10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

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

For the fiscal year ended: December 31, 2012

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

Commission file number: 000-54088

NATIVE AMERICAN ENERGY GROUP, INC.

(Exact Name of Registrant as specified in its charter)

Delaware	65-0777304
(State of Incorporation)	(IRS Employer ID No.)

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)

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

Securities registered under Section 12(g) of the Exchange Act:  Common Stock, $0.001 par value

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

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

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

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

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

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

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

The aggregate market value of registrant’s voting and non-voting common equity held by non-affiliates (as defined by Rule 12b-2 of the Exchange Act) computed by reference to the average bid and asked price of such common equity on June 30, 2012 is $10,189,314. As of May 20, 2013, the issuer has one class of common equity, and the number of shares outstanding of such common equity was 40,522,018.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

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

Forward–looking statements appear in a number of places in this quarterly report 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, 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.

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TABLE OF CONTENTS

		PAGE
PART I
Item 1.	Business.		4
Item 1A.	Risk Factors.		10
Item 1B.	Unresolved Staff Comments.		10
Item 2.	Properties.		10
Item 3.	Legal Proceedings.		12
Item 4.	Mine Safety Disclosures.		12
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.		13
Item 6.	Selected Financial Data.		14
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		14
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.		20
Item 8.	Financial Statements and Supplementary Data.		20
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.		21
Item 9A.	Controls and Procedures.		21
Item 9B.	Other Information.		21
PART III
Item 10.	Directors, Executive Officers and Corporate Governance.		22
Item 11.	Executive Compensation.		24
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.		26
Item 13.	Certain Relationships and Related Transactions and Director Independence.		27
Item 14.	Principal Accountant Fees and Services.		28
PART IV
Item 15.	Exhibits, Financial Statement Schedules.		28
SIGNATURES			30

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PART I

Item 1. Business.

Business Development

Native American Energy Group, Inc. (“we,” “us,” “our”) was incorporated in the State of Nevada on January 18, 2005 under the name Halstead Energy Corporation (“Halstead”). On January 25, 2005, our name was changed to Native American Energy Group, Inc.

In October 2009, we completed a reverse merger transaction with Flight Management International, Inc. (“Flight Management”), a Delaware corporation. Simultaneous with the consummation of the merger, Flight Management changed its name to Native American Energy Group, Inc.

As of the date of this filing, our common stock is quoted on the Over-the-Counter Quotation Bureau (“OTCQB”) market under the symbol “NAGP.” Our wholly owned subsidiaries, NAEG Alaska Corporation (“NAEG Alaska”), a Delaware corporation incorporated in 2005 that was formerly known as Fowler Oil & Gas Corporation, and 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, are our operating entities in Alaska. In November 2011, we reinstated NAEG Economic Development Corporation (“NEDC”), a not-for-profit company established for the purpose of supporting worthy causes and local programs, which in turn promote Native American economic self-sufficiency.

Operations

We are a development-stage energy resource development and management company, which is defined by the Financial Accounting Standards Board (FASB) as an entity that has not commenced planned principal operations and has no significant revenue. In August 2011, we commenced a pilot five well-workover program on four oil and gas lease holdings in the Williston Basin in Montana. During the months of August 2011 through December 2011, we completed the first phase of enhanced oil recovery (“EOR”) operations on four of our five wells. As a result of the initial EOR operations during the 3rd and 4th quarters of 2011, we collected and sold approximately 919 barrels of oil, in aggregate, from two wells during the 4th quarter ending December 31, 2011. Subsequently, we collected and sold approximately 314 barrels of oil, in aggregate during 2012. During the summer of 2013, subject to adequate financing, we intend to complete Phase 2 of the 5-Well Program and commence full-scale oil production shortly thereafter.

Currently, we have four principal projects:

·   development of oil and gas interests in the Williston Basin in Montana (5-Well Program)

·   development of coal-bed methane natural gas (“CBM”) in the Cook Inlet Basin in Alaska; and

·   development of oil & gas properties on Native and non-Native American lands in Oklahoma using newer drilling and Enhanced Oil Recovery (EOR) technologies; and

·   the 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.

We have been in the process of developing several energy projects for the past eight years. This has included the acquisition of oil properties in Montana, natural gas properties in Alaska and identifying both oil & gas properties in Oklahoma. Our management believes, however, that properties in these three states have potential based on the limited EOR operations that have been conducted there and that there are opportunities to acquire properties that formerly produced oil and gas that can be re-developed for commercial profitable operation using newer production techniques. We are also pursing oil properties in on both Native and non-Native American lands in Oklahoma whereby we can implement similar enhanced oil recovery techniques as we applied on the 5-Well EOR pilot program in Montana in addition to other technologies.

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We have limited financial resources available, which has had an adverse impact on our activities and operations. Additional funding would allow the development of future wells, and pay for expenditures for exploration and development, general administrative costs, and possible entrance into strategic arrangements with a third parties. We plan to raise capital through the sale of equity or convertible debt securities and through loans from our stockholders and third parties. There can be no assurance that additional funds will be available to us on favorable terms, or at all. If adequate funds are not available, we may be required to curtail our operations significantly or obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our assets that we would not otherwise relinquish.

Relations with Native American Tribes

We have dedicated a substantial portion of our business plan to the conscientious development and responsible management of our relationships with Native American tribes, which own vast reserves of a wide assortment of minerals, including oil, gas, coal and other valuable minerals. Much of this potential energy has gone undeveloped for a variety of reasons, including a lack of communication and distrust of potential development partners as well as tribal reasons to maintain lands in an undeveloped state.

Our management has committed the past decade to familiarizing themselves with the various Native American tribes, cultures, organizational structures, protocols and customs and believes that attractive arms-length mineral development arrangements can be reached with a large number of Native American tribes once a level of mutual trust and understanding is reached.

On August 15, 2005, we received the approval of our Nationwide Oil and Gas Bond from the Bureau of Indian Affairs at the United States Department of Interior in Washington D.C, which authorizes us to enter into or otherwise acquire an interest in oil and gas mining leases and oil and gas prospecting permits of various dates and periods of duration covering all lands or interests in lands held by the United States in trust for individual Native Americans or Native American tribes or bands also known as Federal Indian Reservations.

According to the Bureau of Indian Affairs at the United States Department of Interior, approximately 56.2 million acres are held in trust by the United States for various Indian tribes and individuals. There are approximately 326 Indian land areas in the U.S. administered as federal Indian reservations (i.e., reservations, pueblos, rancherias, missions, villages, communities, etc.).

In April 2007, we created a proprietary initiative called the Tribal Empowerment Program (the “Program”) whereby we promote tribal self-sufficiency by helping Native Americans to develop their own mineral resources and to use the revenue from such sources to implement renewable energy systems on their tribal lands. The Program has gained attention from tribes throughout the country and continues to win support from Native American activists, tribal leaders, U.S. politicians, spiritual leaders and business and energy professionals. In addition, in November 2011, we reinstated NAEG Economic Development Corporation (NEDC) for the purpose of supporting worthy causes and local programs, which in turn promote Native American economic self-sufficiency.

Williston Basin Operations, Montana

Since January 2005, we have been active in evaluating and acquiring oil and gas leases both on and around the Fort Peck Indian Reservation in the Williston Basin in Northeast Montana. We are currently focused on completing Phase 2 of our 5-Well Enhanced Oil Recovery Pilot Program on four oil and gas leases containing an aggregate of five wells on and around the Fort Peck Indian Reservation in the Williston Basin in Montana. The leases include historically producing oil and gas wells that were shut-in by previous oil and gas companies due to depressurization, paraffin, production falling below commercial levels at that time, termination of previous oil and gas leases by the tribal governments due to improper development and various economic reasons, and most commonly, declining oil prices. Phase 1 was completed in early 2012.

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Our base of operations in the Williston Basin is located in the city of Wolf Point on the Fort Peck Indian Reservation. We have an equipment yard and maintenance facility with a workshop and three vehicle bays which is situated on approximately five acres. We own our own workover and well-servicing rig, which is used to re-work, service and drill shallow wells. Our standby field team includes fabricators, welders, machinists, heavy equipment operators, derrickmen, floor hands, roughnecks and rig operators, all of whom are independent contractors. The terms of the oil and gas leases typically range from three to five years and are automatically extended as long as any oil or gas is being sold off the lease or there is an agreement or understanding with the landowner to extend the lease due to permitting issues, or delayed development or production.

Due to stronger market prices for crude oil as compared to natural gas, our current focus has been on four oil and gas leases, containing an aggregate of five wells, on and around the Fort Peck Indian Reservation in the Williston Basin in Montana. In August 2011, we began the initial phase of work-overs and EOR operations on five wells in Montana which is hereinafter referred to collectively as the “Five-Well Program.” See Item 2—Properties.

In our Five-Well Program, we leveraged advanced technology to enhance oil recovery on our leases. This technology, known as Single Entry Multi-Lateral Jetting System, or SEMJet®, has demonstrated its ability to enhance and exploit reservoirs and increase recovery of up to 50% more oil in place reserves from mature properties. Moreover, the SEMJet System gives us the ability to:

·   inspect the condition of production tubing with in-situ inspection, log the cement bond and correlate the casing collars using its built-in logging system;

·   create horizontal channels off any new or old wellbores that have 4.5” casing or greater, whether the wells are vertical, deviated or horizontal in design;

·   enter mono-bore completions and jet lateral channels at a true 90º in casing as small as 3.5” using a secondary, unique coiled tubing system;

·   unlock and stimulate trapped oil reserves beyond any near wellbore damage by displacing acid, specialty fluids or microbial products into the laterals;

·   penetrate the reservoir and open up larger producing channels without using conventional perforating guns, which can damage the formation and are hazardous; and

·   create a low pressure, high velocity circulating environment within the wellbore to ensure cuttings removal, geological samples and efficient well cleaning;

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Jetting Down-Hole Schematic – Diagram Provided by SEMJET®

 

In September 2006, we consummated an Oil Sale and Purchase Agreement with Shell Trading U.S. Company (Shell), which provides for Shell to purchase all crude oil produced from our leases; and subjects us to no delivery commitments. Since 2006, we have sold oil from these five wells while performing minimal workover operations with our own workover service rig, surfactant treatments and flow testing. As a result of the initial EOR operations during the 3rd and 4th quarters of 2011, we collected and sold approximately 919 barrels of oil, cumulatively, from two wells during the 4th quarter ending December 31, 2011 and 175 barrels in the 1st quarter of 2012. During the summer of 2013, subject to adequate financing, we intend to complete Phase 2 of the 5-Well Program and commence full-scale oil production shortly thereafter.

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The price of oil is a function of oil’s supply and demand, among other factors. Throughout 2008 and 2009, oil prices swung materially as demand contracted in light of the global recession.

According to the U.S. Energy Information Administration’s (“EIA”) Short-Term Energy Outlook, (the “Report”) dated May 7, 2013, the EIA projects that the West Texas Intermediate (“WTI”) spot prices are expected to average about $93 per barrel in 2013, which is $1.00 higher than the average WTI price of crude oil during 2012. The report can be accessed at the following link: http://www.eia.gov/forecasts/steo/pdf/steo_full.pdf

Cook Inlet Operations, Alaska

We explore areas where there are known coal resources because such areas have an increased likelihood of containing Coal Bed Methane (“CBM”). The Matanuska-Susitna (“Mat-Su”) Valley in Alaska is known for its significant coal reserves, which are larger than those in the prolific Powder River Basin of the United States. While the Mat-Su Borough Assembly has adopted some of the strictest regulations for coal bed methane drilling in the United States, our environmentally conscious approach to coal bed methane development led to approval of a Mat-Su Borough drilling permit in October 2, 2007 (“Permit”) and is the first and only CBM drilling permit issued by the Mat-Su Borough Planning Commission (“Mat-Su Borough”).

The issuance of the Mat-Su drilling permit was followed by the economic downturn and further decline in commodity prices in 2008 which changed the economics and fundability of the project. The permit expired on October 1, 2012. Today, we remain the only applicant that has ever received a CBM drilling permit in the Mat-Su Valley due to the Mat-Su Borough Assembly having adopted some of the strictest regulations for coal bed methane drilling in the United States. In addition, we have been approached by other local government agencies in the Mat-Su Valley that are pro-development of CBM and have the authority to issue drilling permits individually using the same permitting guidelines.

Natural gas production is in high demand by purchasers in the Mat-Su Valley such as the local gas and electric utilities including the Conoco Phillips LNG plant (“Conoco”) as they export liquefied natural gas to Japan directly from Alaska. Since 2008 and until recently, we have continued to maintain communication with the various prospective purchasers in the Cook Inlet area such as Conoco, Chugach Electric Association Inc. and the Matanuska Electric Association (“MEA”). In addition, MEA is working to build a 180 megawatt natural gas power generation plant as part of its mission of bringing reliable, affordable power to the residents of the Cook Inlet. Construction is proposed to begin 2013 and they expect to be ready for testing by October 2014. MEA expects to begin generating power by January 1, 2015.

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As per our discussions with local officials, city governments, landowners, gas purchasers and the various permitting agencies in the region, we are confident that once adequate financing is identified, lease acquisitions and re-permitting can be achieved in an expeditious manner due to our relationships in the region as well as the growing demand and the dwindling supply of natural gas in the region.

According to the U.S. Energy Information Administration’s (“EIA”) Short-Term Energy Outlook, (the “Report”) dated May 7, 2013, EIA’s average 2013 Henry Hub natural gas spot price forecast is $3.80 per million British thermal units (MMBtu), an increase of $1.05 per MMBtu from the 2012 average spot price of $2.75. EIA expects that Henry Hub spot prices will average $4.00 per MMBtu in 2014. The report can be accessed at the following link: http://www.eia.gov/forecasts/steo/pdf/steo_full.pdf

Wind Energy Division – Overview

In February 2007, we entered into an exclusive technology and distribution rights agreement (the “Original Windaus Agreement”) for proprietary vertical axis wind turbines created by Windaus Energy, Inc. of Brantford, Ontario (“Windaus”). In March, 2010, we executed an amendment to the Original Windaus Agreement (the “Amendment” and, together with the Original Windaus Agreement, the “Windaus Agreement”), whereby we acquired exclusive manufacturing, marketing, sales, sublicensing and distribution rights to bring Windaus’ proprietary, highly advanced Vertical Axis Wind Turbine Energy Systems (the “Wind Turbine”) to the entire U.S. market, including all Native American Indian lands and reservations with boundaries established by treaty, statute, and/or executive or court order, and that are recognized by the U.S. Federal Government as territory in which U.S. federally recognized tribes American Indian tribes have jurisdiction (includes, without limitation, Rancherias, Pueblos, Indian Colonies, Alaska Native Villages and lands owned by Alaska Native Corporations.

Due to our current focus on the five well enhanced oil recovery program in Montana and other oil & gas development initiatives, in April 2012, we negotiated with Windaus to further amend the license agreement to reduce the licensed territory and relinquish NAGP’s manufacturing rights. On April 25, 2012, we amended the Windaus Agreement to reduce the licensed territory by approximately 95%, leaving NAGP only with distribution rights for all Indian Lands as specified in Exhibit A of the Technology License & Distribution Agreement which were filed as Exhibit 10.3 to Amendment No. 1 to our Form 10 Registration Statement filed November 16, 2010, all of which are incorporated herein by reference.

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Contingent on funding, capital availability, certain strategic partnerships, we intend to engage in two segments of wind power generation:

1. Wind Community Development: small to large-scale wind farms jointly owned by Native American Indian communities, small town local communities, farm owners and us. We plan to connect to the general utility electric grid to produce clean, environmentally sound wind power for use by the electric power industry.

2. Single Unit Distribution: wind turbine systems to produce electrical power, both on and off the grid, for use by individual homeowners, small businesses, commercial industry, institutions, utility companies, schools, government buildings, apartment complexes, industrial sites, communication towers and military facilities.

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 1B. Unresolved Staff Comments.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Properties.

Oil & Gas Properties, Wells, Operations and Acreage

Our properties consist primarily of interests in properties on which oil and gas wells are located, both non-producing and in progress, as well as undeveloped properties. Such property interests are often subject to landowner royalties, overriding royalties and other oil and gas leasehold interests and are listed below.

Five-Well Pilot Program

Below are background information and a field update on each well in the Five-Well Pilot Program. These five wells were specifically chosen due to the following important characteristics present in all wells: Permeability, Porosity and Pressure. Our management’s strategy regarding the Five-Well Program was to complete the initial workover (casing scraping, tubing testing), surfactant treatment and lateral jetting EOR process for the five wells as quickly as possible and complete the final phase of workovers necessary to bring the wells online and into production once we are adequately capitalized to do so. Due to our limited resources, our management completed as much of the plan as possible and intends to complete the Five-Well Program in its entirety by the end of the 3rd quarter of 2013 providing that we are able to raise sufficient funds in a private placement offering.

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Cox 7-1 Well - located on 80 acres (SW NW of Sec.11-31N-44E) in Roosevelt County, Montana

Historically producing sweet crude from the shallow Mississippian Charles Formation, Cox 7-1 was first drilled in 1981 by Century Oil & Gas Corporation and completed at 35 barrels of oil per day, but was later shut-in primarily due to a build-up of naturally occurring paraffin which clogged perforations in the original well bore as well as a tubing anchor that was not able to be released or retrieved over the years by other operators. In addition, the well was only operating approximately 50% of the time mainly due to past operator’s inability to effectively correct mechanical problems with surface equipment. We began the workover and EOR process on this well in August 2011. During the well operations to retrieve the tubing anchor, it was discovered that, in fact, it was a packer instead of an anchor. We were successful in retrieving the packer and then proceeded with the EOR plan for the well. We completed the workover and EOR process in mid-September with satisfactory results. We installed updated surface equipment and in-ground flow lines. We plan to re-enter the well during the fall of 2013 and recomplete it by implementing a casing patch operation to bring the well online for production.

Sandvick 1-11 Well - located on 320 acres (SW NW of Sec.11-31N-44E) in Valley County, Montana

The well was originally drilled in 1983 by Clayton W. Williams, Jr. and was completed at 99 barrels of oil per day; however the average historical production of the well through the 1980s and 1990s declined to approximately 20 barrels per day, due largely to mud blockages down hole. During the initial phase of the workover, we succeeded in overcoming mud filtration issues which hindered past production. After jetting the laterals in the Ratcliffe formation, approximately 60 barrels of oil almost immediately flowed back into the pits on location, which indicated that we definitely stimulated the section of rock from which oil or gas is expected to be produced in commercial quantities (the “pay zone”). Swab testing showed a 30% oil cut (difference between oil and water) from total fluids. The well was brought online for testing in November at which time it exhibited strong oil production – during the initial 18 hours the well was online, it produced approximately 80 barrels of oil. However, a packer installed to close off a casing leak from a water zone above the oil zone lost integrity and allowed water to migrate into the wellbore which overpowered the pay zone. Consequently, we plan to re-enter the well during the fall of 2013 and recomplete the well by applying a cement squeeze into the casing to close off the water zone and then bring the well online for production.

Wright 5-35 Well - located on 160 acres (SW NW of Sec.35-24N-46E) in McCone County, Montana

This well was first drilled in 1960 by State Oil and Cities Service Oil Company. Original completion of the well resulted in 36 barrels of oil per day, a production level which persisted for most of its productive life through 1985 when it was shut down for two years. The well was brought back into production in 1987 and continued to produce oil until 1995 when it was again shut down. At that point in time, oil production had declined to approximately six barrels of oil per day due to a build-up of paraffin that plugged off perforations in the well bore. Following our acquisition of the lease in 2006, we serviced the well and applied a paraffin surfactant to clean the perforations, casing and tubing. Over the two-day testing period, the well produced over 400 barrels of 36 Degree API Gravity Oil. In November 2011, we completed the initial workover and EOR process of the Wright 5-35 well. Further, field crews successfully upgraded the electrical systems which power the surface equipment, replaced the pad under the pumpjack and winterized the well site. The production on the Wright 5-35 prior to originally being shut-in during 1995 was 9 barrels of oil per day. Well testing during the completion stage exhibited an oil cut ranging from 25% to 50%. On December 10, 2011, the well was brought online into minimal production and underwent adjustments to surface equipment to stabilize the well. During the following 2 weeks after being brought online, the well was generating approximately 24 barrels of 36 degree API Gravity Oil per day until it was shut-in during the last week of December 2011 pending purchase of additional equipment needed to effectively operate the well. Based on the well test which included swab testing, we estimate that daily oil production will approximate 60 barrels per day once we begin steady production from this well.

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Beery 2-24 & 22-24 - located on 320 acres (N/2 of Sec.24-23N-49E) in McCone County, Montana

Both Beery 2-24 and Beery 22-24 are situated on NAGP’s 320 acre lease in north McCone County, and located in an oil and gas field originally discovered by Shell Oil in the early 1950s. Beery 22-24 was first drilled and completed in 1953 and is the only original well drilled by Shell that remains in the field today. This well was the second largest producer in the East Richey Field, producing 2300 barrels of oil per day (“BOPD”) during its active production life. Beery 2-24 was originally drilled and completed by Dick Shackelford and Edward Beery in 1980 and initially produced 24 BOPD. The Beery property produced approximately 350,000 barrels of the 2 million barrels of cumulative oil produced in the entire field.

In January 2012, we completed the lateral jetting operations of the Beery 2-24. We also purchased and installed four oil storage tanks at the tank battery location onsite providing 1600 barrels of total oil capacity. Since the jetting of the laterals combined with a proprietary chemical blend, the down-hole pressures have increased significantly and the well has naturally flowed in excess of 5 barrels of oil and a significant amount of gas every morning when the well was being bled off for daily operations. The swab tests indicate a consistent 50% oil cut from total fluids. We plan to mobilize the work-over rig to this site during the summer of 2013 and complete the workover process which includes installation of a specialized down-hole pump specifically designed for this well, replacing the current pumpjack with a larger pumpjack that will allow us to get a longer stroke when the well is in production and install electric equipment needed to operate the well which includes a 50 Horsepower motor. We plan to re-enter the well during the early summer of 2013 and recomplete it by implementing a casing patch operation and bring the well online for production. Based on the well tests from the EOR process, we are estimating the daily production from this well to be at least 100 barrels per day.

Beery 22-24 – Rework Plan

The Beery 22-24 is the fifth and final well in NAEG's five well Rework Program. Shell completed this well at 2600 barrels of oil per day in 1950's and it was one of the largest producers in the area. In 1986, the operator at the time installed a 385' liner at the bottom of the well in order to shut off water from one of three zones open. (B2, C2 and Mission Canyon) Until recently, this well would not have many options to improve oil production but with perforating technology achieving penetration distances of three feet or better and with the success of surfactants, we feel that after what was learned from the Beery 2-24 EOR program, this well has very similar potential as we are exploiting the same geological formations and pay-zones. Our plans include, perforating more holes in the B2 zone but more importantly, perforate the same part of the C2 zone that was completed in the Beery 2-24. The perforating will be followed up with a two hundred barrel surfactant and acid treatment. Ball sealers will be used to make sure all of the perforations are open. Based on the geology, production history of the well and our experience with the same formations in the Beery 2-24 which is in the same field, we are estimating the daily production from the Beery 22-24 well to be at 70 barrels per day. Subject to adequate financing, we plan to commence the workover and EOR operations on the Beery 22-24 well during the summer of 2013 after completion of the Beery 2-24 well.

Facilities

Corporate Office - We maintain our current principal office at 61-43 186th Street Fresh Meadows NY 11365.

