                                        
                                        -Amortize
      intrinsic value of options
                                        
                                        10/31/08
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        17,091Cancel
      common stock options
                                        
                                        11/05/08
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (188,005
                                        )
                                        
                                        
                                        188,005Common
      stock issued for compensation
                                        
                                        11/07/08
                                        
                                        
                                        100
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,250
                                        
                                        
                                        
                                        -Common
      stock issued for accounts payable
                                        
                                        11/07/08
                                        
                                        
                                        60
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,000
                                        
                                        
                                        
                                        -Common
      stock issued for consulting service
                                        
                                        11/12/08
                                        
                                        
                                        3,000
                                        
                                        
                                        
                                        3
                                        
                                        
                                        
                                        310,497
                                        
                                        
                                        
                                        -Common
      stock issued for accounts payable
                                        
                                        11/17/08
                                        
                                        
                                        400
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        24,999
                                        
                                        
                                        
                                        -Capital
      contribution by shareholder in cash
                                        
                                        11/30/08
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        50,000
                                        
                                        
                                        
                                        -Common
      stock issued for:Compensation
                                        
                                        12/09/08
                                        
                                        
                                        338
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,000
                                        
                                        
                                        
                                        -Accounts
      payable
                                        
                                        12/09/08
                                        
                                        
                                        300
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,200
                                        
                                        
                                        
                                        -Accounts
      payable
                                        
                                        12/09/08
                                        
                                        
                                        400
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,000
                                        
                                        
                                        
                                        -Compensation
                                        
                                        01/05/09
                                        
                                        
                                        500
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        4,999
                                        
                                        
                                        
                                        -Accounts
      payable
                                        
                                        01/05/09
                                        
                                        
                                        800
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        3,199
                                        
                                        
                                        
                                        -Accounts
      payable
                                        
                                        01/05/09
                                        
                                        
                                        400
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        3,999
                                        
                                        
                                        
                                        -Accounts
      payable
                                        
                                        01/19/09
                                        
                                        
                                        4,000
                                        
                                        
                                        
                                        4
                                        
                                        
                                        
                                        14,996
                                        
                                        
                                        
                                        -Compensation
                                        
                                        01/26/09
                                        
                                        
                                        1,500
                                        
                                        
                                        
                                        2
                                        
                                        
                                        
                                        4,998
                                        
                                        
                                        
                                        -Accounts
      payable
                                        
                                        02/24/09
                                        
                                        
                                        6,000
                                        
                                        
                                        
                                        6
                                        
                                        
                                        
                                        9,761
                                        
                                        
                                        
                                        -Compensation
                                        
                                        02/24/09
                                        
                                        
                                        1,000
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        1,999
                                        
                                        
                                        
                                        -Compensation
                                        
                                        03/04/09
                                        
                                        
                                        4,000
                                        
                                        
                                        
                                        4
                                        
                                        
                                        
                                        4,996
                                        
                                        
                                        
                                        -Compensation
                                        
                                        04/06/09
                                        
                                        
                                        4,000
                                        
                                        
                                        
                                        4
                                        
                                        
                                        
                                        5,996
                                        
                                        
                                        
                                        -Officer
      compensation
                                        
                                        04/21/09
                                        
                                        
                                        160,000
                                        
                                        
                                        
                                        160
                                        
                                        
                                        
                                        145,440
                                        
                                        
                                        
                                        -Net
      loss
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -BALANCE
      April 30, 2009
                                        
                                        
                                        
                                        
                                        14,035,539
                                        
                                        
                                        $
                                        14,036
                                        
                                        
                                        
                                        960,948
                                        
                                        
                                        
                                        -


(Continued)


See
accompanying notes to consolidated financial statements.


28





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Consolidated
Statements of Stockholders' Deficit, continued


For
the years ended April 30, 2010 and 2009 and the period


from
inception (August 18, 2006) through April 30, 2010





DeficitAccumulated
                                  
                                  
                                  AccumulatedPrepaid
                                  
                                  
                                  Other
                                  
                                  
                                  During
      theOfficer
                                  
                                  
                                  Comprehensive
                                  
                                  
                                  DevelopmentCompensation
                                  
                                  
                                  Loss
                                  
                                  
                                  Stage
                                  
                                  
                                  TotalBALANCE
      August 18, 2006
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Common
      stock issued for net assets
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  100,000Common
      stock issued for cash
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  10,000Common
      stock issued for cash
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  10,000Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (5,379
                                  )
                                  
                                  
                                  (5,379
                                  )BALANCE
      April 30, 2007
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (5,379
                                  )
                                  
                                  
                                  114,621Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (24,805
                                  )
                                  
                                  
                                  (24,805
                                  )BALANCE
      April 30, 2008
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (30,184
                                  )
                                  
                                  
                                  89,816Acquisition
      of North American Energy Resources, Inc.
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  119,830Conversion
      of note payable and accrued interest for common stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  35,530Common
      stock options granted for:350,000
      shares at $1.00 per share
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -50,000
      shares at $1.25 per share
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Exercise
      common stock options:for
      $1.25 per share
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,250for
      $1.00 per share
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  50,000for
      $1.25 per share
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,250for
      $1.00 per share
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,500Accounts
      payable paid with common stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  9,016Amortize
      intrinsic value of options
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  17,091Cancel
      common stock options
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Common
      stock issued for compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,250Common
      stock issued for accounts payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,000Common
      stock issued for consulting service
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  310,500Common
      stock issued for accounts payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  25,000Capital
      contribution by shareholder in cash
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  50,000Common
      stock issued for:Compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5,000Accounts
      payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,200Accounts
      payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,000Compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5,000Accounts
      payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,200Accounts
      payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  4,000Accounts
      payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  15,000Compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5,000Accounts
      payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  9,767Compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,000Compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5,000Compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,000Officer
      compensation
                                  
                                  
                                  (84,933
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  60,667Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,097,468
                                  )
                                  
                                  
                                  (1,097,468
                                  )BALANCE
      April 30, 2009
                                  
                                  
                                  (84,933
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,127,652
                                  )
                                  
                                  $
                                  (237,601
                                  )


(Continued)


See
accompanying notes to consolidated financial statements.


29





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Consolidated
Statements of Stockholders' Deficit, continued


For
the years ended April 30, 2010 and 2009 and the period


from
inception (August 18, 2006) through April 30, 2010





IntrinsicAdditional
                              
                              
                              Value ofCommon
      stock
                              
                              
                              Paid
      in
                              
                              
                              CommonDate
                              
                              Shares
                              
                              
                              Amount
                              
                              
                              Capital
                              
                              
                              Stock OptionsBALANCE
      April 30, 2009
                              
                              
                              
                              
                              14,035,539
                              
                              
                              $
                              14,036
                              
                              
                              $
                              960,948
                              
                              
                              $
                              -Common
      stock issued for:consulting
      agreement
                              
                              05/01/09
                              
                              
                              400,000
                              
                              
                              
                              400
                              
                              
                              
                              419,600
                              
                              
                              
                              -consulting
      agreement
                              
                              05/01/09
                              
                              
                              200,000
                              
                              
                              
                              200
                              
                              
                              
                              209,800
                              
                              
                              
                              -oil
      and gas non-producing property
                              
                              06/09/09
                              
                              
                              700,000
                              
                              
                              
                              700
                              
                              
                              
                              125,300
                              
                              
                              
                              -accounts
      payable
                              
                              07/27/09
                              
                              
                              10,000
                              
                              
                              
                              10
                              
                              
                              
                              4,990
                              
                              
                              
                              -consulting
      agreement
                              
                              07/27/09
                              
                              
                              30,000
                              
                              
                              
                              30
                              
                              
                              
                              14,970
                              
                              
                              
                              -consulting
      agreement
                              
                              07/27/09
                              
                              
                              30,000
                              
                              
                              
                              30
                              
                              
                              
                              14,970
                              
                              
                              
                              -oil
      and gas producing property
                              
                              09/25/09
                              
                              
                              350,000
                              
                              
                              
                              350
                              
                              
                              
                              192,150
                              
                              
                              
                              -consulting
      contract
                              
                              09/25/09
                              
                              
                              300,000
                              
                              
                              
                              300
                              
                              
                              
                              182,700
                              
                              
                              
                              -cash
                              
                              02/23/10
                              
                              
                              200,000
                              
                              
                              
                              200
                              
                              
                              
                              5,800
                              
                              
                              
                              -consulting
      agreement
                              
                              02/24/10
                              
                              
                              400,000
                              
                              
                              
                              400
                              
                              
                              
                              31,600
                              
                              
                              
                              -consulting
      agreement - director fees
                              
                              02/24/10
                              
                              
                              450,000
                              
                              
                              
                              450
                              
                              
                              
                              35,550
                              
                              
                              
                              -consulting
      agreement - director fees
                              
                              02/24/10
                              
                              
                              150,000
                              
                              
                              
                              150
                              
                              
                              
                              11,850
                              
                              
                              
                              -officer
      compensation - director fees
                              
                              02/24/10
                              
                              
                              120,000
                              
                              
                              
                              120
                              
                              
                              
                              9,480
                              
                              
                              
                              -Other
      comprehensive loss on available-for- sale securities
                              
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Net
      loss
                              
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -BALANCE
      April 30, 2010
                              
                              
                              
                              
                              17,375,539
                              
                              
                              $
                              17,376
                              
                              
                              $
                              2,219,708
                              
                              
                              $
                              -


(Continued)


See
accompanying notes to consolidated financial statements.


