Native American Energy Group, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.2 - CERTIFICATION - Native American Energy Group, Inc.	nagp_ex312.htm
EXCEL - IDEA: XBRL DOCUMENT - Native American Energy Group, Inc.	Financial_Report.xls
EX-31.1 - CERTIFICATION - Native American Energy Group, Inc.	nagp_ex311.htm
EX-32.1 - CERTIFICATION - Native American Energy Group, Inc.	nagp_ex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

¨ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended: March 31, 2013

¨ 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: 000-54088

Native American Energy Group, Inc.

(Exact Name of registrant as specified in its charter)

Delaware		65-0777304
(State or other Jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

61-43 186th Street Suite 507

Fresh Meadows, NY 11365

(Address of principal executive offices)

(718) 408-2323

(Registrant’s telephone number, including area code)

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

¨	Large Accelerated Filer	¨	Accelerated Filer

¨	Non-Accelerated Filer	x	Smaller Reporting Company

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

As of May 20, 2013, there were 40,522,018 shares issued and outstanding of the registrant’s common stock.

NATIVE AMERICAN ENERGY GROUP, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2013

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements.		4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		24

Item 3.	Quantitative and Qualitative disclosures about Market Risk.		30

Item 4.	Controls and Procedures.		31

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings.		33

Item1A.	Risk Factors.		33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		33

Item 3.	Defaults Upon Senior Securities.		34

Item 4.	Mine Safety Disclosures.		34

Item 5.	Other Information.		34

Item 6.	Exhibits.		34

SIGNATURES			35

FORWARD-LOOKING STATEMENTS

Written forward–looking statements may appear in documents filed with the Securities and Exchange Commission (“SEC”), including this quarterly report on Form 10-Q, documents incorporated by reference, reports to stockholders and other communications.

Forward–looking statements appear in a number of places in this quarterly report on Form 10-Q and include but are not limited to management’s comments regarding business strategy, workover activities at our oil and gas properties, meeting our capital raising targets and following any use of proceeds plans, our ability to and methods by which we may raise additional capital, production and future operating results.

In this quarterly report on Form 10-Q, the use of words such as “anticipate,” “continue,” “estimate,” “expect,” “likely,” “may,” “project,” “should,” “believe” and similar expressions are intended to identify uncertainties. While we believe that the expectations reflected in those forward–looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. Our actual results could differ materially from those anticipated in these forward–looking statements. The differences between actual results and those predicted by the forward-looking statements could be material. Forward-looking statements are based upon our expectations relating to, among other things:

oil and natural gas prices and demand;

our future financial position, including cash flow, debt levels and anticipated liquidity;

the timing, effects and success of our acquisitions, dispositions and workover activities;

uncertainties in the estimation of proved reserves and in the projection of future rates of production;

timing, amount, and marketability of production;

our ability to find, acquire, market, develop and produce new properties;

effectiveness of management strategies and decisions;

the strength and financial resources of our competitors;

climatic conditions;

the receipt of governmental permits and other approvals relating to our operations;

unanticipated recovery or production problems; and

uncontrollable flows of oil, gas, or well fluids.

Many of these factors are beyond our ability to control or predict. These factors do not represent a complete list of the factors that may affect us. We do not undertake to update our forward–looking statements.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

NATIVE AMERICAN ENERGY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2013			2012
	(unaudited)
ASSETS
Current assets:
Cash	$	-		$	4,957
Prepaid expenses		88,144			80,822
Total current assets		88,144			85,779

Other property plant and equipment, net		425,252			463,702

Other assets:
Collateral on surety bonds		175,467			175,381
Security deposits		5,150			2,500
Total other assets		180,617			177,881

Total assets	$	694,013		$	727,362

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Cash overdraft	$	987		$	-
Accounts payable and accrued expenses		2,656,857			2,430,368
Capital leases and notes payable, short term		139,239			139,239
Convertible debentures, net of debt discounts		50,000			27,901
Notes payable, bridge, net of debt discounts		750,000			750,000
Loans payable, net of debt discounts		1,286,395			1,261,468
Total current liabilities		4,883,478			4,608,976

Long term debt:
Derivative liabilities		396,727			632,777
Total long term debt		396,727			632,777

Total liabilities		5,280,205			5,241,753

Commitments and contingencies		-			-

Stockholders' deficit:
Preferred stock, par value $0.0001; 21,000,000 shares authorized:
Series A Convertible Preferred stock, par value $0.0001; 1,000,000 shares designated, 500,000 shares issued and outstanding as of March 31, 2013 and December 31, 2012		50			50
Series B Callable Preferred stock, par value $0.0001; 5,750,000 shares designated, -0- shares issued and outstanding		-			-
Common stock, par value $0.001; 1,000,000,000 shares authorized, 39,397,018 and 38,716,299 shares issued and outstanding as of March 31, 2013 and December 31, 2012, respectively		39,397			38,716
Additional paid in capital		26,980,666			26,793,922
Common stock subscription		-			-
Deficit accumulated during development stage		(31,606,305	)		(31,347,079	)
Total stockholders' deficit		(4,586,192	)		(4,514,391	)

Total liabilities and stockholders' deficit	$	694,013		$	727,362

See the accompanying notes to the unaudited condensed consolidated financial statements

NATIVE AMERICAN ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(a development stage company)
(unaudited)

	Three months ended March 31,						From January 18, 2005 (date of inception) through March 31,
	2013			2012			2013
REVENUE	$	-		$	11,572		$	200,508

Operating expenses:
Selling, general and administrative		327,405			433,824			19,651,074
Impairment of undeveloped properties		-			-			5,410,802
Impairment of acquired licenses		-			-			2,500,000
Loss on repossession of fixed assets		-			-			56,622
Litigation settlement		-			1,757,182			2,173,620
Depreciation and amortization		38,450			39,790			575,936
Total operating expenses		365,855			2,230,796			30,368,054

Loss from operations		(365,855	)		(2,219,224	)		(30,167,546	)

Other income (expense):
Interest income		87			87			26,890
Gain on change in fair value of derivatives		261,519			-			111,554
Gain on settlement of debt		-			-			715,222
Loss on debt modification		(30,111	)		-			(457,091	)
Other income		-			-			126,174
Interest expense		(124,866	)		(229,747	)		(1,961,508	)

Loss before provision for income taxes		(259,226	)		(2,448,884	)		(31,606,305	)

Provision for income taxes (benefit)		-			-			-

NET LOSS	$	(259,226	)	$	(2,448,884	)	$	(31,606,305	)

Net loss per common share, basic and diluted	$	(0.01	)	$	(0.07	)

Weighted average number of outstanding shares, basic and diluted		39,026,103			35,256,867

See the accompanying notes to the unaudited condensed consolidated financial statements

NATIVE AMERICAN ENERGY GROUP, INC
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
(a development stage company)
FROM JANUARY 1, 2013 THROUGH MARCH 31, 2013
(unaudited)

	Preferred stock				Common stock				Additional			Deficit Accumulated during Development
	Shares		Amount		Shares		Amount		Paid in Capital			Stage			Total
Balance December 31, 2012		500,000	$	50		38,716,299	$	38,716	$	26,793,922		$	(31,347,079	)	$	(4,514,391	)
Sale of common stock		-		-		125,000		125		12,375			-			12,500
Common stock issued in exchange for services		-		-		200,000		200		31,780			-			31,980
Common stock issued in settlement of interest and anti-dilutive provisions		-		-		280,719		281		20,789			-			21,070
Common stock issued in settlement of forbearance agreement subject to reset provisions		-		-		75,000		75		(75	)		-			-
Fair value of vesting options		-		-		-		-		121,875			-			121,875
Net loss		-		-		-		-		-			(259,226	)		(259,226	)
		500,000	$	50		39,397,018	$	39,397	$	26,980,666		$	(31,606,305	)	$	(4,586,192	)

