UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended June 30, 2012; or

[  ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from                                        to                                        .

Commission File Number 0-18596

American Natural Energy Corporation
(Exact name of small business issuer as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [  ]

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 [  ]          No [X]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]          No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of August 14, 2012, 25,928,895 shares of the Registrant's Common Stock, $0.001 par value, were outstanding.

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AMERICAN NATURAL ENERGY CORPORATION

QUARTERLY REPORT ON FORM 10-Q

INDEX

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN NATURAL ENERGY CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)

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

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AMERICAN NATURAL ENERGY CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
For the thee-month and six-month periods ended June 30, 2012 and 2011

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

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AMERICAN NATURAL ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the six-month periods ended June 30, 2012 and 2011

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

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AMERICAN NATURAL ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)
For the six-month periods ended June 30, 2012 and 2011

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

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2012 and 2011

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2012 and 2011

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2012 and 2011

On September 10, 2009, the Company entered into a $500,000 unsecured short-term note with interest at the rate of 6% per annum with Citizens Bank of Oklahoma. The loan was modified with a new interest rate of 12% and a maturity date of July 31, 2012. All accrued interest is payable monthly. Proceeds of $475,500 from the note were paid to the Company and the remaining proceeds of $24,500 were used to pay off a prior note with Citizens Bank of Oklahoma. Net payments of $106,543 were made during the six months ended June 30, 2012. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded that the revised terms constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring.

In 2009 and 2010, the Company and TPC Energy entered into financing agreements whereas TPC Energy advanced funds required for the recompletion of behind pipe zones in several existing wells. The terms of the financing required the Company to repay the funds advanced out of specified cash flow from the subject wells. Principal and interest at 10% per annum and is payable monthly. Upon payout of the cost of recompleting the wells, the Company assigned a pro-rata 25% working interest in the wells to TPC Energy. Based on the relative fair value of the wells, a discount on the note was recorded with the discount being amortized over the life of the loan using the effective interest rate method. These discounts were fully amortized as of December 31, 2010. During the six months ended June 30, 2011, cash payments totaling $133,535 were also applied to the note which paid the note in full. In June 2010, the Company borrowed $100,000 from TPC Energy with an interest rate of 10% per annum. The principal and interest was repaid during the first quarter of 2011. On March 31, 2011, with an effective date of January 1, 2011, the Company purchased the working interests from TPC Energy for $300,000 through the issuance of a note payable in the same amount. Principal payments of $12,500 and interest at the rate of 10% per annum are due monthly. During the effective date through the closing date of March 31, 2011, revenues of $95,662 were recorded as a purchase price adjustment that lowered the note payable balance to $204,338 and during the year ended December 31, 2011, cash payments totaling $40,155 were also applied to the note which left a remaining balance due of $164,183. During the first quarter of 2012 TPC Energy advanced an additional $250,000 to the Company with repayment of the loan due one year from the date of advancement and with interest payable monthly. In addition to the additional $250,000, the Company assigned 50% of its interest in its share of the Liquidation Agents account distributions to TPC Energy for the life of the note. The rights were valued at $39,619 and were recorded as a discount on the note, which is being amortized over the life of the note using the effective interest method. The TPC note is included in Notes Payable – Related Parties on the balance sheet as of June 30, 2012.

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2012 and 2011

On February 17, 2011, the Company entered into a $500,000 note payable with Mike Paulk and Steven Ensz, directors of the Company, with an annual interest rate of 10%. The note, initially due February 15, 2012 has been renewed and extended until February 15, 2013. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded that the revised terms constituted a debt modification rather than a debt extinguishment or a troubled debt restructuring. As of August 14, 2012 this note has not been paid.