30





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Consolidated
Statements of Stockholders' Deficit, continued


For
the years ended April 30, 2010 and 2009 and the period


from
inception (August 18, 2006) through April 30, 2010





DeficitAccumulated
                  
                  
                  AccumulatedPrepaid
                  
                  
                  Other
                  
                  
                  During theOfficer
                  
                  
                  Comprehensive
                  
                  
                  DevelopmentCompensation
                  
                  
                  Loss
                  
                  
                  Stage
                  
                  
                  TotalBALANCE
      April 30, 2009
                  
                  $
                  (84,933
                  )
                  
                  $
                  -
                  
                  
                  $
                  (1,127,652
                  )
                  
                  $
                  (237,601
                  )Common
      stock issued for:consulting
      agreement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  420,000consulting
      agreement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  210,000oil
      and gas non-producing property
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  126,000accounts
      payable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5,000consulting
      agreement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  15,000consulting
      agreement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  15,000oil
      and gas producing property
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  192,500consulting
      contract
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  183,000cash
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,000consulting
      agreement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  32,000consulting
      agreement - director fees
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  36,000consulting
      agreement - director fees
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  12,000officer
      compensation - director fees
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,600Other
      comprehensive loss on available-for- sale securities
                  
                  
                  -
                  
                  
                  
                  (1,000
                  )
                  
                  
                  -
                  
                  
                  
                  (1,000
                  )Amortize
      officer compensation
                  
                  
                  72,804
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  72,804Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,382,974
                  )
                  
                  
                  (1,382,974
                  )BALANCE
      April 30, 2010
                  
                  $
                  (12,129
                  )
                  
                  $
                  (1,000
                  )
                  
                  $
                  (2,510,626
                  )
                  
                  $
                  (286,671
                  )





See
accompanying notes to consolidated financial statements.


31





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Consolidated
Statements of Cash Flows


For
the years ended April 30, 2010 and April 30, 2009 and the period


from
inception (August 18, 2006) through April 30, 2010





Inception(August 18, 2006)throughApril
      30,2010
                                
                                
                                2009
                                
                                
                                2010Operating
      activitiesNet
      loss
                                
                                $
                                (1,382,974
                                )
                                
                                $
                                (1,097,468
                                )
                                
                                $
                                (2,510,626
                                )Adjustments to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                                
                                
                                6,943
                                
                                
                                
                                5,799
                                
                                
                                
                                14,586Non-cash
      compensation
                                
                                
                                759,279
                                
                                
                                
                                388,258
                                
                                
                                
                                1,147,537Asset
      impairment
                                
                                
                                445,980
                                
                                
                                
                                417,840
                                
                                
                                
                                863,820Bad
      debt expense
                                
                                
                                15,415
                                
                                
                                
                                76,000
                                
                                
                                
                                91,415Accounts
      receivable
                                
                                
                                (38,236
                                )
                                
                                
                                (1,397
                                )
                                
                                
                                (96,378
                                )Accrued
      interest income - related party
                                
                                
                                (900
                                )
                                
                                
                                -
                                
                                
                                
                                (900
                                )Prepaid
      expenses and other assets
                                
                                
                                (5,472
                                )
                                
                                
                                -
                                
                                
                                
                                (5,472
                                )Accounts
      payable
                                
                                
                                125,115
                                
                                
                                
                                125,645
                                
                                
                                
                                274,054Accrued
      interest
                                
                                
                                49,618
                                
                                
                                
                                (1,094
                                )
                                
                                
                                49,898Related
      party advances for working capital
                                
                                
                                -
                                
                                
                                
                                (17,993
                                )
                                
                                
                                (17,993
                                )Oil
      and gas proceeds due others
                                
                                
                                4,034
                                
                                
                                
                                385
                                
                                
                                
                                4,990Advances
      from joint interest owners
                                
                                
                                (29,747
                                )
                                
                                
                                (159,471
                                )
                                
                                
                                (8,417
                                )Net
      cash used in operating activities
                                
                                
                                (50,945
                                )
                                
                                
                                (263,496
                                )
                                
                                
                                (193,486
                                )Investing
      activitiesPayments
      for oil and natural gas properties and equipment
                                
                                
                                (95
                                )
                                
                                
                                (40,141
                                )
                                
                                
                                (161,418
                                )Cash received in excess of cash paid to acquire North American Energy
      Resources, Inc.
                                
                                
                                -
                                
                                
                                
                                119,830
                                
                                
                                
                                119,830Proceeds
      from sale of oil and natural gas properties
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                7,500Payments
      for pipeline
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (7,500
                                )Net
      cash used in investing activities
                                
                                
                                (95
                                )
                                
                                
                                79,689
                                
                                
                                
                                (41,588
                                )Financing
      activitiesLoan
      proceeds
                                
                                
                                -
                                
                                
                                
                                13,500
                                
                                
                                
                                48,750Loans
      from shareholders
                                
                                
                                20,100
                                
                                
                                
                                (36,750
                                )
                                
                                
                                113,350Cash
      contributions from shareholders
                                
                                
                                -
                                
                                
                                
                                50,000
                                
                                
                                
                                50,000Sale
      of common stock
                                
                                
                                6,000
                                
                                
                                
                                -
                                
                                
                                
                                26,000Net
      cash provided by financing activities
                                
                                
                                26,100
                                
                                
                                
                                26,750
                                
                                
                                
                                238,100Net
      increase in cash and cash equivalents
                                
                                
                                (24,940
                                )
                                
                                
                                (157,057
                                )
                                
                                
                                3,026Cash
      and cash equivalents, beginning of
    period
                                
                                
                                27,966
                                
                                
                                
                                185,023
                                
                                
                                
                                -Cash
      and cash equivalents, end of period
                                
                                $
                                3,026
                                
                                
                                $
                                27,966
                                
                                
                                $
                                3,026


(Continued)


See
accompanying notes to consolidated financial statements.


32





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Consolidated
Statements of Cash Flows, Continued


For
the years ended April 30, 2010 and April 30, 2009 and the period


from
inception (August 18, 2006) through April 30, 2010





Inception(August 18, 2006)throughApril 30,2010
                      
                      
                      2009
                      
                      
                      2010Supplemental
      cash flow informationCash
      paid for interest and income taxes:Interest
                      
                      $
                      -
                      
                      
                      $
                      437
                      
                      
                      $
                      437Income
      taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Non-cash
      investing and financing activities:Common
      stock issued for:Notes
      receivable
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      76,000Oil
      and gas properties
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      303,670Interest
      in pipeline
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      100,000Loans
      to shareholders assumed
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (371,000
                      )Advance
      from joint interest participant assumed
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (8,670
                      )$
                      100,000Common
      stock issued for convertible note payable and accrued
    interest
                      
                      
                      -
                      
                      
                      
                      35,530
                      
                      
                      
                      35,530Exchange
      of joint interest receivable for oil and natural gas
      properties
                      
                      
                      15,752
                      
                      
                      
                      37,316
                      
                      
                      
                      53,068Common
      stock options granted
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      205,096Common
      stock options cancelled
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      188,005Common
      stock issued for consulting agreements
                      
                      
                      902,600
                      
                      
                      
                      -
                      
                      
                      
                      902,600Unevaluated
      oil and gas properties
                      
                      
                      126,000
                      
                      
                      
                      -
                      
                      
                      
                      126,000Proven
      oil and natural gas properties
                      
                      
                      192,500
                      
                      
                      
                      -
                      
                      
                      
                      192,500Accounts
      payable
                      
                      
                      5,000
                      
                      
                      
                      -
                      
                      
                      
                      106,183Chief
      executive officer compensation
                      
                      
                      9,600
                      
                      
                      
                      -
                      
                      
                      
                      155,200Credit
      balance transferred from accounts receivable to accounts
      payable
                      
                      
                      1,068
                      
                      
                      
                      -
                      
                      
                      
                      1,068Accounts
      receivable applied as payment on note payable to related
    party
                      
                      
                      4,572
                      
                      
                      
                      -
                      
                      
                      
                      4,572Option
      exercises paid by reducing note payable to related party
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      75,250Advance
      from shareholder converted to note
                      
                      
                      2,000
                      
                      
                      
                      -
                      
                      
                      
                      2,000





See
accompanying notes to consolidated financial statements.