Montana Maintenance Facility – We maintain an equipment yard and maintenance facility on the Fort Peck Indian Reservation in Montana. It is located on 5 acres and includes a tool workshop and three vehicle bays. It is located on Highway 2 in Wolf Point, Montana. There is no physical address for this location.

Item 3. Legal Proceedings.

The information required by Item 3 is included in “Notes to the Consolidated Financial Statements—Note 15 – Commitments and Obligation—Litigation.”

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information.

While there is no established public trading market for our common stock, our common stock is quoted on the OTCQB market under the symbol NAGP. The following table sets forth the high and low bid prices for our common stock reported by the OTC marketplace for the periods indicated below. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

	Price Range Per Share
	High ($)		Low ($)
Year Ending December 31, 2012
First Quarter		1.01		0.14
Second Quarter		0.64		0.10
Third Quarter		6.00		0.15
Fourth Quarter		0.23		0.05
Year Ending December 31, 2011
First Quarter		0.64		0.13
Second Quarter		0.90		0.25
Third Quarter		0.83		0.15
Fourth Quarter		1.02		0.08

On March 13, 2008, the Depository Trust & Clearing Corporation (“DTC”) had originally suspended trade and settlement services (known as a “Global Lock” or “Chill”) for our Company’s security along with 25 other companies, resulting in our common stock not being ineligible for delivery, transfer or withdrawal through the DTC system and not being electronically tradable. On June 21, 2012, after a four year appeal, the Depository Trust Company (DTC) restored full electronic clearance and settlement services for the Company’s “NAGP” security. A notice of reinstatement was filed as Exhibit 99.1 to an 8-K filed on June 25, 2012.

Holders

As of May 20, 2013, we had 756 registered shareholders of common stock.

Dividends

We have not paid any cash dividends to date and do not anticipate or contemplate paying any dividends in the foreseeable future. It is the present intention of our management to utilize all available funds for the growth of our business.

Equity Compensation Plan Information

Plan category	Number of securities  to be issued upon  exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available  for future issuance under equity compensation plans
Equity compensation plans approved by security holders		10,000,000	$	0.92		20,000,000	(1)
Equity compensation plans not approved by security holders		-0-		-0-		-0-

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Our 2011 Equity Incentive Plan (the “2011 Equity Incentive Plan”) was adopted by our Board of Directors effective June 6, 2011, and has been approved by the written consent of holders of shares of our common stock and Series A Preferred Stock.

Recent Sales of Unregistered Securities

In the fiscal year ended December 31, 2012, we made the following shares of unregistered securities, some of which have previously been disclosed on our Current Reports on Form 8-K and our Quarterly Reports on Form 10-Q:

· During the three months ended March 31, 2012, we issued and sold to four investors an aggregate of 592,000 shares of our common stock at a per share purchase price of $.25 for proceeds of $148,000.

· During the three months ended June 30, 2012, we issued and sold to 13 investors an aggregate of 675,800 shares of our common stock at a per share purchase price of $0.25 for proceeds of $168,950.

· During the three months ended September 30, 2012, we issued and sold to 15 investors an aggregate of 551,200 shares of our common stock at a per share purchase price of $0.25 for proceeds of $137,800.

· During the three months ended December 31, 2012, we issued and sold to 2 investors an aggregate of 850,000 shares of our common stock at a per share purchase price of $0.10 for proceeds of $85,000.

Item 6. Selected Financial Data.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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

The following information should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K.

Overview

Native American Energy Group, Inc. is a development-stage energy resource development and management company, with four principal projects:

·   development of oil and gas interests in the Williston Basin in Montana (5-Well EOR Program);

·   development of coal-bed methane natural gas (“CBM”) in the Cook Inlet Basin in Alaska;

·   development of oil & gas properties on Native and non-Native American lands in Oklahoma using newer drilling and Enhanced Oil Recovery (EOR) technologies; and

·   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 inception (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, oil and natural gas properties which management believes have potential for improved production rates and resulting income by application of both conventional and non-conventional improvement and enhancement techniques, including horizontal drilling.

Our consolidated financial statements include the accounts, including our wholly owned subsidiaries, NAEG Alaska and NAEG Operations. All significant intercompany balances and transactions have been eliminated in consolidation.

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

We are 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, we have not generated sales revenues; have incurred expenses and 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 December 31, 2012, the Company has accumulated losses of $31,331,949.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, we have identified several accounting principles that we believe are key to the understanding of our financial statements. These important accounting policies require management’s most difficult, subjective judgments.

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.

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. 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.

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

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.

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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 have assessed 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 year ended December 31, 2012 and 2011. 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 years ended December 31, 2012 and 2011, our 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, 2012 and 2011. As a result, upon completion of the assessment, management recorded a non-cash impairment charge of $-0-, net of tax, during the year ended December 31, 2012 and $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.

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. During the years ended December 31, 2012 and 2011, we received proceeds from the sale of oil from two wells on our sites in the amount of $41,831 and $111,606 respectively.

Income Taxes

We have adopted 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 are insignificant

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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.

Net Loss per Share

We follow 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. Our common stock equivalents, represented by convertible preferred stock and warrants, were not considered as including such would be anti-dilutive.

Results of Operations for the Twelve Months Ended December 31, 2012 and 2011

Revenues

During the years ended December 31, 2012 and 2011, we received proceeds from the sale of oil for test purposes from two wells on our sites in the amount of $26,702 and $111,606 respectively.

Operating Expenses

Selling, General and Administrative

Selling, general and administrative expenses decreased from $5,293,927 for the twelve months ended December 31, 2011 to $1,758,749 for the twelve months ended December 31, 2012. The decrease of $3,535,178 or 67% is primarily attributable to a decrease in equity based compensation to consultants and service providers of $2,751,192 along with a reduction in operations expenses due to funding constraints.

Impairment of undeveloped properties

Impairment of undeveloped properties in the current fiscal year decreased from $690,552 for the twelve months ended December 31, 2011 to $-0- for the twelve months ended December 31, 2012. This decrease of $690,552 is attributed to an reduced investments in our undeveloped properties.

Litigation Settlement

During the year ended December 31, 2012, we concluded litigation as described in our accompanying financial statements. As such, we incurred a $1,757,182 charge in the year ended December 31, 2012 comprised of additional shares of our common stock and an obligation to issue warrants based on certain conditions occurring. During the year ended December 31, 2011, we incurred costs of $247,438.

Depreciation and Amortization

In the twelve months ended December 31, 2012, depreciation and amortization decreased by $5,839 from $159,594 for the twelve months ended December 31, 2011 to $153,755 for the twelve months ended December 31, 2012. The decrease is attributable aging of our field equipment purchased in prior years.

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Total Operating Expenses

Total operating expenses decreased to $3,669,686 for the year ended December 31, 2012 from $6,391,511 for the year ended December 31, 2011. The decrease of $2,721,825 is primarily attributable to a decrease in equity based compensation issued to consultants and services providers net with the settlement of litigation as described above.

Loss 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 loss of $149,965 for the year ended December 31, 2012, $-0- for the same period, last year.

Gain on settlement of debt

During the year ended December 31, 2012, we amended our previously acquired and expensed licensing agreement, reducing our remaining debt obligation from $469,500 to $69,500 realizing a gain from debt cancelation. In addition, we settled accounts payable, debt and related accrued interest by issuance of our common stock realizing a gain of $253,220. During the year ended December 31, 2011, we received notification of the cancellation of two vehicle notes from the financing company totaling $21,606; due to the cancellation of certain oil & gas leases, we were notified that certain lease payments totaling $25,698 were no longer payable; and a lender and a former consultant forgave a loan payable and an account payable, respectively, in the amount of $10,197 and $4,500. Accordingly, we recognized $62,002 included as gain on settlement of debt on the statement of operations.

Loss on Debt Modification

On October 26, 2012, we entered into a settlement agreement with our bridge note holders and High Capital Funding LLC, holder of $723,000 in matured notes payable. In connection with a forbearance on the security held, we agreed to issue common stock and warrants in conjunction with the settlement. In addition, we agreed to assume the legal costs incurred by the note holders. As such, we recorded the fair valve of the issued common, warrants and debt assumption as loss on debt modification of $426,980 for the year ended December 31, 2012.

Interest Expenses, net

Interest expense, net for the twelve months ended December 31, 2012 decreased by $38,218 to $511,943 from $69,374 for the twelve months ended December 31, 2011. The decrease in interest expense was due to issuing common shares in connection with our bridge financing charged to period interest in 2011.

Net (Loss)

Net loss for the twelve months ended December 31, 2012 decreased to $4,072,286 from a net loss of $6,767,737 for the twelve months ended December 31, 2011. The decrease of $2,695,451 is primarily attributable to the following factors: (i) a decrease in field operations expenses in our Montana field site and the Five-Well Program; (2) an decrease in equity based compensation to consultants and service providers; (iii) a decrease in the amount of impairment of undeveloped properties for the twelve months ended December 31, 2012 as compared to the twelve months ended December 31, 2011; (iv) gain on settlement of debt in 2012 of $653,220 and compared with $62,002 in 2011; (v) net with a loss on debt modification of $426,980 in 2012 as compared to nil in 2011 and a loss on change in fair value of derivatives of $149,965.

Liquidity, Capital Resources and Going Concern

We generated minimum revenues in the year ended December 31, 2012. 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 find expenditures for exploitation 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.

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Our liquidity needs consist of our working capital requirements, indebtedness payments and property development expenditure funding. Historically, we have financed our operations through the sale of equity and debt, as well as borrowings from various credit sources, and we have adjusted our operations and development to our level of capitalization. On a going-forward basis, we anticipate that we may need approximately $250,000 to $350,000 annually to maintain our corporate existence and pay the expenses and costs that we likely will incur to ensure that we can remain a corporate enterprise with all of our attendant responsibilities, filings, and associated documentation.

As of December 31, 2012 we had a working capital deficit of $4,523,197. For the twelve months ended December 31, 2012, we generated a net cash flow deficit from operating activities of $529,723, consisting primarily of year to date loss of $4,072,286. Non cash adjustments included $153,755 in depreciation and amortization charges, $448,500 for equity based compensation, $27,901 amortization of debt discount, $426,980 loss on debt modification, $1,757,182 for fair value of common stock and warrants issued in litigation settlement, $87,514 non-cash interest paid, $149,965 for loss on change in fair value of derivative liabilities, $162,500 in fair value of vesting options and $185,306 for the fair value of warrants issued in connection with debt net with $663,220 gain on settlement of debt Additionally, we had a net decrease in assets of $64,455 and a net increase in current liabilities of $741,725. A net cash flow deficit from investing activities for the twelve months ended December 31, 2012 was nil. Cash provided by financing activities for the twelve months ended December 31, 2012 totaled $516,945, consisting of proceeds from the sale of our common stock and proceeds from loans and notes payable, net with repayments on loans and notes payable.

We expect that exploitation of potential revenue sources will be financed primarily through the private placement of securities, including issuance of notes payable and other debt or a combination thereof, depending upon the transaction size, market conditions and other factors.

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 would expect cash flow from future operations to rise as our as we are able to improve our operations, post funding, and the number of projects we successfully develop grows, we will continue to focus, in the near term, on raising additional capital, probably through the private placement of equity securities, to assure we have the necessary liquidity for 2013.

We need to raise capital to fund the development of future wells. 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. There can be no assurance that additional funding will be available on favorable terms, if at all. 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 entering into 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 funding to meet current commitments and fund the continuation of our business operations, and our ability to ultimately achieve adequate profitability and cash flows from operations to sustain our operations.

Impact of Default

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

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

Default on lease obligations could result in the impairment of our ability to conduct executive functions, which would be the case if we lost the New York executive office space. The loss any of our oil and gas leases will likely result in the curtailment of potential oil and gas production revenues to us. There are no other known alternative sources of funding to pay off or replace these obligations.

Going Concern

Our financial statements have been presented on the basis that we continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, we incurred a net operating loss in the years ended December 31, 2012, 2011, 2010, 2009 and 2008, and have minimum revenues at this time. These factors create an uncertainty about our ability to continue as a going concern. We are currently trying to raise capital through a private offering of our stock. Our ability to continue as a going concern is dependent on the success of this plan. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Material Commitments

Among other debts, as of December 31, 2012, 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

· 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.

· 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

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, or result in changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 8. Financial Statements and Supplementary Data.

Our financial statements, together with the report of our independent registered public accounting firm, are contained in pages F-1 through F-30 which appear at the end of this Annual Report.

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

None.

Item 9A. Controls and Procedures.

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 “1934 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 December 31, 2012. Based on this evaluation, and because of our limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of December 31, 2012.

Management’s Report on Internal Control over Financial Reporting

Our management is also responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of our financial statements in accordance with U.S. generally accepted accounting principles.

Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2012 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on our evaluation and the material weaknesses described below, our management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2012 based on the COSO framework criteria. Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis, and thus are a material weakness. Our management believes that these material weaknesses are due to the small size of our accounting staff due to financial restrictions. As we grow and obtain financing, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, during the fourth fiscal quarter of December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Offices and Corporate Governance.

Directors and Executive Officers

The following table and text sets forth the names and ages of all our directors and executive officers and our key management personnel as of December 31, 2012. All of our directors serve until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of the Board of Directors, and are elected or appointed to serve until the next Board of Directors meeting following the annual meeting of stockholders. Also provided is a brief description of the business experience of each director and executive officer and the key management personnel during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.

Name	Age	Position
Joseph G. D’Arrigo	51	President, Chief Executive Officer and Chairman
Raj S. Nanvaan	35	Chief Financial Officer, Chief Operations Officer, Vice President, Treasurer and Director
Richard Ross	61	Corporate Secretary, Chief Communications Officer and Director
Doyle A. Johnson	58	Chief Geologist & Petroleum Engineer
Linda C. Chontos	58	Administrative Operations Officer

Following is a brief summary of the background and experience of each director and executive officer of our Company:

Joseph G. D’Arrigo. Mr. D’Arrigo has served as our President, Chief Executive Officer and Chairman since our formation in January 2005. Since our inception, he has been responsible for guiding us through all aspects of our early stage development, including capital formation, project assessments, lease acquisitions, and tribal employment policy. In addition to his services as our officer and director, Mr. D’Arrigo has served as President, Chief Executive Officer and sole director of our subsidiary, NAEG Alaska Corporation (formerly Fowler Oil and Gas Corporation) since May 2009. Concurrently, he has served as President and director of Founders since our formation in April 2005. In November 2011, he was appointed as President and director of NEDC.

Raj S. Nanvaan. Mr. Nanvaan has served as our Chief Financial Officer, Vice President, Treasurer, and director since our formation in January 2005. He resigned from his position as our Corporate Secretary in July 2009 and was appointed Chief Operating Officer on that date. Concurrent with his services as our officer and director, Mr. Nanvaan has served as Secretary, Treasurer and director of Founders since our formation in April 2005. He resigned as Secretary of Founders in September 2010. In November 2011, he was appointed as Vice President, Treasurer and director of NEDC.

Richard Ross. Mr. Ross has served as our Chief Communications Officer in charge of Investor Relations since February 2005 and as Assistant Corporate Secretary from February 2005 through July 2009, when he was promoted to Corporate Secretary. Mr. Ross has served on our Board since December 2009. In addition to his services as our officer and director, he has served as Secretary and a member of the board of directors of Founders since September 2010. In November 2011, Mr. Ross was appointed as Corporate Secretary and director of NEDC.

Doyle A. Johnson. Mr. Johnson has provided consulting services to us since February 2005 through December 2008, and was appointed our Chief Geologist & Petroleum Engineer in July 2010. He is a third-generation oil and gas professional with over 35 years of oilfield exploration, production and engineering experience. Mr. Johnson has worked on over 5,000 oil & gas wells and has a good safety record. He has successfully managed operations in the most sensitive of natural areas and has established a good reputation in the industry.

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Linda C. Chontos. Mrs. Chontos has advised our executives since 2005 on certain initiatives on a complimentary basis. She is credited for introducing us to certain relationships within the state of Alaska and has continued to help us cultivate and preserve certain key relationships in Alaska related to its Coal Bed Methane development initiative. On June 1, 2011, she was appointed as our Administrative Operations Officer. From March 2005 through June 2011, Mrs. Chontos previously served as the President of United Consultants, Inc. where she advised development stage companies on business development and administrative operations.

Family Relationships.

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

Involvement in Certain Legal Proceedings.

There have been no events under any bankruptcy act, any criminal proceedings or any judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person during the past ten years except as follows:

From February 1, 1998 to June 1, 1998, Raj S. Nanvaan, at the age of 20, was employed as a General Securities Representative by Renaissance Capital Management, Inc., a brokerage firm, the principal owners / officers of which were later criminally prosecuted for selling unregistered securities. While employed by such brokerage firm for such 5 month period, Mr. Nanvaan received compensation for normal brokerage commissions by the principals from an account that was used from October 1997 to March 1999. Mr. Nanvaan subsequently decided to leave the firm to become a Securities Compliance Manager by taking the Series 24 exam and established his own securities brokerage firm. Nearly two years later, in March 2000, Mr. Nanvaan was notified by the Securities and Exchange Commission (“SEC”) of a civil lawsuit whereby the SEC was seeking an injunctive action against several registered representatives who worked at Renaissance during the period from October 1997 to March 1999 for inducing investors to invest in a soon to be defunct corporation, making false representations regarding such corporation’s IPO and negligently or recklessly distributing materials containing misstatements and omissions. Mr. Nanvaan’s five month employment with Renaissance fell within such period.

Subsequently, the SEC charged the five individuals named in the complaint, which included Mr. Nanvaan, for violations of Sections 5 and 17(a) of the Securities Act of 1933, as amended (the “Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). On March 29, 2003, the district court in an administrative proceeding granted the SEC’s application to permanently enjoin each of the remaining securities representatives, including Mr. Nanvaan, from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder. On October 31, 2003, Mr. Nanvaan was ordered to return $10,000 plus $4,273.26 in pre-judgment interest and pay a civil penalty of $10,000. In June 2005, the SEC and Mr. Nanvaan agreed to a settlement whereby Mr. Nanvaan neither admitted nor denied the findings of the Commission. As part of the settlement, the SEC imposed remedial sanctions pursuant to Section 15(b)(6) of the Exchange Act, barring Mr. Nanvaan from having any association with any broker or dealer. None of the above sanctions prohibit Mr. Nanvaan from being employed as an officer or director of a public or private company.

Since the year 2000, Mr. Nanvaan has not been associated with a broker or dealer or been involved in the securities industry. Since 2001, he has been actively involved in the energy industry. Since 2005, he has been employed by Native American Energy Group, Inc. He has at all times been in full compliance with the above administrative order.

Section 16(a) Beneficial Ownership Reporting Compliance.

Section 16 (a) of the Securities Exchange Act of 1934, as amended, requires our directors and officers, and persons who own more than ten percent (10%) of the our common stock, to file with the Securities and Exchange Commission reports of ownership on Form 3 and reports of change in ownership on Forms 4 and 5. Such officers, directors and ten-percent stockholders are also required to furnish us with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such forms received by us and on written representations from certain reporting persons, we believe that all Section 16(a) reports applicable to its officers, directors and ten-percent stockholders with respect to the fiscal year ended December 31, 2012 were filed timely.

23

Code of Ethics

The Board of Directors adopted a Code of Business Conduct and Ethics (“Code of Ethics”) on May 3, 2011. The Code of Ethics is applicable to our employees, officers and directors, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code of Ethics is posted and available on the Corporate section of our website, http://www.nativeamericanenergy.com, under Governance. Information on our website is not incorporated by reference in this Annual Report on Form 10-K.

Board of Directors

Our board currently consists of three directors. There have been no material changes to the procedures by which security holders may recommend nominees to the board of directors.

Audit Committee Financial Expert

The Board of Directors has not established any committees and acts as our Audit Committee. We have no qualified financial expert at this time because it has not been able to identify a qualified candidate. We intend to continue to search for a qualified individual for hire.

Item 11. Executive Compensation.

Summary Compensation Table

The following table sets forth all compensation earned for services rendered to us in all capacities for the fiscal years ended December 31, 2012 and 2011, by our principal executive officer, principal financial officer, and three of our other executive officers who served in such capacities as of the end of fiscal 2012, collectively referred to as the “Named Executive Officers.”

Name and Principal Position	Year	Salary($) (1)		Option Awards ($)(3)		Deferred Salaries ($)(4)		Total ($)
(a)	(b)	(c)		(d)		(e)		(f)
Joseph G. D’Arrigo,	2012		-		389,998		12,000		402,000
President & Chief Executive Officer	2011		1,000						1,000
Raj S. Nanvaan,	2012		-		389,998		12,000		402,000
Chief Financial Officer & Chief Operations Officer	2011		1,000						1,000
Richard Ross,	2012		-		390,000		12,000		402,000
Corporate Secretary & Chief Communications Officer	2011		1,000						1,000
Doyle A. Johnson,	2012		-		390,000		12,000		402,000
Chief Geologist & Petroleum Engineer	2011		-						-
Linda C. Chontos,	2012		-		390,000		12,000		402,000
Administrative Operations Officer (2)	2011		-						-

24

(1) In September 2011, we implemented a payroll system with Automatic Data Processing, Inc. (ADP), a company that provides payroll services for businesses. The payroll system was setup in anticipation of funding that was expected to be received, whereby we could begin paying salaries to its employees. We had never had a payroll system in place since our inception. During the payroll system and direct deposit setup process, three of our officers received $1,000 each for their services provided as an initial test of the payroll system and its initiation process.

(2) On June 1, 2011, Linda C. Chontos was appointed as our Administrative Operations Officer.

(3) On September 14, 2012, the Board of Directors granted 2,000,000 common stock options each to Mr. D’Arrigo and Mr. Nanvaan. The options are exercisable at $2.00 for five years with vesting in four year increments beginning the first anniversary. In addition, on September 14, 2012, the Board of Directors granted 2,000,000 common stock options each to Mr. Ross, Mr. Johnson and Ms. Chontos. The options are exercisable at $0.20 for ten years with vesting in four year increments beginning the first anniversary.

(4) Beginning October 1, 2012, the Company began accruing salaries for its five (5) employees in accordance with employment agreements executed on September 14, 2012. Each employee receives an annual salary of $48,000 at the rate of $4,000 per month. Currently the salaries are currently being deferred until the company is in a financial position to pay such salaries.

Members of the Board do not receive compensation but are entitled to reimbursement of their expenses incurred in attending Board meetings.

Employment Contracts

The Company has no pension, annuity, insurance, profit sharing or similar benefit plans; however, the Company may adopt such plans in the near future. On September 14, 2012, the Company entered into employment agreements with Joseph G. D’Arrigo, Raj S. Nanvaan, Richard Ross, Doyle A. Johnson and Linda C. Chontos. All Executives’ salaries are being deferred until sufficient capital is available.

Mr. D’Arrigo's agreement is for a period of 5 years and provides for payment of $48,000 annually in exchange for Mr. D’Arrigo's services as President and Chief Executive Officer of the Company. The Company will defer payment of Mr. D’Arrigo's base salary until sufficient capital is available.

Mr. Nanvaan's agreement is also for a period of 5 years and provides for payment of $48,000 annually in exchange for Mr. Nanvaan 's services as Chief Financial & Operations Officer of the Company. The Company will defer payment of Mr. Nanvaan's base salary until sufficient capital is available.

