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NAMG > SEC Filings for NAMG > Form 10-K on 29-Mar-2013All Recent SEC Filings

Show all filings for NORTH AMERICAN OIL & GAS CORP. | Request a Trial to NEW EDGAR Online Pro



Annual Report

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


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

The Company is a development stage enterprise, has never earned a profit, and has incurred an accumulated deficit of $402,206 as of December 31, 2012. Post merger with Lani, the Company raised $500,080 in the sale of common stock, which gives the company a $312,074 net equity position. The Company has used these funds to purchase or obtain leaseholds on three oil and gas lease prospects, and through is wholly owned subsidiary, Lani, began its operations as an oil and gas exploration and production company in June 2011. As of December 31, 2012, the Company has completed the drilling and testing of seven zones in our Tejon Extension lease. Drilling was suspended February 2013 to secure and analyze purchased seismic data covering thirty-seven square miles covering two of our prospect areas. This seismic data will allow for a thorough analysis of the structure of the leased area and provide detailed targeting of future oil and gas exploration. In addition, the seismic data will be used to further analyze the 77-20 well and once our analysis is complete, we will determine if further testing is warranted.

Through the Farm-In with Avere Energy Corp., along with the purchase of 5,000,000 shares of common stock at $.10 per share by East/West Petroleum, NAMOG has sufficient funds to continue operations through September 30, 2013. The purchase of the seismic data, and further analysis of the 77-20 well, will allow NAMOG to actively seek additional capital, through sale of common stock, or through working interest investors.

In addition, the Farm-In has provided NAMOG with an additional $300,000 in an advance, on an as-needed basis to meet general and administrative expenses. The Company's success is dependent on securing additional capital through capital raisings and/or farm-in agreements with potential working interest partners.

Plans for our fiscal year 2013 include the following:

complete testing on the 77-20 well, and if tests prove commercially viable oil production, complete the well and put on production within six months;

purchase seismic surveying and analysis at a net cost of $125,000 and 350,000 shares of stock options;

drill, and if exploration results are favorable, complete and put on production our second well within six to twelve months; and

acquire leasehold interests in over 2,000 net acres in California for exploration over the next twelve months.

Results of Operations

Year Ended December 31, 2012 Compared With Year Ended December 31, 2011

Revenues from Operations - Revenues for the year ended December 31, 2012 and December 31, 2011 were $0 and $0 respectively.

Expenses from Continuing Operations - The Company incurred operating expenses of $468,698 for the fiscal year ended December 31, 2012; an increase of $412,347 compared to $56,351 for the period from Inception to December 31, 2011. The operating expense increase was primarily due to increased operations of Lani in its development stage of oil and gas exploration and was a result of the reverse merger, wherein Lani became NAMOG's wholly owned subsidiary and the accounting acquirer.

The largest expenditures operationally were increased general and administrative costs over the previous year of $223,674, and increased costs of geological, geophysical, and delay rental costs on increased acreage rentals of $86,899. Operating costs for the fiscal year ending December 31, 2012 were specifically:
operational general and administrative costs $224,260, (including $85,989 in employee compensation, and $137,721 for corporate overhead), and geological, geophysical, and delay rents $142,664.

Other Income/Loss - For the fiscal year ended December 31, 2012, the Company had a gain on Assignment of Working Interest of $123,476, earned interest income of $167, and other expenses of $800 resulting in Total other Income of $122,843. Lani entered into an agreement August 6, 2012 with Solimar Energy LLC (Solimar). This agreement superseded all previous agreements, discussions and understandings concerning the Tejon Main Prospect and the Tejon Extension Prospect. Per previous agreements Solimar paid Lani a $200,000 prospect fee. This prospect fee reduced capitalized oil and gas costs (cost recovery) for the Tejon Main prospect through August 6, 2012 of $76,524, realizing a gain on sale of assets in the amount of $123,476.

Net Loss - For the fiscal year ended December 31, 2012, the Company incurred a net loss of $345,855 compared to a net loss of $56,351 for the fiscal year ended December 31, 2011, a loss increase over the previous year of $289,504. The major reasons for the Company having a higher net loss during the fiscal year ended December 31, 2012 can be attributed to the higher expenses from operations ($468,698) partially offset by the gain on sale of assets of $123,476.

Liquidity - At December 31, 2012, the Company had a cash balance of $1,515,995. As of December 31, 2011, the Company had a cash balance of $34,911. Property and equipment net was $4,686 as of December 31, 2012 compared to $0 as of December 31, 2011. The increase in property and equipment is the direct result of the Company investing in furniture and fixtures, computers and peripherals.

Historically the Company has lacked liquidity, a result of insufficient financing alternatives available to the Company and the lack of a business strategy that produced significant revenues.

Based on current expectations, the Company will need to find additional sources of financing to meet our general corporate needs beyond 2013 as well as any large capital requirements necessary for additional oil and gas exploration.

Cash Requirements

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

the Company has only secured sufficient funds to maintain its current operations through September 30, 2013;

the commitment to drill a well on the Tejon Main prospect during the fourth quarter 2013 as committed to in the Farm-In with Avere Energy necessitates restricted operations of the company;

there is an uncertainty as to whether the Company can maintain operations through the fourth quarter of 2013 without securing additional capital through cash raisings, or investor project participation; and

there is no certainty that the Company can achieve profitable levels in the oil and gas exploration field, or that it will be able to raise additional capital through any means.

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