33





NORTH
AMERICAN ENERGY RESOURCES, INC. AND SUBSIDIARY


(An
Exploration Stage Company)


Notes
to Consolidated Financial Statements





NOTE
      1:
            ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Organization


The
consolidated financial statements include the accounts of North American Energy
Resources ("NAEY") and its wholly owned subsidiary North American Exploration,
Inc. (“NAE”) (collectively the "Company").





NAEY was
originally organized in Nevada on August 22, 2006 with the name Mar Ked Mineral
Exploration, Inc. ("Mar Ked").  The Company changed its name from Mar
Ked to North American Energy Resources, Inc. on August 11, 2008.





At a
special meeting of shareholders held on April 23, 2009, 63% of our shareholders,
either in person or by proxy, voted to approve a 1:50 reverse split of the
Company's common stock.  This amendment to the Company's Articles of
Incorporation was filed with the Nevada Secretary of State and became effective
on April 27, 2009.  Accordingly, all references to shares of our
common stock included herein have been retroactively restated to give effect to
the reverse split.





On July
28, 2008, the Company acquired 100% of the outstanding stock of NAE for 420,000
shares of our common stock pursuant to a Stock Purchase Agreement
("SPA").  Completion of the SPA resulted in the shareholders of NAE
having control of NAEY.  Accordingly, the transaction was recorded for
accounting purposes as the acquisition of NAE by NAEY with NAE as the acquirer
(reverse acquisition).  The financial statements of the Company prior
to July 28, 2008 are those of NAE.  Formerly NAEY used a November 30
year-end.  As a result of the reverse acquisition, the Company will
utilize the April 30 year-end of NAE after April 30, 2008.





The SPA
provided that NAEY was to have $1,500,000 in cash and no liabilities at
closing.  At closing, NAEY had $150,000 of the required cash and on
August 28, 2008, the parties to the SPA entered into a Modification Agreement
("MA") which provided an extension until January 27, 2009 for the additional
cash to be contributed to the Company.  At January 27, 2009, the
Company had received an additional $50,000 and was still short $1,300,000 of the
amount agreed.  The MA provided that the Buyer would make contingent
issuances of shares to the Seller equal to 95% of all the outstanding stock
after issuance.  Accordingly, effective April 30, 2009, an additional
13,250,381 shares were issued to the Sellers.  The total purchase
price for NAE was 13,690,381 shares of common stock.





NAE was
organized in Nevada on August 18, 2006 as Signature Energy, Inc. and changed its
name to North American Exploration, Inc. on June 2, 2008.


34


Business


The
Company operates in the upstream segment of the oil and gas industry with
activities, including the drilling, completion and operation of oil and gas
wells in Oklahoma.  The Company also has an interest in a pipeline in
its area of operations which is used for gathering its gas and the gas
production of other producers.





Exploration
stage


The
Company is in the exploration stage and has realized only nominal revenue to
date.  The Company has developed a portion of the leasehold which it
owns in Washington County, Oklahoma.  Accordingly, the operation of
the Company is presented as those of an exploration stage enterprise, from its
inception (August 18, 2006).





Cash
and cash equivalents


The
Company considers all cash on hand; cash in banks and all highly liquid debt
instruments purchased with a maturity of three months or less to be cash and
cash equivalents.  At times cash and cash equivalent balances at a
limited number of banks and financial institutions may exceed insurable
amounts.  The Company believes it mitigates its risks by depositing
cash or investing in cash equivalents in major financial
institutions.





Revenue
recognition


Revenue
is recognized at the date of shipment to customers when a formal arrangement
exists, the price is fixed or determinable, the delivery is completed, and no
other significant obligations of the Company exist and collectability is
reasonably assured.





Property
and equipment


The
Company follows the full cost method of accounting for oil and natural gas
operations.  Under this method all productive and nonproductive costs
incurred in connection with the acquisition, exploration and development of oil
and natural gas reserves are capitalized.  No gains or losses are
recognized upon the sale or other disposition of oil and natural gas properties
except in transactions that would significantly alter the relationship between
capitalized costs and proved reserves.  The costs of unevaluated oil
and natural gas properties are excluded from the amortizable base until the time
that either proven reserves are found or it has determined that such properties
are impaired.  The Company had no capitalized costs related to
unevaluated properties at April 30, 2010 and 2009.  As properties are
evaluated, the related costs would be transferred to proven oil and natural gas
properties using full cost accounting.  All capitalized costs were
included in the amortization base as of April 30, 2010 and 2009.





Under the
full cost method the net book value of oil and natural gas properties, less
related deferred income taxes, may not exceed the estimated after-tax future net
revenues from proved oil and natural gas properties, discounted at 10% (the
“Ceiling Limitation”).  In arriving at estimated future net revenues,
estimated lease operating expenses, development costs, and certain
production-related taxes are deducted.  In calculating future net
revenues, in 2010, revenues are based on the arithmetic average of beginning of
month prices for the past year and in 2009 revenues are based on prices in
effect at the end of 2009.  Costs in effect at the time of the
calculation for both years are held constant indefinitely, except for changes
that are fixed and determinable by existing contracts.  The net book
value is compared to the ceiling limitation on a quarterly and yearly
basis.  The excess, if any, of the net book value above the ceiling
limitation is charged to expense in the period in which it occurs and is not
subsequently reinstated.  Reserve estimates used in determining
estimated future net revenues have been prepared by an independent
consultant.  The Company recorded an impairment of $313,317 and
$417,840 in 2010 and 2009, respectively.


35





Other
property and equipment consists principally of the Company’s interest in a
pipeline.  Other property and equipment and related accumulated
amortization and depreciation are relieved upon retirement or sale and the gain
or loss is included in operations.  Renewals and replacements that
extend the useful life of property and equipment are treated as capital
additions.  Accumulated depreciation of other property and equipment
at April 30, 2009 is $6,128.  The equipment was written off at the end
of 2010 and an asset impairment charge of $132,663 was recorded.





The
Company assesses the recoverability of the carrying value of its non-oil and gas
long-lived assets when events occur that indicate an impairment in value may
exist.  An impairment loss is indicated if the sum of the expected
undiscounted future net cash flows is less than the carrying amount of the
assets.  If this occurs, an impairment loss is recognized for the
amount by which the carrying amount of the assets exceeds the estimated fair
value of the asset.





Depreciation
and amortization


All
capitalized costs of oil and natural gas properties and equipment, including the
estimated future costs to develop proved reserves, are amortized using the
unit-of-production method based on total proved
reserves.  Depreciation of other equipment is computed on the
straight-line method over the estimated useful lives of the assets, which range
from three to twenty-five years.





Natural
gas sales and gas imbalances


The
Company follows the entitlement method of accounting for natural gas sales,
recognizing as revenues only its net interest share of all production
sold.  Any amount attributable to the sale of production in excess of
or less than the Company’s net interest is recorded as a gas balancing asset or
liability.  At April 30, 2010 and 2009, there were no natural gas
imbalances.





Credit
and market risk


The
Company sells oil and natural gas to one customer and participates with other
parties in the drilling, completion and operation of oil and natural gas
wells.  Joint interest and oil and natural gas sales receivables
related to these operations are generally unsecured.  The Company
provides an allowance for doubtful accounts for certain joint interest owners’
receivable balances when the Company believes the recoverable balance may not be
collected.  The Company has the right of offset of the joint interest
owners’ share of oil and natural gas production against amounts owed by the
joint interest owners.  Accounts receivable are presented net of the
related allowance for doubtful accounts.





In 2010
and 2009, the Company had cash deposits in certain banks that at times exceeded
the maximum insured by the Federal Deposit Insurance Corporation.  The
Company monitors the financial condition of the banks and has experienced no
losses on these accounts.


36


General
and administrative expense


The
Company receives fees for the operation of jointly owned oil and natural gas
properties and records such reimbursements as reductions of general and
administrative expense.  Such fees totaled approximately $7,200 and
$12,300 in 2010 and 2009, respectively.





Oil
and natural gas reserve estimates


The
Company engaged an independent consultant to prepare its oil and natural gas
reserves.  Proved reserves, estimated future net revenues and the
present value of our reserves are estimated based upon a combination of
historical data and estimates of future activity.  Consistent with SEC
requirements, we have based our revenue projections on the arithmetic average of
beginning of the month historical prices in 2010 and on spot prices on the date
of the estimate for 2009.  The reserve estimates are used in
calculating depletion, depreciation and amortization and in the assessment of
the Company’s Ceiling Limitation.  Significant assumptions are
required in the valuation of proved oil and natural gas reserves which, as
described herein, may affect the amount at which oil and natural gas properties
are recorded.  Actual results could differ materially from these
estimates.





Income
taxes


Provisions
for income taxes are based on taxes payable or refundable for the current year
and deferred taxes.  Deferred taxes are provided on differences
between the tax bases of assets and liabilities and their reported amounts in
the financial statements, and tax carry forwards.  Deferred tax assets
and liabilities are included in the financial statements at currently enacted
income tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled.  As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.