See the accompanying notes to the unaudited condensed consolidated financial statements

NATIVE AMERICAN ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended March 31,						From January 18, 2005 (date of inception) through March 31,
	2013			2012			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(259,226	)	$	(2,448,884	)	$	(31,606,305	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		38,450			39,790			711,522
Impairment losses		-			-			7,829,119
Amortization of debt discount		22,099			-			50,000
Losses on repossession of fixed assets		-			-			56,622
Equity based compensation		24,658			70,923			12,693,359
Gain on settlement of debt		-			-			(725,222	)
Loss on debt modification		30,111			-			457,091
Common stock issued in connection with debt		-			375,779			374,769
Common stock issued in settlement of litigation		-			-			375,779
Non-cash interest expense		46,539			-			134,053
Loss on change in fair value of derivatives		(261,519	)		-			(111,554	)
Fair value of vesting employee options		121,875			-			284,375
Fair value of warrants to be issued in settlement of litigation		-			1,381,403			1,381,403
Fair value of warrants issued in connection with debt		-			177,420			261,095
Preferred stock issued for services		-			-			400,000
(Increase) decrease in:
Accounts receivable		-			15,213			-
Licensing		-			-			(30,407	)
Guarantee fees		-			-			(4,357	)
Surety bond		(86	)		(87	)		(171,110	)
Deposits		(2,650	)		(1,000	)		(4,743	)
Increase (decrease) in:
Accounts payable and accrued expenses		196,378			249,536			3,702,558
Net cash (used in) operating activities		(43,371	)		(139,907	)		(3,941,953	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in oil and gas properties		-			-			(1,986,949	)
Purchase of property and equipment		-			-			(2,784,883	)
Net cash (used in) investing activities		-			-			(4,771,832	)

NATIVE AMERICAN ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended March 31,						From January 18, 2005 (date of inception) through March 31,
	2013			2012			2013
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft		987			-			987
Proceeds from sale of common stock and subscriptions		12,500			148,000			1,830,475
Proceeds from sale of royalty interest		-			-			2,923,570
Proceeds from loans payable		25,927			14,000			2,778,518
Proceeds from notes payable		-			-			951,964
Proceeds from convertible debentures		-			-			50,000
Contributions by major shareholders		-			-			1,315,963
Payments of capital leases		-			-			(497,102	)
Payments on loans payable		(1,000	)		(17,672	)		(553,337	)
Payments of notes payable		-			(441	)		(87,253	)
Net cash provided by financing activities		38,414			143,887			8,713,785

Net (decrease) increase in cash and cash equivalents		(4,957	)		3,980			-
Cash and cash equivalents, beginning of the period		4,957			17,735			-

Cash and cash equivalents, end of period	$	-		$	21,715		$	-

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for interest	$	-		$	-		$	-
Cash paid during period for taxes	$	-		$	-		$	800

NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for services rendered	$	31,980		$	70,923		$	12,721,405
Common stock issued for licensing	$	-		$	-		$	2,000,002
Common stock issued for conversion of debt	$	-		$	-		$	1,700,148
Preferred stock issued for services rendered	$	-		$	-		$	400,000
Fair value of warrants issued in connection with settlement agreement	$	-		$	-		$	223,849
Fair value of warrants issuable for interest expense	$	25,468		$	-		$	54,802
Fair value of common stock issuable for interest and anti-dilutive expenses	$	21,070		$	-		$	38,393

See the accompanying notes to the unaudited condensed consolidated financial statements

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:

Business and Basis of Presentation

The registrant, Native American Energy Group, Inc. (the “Company”), formerly Flight Management International, Inc. was incorporated under the laws of the State of Delaware on November 1, 1996. The Company leases and revitalizes oil fields which were previously developed using enhanced oil recovery capabilities. The oil and natural gas fields are owned by individual land owners and located on native and non-native American lands in the State of Montana and Alaska.

The consolidated financial statements include the accounts of the Company, including its wholly owned subsidiary, NAEG Alaska Corporation (“NAEG Alaska”), a Delaware corporation incorporated in 2005 that was formerly known as Fowler Oil & Gas Corporation, and its wholly owned subsidiary, NAEG CBM Operations LLC (“NAEG Operations”), an Alaskan limited liability company formed in August 2006 that was formerly known as Fowler Oil & Gas Alaska, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

To implement its current business plan, significant additional financing will be required and the Company will need to be successful in its efforts to identify, acquire and develop oil and gas reserves that are economically recoverable.

The Company is in the development stage as defined by Accounting Standards Codification subtopic 915-10 Development Stage Entities (“ASC 915-10”) with its efforts principally devoted to developing oil and gas reserves. To date, the Company, has not generated sales revenues, has incurred expenses, and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from inception through March 31, 2013, the Company has accumulated losses of $31,606,305.

Interim Financial Statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K filed with the SEC on May 20, 2013.

Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Property and Equipment

Property and equipment is recorded at cost. Depreciation of assets is provided by use of a straight line method over the estimated useful lives of the related assets. Expenditures for replacements, renewals, and betterments are capitalized. Maintenance and repairs are charged to operations as incurred.

Derivative financial instruments

Accounting Standards Codification subtopic 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company on October 1, 2009. The Company’s convertible debt can be convertible into the Company’s common shares, at the holder’s option, at the conversion rates of 50% discount to the lowest bid price of the Company’s common shares during the ten-day period ending one trading day prior to the date of the conversion. In addition, the Company entered into a settlement agreement with certain note holders requiring the issuance of warrants and common stock with anti-dilutive provisions.

Undeveloped Oil and Gas Properties

Acquisition, exploration, and development of oil and gas activities are capitalized when costs are recoverable and directly result in an identifiable future benefit, following the full cost method of accounting. Improvements that increase capacity or extend the useful lives of assets are capitalized. Maintenance and turnaround costs are expensed as incurred.

Undeveloped oil and gas properties are assessed, at minimum annually or as economic events dictate, for potential impairment. If required, the impairment recorded is the amount by which the carrying value of the asset exceeds its fair value.

Capitalized costs are depleted and depreciated on the unit-of-production method based on the estimated gross proved reserves once determined by the independent petroleum engineers. Depletion and depreciation is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future costs to be incurred in developing proved reserves, net of estimated salvage value.

Costs of acquiring and evaluating unproved properties and major development projects are excluded from the depletion and depreciation calculation if and until it is determined whether or not proved reserves can be assigned to such properties. Costs of unproved properties and major development projects are transferred to depletable costs based on the percentage of reserves assigned to each project over the expected total reserves when the project was initiated. These costs are assessed periodically to ascertain whether impairment has occurred.