Mr. Ross’ agreement is also for a period of 5 years and provides for payment of $48,000 annually in exchange for Mr. Ross' services as Chief Communications Officer and Corporate Secretary of the Company. The Company will defer payment of Mr. Ross' base salary until sufficient capital is available.

Mr. Johnson’s agreement is also for a period of 5 years and provides for payment of $48,000 annually in exchange for Mr. Johnson’s services as Chief Geologist and Petroleum Engineer of the Company. The Company will defer payment of Mr. Johnson's base salary until sufficient capital is available.

Ms. Chontos’ agreement is also for a period of 5 years and provides for payment of $48,000 annually in exchange for Ms. Chontos' services as Administrative Operations Officer of the Company. The Company will defer payment of Mr. Chontos' base salary until sufficient capital is available.

25

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

The following table sets forth, as of May 20, 2013 the number of shares of (i) Common Stock and (ii) Series A Stock owned of record and beneficially by our current executive officers, directors and persons who hold 5% or more of the outstanding shares of Common Stock and Series A Stock, respectively, of us, and all of our current directors and executive officers as a group. Amounts reported under “Common Stock Beneficially Owned” includes the number of shares that could be acquired through the conversion of Series A Stock within 60 calendar days of this date. Except as otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment power with respect to the securities listed. Further, unless otherwise indicated, each director’s, officer’s and beneficial owner’s address is c/o Native American Energy Group, Inc., 61-43 186th Street Suite 507 Fresh Meadows NY 11365.

Name and Address of Beneficial Owner	Common Stock Beneficially Owned (par value $.001)			Percentage of Common Stock (1)			Series A Stock Beneficially Owned (par value $.0001)			Percentage of Series A Stock (2)
Joseph G. D’Arrigo, Chairman, Chief Executive Officer, President and Director		5,295,751	(3)		13	%		250,000	(4)		50	%
Raj S. Nanvaan, Chief Financial Officer, Chief Operations Officer and Director		5,295,751	(5)		13	%		250,000	(4)		50	%
Richard Ross, Chief Communications Officer, Corporate Secretary and Director		—			—			—			—
Doyle A. Johnson, Chief Geologist & PetroleumEngineer		—			—			—			—
Linda C. Chontos Administrative Operations Officer		—			—			—			—
All Officers and Directors as a Group (5 persons)		10,591,502			26.0	%		500,000			100	%
High Capital Funding LLC 333 Sandy Springs Circle Suite 230 Atlanta GA 30328 (HCF)		4,819,392	(6)		9.95	%		—			—

(1) Based on 40,522,018 shares of Common Stock outstanding as of May 20, 2013. Under Rule 13d-3(d) of the Exchange Act, shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but are not deemed outstanding for the purpose of calculating the percentage owned by each other person listed.

(2) Based on 500,000 shares of Series A Stock issued and outstanding as of May 20, 2013.

(3) Includes 250,000 shares of Common Stock issuable upon conversion of Series A Stock issued to Mr. D’Arrigo on a one share of Series A Stock for one share of Common Stock basis. All such shares of Series A Stock are convertible as of the date of this Information Statement.

26

(4) Each of Joseph G. D’Arrigo and Raj S. Nanvaan are the beneficial owners of 250,000 shares of Series A Stock, which have super-voting rights on the basis of 1,000 votes for each 1 share of Series A Stock. Therefore, each has 250,000,000 votes for the Voting Shares held by them, in addition to 5,045,751 votes for the 5,045,741 shares of Common Stock held by them.

(5) Includes 250,000 shares of Common Stock issuable upon conversion of Series A Stock issued to Mr. Nanvaan on a one share of Series A Stock for one share of Common Stock basis. All such shares of Series A Stock are convertible as of the date of this Information Statement.

(6) Includes 2,522,655 warrants which are exercisable within 60 days of May 20, 2013 but which may not be exercised to the extent such exercise would result in HCF beneficially owning more than 9.95% of NAGP common stock at any given time. As such, all 2,522,655 warrants are exercisable as of the Record Date.

Outstanding Equity Awards at May 20, 2013

The following table summarizes certain information regarding unexercised stock options outstanding for each of the Named Officers as of May 20, 2013.

	Number of Securities Underlying Unexercised Stock Options Exercisable		Number of Securities Underlying Unexercised Stock Options Unexercisable		Stock Option Exercise Price		Stock Option Expiration Date
Joseph G. D’Arrigo, Chairman, Chief Executive Officer, President and Director		—		2,000,000	$	2.00	9/13/2017
Raj S. Nanvaan, Chief Financial Officer, Chief Operations Officer and Director		—		2,000,000	$	2.00	9/13/2017
Richard Ross, Chief Communications Officer, Corporate Secretary and Director		—		2,000,000	$	0.20	9/13/2022
Doyle A. Johnson, Chief Geologist & PetroleumEngineer		—		2,000,000	$	0.20	9/13/2022
Linda C. Chontos Administrative Operations Officer		—		2,000,000	$	0.20	9/13/2022

The Company does not currently have in place or provide retirement, disability or other benefits to its employees.

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

As of December 31, 2012, Joseph D’Arrigo has a loan outstanding to us of $10,550, and Raj Nanvaan has a loan outstanding to us 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.

27

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 prior to the formation of the Company. 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 October 2011, we 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.

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.

 Item 14. Principal Accountant Fees and Services.

Summary of Principal Accountant Fees for Professional Services Rendered

The following table presents the aggregate fees for professional audit services and other services rendered by Kalantry, LLP in 2012 and 2011:

	Fiscal Year Ended December 31, 2012			Fiscal Year Ended December 31, 2011
Audit Fees	$	45,000	(1)	$	45,000	(1)
Audit-Related Fees	$	0		$	0
Tax Fees	$	0		$	0
All Other Fees	$	0		$	0

(1) Includes fees paid to Kalantry LLP are for reviews of the financial statements of our quarterly reports on Form 10-Q.

All services described above were approved by the Board.

Item 15. Exhibits, Financial Statement Schedules.

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

1.  Financial Statements.

Our consolidated financial statements are filed as a part of this Annual Report on Form 10-K.

28

	Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets		F-2
Consolidated Statements of Operations		F-3
Consolidated Statements of Stockholders’ Equity	F-4 to F-6
Consolidated Statements of Cash Flows		F-7
Notes to the Consolidated Financial Statements	F-10 to F-30

2.  Financial Statement Schedules.

All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.

3.  Exhibits

The information required by this Item is set forth on the Exhibit Index that follows the financial statements at the end of this report.

Exhibit No.	Description
10.26	Joseph Darrigo Senior Executive Agreement
10.27	Raj Nanvaan Senior Executive Agreement
10.28	Doyle Johnson Senior Executive Agreement
10.29	Richard Ross Senior Executive Agreement
10.30	Linda Chontos Executive Employment Agreement
31.1	Joseph Darrigo Certification
31.2	Raj Nanvaan Certification
32.1	Joint Certification 18 U.S.C Section 1350

29

SIGNATURES

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

	NATIVE AMERICAN ENERGY GROUP, INC.
Dated: May 20, 2013	By:	/s/ Joseph G. D’Arrigo
		Name: Joseph G. D’Arrigo
		Title: President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons of the Registrant and in the capacities and on the dates indicated:

Dated: May 20, 2013	/s/ Joseph G. D’Arrigo
	Name: Joseph G. D’Arrigo
	Title: President, CEO and Director
	(Principal Executive Officer)
Dated: May 20, 2013	/s/ Raj S. Nanvaan
	Name: Raj S. Nanvaan
	Title: Chief Financial Officer and Director
	(Principal Accounting Officer)

Dated: May 20, 2013	/s/ Richard Ross
	Name: Richard Ross
	Title: Director

30

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets as of December 31, 2012 and 2011		F-2
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and from the period January 18, 2005 (date of inception) to December 31, 2012		F-3
Consolidated Statement of Stockholders’ Equity (Deficit) for the period from January 18, 2005 (date of inception) to December 31, 2012	F-4 to F-7
Consolidated Statements of Cash Flows for the year ended December 31, 2012, 2011 and from the period January 18, 2005 (date of inception) to December 31, 2012	F-8
Notes to the Consolidated Financial statements	F-9 to F-30

31

KALANTRY LLP

CERTIFIED PUBLIC ACCOUNTANTS

70-26 Groton Street Forest Hills NY 11375

Tel (718) 544 2772 | Fax (267) 295 8501

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Native American Energy Group Inc.

Fresh Meadows, New York

We have audited the accompanying consolidated balance sheets of Native American Energy Group, Inc. (the “Company”), a development stage company as of December 31, 2012 and 2011 and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Native American Energy Group, Inc. as of December 31, 2012 and 2011 and the consolidated results of operations, changes in stockholders’ equity and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the accompanying consolidated financial statements, the Company has suffered recurring losses from operations and does not have sufficient cash or working capital to meet anticipated requirements through 2013. This raises substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Kalantry LLP

Forest Hills, New York

May 20, 2013

F-1

NATIVE AMERICAN ENERGY GROUP, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2012 AND 2011
	2012			2011
ASSETS
Current assets:
Cash	$	4,957		$	17,735
Accounts receivable		-			15,213
Prepaid expenses		80,822			34,923
Total current assets		85,779			67,871
Other property plant and equipment, net		463,702			617,457
Other assets:
Collateral on surety bonds		175,381			175,030
Security deposits		2,500			52,093
Total other assets		177,881			227,123
Total assets	$	727,362		$	912,451
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	2,430,368		$	2,430,370
Put liability		-			100,000
Capital leases and notes payable, short term		139,239			524,252
Convertible debentures, net of debt discounts		27,901			-
Notes payable, bridge, net of debt discounts		750,000			680,755
Loans payable, net of debt discounts		1,261,468			1,265,819
Total current liabilities		4,608,976			5,001,196
Long term debt:
Notes payable		-			14,841
Derivative liabilities		632,777			-
Total long term debt		632,777			14,841
Total liabilities		5,241,753			5,016,037
Commitments and contingencies		-			-
Stockholders' deficit:
Preferred stock, par value $0.0001; 21,000,000 and 1,000,000 shares authorized as of December 31, 2012 and 2011, respectively
Series A Convertible Preferred stock, par value $0.0001; 1,000,000 shares designated, 500,000 shares issued and outstanding as of December 31, 2012 and 2011		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, 38,716,299 and 35,128,580 shares issued as of December 31, 2012 and 2011, respectively; 38,716,299 and 33,389,830 shares outstanding as of December 31, 2012 and 2011, respectively		38,716			33,390
Additional paid in capital		26,793,922			23,137,767
Common stock subscription		-			-
Deficit accumulated during development stage		(31,347,079	)		(27,274,793	)
Total stockholders' deficit		(4,514,391	)		(4,103,586	)
Total liabilities and stockholders' deficit	$	727,362		$	912,451

See the accompanying notes to the consolidated financial statements

F-2

NATIVE AMERICAN ENERGY GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(a development stage company)
	Year ended December 31,						From January 18, 2005 (date of inception) through December 31,
	2012			2011			2012
REVENUE	$	26,702		$	111,606		$	200,508
Operating expenses:
Selling, general and administrative		1,758,749			5,293,927			19,323,669
Impairment of undeveloped properties		-			690,552			5,410,802
Impairment of acquired licenses		-			-			2,500,000
Loss on repossession of fixed assets		-			-			56,622
Litigation settlement		1,757,182			247,438			2,173,620
Depreciation and amortization		153,755			159,594			537,486
Total operating expenses		3,669,686			6,391,511			30,002,199
Loss from operations		(3,642,984	)		(6,279,905	)		(29,801,691	)
Other income (expense):
Interest income		350			327			26,803
Loss on change in fair value of derivatives		(149,965	)		-			(149,965	)
Gain on settlement of debt		653,220			62,002			715,222
Loss on debt modification		(426,980	)		-			(426,980	)
Other income		6,016			-			126,174
Interest expense		(511,943	)		(550,161	)		(1,836,642	)
Loss before provision for income taxes		(4,072,286	)		(6,767,737	)		(31,347,079	)
Provision for income taxes (benefit)		-			-			-
NET LOSS	$	(4,072,286	)	$	(6,767,737	)	$	(31,347,079	)
Net loss per common share, basic and diluted	$	(0.11	)	$	(0.22	)
Weighted average number of outstanding shares, basic and diluted		36,117,215			30,469,062

See the accompanying notes to the consolidated financial statements

F-3

NATIVE AMERICAN ENERGY GROUP, INC
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(a development stage company)
FROM JANUARY 18, 2005 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2012
																					Deficit
	Preferred stock				Common stock						Additional Paid in			Common shares to be issued				Common Stock			Accumulated during Development
	Shares		Amount		Shares			Amount			Capital			Shares		Amount		Subscription			Stage			Total
Shares outstanding at inception		-	$	-		30		$	-		$	-			-	$	-	$	-		$	-		$	-
Sale of common stock		-		-		97,500			98			48,652			-		-		-			-			48,750
Common stock issued in exchange for services rendered		-		-		920			1			459,999			-		-		-			-			460,000
Contributed capital by majority shareholders		-		-		-			-			794,682			-		-		-			-			794,682
Net loss for period ended December 31, 2005		-		-		-			-			-			-		-		-			(579,779	)		(579,779	)
Balance, December 31, 2005 (unaudited)		-		-		98,450			99			1,303,333			-		-		-			(579,779	)		723,653
Common stock issued as debt collateral		-		-		20,640			20			(20	)		-		-		-			-			-
Common stock issued in exchange for services rendered		-		-		136			-			19,500			-		-		-			-			19,500
Common stock issued in exchange for expenses		-		-		50			-			3,000			-		-		-			-			3,000
Sale of common stock		-		-		8,046			8			249,992			-		-		-			-			250,000
Common stock subscription		-		-		-			-			-			-		-		40,000			-			40,000
Contributed capital by majority shareholders		-		-		-			-			451,739			-		-		-			-			451,739
Net loss for year ended December 31, 2006		-		-		-			-			-			-		-		-			(763,264	)		(763,264	)
Balance, December 31, 2006		-		-		127,322			127			2,027,544			-		-		40,000			(1,343,043	)		724,628
Issuance of common stock for subscription		-		-		5,000			5			39,995			-		-		(40,000	)		-			-
Sale of common stock, net		-		-		17,507			17			317,358			-		-		-			-			317,375
Return of common stock issued for collateral		-		-		(20,400	)		(20	)		20			-		-		-			-			-
Common stock to be issued for acquisition of Fowler Oil & Gas		-		-		-			-			-			11,765		691,200		-			-			691,200
Sale of royalty rights		-		-		-			-			1,715,000			-		-		-			-			1,715,000
Cancelation of common stock issued for services		-		-		(20	)		-			-			-		-		-			-			-
Contributed capital by majority shareholders		-		-		-			-			64,301			-		-		-			-			64,301
Net loss for the year ended December 31, 2007		-		-		-			-			-			-		-		-			(905,809	)		(905,809	)
Balance, December 31, 2007		-	$	-		129,409		$	129		$	4,164,218			11,765	$	691,200	$	-		$	(2,248,852	)	$	2,606,695

F-4

NATIVE AMERICAN ENERGY GROUP, INC
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(a development stage company)
FROM JANUARY 18, 2005 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2012
																			Deficit
	Preferred stock				Common stock				Additional Paid in		Common shares to be issued						Common Stock		Accumulated during Development
	Shares		Amount		Shares		Amount		Capital		Shares			Amount			Subscription		Stage			Total
Balance, December 31, 2007		-	$	-		129,409	$	129	$	4,164,218		11,765		$	691,200		$	-	$	(2,248,852	)	$	2,606,695
Issuance of common stock for investment in wholly owned subsidiary		-		-		11,765		12		936,187		(11,765	)		(691,200	)		-		-			244,999
Sale of royalty rights		-		-		-		-		1,208,570		-			-			-		-			1,208,570
Contributed capital by majority shareholders		-		-		-		-		2,754		-			-			-		-			2,754
Net loss for the year ended December 31, 2008		-		-		-		-		-		-			-			-		(5,111,099	)		(5,111,099	)
Balance, December 31, 2008		-		-		141,174		141		6,311,729		-			-			-		(7,359,951	)		(1,048,081	)
Issuance of common stock for technology license		-		-		2,000		2		-								-		-			2
Effective of Merger with Native American Group, Inc. (formerly Flight Management International, Inc.)		-		-		351,829		352		25,580		-			-			-		-			25,932
Preferred shares issued in exchange for services		500,000		50		-		-		399,950		-			-			-		-			400,000
Common shares issued in exchange for services		-		-		10,000,000		10,000		7,990,000		-			-			-		-			8,000,000
Sale of Common Stock		-		-		490,000		490		104,510		-			-			-		-			105,000
Common stock issued in exchange for expenses		-		-		45,000		45		30,955		-			-			-		-			31,000
Contributed capital by majority shareholders		-		-		-		-		2,486		-			-			-		-			2,486
Net loss for the year ended December 31, 2009		-		-		-		-		-		-			-			-		(9,144,034	)		(9,144,034	)
Balance, December 31, 2009		500,000		50		11,030,003		11,030		14,865,210		-			-			-		(16,503,985	)		(1,627,695	)
Shares issued for fractional roundup (merger)		-		-		4,425		4		-		-			-			-		-			4
Common stock issued to acquire technology license		-		-		2,000,000		2,000		1,998,000		-			-			-		-			2,000,000
Common stock issued in settlement of debt		-		-		10,040,702		10,042		1,514,716		-			-			-		-			1,524,758
Sale of common stock		-		-		2,318,900		2,318		290,382		-			-			-		-			292,700
Common stock issued in exchange for services		-		-		100,000		100		19,900		-			-			-		-			20,000
Common stock issued in exchange for expenses		-		-		1,543,000		1,543		619,947		-			-			-		-			621,490
Net loss		-		-		-		-		-		-			-			-		(4,003,071	)		(4,003,071	)
Balance, December 31, 2010		500,000	$	50		27,037,030	$	27,037	$	19,308,155	$	-		$	-		$	-	$	(20,507,056	)	$	(1,171,814	)

F-5

NATIVE AMERICAN ENERGY GROUP, INC
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(a development stage company)
FROM JANUARY 18, 2005 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2012
																				Deficit
	Preferred stock				Common stock						Additional Paid in			Common shares to be issued				Common Stock		Accumulated during Development
	Shares		Amount		Shares			Amount			Capital			Shares		Amount		Subscription		Stage			Total
Balance, December 31, 2010		500,000	$	50		27,037,030		$	27,037		$	19,308,155		$	-	$	-	$	-	$	(20,507,056	)	$	(1,171,814	)
Sale of common stock		-		-		1,892,800			1,893			222,507			-		-		-		-			224,400
Common stock issued in exchange for services		-		-		3,860,000			3,860			3,027,840			-		-		-		-			3,031,700
Common stock issued for expenses		-		-		10,000			10			4,990			-		-		-		-			5,000
Common stock issued in settlement of debt		-		-		15,000			15			1,485			-		-		-		-			1,500
Cancellation of previously issued common shares for services		-		-		(1,000,000	)		(1,000	)		1,000			-		-		-		-			-
Common stock issued in connection with issuance of debt		-		-		1,575,000			1,575			461,863												463,438
Fair value of warrants issued for services rendered		-		-		-			-			37,498			-		-		-		-			37,498
Fair value of warrants issued in connection with issuance of debt		-		-		-			-			172,429			-		-		-		-			172,429
Put liability reclassified outside equity		-		-		-			-			(100,000	)		-		-		-		-			(100,000	)
Net loss		-		-		-			-			-			-		-		-		(6,767,737	)		(6,767,737	)
Balance, December 31, 2011		500,000	$	50		33,389,830		$	33,390		$	23,137,767		$	-	$	-	$	-	$	(27,274,793	)	$	(4,103,586	)

F-6

NATIVE AMERICAN ENERGY GROUP, INC
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(a development stage company)
FROM JANUARY 18, 2005 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2012
																				Deficit
	Preferred stock				Common stock						Additional Paid in			Common shares to be issued				Common Stock		Accumulated during Development
	Shares		Amount		Shares			Amount			Capital			Shares		Amount		Subscription		Stage			Total
Balance, December 31, 2011		500,000	$	50		33,389,830		$	33,390		$	23,137,767		$	-	$	-	$	-	$	(27,274,793	)	$	(4,103,586	)
Sale of common stock		-		-		2,669,000			2,669			537,081			-		-		-		-			539,750
Common stock issued for services		-		-		1,110,000			1,110			493,289			-		-		-		-			494,399
Common stock issued in settlement of litigation		-		-		2,345,506			2,345			789,871			-		-		-		-			792,216
Common stock issued in settlement of debt		-		-		281,650			282			173,608			-		-		-		-			173,890
Common stock issued in settlement of forbearance agreement subject to reset provisions		-		-		820,313			820			(820	)		-		-		-		-			-
Fair value of common stock issuable for interest		-		-		-			-			17,323			-		-		-		-			17,323
Net common stock returned and canceled in connection with amendment to licensing agreement		-		-		(1,900,000	)		(1,900	)		1,900			-		-		-		-			-
Fair value of vesting options		-		-		-			-			162,500			-		-		-		-			162,500
Expiry of put agreement		-		-		-			-			100,000			-		-		-		-			100,000
Fair value of warrant obligation to be issued in settlement of obligation		-		-		-			-			1,381,403			-		-		-		-			1,381,403
Net loss		-		-		-			-			-			-		-		-		(4,072,286	)		(4,072,286	)
Balance, December 31, 2012		500,000	$	50		38,716,299		$	38,716		$	26,793,922		$	-	$	-	$	-	$	(31,347,079	)	$	(4,514,391	)

See the accompanying notes to the consolidated financial statements

F-7

NATIVE AMERICAN ENERGY GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
							From January 18, 2005 (date of inception) through
	Year ended December 31,						December 31,
	2012			2011			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,072,286	)	$	(6,767,737	)	$	(31,347,079	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		153,755			159,594			673,072
Impairment losses		-			690,552			7,829,119
Amortization of debt discount		27,901			-			27,901
Losses on repossession of fixed assets		-			-			56,622
Equity based compensation		448,500			3,199,692			12,668,701
Gain on settlement of debt		(663,220	)		(62,002	)		(725,222	)
Loss on debt modification		426,980			-			426,980
Common stock issued in connection with debt		-			374,769			374,769
Common stock issued in settlement of litigation		375,779			-			375,779
Non cash interest expense		87,514			-			87,514
Loss on change in fair value of derivatives		149,965			-			149,965
Fair value of vesting employee options		162,500			-			162,500
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		185,306			75,789			261,095
Preferred stock issued for services		-			-			400,000
(Increase) decrease in:
Accounts receivable		15,213			(15,213	)		-
Licensing		(407	)		-			(30,407	)
Guarantee fees		-			-			(4,357	)
Surety bond		(351	)		(327	)		(171,024	)
Deposits		50,000			106,497			(2,093	)
Increase (decrease) in:
Accounts payable and accrued expenses		741,725			1,327,157			3,506,180
Net cash (used in) operating activities		(529,723	)		(911,229	)		(3,898,582	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in oil and gas properties		-			(780,387	)		(1,986,949	)
Purchase of property and equipment		-			(124,910	)		(2,784,883	)
Net cash (used in) investing activities		-			(905,297	)		(4,771,832	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and subscriptions		539,750			224,400			1,817,975
Proceeds from sale of royalty interest		-			-			2,923,570
Proceeds from loans payable		86,000			987,183			2,752,591
Proceeds from notes payable		-			750,000			951,964
Proceeds from convertible debentures		50,000			-			50,000
Contributions by major shareholders		-			-			1,315,963
Payments of capital leases		-			-			(497,102	)
Payments on loans payable		(156,912	)		(130,150	)		(552,337	)
Payments of notes payable		(1,893	)		(3,000	)		(87,253	)
Net cash provided by financing activities		516,945			1,828,433			8,675,371
Net (decrease) increase in cash and cash equivalents		(12,778	)		11,907			4,957
Cash and cash equivalents, beginning of the period		17,735			5,828			-
Cash and cash equivalents, end of period	$	4,957		$	17,735		$	4,957
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	$	494,399	$	3,014,100	$	12,689,425
Common stock issued for licensing	$	-	$	-	$	2,000,002
Common stock issued for conversion of debt	$	173,890	$	1,500	$	1,700,148
Preferred stock issued for services rendered	$	-	$	-	$	400,000
Fair value of warrants issued in connection with settlement agreement	$	223,849	$	-	$	223,849
Fair value of warrants issuable for interest expense	$	29,334	$	-	$	29,334
Fair value of common stock issuable for interest expense	$	17,323	$	-	$	17,323

See the accompanying notes to the consolidated financial statements

F-8

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 our wholly owned subsidiaries, NAEG Alaska Corporation (“NAEG Alaska”), a Delaware corporation incorporated in 2005 that was formerly known as Fowler Oil & Gas Corporation and NAEG CBM Operations LLC (“NAEG Operations”), an Alaskan limited liability company formed in August 2006 that was formerly known as Fowler Oil & Gas Alaska. 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 December 31, 2012, the Company has accumulated losses of $31,347,079.