Earnings
(loss) per common share


The
Company is required to report both basic earnings per share, which is based on
the weighted-average number of common shares outstanding, and diluted earnings
per share, which is based on the weighted-average number of common shares
outstanding plus all potential dilutive shares outstanding.  At April
30, 2010 and 2009, there were no potentially dilutive common stock
equivalents.  Accordingly, basic and diluted earnings (loss) per share
are the same for each of the periods presented.





Estimates


The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.




Fair
value of financial instruments


Financial
instruments consist of accounts payable, accrued expenses and short-term
borrowings. The carrying amount of these financial instruments approximates fair
value due to their short-term nature or the current rates at which the Company
could borrow funds with similar remaining maturities.


37


Stock
option plans


The
compensation cost relating to share-based payment transactions (including the
cost of all employee stock options) is required to be recognized in the
financial statements.  That cost will be measured based on the
estimated fair value of the equity or liability instruments
issued.  The accounting literature covers a wide range of share-based
compensation arrangements including share options, restricted share plans,
performance-based awards, share appreciation rights, and employee share purchase
plans.





The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable.  In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility.  Because the Company's options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models may not necessarily provide a reliable
single measure of the fair value of its options.  However, the
Black-Scholes option valuation model provides the best available estimate for
this purpose.





Contingencies


Certain
conditions may exist as of the date financial statements are issued, which may
result in a loss to the Company, but which will only be resolved when one or
more future events occur or fail to occur.  Company management and its
legal counsel assess such contingencies related to legal proceeding that are
pending against the Company or unasserted claims that may result in such
proceedings, the Company’s legal counsel evaluates the perceived merits of any
legal proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.  If the
assessment of a contingency indicates that it is probable that a liability has
been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s consolidated financial
statements.  If the assessment indicates that a potential material
loss contingency is not probable but is reasonably possible, or if probable but
cannot be estimated, then the nature of the contingent liability, together with
an estimate of the range of possible loss if determinable would be
disclosed.





Asset
retirement obligations


The fair
value of a liability for an asset retirement obligation is required to be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made, and that the associated retirement costs be capitalized
as part of the carrying amount of the long-lived asset.  The Company
determines its asset retirement obligation by calculating the present value of
the estimated cash flows related to the liability.  Periodic accretion
of the discount of the estimated liability would be recorded in the statement of
operations.  At April 30, 2010 and 2009, the Company has estimated
that its share of the salvage value of lease equipment would exceed its share of
the cost of plugging and abandoning its producing properties.





Recent
accounting pronouncements


Below is
a listing of the most recent accounting standards and their effect on the
Company.


38


In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting
Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures
(Topic 820): Improving Disclosures about Fair Value
Measurements.  This amendment to Topic 820 has improved disclosures
about fair value measurements on the basis of input received from the users of
financial statements.  This is effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements.  Those disclosures are
effective for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years.  Early adoption is
permitted.  The Company adopted the provisions of ASU 2010-06 on
January 31, 2010,and it did not have a material effect on the financial
position, results of operations or cash flows of the Company.





In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting
Standards Update 2010-03 (ASU 2010-03), Extractive Activities—Oil and Gas (Topic
932): Oil and Gas Reserve Estimation and Disclosures.  This amendment
to Topic 932 has improved the reserve estimation and disclosure requirements by
(1) updating the reserve estimation requirements for changes in practice and
technology that have occurred over the last several decades and (2) expanding
the disclosure requirements for equity method investments.  This is
effective for annual reporting periods ending on or after December 31,
2009.  However, an entity that becomes subject to the disclosures
because of the change to the definition oil- and gas- producing activities may
elect to provide those disclosures in annual periods beginning after December
31, 2009.  Early adoption is not permitted.  The Company
adopted the provisions of ASU 2010-03 on April 30, 2010 which did not have a
material effect on the financial position, results of operations or cash flows
of the Company.





NOTE
      2:
            ACCOUNTS
      AND NOTE RECEIVABLE





Accounts
receivable at April 30, 2010 and 2009 include the following:





2010
                      
                      
                      2009Natural
      gas sales, net
                      
                      $
                      4,279
                      
                      
                      $
                      -Joint
      interest operations, net
                      
                      
                      18,871
                      
                      
                      
                      53,628Allowance
      for doubtful accounts
                      
                      
                      (10,000
                      )
                      
                      
                      -$
                      13,150
                      
                      
                      $
                      53,628





During
the two years ended April 30, 2010 and 2009, the Company has acquired interests
in oil and gas properties in exchange for $15,752 and $37,316 of joint interest
receivables, respectively.





The
Company had a note receivable with a balance of $76,000 at April 30, 2008, which
was accruing interest at its default rate of 12%.  During 2009, the
Company recorded $76,000 in bad debt expense and fully reserved the note
receivable.





During
2010, the Company established an allowance for doubtful accounts in the amount
of $10,000 and wrote off the balance of a note receivable from a related party
in the amount of $5,415.


39





NOTE
      3:
            PREPAID
      EXPENSES





The
Company has recorded prepaid expenses from the issue of its common stock for
consulting services.  The cost, based on the trading price of the
stock at the time of the transaction, is amortized to expense over the term of
the contracts.  The unamortized balances at April 30, 2010 and 2009
are as follows.





2010
                      
                      
                      2009Current
      assetStockholder
      relations firm
                      
                      $
                      168,000
                      
                      
                      $
                      -Consulting
      firm assisting with listing common stock on the Frankfort
      Exchange
                      
                      
                      68,625
                      
                      
                      
                      -Administrative
      management
                      
                      
                      9,500
                      
                      
                      
                      -Other
      prepaid expense
                      
                      
                      4,608
                      
                      
                      
                      -$
                      250,733
                      
                      
                      $
                      -Component
      of stockholders' deficitChief
      executive officer compensation
                      
                      $
                      12,129
                      
                      
                      $
                      84,933





NOTE
      4:
            RELATED
      PARTY TRANSACTIONS





The
Company had non-interest bearing obligations to its shareholders at April 30,
2009, of  $2,000.





The
Company sold its gas pursuant to a contract with a gathering system principally
owned by a related party.  The Company received a price equal to 70%
of the posted price.  The related party retained the other 30% of the
posted price for gathering fees and marketing fees.  At April 30, 2010
and 2009, the gathering system was shut-in due to low gas prices and had no
deliveries in 2010.





At April
30, 2009, the Company had advanced $19,993 to one shareholder
consultant.  During 2010, the Company accrued interest of $900,
received a payment of $15,478 and recorded bad debt expense for the balance of
$5,415.





In April
2009, the Company issued 160,000 shares of its common stock valued at $145,600
to its Chief Executive Officer for compensation for the period from August 1,
2008 through July 31, 2010.  See Note 3.  In February 2010,
the Company issued an additional 120,000 shares of its common stock valued at
$9,600 for director fees to its CEO, issued 450,000 shares of its common stock
valued at $36,000 to a Director for director fees and consulting services and
issued 150,000 shares of its common stock valued at $12,000 to a company
controlled by a Director for director fees and management services.





The
Company has notes payable to shareholders in the amount of $406,528 and $389,000
at April 30, 2010 and 2009, respectively, as described in Note
5.


40





The Chief
Executive Officer currently provides the corporate office for the Company at no
charge.





NOTE
      5:
            CONVERTIBLE
      NOTES PAYABLE AND LONG-TERM DEBT




Convertible
notes payable and long-term debt consists of the following at April 30, 2010 and
2009.





2010
                      
                      
                      2009Convertible
      note payable due April 27, 2011 with interest at 12% per annum;
      convertible into the Company's common stock at the rate of $1.00 per
      share
                      
                      $
                      13,500
                      
                      
                      $
                      13,500Convertible
      note payable due March 1, 2011 with interest at 12% per annum; convertible
      into the Company's common stock at the rate of $0.10 per
    share
                      
                      
                      53,618
                      
                      
                      
                      -Convertible
      note payable due March 1, 2011 with interest at 12% per annum; convertible
      into the Company's common stock at the rate of $0.03 per
    share
                      
                      
                      36,830
                      
                      
                      
                      -Convertible
      notes payable to shareholders due April 30, 2011 with interest at 12% per
      annum; convertible into the Company's common stock at the rate of $0.04
      per share
                      
                      
                      22,100
                      
                      
                      
                      -Convertible
      note payable to a shareholder due May 1, 2010 with interest at 12% per
      annum; convertible into the Company's common stock at the rate of $1.50
      per share
                      
                      
                      384,428
                      
                      
                      
                      389,000Total
                      
                      
                      510,476
                      
                      
                      
                      402,500Long
      term debt, less current maturities
                      
                      
                      -
                      
                      
                      
                      (402,500
                      )Current
      maturities of long-term debt
                      
                      $
                      510,476
                      
                      
                      $
                      -





The
$389,000 convertible note payable to a shareholder consists of all non-interest
bearing advances to this shareholder at April 30, 2009.