Depletion and Amortization of Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of properties within a relatively large geopolitical cost center are capitalized when incurred and are amortized as mineral reserves in the cost center are produced, subject to a limitation that the capitalized costs not exceed the value of those reserves. All costs incurred in oil and gas producing activities are regarded as integral to the acquisition, discovery, and development of whatever reserves ultimately result from the efforts as a whole, and are thus associated with the Company’s reserves. The Company capitalizes internal costs directly identified with performing or managing acquisition, exploration, and development activities. Unevaluated costs are excluded from the full cost pool and are periodically evaluated for impairment rather than amortized. Upon evaluation, costs associated with productive properties are transferred to the full cost pool and amortized. Gains or losses on the sale of oil and natural gas properties are generally included in the full cost pool unless the entire pool is sold.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Capitalized costs and estimated future development costs are amortized on a unit-of-production method based on proved reserves associated with the applicable cost center. The Company has assesses for impairment for oil and natural gas properties for the full cost pool quarterly using a ceiling test to determine if impairment is necessary. Specifically, the net unamortized costs for each full cost pool, less related deferred income taxes, should not exceed the following: (a) the present value, discounted at 10%, of future net cash flows from estimated production of proved oil and gas reserves, plus (b) all costs being excluded from the amortization base, plus (c) the lower of cost or estimated fair value of unproved properties included in the amortization base, less (d) the income tax effects related to differences between the book and tax basis of the properties involved. The present value of future net revenues should be based on current prices, with consideration of price changes only to the extent provided by contractual arrangements, as of the latest balance sheet presented. The full cost ceiling test must take into account the prices of qualifying cash flow hedges in calculating the current price of the quantities of the future production of oil and gas reserves covered by the hedges as of the balance sheet date. In addition, the use of the hedge-adjusted price should be consistently applied in all reporting periods and the effects of using cash flow hedges in calculating the ceiling test, the portion of future oil and gas production being hedged, and the dollar amount that would have been charged to income had the effects of the cash flow hedges not been considered in calculating the ceiling limitation should be disclosed. Any excess is charged to expense during the period that the excess occurs. The Company did not have any hedging activities during the three months ended March 31, 2013 and 2012. Application of the ceiling test is required for quarterly reporting purposes, and any write-downs cannot be reinstated even if the cost ceiling subsequently increases by year-end. Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income.

Abandonment of properties is accounted for as adjustments of capitalized costs with no loss recognized.

During the year ended December 31, 2011, the Company management performed an evaluation of its unproved properties for purposes of determining the implied fair value of the assets at the end of each respective year. The test indicated that the recorded remaining book value of its unproved properties exceeded its fair value for the years ended December 31, 2011. As a result, upon completion of the assessment, management recorded a non-cash impairment charge of $690,552, net of tax, or $0.02 per share during the year ended December 31, 2011 to reduce the carrying value of the unproved properties to $-0-. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.

Intangible assets

The Company accounts for and reports acquired goodwill and other intangible assets under Accounting Standards Codification subtopic 305-10, Intangibles, Goodwill and Other (“ASC 305-10”). In accordance with ASC 305-10, the Company tests its intangible assets for impairment on an annual basis and when there is reason to suspect that their values have been diminished or impaired. Any write-downs will be included in results from operations.

Asset Retirement Obligations

The Company accounts for reclamation costs under the provisions of Accounting Standards Codification subtopic 410-20, Asset Retirement and Environmental Obligations, Asset Retirement Obligations (“ASC 410-20”). ASC 410-20 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Specifically, the statement requires that retirement obligations be recognized when they are incurred and displayed as liabilities with the initial measurement being at the present value of estimated third party costs. In addition, the asset retirement cost is capitalized as part of the assets’ carrying value and subsequently allocated to expense over the assets’ useful lives. There are no changes in the carrying amounts of the asset retirement obligations as no expenses have yet been incurred.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses are $-0- for the three months ended March 31, 2013, 2012 and from January 18, 2005 (date of inception) through March 31, 2013.

Income Taxes

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”), which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of stock compensation accounting versus tax differences.

Net Loss per Share

The Company follows Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which specifies the computation, presentation and disclosure requirements of earnings per share information. Basic earnings per share have been calculated based upon the weighted average number of common shares outstanding. The Company’s common stock equivalents, represented by convertible debt, convertible preferred stock, options and warrants, were not considered as including such would be anti-dilutive for the three months ended March 31, 2013 and 2012.

Reliance on Key Personnel and Consultants

The Company has five full-time employees who are executive officers and no part-time employees. The Company’s officers do not receive any payroll and their assistance is now being provided on an expense reimbursement basis. This situation will remain constant until such time as the Company has sufficient capital to afford to pay salaries. Additionally, there are outside consultants performing various specialized services. The Company is heavily dependent on the continued active participation of these current executive officers, employees and key consultants. The loss of any of the senior management or key consultants could significantly and negatively impact the business of the Company until adequate replacements can be identified and put in place.

Concentrations of Credit Risk

The Company’s cash is exposed to a concentration of credit risk. Generally, the Company’s cash and cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

Reclassification

Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year.

Recent Accounting Pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

NOTE 2 – GOING CONCERN MATTERS

The Company has incurred a net loss of $259,226 and $2,448,884 for the three months ended March 31, 2013 and 2012, respectively. The Company has incurred significant losses and has an accumulated deficit of $31,606,305 at March 31, 2013. These factors raised substantial doubt about the Company’s ability to continue as a going concern.

There can be no assurance that sufficient funds will be generated during the next twelve months or thereafter from the Company’s current operations, or those funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital could force the Company to curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders.

The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 3 – OIL AND GAS PROPERTIES, UNEVALUATED

Unevaluated and Unproved properties are comprised of acquired leases on Native American tribal lands and non-native lands in the states of Montana and Alaska. All properties are in development stage with unproven and unevaluated reserves.

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following:

	March 31, 2013			December 31, 2012
Field equipment	$	1,116,585		$	1,116,585
Office equipment		40,283			40,283
Furniture and fixtures		31,704			31,704
Transportation equipment		54,250			54,250
Leasehold improvements		39,806			39,806
Total		1,282,628			1,282,628
Less accumulated depreciation		(857,376	)		(818,926	)
Net	$	425,252		$	463,702

Depreciation is recorded ratably over the estimated useful lives of five to ten years. Depreciation expense was $38,450 and $39,790 for the three months ended March 31, 2013 and 2012, respectively and $857,376 from January 18, 2005 (date of inception) through March 31, 2013.

NOTE 5 – SURETY BONDS

The Company has an aggregate of $175,467 and $175,381, as of March 31, 2013 and December 31, 2012, respectively, deposited in a financial institution as collateral for posted surety bonds with various governmental agencies as assurance for possible well-site reclamation, if required. The Company is obligated to maintain a surety bond in conjunction with certain acquired leases. Our obligation for site reclamation does not become a liability until production begins.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses are comprised of the following:

	March 31,		December 31,
	2013		2012
Accounts payable and accrued expenses	$	2,055,315	$	1,950,142
Accrued salaries and professional fees		159,000		94,000
Accrued interest		442,542		386,226
	$	2,656,857	$	2,430,368

NOTE 7 – CONVERTIBLE DEBENTURES

On September 21, 2012, the Company issued two $25,000 Convertible Debenture Notes that matured on March 21, 2013 (“Six Month Anniversary”). The notes bear interest at a rate of 8%. At any time after the six month anniversary of the Original Issue Date until the Debenture is no longer outstanding, the Debenture shall be convertible, in whole or in part, into shares of Common Stock at the option of holder, subject to certain conversion limitations set forth in the Debenture, at the conversion rate of 50% of the lowest daily bid price for 10 days prior to notice of conversion. The notes currently are in default

The Company identified embedded derivatives related to the Convertible Debentures entered into on September 21, 2012. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Notes and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Debentures, the Company determined a fair value of $90,858 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

Dividend yield:	-0-	%
Volatility	299.97	%
Risk free rate:	0.14	%

The initial fair value of the embedded debt derivative of $90,858 was allocated as a debt discount up to the proceeds of the notes ($50,000) with the remainder ($40,858) charged to current period operations as interest expense.

During the three months ended March 31, 2013, the Company amortized $22,099 current period operations as interest expense.