The Company entered into a financing agreement with TCA Global Credit Master Fund, LP during the first quarter of 2012. Proceeds of the financing are to be used for the drilling and completion of wells included in the Company’s inventory of Proved Undeveloped reserves (“PUD”). The Company has a commitment for a total amount of $3 million, before fees and expenses, through the issuance of a series of $1 million debentures, of which $1 million was issued in January 2012. The debenture is secured by a first priority, perfected security interest and mortgage in oil and gas leases and properties. At no time shall the investor funds exceed 65% of the drilling and completion cost of the PUD’s with the balance provided by the Company’s generated funds. The outstanding debenture is due on December 29, 2012 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Fees paid in cash and common stock to TCA Global Credit Master Fund, LP of $195,440 were recorded as a debt discount and as of June 30, 2012 $128,628 of the debt discount has been amortized. During the six months ended June 30, 2012, cash payments totaling $500,000 were applied to the note principal.

In connection with the financing agreement with TCA Global Credit Master Fund, LP, the Company paid cash fees and issued shares and warrants to other third parties valued at $273,833, which were recorded as deferred financing costs and as of June 30, 2012 $177,388 of the deferred financing costs have been amortized.

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2012 and 2011

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American Natural Energy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2012 and 2011

For the six months ended June 30, 2012, the Company recognized compensation costs of approximately $149,000 related to stock options issued September 8, 2009 and November 30, 2010. At June 30, 2012, there was no unrecognized compensation costs related to non-vested stock options granted on September 8, 2009 and November 30, 2010.

At June 30, 2012 there were 2,515,000 options outstanding and exercisable with a weighted average exercise price of $0.41. The weighted average remaining contractual term for these outstanding and exercisable options at June 30, 2012 was 3.24 years. The exercisable options had no intrinsic value at June 30, 2012.

As discussed in Note 6 above, the Company issued 596,000 warrants in February 2012 in connection with the financing agreement entered into with TCA Global Credit Master Fund, LP during the first quarter of 2012. The fair value of these warrants was estimated on the date of the grant using a Black-Scholes valuation model that uses the following weighted average assumptions:

The fair value of these warrants of $50,557 was recorded as a deferred financing cost and is being amortized over the life of the note using the effective interest method.

At June 30, 2012, there were 596,000 warrants outstanding and exercisable with a weighted average exercise price of $0.12. The weighted average remaining contractual term for these warrants at June 30, 2012 was 4.71 years. The warrants had no intrinsic value at June 30, 2012.

On August 13, 2012 the Company entered into a Securities Purchase Agreement with a private investment group for a financing consisting of a series of $1 million Unsecured Convertible Debentures, up to a total of $3 million. The financing is to be used for the drilling and completion of wells included in the company's inventory of Proved Undeveloped reserves (“PUD”).

Each debenture will be due and payable two years from issuance, with interest payable quarterly at an equivalent rate of 12% per annum in either cash or common shares, and be convertible into shares of the Company's common stock at a conversion rate of $0.10 per share. Warrants, expiring in two years and exercisable into common shares, will also be issued with the funding of each debenture equivalent to one warrant for each converted share and will be exercisable into common shares at $0.23 per share. The warrants are non-transferable.

Holdings by the investment group, including conversion of shares and exercise of warrants is limited to 19.9% of the outstanding shares of the Company without the approval of a majority of the outstanding existing shareholders.

As of August 14, 2012 the Company has issued a $2 million convertible note and 20 million warrants related to the Securities Purchase Agreement as discussed above.

The investment group has the right to appoint 3/5 of the members of the Board of Directors as a condition to the investment.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

We currently are experiencing a severe shortage of working capital and funds to pay our liabilities. We have no current borrowing capacity with any lender. We incurred a net loss of $1,359,000 for the six months ended June 30, 2012 and a net loss of $906,000 and $2,062,000 for the years ended December 31, 2011 and 2010. We have a working capital deficiency and an accumulated deficit at June 30, 2012 which leads to substantial doubt concerning our ability to meet our obligations as they come due. We also have a need for substantial funds to develop our oil and gas properties and repay borrowings as well as to meet our other current liabilities.