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.

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.

F-9

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. 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.

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. 

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 year ended December 31, 2012 and 2011. 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.

F-10

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

During the years ended December 31, 2012 and 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 year 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.

In March 2010, the Company executed an amendment to their original agreement with Windaus Energy Inc. (of Canada), whereby the Company acquired manufacturing, marketing, sales, sublicensing and distribution rights to bring to the U.S. market Windaus’ Vertical Axis Wind Turbine Energy Systems.

During the year ended December 31, 2010, the Company management performed an evaluation of its licensing agreement for purposes of determining the implied fair value of the asset at December 31, 2010. The test indicated that the recorded remaining book value of its licensing agreement exceeded its fair value for the year ended December 31, 2010. As a result, upon completion of the assessment, management recorded a non-cash impairment charge of $2,500,000, net of tax, or $0.13 per share during the year ended December 31, 2010 to reduce the carrying value of licensing agreement to $-0-. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.

F-11

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. 

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.

Comprehensive Income

The Company does not have any items of comprehensive income in any of the periods presented.

Revenue Recognition

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

Stock-based compensation

The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to its employees and directors, including employee stock options and restricted stock awards. The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of our common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company’s statements of operations.

Total stock-based compensation expense for the years ended December 31, 2012 and 2011 amounted to $162,500 and $-0-, respectively.

F-12

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.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2012 and 2011. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses are $-0- for the years ended December 31, 2012, 2011 and from January 18, 2005 (date of inception) through December 31, 2012.

Income Taxes

The Company has adopted 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 are insignificant.

At December 31, 2012, the significant components of the deferred tax assets (liabilities) are summarized below:

Net operating loss carry forwards expiring through 2031	$	7,200,000
Tax Asset		2,520,000
Less valuation allowance		(2,520,000	)
Balance	$	—

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 years ended December 31, 2012 and 2011.

F-13

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. Effective December 31, 2010 and extending through December 31, 2012, all non-interest-bearing transaction accounts are fully insured by the Federal Deposit Insurance Corporation (FDIC), regardless of the balance of the account. 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.

NOTE 2 – GOING CONCERN MATTERS

The Company has incurred a net loss of $4,072,286 and $6,767,737 for the years ended December 31, 2012 and 2011, respectively. The Company has incurred significant losses and has an accumulated deficit of $31,331,949 at December 31, 2012. 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.

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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:

	2012			2011
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		(818,926	)		(665,171	)
Net	$	463,702		$	617,457

Depreciation is recorded ratably over the estimated useful lives of five to ten years. Depreciation expense was $153,755 and $159,594 for the year ended December 31, 2012 and 2011, respectively and $673,072 from January 18, 2005 (date of inception) through December 31, 2012 respectively.

In October 2011, we 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.

NOTE 5 – SURETY BONDS

The Company has an aggregate of $175,381 and $175,030, as of December 31, 2012 and 2011, 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.

NOTE 6 – SECURITY DEPOSITS

The Company had an aggregate of -0- and $50,000 as of December 31, 2012 and 2011, respectively, deposited in two financial institutions as collateral for posted surety bonds with various governmental agencies in Alaska and Montana as assurance for possible well-site reclamation, if required. The Company is obligated to maintain a surety bond in conjunction with certain drilling permits. In March 2011 and in September 2012, the Company cancelled two of its oil and gas surety bonds in the aggregate amount $150,000 issued to the Alaska Oil & Gas Conservation Commission (“AOGCC”) and the Matanuska-Susitna Borough Planning Commission (“Mat-Su Borough”) for its Kircher Unit state and borough drilling permits in Alaska. As a result of the bond terminations, the financial institution returned the $150,000 cash collateral to the Company. In the event that the Company re-applies for the state and borough drilling permits with the AOGCC and the Mat-Su Borough, it will be required to re-post bonds in the amount of $100,000 and $50,000, respectively. During the year ended December 31, 2011, the Company forfeited an $8,590 deposit held as security for its corporate office lease in New York.

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NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses are comprised of the following:

	2012		2011
Accounts payable and accrued expenses	$	2,044,142	$	2,192,317
Accrued interest		386,226		238,053
	$	2,430,368	$	2,430,370

During the year ended December 31, 2012, the Company issued an aggregate of 281,650 shares of its common stock in settlement of $50,000 of notes payable and $387,100 of accounts payable and accrued interest recognizing a gain on settlement of debt of $253,220.

NOTE 8 – PUT LIABILITY

On June 28, 2011, the Company offered to certain purchasers of the Company’s common stock the right to rescind their previous common stock acquisitions and receive in exchange for any shares relinquished to the Company a payment equal to their original purchase price plus interest at the applicable statutory rate in the state they reside.  The common stock subject to the rescission offers total 2,732,500 common shares and were sold in 2010 and 2011 at prices ranging from $0.08 to $0.10 per share. The rescission offer expired at 5:00 pm (EDT) on August 1, 2011.

On August 1, 2011, we received one acceptance of the rescission offer in the amount of 1,125,000 shares for the return of $100,000. Accordingly, the Company reclassified $100,000 from equity to a put liability as of June 30, 2011.

During the year ended December 31, 2012, the right or rescission as described above expired. Accordingly, the Company reclassified $100,000 from put liability to equity.

NOTE 9 – CONVERTIBLE DEBENTURES

On September 21, 2012, the Company issued two $25,000 Convertible Debenture Notes that mature 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 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:

F-16

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 year ended December 31, 2012, the Company amortized $27,901 to current period operations as interest expense.

NOTE 10 – CAPITAL LEASES AND NOTES PAYABLE

Notes payable are comprised of the following:

	2012		2011
Note payable, due in monthly installments of $589 including interest of 24.9% due to mature in December 2015, secured by equipment. Currently in default.	$	17,950	$	17,804
Note payable, due in monthly installments of $369 including interest of 2.9%, due to mature in April 2013, secured by related equipment. Currently in default	$	14,788	$	14,788
Note payable, due in monthly installments of $1,022 including interest of 18.89%, due to mature in July 2013, secured by related equipment. Currently in default	$	37,001	$	37,001
Note payable, due in March 2012 at 0% interest., currently in default		69,500		469,500
Sub-total		139,239		539,093
Less current portion		139,239		524,252
Long term portion	$	-0-	$	14,841

During the year ended December 31, 2011, the Company was notified by the lender that it will not be held responsible for an installment loan previously in default of $10,109 including accrued interest of $6,703 Accordingly, the Company recorded a gain on settlement of debt of $16,812.

During the year ended December 31, 2012, the Company amended a previously acquired licensing agreement with no remaining carrying value whereby the remaining debt obligation was reduced from $469,500 to $69,500. Accordingly, the Company recognized a gain on settlement of debt of $400,000 to current period operations.

NOTE 11 – LOANS PAYABLE

Loans payable are comprised of the following:

	2012		2011
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, net of debt discount of $-0- and $83,432, respectively. Currently in default		593,000		509,568
Loan payable, bearing 12% per annum through February 29, 2012; 15% thereafter, secured by certain oil and gas properties; due April 29, 2012, net of debt discount of $-0- and $32,632, respectively.		130,000		97,368
Various loans payable, with interest rates from 4% to 20% per annum, unsecured, currently in default ($52,918 and $103,133 related party loans, respectively), net of debt discount of $-0- and $69,245, respectively.		408,468		528,883
Total		1,261,468		1,265,819
Less current portion		1,261,468		1,265,819
Long term portion	$	-	$	-

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In connection with the issuance of debt on November 8, 2011, the Company issued an aggregate of 593,000 warrants to purchase the Company's common stock at $0.001 per share for five years from the date of issuance. The aggregate fair value of $157,130 was determined using the Black Scholes option pricing model based on the following assumptions: dividend yield: 0%; volatility: 369.88% to 375.20% and risk free rate of 0.96%. The determined fair value of the issued warrants are amortized ratably over the term of the loan. See discussion of settlement agreement the Company entered into on October 26, 2012 in Note 12 below.

In connection with the issuance of debt on December 12, 2011, the Company issued an aggregate of 55,000 warrants to purchase the Company's common stock at $0.001 per share for five years from date of issuance and 75,000 shares of the Company's common stock. The aggregate fair value of the warrants of $15,300 was determined using the Black Scholes option pricing model based on the following assumptions: dividend yield: 0%; volatility: 364.69% to 366.74% and risk free rate of 0.96%. The total determined fair value of the issued warrants and common stock of $37,800 is amortized ratably over the term of the loan. See discussion of settlement agreement the Company entered into on October 26, 2012 in Note 12 below.

During the year ended December 31, 2012, the Company issued 92,390 shares of its common stock in settlement of $50,000 notes payable and related accrued interest recognizing a gain on settlement of debt of $36,956.

NOTE 12 – 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 year ended December 31, 2011, the Company has amortized $371,693 to interest expense.

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%.

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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 11) and the loan note holder of a note issued on December 12, 2011 for $130,000 (Note 11) agreed not to 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.

d.   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 13 below)

NOTE 13 – 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 12 above. A summary of the derivative liabilities are as follows:

Convertible Debentures

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:

F-19

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.

The fair value of the described embedded derivative of $141,407 at December 31, 2012 was determined using the Binomial Lattice Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	170.02	%
Risk free rate:	0.05	%

At December 31, 2012, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating loss of $50,549 for the year ended December 31, 2012.

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 $491,370 at December 31, 2012 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 December 31, 2012, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating loss of $99,416 for the year ended December 31, 2012.

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NOTE 14 – STOCKHOLDERS’ EQUITY

Preferred Stock

Amendments to Certificate of Incorporation; Designations of Preferred Stock

On May 8, 2012, the Company filed with the Delaware Secretary of State a Certificate of Amendment to its Certificate of Incorporation establishing a class of blank check preferred stock comprised of 20,000,000 shares, in addition to its 1,000,000,000 authorized common stock and 1,000,000 authorized Series A Convertible Preferred Stock (the “Series A”).

On May 9, 2012, the Company filed a Certificate of Designations designating 5,750,000 of the newly created blank check preferred as Series B Callable Preferred Stock (the “Series B”) and setting forth the rights, powers, designations and preferences of the Series B.

On May 10, 2012, the Company filed a Certificate of Amendment to its Certificate of Designations for the Series A dated September 22, 2009.

The Series A

The general attributes of the Series A is as follows:

Rank. The Series A ranks junior to the Senior B and pari passu with our common stock for liquidation and dividend rights.

Dividends. Holders of the Series A Convertible Preferred Stock shall be entitled to receive dividends when and if declared by the Board of Directors. Notwithstanding the forgoing, no dividends or other distributions shall be made or declared, in cash or in kind, to holders of the Series A or to our common unless and until a dividend of like amount is first paid in full to holders of the Series B.

Voting Rights. Holders of Series A Convertible Preferred Stock will have the right to that number of votes determined by multiplying the number of shares issuable upon conversion of the Series A Convertible Preferred Stock by 1,000.

Conversion. Holders of Series A Convertible Preferred Stock will have the right to convert the Series A Convertible Preferred Stock at the option of the holder, at any time, into same number of common shares, subject to certain fundamental transaction adjustments.

The Series B

The general attributes of the Series B is as follows:

Rank. The Series B ranks senior to the Senior A and our common stock for liquidation and dividend rights.

Dividends. Holders of the Series A shall be entitled to receive cumulative dividends quarterly at the rate of 13% per annum of (as adjusted for subdivisions, combinations, stock dividends, recapitalizations and the like, the “Original Issue Price”) for the first year following the original date of issuance of such share of Series B, and at the rate of 15% per annum of the Original Issue Price for each subsequent year until such share of Series B is redeemed. No dividends or other distributions shall be made or declared, in cash or in kind, to holders of the Series A or our common stockholders unless and until a dividend of like amount is first paid in full to holders of the Series B.

F-21

Redemption. The Series B shall not be redeemable by the Company prior to one year after the original date of issuance of each shares, after which time such share may be redeemed by the Company at any time at a redemption price of $1.00 plus all unpaid dividends thereon.

Common stock

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

On October 23, 2009, the Company affected a ten thousand-for-one (10,000 to 1) reverse stock split of its issued and outstanding shares of common stock, $0.001 par value. All references in the consolidated financial statements and the notes to consolidated financial statements, number of shares, and share amounts have been retroactively restated to reflect the forward split.

During the year ended December 31, 2005, the Company issued an aggregate of 920 shares of common stock for services rendered at approximately $500.00 per share.

During the year ended December 31, 2006, the Company issued an aggregate of 186 shares of common stock for services rendered and expenses at approximately $121.97 per share.

During the year ended December 31, 2009, the Company issued an aggregate of 10,045,000 shares of common stock for services rendered and expenses at approximately $0.80 per share.

On October 23, 2009, the Company affected a ten thousand-for-one (10,000 to 1) reverse stock split of its issued and outstanding shares of common stock, $0.001 par value. All references in the consolidated financial statements and the notes to consolidated financial statements, number of shares, and share amounts have been retroactively restated to reflect the forward split.

During the year ended December 31, 2010, the Company converted various outstanding debts including loans, equipment leases and account payables. Pursuant to the various debt conversion agreements and pay-off letters, the Company converted 13 promissory notes and accrued interest, an equipment lease and an account payable totaling $1,524,757 into the Company’s common stock at various conversion prices ranging from $0.07 to $0.80 per share. An aggregate of 10,040,702 shares of common stock were issued in exchange for full release from such debt obligations.

On May 24, 2010, the Company issued 375,000 shares to a consultant for consulting services.

During the year ended December 31, 2010, the Company issued an aggregate of 1,643,000 shares of common stock for services rendered and expenses at between approximately $0.18 and $1.18 per share.

During the year ended December 31, 2010, the Company issued 1,300,000 and 37,500 shares of common stock in settlement of ligation and notes payable, respectively. The common shares are held in escrow awaiting final resolution, therefore are reflected as issued, but not outstanding as of December 31, 2010.

During the year ended December 31, 2011, the Company issued an aggregate of 3,860,000 shares of common stock for services ranging from $0.20 to $0.87 per share.

During the year ended December 31, 2012, the Company issued an aggregate of 1,110,000 shares for services rendered valued at $494,399.

During the year ended December 31, 2012, the Company received and cancelled a net of 1,900,000 shares of common stock in connection with an amendment of a previously acquired license agreement.

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NOTE 15 – 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.

Operating leases

1. The Company leases office temporary space in New York at approximately $100 per month on a month to month basis.

2.	The Company currently leases a maintenance facility in Montana on a month-to-month basis at $1,500 per month.
3.	The Company currently leases an office/storage facility in Montana on a month-to-month basis at $1,100 per month.

The lease expenses for the Company’s field office, storage and maintenance facilities in Montana have been included on the balance sheet in Oil & Gas Properties.

Consulting agreements

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

Litigation

High Capital Funding, LLC. vs. Native American Energy Group, Inc. - Cause No. DV-12-30

On May 25, 2012, High Capital Funding LLC (“High Capital or Plaintiff”), filed a Complaint for Foreclosure in the Fifteenth Judicial District Court of the State of Montana, Roosevelt County, against the Company alleging that the Company is in default for nonpayment of monies owed under various loans made to the Company from the period beginning July 25, 2012 to December 12, 2012 (“the Loans”) during the Company’s field operations in Montana related to its 5 Well Workover and Enhanced Oil Recovery Program. In the Complaint, Plaintiff sought a judgment against the Company for the unpaid principal and interest owed under such loans. 

On June 27, 2012, the Company filed a motion to dismiss Plaintiff’s complaint on the grounds that Plaintiff’s complaint failed to state a claim upon which relief can be granted (the “Motion”). On July 11, 2012, the Honorable Judge David Cybulski issued an order denying the Motion and allowed the Company 20 additional days to file its answer to the Complaint.

F-23

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. In its Answer and Counterclaim, the Company is ultimately seeking damages to be proven at trial which include, but are not limited to; lost revenue from oil production continuing to accrue since September 2011 as a result of Plaintiff’s negligent and untimely remittance of loan proceeds as agreed to by both parties, recovery of various shares of the Company’s restricted common stock and five year exercise warrants for the purchase of the Company’s restricted common stock; and specific performance by the Plaintiff of its obligations under the Loans. On the same date, the Company also filed an “Application for Preliminary Injunction and Temporary Restraining Order” (the “Application”). In its Application, Company is seeking relief including but not limited to, an injunction preventing Plaintiff from transferring common shares or exercising warrants issued as partial consideration for such loans agreements.

On August 21, 2012, Judge David Cybulski issued an order granting the Company’s request for a Temporary Restraining Order, as stated above, and set the date for a show cause hearing for Wednesday, August 29, 2012.

On August 29, 2012, the parties agreed to stipulate in court to the entry of a Temporary Order in resolution to the Company’s Application for a Temporary Restraining Order and Preliminary Injunction. The Temporary Restraining Order and order to Show Cause dated August 22, 2012, was ordered, vacated and dissolved, permitting Plaintiff’s to transfer its Bridge Shares, LTA warrants, and SL3 warrants.

On October 26, 2012, in an effort to avoid further litigation, both parties agreed to terms for a Settlement Agreement. See discussion of Settlement Agreement in Note 12 above. 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.

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 litigations 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.

F-24

NOTE 16 – 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 December 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.

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 17 – 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 December 31, 2012:

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		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		9.71	$	0.20		-	$	-
	2.00		4,000,000		4.71		2.00		-		-
			10,000,000		7.71	$	0.92		-	$	-

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

			Average
	Number of		Price
	Shares		Per Share
Options outstanding at December 31, 2010		-	$	-
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
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

On September 14, 2012, the Company granted employee options to purchase an aggregate of 10,000,000 shares of the Company’s common stock to directors, officers and employees. The option grants are vesting at 25% per year, fully vest in four years and the exercise prices from $0.20 to $2.00 per share for five to ten years.

The fair value for these awards was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions, assuming no expected dividends:

Expected volatility	433.11	%
Risk-free interest rate	0.72% to 1.88	%
Dividend yield	—	%

During the year ended December 31, 2012, the Company charged the vesting fair value of employee options of $162,500 to current period operations.

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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 December 31, 2012:

		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		1,000,000		1.71	$	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, 2010		-	$	-
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
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

On September 14, 2012, the Company granted non-employee options to purchase 1,000,000 shares of the Company’s common stock to a consultant. The option grant vest at a rate of 50% per year and fully vest in two years with an exercise price of $0.20 per share.

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Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock at December 31, 2012:

		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		2,092,188		4.52	$	0.001		2,092,188	$	0.001
	0.60		150,000		4.17		0.60		150,000		0.60
	0.70		2,345,506		1.73		0.70		2,345,506		0.70
			4,587,694		3.08	$	0.38		4,587,694	$	0.38

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

			Average
	Number of		Price
	Shares		Per Share
Warrants outstanding at December 31, 2010		-	$	-
Granted		798,000		0.11
Exercised		-		-
Cancelled or expired		-		-
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

In November 2011, in connection with the issuance of bridge notes payable as described above, the Company issued an aggregate of 150,000 warrants to purchase the Company's common stock at $0.60 per share expiring five years from the date of issuance. The fair value of the warrants was determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-	%
Volatility	371.27	%
Risk free rate:	0.96	%

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The aggregate fair value of $37,198 was charged to period operations in 2011.

In November and December 2011, in connection with the issuance of notes payable as described above, the Company issued an aggregate of 648,000 warrants to purchase the Company's common stock at $0.001 per share expiring five years from the date of issuance. The fair value of the warrants was determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-	%
Volatility	364.69% to 375.20	%
Risk free rate:	0.96	%

The aggregate fair value of $172,430 was recorded as a debt discount and amortized over the term of the note payable.

As per the Settlement Agreement entered into on January 27, 2012 and as previously reported in the 8-K filing with the Securities and Exchange Commission on January 31, 2012, on June 21, 2012, the Company issued an aggregate of 2,345,506 warrants to purchase the Company's common stock exercisable at $0.70 per share for two years from the date of issuance within 30 calendar days of the removal of the global lock by DTC. The Global Lock was removed by DTC on June 21, 2012. The Company recorded the estimated fair value of $1,381,403 as a charge to current period operations in 2012. The estimated fair value was determined using the Black Scholes option pricing method with the following assumptions: Dividend yield- 0%, risk free rate-0.12%, volatility- 431.55%, expected life-contract life.

As per the Settlement Agreement entered into on October 26, 2012, the Company issued an aggregate of 1,444,188 warrants to purchase the Company’s common stock at $0.001 for five years. The Company recorded the estimated fair value of $223,849 as a charge to current period operations in 2012 as loan modification expense. The estimated fair value was determined using the Binomial Lattice option pricing method with the following assumptions: Dividend yield- 0%, risk free rate-0.41%, volatility- 422.12%, expected life-contract life.

NOTE 18 – 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 bases 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 are insignificant.

At December 31, 2012, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $7,200,000 expiring in the year 2031 that may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Due to significant changes in the Company’s ownership, the future use of its existing net operating losses may be limited. Components of deferred tax assets as of December 31, 2011 are as follows:

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Noncurrent:
Net operating loss carry forward	$	2,520,000
Valuation allowance		(2,520,000	)
Net deferred tax asset	$	-

The total provision differs from the amount that would be obtained by applying the federal statutory rate of 35% to income before income taxes, as follows:

Expected tax provision (benefit)	$	(2,520,000	)
Effect of:
State income taxes, net of federal benefit		-
Net operating loss carry forward		2,625,000
Decrease in valuation allowance		(105,000	)
Graduated rates		-
	$	2,520,000

NOTE 19 – SUBSEQUENT EVENTS

Related Party Transaction: The Company borrowed $18,950 from an officer of the Company in January 2013.

In February & March 2013, we issued and sold to 3 investors 125,000 shares of our common stock at a per share purchase price of $0.10 for proceeds of $12,500. In February 2013, we issued 200,000 shares of common stock to a law firm as collateral against an outstanding payable.