NOTE 8 – LOANS PAYABLE

Loans payable are comprised of the following:

	March 31, 2013		December 31, 2012
Loan payable, - bearing 7.5% per annum with no specific due date, guaranteed by Company officers. Currently in default.	$	130,000	$	130,000
Loan payable, bearing 6.25% per annum, secured by certain oil and gas properties; due February 29, 2012. Currently in default		593,000		593,000

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

	March 31, 2013		December 31, 2012
Loan payable, bearing 12% per annum through February 29, 2012; 15% thereafter, secured by certain oil and gas properties; due April 29, 2012. Currently in default		130,000		130,000
Various loans payable, with interest rates from 4% to 20% per annum, unsecured, currently in default ($78,195 and $52,918 related party loans, respectively).		433,395		408,468
Total		1,286,395		1,261,468
Less current portion		1,286,395		1,261,468
Long term portion	$	-	$	-

NOTE 9 – NOTES PAYABLE-BRIDGE

On July 25, 2011, the Company began conducting a private placement of up to $600,000 of Bridge Units (the “Units”) at a price of $25,000 per Unit to accredited investors only (the “Offering”); provided, however, that up to an additional six Units may be offered to fill over-allotments. Each Unit consists of (1) a $25,000 promissory note (each, a “Bridge Note,” as more fully described below), unless extended pursuant to the Bridge Note, and (2) 50,000 shares of the Company’s common stock.

The Bridge Notes are secured by a first lien on certain oil and gas leases and related equipment and were initially due the earlier of (i) November 30, 2011 (subsequently extended to January 31, 2012 with the payment of accrued interest) or (ii) within two business days following the close of any debt or equity financing totaling $3,000,000 or more. The interest rate(s) is at 6.25% per annum through September 30, 2011; 8.25% per annum from October 1, 2011 through November 30, 2011; and 12.25% per annum thereafter (default interest). Interest is payable at the end of each period and payable monthly thereafter. During the year ended December 31, 2011, the Company issued an aggregate of $750,000 Units.

In connection with the issuance of the Units, the Company issued an aggregate of 1,500,000 shares of its common stock. The fair value of the common stock of $440,938 was recorded as a debt discount and amortized ratably to current period interest expense. During the years ended December 31, 2012 and 2011, the Company has amortized $69,245 and $371,693 to interest expense, respectively.

During the months of August and September 2011, the Company entered into non-exclusive placement agent agreements (each, a “Placement Agent Agreement”) with the following broker-dealers registered with the SEC and who are members of the Financial Industry Regulatory Authority (“FINRA”): Beige Securities, LLC; ViewTrade Securities, Inc.; McNicoll, Lewis & Vlak LLC; Park City Capital, Inc.; and I-Bankers Securities, Inc. Aegis Capital Corporation and Halcyon Cabot Partners Ltd. Each Placement Agent Agreement provides that the respective placement agent will receive (1) a placement agent fee equal to 5% of the gross proceeds from sales of Units by such placement agent; and (2) a five-year warrant to purchase that certain number of shares of our common stock equal to 10% of the common stock sold in the offering by such placement agent exercisable at $0.60 per share. The term of each Placement Agent Agreement is coterminous with the term of the offering. During the year ended December 31, 2011, the Company charged the fair value of the warrants of $37,498 to current period operations. The estimated fair value of the issued warrants were determined using the Black Scholes option pricing model based on the following assumptions: dividend yield: 0%; volatility: 371.27% and risk free rate of 0.96%.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Settlement Agreement

On October 26, 2012, the Company entered into a Settlement Agreement (“Agreement”) whereby the bridge note holders in aggregate of $750,000, the loan note holder of a note issued on November 8, 2011 for $593,000 (Note 8) and the loan note holder of a note issued on December 12, 2011 for $130,000 (Note 8) agreed not pursue foreclosure action against secured property in exchange for the Company agreeing to drop its counter claims subject to the following terms:

a.	Beginning November 1, 2012, the interest rate on the above described notes will be 12% per annum.

b.	Beginning November 1, 2013, the interest rate on the above described notes will increase to 15% per annum.

c.	Beginning on May 1, 2014, the interest rate on the above described notes will increase to 18% per annum.

Until all obligations are paid in full (as defined), the Company will pay into an escrow 20% through February 28, 2013, 35% through April 30, 2013 and 35% thereafter, of all revenue paid to the Company by any purchaser of hydrocarbons from any of the Montana Leases. Application of funds to be applied as defined.

e.	Until all obligations are paid in full (as defined), the Company will pay into an escrow a 10% overriding royalty for any hydrocarbon wells other than the Montana Leases.

f.	The Company is required to issue an aggregate of 895,313 shares of common stock and 1,444,187 warrants to purchase the Company’s common stock at an exercise price of $0.001 for five years. Anti-dilutive rights were also provided to the note holders in connection with these issuances.

g.	For the two months ended December 31, 2012, the Company must deliver common stock or warrants, as the case may be, based on 0.1667 share (warrant) per dollar of principal outstanding at December 31, 2012. Anti-dilutive rights provided.

h.	Beginning for the three months ended March 31, 2013, the Company must deliver common stock or warrants, as the case may be, based on 0.25 share (warrant) per dollar of principal outstanding at December 31, 2012. Anti-dilutive rights provided.

In connection with the Settlement agreement, the Company recorded a loss on debt modification of $426,980 comprised of legal obligations incurred and assumed of $64,359 and $362,621 fair value of issued commons stock and warrants (see Note 10 below)

During the three months ended March 31, 2013, the Company issued an aggregate of 280,719 shares of its common stock in settlement of accrued interest and anti-dilutive provisions through March 31, 2013. The fair value of the issued shares of $21,070 was charged to current period interest costs.

NOTE 10 – DERIVATIVE LIABILITIES

Company has identified embedded derivatives in connection with the issuance of convertible debentures and anti-dilutive rights embedded in the settlement warrants and common stock as discussed in Note 9 above. A summary of the derivative liabilities are as follows:

Convertible Debentures

Dividend yield:	-0-	%
Volatility	299.97	%
Risk free rate:	0.14	%

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

The fair value of the described embedded derivative of $92,038 at March 31, 2013 was determined using the Binomial Lattice Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	183.82	%
Risk free rate:	0.11	%

At March 31, 2013, the Company adjusted the recorded fair value of the derivative liability at December 31, 2012 to market resulting in non-cash, non-operating gain of $49,369 for the three months ended March 31, 2013.

Settlement Agreement

The Company identified embedded derivatives related to warrants and common stock issued in connection with a settlement agreement entered into on October 26, 2012. These embedded derivatives included anti-dilutive features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the issuance date and to adjust the fair value as of each subsequent balance sheet date. At the issuance date of the warrants and common stock (including anti-dilutive common stock and warrants issued for payment of interest), the Company determined a fair value of $391,955 as the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

Dividend yield:		-0-	%
Volatility	410.17% to 422.12		%
Risk free rate:	0.41% to .76		%

The initial fair value of the embedded derivative of $391,956 was charged to current period operations as debt modification of $362,621 and $$29,335 as interest expense.

The fair value of the described embedded derivatives of $304,689 at March 31, 2013 was determined using the Binomial Lattice Model with the following assumptions:

Dividend yield:		-0-	%
Volatility		396.42	%
Risk free rate:	0.36% to 0.77		%

At March 31, 2013, the Company adjusted the recorded fair value of the derivative liability at December 31, 2012 to market resulting in non-cash, non-operating gain of $212,150 for the three months ended March 31, 2013.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

NOTE 11 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 21,000,000 shares of its $0.0001 par value preferred stock. As of March 31, 2013 and December 31, 2012, there were 500,000 shares of Series A convertible preferred stock issued and outstanding.