41


NOTE
      6:
            STOCKHOLDER’S
      EQUITY





PREFERRED
STOCK





The
Company has 100,000,000 shares of $0.001 par value preferred stock authorized
and no shares issued or outstanding at April 30, 2010 and 2009.





COMMON
STOCK





The
Company has 100,000,000 shares of its $0.001 par value common stock
authorized.  At April 30, 2010 and 2009 the Company had 17,375,539 and
14,035,539 shares issued and outstanding, respectively.





REVERSE
SPLIT





At a
special meeting of shareholders held on April 23, 2009, 63% of our shareholders,
either in person or by proxy, voted to approve a 1:50 reverse split of the
Company's common stock.  This amendment to the Company's Articles of
Incorporation was filed with the Nevada Secretary of State and became effective
on April 27, 2009.  Accordingly, all references to shares of our
common stock included herein have been retroactively restated to give effect to
the reverse split.





CONTINGENT
SHARES





On July
28, 2008, the Company acquired 100% of the outstanding stock of NAE for 420,000
shares of our common stock pursuant to a Stock Purchase Agreement
("SPA").  Completion of the SPA resulted in the shareholders of NAE
having control of NAEY.





The SPA
provided that NAEY was to have $1,500,000 in cash and no liabilities at
closing.  At July 28, 2008, the closing date, NAEY had $150,000 of the
required cash and on August 28, 2008, the parties to the SPA entered into a
Modification Agreement ("MA") which provided an extension until January 27, 2009
for the additional cash to be contributed to the Company.  At January
27, 2009, the Company had received an additional $50,000 and was still short
$1,300,000 of the agreed amount.  The MA provided that the Buyer would
make contingent issuances of shares to the Seller equal to 95% of all the
outstanding stock after issuance.  Accordingly, effective April 30,
2009, an additional 13,250,381 shares were issued to the Sellers.  The
total purchase price of NAE was 13,670,381 shares.





COMMON
STOCK OPTIONS





The North
American Energy Resources, Inc. 2008 Stock Option Plan ("Plan") was filed on
September 11, 2008 and reserved 2,500,000 shares for awards under the
Plan.  The Company's Board of Directors is designated to administer
the Plan and may form a Compensation Committee for this purpose.  The
Plan terminates on July 23, 2013.





Options
granted under the Plan may be either "incentive stock options" intended to
qualify as such under the Internal Revenue Code, or "non-qualified stock
options."  Options outstanding under the Plan have a maximum term of
up to ten years, as designated in the option agreements.


42





A summary
of stock option activity during the years ended April 30, 2010 and 2009
follows.





Weightedaverage
                                  
                                  
                                  Initialexercise
                                  
                                  
                                  intrinsicShares
                                  
                                  
                                  price
                                  
                                  
                                  valueOutstanding,
      April 30, 2008
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0Granted
                                  
                                  
                                  1,586,167
                                  
                                  
                                  $
                                  0.32
                                  
                                  
                                  $
                                  205,096Exercised
                                  
                                  
                                  (1,257,667
                                  )
                                  
                                  $
                                  0.14
                                  
                                  
                                  
                                  (17,091
                                  )Forfeited/cancelled
                                  
                                  
                                  (328,500
                                  )
                                  
                                  $
                                  0.97
                                  
                                  
                                  
                                  (188,005
                                  )Outstanding,
      April 30, 2009
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  -Granted
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  -Exercised
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  -Forfeited/cancelled
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  -Outstanding,
      April 30, 2010
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  -Plan
      shares available for grant
                                  
                                  
                                  1,242,333





The fair
value of each option on the date of grant is estimated using the Black Scholes
option valuation model.  The following weighted-average assumptions
were used for options granted during the year ended April 30, 2009.





2009Expected
      term
                  
                  3
      yearsExpected
      average volatility
                  
                  
                  126.39
                  %Expected
      dividend yield
                  
                  
                  0
                  %Risk-free
      interest rate
                  
                  
                  3.50
                  %Expected
      annual forfeiture rate
                  
                  
                  0
                  %





NOTE
      7:
            INCOME
      TAXES





The
Company has not provided a deferred tax benefit or expense for the years ended
April 30, 2010 and 2009, as all net deferred tax assets have a full valuation
allowance.





Actual
income tax benefit applicable to net loss before income taxes is reconciled with
the “normally expected” federal income tax as follows:


43





2010
                  
                  
                  2009"Normally
      expected" income tax benefit
                  
                  $
                  (470,200
                  )
                  
                  $
                  (373,200
                  )State
      income taxes net of federal income tax benefit
                  
                  
                  (55,300
                  )
                  
                  
                  (43,900
                  )Valuation
      allowance
                  
                  
                  525,500
                  
                  
                  
                  417,100Total
                  
                  $
                  -
                  
                  
                  $
                  -





The
Company’s income tax provision was computed based on the federal statutory rate
and the average state rate, net of the related federal
benefit.  Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.  Significant components of the Company’s deferred tax assets
and liabilities are as follows:





2010
                  
                  
                  2009Net
      operating loss carryforward
                  
                  $
                  675,400
                  
                  
                  $
                  271,200Depreciable/depletable
      property, plant and equipment
                  
                  
                  278,700
                  
                  
                  
                  157,400Valuation
      allowance
                  
                  
                  (954,100
                  )
                  
                  
                  (428,600
                  )Total
                  
                  $
                  -
                  
                  
                  $
                  -





At April
30, 2010, the Company has a net operating loss carryforward in the amount of
approximately $1,777,000, which expires between 2027 and 2030.





NOTE
      8:
            GOING
      CONCERN





The
accompanying financial statements are prepared assuming the company will
continue as a going concern.  As of April 30, 2010, the Company’s
current liabilities exceed its current assets by $332,656 and its total
liabilities exceed its total assets by 274,542.  The company has also
incurred net losses since its inception.  These factors, among others,
raise substantial doubt as to the Company’s ability to continue as a going
concern.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





The
Company expects to raise capital with private placements of common stock and
borrow funds as necessary to implement its business plan.


44


NOTE
      9:
            ASSET
      IMPAIRMENTS





The
Company recorded the following asset impairments during the years ended April
30, 2010 and 2009.





2010
                    
                    
                    2009Ceiling
      test limitation of oil and gas reserves
                    
                    $
                    313,317
                    
                    
                    $
                    417,840Impairment
      of interest in pipeline
                    
                    
                    132,663
                    
                    
                    
                    -$
                    445,980
                    
                    
                    $
                    417,840





In 2009,
the Company recorded an impairment of all of its gas reserves as a result of the
low gas prices in effect at the time.  In 2010, the Company recorded
an impairment of an interest in two oil wells that it had acquired for its
common stock in the amount of $108,000.  It was determined during
2010, as the result of two failed workover attempts that the unevaluated
property costs should be fully impaired and $126,607 was transferred from
unevaluated property costs to the full cost pool.  The Company
recorded an impairment of $205,317 at April 30, 2010 based on its estimate of
reserves.  In addition, as a result of the gas reserves continuing to
be impaired, the Company wrote off its investment in a pipeline of $132,663 that
was principally used to gather the gas production.





NOTE 10:
            SUPPLEMENTARY
      OIL AND GAS RESERVE INFORMATION
              (UNAUDITED)





The
Company has interest in oil and natural gas properties that are all located in
Washington County, Oklahoma at April 30, 2010 and 2009.





The
Company engaged an independent consultant to prepare its own year-end estimates
of future net recoverable oil and natural gas reserves.  Estimated
proved net recoverable reserves as shown below include only those quantities
that can be expected to be commercially recoverable using the beginning of month
average prices in 2010 and the end of year prices in 2009 and costs in effect at
the balance sheet dates existing under existing regulatory practices and with
conventional equipment and operating methods.





Proved
developed reserves represent only those reserves expected to be recovered
through existing wells.  Proved undeveloped reserves would include
those reserves expected to be recovered from new wells on un-drilled acreage or
from existing wells on which a relatively major expenditure is required for
re-completion.