In May 2013, the Company moved its principal offices to 61-43 186th Street Suite 507 Fresh Meadows, NY 11365.

In March 2012, we issued 355,719 shares and 430,467 warrants in accordance with the settlement agreement executed with High Capital Funding LLC on December 26, 2012 as per Note 12 – Notes Payable Bridge – Settlement Agreement.

F-30

EX-10.26

EXHIBIT 10.26

NATIVE AMERICAN ENERGY GROUP

SENIOR EXECUTIVE AGREEMENT

THIS AGREEMENT is made as of September 14, 2012, between NATIVE AMERICAN ENERGY GROUP, INC., a Delaware corporation (the “Company”), and JOSEPH G. D’ARRRIGO (“Executive”).

Recitals

A.   The Company and Executive acknowledge that Executive has served the Company as a duly appointed officer or director without any formal written contract or salary since inception. Further, regarding EMPLOYMENT AGREEMENTS in general: None of the Company's officers, directors or key employees are currently party to employment agreements with the Company. The Company has no pension, health, annuity, insurance or profit sharing plans; however, the Company may adopt such plans in the future. There are presently no personal benefits available for directors, officers or employees of the Company.

B.   The Company and Executive desire to enter into an agreement pursuant to which Executive will be employed as the President and Chief Executive Officer ("CEO") of the Company on the terms and conditions set forth in this Agreement.

C.   Certain definitions are set forth in Section 4 of this Agreement.

Agreement

The parties hereto agree as follows:

1.    Employment. The Company hereby engages Executive to serve as the President and Chief Executive Officer ("CEO") of the Company, and Executive agrees to serve the Company, during the Service Term (as defined in Section 1(g) hereof) in the capacities, and subject to the terms and conditions, set forth in this Agreement.

(a)  Services. During the Employment Period, Executive shall serve as the President and Chief Executive Officer ("CEO") of the Company and shall have the normal duties, responsibilities, functions and authorities customarily exercised by the President and CEO of a company of similar size and nature as the Company. During the Employment Period, Executive shall render such administrative, financial and other executive and managerial services to the Company and its affiliates which are consistent with Executive's position as the Board of Directors of the Company (the "Board") may from time to time direct.

During the Employment Period, Executive shall report to the Board and shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. Executive shall perform his duties, responsibilities and functions to the Company hereunder to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply with the Company's policies and procedures in all material respects. In performing his duties and exercising his authority under this Agreement, Executive shall support and implement the business and strategic plans approved from time to time by the Board and shall support and cooperate with the Company's efforts to expand its businesses and operate profitably and in conformity with the business and strategic plans approved by the Board. The Company may also utilize Executive in any other work or activity in furtherance of the business of the Company in which his talents may be applied in a manner commensurate with his position, training, knowledge, skills and abilities.

During the Employment Period, Executive shall not serve as an officer or director of, or otherwise perform services for compensation for, any other entity unless otherwise agreed to between the Company and the Executive along with the prior written consent of the Board. Executive may serve as an officer or director of or otherwise participate in purely educational, welfare, social, religious and civic organizations so long as such activities do not interfere with Executive's employment. Nothing contained herein shall preclude Executive from (i) engaging in charitable and community activities; (ii) participating in industry and trade organization activities; (iii) managing his and his family's personal investments and affairs; and (iv) delivering lectures, fulfilling speaking engagements or teaching at educational institutions; provided, that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.

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(b) Salary, Bonus, Incentive Compensation and Benefits.

(i)   Salary.In consideration of the services to be rendered under this Agreement, during the Period of Employment, the Company shall pay Executive a salary, commencing on October 1, 2012, at the minimum rate of forty-eight thousand Dollars ($48,000) per year ("Base Salary"). Executive's Base Salary will be reviewed and increased by the Board (or a committee or designee thereof) on an annual basis from the 1st anniversary of the Commencement Date (or more frequently, should the Board decide to do so), in accordance with the established procedures of the Company, as in effect from time to time, for adjusting salaries for similarly situated employees (such initial annual base salary and the annual base salary as determined and adjusted from time to time by the Board are referred to herein as, the "Base Salary") and, in the sole discretion of the Board (or such committee or designee thereof), such annual Base Salary may be increased, but not decreased, effective as of any date determined by the Board. The Base Salary shall be payable by the Company in regular installments in accordance with the Company's general payroll practices, but in any event no less frequently than monthly. During the period beginning on the Commencement Date and ending September 13, 2017, the Base Salary shall be pro-rated on an annualized basis. For purposes of this Agreement, the Base Salary shall not include any other type of compensation or benefit paid or payable to the Executive. Notwithstanding anything in this Agreement to the contrary, any decrease in Executive's then Base Salary shall be deemed Good Reason. 

(ii)  Bonuses. During the Period of Employment, Executive shall be eligible to receive an annual incentive bonus (the "Bonus") on terms applicable to Company employees generally. The annual target amount of the Bonus shall be (to be determined). The amount of the Bonus paid shall be determined by Executive's supervisors or the Board in their sole discretion, based on performance objectives established for the Company employees generally for the relevant period. The Bonus will be paid at the same time as bonuses for other executive officers provided that Executive remains employed with the Company through the payment date. The annual target amount of Executive's Bonus will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be increased, but not decreased, in the sole discretion of Company.

(iii) Equity Awards. Executive will be eligible for grants of equity compensation awards under a stock plan maintained by the Company, the 2011 Equity Incentive Plan (the “Plan”), as in effect from time to time, and subject to such terms and conditions as the Company determines, including vesting criteria such as continued service or performance objectives.

 The Company shall provide Executive with a combination of restricted stock or units ("restricted stock") and stock options. The specific terms of the restricted stock and the stock options granted under the Plan (including, without limitation, customary anti-dilution and other provisions) will be reflected in separate stock option and restricted stock agreements that will be negotiated by Executive and the Company in good faith prior to the Commencement Date. The terms and conditions of stock options and restricted stock shall otherwise be those set forth under the Plan and shall be consistent with the terms contained in restricted stock and the stock option agreements provided to other key executives of the Company.

Issuance of Incentive Stock Options: The Company will grant 2,000,000 stock options with an exercise price for such options at $2.00 per share as requested by Executive, which is significantly higher than the price at the time of this agreement 9-14-12 ($0.195). Company shall provide, pursuant to the 2011 Equity Incentive Plan, with a 5-year term to be implemented by Company, stock options with vesting as set forth below.

2

9-14-13: 500,000 shares

9-14-14: 500,000 shares

9-14-15: 500,000 shares

9-14-16: 500,000 shares

Except for termination of this Agreement for cause pursuant to Section 1(d)(i)(D) any termination of this Agreement by Company shall cause the immediate vesting of any unvested restricted stock, options or warrants awarded hereunder or pursuant to any future award by Company to Executive.

Further stock and stock option allocations awards will be based on a combination of the performance of Executive and the Company.

(iv)  Benefits. During the Service Term, Executive shall be entitled to participate in and shall receive all benefits under pension benefit plans provided by the Company (including without limitation participation in any Company incentive, savings and retirement plans, practices, policies and programs) to the extent applicable generally to other peer executives of the Company. In addition, during the Service Term, the Executive and/or the Executives family shall be entitled to participate and shall receive all benefits under welfare plans provided by the Company (including without limitation medical prescriptions, dental, disability, employee life, group life, accidental life and travel accident insurance plans and plans) to the extent and on the same basis applicable generally to other peer executives of the Company. Executive shall be reimbursed for customary travel and other expenses, subject to standard and reasonable documentation requirements. In addition, Executive will receive a stipend of $950 per month for lease of an automobile and other related expenses during the Service Term. Executive shall also be eligible to receive four weeks paid vacation per annum. Any unused vacation time during each fiscal year shall be rolled-over to the following fiscal year to the extent permitted by the Company’s policies for other senior executives of the Company.

(v)  Relocation Benefits. The Company will pay or reimburse Executive for the expenses incurred by Executive in connection with (a) the relocation of Executive, Executives family and household to the area of the Company’s headquarter and (b) the establishment of Executives new residence in the area of the Company’s headquarters, which expenses shall include but not be limited to, travel expenses, mortgage fees and closing costs, subject to standard and reasonable documentation requirements. If the Internal Revenue Service or any state or local taxing authority takes the position that the relocation expenses paid or reimbursed subject to this Section 1(b)(iv) results in the receipt of taxable income to Executive, such expenses shall include an amount equal to the aggregate Federal, state and local income and employment taxes imposed on Executive as a direct result of such payment or reimbursement. The maximum amount the Company will pay or reimburse for relocation expenses pursuant to this Section 1(b)(iv) is $180,000, this limit excluding any additional amounts the Company will reimburse Executive for any taxes due on any portion of this relocation reimbursement because that reimbursement has been deemed taxable income to the Executive.

(vi)  Expenses. During the Employment Period, the Company shall promptly reimburse Executive for all reasonable business expenses incurred by him in the course of performing his duties and responsibilities under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. The Company will promptly reimburse Executive for reasonable expenses incurred for tax return preparation, tax advice, financial planning and legal expenses incurred in connection with negotiating this Agreement and the other agreements referred to herein.

(c)      Board Membership. With respect to all regular elections of directors during the Employment Period, the Company shall nominate, and use its reasonable efforts to cause the election of, Executive to serve as a member of the Board. Effective upon the termination or expiration of the Employment Period, Executive shall resign as a director of the Company and its affiliates, as the case may be.

3

(d)      Termination.

(i)   Events of Termination. Executives employment with the Company shall cease upon:

(A)Executives death.

(B)Executives voluntary retirement.

(C) Executives permanent disability, which means his incapacity due to physical or mental illness such that he is unable to perform the essential functions of his previously assigned duties for a period of six months in any twelve month period and such permanent incapacity has been determined to exist by either (x) the Company’s disability insurance carrier or (y) by the Board in good faith based on competent medical advice in the event that the Company does not maintain disability insurance on Executive.

(D) Termination by the Company by the delivery to Executive of a written notice from the Board or the CEO that Executive has been terminated (Notice of Termination) with or without Cause. Cause shall mean: 

(1) Executives (aa) conviction of a felony; (bb) Executives commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Subsidiaries; (cc) Executives misappropriation of material funds or assets of the Company for personal use; or (dd) Executives engagement in unlawful harassment or other discrimination with respect to the employees of the Company or its Subsidiaries;

(2) Executives continued substantial and repeated neglect of his duties, after written notice thereof from the Board, and such neglect has not been cured within 30 days after Executive receives notice thereof from the Board;

(3) Executives gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company;

(4) Executives engaging in conduct constituting a breach of Sections 2 or 3 hereof that is not cured in full within 15 days, and is materially and demonstrably injurious to the Company, after notice of default thereof, from the Company, as determined by a court of law.

In order for the termination to be effective: Executive must be notified in writing (which writing shall specify the cause in reasonable detail) of any termination of his employment for Cause. Executive will then have the right, within ten days of receipt of such notice, to file a written request for review by the Company. In such case, Executive will be given the opportunity to be heard, personally or by counsel, by the Board and a majority of the Directors must thereafter confirm that such termination is for Cause. If the Directors do not provide such confirmation, the termination shall be treated as other than for Cause. Notwithstanding anything to the contrary contained in this paragraph, Executive shall have the right after termination has occurred to appeal any determination by the Board that such termination was for Cause in accordance with the provisions of Section 7(f) hereof.

The delivery by the Company of notice to Executive that it does not intend to renew this Agreement as provided in Section 1(e) shall constitute a termination by the Company without Cause unless such notice fulfills the requirements of Section 1(d)(i)(D)(1), (2), (3) or (4) above.

(E) Executives voluntary resignation by the delivery to the Company and the Board of at least 30 days written notice from Executive that Executive has resigned with or without Good Reason. Good Reason shall mean Executives resignation from employment with the Company within 30 days after the occurrence of any one of the following:

(1) the failure of the Company to pay an amount owing to Executive hereunder after Executive has provided the Company and the Board with written notice of such failure and such payment has not thereafter been made within 15 days of the delivery of such written notice;

(2)  the relocation of Executive from the corporate headquarters metropolitan area (as of the date of this agreement) without his consent.

4

The delivery by Executive of notice to the Company that he does not intend to renew this Agreement as provided in Section 1(d) shall constitute a resignation by Executive without Good Reason unless such notice fulfills the requirements of Section 1(d)(i)(E)(1)or (2) above.

(ii)   Date of Termination. Date of Termination means (i) if the employment is terminated for Cause, or by Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the employment is terminated other than for Cause or Disability, the Date of Termination shall be the date on which the Employer notifies the Employee of such termination and (iii) if the Employees employment is terminated by reason of death or disability, the date of Termination shall be the date of death or the disability effective date, as the case may be.

(iii)  Rights on Termination.

(A)     In the event that termination is by the Company without Cause (including by operation of the last paragraph of Section 1(d)(i)(D) above) or by Executive with Good Reason, the Company will continue, for a period of eighteen (18) months commencing on the effective date of the termination (the Severance Period), to pay Executive a monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates. During the Severance Period, the Company will also pay for Executives existing Company insurance coverage. The payments of Annual Base Salary and insurance premiums in accordance with this Section 1(d)(iii)(A) are collectively referred to as Severance Payments. This Section 1(d)(iii)(A) shall not apply unless the Company and Executive have executed a contingent mutual release in a form mutually acceptable to both the Company and Executive and is subject to paragraph (e) below. In addition, the Company will pay to Executive in a lump sum any accrued but unused vacation time.

(B)      If the Company terminates Executives employment for Cause, or if Executive resigns without Good Reason (including by operation of the last paragraph of Section 1(d)(i)(E)), the Company’s obligations to pay any compensation or benefits under this Agreement (other than accrued but unused vacation time which shall be paid to Executive in a lump sum payment) and all vesting under all stock and stock options held by Executive will cease effective as of the date of termination. Executives right to receive any other health or other benefits, if any, will be determined under the provisions of applicable plans, programs or other coverages.

(C)      If Executives employment terminates because of Executives death or permanent disability, then Executive or his estate shall be entitled to any disability income or life insurance payments from any insurance policies (other than any key man life insurance policy) paid for by the Company. In addition, if such death or disability occurs while Executive is employed hereunder, for a period of six (6) months commencing on the date of such death or such disability is established, Executive or his estate shall be entitled to payment of his monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates.

Notwithstanding the foregoing, the Company’s obligation to Executive for severance pay or other rights under either subparagraphs (A) or (B) above (the Severance Pay) shall cease if Executive is found by a court of law to be in material violation of the provisions of Sections 2 or 3 hereof. Until such time as Executive has received all of his Severance Payments, he will be entitled to continue to receive any health, life, accident and disability insurance benefits provided by the Company to Executive under this Agreement.

(e)   Involuntary Termination after “Change of Control.”

In the event of a "Change of Control" as defined below, the Company shall have the right to terminate Executive's employment and this Agreement at will. Should the Company exercise this option to involuntarily terminate Executive during the pendency of this Agreement for any reason other than as specified in Section 1(d)(i)(D) within twelve (12) months following a defined Change of Control, Executive shall be entitled to an immediate cash payment equal in amount to twelve (12) months of compensation based upon a monthly proration of his Form W-2 earning from Company in the year preceding such termination and (ii) the fair value of eighteen months of Executive's then current fringe benefits provided by the Company.

In the event there is a Change of Control during the pendency of this Agreement, and Company gives Executive notice of intent to not thereafter renew the Agreement for a successive term, should Executive be involuntarily terminated from employment after expiration of the Agreement and within twelve (12) months following the Change of Control, Executive shall be entitled to an immediate cash payment in the amount set forth in the preceding paragraph. The contractual right to such payment is expressly agreed to be a covenant which shall survive expiration of this Agreement, and be enforceable hereunder.

5

For purposes of this Agreement, a "Change of Control" shall be deemed to have taken place if: (i) a third person, including a "group" as determined in accordance with Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having fifty percent (50%) or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) as a result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board or any successor to Company.

(f)   Mitigation. The Company’s obligation to continue to provide Executive with the Severance Payments pursuant to Section 1(d)(iii)(A) above and the benefits pursuant to the second sentence of Section 1(d)(iii)(C) above shall cease if Executive becomes employed as a senior executive by a third party.

(g)  Liquidated Damages. The parties acknowledge and agree that damages which will result to Executive for termination by the Company without Cause shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination. Executive agrees that, except for such other payments and benefits to which Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, Executive will execute a contingent mutual release of claims in a form reasonably satisfactory to both the Company and Executive.

(h)  Term of Employment. Unless Executives employment under this Agreement is sooner terminated as a result of Executives termination in accordance with the provisions of Section 1(d) above, Executives employment under this Agreement shall commence on September 14, 2012 and shall terminate on September 13, 2017 (the Service Term); provided, however, that Executives employment under this Agreement, and the Service Term, shall be automatically renewed for additional two-year periods commencing on September 14, 2017 and, thereafter, on each successive anniversary of such date unless either the Company or Executive notify the other party in writing within ninety (90) days prior to any such September 14th anniversary that it or he desires not to renew Executives employment under this Agreement. All references herein to Service Term shall include any renewals thereof after September 13, 2017.

2.    Confidential Information; Proprietary Information, etc.

(a)   Obligation to Maintain Confidentiality. Executive acknowledges that any Proprietary Information disclosed or made available to Executive or obtained, observed or known by Executive as a direct or indirect consequence of his employment with or performance of services for the Company or any of its Affiliates during the course of his performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) and during the period in which Executive is receiving Severance Payments, are the property of the Company and its Affiliates. Therefore, Executive agrees that he will not at any time (whether during or after Executives term of employment) disclose or permit to be disclosed to any Person or, directly or indirectly, utilize for his own account or permit to be utilized by any Person any Proprietary Information or Records for any reason whatsoever without the Boards consent, unless and to the extent that (except as otherwise provided in the definition of Proprietary Information) the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executives acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, as a condition to receipt of the next or final payment of compensation, or at any other time the Company may request in writing (whether during or after Executives term of employment), all Records which he may then possess or have under his control. Executive further agrees that any property situated on the Company’s or its Affiliates premises and owned by the Company or its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company or its Affiliates and their personnel at any time with or without notice. Nothing in this Section 2(a) shall be construed to prevent Executive from using his general knowledge and experience in future employment so long as Executive complies with this Section 2(a) and the other restrictions contained in this Agreement.

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(b)Ownership of Property. Executive acknowledges that all inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the Company’s or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by the Company or any of its Affiliates (including any of the foregoing that constitutes any Proprietary Information or Records) (Work Product) belong to the Company or such Affiliate and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or such Affiliate. Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Executive hereby assigns and agrees to assign to Company or such Affiliate all right, title and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after Executives term of employment) to establish and confirm the Company’s or its Affiliates ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments). Notwithstanding anything contained in this Section 2(b) to the contrary, the Company’s ownership of Work Product does not apply to any invention that Executive develops entirely on his own time without using the equipment, supplies or facilities of the Company or its Affiliates or Subsidiaries or any Proprietary Information (including trade secrets), except that the Company’s ownership of Work Product does include those inventions that: (a) relate to the business of the Company or its Affiliates or Subsidiaries or to the actual or demonstrably anticipated research or development relating to the Company’s business; or (b) result from any work that Executive performs for the Company or its Affiliates or Subsidiaries.

(c)Third Party Information. Executive understands that the Company and its Affiliates will receive from third parties confidential or proprietary information (Third Party Information) subject to a duty on the Company’s and its Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Executives employment and thereafter, and without in any way limiting the provisions of Sections 2(a) and 2(b) above, Executive shall hold Third Party Information in the strictest confidence and shall not disclose to anyone (other than personnel of the Company or its Affiliates who need to know such information in connection with their work for the Company or its Affiliates) or use, except in connection with his work for the Company or its Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.

(d)Use of Information of Prior Employers, etc. Executive will abide by any enforceable obligations contained in any agreements that Executive has entered into with his prior employers or other parties to whom Executive has an obligation of confidentiality.

(e)Compelled Disclosure. If Executive is required by law or governmental regulation or by subpoena or other valid legal process to disclose any Proprietary Information or Third Party Information to any Person, Executive will immediately provide the Company with written notice of the applicable law, regulation or process so that the Company may seek a protective order or other appropriate remedy. Executive will cooperate fully with the Company and the Company’s Representatives in any attempt by the Company to obtain any such protective order or other remedy. If the Company elects not to seek, or is unsuccessful in obtaining, any such protective order or other remedy in connection with any requirement that Executive disclose Proprietary Information or Third Party Information, and if Executive furnishes the Company with a written opinion of reputable legal counsel acceptable to the Company confirming that the disclosure of such Proprietary Information or Third Party Information is legally required, then Executive may disclose such Proprietary Information or Third Party Information to the extent legally required; provided, however, that Executive will use his reasonable best efforts to ensure that such Proprietary Information is treated confidentially by each Person to whom it is disclosed. 

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3.    Nonsolicitation.

(a)   Nonsolicitation. As long as Executive is an employee of the Company or any Affiliate thereof, and for eighteen (18) months thereafter, Executive shall not directly or indirectly through another entity: (i) induce or attempt to induce any employee of the Company or any Affiliate to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any Affiliate and any employee thereof; (ii) hire or employ any person who was an employee of the Company or any Affiliate at any time during the nine (9) month period immediately preceding the date of such Executives termination; (iii) induce or attempt to induce any customer, client, supplier, licensee or other business relation of the Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way interfere with the relationship between any such customer, client, supplier, licensee or business relation and the Company or any Affiliate; (iv) call on, solicit or service any Person who was a customer or client of the Company or any Affiliate or (v) call on, solicit or service any Person who was Prospective Client for any purpose which directly or indirectly competes with the business of the Company. For purposes hereof, a Prospective Client means any Person whom the Company or any of its Affiliates has entertained discussions with to become a client or customer at any time during the twelve (12) month period immediately preceding the date of such Executives termination.

(b)  Acknowledgment. Executive acknowledges that in the course of his employment with the Company and its Affiliates, he has and will become familiar with the trade secrets and other Proprietary Information of the Company and its Affiliates. It is specifically recognized by Executive that his services to the Company and its Subsidiaries are special, unique and of extraordinary value, that the Company has a protectable interest in prohibiting Executive as provided in this Section 3, that money damages are insufficient to protect such interests, that there is adequate consideration being provided to Executive hereunder, that such prohibitions are necessary and appropriate without regard to payments being made to Executive hereunder and that the Company would not enter this Agreement with Executive without the restriction of this Section 3. Executive further acknowledges that the restrictions contained in this Section 3 do not impose an undue hardship on him and, since he has general business skills which may be used in industries other than that in which the Company and its Subsidiaries conduct their business, do not deprive Executive of his livelihood. Executive further acknowledges that the provisions of this Section 3 are separate and independent of the other sections of this Agreement.

(c)Enforcement, etc. If, at the time of enforcement of Section 2 or 3 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances as determined by the court shall be substituted for the stated period, scope or area. Because Executives services are unique, because Executive has access to Proprietary Information and for the other reasons set forth herein, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, without limiting the generality of Section 7(g), in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof.

(d)   Submission to Jurisdiction. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New Yorkin any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement in any other court. The parties hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

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GENERAL PROVISIONS

4.    Definitions.

Affiliate of any Person means any other Person which directly or indirectly controls, is controlled by or is under common control with such Person.

Board means the Company’s board of directors or the board of directors or similar management body of any successor of the Company.