Common stock

The Company is authorized to issue 1,000,000,000 shares of its $0.001 par value common stock. As of March 31, 2013 and December 31, 2012, there were 39,397,018 and 38,716,299 shares issued and outstanding, respectively.

NOTE 12 – COMMITMENTS AND OBLIGATIONS

Overriding Royalty Interests

On April 11, 2005, the principal stockholders of the Company formed NAEG Founders Holding Corporation (formerly NAEG Founders Corporation) for the purpose of selling a 5% overriding royalty interest in the Company’s future oil and gas production. The Company sold a 5% overriding royalty interest on future potential oil and gas production from oil and gas properties held and operated by the Company. During the years ended December 31, 2007 and 2008, the Company received payments of $1,715,000 and $1,208,570, respectively, and was recorded as additional paid in capital in each respectively year.

Mineral Royalty Payments and Oil & Gas Lease Payments

The Company is obligated to pay royalties to the lessors of its oil fields under the oil and gas leases with payments ranging from 16.67% to 20% of any production revenue. The Company is obligated for a minimum of $3.00 per acre per year in lease rental payments in Montana. The Company has fully paid-up several leases in advance or the leases are held by production or an extension provided by such Lessors and is therefore not at this time required to make any yearly lease rental payments.

Consulting agreements

The Company has consulting agreements with outside contractors. The Agreements are generally month-to-month.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Litigation

Steven Glodack vs. Native American Energy Group, Inc, Joseph D’Arrigo, Raj Nanvaan - Case No. 12-28983

On October 16, 2012, the Company was notified of a complaint filed in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida. The complaint was filed by Steven Glodack, an unsecured creditor of the Company (“Plaintiff”) and names as Defendants, the Company, and Mr. Joseph D’Arrigo and Raj Nanvaan, in their individual capacity. Plaintiff’s complaint alleges, among other things, that the Company is in default for non-payment of monies owed under a loan made to the Company in August 2008 and seeks a judgment against the Defendants for the principal sum of $165,000 together with interest, costs and reasonable attorney’s fees. On November 5, 2012, Florida counsel entered a Notice of Special Appearance on behalf of the Company and Messrs. D’Arrigo and Nanvaan for the limited purposes of challenging the sufficiency of process, service of process and jurisdiction of the Florida court. On or about November 20, 2012, a Motion to Quash Service of Process and to Dismiss Plaintiff’s Complaint for lack of jurisdiction was filed with the Court on behalf of the Company and D’Arrigo and Nanvaan (collectively the “Motion to Dismiss”).

Subsequent to the filing of the Motion to Dismiss, the lawsuit has remained dormant and the parties have been attempting to negotiate an out-of-court settlement. Based upon the applicable facts and law, there exists a strong likelihood that, barring an out-of-court settlement, the litigation will be dismissed by the Florida court on procedural grounds. The Company intends to contest the case vigorously.

Other than the litigation disclosed above, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of its subsidiaries, threatened against or affecting the Company, its common stock, any of its subsidiaries or the Company’s or the Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

NOTE 13 – RELATED PARTY TRANSACTIONS

From January 18, 2005 (date of inception) through December 31, 2012, our principal stockholders have contributed an aggregate of $1,315,963 in working capital with the funds thereof reflected as additional paid in capital in the Company’s financial statements.

In conjunction with the reverse acquisition in 2009, the Company issued an aggregate of 10,000,000 shares of common stock and 500,000 shares of convertible preferred stock to two officers of Native American Energy Group, Inc.

As of March 31, 2012, Joseph D’Arrigo and family members have loans outstanding to the Company of $16,550, and Raj Nanvaan has a loan outstanding of $36,418. These loans are included in our loans payable and were made interest free. There is no benefit to either Mr. D’Arrigo or Mr. Nanvaan directly or indirectly from providing such loans.

In October 2011, the Company acquired a vehicle for a down payment of $12,000 towards the total purchase price of $29,500. For credit purposes only, the vehicle's title and related loan were issued in the name of our president. Upon settlement of the outstanding loan, the vehicle's ownership will be transferred to our name. For accounting purposes, the vehicle and related loan are recorded as part of our financial statements as assets and obligations, respectively.

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

In addition to being officers and directors of Native American Energy Group, Inc., Joseph D’Arrigo, our President, Chief Executive Officer and Chairman, and Raj Nanvaan, our Chief Financial Officer, Chief Operations Officer, Vice President, Treasurer and Director, are directors and minority shareholders of NAEG Founders Holding Corporation, a private New York corporation that Messrs. D’Arrigo and Nanvaan formed to hold (i) Mr. D’Arrigo’s 2.5% Overriding Royalty interest in our future oil & gas production and (ii) Mr. Nanvaan’s 2.5% Overriding Royalty interest in our future oil & gas production. After the transfer of such interests to NAEG Founders Holding Corporation, Messrs. D’Arrigo and Nanvaan each had a remaining 0.5% Overriding Royalty interest in our future oil & gas production, which they voluntarily cancelled for no consideration. As the result of the assignment of the interests of both Messrs. D’Arrigo and Nanvaan to NAEG Founders Holding Corporation by way of a board resolution, NAEG Founders Holding Corporation held a total 5% Overriding Royalty Interest in the future oil & gas production from leasehold interests. As background, Messrs. D’Arrigo and Nanvaan had each been granted their respective 3% Overriding Royalty Interest in our future oil & gas production in exchange for the assignment of their respective interests in a drilling project associated with another company called Rockwell Petroleum. The project was called the Jones Draw Field. Such rights were acquired by them before our organization while working with other oil & gas companies as tribal liaisons. To date, Messrs. D’Arrigo and Nanvaan have not received any compensation or dividend distributions from NAEG Founders Holdings Corporation because such company has not had any commercial production to date.

In connection with the execution of a capital lease obligation in March of 2006 regarding our Workover Rig, Messrs. D’Arrigo and Nanvaan and their respective relatives provided real estate collateral pledges and personal guarantees to the financial institution in exchange for an obligation fee of $325,000, of which $75,000 was payable to Joseph D’Arrigo, $150,000 was payable to Raj Nanvaan and the balance payable to the parents of Raj Nanvaan. The guarantee fees were being amortized ratably over the term of such lease, which was due to expire in 2014. On March 24, 2010, the capital lease obligation was converted to equity. As part of this conversion and settlement, the lien placed on Mr. Nanvaan’s home was lifted by the finance company.

In January 2013, Richard Ross loaned the company $18,950. The loan was made interest free. There is no benefit to Mr. Ross directly or indirectly from providing such loans.

NOTE 14 -STOCK OPTIONS AND WARRANTS

Stock Options

Employee options:

The following table summarizes the changes in employee options outstanding and the related prices for the shares of the Company’s common stock at March 31, 2013:

		Options Outstanding						Options Exercisable
				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Exercise		Number		Contractual		Exercise		Number		Exercise
Price		Outstanding		Life (Years)		Price		Exercisable		Price
$	0.20		6,000,000		9.46	$	0.20		-	$	-
	2.00		4,000,000		4.46		2.00		-		-
			10,000,000		7.46	$	0.92		-	$	-

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Transactions involving the Company’s employee option issuance are summarized as follows:

			Average
	Number of		Price
	Shares		Per Share
Options outstanding at December 31, 2011		-	$	-
Granted		10,000,000		0.92
Exercised		-		-
Cancelled or expired		-		-
Options outstanding at December 31, 2012		10,000,000		0.92
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
Options outstanding at March 31, 2013		10,000,000	$	0.92

During the three months ended March 31, 2013, the Company charged the vesting fair value of employee options of $121,875 to current period operations.