Capitalized
costs relating to oil and natural gas producing activities and related
accumulated depreciation and amortization at April 30, 2010 and 2009 are
summarized as follows:


45





2010
                    
                    
                    2009Proved
      oil and natural gas properties under full cost
                    
                    $
                    68,424
                    
                    
                    $
                    47,394Accumulated
      depreciation and amortization
                    
                    
                    (16,174
                    )
                    
                    
                    (9,015
                    )$
                    52,250
                    
                    
                    $
                    38,379





Costs
incurred in oil and natural gas producing activities for the year ended April
30, 2010 and 2009 are summarized as follows:




2010
                    
                    
                    2009Acquisition
      of proved properties
                    
                    $
                    207,645
                    
                    
                    $
                    37,316Acquisition
      of non-producing properties
                    
                    
                    126,607
                    
                    
                    
                    -Development
      costs
                    
                    
                    95
                    
                    
                    
                    3,066$
                    334,347
                    
                    
                    $
                    40,382Amortization
      rate per equivalent BOE
                    
                    $
                    23.22
                    
                    
                    $
                    5.27





Net
quantities of proved and proved developed reserves of oil and natural gas are
summarized as follows:





Oil
      (BBLs)
                  
                  
                  Gas
      (MCF)Balance,
      April 30, 2008
                  
                  
                  -
                  
                  
                  
                  1,603,895Extensions
      and discoveries
                  
                  
                  7,334Revisions
      of estimates
                  
                  
                  -
                  
                  
                  
                  (1,602,680
                  )Production
                  
                  
                  (46
                  )
                  
                  
                  (1,215
                  )Balance,
      April 30, 2009
                  
                  
                  7,288
                  
                  
                  
                  -Extensions
      and discoveries
                  
                  
                  -
                  
                  
                  
                  -Acquisition
      of producing reserves
                  
                  
                  7,222
                  
                  
                  
                  -Revisions
      of estimates
                  
                  
                  (12,040
                  )
                  
                  
                  -Production
                  
                  
                  (220
                  )
                  
                  
                  -Balance,
      April 30, 2010
                  
                  
                  2,250
                  
                  
                  
                  -





The
following is a summary of a standardized measure of discounted net cash flows
related to the Company’s proved oil and natural gas reserves.  For
these calculations, estimated future cash flows from estimated future production
of proved reserves were computed using the arithmetic average of beginning of
month prices for the year ended April 30, 2010 and oil and natural gas spot
prices as of the end of the period presented for 2009.  Future
development and production costs attributable to the proved reserves were
estimated assuming that existing conditions would continue over the economic
lives of the individual leases and costs were not escalated for the
future.  Estimated future income tax expenses were calculated by
applying future statutory tax rates (based on the current tax law adjusted for
permanent differences and tax credits) to the estimated future pretax net cash
flows related to proved oil and natural gas reserves, less the tax basis of the
properties involved.


46





The
Company cautions against using this data to determine the fair value of its oil
and natural gas properties.  To obtain the best estimate of the fair
value of the oil and natural gas properties, forecasts of future economic
conditions, varying discount rates, and consideration of other than proved
reserves would have to be incorporated into the calculation.  In
addition, there are significant uncertainties inherent in estimating quantities
of proved reserves and in projection rates of production that impair the
usefulness of the data.





In 2009,
the Company recorded an impairment of all of its gas reserves as a result of the
low gas prices in effect at the time.  In 2010, the Company recorded
an impairment of an interest in two oil wells that it had acquired for its
common stock in the amount of $108,000.  It was determined during
2010, as the result of two failed workover attempts that the unevaluated
property costs should be fully impaired and $126,607 was transferred from
unevaluated property costs to the full cost
pool.  The  Company recorded an impairment of $205,317 at
the end of 2010.  In addition, as a result of the gas reserves
continuing to be impaired, the Company wrote off its investment in a pipeline of
$132,663 that was principally used to gather the gas production.





The
standardized measure of discounted future net cash flows relating to proved oil
and natural gas reserves at April 30, 2010 and 2009 are summarized as
follows:





2010
                    
                    
                    2009Future
      cash inflows
                    
                    $
                    154,220
                    
                    
                    $
                    207,103Future
      production costs
                    
                    
                    (87,530
                    )
                    
                    
                    (126,000
                    )Future
      income tax expenses
                    
                    
                    -
                    
                    
                    
                    -Future
      net cash flows
                    
                    
                    66,690
                    
                    
                    
                    81,10310%
      annual discount for estimated timing of cash flows
                    
                    
                    (14,440
                    )
                    
                    
                    (42,724
                    )Standardized
      measure of discounted future net cash flows
                    
                    $
                    52,250
                    
                    
                    $
                    38,379





The
following are the principal sources of changes in the standardized measure of
discounted future net cash flows of the Company for the years ended April 30,
2010 and 2009:


47





2010
                    
                    
                    2009Standardized
      measure of discounted future net cash flows at beginning of
      period
                    
                    $
                    38,379
                    
                    
                    $
                    1,923,078Changes
      during the period:Sales
      of natural gas produced, net of production costs
                    
                    
                    9,270
                    
                    
                    
                    30,795Net
      changes in prices and production costs
                    
                    
                    48,325
                    
                    
                    
                    (1,533,970
                    )Impairments
                    
                    
                    (313,317
                    )
                    
                    
                    (417,840
                    )Unevaluated
      costs transferred to full cost pool
                    
                    
                    126,607
                    
                    
                    
                    -Development
      costs incurred and revisions
                    
                    
                    95
                    
                    
                    
                    4,966Purchase
      of reserves in place
                    
                    
                    207,645
                    
                    
                    
                    37,316Revision
      of previous quantity estimates
                    
                    
                    (64,754
                    )
                    
                    
                    (5,966
                    )Net
      change
                    
                    
                    13,871
                    
                    
                    
                    (1,884,699
                    )Standardized
      measure of discounted future net cash flows at end of
    period
                    
                    $
                    52,250
                    
                    
                    $
                    38,379





Prices
used in computing these calculations of future production of proved reserves
were $68.47 per BBL of oil at April 30, 2010 and $37.80 per BBL of oil and $1.90
per thousand cubic feet (MCF) of natural gas at April 30, 2009.  Gas
reserves were still shut-in at April 30, 2010 and were not
revalued.


48


ITEM
      9:
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE




Not
applicable.





ITEM 9AT:
            CONTROLS
      AND PROCEDURES




(a)
Evaluation of Disclosure Controls and Procedures





Disclosure
controls and procedures are designed to ensure that information required to be
disclosed in the reports that are filed or submitted under the Exchange Act 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 the reports that are filed under the Exchange Act is
accumulated and communicated to management, including the principal executive
officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.  Under the supervision of and
with the participation of management, including the principal executive officer
and principal financial officer, the Company has evaluated the effectiveness of
the design and operation of its disclosure controls and procedures as of April
30, 2010, and, based on its evaluation, our principal executive officer and
principal financial officer have concluded that these controls and procedures
are not effective primarily due to a lack of segregation of duties.





(b)  Changes
in Disclosure Controls and Internal Controls





There
were no changes in our disclosure controls and internal control over financial
reporting during the quarter ended April 30, 2010 that materially affected, or
are reasonably likely to materially affect, our disclosure controls and our
internal control over financial reporting.





(c)
Management’s Annual Report on Internal Control Over Financial
Reporting





The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting.  As
defined by the SEC, internal control over financial reporting is defined in Rule
13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed
by, or under the supervision of, the Company’s principal executive and principal
financial officers and effected by the Company’s board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles.  The Company’s internal control over financial reporting
is supported by written policies and procedures that:  (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the Company’s assets; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the Company are
being made only in accordance with authorizations of the Company’s management
and directors; and (3) 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.


49





The
Company’s internal control system was designed to provide reasonable assurance
to the Company’s management and board of directors regarding the preparation and
fair presentation of published financial statements.  All internal
control systems, no matter how well designed, have inherent limitations which
may not prevent or detect misstatements.  Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and
presentation.  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
conducted an evaluation of the effectiveness of the Company’s internal control
over financial reporting as of April 30, 2010.  In making this
assessment, management used the framework set forth in the report entitled
“Internal Control-Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO.  The COSO framework
summarizes each of the components of a company’s internal control system,
including (i) the control environment, (ii) risk assessment, (iii) control
activities, (iv) information and communication, and (v)
monitoring.  Based on this evaluation, management concluded that the
Company’s internal control over financial reporting was not effective as of
April 30, 2010, due primarily to a lack of segregation of duties.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permits us to provide only management’s report in
this annual report.





ITEM 9B:
            OTHER
      INFORMATION





Pursuant
to General Instruction B of Form 8-K, any reports previously or in the future
submitted under Item 2.02 (Results of Operations and Financial Condition) are
not deemed to be “filed” for the purpose of Section 18 of the Securities
Exchange Act of 1934 and the Company is not subject to the liabilities of that
section, unless the Company specifically states that the information is to be
considered “filed” under the Exchange Act or incorporates it by reference into a
filing under the Securities Act or Exchange Act.  If a report on Form
8-K contains disclosures under Item 2.02, whether or not the report contains
disclosures regarding other items, all exhibits to such report relating to Item
2.02 will be deemed furnished, and not filed, unless the registrant specifies,
under Item 9.01 (Financial Statements and Exhibits), which exhibits, or portions
of exhibits, are intended to be deemed filed rather than furnished pursuant to
this instruction.  The Company is not incorporating, and will not
incorporate, by reference these reports into a filing under the Securities Act
of 1933, as amended, or the Exchange Act of 1934, as amended.


50


In 2010,
the Company recorded an impairment of an interest in two oil wells that it had
acquired for its common stock in the amount of $108,000.  It was
determined during 2010, as the result of two failed workover attempts that the
unevaluated property costs should be fully impaired and $126,607 was transferred
from unevaluated property costs to the full cost pool.  The Company
recorded an impairment of $205,317 at the end of 2010.  In addition,
as a result of the gas reserves continuing to be impaired, the Company wrote off
its investment in a pipeline of $132,663 that was principally used to gather the
gas production.