The accompanying consolidated financial statements in this Report have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. The independent registered public accounting firm’s report on our consolidated financial statements as of and for the year ended December 31, 2011 includes an explanatory paragraph which states that we have sustained a substantial loss in 2011 and have a working capital deficiency and an accumulated deficit at December 31, 2011 that raise substantial doubt about our ability to continue as a going concern. These matters raise substantial doubt about our ability to continue as a going concern. As a result of our losses incurred and current negative working capital, there is no assurance that the carrying amounts of assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. Our ability to continue as a going concern is dependent upon adequate sources of capital and our ability to sustain positive results of operations and cash flows sufficient to continue to explore for and develop our oil and gas reserves and pay our obligations.

A Comparison of Operating Results For The Three Months Ended June 30, 2012 and June 30, 2011

We recorded a net loss of $158,000 during the three months ended June 30, 2012 compared to a net loss of $22,000 for the three months ended June 30, 2011. During the three months ended June 30, 2012, our revenues were comprised of oil and gas sales totaling $555,000 compared with oil and gas sales of $642,000 during the same period of 2011. Oil and gas prices were lower and there was a slight decrease in production for the second quarter of 2012 as compared to the same period of 2011. Our net average daily production for the three month period ended June 30, 2012 decreased by 6% over the same period of the prior year, from 62 net barrels of oil equivalent per day to 58 net barrels of oil equivalent per day. Oil and gas prices decreased by 9% for the three month period ended June 30, 2012 over the same period of the prior year. The weighted average price decreased from $115.76 per barrel of oil equivalent to $105.02 per barrel of oil equivalent. Production from our existing wells is subject to fluctuation based upon which zones of wells are in production.

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We had expenses of $725,000 for the three months ended June 30, 2012 compared to expenses of $676,000 for the three months ended June 30, 2011. Our general and administrative expenses were $455,000 for the three months ended June 30, 2012 compared to $351,000 for the three months ended June 30, 2011. The increase is primarily the result of increased payroll and legal expenses.

Interest and financing costs increased for the three months ended June 30, 2012 compared to the same period in 2011 at $259,000 and $56,000 respectively. Interest and financing costs were higher in the second quarter of 2012 due to higher debt and the amortization of note discounts and deferred financing costs.

Lease operating expenses of $189,000, production taxes of $29,000 and depletion, depreciation and amortization of $135,000 during the three months ended June 30, 2012 changed from $163,000, $24,000, and $139,000, respectively, during the three months ended June 30, 2011. The expenses were consistent for the second quarter of 2012 compared to the same period of 2011 due to the fact that production was consistent with only a 6% decrease from the second quarter of 2011 to the second quarter of 2012.

During the three months ended June 30, 2012, we had a foreign exchange gain of $341,000, compared to a $56,000 foreign exchange gain for the three months ended June 30, 2011. Our foreign exchange gains and losses arise out of an inter-company indebtedness we owe to our wholly-owned subsidiary, Gothic, which is payable in Canadian dollars. The foreign exchange gain for the three months ended June 30, 2012 was caused by the strengthening of the US dollar against the Canadian dollar.

A Comparison of Operating Results For The Six Months Ended June 30, 2012 and June 30, 2011

We recorded a net loss of $1,359,000 during the six months ended June 30, 2012 compared to a net loss of $643,000 for the six months ended June 30, 2011. During the six months ended June 30, 2012, our revenues were comprised of oil and gas sales totaling $1,005,000 compared with oil and gas sales of $1,292,000 during the same period of 2011. Oil and gas prices were consistent but production decreased for the first six months of 2012 as compared to the same period of 2011. Our net average daily production for the six month period ended June 30, 2012 decreased by 22% over the same period of the prior year, from 67 net barrels of oil equivalent per day to 52 net barrels of oil equivalent per day. Oil and gas prices were consistent for the six month period ended June 30, 2012 over the same period of the prior year. The weighted average price was $105.72 and $105.81 per barrel of oil equivalent for the six months ended 2012 and 2011 respectively. Production from our existing wells is subject to fluctuation based upon which zones of wells are in production.