Non- Employee options:

The following table summarizes the changes in non-employee options outstanding and the related prices for the shares of the Company’s common stock at March 31, 2013:

Options Outstanding

Options Exercisable

Weighted

Average

Weighted

Remaining

Average

Exercise

Number

Contractual

Exercise

Number

Exercise

Price

Outstanding

Life (Years)

Price

Exercisable

Price

0.20

1,000,000

1.46

0.20

Transactions involving the Company’s non-employee option issuance are summarized as follows:

			Average
	Number of		Price
	Shares		Per Share
Options outstanding at December 31, 2011		-	$	-
Granted		1,000,000		0.20
Exercised		-		-
Cancelled or expired		-		-
Options outstanding at December 31, 2012		1,000,000		0.20
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
Options outstanding at March 31, 2013		1,000,000	$	0.20

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock at March 31, 2013:

		Warrants Outstanding						Warrants Exercisable
				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Exercise		Number		Contractual		Exercise		Number		Exercise
Price		Outstanding		Life (Years)		Price		Exercisable		Price
$	0.001		2,326,041		4.30	$	0.001		2,326,041	$	0.001
	0.60		150,000		3.92		0.60		150,000		0.60
	0.70		2,345,506		1.48		0.70		2,345,506		0.70
			4,821,547		2.80	$	0.35		4,821,547	$	0.35

Transactions involving the Company’s warrant issuance are summarized as follows:

			Average
	Number of		Price
	Shares		Per Share
Warrants outstanding at December 31, 2011		798,000	$	0.11
Granted		3,789,694		0.43
Exercised		-		-
Cancelled or expired		-		-
Warrants outstanding at December 31, 2012		4,587,694		0.38
Granted		233,853		0.001
Exercised		-		-
Cancelled or expired		-		-
Warrants outstanding at March 31, 2013		4,821,547	$	0.35

As per the Settlement Agreement entered into on October 26, 2012 (Note 9), for the three months ended March 31, 2013, the Company issued 233,853 warrants to purchase the Company’s common stock at $0.001 for five years. The Company recorded the estimated fair value of $25,724 as a charge to current period operations during the three months ended March 31, 2013 as interest expense. The estimated fair value was determined using the Binomial Lattice option pricing method with the following assumptions: Dividend yield- 0%, risk free rate-0.77%, volatility- 396.42%, expected life-contract life.

NOTE 15 - FAIR VALUE MEASUREMENT

The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

NATIVE AMERICAN ENERGY GROUP, INC.

(a development stage company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of March 31, 2013:

	Convertible
	Debt			Anti-dilutive
	Derivative			Provisions
Balance, January 1, 2013	$	141,407		$	491,370

Transfers in/out:		-			25,469

Total (gains) losses:
Mark-to-market at March 31, 2013:
- Reset provisions relating to debt		(49,369	)		(212,150	)
-Anti-dilutive provisions embedded in warrants and s

Balance, March 31, 2013	$	92,038		$	304,689

Net gain for the period included in earnings relating to the liabilities held at March 31, 2013	$	49,369		$	212,150

NOTE 16 - SUBSEQUENT EVENTS

In April 2013, we issued and sold to 3 investors 700,00 shares of our common stock at a per share purchase price of $0.05 for proceeds of $35,000.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and the Notes thereto that are included elsewhere in this report.

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Commission.

Although the forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

As used in this Quarterly Report, the terms “we,” “us,” and “our,” mean Native American Energy Group, Inc. unless otherwise indicated.

General Information

Our business address is 61-43 186th Street Suite 507 Fresh Meadows NY 11365. Our Internet website address is www.nativeamericanenergy.com. Any information accessible through our website is not a part of this Quarterly Report.

Overview

We are an energy resource development and management company. We have four principal projects: (i) development of oil and gas interests in the Williston Basin in Montana (5-Well EOR Program); (ii) development of coal-bed methane natural gas (“CBM”) in the Cook Inlet Basin in Alaska; (iii) development of oil & gas properties on Native and non-Native American lands in Oklahoma using newer drilling and Enhanced Oil Recovery (EOR) technologies; and (iv) planned implementation of vertical axis wind turbine power generation technology for the production of clean, cost-efficient green energy on all U.S. Native American Indian reservations.

Since 2005, we have primarily been involved in the acquisition and management of Native American land and fee land acreage in Montana and Alaska and the exploration for, and development of, proven oil and natural gas properties which our management believes have potential for improved production rates and resulting income by application of both conventional and non-conventional resource recovery improvement and enhancement techniques, including horizontal drilling and high-pressure lateral jetting.

Due to our limited financial and organizational resources, however, we have amended our Technology License & Distribution Agreement (the “TLDA”) with Windaus Energy, Inc. (“Windaus”) and are currently focusing on completing the work-overs and enhanced oil recovery operations on five wells in the Williston Basin in Montana.

Results of Operations for the Three Months Ended March 31, 2013 as compared to the Three Months Ended March 31, 2012:

Revenues

We have not generated any revenues for the three months ended March 31, 2013 as compared to $11,572 from the sale of oil from well testing for the three months ended March 31, 2012.

Operating Expenses

Selling, General, and Administrative

Selling, general, and administrative expenses decreased from $433,824 for the three months ended March 31, 2012 to $327,405 for the three months ended March 31, 2013. The decrease of $106,419, or 33%, is primarily attributable to a decrease reduction in overall cash operating expenses in the current period.

Litigation Settlement

During the three months ended March 31, 2012, we incurred litigation cost as described in our accompanying financial statements. As such, we incurred a $1,757,182 charge in the three months ended March 31, 2012 comprised of accrual of expected costs. During the three months ended March 31, 2013, we did not have any incurred costs.

Depreciation and Amortization

Depreciation and amortization decreased from $39,790 for the three months ended March 31, 2012 to $38,450 for the three months ended March 31, 2013. The decrease of $1,340 is attributable to aging equipment previously acquired.

Total Operating Expenses

Total operating expenses decreased to $365,855 for the three months ended March 31, 2013 from $2,230,796 for the three months ended March 31, 2012. The decrease of $1,864,941 is primarily attributable to incurring litigation costs during the three months ended March 31, 2012.

Gain on change in fair value of derivative liabilities

During the year ended December 31, 2012, we issued convertible debentures with certain conversion features and entered into a settlement agreement requiring us to issue warrants and common stock with anti-dilution provisions, which we identified as embedded derivatives. All require us to fair value the derivatives each reporting period and mark to market as a non-cash adjustment to our current period operations. This resulted in a net gain of $261,519 for the three months ended March 31, 2013, $-0- for the same period, last year.

Interest Expenses, net

Interest expense, net for the three months ended March 31, 2013, decreased by $104,881 to $124,866 from $229,747 for the three months ended March 31, 2012. The primary reason for the increase in interest expense was due to issuing common shares and warrants in connection with our bridge financing charged to period interest of $177,420 during the three months ended March 31, 2012.

Net Income (Loss)

Net Loss for the three months ended March 31, 2013 decreased to $259,226 from a net loss of $2,448,884 for the three months ended March 31, 2012. The decrease of $2,189,658 is primarily attributable to the factors described above.