Proprietary Information means any and all data and information concerning the business affairs of the Company or any of its Affiliates and not generally known in the industry in which the Company or any of its Affiliates is or may become engaged, and any other information concerning any matters affecting or relating to the Company’s or its Affiliates businesses, but in any event Proprietary Information shall include, any of the Company’s and its Affiliates past, present or prospective business opportunities, including information concerning acquisition opportunities in or reasonably related to the Company’s or its Affiliates businesses or industries, customers, customer lists, clients, client lists, the prices the Company and its Affiliates obtain or have obtained from the sale of, or at which they sell or have sold, their products, unit volume of sales to past or present customers and clients, or any other information concerning the business of the Company and its Affiliates, their manner of operation, their plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets, information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the foregoing matters will be deemed confidential, material or important. Proprietary Information does not include any information which Executive has obtained from a Person other than an employee of the Company, which was disclosed to him without a breach of a duty of confidentiality.

Records means (i) any and all procedure manuals, books, records and accounts; (ii) all property of the Company and its Affiliates, including papers, note books, tapes and similar repositories containing Proprietary Information; (iii) all invoices and commission reports; (iv) customer lists partial and/or complete; (v) data layouts, magnetic tape layouts, diskette layouts, etc.; (vi) samples; (vii) promotional letters, brochures and advertising materials; (viii) displays and display materials; (ix) correspondence and old or current proposals to any former, present or prospective customer of the Company and its Affiliates; (x) information concerning revenues and profitability and any other financial conditions of the Company and its Affiliates; (xi) information concerning the Company and its Affiliates which was input by Executive or at his direction, under his supervision or with his knowledge, including on any floppy disk, diskette, cassette or similar device used in, or in connection with, any computer, recording devices or typewriter; (xii) data, account information or other matters furnished by customers of the Company and its Affiliates; and (xiii) all copies of any of the foregoing data, documents or devices whether in the form of carbon copies, photo copies, copies of floppy disks, diskettes, tapes or in any other manner whatsoever.

Person means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

Subsidiary means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

5.    Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class United States mail (postage prepaid, return receipt requested) or sent by reputable overnight courier service (charges prepaid) or by facsimile to the recipient at the address below indicated:

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If to Executive:
	Joseph G. D’Arrigo
	108-18 Queens Blvd.
	Forest Hills, New York 11375
	Tel No.:(718) 408-2323
If to the Company:

108-18 Queens Blvd.

Forest Hills, New York 11375

Attention:Chief Executive Officer

Tel No.:(718) 408-2323

Fax No.:(718) 408-1471

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

6.     Executives Representations and Warranties. Executive represents and warrants that he has full and authority to enter into this Agreement and fully to perform his obligations hereunder, that he is not subject to any non-competition agreement, and that his past, present and anticipated future activities have not and will not infringe on the proprietary rights of others, including, but not limited to, proprietary information rights or interfere with any agreements he has with any prior employee. Executive further represents and warrants that he is not obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, which would conflict with or result in a breach of this Agreement or which would in any manner interfere with the performance of his duties for the Company.

7.    General Provisions.

(a)   Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(b)   Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

(c)   Counterparts; Facsimile Transmission. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Each party to this Agreement agrees that it will be bound by its own telecopied signature and that it accepts the telecopied signature of each other party to this Agreement.

(d)   Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable and, provided further that, the rights and obligations of the Company may be assigned to any Affiliate of the Company.

(e)   Choice of Law; Jurisdiction. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New York in any action or proceeding arising out of or relating to Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Executive hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

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(f)    Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 

(g)   Amendment and Waiver. The provisions of this Agreement may be amended or and waived only with the prior written consent of the Company, Executive and the Investor.

(h)   Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief executive office is located, the time period shall be automatically extended to the business day immediately following, such Saturday, Sunday or holiday.

(i)    Termination. This Agreement shall survive the termination of Executives employment with the Company and shall remain in full force and effect after such termination.

(j)No Waiver. A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such party would otherwise have on any future occasion. No failure to exercise, nor any delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.

(k)Insurance. The Company, at its discretion, may apply for and procure in its own name for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for healthy men of his age.

(m)Offset. Whenever the Company or any of its Subsidiaries is obligated to pay any sum to Executive or any Affiliate or related person thereof pursuant to this Agreement, any bona fide debts that Executive or such Affiliate or related person owes to the Company or any of its Subsidiaries may be deducted from that sum before payment.

(n)Indemnification and Reimbursement of Payments on Behalf of Executive. The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, provincial, local or foreign withholding taxes, excise taxes, or employment taxes (Taxes) imposed with respect to Executives compensation or other payments from the Company or any of its Subsidiaries or Executives ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, royalties, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock.

(o)      Insurance and Indemnification. For the period from the date of this Agreement (as can be afforded) through at least the tenth anniversary of the Employees termination of employment from the Employer, the Employer shall maintain the Employee as an insured party on all directors and officers insurance maintained by the Employer for the benefit of its directors and officers on at least the same basis as all other covered individuals and provide the Employee with at least the same corporate indemnification as it provides to the peer executives of the Employer.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. 

NATIVE AMERICAN ENERGY GROUP, INC.
By:	/s/ Joseph G. D’Arrigo
	Joseph G. D’Arrigo
	President and Chief Executive Officer
By:	/s/ Richard Ross
	Richard Ross Corporate Secretary

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EX-10.27

EXHIBIT 10.27

NATIVE AMERICAN ENERGY GROUP

SENIOR EXECUTIVE AGREEMENT

THIS AGREEMENT is made as of September 14, 2012, between NATIVE AMERICAN ENERGY GROUP, INC., a Delaware corporation (the “Company”), and RAJ S. NANVAAN (“Executive”).

Recitals

A.   The Company and Executive acknowledge that Executive has served the Company as a duly appointed officer or director without any formal written contract or salary since inception. Further, regarding EMPLOYMENT AGREEMENTS in general: None of the Company's officers, directors or key employees are currently party to employment agreements with the Company. The Company has no pension, health, annuity, insurance or profit sharing plans; however, the Company may adopt such plans in the future. There are presently no personal benefits available for directors, officers or employees of the Company.

B.   The Company and Executive desire to enter into an agreement pursuant to which Executive will be employed as the Chief Operating Officer (“COO”), Executive Vice President, Chief Financial Officer ("CFO") and Treasurer of the Company on the terms and conditions set forth in this Agreement.

C.   Certain definitions are set forth in Section 4 of this Agreement.

Agreement

The parties hereto agree as follows:

1.       Employment. The Company hereby engages Executive to serve as the Chief Operating Officer ("COO"), Executive Vice President, Chief Financial Officer ("CFO") and Treasurer of the Company, and Executive agrees to serve the Company, during the Service Term (as defined in Section 1(g) hereof) in the capacities, and subject to the terms and conditions, set forth in this Agreement.

(a)      Services. During the Employment Period, Executive shall serve as the Chief Operating Officer ("COO"), Executive Vice President, Chief Financial Officer ("CFO") and Treasurer of the Company and shall have the normal duties, responsibilities, functions and authorities customarily exercised by the Chief Operating Officer ("COO"), Executive Vice President, Chief Financial Officer ("CFO") and Treasurer of a company of similar size and nature as the Company. During the Employment Period, Executive shall render such administrative, financial and other executive and managerial services to the Company and its affiliates which are consistent with Executive's position as the Board of Directors of the Company (the "Board") may from time to time direct.

During the Employment Period, Executive shall report to the Board and shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. Executive shall perform his duties, responsibilities and functions to the Company hereunder to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply with the Company's policies and procedures in all material respects. In performing his duties and exercising his authority under this Agreement, Executive shall support and implement the business and strategic plans approved from time to time by the Board and shall support and cooperate with the Company's efforts to expand its businesses and operate profitably and in conformity with the business and strategic plans approved by the Board. The Company may also utilize Executive in any other work or activity in furtherance of the business of the Company in which his talents may be applied in a manner commensurate with his position, training, knowledge, skills and abilities.

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During the Employment Period, Executive shall not serve as an officer or director of, or otherwise perform services for compensation for, any other entity unless otherwise agreed to between the Company and the Executive along with the prior written consent of the Board. Executive may serve as an officer or director of or otherwise participate in purely educational, welfare, social, religious and civic organizations so long as such activities do not interfere with Executive's employment. Nothing contained herein shall preclude Executive from (i) engaging in charitable and community activities; (ii) participating in industry and trade organization activities; (iii) managing his and his family's personal investments and affairs; and (iv) delivering lectures, fulfilling speaking engagements or teaching at educational institutions; provided, that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.

(b)      Salary, Bonus, Incentive Compensation and Benefits.

(i)      Salary.In consideration of the services to be rendered under this Agreement, during the Period of Employment, the Company shall pay Executive a salary, commencing on October 1, 2012, at the minimum rate of forty-eight thousand Dollars ($48,000) per year ("Base Salary"). Executive's Base Salary will be reviewed and increased by the Board (or a committee or designee thereof) on an annual basis from the 1st anniversary of the Commencement Date (or more frequently, should the Board decide to do so), in accordance with the established procedures of the Company, as in effect from time to time, for adjusting salaries for similarly situated employees (such initial annual base salary and the annual base salary as determined and adjusted from time to time by the Board are referred to herein as, the "Base Salary") and, in the sole discretion of the Board (or such committee or designee thereof), such annual Base Salary may be increased, but not decreased, effective as of any date determined by the Board. The Base Salary shall be payable by the Company in regular installments in accordance with the Company's general payroll practices, but in any event no less frequently than monthly. During the period beginning on the Commencement Date and ending September 13, 2017, the Base Salary shall be pro-rated on an annualized basis. For purposes of this Agreement, the Base Salary shall not include any other type of compensation or benefit paid or payable to the Executive. Notwithstanding anything in this Agreement to the contrary, any decrease in Executive's then Base Salary shall be deemed Good Reason. 

(ii)     Bonuses. During the Period of Employment, Executive shall be eligible to receive an annual incentive bonus (the "Bonus") on terms applicable to Company employees generally. The annual target amount of the Bonus shall be (to be determined). The amount of the Bonus paid shall be determined by Executive's supervisors or the Board in their sole discretion, based on performance objectives established for the Company employees generally for the relevant period. The Bonus will be paid at the same time as bonuses for other executive officers provided that Executive remains employed with the Company through the payment date. The annual target amount of Executive's Bonus will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be increased, but not decreased, in the sole discretion of Company.

(iii)     Equity Awards. Executive will be eligible for grants of equity compensation awards under a stock plan maintained by the Company, the 2011 Equity Incentive Plan (the “Plan”), as in effect from time to time, and subject to such terms and conditions as the Company determines, including vesting criteria such as continued service or performance objectives.

The Company shall provide Executive with a combination of restricted stock or units ("restricted stock") and stock options. The specific terms of the restricted stock and the stock options granted under the Plan (including, without limitation, customary anti-dilution and other provisions) will be reflected in separate stock option and restricted stock agreements that will be negotiated by Executive and the Company in good faith prior to the Commencement Date. The terms and conditions of stock options and restricted stock shall otherwise be those set forth under the Plan and shall be consistent with the terms contained in restricted stock and the stock option agreements provided to other key executives of the Company.

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Issuance of Incentive Stock Options: The Company will grant 2,000,000 stock options with an exercise price for such options at $2.00 per share as requested by Executive, which is significantly higher than the price at the time of this agreement 9-14-12 ($0.195). Company shall provide, pursuant to the 2011 Equity Incentive Plan, with a 5-year term to be implemented by Company, stock options with vesting as set forth below.

9-14-13: 500,000 shares

9-14-14: 500,000 shares

9-14-15: 500,000 shares

9-14-16: 500,000 shares

Except for termination of this Agreement for cause pursuant to Section 1(d)(i)(D) any termination of this Agreement by Company shall cause the immediate vesting of any unvested restricted stock, options or warrants awarded hereunder or pursuant to any future award by Company to Executive.

Further stock and stock option allocations awards will be based on a combination of the performance of Executive and the Company.

(iv)     Benefits. During the Service Term, Executive shall be entitled to participate in and shall receive all benefits under pension benefit plans provided by the Company (including without limitation participation in any Company incentive, savings and retirement plans, practices, policies and programs) to the extent applicable generally to other peer executives of the Company. In addition, during the Service Term, the Executive and/or the Executives family shall be entitled to participate and shall receive all benefits under welfare plans provided by the Company (including without limitation medical prescriptions, dental, disability, employee life, group life, accidental life and travel accident insurance plans and plans) to the extent and on the same basis applicable generally to other peer executives of the Company. Executive shall be reimbursed for customary travel and other expenses, subject to standard and reasonable documentation requirements. In addition, Executive will receive a stipend of $950 per month for lease of an automobile and other related expenses during the Service Term. Executive shall also be eligible to receive four weeks paid vacation per annum. Any unused vacation time during each fiscal year shall be rolled-over to the following fiscal year to the extent permitted by the Company’s policies for other senior executives of the Company.

(v)     Relocation Benefits. The Company will pay or reimburse Executive for the expenses incurred by Executive in connection with (a) the relocation of Executive, Executives family and household to the area of the Company’s headquarter and (b) the establishment of Executives new residence in the area of the Company’s headquarters, which expenses shall include but not be limited to, travel expenses, mortgage fees and closing costs, subject to standard and reasonable documentation requirements. If the Internal Revenue Service or any state or local taxing authority takes the position that the relocation expenses paid or reimbursed subject to this Section 1(b)(iv) results in the receipt of taxable income to Executive, such expenses shall include an amount equal to the aggregate Federal, state and local income and employment taxes imposed on Executive as a direct result of such payment or reimbursement. The maximum amount the Company will pay or reimburse for relocation expenses pursuant to this Section 1(b)(iv) is $180,000, this limit excluding any additional amounts the Company will reimburse Executive for any taxes due on any portion of this relocation reimbursement because that reimbursement has been deemed taxable income to the Executive.

(vi)    Expenses. During the Employment Period, the Company shall promptly reimburse Executive for all reasonable business expenses incurred by him in the course of performing his duties and responsibilities under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. The Company will promptly reimburse Executive for reasonable expenses incurred for tax return preparation, tax advice, financial planning and legal expenses incurred in connection with negotiating this Agreement and the other agreements referred to herein.

(c)      Board Membership. With respect to all regular elections of directors during the Employment Period, the Company shall nominate, and use its reasonable efforts to cause the election of, Executive to serve as a member of the Board. Effective upon the termination or expiration of the Employment Period, Executive shall resign as a director of the Company and its affiliates, as the case may be.

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(d)      Termination.

(i)     Events of Termination. Executives employment with the Company shall cease upon:

(A)    Executives death.

(B)     Executives voluntary retirement.

(C)     Executives permanent disability, which means his incapacity due to physical or mental illness such that he is unable to perform the essential functions of his previously assigned duties for a period of six months in any twelve month period and such permanent incapacity has been determined to exist by either (x) the Company’s disability insurance carrier or (y) by the Board in good faith based on competent medical advice in the event that the Company does not maintain disability insurance on Executive.

(D)     Termination by the Company by the delivery to Executive of a written notice from the Board or the CEO that Executive has been terminated (Notice of Termination) with or without Cause. Cause shall mean: 

(1)      Executives (aa) conviction of a felony; (bb) Executives commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Subsidiaries; (cc) Executives misappropriation of material funds or assets of the Company for personal use; or (dd) Executives engagement in unlawful harassment or other discrimination with respect to the employees of the Company or its Subsidiaries;

(2)      Executives continued substantial and repeated neglect of his duties, after written notice thereof from the Board, and such neglect has not been cured within 30 days after Executive receives notice thereof from the Board;

(3)      Executives gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company;

(4)      Executives engaging in conduct constituting a breach of Sections 2 or 3 hereof that is not cured in full within 15 days, and is materially and demonstrably injurious to the Company, after notice of default thereof, from the Company, as determined by a court of law.

In order for the termination to be effective: Executive must be notified in writing (which writing shall specify the cause in reasonable detail) of any termination of his employment for Cause. Executive will then have the right, within ten days of receipt of such notice, to file a written request for review by the Company. In such case, Executive will be given the opportunity to be heard, personally or by counsel, by the Board and a majority of the Directors must thereafter confirm that such termination is for Cause. If the Directors do not provide such confirmation, the termination shall be treated as other than for Cause. Notwithstanding anything to the contrary contained in this paragraph, Executive shall have the right after termination has occurred to appeal any determination by the Board that such termination was for Cause in accordance with the provisions of Section 7(f) hereof.

The delivery by the Company of notice to Executive that it does not intend to renew this Agreement as provided in Section 1(e) shall constitute a termination by the Company without Cause unless such notice fulfills the requirements of Section 1(d)(i)(D)(1), (2), (3) or (4) above.

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(E)      Executives voluntary resignation by the delivery to the Company and the Board of at least 30 days written notice from Executive that Executive has resigned with or without Good Reason. Good Reason shall mean Executives resignation from employment with the Company within 30 days after the occurrence of any one of the following:

(1)      the failure of the Company to pay an amount owing to Executive hereunder after Executive has provided the Company and the Board with written notice of such failure and such payment has not thereafter been made within 15 days of the delivery of such written notice;

(2)      the relocation of Executive from the corporate headquarters metropolitan area (as of the date of this agreement) without his consent.

The delivery by Executive of notice to the Company that he does not intend to renew this Agreement as provided in Section 1(h) shall constitute a resignation by Executive without Good Reason unless such notice fulfills the requirements of Section 1(d)(i)(E)(1)or (2) above.

(ii)      Date of Termination. Date of Termination means (i) if the employment is terminated for Cause, or by Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the employment is terminated other than for Cause or Disability, the Date of Termination shall be the date on which the Employer notifies the Employee of such termination and (iii) if the Employees employment is terminated by reason of death or disability, the date of Termination shall be the date of death or the disability effective date, as the case may be.

(iii)     Rights on Termination.

(A)     In the event that termination is by the Company without Cause (including by operation of the last paragraph of Section 1(d)(i)(D) above) or by Executive with Good Reason, the Company will continue, for a period of eighteen (18) months commencing on the effective date of the termination (the Severance Period), to pay Executive a monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates. During the Severance Period, the Company will also pay for Executives existing Company insurance coverage. The payments of Annual Base Salary and insurance premiums in accordance with this Section 1(d)(iii)(A) are collectively referred to as Severance Payments. This Section 1(d)(iii)(A) shall not apply unless the Company and Executive have executed a contingent mutual release in a form mutually acceptable to both the Company and Executive and is subject to paragraph (e) below. In addition, the Company will pay to Executive in a lump sum any accrued but unused vacation time.

(B)      If the Company terminates Executives employment for Cause, or if Executive resigns without Good Reason (including by operation of the last paragraph of Section 1(d)(i)(E)), the Company’s obligations to pay any compensation or benefits under this Agreement (other than accrued but unused vacation time which shall be paid to Executive in a lump sum payment) and all vesting under all stock and stock options held by Executive will cease effective as of the date of termination. Executives right to receive any other health or other benefits, if any, will be determined under the provisions of applicable plans, programs or other coverages.

(C)      If Executives employment terminates because of Executives death or permanent disability, then Executive or his estate shall be entitled to any disability income or life insurance payments from any insurance policies (other than any key man life insurance policy) paid for by the Company. In addition, if such death or disability occurs while Executive is employed hereunder, for a period of six (6) months commencing on the date of such death or such disability is established, Executive or his estate shall be entitled to payment of his monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates.

Notwithstanding the foregoing, the Company’s obligation to Executive for severance pay or other rights under either subparagraphs (A) or (B) above (the Severance Pay) shall cease if Executive is found by a court of law to be in material violation of the provisions of Sections 2 or 3 hereof. Until such time as Executive has received all of his Severance Payments, he will be entitled to continue to receive any health, life, accident and disability insurance benefits provided by the Company to Executive under this Agreement.

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(e)      Involuntary Termination after “Change of Control.”

In the event of a "Change of Control" as defined below, the Company shall have the right to terminate Executive's employment and this Agreement at will. Should the Company exercise this option to involuntarily terminate Executive during the pendency of this Agreement for any reason other than as specified in Section 1(d)(i)(D) within twelve (12) months following a defined Change of Control, Executive shall be entitled to an immediate cash payment equal in amount to twelve (12) months of compensation based upon a monthly proration of his Form W-2 earning from Company in the year preceding such termination and (ii) the fair value of eighteen months of Executive's then current fringe benefits provided by the Company.

In the event there is a Change of Control during the pendency of this Agreement, and Company gives Executive notice of intent to not thereafter renew the Agreement for a successive term, should Executive be involuntarily terminated from employment after expiration of the Agreement and within twelve (12) months following the Change of Control, Executive shall be entitled to an immediate cash payment in the amount set forth in the preceding paragraph. The contractual right to such payment is expressly agreed to be a covenant which shall survive expiration of this Agreement, and be enforceable hereunder.

For purposes of this Agreement, a "Change of Control" shall be deemed to have taken place if: (i) a third person, including a "group" as determined in accordance with Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having fifty percent (50%) or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) as a result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board or any successor to Company.

(f)       Mitigation. The Company’s obligation to continue to provide Executive with the Severance Payments pursuant to Section 1(d)(iii)(A) above and the benefits pursuant to the second sentence of Section 1(d)(iii)(C) above shall cease if Executive becomes employed as a senior executive by a third party.

(g)      Liquidated Damages. The parties acknowledge and agree that damages which will result to Executive for termination by the Company without Cause shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination. Executive agrees that, except for such other payments and benefits to which Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, Executive will execute a contingent mutual release of claims in a form reasonably satisfactory to both the Company and Executive.

(h)      Term of Employment. Unless Executives employment under this Agreement is sooner terminated as a result of Executives termination in accordance with the provisions of Section 1(d) above, Executives employment under this Agreement shall commence on September 14, 2012 and shall terminate on September 13, 2017 (the Service Term); provided, however, that Executives employment under this Agreement, and the Service Term, shall be automatically renewed for additional two-year periods commencing on September 14, 2017 and, thereafter, on each successive anniversary of such date unless either the Company or Executive notify the other party in writing within ninety (90) days prior to any such September 14th anniversary that it or he desires not to renew Executives employment under this Agreement. All references herein to Service Term shall include any renewals thereof after September 13, 2017.

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                       2.       Confidential Information; Proprietary Information, etc.

(a)      Obligation to Maintain Confidentiality. Executive acknowledges that any Proprietary Information disclosed or made available to Executive or obtained, observed or known by Executive as a direct or indirect consequence of his employment with or performance of services for the Company or any of its Affiliates during the course of his performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) and during the period in which Executive is receiving Severance Payments, are the property of the Company and its Affiliates. Therefore, Executive agrees that he will not at any time (whether during or after Executives term of employment) disclose or permit to be disclosed to any Person or, directly or indirectly, utilize for his own account or permit to be utilized by any Person any Proprietary Information or Records for any reason whatsoever without the Boards consent, unless and to the extent that (except as otherwise provided in the definition of Proprietary Information) the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executives acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, as a condition to receipt of the next or final payment of compensation, or at any other time the Company may request in writing (whether during or after Executives term of employment), all Records which he may then possess or have under his control. Executive further agrees that any property situated on the Company’s or its Affiliates premises and owned by the Company or its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company or its Affiliates and their personnel at any time with or without notice. Nothing in this Section 2(a) shall be construed to prevent Executive from using his general knowledge and experience in future employment so long as Executive complies with this Section 2(a) and the other restrictions contained in this Agreement.