We had expenses of $2,390,000 for the six months ended June 30, 2012 compared to expenses of $1,960,000 for the six months ended June 30, 2011. Our general and administrative expenses were $1,158,000 for the six months ended June 30, 2012 compared to $827,000 for the six months ended June 30, 2011. The increase is primarily the result of increased compensation expense related to the issuance of stock and increased payroll and legal expenses.

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Interest and financing costs increased for the six months ended June 30, 2012 compared to the same period in 2011 at $479,000 and $115,000 respectively. Interest and financing costs were higher in the first two quarters of 2012 due to higher debt and the amortization of note discounts and deferred financing costs.

Lease operating expenses of $511,000, production taxes of $57,000 and depletion, depreciation and amortization of $247,000 during the six months ended June 30, 2012 changed from $371,000, $36,000, and $310,000, respectively, during the six months ended June 30, 2011. Lease operating expenses were higher for the six months ended June 30, 2012 due to repairs and maintenance on the field. Production taxes were higher for the six months ended June 30, 2012 compared to the same period in 2011 as a result of changes in tax classifications on some producing wells. The decrease in depletion, depreciation and amortization charges were due to decreased production for the six months ended June 30, 2012.

During the six months ended June 30, 2012, we had a foreign exchange gain of $62,000, compared to a $301,000 foreign exchange loss for the six months ended June 30, 2011. Our foreign exchange gains and losses arise out of an inter-company indebtedness we owe to our wholly-owned subsidiary, Gothic, which is payable in Canadian dollars. The foreign exchange gain for the six months ended June 30, 2012 was caused by the strengthening of the US dollar against the Canadian dollar.

Liquidity and Capital Resources

General

To date, our production has not been sufficient to fund our operations and drilling program. At June 30, 2012, we do not have any available borrowing capacity and have negative working capital of approximately $7.4 million.

We have substantial need for capital to develop our oil and gas prospects. Since 2001, we have funded our capital expenditures and operating activities through a series of debt and equity capital-raising transactions, drilling participations and through an increase in vendor payables and notes payable. We expect any future capital expenditures for drilling and development to be funded from the sale of drilling participations and equity capital. It is management's plan to raise additional capital through the sale of interests in our drilling activities or other strategic transaction; however, we currently have no firm commitment from any potential investors and such additional capital may not be available to us in the future.

A Comparison of Cash Flow For The Six Months Ended June 30, 2012 and June 30, 2011

Our net cash used in operating activities was $463,000 for the six months ended June 30, 2012 as compared to net cash provided by operating activities of $43,000 for the six months ended June 30, 2011, a decrease of $506,000. The decrease in net cash provided by operating activities for the six months ended June 30, 2012 was primarily due to a higher net loss and partially offset by an increase in non cash items. Changes in working capital items had the effect of decreasing cash flows from operating activities by $4,000 during the six months ended June 30, 2012 mainly due to an increase in accounts payable and accrued liabilities of $36,000 and a decrease and prepaid expenses and other current assets of $52,000 and offset by an increase in accounts receivable of $92,000. Changes in working capital items had the effect of decreasing cash flows from operating activities by $112,000 during the six months ended June 30, 2011 primarily due to an increase in accounts receivable of $59,000 and a decrease to accounts payable and other accrued liabilities of $48,000.

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We used $31,000 of net cash in investing activities during the six months ended June 30, 2012 compared to net cash used of $90,000 in 2011. The cash used in investing in 2012 and 2011 was for the purchase and development of oil and gas properties.

Our net cash provided by financing activities was $892,000 for the six months ended June 30, 2012 compared to $53,000 for the same period in 2011. For the six months ended June 30, 2012, net cash outflows from financing activities were a result of the issuance of notes, net of fees, of $1,191,000, of which $250,000 was to related parties, offset by payments against outstanding notes of $655,000, and payments of deferred financing costs of $65,000. Proceeds of $420,000 were received during the second quarter of 2012 for the issuance of 7,000,000 shares of common stock at $0.06 per share in a private placement. For the six months ended June 30, 2011, net cash inflows from financing activities were a result of the issuance of notes of $551,000 of which $500,000 was to related parties offset by payments against outstanding notes of $498,000 of which $160,000 was to related parties.