Liquidity and Capital Resources

We have generated minimal revenues between inception and the date of this report. We have continued to incur expenses and have limited sources of liquidity. Our limited financial resources have had an adverse impact on our liquidity, activities, and operations. These limitations have also adversely affected our ability to obtain certain projects and pursue additional business ventures. We may have to borrow money from stockholders or issue debt or equity securities in order to fund expenditures for exploration and development and general administration or enter into a strategic arrangement with a third party. There can be no assurance that additional funds will be available to us on favorable terms or at all.

As of March 31, 2013, we had a working capital deficit of $4,795,334. For the three months ended March 31, 2013, we generated a net cash flow deficit from operating activities of $43,371, consisting primarily of year-to-date losses of $259,226. Non-cash adjustments included $60,549 in depreciation and amortization charges, $146,533 for equity-based compensation, and non-cash interest paid of $46,539, offset gain on change in derivative liabilities of $261,519. Additionally, we had a net increase in current assets of $2,736 and a net increase in current liabilities of $196,378. Cash used in investing activity was $-0-. Cash provided by financing activities for the three months ended March 31, 2013 totaled $38,414, consisting of proceeds from the sale of our common stock and proceeds from related party loans, net with repayments.

Our liquidity needs consist of our working capital requirements, indebtedness payments, and property development expenditures. Historically, we have financed our operations through the sale of equity and debt securities exempt from the registration requirements of the Securities Act, as well as borrowings from various credit sources; and we have adjusted our operations and development to our level of capitalization.

We expect that potential financing sources will primarily be obtained through the private placement of our securities, including, without limitation, the issuance of notes payable and other debt, the terms, and conditions of which will depend upon the transaction size, market conditions and other factors.

Going Concern and Recent Events

While we have raised capital to meet our working capital and financing needs in the past, additional financing is required within the next three months in order to meet our current and projected cash flow deficits from operations and development. Our registered independent certified public accountants have stated in their report dated May 20, 2013 that we have incurred operating losses in the last year, and that we are dependent upon management’s ability to develop profitable operations and raise additional capital. These factors, among others, may raise substantial doubt about our ability to continue as a going concern.

We also are unable to determine whether we will generate sufficient cash flow from our future oil and gas operations to fund our future operations. Although we expect cash flow from future operations to rise as we are able to improve our operations, and that the number of projects we successfully develop will grow, we will continue to focus, in the near term, on raising additional capital, likely through the private placement of our equity securities or other debt securities.

We need to raise capital to fund the development of future wells. There can be no assurance that additional funding will be available on favorable terms, if at all. To the extent that additional capital is raised through the sale of equity or equity-related securities, the issuance of such securities would result in dilution of the existing stockholders’ shares. If adequate funds are not available within the next 12 months, we may be required to curtail our operations significantly, or to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our assets that we would not otherwise relinquish.

Our long term viability depends on our ability to obtain adequate sources of debt or equity financing to meet current commitments and fund the continuation of our business operations, and to ultimately achieve enough profits and cash flow from operations to sustain our business.

Impact of Default

As we disclosed in our financial statements, certain notes, loan payables, and operating lease obligations are currently in default.

Notes and loans payable are being resolved through debt-to-equity conversion agreements. We plan to resolve our operating lease obligations through revenues from the future commencement of production or proceeds of additional equity financing or debt financing.

Default on lease obligations could result in the impairment of our ability to conduct executive and administrative functions, which would be the case if we lost our executive office space in New York. Further, the loss of any of our oil and gas leases would likely result in the curtailment of our potential oil and gas production revenues.

Material Commitments

Due to amending our technology license agreement with Windaus Energy, Inc. (“Windaus”) on April 25, 2012, pursuant to which we reduced the licensed territory, relinquished our manufacturing rights, the license fee under the Agreement was adjusted as follows: (i) decrease the amount of shares from 2,000,000 shares to 100,000 shares (95% less), with Windaus returning 2,000,000 shares to NAGP in exchange for NAGP issuing 100,000 shares to Windaus Global Energy, Inc.; and (ii) decrease the cash portion of the fee $500,000 to $100,000, of which $30,500 had already been paid as of the date of the Second Amendment leaving a balance of $69,500 owed to Windaus.

Among other debts, as of March 31, 2013, we owed:

Bridge Notes Payable of an aggregate of $750,000, that are secured by a first lien on certain oil and gas leases and related equipment and are already past due and are currently accruing interest at the rate of 12.00% per year as of November 1, 2012, increasing to 18% by May 1, 2014. On October 26, 2012, we entered into a settlement agreement and in connection with a forbearance not to exercise their security rights, we agreed to term modifications, issued warrants and common stock with anti-dilutive provisions and settled on payment terms based on future well production period.

Loans payable of an aggregate of $593,000, under the Loan Terms Agreement that are secured by a second lien on certain oil and gas leases and related equipment, bear interest at the rate of 6.25% per year and were due on February 29, 2012; these loans were part of the October 26, 2012 settlement period.

SLA Notes payable of $130,000, under the Third Secured Loan Agreement that are secured by (i) a second lien pari pasu with the secured loans under the Loan Term Agreement and (ii) bear interest at the rate of 12% per year until February 29, 2012, at the rate of 15% per year until April 30, 2012, and at the rate of 18% per year after April 30, 2012, and that are due the earlier of (i) April 30, 2012; and (ii) the final closing of any equity and/or debt financing totaling at least $3,000,000 which occurs after December 31, 2011. These loans were part of the October 26, 2012 settlement period.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Critical Accounting Policies

Financial Reporting Release No. 60, published by the Securities and Exchange Commission (“SEC”), recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements in management’s discussion and analysis of financial condition and results of operations. Policies determined to be critical are those policies that have the most significant impact on our condensed consolidated financial statements and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There can be no assurance that actual results will not differ from those estimates.

The accounting policies identified as critical are as follows:

Stock-Based Payments

We follow ASC 718-10, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro-forma disclosure is no longer an alternative. This statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in ASC 718-10. We implemented AC 718-10 on January 1, 2006 using the modified prospective method.

Revenue Recognition

Revenues from the sale of petroleum and natural gas are recorded when title passes from us to our petroleum or natural gas purchaser and collectability is reasonably assured.

Property and Equipment

Undeveloped Oil and Gas Properties

Undeveloped oil and gas properties are assessed, at minimum annually or as economic events dictate, for potential impairment. Impairment is assessed by comparing the estimated net undiscounted future cash flows to the carrying value of the asset. If required, the impairment recorded is the amount by which the carrying value of the asset exceeds its fair value.

Depletion and Amortization of Oil and Gas Properties

We follow the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of properties within a relatively large geopolitical cost center are capitalized when incurred and are amortized as mineral reserves in the cost center are produced, subject to a limitation that the capitalized costs not exceed the value of those reserves. All costs incurred in oil and gas producing activities are regarded as integral to the acquisition, discovery, and development of whatever reserves ultimately result from the efforts as a whole, and are thus associated with our reserves. We capitalize internal costs directly identified with performing or managing acquisition, exploration, and development activities. Unevaluated costs are excluded from the full cost pool and are periodically evaluated for impairment rather than amortized.

Upon evaluation, costs associated with productive properties are transferred to the full cost pool and amortized. Gains or losses on the sale of oil and natural gas properties are generally included in the full cost pool unless the entire pool is sold.