51


PART
III




ITEM 10:
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE




Executive
Officers and Directors




The
following section sets forth the names, ages and current positions with the
Company held by the Directors, Executive Officers and Significant Employees;
together with the year such positions were assumed.  We are not aware
of any arrangement or understanding between any Director or Executive Officer
and any other person pursuant to which he was elected to his current position.
Each Executive Officer will serve until he or she resigns or is removed or
otherwise disqualified to serve, or until his or her successor is elected and
qualified.





Each
Director will serve until he or she resigns or is removed or otherwise
disqualified to serve or until his or her successor is elected.  The
Company currently has three Directors.





DATE
      FIRSTNAME
                          
                          AGE
                          
                          POSITION
                          
                          ELECTED/APPOINTEDRoss
      E. Silvey
                          
                          80
                          
                          President,
                          
                          June
      24, 2008Chief
      Executive Officer,Chief
      Financial Officerand
      DirectorMichael
      D. Pruitt
                          
                          49
                          
                          Executive
      Vice President
                          
                          December
      29, 2009and
      DirectorGeorge
      S. Young
                          
                          58
                          
                          Director
                          
                          December
      29,
2009





ROSS E.
SILVEY has owned and operated franchised automobile businesses, finance
companies and insurance companies for over thirty years.  Dr. Silvey
has taught as an adjunct or full-time professor most of the courses in the upper
division and MBA programs at the University of Tulsa, Oral Roberts University,
Langston University and Southern Nazarene University.  His formal
education is an MBA from the Harvard Business School.  He has also
been awarded the Ph.D. degree from the Walden Institute of Advance
Studies.  Dr. Silvey is also a director of Global Beverage Solutions,
Inc. and Double Eagle Holdings, Ltd.


52


MICHAEL
D. PRUITT is a long-time entrepreneur with a proven track record, possesses the
expertise to evaluate potential investments, form key relationships and
recognize a strong management team.  Mr. Pruitt founded Avenel Financial
Group, a boutique financial services firm concentrating on emerging technology
company investments.  The business succeeded immediately, and in order to
grow Avenel Financial Group to its full potential and better represent the
company's ongoing business model, he formed Avenel Ventures, an innovative
technology investment and business development company.  In the late 1980s,
Mr. Pruitt owned Southern Cartridge, Inc., which he eventually sold to
MicroMagnetic, Inc., where he continued working as Executive Vice President and
a Board member until Southern Cartridge was sold to Carolina Ribbon in
1992.  From 1992 to 1996, Mr. Pruitt worked in a trucking firm where he was
instrumental in increasing revenues from $6 million to $30 million.  The
firm was sold in 1996 to Priority Freight Systems.  Between 1997 and 2000,
Mr. Pruitt assisted several public and private companies in raising capital,
recruiting management and preparing companies to go public or be
sold.  He was the CEO, President and Chairman of the Board of
Onetravel Holdings, Inc. (formerly RCG Companies), a publicly traded holding
company formerly listed on the AMEX.  Mr. Pruitt received a
Bachelor of Arts degree from Coastal Carolina University in Conway, South
Carolina, where he sits on the Board of Visitors of the Wall School of
Business.   Mr. Pruitt is currently a director of Chanticleer
Holdings, Inc., Green St. Energy, Inc. and Efftec International, Inc. and is
Chief Executive Officer of Chanticleer Holdings, Inc. and Efftec International,
Inc.





GEORGE S.
YOUNG became a director on December 29, 2009.  Mr. Young has been
involved in over $9 billion in natural resource debt and equity financings in
legal practice and business management of gold, mining and natural
resources.  Since 2005, Mr. Young has been a consultant for project
acquisitions, seed capital formation and structuring IPOs and other financings
and listing on public exchanges for various public companies in the oil and gas
and resource industries.  From 2003 to 2008, Mr. Young was founder,
director and vice president of International Royalty Corp.  From 2002
to 2005, Mr. Young was president and CEO of MAG Silver Corp in Vancouver,
B.C.  From 1998 to 2002, Mr. Young was in private law practice in Salt
Lake City, Utah.  Mr. Young received his J.D. from the University of
Utah College of Law in 1979 and his B.S. in Metallurgical Engineering from the
University of Utah in 1975.  Mr. Young is a member of the Society of
Mining Engineers and the State Bar Associations of Colorado, Utah and Texas. Mr.
Young is president, chief operating officer and a director of Mexoro Minerals
Ltd. and is the chief executive officer and director of Fellows Energy
Ltd.





Audit
Committee





The Board
of Directors of the Company serves as the audit committee.





Compliance
with Section 16(a) Of the Exchange Act




Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
executive officers, directors and persons who own more than ten percent of the
Company’s common stock to file initial reports of ownership and changes in
ownership with the SEC. Additionally, SEC regulations require that the Company
identify any individuals for whom one of the referenced reports was not filed on
a timely basis during the most recent fiscal year or prior fiscal years. The
Company's new directors were late filing their notifications when they became
directors and all directors were late filing changes in stock
ownership.




Code
of Ethics





The
Company has not yet adopted a code of ethics to apply to its principal executive
officer, principal financial officer, principal accounting officer and
controller, or persons performing similar functions.


53


NOMINATING
COMMITTEE





We do not
currently have a standing nominating committee, or a committee performing
similar functions.  The full Board of Directors currently serves this
function.





ITEM 11:
            EXECUTIVE
      COMPENSATION




The
Compensation Committee of the Board of Directors deliberates executive
compensation matters to the extent they are not delegated to the Chief Executive
Officer.




a.
            Summary
      Compensation Table




The
following table shows the compensation of the Company’s Chief Executive Officer
and each executive officer whose total cash compensation exceeded $100,000 for
the three years ended April 30, 2010 (no compensation was paid until
2009).





ANNUAL
COMPENSATION





StockName
      and Principal Position
                                      
                                      Year
                                      
                                      Salary
                                      
                                      
                                      Awards
                                      
                                      
                                      TotalRoss
      E. Silvey (CEO since
                                      
                                      2010
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      82,404
                                      
                                      
                                      $
                                      82,404June
      2008) (1)
                                      
                                      2009
                                      
                                      
                                      -
                                      
                                      
                                      
                                      60,667
                                      
                                      
                                      
                                      60,6672008
                                      
                                      
                                      N/A
                                      
                                      
                                      
                                      N/A
                                      
                                      
                                      
                                      N/AVladimir
      Fedyunin (CEO from
                                      
                                      2010
                                      
                                      
                                      N/A
                                      
                                      
                                      
                                      N/A
                                      
                                      
                                      
                                      N/AApril
      2008 until June 2008)
                                      
                                      2009
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -2008
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Maria
      Camila Maz (CEO from
                                      
                                      2010
                                      
                                      
                                      N/A
                                      
                                      
                                      
                                      N/A
                                      
                                      
                                      
                                      N/ANovember
      2007 until April 2008)
                                      
                                      2009
                                      
                                      
                                      N/A
                                      
                                      
                                      
                                      N/A
                                      
                                      
                                      
                                      N/A2008
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -





Narrative
disclosure to summary compensation table





Required
columns for bonus, option awards, non-entity incentive plan compensation, change
in pension value and nonqualified deferred compensation earnings and all other
compensation are omitted from the table above as the amounts are all
zero.





Compensation
levels and amounts are determined by the Board of Directors based on amounts
paid to executives in similar sized companies with similar
responsibilities.  Mr. Silvey was granted 160,000 shares of our
restricted common stock valued at $145,600 in exchange for his services for the
period July 1, 2008 through June 30, 2010.  The value of the amount
earned in 2009 of $60,667 is included in the 2009 period above and the remaining
$84,933 is included in prepaid expenses in the consolidated balance sheet at
April 30, 2009.  In 2010, Mr. Silvey's compensation included $72,804
from amortization of the stock issued in 2009 and $9,600 from the value of
120,000 shares issued in 2010 for director fees.


54





EMPLOYMENT
AGREEMENTS





The
Company does not have any current employment agreements with its officers and
directors. The Company intends to pay its Executives and Directors salaries,
wages, or fees commensurate with experience and industry standards in
relationship to the success of the company.





b.
            Grants
      of plan-based awards table





There
were no grants of plan-based awards during the year for the named
individual.





c.
            Outstanding
      equity awards at fiscal year-end
table





There
were no outstanding equity awards at fiscal year-end for the named
individual.





d.
              Option
      exercises and stock vested
table





There
were no option exercises during the year and no stock vested at fiscal year-end
for the named individual.





e.
            Pension
      benefits





There are
no pension plans.





f.
            Nonqualified
      defined contribution and other nonqualified deferred compensation
      plans





There are
no nonqualified defined contribution or other nonqualified deferred compensation
plans.





g.
            Potential
      payments upon termination or
changes-in-control





There are
no potential payments upon termination or changes-in-control for the named
individual.





h.
            Compensation
      of directors





Dr.
Silvey received $9,600 from the value of 120,000 shares issued in 2010 for
director fees.  Mr. Young received $36,000 from the value of 450,000
shares issued in 2010 for director fees and consulting fees and Mr. Pruitt's
company received $12,000 from the value of 150,000 shares issued in 2010 for
director fees and management services.





i.
            Compensation
      committee interlocks and insider
participation





The Board
of Directors currently serves as the compensation committee.