We have no other commitments to expend additional funds for drilling activities for the rest of 2012.

How We Have Financed Our Activities

On July 29, 2009 we closed the final tranche of a Private Placement of 6.67 million shares of our common stock at $0.30 per share for total proceeds of $2.0 million. In conjunction with this placement, finders’ fees were paid to two firms in Vancouver, BC in the amount of $96,839 and finders’ warrants were issued for the purchase of 538,000 shares of common stock exercisable through July 29, 2010 at $0.50 per share. The net proceeds of the private placement were used to close the Dune Transaction and for working capital purposes.

On August 4, 2009 we re-purchased and retired $7.8 million, plus accrued and unpaid interest, of its 8% Secured Debentures held by Dune (including release of collateral rights), acquired Dune’s interest in producing wells and certain leasehold rights in the Bayou Couba field, resumed operations of the Bayou Couba field and settled outstanding issues between the companies. In exchange, we agreed to assign a portion of certain deep rights held by us and pay Dune a total of $1.3 million dollars with $1 million due at closing and an additional $300,000 due in quarterly payments commencing 90 days after resuming operations of the field. As of March 31, 2010 additional deep rights were assigned to Dune valued at $93,000 and were recorded as a reduction to the note payable. As of June 30, 2012 the balance of the note payable to Dune was approximately $157,000.

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We re-purchased our remaining outstanding 8% Secured Debenture debt totaling $2.0 million and an additional $821,000 of accrued interest from various holders with the payment of $256,000 and the issuance of 1.17 million shares of our common stock at a deemed price of $0.30 per share. The issuance of the shares occurred during the third quarter of 2009.

On July 31, 2012 we received final approval from the TSX Venture Exchange for the issuance of 7 million shares of our common stock in a private placement. The shares were issued at $0.06 per share for a total raise of $420,000.

On August 13, 2012 we entered into a Securities Purchase Agreement with a private investment group for a financing consisting of a series of $1 million Unsecured Convertible Debentures, up to a total of $3 million. The financing is to be used for the drilling and completion of wells included in our inventory of Proved Undeveloped reserves ("PUD").

Each debenture will be due and payable two years from issuance, with interest payable quarterly at an equivalent rate of 12% per annum in either cash or common shares, and be convertible into shares of ANEC common stock at a conversion rate of $0.10 per share. Warrants, expiring in two years and exercisable into common shares, will also be issued with the funding of each debenture equivalent to one warrant share for each converted share and will be exercisable into common shares at $0.23 per share. The warrants are non-transferable.

Holdings by the investment group, including conversion of shares and exercise of warrants is limited to 19.9% of our outstanding shares without the approval of a majority of the outstanding existing shareholders.

The investment group has the right to appoint 3/5 of the members of the Board of Directors as a condition to the investment.

As of August 14, 2012, we have issued a $2 million convertible note and 20 million warrants related to the Securities Purchase Agreement as discussed above.

Future Capital Requirements and Resources

At June 30, 2012, we do not have any available borrowing capacity under existing credit facilities and our current assets are $700,000 compared with current liabilities of $8.1 million. Our current liabilities include accounts payable, revenues payable, notes payable (a portion of which is past due), and other current obligations. We have substantial needs for funds to pay our outstanding payables and debt due during 2012. In addition, we have substantial need for capital to develop our oil and gas prospects. At June 30, 2012, we have no commitments for additional capital to fund drilling activities in 2012.

Since 2001, we have funded our capital expenditures and operating activities through a series of debt and equity capital-raising transactions, drilling participations and, during the last two quarters of 2004 and all of 2005 and 2006, through an increase in vendor payables and notes payable. It is our intention to raise additional capital through the sale of interests in our drilling activities or other strategic transaction; however, we currently have no firm commitment from any potential investors and such additional capital may not be available to us in the future. We expect that any capital expenditures for drilling purposes during 2012 will be funded from the sale of drilling participations and equity capital.