(b)     Ownership of Property. Executive acknowledges that all inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the Company’s or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by the Company or any of its Affiliates (including any of the foregoing that constitutes any Proprietary Information or Records) (Work Product) belong to the Company or such Affiliate and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or such Affiliate. Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Executive hereby assigns and agrees to assign to Company or such Affiliate all right, title and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after Executives term of employment) to establish and confirm the Company’s or its Affiliates ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments). Notwithstanding anything contained in this Section 2(b) to the contrary, the Company’s ownership of Work Product does not apply to any invention that Executive develops entirely on his own time without using the equipment, supplies or facilities of the Company or its Affiliates or Subsidiaries or any Proprietary Information (including trade secrets), except that the Company’s ownership of Work Product does include those inventions that: (a) relate to the business of the Company or its Affiliates or Subsidiaries or to the actual or demonstrably anticipated research or development relating to the Company’s business; or (b) result from any work that Executive performs for the Company or its Affiliates or Subsidiaries.

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(c)      Third Party Information. Executive understands that the Company and its Affiliates will receive from third parties confidential or proprietary information (Third Party Information) subject to a duty on the Company’s and its Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Executives employment and thereafter, and without in any way limiting the provisions of Sections 2(a) and 2(b) above, Executive shall hold Third Party Information in the strictest confidence and shall not disclose to anyone (other than personnel of the Company or its Affiliates who need to know such information in connection with their work for the Company or its Affiliates) or use, except in connection with his work for the Company or its Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.

(d)      Use of Information of Prior Employers, etc. Executive will abide by any enforceable obligations contained in any agreements that Executive has entered into with his prior employers or other parties to whom Executive has an obligation of confidentiality.

(e)      Compelled Disclosure. If Executive is required by law or governmental regulation or by subpoena or other valid legal process to disclose any Proprietary Information or Third Party Information to any Person, Executive will immediately provide the Company with written notice of the applicable law, regulation or process so that the Company may seek a protective order or other appropriate remedy. Executive will cooperate fully with the Company and the Company’s Representatives in any attempt by the Company to obtain any such protective order or other remedy. If the Company elects not to seek, or is unsuccessful in obtaining, any such protective order or other remedy in connection with any requirement that Executive disclose Proprietary Information or Third Party Information, and if Executive furnishes the Company with a written opinion of reputable legal counsel acceptable to the Company confirming that the disclosure of such Proprietary Information or Third Party Information is legally required, then Executive may disclose such Proprietary Information or Third Party Information to the extent legally required; provided, however, that Executive will use his reasonable best efforts to ensure that such Proprietary Information is treated confidentially by each Person to whom it is disclosed.

3.       Nonsolicitation.

(a)      Nonsolicitation. As long as Executive is an employee of the Company or any Affiliate thereof, and for eighteen (18) months thereafter, Executive shall not directly or indirectly through another entity: (i) induce or attempt to induce any employee of the Company or any Affiliate to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any Affiliate and any employee thereof; (ii) hire or employ any person who was an employee of the Company or any Affiliate at any time during the nine (9) month period immediately preceding the date of such Executives termination; (iii) induce or attempt to induce any customer, client, supplier, licensee or other business relation of the Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way interfere with the relationship between any such customer, client, supplier, licensee or business relation and the Company or any Affiliate; (iv) call on, solicit or service any Person who was a customer or client of the Company or any Affiliate or (v) call on, solicit or service any Person who was Prospective Client for any purpose which directly or indirectly competes with the business of the Company. For purposes hereof, a Prospective Client means any Person whom the Company or any of its Affiliates has entertained discussions with to become a client or customer at any time during the twelve (12) month period immediately preceding the date of such Executives termination.

(b)      Acknowledgment. Executive acknowledges that in the course of his employment with the Company and its Affiliates, he has and will become familiar with the trade secrets and other Proprietary Information of the Company and its Affiliates. It is specifically recognized by Executive that his services to the Company and its Subsidiaries are special, unique and of extraordinary value, that the Company has a protectable interest in prohibiting Executive as provided in this Section 3, that money damages are insufficient to protect such interests, that there is adequate consideration being provided to Executive hereunder, that such prohibitions are necessary and appropriate without regard to payments being made to Executive hereunder and that the Company would not enter this Agreement with Executive without the restriction of this Section 3. Executive further acknowledges that the restrictions contained in this Section 3 do not impose an undue hardship on him and, since he has general business skills which may be used in industries other than that in which the Company and its Subsidiaries conduct their business, do not deprive Executive of his livelihood. Executive further acknowledges that the provisions of this Section 3 are separate and independent of the other sections of this Agreement.

(c)      Enforcement, etc. If, at the time of enforcement of Section 2 or 3 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances as determined by the court shall be substituted for the stated period, scope or area. Because Executives services are unique, because Executive has access to Proprietary Information and for the other reasons set forth herein, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, without limiting the generality of Section 7(g), in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof.

(d)      Submission to Jurisdiction. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New Yorkin any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement in any other court. The parties hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

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GENERAL PROVISIONS

4.       Definitions.

Affiliate of any Person means any other Person which directly or indirectly controls, is controlled by or is under common control with such Person.

Board means the Company’s board of directors or the board of directors or similar management body of any successor of the Company.

Proprietary Information means any and all data and information concerning the business affairs of the Company or any of its Affiliates and not generally known in the industry in which the Company or any of its Affiliates is or may become engaged, and any other information concerning any matters affecting or relating to the Company’s or its Affiliates businesses, but in any event Proprietary Information shall include, any of the Company’s and its Affiliates past, present or prospective business opportunities, including information concerning acquisition opportunities in or reasonably related to the Company’s or its Affiliates businesses or industries, customers, customer lists, clients, client lists, the prices the Company and its Affiliates obtain or have obtained from the sale of, or at which they sell or have sold, their products, unit volume of sales to past or present customers and clients, or any other information concerning the business of the Company and its Affiliates, their manner of operation, their plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets, information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the foregoing matters will be deemed confidential, material or important. Proprietary Information does not include any information which Executive has obtained from a Person other than an employee of the Company, which was disclosed to him without a breach of a duty of confidentiality.

Records means (i) any and all procedure manuals, books, records and accounts; (ii) all property of the Company and its Affiliates, including papers, note books, tapes and similar repositories containing Proprietary Information; (iii) all invoices and commission reports; (iv) customer lists partial and/or complete; (v) data layouts, magnetic tape layouts, diskette layouts, etc.; (vi) samples; (vii) promotional letters, brochures and advertising materials; (viii) displays and display materials; (ix) correspondence and old or current proposals to any former, present or prospective customer of the Company and its Affiliates; (x) information concerning revenues and profitability and any other financial conditions of the Company and its Affiliates; (xi) information concerning the Company and its Affiliates which was input by Executive or at his direction, under his supervision or with his knowledge, including on any floppy disk, diskette, cassette or similar device used in, or in connection with, any computer, recording devices or typewriter; (xii) data, account information or other matters furnished by customers of the Company and its Affiliates; and (xiii) all copies of any of the foregoing data, documents or devices whether in the form of carbon copies, photo copies, copies of floppy disks, diskettes, tapes or in any other manner whatsoever.

                       Person means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

                       Subsidiary means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

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5.       Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class United States mail (postage prepaid, return receipt requested) or sent by reputable overnight courier service (charges prepaid) or by facsimile to the recipient at the address below indicated:

If to Executive:
	Raj S. Nanvaan
	108-18 Queens Blvd.
	Forest Hills, New York 11375
	Tel No.: (718) 408-2323
If to the Company:
	108-18 Queens Blvd.
	Forest Hills, New York 11375
	Attention: Chief Executive Officer
	Tel No.: (718) 408-2323
	Fax No.: (718) 408-1471

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

6.       Executives Representations and Warranties. Executive represents and warrants that he has full and authority to enter into this Agreement and fully to perform his obligations hereunder, that he is not subject to any non-competition agreement, and that his past, present and anticipated future activities have not and will not infringe on the proprietary rights of others, including, but not limited to, proprietary information rights or interfere with any agreements he has with any prior employee. Executive further represents and warrants that he is not obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, which would conflict with or result in a breach of this Agreement or which would in any manner interfere with the performance of his duties for the Company.

7.       General Provisions.

(a)      Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(b)      Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

(c)      Counterparts; Facsimile Transmission. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Each party to this Agreement agrees that it will be bound by its own telecopied signature and that it accepts the telecopied signature of each other party to this Agreement.

(d)      Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable and, provided further that, the rights and obligations of the Company may be assigned to any Affiliate of the Company.

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(e)      Choice of Law; Jurisdiction. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New York in any action or proceeding arising out of or relating to Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Executive hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

(f)       Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

(g)      Amendment and Waiver. The provisions of this Agreement may be amended or and waived only with the prior written consent of the Company, Executive and the Investor.

(h)      Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief executive office is located, the time period shall be automatically extended to the business day immediately following, such Saturday, Sunday or holiday.

(i)       Termination. This Agreement shall survive the termination of Executives employment with the Company and shall remain in full force and effect after such termination.

(j)      No Waiver. A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such party would otherwise have on any future occasion. No failure to exercise, nor any delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.

(k)    Insurance. The Company, at its discretion, may apply for and procure in its own name for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for healthy men of his age.

(m)    Offset. Whenever the Company or any of its Subsidiaries is obligated to pay any sum to Executive or any Affiliate or related person thereof pursuant to this Agreement, any bona fide debts that Executive or such Affiliate or related person owes to the Company or any of its Subsidiaries may be deducted from that sum before payment.

(n) Indemnification and Reimbursement of Payments on Behalf of Executive. The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, provincial, local or foreign withholding taxes, excise taxes, or employment taxes (Taxes) imposed with respect to Executives compensation or other payments from the Company or any of its Subsidiaries or Executives ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, royalties, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock.

(o)      Insurance and Indemnification. For the period from the date of this Agreement (as can be afforded) through at least the tenth anniversary of the Employees termination of employment from the Employer, the Employer shall maintain the Employee as an insured party on all directors and officers insurance maintained by the Employer for the benefit of its directors and officers on at least the same basis as all other covered individuals and provide the Employee with at least the same corporate indemnification as it provides to the peer executives of the Employer.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

NATIVE AMERICAN ENERGY GROUP, INC.
By:	/s/ Raj S. Nanvaan
	Raj S. Nanvaan
	Chief Financial & Operations Officer
	/s/ Richard Ross
	Richard Ross
	Corporate Secretary

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EX-10.28

EXHIBIT 10.28

NATIVE AMERICAN ENERGY GROUP

SENIOR EXECUTIVE AGREEMENT

THIS AGREEMENT is made as of September 14, 2012, between NATIVE AMERICAN ENERGY GROUP, INC., a Delaware corporation (the “Company”), and DOYLE A. JOHNSON (“Executive”).

Recitals

A. The Company and Executive acknowledge that Executive has served the Company in prior years as a duly appointed officer or consultant without receiving any salary nearly since inception. Further, regarding EMPLOYMENT AGREEMENTS in general: None of the Company's officers, directors or key employees are currently party to employment agreements with the Company. The Company has no pension, health, annuity, insurance or profit sharing plans; however, the Company may adopt such plans in the future. There are presently no personal benefits available for directors, officers or employees of the Company.

B. The Company and Executive desire to enter into an agreement pursuant to which Executive will be employed as the Chief Geologist and Petroleum Engineerof the Company on the terms and conditions set forth in this Agreement.

C. Certain definitions are set forth in Section 4 of this Agreement.

Agreement

The parties hereto agree as follows:

1. Employment. The Company hereby engages Executive to serve as the Chief Geologist and Petroleum Engineerof the Company of the Company, and Executive agrees to serve the Company, during the Service Term (as defined in Section 1(g) hereof) in the capacities, and subject to the terms and conditions, set forth in this Agreement,each Party expressly revoking any and all prior employment agreements (oral or otherwise), to which the Parties may be mutually subject.

(a) Services. During the Employment Period, Executive shall serve as the Chief Geologist and Petroleum Engineerof the Company and shall have the normal duties, responsibilities, functions and authorities customarily exercised by the Chief Geologist and Petroleum Engineerof a company of similar size and nature as the Company. During the Employment Period, Executive shall employ his oil and gas industry expertise to manage all aspects of the Company’s geological operations, identify drilling locations, coordinate with Land, Engineering and Regulatory to progress locations from permits to completed wells for the Company and its affiliates which are consistent with Executive's position as the Board of Directors of the Company (the "Board") may from time to time direct.

During the Employment Period, Executive shall report to the Board and shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. Executive shall perform his duties, responsibilities and functions to the Company hereunder to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply with the Company's policies and procedures in all material respects. In performing his duties and exercising his authority under this Agreement, Executive shall support and implement the business and strategic plans approved from time to time by the Board and shall support and cooperate with the Company's efforts to expand its businesses and operate profitably and in conformity with the business and strategic plans approved by the Board.The Company may also utilize Executive in any other work or activity in furtherance of the business of the Company in which his talents may be applied in a manner commensurate with his position, training, knowledge, skills and abilities.

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During the Employment Period, Executive shall not serve as an officer or director of, or otherwise perform services for compensation for, any other entity unless otherwise agreed to between the Company and the Executive along with the prior written consent of the Board. Executive may serve as an officer or director of or otherwise participate in purely educational, welfare, social, religious and civic organizations so long as such activities do not interfere with Executive's employment. Nothing contained herein shall preclude Executive from (i) engaging in charitable and community activities; (ii) participating in industry and trade organization activities; (iii) managing his and his family's personal investments and affairs; and (iv) delivering lectures, fulfilling speaking engagements or teaching at educational institutions; provided, that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.

(b) Salary, Bonus, Incentive Compensation and Benefits.

(i) Salary.In consideration of the services to be rendered under this Agreement, during the Period of Employment, the Company shall pay Executive a salary, commencing on October 1, 2012, at the minimum rate of forty-eight thousand Dollars ($48,000) per year ("Base Salary"). Executive's Base Salary will be reviewed and increased by the Board (or a committee or designee thereof) on an annual basis from the 1st anniversary of the Commencement Date (or more frequently, should the Board decide to do so), in accordance with the established procedures of the Company, as in effect from time to time, for adjusting salaries for similarly situated employees (such initial annual base salary and the annual base salary as determined and adjusted from time to time by the Board are referred to herein as, the "Base Salary") and, in the sole discretion of the Board (or such committee or designee thereof), such annual Base Salary may be increased, but not decreased, effective as of any date determined by the Board. The Base Salary shall be payable by the Company in regular installments in accordance with the Company's general payroll practices, but in any event no less frequently than monthly. During the period beginning on the Commencement Date and ending September 13, 2017, the Base Salary shall be pro-rated on an annualized basis. For purposes of this Agreement, the Base Salary shall not include any other type of compensation or benefit paid or payable to the Executive. Notwithstanding anything in this Agreement to the contrary, any decrease in Executive's then Base Salary shall be deemed Good Reason.

(ii) Bonuses. During the Period of Employment, Executive shall be eligible to receive an annual incentive bonus (the "Bonus") on terms applicable to Company employees generally. The annual target amount of the Bonus shall be (to be determined). The amount of the Bonus paid shall be determined by Executive's supervisors or the Board in their sole discretion, based on performance objectives established for the Company employees generally for the relevant period. The Bonus will be paid at the same time as bonuses for other executive officers provided that Executive remains employed with the Company through the payment date. The annual target amount of Executive's Bonus will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be increased, but not decreased, in the sole discretion of Company.

(iii) Equity Awards. Executive will be eligible for grants of equity compensation awards under a stock plan maintained by the Company, the 2011 Equity Incentive Plan (the “Plan”), as in effect from time to time, and subject to such terms and conditions as the Company determines, including vesting criteria such as continued service or performance objectives.

The Company shall provide Executive with a combination of restricted stock or units ("restricted stock") and stock options. The specific terms of the restricted stock and the stock options granted under the Plan (including, without limitation, customary anti-dilution and other provisions) will be reflected in separate stock option and restricted stock agreements that will be negotiated by Executive and the Company in good faith prior to the Commencement Date. The terms and conditions of stock options and restricted stock shall otherwise be those set forth under the Plan and shall be consistent with the terms contained in restricted stock and the stock option agreements provided to other key executives of the Company.

Issuance of Incentive Stock Options: The Company will grant 2,000,000 stock options having an exercise price of $0.20 per share which is based on the price at the time of this agreement 9-14-12 ($0.195). Company shall provide, pursuant to the 2011 Equity Incentive Plan, with a 10-year term to be implemented by Company, stock options with vesting as set forth below.

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9-14-13: 500,000 shares

9-14-14: 500,000 shares

9-14-15: 500,000 shares

9-14-16: 500,000 shares

Except for termination of this Agreement for cause pursuant to Section 1(d)(i)(D) any termination of this Agreement by Company shall cause the immediate vesting of any unvested restricted stock, options or warrants awarded hereunder or pursuant to any future award by Company to Executive.

Further stock and stock option allocations awards will be based on a combination of the performance of Executive and the Company.

(iv) Benefits. During the Service Term, Executive shall be entitled to participate in and shall receive all benefits under pension benefit plans provided by the Company (including without limitation participation in any Company incentive, savings and retirement plans, practices, policies and programs) to the extent applicable generally to other peer executives of the Company. In addition, during the Service Term, the Executive and/or the Executives family shall be entitled to participate and shall receive all benefits under welfare plans provided by the Company (including without limitation medical prescriptions, dental, disability, employee life, group life, accidental life and travel accident insurance plans and plans) to the extent and on the same basis applicable generally to other peer executives of the Company. Executive shall be reimbursed for customary travel and other expenses, subject to standard and reasonable documentation requirements. In addition, Executive will receive a stipend of $950 per month for lease of an automobile and other related expenses during the Service Term. Executive shall also be eligible to receive four weeks paid vacation per annum. Any unused vacation time during each fiscal year shall be rolled-over to the following fiscal year to the extent permitted by the Company’s policies for other senior executives of the Company.

(v) Relocation Benefits. The Company will pay or reimburse Executive for the expenses incurred by Executive in connection with (a) the relocation of Executive, Executives family and household to the area of the Company’s headquarter and (b) the establishment of Executives new residence in the area of the Company’s headquarters, which expenses shall include but not be limited to, travel expenses, mortgage fees and closing costs, subject to standard and reasonable documentation requirements. If the Internal Revenue Service or any state or local taxing authority takes the position that the relocation expenses paid or reimbursed subject to this Section 1(b)(iv) results in the receipt of taxable income to Executive, such expenses shall include an amount equal to the aggregate Federal, state and local income and employment taxes imposed on Executive as a direct result of such payment or reimbursement. The maximum amount the Company will pay or reimburse for relocation expenses pursuant to this Section 1(b)(iv) is $180,000, this limit excluding any additional amounts the Company will reimburse Executive for any taxes due on any portion of this relocation reimbursement because that reimbursement has been deemed taxable income to the Executive.

(vi) Expenses. During the Employment Period, the Company shall promptly reimburse Executive for all reasonable business expenses incurred by him in the course of performing his duties and responsibilities under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. The Company will promptly reimburse Executive for reasonable expenses incurred for tax return preparation, tax advice, financial planning and legal expenses incurred in connection with negotiating this Agreement and the other agreements referred to herein.

(c) Termination.

(i)Events of Termination. Executives employment with the Company shall cease upon:

(A)Executives death.

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(B)Executives voluntary retirement.

(C) Executives permanent disability, which means his incapacity due to physical or mental illness such that he is unable to perform the essential functions of his previously assigned duties for a period of six months in any twelve month period and such permanent incapacity has been determined to exist by either (x) the Company’s disability insurance carrier or (y) by the Board in good faith based on competent medical advice in the event that the Company does not maintain disability insurance on Executive.

(D) Termination by the Company by the delivery to Executive of a written notice from the Board or the CEO that Executive has been terminated (Notice of Termination) with or without Cause. Cause shall mean:

(1) Executives (aa) conviction of a felony; (bb) Executives commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Subsidiaries; (cc) Executives misappropriation of material funds or assets of the Company for personal use; or (dd) Executives engagement in unlawful harassment or other discrimination with respect to the employees of the Company or its Subsidiaries;

(2) Executives continued substantial and repeated neglect of his duties, after written notice thereof from the Board, and such neglect has not been cured within 30 days after Executive receives notice thereof from the Board;

(3) Executives gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company;

(4) Executives engaging in conduct constituting a breach of Sections 2 or 3 hereof that is not cured in full within 15 days, and is materially and demonstrably injurious to the Company, after notice of default thereof, from the Company, as determined by a court of law.

In order for the termination to be effective: Executive must be notified in writing (which writing shall specify the cause in reasonable detail) of any termination of his employment for Cause. Executive will then have the right, within ten days of receipt of such notice, to file a written request for review by the Company. In such case, Executive will be given the opportunity to be heard, personally or by counsel, by the Board and a majority of the Directors must thereafter confirm that such termination is for Cause. If the Directors do not provide such confirmation, the termination shall be treated as other than for Cause. Notwithstanding anything to the contrary contained in this paragraph, Executive shall have the right after termination has occurred to appeal any determination by the Board that such termination was for Cause in accordance with the provisions of Section 7(f) hereof.

The delivery by the Company of notice to Executive that it does not intend to renew this Agreement as provided in Section 1(h) shall constitute a termination by the Company without Cause unless such notice fulfills the requirements of Section 1(c)(i)(D)(1), (2), (3) or (4) above.

(E) Executives voluntary resignation by the delivery to the Company and the Board of at least 30 days written notice from Executive that Executive has resigned with or without Good Reason. Good Reason shall mean Executives resignation from employment with the Company within 30 days after the occurrence of any one of the following:

(1) the failure of the Company to pay an amount owing to Executive hereunder after Executive has provided the Company and the Board with written notice of such failure and such payment has not thereafter been made within 15 days of the delivery of such written notice;

(2) the relocation of Executive from the corporate headquarters metropolitan area (as of the date of this agreement) without his consent.

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The delivery by Executive of notice to the Company that he does not intend to renew this Agreement as provided in Section 1(g) shall constitute a resignation by Executive without Good Reason unless such notice fulfills the requirements of Section 1(c)(i)(E)(1)or (2) above.

(ii) Date of Termination. Date of Termination means (i) if the employment is terminated for Cause, or by Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the employment is terminated other than for Cause or Disability, the Date of Termination shall be the date on which the Employer notifies the Employee of such termination and (iii) if the Employees employment is terminated by reason of death or disability, the date of Termination shall be the date of death or the disability effective date, as the case may be.

(iii) Rights on Termination.

(A) In the event that termination is by the Company without Cause (including by operation of the last paragraph of Section 1(c)(i)(D) above) or by Executive with Good Reason, the Company will continue, for a period of eighteen (18) months commencing on the effective date of the termination (the Severance Period), to pay Executive a monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates. During the Severance Period, the Company will also pay for Executives existing Company insurance coverage. The payments of Annual Base Salary and insurance premiums in accordance with this Section 1(c)(iii)(A) are collectively referred to as Severance Payments. This Section 1(c)(iii)(A) shall not apply unless the Company and Executive have executed a contingent mutual release in a form mutually acceptable to both the Company and Executive and is subject to paragraph (e) below. In addition, the Company will pay to Executive in a lump sum any accrued but unused vacation time.

(B) If the Company terminates Executives employment for Cause, or if Executive resigns without Good Reason (including by operation of the last paragraph of Section 1(c)(i)(E)), the Company’s obligations to pay any compensation or benefits under this Agreement (other than accrued but unused vacation time which shall be paid to Executive in a lump sum payment) and all vesting under all stock and stock options held by Executive will cease effective as of the date of termination. Executives right to receive any other health or other benefits, if any, will be determined under the provisions of applicable plans, programs or other coverages.