55





j.
            Compensation
      committee report





Based on
the Compensation Discussion and Analysis required by Item 402(b) between the
compensation committee and management, the compensation committee recommended to
the Board of Directors that the Compensation Discussion and Analysis be included
in the 10-K.





ITEM
      12:
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS




(a)
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT





The table
below lists the beneficial ownership of the Company’s voting securities by each
person known to be the beneficial owner of more than 5% of such
securities.  As of April 30, 2010 and June 30, 2010, there were
17,375,539 shares of the Company’s common stock issued and
outstanding.  To the best of our knowledge, the persons named have
sole voting and investment power with respect to such shares, except as
otherwise noted.  There are not any pending or anticipated
arrangements that may cause a change in control.





The
information presented below regarding beneficial ownership of our voting
securities has been presented in accordance with the rules of the Securities and
Exchange Commission and is not necessarily indicative of ownership for any other
purpose.  Under these rules, a person is deemed to be a “beneficial
owner” of a security if that person has or shares the power to vote or direct
the voting of the security or the power to dispose or direct the disposition of
the security.  A person is deemed to own beneficially any security as
to which such person has the right to acquire sole or shared voting or
investment power within 60 days through the conversion or exercise of any
convertible security, warrant, option or other right.  More than one
person may be deemed to be a beneficial owner of the same
securities.  The percentage of beneficial ownership by any person as
of a particular date is calculated by dividing the number of shares beneficially
owned by such person, which includes the number of shares as to which such
person has the right to acquire voting or investment power within 60 days, by
the sum of the number of shares outstanding as of such date plus the number of
shares as to which such person has the right to acquire voting or investment
power within 60 days.  Consequently, the denominator used for
calculating such percentage may be different for each beneficial
owner.  We believe that the beneficial owners of our common stock
listed below have sole voting and investment power with respect to the shares
shown.





The
following information lists, as to each class, equity securities beneficially
owned by all officers and directors, and of the directors and officers of the
issuer, as a group as of April 30, 2010.


56





Name
      and
                                              
                                              Amount
      andaddress
                                              
                                              nature
      ofof
      beneficial
                                              
                                              beneficial
                                              
                                              
                                              PercentTitle
      of class
                                              
                                              owner
                                              
                                              owner
                                              
                                              
                                              of
      classCommon
                                              
                                              Ross
      Silvey
                                              
                                              
                                              280,000
                                              
                                              
                                              
                                              1.6
                                              %11005
      Anderson Mill RoadAustin,
      TX  78750Common
                                              
                                              Michael
      D. Pruitt (1)
                                              
                                              
                                              2,735,440
                                              
                                              
                                              
                                              15.7
                                              %11220
      Elm Lane, Ste 203Charlotte,
      NC  28277Common
                                              
                                              George
      S. Young
                                              
                                              
                                              450,000
                                              
                                              
                                              
                                              2.6
                                              %402
      LindenBorger,
      TX  79007Common
                                              
                                              All
      officers and directors
                                              
                                              
                                              3,465,440
                                              
                                              
                                              
                                              19.9
                                              %as
      a group (3 persons)





(1)  The
shares beneficially owned by Mr. Pruitt include 1,885,440 shares owned by Avenel
Financial Group, Inc. which is wholly owned by Mr. Pruitt; 700,000 shares owned
by Chanticleer Holdings, Inc. of which Mr. Pruitt is Chief Executive Officer, a
director and 17.33% owner; and 150,000 shares owned by Avenel Ventures, LLC,
which is wholly owned by Chanticleer Holdings, Inc.





Equity
Compensation Plan Information





Number of securitiesremaining available forfuture issuance underNumber of securities to be
                        
                        Weighted-average exercise
                        
                        equity compensationissued upon exercise of
                        
                        price of outstanding
                        
                        plans (excludingoutstanding options,
                        
                        options, warrants
                        
                        securities reflectedPlan category
                        
                        warrants and rights
                        
                        and rights
                        
                        in the first columnEquity
      compensation plans  approved by security holders
                        
                        
                        -
                        
                        
                        
                        
                        1,242,333Equity
      compensation plans  not approve by security
    holders
                        
                        
                        -
                        
                        
                        
                        
                        -Total
                        
                        
                        -
                        
                        
                        
                        
                        1,242,333





The North
American Energy Resources, Inc. 2008 Stock Option Plan (“Plan”) was filed on
September 11, 2008 and reserved 2,500,000 shares for Awards under the
Plan.  The Company’s Compensation Committee is designated to
administer the Plan at the direction of the Board of Directors.


57


ITEM
      13:
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE




The
Company had non-interest bearing obligations to its shareholders at April 30,
2009, of  $2,000.





The
Company sold its gas pursuant to a contract with a gathering system principally
owned by a related party.  The Company received a price equal to 70%
of the posted price.  The related party retained the other 30% of the
posted price for gathering fees and marketing fees.  At April 30, 2010
and 2009, the gathering system was shut-in due to low gas prices and had no
deliveries in 2010.





At April
30, 2009, the Company had advanced $19,993 to one shareholder
consultant.  During 2010, the Company accrued interest of $900,
received a payment of $15,478 and recorded bad debt expense for the balance of
$5,415.





In April
2009, the Company issued 160,000 shares of its common stock valued at $145,600
to its Chief Executive Officer for compensation for the period from August 1,
2008 through July 31, 2010.  See Note 3.  In February 2010,
the Company issued an additional 120,000 shares of its common stock valued at
$9,600 for director fees to its CEO, 450,000 shares of its common stock valued
at $36,000 to a Director for director fees and consulting services and 150,000
shares of its common stock valued at $12,000 to a company controlled by a
Director for director fees and consulting services.





The
Company has notes payable to shareholders in the amount of $406,528 and $389,000
at April 30, 2010 and 2009, respectively, as described in Note 6.





ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





Audit
Fees – The aggregate fees billed as of June 30, 2010 for professional services
rendered by the Company’s accountant was approximately $9,250 and $15,500 for
the audit of the Company’s annual financial statements and the quarterly reviews
for the fiscal years ended April 30, 2010 and 2009.  The costs for the
audit of 2010 had not been billed at June 30, 2010.





Audit-Related
Fees – None.





Tax Fees
– None.





All Other
Fees – Other than the services described above, no other fees were billed for
services rendered by the principal accountant.





Audit
Committee Policies and Procedures – Not applicable.





If
greater than 50 percent, disclose the percentage of hours expended on the
principal accountant’s engagement to audit the registrant’s financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant’s full-time, permanent employees –
Not applicable.


58


PART
IV





ITEM
      15:
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES





(a)
            The
      following documents are filed as part of this
  report:


1.
            Financial
      Statements – The following consolidated financial statements of North
      American Energy Resources, Inc. are contained in Item 8 of this Form
      10-K:


·
            Report
      of Independent Registered Public
Accountant


·
            Consolidated
      Balance Sheets at April 30, 2010 and
2009


·
            Consolidated
      Statements of Operations – For the years ended April 30, 2010 and 2009 and
      from inception (August 18, 2006) through April 30,
  2010


·
            Consolidated
      Statements of Stockholders’ Deficit - From inception (August 18, 2006)
      through April 30, 2010


·
            Consolidated
      Statements of Cash Flows – For the years ended April 30, 2010 and 2009 and
      from inception (August 18, 2006) through April 30,
  2010


·
            Notes
      to the Consolidated Financial
Statements





2.
            Financial
      Statement Schedules were omitted, as they are not required or are not
      applicable, or the required information is included in the Financial
      Statements.





3.
            Exhibits
      – The following exhibits are filed with this report or are incorporated
      herein by reference to a prior filing, in accordance with Rule 12b-32
      under the Securities Exchange Act of
1934.




Exhibit
                  
                  Description31.1
                  
                  Certification
      of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities
      Exchange Act of 193432.1
                  
                  Certification
      of the Chief Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
  1350


59


SIGNATURES




In
accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.





NORTH
      AMERICAN ENERGY RESOURCES, INC.July
      29, 2010
                /s/
      Ross SilveyRoss
      Silvey, President, CEO and
CFO





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





July
      29, 2010
                    /s/
      Ross SilveyRoss
      Silvey, Director, President, CEO and CFOJuly
      29, 2010
                    /s/
      Michael D. PruittMichael
      D. Pruitt, DirectorJuly
      29, 2010
                    /s/
      George S. YoungGeorge
      S. Young,
Director


60