Our business strategy requires us to obtain additional financing and our failure to do so can be expected to adversely affect our ability to grow our revenues, oil and gas reserves and achieve and maintain a significant level of revenues and profitability. There can be no assurance we will obtain this additional funding. Such funding may be obtained through the sale of drilling participations, joint ventures, equity securities or by incurring additional indebtedness. Without such funding, our revenues will continue to be limited and it can be expected that our operations will not be profitable. In addition, any additional equity funding that we obtain may result in material dilution to the current holders of our common stock.

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Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

With the exception of historical matters, the matters we discussed below and elsewhere in this Report are “forward-looking statements” as defined under the Securities Exchange Act of 1934, as amended that involve risks and uncertainties. The forward-looking statements appear in various places including under the headings Item 1. Financial Statements and Item 2. Management’s Discussion and Analysis or Plan of Operation. These risks and uncertainties relate to

• our ability to raise capital and fund our oil and gas well drilling and development plans,

• our ability to fund the repayment of our current liabilities, and

• our ability to negotiate and enter into any agreement relating to a merger or sale of all or substantially all our assets.

These risks and uncertainties also relate to our ability to attain and maintain profitability and cash flow and continue as a going concern, our ability to increase our reserves of oil and gas through successful drilling activities and acquisitions, our ability to enhance and maintain production from existing wells and successfully develop additional producing wells, our access to debt and equity capital and the availability of joint venture development arrangements, our ability to remain in compliance with the terms of any agreements pursuant to which we borrow money and to repay the principal and interest when due, our estimates as to our needs for additional capital and the times at which additional capital will be required, our expectations as to our sources for this capital and funds, our ability to successfully implement our business strategy, our ability to maintain compliance with covenants of our loan documents and other agreements pursuant to which we issue securities or borrow funds and to obtain waivers and amendments when and as required, our ability to borrow funds or maintain levels of borrowing availability under our borrowing arrangements, our ability to meet our intended capital expenditures, our statements and estimates about quantities of production of oil and gas as it implies continuing production rates at those levels, proved reserves or borrowing availability based on proved reserves and our future net cash flows and their present value.

Readers are cautioned that the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2011 and other reports filed with the Commission, as well as those described elsewhere in this Report, in some cases have affected, and in the future could affect, our business plans and actual results of operations and could cause our actual consolidated results during 2012 and beyond, to differ materially from those expressed in any forward-looking statements made by or on our behalf.

Our common shares have no trading market in the United States, and there can be no assurance as to the liquidity of any markets that may develop for our common shares, the ability of the holders of common shares to sell their common shares in the United States or the price at which holders would be able to sell their common shares. Any future trading prices of the common shares will depend on many factors, including, among others, our operating results and the market for similar securities.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report on Form 10-Q, our Chief Executive Officer and our Chief Financial Officer performed an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of the end of the period covered by this report on Form 10-Q that our disclosure controls and procedures are not effective to provide reasonable assurance that: (i) information required to be disclosed by us in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure by us; and (ii) information required to be disclosed by us in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In our evaluation of disclosure controls and procedures as of December 31, 2011, we concluded there were material weaknesses in our internal controls over financial reporting which we viewed as an integral part of our disclosure controls and procedures. The material weaknesses as noted below have not been remediated as of August 14, 2012.

Changes in Internal Control Over Financial Reporting

As of December 31, 2011 we identified material weaknesses in our internal controls over financial reporting. The material weaknesses relate to:

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In order to mitigate these material weaknesses to the fullest extent possible, all financial reports are reviewed by the CEO and CFO. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient staff and implement appropriate procedures to address the segregation of duties and improve the closing process.

There were no significant changes in our internal control over financial reporting identified in connection with the evaluation that occurred during the last fiscal quarter that have materially affected or that are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 6. Exhibits

____________________________
⁽¹⁾ Filed or furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

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