Capitalized costs and estimated future development costs are amortized on a unit-of-production method based on proved reserves associated with the applicable cost center. We assess for impairment for oil and natural gas properties for the full cost pool quarterly using a ceiling test to determine if impairment is necessary. Specifically, the net unamortized costs for each full cost pool, less related deferred income taxes, should not exceed the following: (a) the present value, discounted at 10%, of future net cash flows from estimated production of proved oil and gas reserves, plus (b) all costs being excluded from the amortization base, plus (c) the lower of cost or estimated fair value of unproved properties included in the amortization base, less (d) the income tax effects related to differences between the book and tax basis of the properties involved. The present value of future net revenues should be based on current prices, with consideration of price changes only to the extent provided by contractual arrangements, as of the latest balance sheet presented. The full cost ceiling test must take into account the prices of qualifying cash flow hedges in calculating the current price of the quantities of the future production of oil and gas reserves covered by the hedges as of the balance sheet date. In addition, the use of the hedge-adjusted price should be consistently applied in all reporting periods and the effects of using cash flow hedges in calculating the ceiling test, the portion of future oil and gas production being hedged, and the dollar amount that would have been charged to income had the effects of the cash flow hedges not been considered in calculating the ceiling limitation should be disclosed.

Any excess is charged to expense during the period that the excess occurs. We did not have any hedging activities during the quarter ended March 31, 2013. Application of the ceiling test is required for quarterly reporting purposes, and any write-downs cannot be reinstated even if the cost ceiling subsequently increases by year-end. Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income.

Abandonment of properties is accounted for as adjustments of capitalized costs with no loss recognized.

Asset Retirement Obligations

We account for reclamation costs under the provisions of ASC 410-20, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Specifically, the statement requires that retirement obligations be recognized when they are incurred and displayed as liabilities with the initial measurement being at the present value of estimated third party costs. In addition, the asset retirement cost is capitalized as part of the assets’ carrying value and subsequently allocated to expense over the assets’ useful lives. There are no changes in the carrying amounts of the asset retirement obligations as no expenses have yet been incurred.

We are obligated to maintain a surety bond in conjunction with certain acquired leases. Our obligation for site reclamation does not become a liability until production begins.

Derivative Instruments and Fair Value of Financial Instruments

We have evaluated the application of Accounting Standards Codification 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”) to certain convertible debentures that contain exercise price adjustment features known as reset provisions, issued warrants with anti-dilutive provisions and an obligation it issue common shares under anti-dilutive provision in a settlement agreement . Based on the guidance in ASC 815-40, we have concluded these instruments and obligations are required to be accounted for as derivatives effective upon issuance.

We have recorded the fair value of the reset provisions of the convertible debentures and classified as derivative liabilities in our balance sheet at fair value with changes in the value of these derivatives reflected in the consolidated statements of operations as gain or loss on derivative liabilities. These derivative instruments are not designated as hedging instruments under ASC 815-10.

Recently Issued Accounting Pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries, and are not expected to a have a material impact on our financial position, results of operations or cash flows.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4 – CONTROLS AND PROCEDURES

a) Evaluation of disclosure controls and procedures.

Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2013. Based on this evaluation, and because of our limited resources and limited number of employees, our management concluded that our disclosure controls and procedures were ineffective as of March 31, 2013 due to a material weakness in internal control over financial reporting, which we view as an integral part of our disclosure controls and procedures.

b) Management’s Quarterly Report on Internal Control over Financial Reporting

Our management is also responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our internal control system is a process designed by, or under the supervision of, our principal executive and principal financial officer, or persons performing similar functions, and effected by our 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 GAAP.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with the authorization of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

Because of our inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to 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 assessed the effectiveness of our internal control over financial reporting as of March 31, 2013. As a result of its assessment, management identified a material weakness in our internal control over financial reporting. Based on the weakness described below, management concluded that our internal control over financial reporting was not effective as of March 31, 2013.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that, there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a result of our assessment, management identified the following material weaknesses in internal control over financial reporting as of March 31, 2013:

While there were internal controls and procedures in place that relate to financial reporting and the prevention and detection of material misstatements, these controls did not meet the required documentation and effectiveness requirements under the Sarbanes-Oxley Act (“SOX”), and therefore, management could not certify that these controls were correctly implemented. As a result, it was management’s opinion that the lack of documentation warranted a material weakness in the financial reporting process.

Our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Financial Officer, as appropriate to allow timely decisions. Inadequate controls include the lack of procedures used for identifying, determining, and calculating required disclosures and other supplementary information requirements.

There is lack of segregation of duties in financial reporting, as our financial reporting and all accounting functions are performed by our Chief Financial Officer who also serves as our Chief Operations Officer. This weakness is due to our lack of working capital to hire additional staff during the period covered by this report. We intend to hire additional accounting personnel to assist with financial reporting as soon as our finances will allow.

This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

c) Changes in internal control over financial reporting.

There were no significant changes in our internal control over financial reporting that occurred during the three months ended March 31, 2013 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

The information required by Item 1 is included in “Notes to the Consolidated Financial Statements—Note 12 – Commitments and Obligation—Litigation.”

ITEM 1A – RISK FACTORS

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

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 7, 2013, we issued 200,000 shares to a law firm for legal services to be provided, valued at $31,980.

On February 12, 2013, we issued and sold to 1 investor 25,000 shares of our common stock at a per share purchase price of $0.10 per share for proceeds of $2,500.

On February 14, 2013, we issued an aggregate of $355,719 shares of our common stock in payment of interest and anti-dilutive provisions as part of our settlement agreement as described in our financial statements.

On March 28, 2013, we issued an aggregate of 100,000 shares of our common stock at a per share purchase price of $0.10 per share for proceeds of $5,000.

Each of the above issuances was made pursuant to an exemption from registration in reliance upon Section 4(2) of the Securities Act.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

As of November 14, 2012, we are in default with respect to secured debt comprised of 3 secured loans made to the company by High Capital Funding LLC (“Lender or Plaintiff”) from August 2011 to December 2011 during our field operations related to our 5 Well Workover and Enhanced Oil Recovery Program in Montana (“Bridge Loans and Secured Loans”). On May 25, 2012, Lender filed a Complaint for Foreclosure against the Company alleging that the Company is in default for nonpayment of monies owed under the Bridge Loans and Secured Loans.

On August 13, 2012, the Company filed its “Answer and Counterclaim” in which the Company asserted various defenses to Plaintiff’s claims for relief as well as counterclaims against the Plaintiff for; Breach of Contract, Unjust Enrichment, Breach of Duty of Good Faith and Fair Dealing, Promissory Estoppel, Negligent Misrepresentation, and Constructive Fraud.

On October 26, 2012, in an effort to avoid further litigation, both parties agreed to certain terms and conditions for a Settlement Agreement. On December 26, 2012, Native American Energy Group, Inc. and High Capital Funding LLC jointly executed a Stipulation of Dismissal of the Foreclosure Action and all Counterclaims alleged by the Company against High Capital Funding LLC in its Answer and Counterclaim filed with the court on August 13, 2012.

As High Capital Funding LLC understands that the Company is making diligent efforts to procure the financing necessary for completion of Phase 2 of its 5-Well EOR program in Montana and to commence oil production which would provide revenue sufficient enough to begin repaying the 3 loans, High Capital Funding LLC has waived all default provisions until June 30, 2013.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

None

ITEM 6 – EXHIBITS

The information required by this Item is set forth on the Exhibit Index at the end of this Quarterly Report on Form 10-Q.

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.

DATED: May 20, 2013	NATIVE AMERICAN ENERGY GROUP, INC.

	By:	/s/ Joseph G. D’Arrigo
	Name:	Joseph G. D’Arrigo
	Title:	Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Raj S. Nanvaan
	Name:	Raj S. Nanvaan
	Title:	Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Native American Energy Group, Inc. - FORM 10-Q - May 20, 2013

Attached files

Native American Energy Group, Inc. Reports