(C) If Executives employment terminates because of Executives death or permanent disability, then Executive or his estate shall be entitled to any disability income or life insurance payments from any insurance policies (other than any key man life insurance policy) paid for by the Company. In addition, if such death or disability occurs while Executive is employed hereunder, for a period of six (6) months commencing on the date of such death or such disability is established, Executive or his estate shall be entitled to payment of his monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates.

Notwithstanding the foregoing, the Company’s obligation to Executive for severance pay or other rights under either subparagraphs (A) or (B) above (the Severance Pay) shall cease if Executive is found by a court of law to be in material violation of the provisions of Sections 2 or 3 hereof. Until such time as Executive has received all of his Severance Payments, he will be entitled to continue to receive any health, life, accident and disability insurance benefits provided by the Company to Executive under this Agreement.

(d) Involuntary Termination after “Change of Control.”

In the event of a "Change of Control" as defined below, the Company shall have the right to terminate Executive's employment and this Agreement at will. Should the Company exercise this option to involuntarily terminate Executive during the pendency of this Agreement for any reason other than as specified in Section 1(c)(i)(D) within twelve (12) months following a defined Change of Control, Executive shall be entitled to an immediate cash payment equal in amount to twelve (12) months of compensation based upon a monthly proration of his Form W-2 earning from Company in the year preceding such termination and (ii) the fair value of eighteen months of Executive's then current fringe benefits provided by the Company.

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In the event there is a Change of Control during the pendency of this Agreement, and Company gives Executive notice of intent to not thereafter renew the Agreement for a successive term, should Executive be involuntarily terminated from employment after expiration of the Agreement and within twelve (12) months following the Change of Control, Executive shall be entitled to an immediate cash payment in the amount set forth in the preceding paragraph. The contractual right to such payment is expressly agreed to be a covenant which shall survive expiration of this Agreement, and be enforceable hereunder.

For purposes of this Agreement, a "Change of Control" shall be deemed to have taken place if: (i) a third person, including a "group" as determined in accordance with Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having fifty percent (50%) or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) as a result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board or any successor to Company.

(e) Mitigation. The Company’s obligation to continue to provide Executive with the Severance Payments pursuant to Section 1(c)(iii)(A) above and the benefits pursuant to the second sentence of Section 1(c)(iii)(C) above shall cease if Executive becomes employed as a senior executive by a third party.

(f) Liquidated Damages. The parties acknowledge and agree that damages which will result to Executive for termination by the Company without Cause shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination. Executive agrees that, except for such other payments and benefits to which Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, Executive will execute a contingent mutual release of claims in a form reasonably satisfactory to both the Company and Executive.

(g) Term of Employment. Unless Executives employment under this Agreement is sooner terminated as a result of Executives termination in accordance with the provisions of Section 1(c) above, Executives employment under this Agreement shall commence on September 14, 2012 and shall terminate on September 13, 2017 (the Service Term); provided, however, that Executives employment under this Agreement, and the Service Term, shall be automatically renewed for additional two-year periods commencing on September 14, 2017 and, thereafter, on each successive anniversary of such date unless either the Company or Executive notify the other party in writing within ninety (90) days prior to any such September 14th anniversary that it or he desires not to renew Executives employment under this Agreement. All references herein to Service Term shall include any renewals thereof after September 13, 2017.

2. Confidential Information; Proprietary Information, etc.

(a) Obligation to Maintain Confidentiality. Executive acknowledges that any Proprietary Information disclosed or made available to Executive or obtained, observed or known by Executive as a direct or indirect consequence of his employment with or performance of services for the Company or any of its Affiliates during the course of his performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) and during the period in which Executive is receiving Severance Payments, are the property of the Company and its Affiliates. Therefore, Executive agrees that he will not at any time (whether during or after Executives term of employment) disclose or permit to be disclosed to any Person or, directly or indirectly, utilize for his own account or permit to be utilized by any Person any Proprietary Information or Records for any reason whatsoever without the Boards consent, unless and to the extent that (except as otherwise provided in the definition of Proprietary Information) the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executives acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, as a condition to receipt of the next or final payment of compensation, or at any other time the Company may request in writing (whether during or after Executives term of employment), all Records which he may then possess or have under his control. Executive further agrees that any property situated on the Company’s or its Affiliates premises and owned by the Company or its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company or its Affiliates and their personnel at any time with or without notice. Nothing in this Section 2(a) shall be construed to prevent Executive from using his general knowledge and experience in future employment so long as Executive complies with this Section 2(a) and the other restrictions contained in this Agreement.

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(b)Ownership of Property. Executive acknowledges that all inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the Company’s or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by the Company or any of its Affiliates (including any of the foregoing that constitutes any Proprietary Information or Records) (Work Product) belong to the Company or such Affiliate and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or such Affiliate. Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Executive hereby assigns and agrees to assign to Company or such Affiliate all right, title and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after Executives term of employment) to establish and confirm the Company’s or its Affiliates ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments). Notwithstanding anything contained in this Section 2(b) to the contrary, the Company’s ownership of Work Product does not apply to any invention that Executive develops entirely on his own time without using the equipment, supplies or facilities of the Company or its Affiliates or Subsidiaries or any Proprietary Information (including trade secrets), except that the Company’s ownership of Work Product does include those inventions that: (a) relate to the business of the Company or its Affiliates or Subsidiaries or to the actual or demonstrably anticipated research or development relating to the Company’s business; or (b) result from any work that Executive performs for the Company or its Affiliates or Subsidiaries.

(c)Third Party Information. Executive understands that the Company and its Affiliates will receive from third parties confidential or proprietary information (Third Party Information) subject to a duty on the Company’s and its Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Executives employment and thereafter, and without in any way limiting the provisions of Sections 2(a) and 2(b) above, Executive shall hold Third Party Information in the strictest confidence and shall not disclose to anyone (other than personnel of the Company or its Affiliates who need to know such information in connection with their work for the Company or its Affiliates) or use, except in connection with his work for the Company or its Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.

(d)Use of Information of Prior Employers, etc. Executive will abide by any enforceable obligations contained in any agreements that Executive has entered into with his prior employers or other parties to whom Executive has an obligation of confidentiality.

(e)Compelled Disclosure. If Executive is required by law or governmental regulation or by subpoena or other valid legal process to disclose any Proprietary Information or Third Party Information to any Person, Executive will immediately provide the Company with written notice of the applicable law, regulation or process so that the Company may seek a protective order or other appropriate remedy. Executive will cooperate fully with the Company and the Company’s Representatives in any attempt by the Company to obtain any such protective order or other remedy. If the Company elects not to seek, or is unsuccessful in obtaining, any such protective order or other remedy in connection with any requirement that Executive disclose Proprietary Information or Third Party Information, and if Executive furnishes the Company with a written opinion of reputable legal counsel acceptable to the Company confirming that the disclosure of such Proprietary Information or Third Party Information is legally required, then Executive may disclose such Proprietary Information or Third Party Information to the extent legally required; provided, however, that Executive will use his reasonable best efforts to ensure that such Proprietary Information is treated confidentially by each Person to whom it is disclosed.

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3. Nonsolicitation.

(a) Nonsolicitation. As long as Executive is an employee of the Company or any Affiliate thereof, and for eighteen (18) months thereafter, Executive shall not directly or indirectly through another entity: (i) induce or attempt to induce any employee of the Company or any Affiliate to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any Affiliate and any employee thereof; (ii) hire or employ any person who was an employee of the Company or any Affiliate at any time during the nine (9) month period immediately preceding the date of such Executives termination; (iii) induce or attempt to induce any customer, client, supplier, licensee or other business relation of the Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way interfere with the relationship between any such customer, client, supplier, licensee or business relation and the Company or any Affiliate; (iv) call on, solicit or service any Person who was a customer or client of the Company or any Affiliate or (v) call on, solicit or service any Person who was Prospective Client for any purpose which directly or indirectly competes with the business of the Company. For purposes hereof, a Prospective Client means any Person whom the Company or any of its Affiliates has entertained discussions with to become a client or customer at any time during the twelve (12) month period immediately preceding the date of such Executives termination.

(b)Acknowledgment. Executive acknowledges that in the course of his employment with the Company and its Affiliates, he has and will become familiar with the trade secrets and other Proprietary Information of the Company and its Affiliates. It is specifically recognized by Executive that his services to the Company and its Subsidiaries are special, unique and of extraordinary value, that the Company has a protectable interest in prohibiting Executive as provided in this Section 3, that money damages are insufficient to protect such interests, that there is adequate consideration being provided to Executive hereunder, that such prohibitions are necessary and appropriate without regard to payments being made to Executive hereunder and that the Company would not enter this Agreement with Executive without the restriction of this Section 3. Executive further acknowledges that the restrictions contained in this Section 3 do not impose an undue hardship on him and, since he has general business skills which may be used in industries other than that in which the Company and its Subsidiaries conduct their business, do not deprive Executive of his livelihood. Executive further acknowledges that the provisions of this Section 3 are separate and independent of the other sections of this Agreement.

(c)Enforcement, etc. If, at the time of enforcement of Section 2 or 3 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances as determined by the court shall be substituted for the stated period, scope or area. Because Executives services are unique, because Executive has access to Proprietary Information and for the other reasons set forth herein, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, without limiting the generality of Section 7(g), in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof.

(d) Submission to Jurisdiction. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New Yorkin any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement in any other court. The parties hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

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GENERAL PROVISIONS

4. Definitions.

Affiliate of any Person means any other Person which directly or indirectly controls, is controlled by or is under common control with such Person.

Board means the Company’s board of directors or the board of directors or similar management body of any successor of the Company.

Proprietary Information means any and all data and information concerning the business affairs of the Company or any of its Affiliates and not generally known in the industry in which the Company or any of its Affiliates is or may become engaged, and any other information concerning any matters affecting or relating to the Company’s or its Affiliates businesses, but in any event Proprietary Information shall include, any of the Company’s and its Affiliates past, present or prospective business opportunities, including information concerning acquisition opportunities in or reasonably related to the Company’s or its Affiliates businesses or industries, customers, customer lists, clients, client lists, the prices the Company and its Affiliates obtain or have obtained from the sale of, or at which they sell or have sold, their products, unit volume of sales to past or present customers and clients, or any other information concerning the business of the Company and its Affiliates, their manner of operation, their plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets, information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the foregoing matters will be deemed confidential, material or important. Proprietary Information does not include any information which Executive has obtained from a Person other than an employee of the Company, which was disclosed to him without a breach of a duty of confidentiality.

Records means (i) any and all procedure manuals, books, records and accounts; (ii) all property of the Company and its Affiliates, including papers, note books, tapes and similar repositories containing Proprietary Information; (iii) all invoices and commission reports; (iv) customer lists partial and/or complete; (v) data layouts, magnetic tape layouts, diskette layouts, etc.; (vi) samples; (vii) promotional letters, brochures and advertising materials; (viii) displays and display materials; (ix) correspondence and old or current proposals to any former, present or prospective customer of the Company and its Affiliates; (x) information concerning revenues and profitability and any other financial conditions of the Company and its Affiliates; (xi) information concerning the Company and its Affiliates which was input by Executive or at his direction, under his supervision or with his knowledge, including on any floppy disk, diskette, cassette or similar device used in, or in connection with, any computer, recording devices or typewriter; (xii) data, account information or other matters furnished by customers of the Company and its Affiliates; and (xiii) all copies of any of the foregoing data, documents or devices whether in the form of carbon copies, photo copies, copies of floppy disks, diskettes, tapes or in any other manner whatsoever.

Person means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

Subsidiary means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

5. Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class United States mail (postage prepaid, return receipt requested) or sent by reputable overnight courier service (charges prepaid) or by facsimile to the recipient at the address below indicated:

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If to Executive:
	DOYLE A. JOHNSON
	108-18 Queens Blvd.
	Forest Hills, New York 11375
	Tel No.: (718) 408-2323
If to the Company:

108-18 Queens Blvd.

Forest Hills, New York 11375

Attention: Chief Executive Officer

Tel No.: (718) 408-2323

Fax No.: (718) 408-1471

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

6. Executives Representations and Warranties. Executive represents and warrants that he has full and authority to enter into this Agreement and fully to perform his obligations hereunder, that he is not subject to any non-competition agreement, and that his past, present and anticipated future activities have not and will not infringe on the proprietary rights of others, including, but not limited to, proprietary information rights or interfere with any agreements he has with any prior employee. Executive further represents and warrants that he is not obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, which would conflict with or result in a breach of this Agreement or which would in any manner interfere with the performance of his duties for the Company.

7. General Provisions.

(a) Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(b) Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

(c) Counterparts; Facsimile Transmission. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Each party to this Agreement agrees that it will be bound by its own telecopied signature and that it accepts the telecopied signature of each other party to this Agreement.

(d) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable and, provided further that, the rights and obligations of the Company may be assigned to any Affiliate of the Company.

(e) Choice of Law; Jurisdiction. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New York in any action or proceeding arising out of or relating to Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Executive hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

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(f) Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

(g) Amendment and Waiver. The provisions of this Agreement may be amended or and waived only with the prior written consent of the Company, Executive and the Investor.

(h) Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief executive office is located, the time period shall be automatically extended to the business day immediately following, such Saturday, Sunday or holiday.

(i) Termination. This Agreement shall survive the termination of Executives employment with the Company and shall remain in full force and effect after such termination.

(j)No Waiver. A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such party would otherwise have on any future occasion. No failure to exercise, nor any delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.

(k)Insurance. The Company, at its discretion, may apply for and procure in its own name for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for healthy men of his age.

(m)Offset. Whenever the Company or any of its Subsidiaries is obligated to pay any sum to Executive or any Affiliate or related person thereof pursuant to this Agreement, any bona fide debts that Executive or such Affiliate or related person owes to the Company or any of its Subsidiaries may be deducted from that sum before payment.

(n)Indemnification and Reimbursement of Payments on Behalf of Executive. The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, provincial, local or foreign withholding taxes, excise taxes, or employment taxes (Taxes) imposed with respect to Executives compensation or other payments from the Company or any of its Subsidiaries or Executives ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, royalties, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock.

(o) Insurance and Indemnification. For the period from the date of this Agreement (as can be afforded) through at least the tenth anniversary of the Employees termination of employment from the Employer, the Employer shall maintain the Employee as an insured party on all directors and officers insurance maintained by the Employer for the benefit of its directors and officers on at least the same basis as all other covered individuals and provide the Employee with at least the same corporate indemnification as it provides to the peer executives of the Employer.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

NATIVE AMERICAN ENERGY GROUP, INC.
By:	/s/ Doyle A. Johnson
	Doyle A. Johnson Chief Geologist and Petroleum Engineer
By:	/s/ Richard Ross
	Richard Ross Corporate Secretary

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EX-10.29

EXHIBIT 10.29

NATIVE AMERICAN ENERGY GROUP

SENIOR EXECUTIVE AGREEMENT

THIS AGREEMENT is made as of September 14, 2012, between NATIVE AMERICAN ENERGY GROUP, INC., a Delaware corporation (the “Company”), and RICHARD ROSS (“Executive”).

Recitals

A. The Company and Executive acknowledge that Executive has served the Company as a duly appointed officer or director without any formal written contract or salary since inception. Further, regarding EMPLOYMENT AGREEMENTS in general: None of the Company's officers, directors or key employees are currently party to employment agreements with the Company. The Company has no pension, health, annuity, insurance or profit sharing plans; however, the Company may adopt such plans in the future. There are presently no personal benefits available for directors, officers or employees of the Company.

B. The Company and Executive desire to enter into an agreement pursuant to which Executive will be employed as the Chief Communications Officer (“CCO”) and Corporate Secretaryof the Company on the terms and conditions set forth in this Agreement.

C. Certain definitions are set forth in Section 4 of this Agreement.

Agreement

The parties hereto agree as follows:

1. Employment. The Company hereby engages Executive to serve as the Chief Communications Officer (“CCO”) and Corporate Secretaryof the Company of the Company, and Executive agrees to serve the Company, during the Service Term (as defined in Section 1(g) hereof) in the capacities, and subject to the terms and conditions, set forth in this Agreement,each Party expressly revoking any and all prior employment agreements (oral or otherwise), to which the Parties may be mutually subject.

(a) Services. During the Employment Period, Executive shall serve as the Chief Communications Officer (“CCO”) and Corporate Secretaryof the Company and shall have the normal duties, responsibilities, functions and authorities customarily exercised by the Chief Communications Officer (“CCO”) and Corporate Secretary of a company of similar size and nature as the Company. During the Employment Period, Executive shall render such administrative, financial and other executive and managerial services to the Company and its affiliates which are consistent with Executive's position as the Board of Directors of the Company (the "Board") may from time to time direct.

During the Employment Period, Executive shall report to the Board and shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. Executive shall perform his duties, responsibilities and functions to the Company hereunder to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply with the Company's policies and procedures in all material respects. In performing his duties and exercising his authority under this Agreement, Executive shall support and implement the business and strategic plans approved from time to time by the Board and shall support and cooperate with the Company's efforts to expand its businesses and operate profitably and in conformity with the business and strategic plans approved by the Board.The Company may also utilize Executive in any other work or activity in furtherance of the business of the Company in which his talents may be applied in a manner commensurate with his position, training, knowledge, skills and abilities.

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During the Employment Period, Executive shall not serve as an officer or director of, or otherwise perform services for compensation for, any other entity unless otherwise agreed to between the Company and the Executive along with the prior written consent of the Board. Executive may serve as an officer or director of or otherwise participate in purely educational, welfare, social, religious and civic organizations so long as such activities do not interfere with Executive's employment. Nothing contained herein shall preclude Executive from (i) engaging in charitable and community activities; (ii) participating in industry and trade organization activities; (iii) managing his and his family's personal investments and affairs; and (iv) delivering lectures, fulfilling speaking engagements or teaching at educational institutions; provided, that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.

(b) Salary, Bonus, Incentive Compensation and Benefits.

(i) Salary.In consideration of the services to be rendered under this Agreement, during the Period of Employment, the Company shall pay Executive a salary, commencing on October 1, 2012, at the minimum rate of forty-eight thousand Dollars ($48,000) per year ("Base Salary"). Executive's Base Salary will be reviewed and increased by the Board (or a committee or designee thereof) on an annual basis from the 1st anniversary of the Commencement Date (or more frequently, should the Board decide to do so), in accordance with the established procedures of the Company, as in effect from time to time, for adjusting salaries for similarly situated employees (such initial annual base salary and the annual base salary as determined and adjusted from time to time by the Board are referred to herein as, the "Base Salary") and, in the sole discretion of the Board (or such committee or designee thereof), such annual Base Salary may be increased, but not decreased, effective as of any date determined by the Board. The Base Salary shall be payable by the Company in regular installments in accordance with the Company's general payroll practices, but in any event no less frequently than monthly. During the period beginning on the Commencement Date and ending September 13, 2017, the Base Salary shall be pro-rated on an annualized basis. For purposes of this Agreement, the Base Salary shall not include any other type of compensation or benefit paid or payable to the Executive. Notwithstanding anything in this Agreement to the contrary, any decrease in Executive's then Base Salary shall be deemed Good Reason.

(ii) Bonuses. During the Period of Employment, Executive shall be eligible to receive an annual incentive bonus (the "Bonus") on terms applicable to Company employees generally. The annual target amount of the Bonus shall be (to be determined). The amount of the Bonus paid shall be determined by Executive's supervisors or the Board in their sole discretion, based on performance objectives established for the Company employees generally for the relevant period. The Bonus will be paid at the same time as bonuses for other executive officers provided that Executive remains employed with the Company through the payment date. The annual target amount of Executive's Bonus will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be increased, but not decreased, in the sole discretion of Company.

(iii) Equity Awards. Executive will be eligible for grants of equity compensation awards under a stock plan maintained by the Company, the 2011 Equity Incentive Plan (the “Plan”), as in effect from time to time, and subject to such terms and conditions as the Company determines, including vesting criteria such as continued service or performance objectives.

The Company shall provide Executive with a combination of restricted stock or units ("restricted stock") and stock options. The specific terms of the restricted stock and the stock options granted under the Plan (including, without limitation, customary anti-dilution and other provisions) will be reflected in separate stock option and restricted stock agreements that will be negotiated by Executive and the Company in good faith prior to the Commencement Date. The terms and conditions of stock options and restricted stock shall otherwise be those set forth under the Plan and shall be consistent with the terms contained in restricted stock and the stock option agreements provided to other key executives of the Company.

Issuance of Incentive Stock Options: The Company will grant 2,000,000 stock options having an exercise price of $0.20 per share which is based on the price at the time of this agreement 9-14-12 ($0.195). Company shall provide, pursuant to the 2011 Equity Incentive Plan, with a 10-year term to be implemented by Company, stock options with vesting as set forth below.

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9-14-13: 500,000 shares

9-14-14: 500,000 shares

9-14-15: 500,000 shares

9-14-16: 500,000 shares

Except for termination of this Agreement for cause pursuant to Section 1(d)(i)(D) any termination of this Agreement by Company shall cause the immediate vesting of any unvested restricted stock, options or warrants awarded hereunder or pursuant to any future award by Company to Executive.

Further stock and stock option allocations awards will be based on a combination of the performance of Executive and the Company.

(iv) Benefits. During the Service Term, Executive shall be entitled to participate in and shall receive all benefits under pension benefit plans provided by the Company (including without limitation participation in any Company incentive, savings and retirement plans, practices, policies and programs) to the extent applicable generally to other peer executives of the Company. In addition, during the Service Term, the Executive and/or the Executives family shall be entitled to participate and shall receive all benefits under welfare plans provided by the Company (including without limitation medical prescriptions, dental, disability, employee life, group life, accidental life and travel accident insurance plans and plans) to the extent and on the same basis applicable generally to other peer executives of the Company. Executive shall be reimbursed for customary travel and other expenses, subject to standard and reasonable documentation requirements. In addition, Executive will receive a stipend of $950 per month for lease of an automobile and other related expenses during the Service Term. Executive shall also be eligible to receive four weeks paid vacation per annum. Any unused vacation time during each fiscal year shall be rolled-over to the following fiscal year to the extent permitted by the Company’s policies for other senior executives of the Company.

(v) Relocation Benefits. The Company will pay or reimburse Executive for the expenses incurred by Executive in connection with (a) the relocation of Executive, Executives family and household to the area of the Company’s headquarter and (b) the establishment of Executives new residence in the area of the Company’s headquarters, which expenses shall include but not be limited to, travel expenses, mortgage fees and closing costs, subject to standard and reasonable documentation requirements. If the Internal Revenue Service or any state or local taxing authority takes the position that the relocation expenses paid or reimbursed subject to this Section 1(b)(iv) results in the receipt of taxable income to Executive, such expenses shall include an amount equal to the aggregate Federal, state and local income and employment taxes imposed on Executive as a direct result of such payment or reimbursement. The maximum amount the Company will pay or reimburse for relocation expenses pursuant to this Section 1(b)(iv) is $180,000, this limit excluding any additional amounts the Company will reimburse Executive for any taxes due on any portion of this relocation reimbursement because that reimbursement has been deemed taxable income to the Executive.

(vi) Expenses. During the Employment Period, the Company shall promptly reimburse Executive for all reasonable business expenses incurred by him in the course of performing his duties and responsibilities under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. The Company will promptly reimburse Executive for reasonable expenses incurred for tax return preparation, tax advice, financial planning and legal expenses incurred in connection with negotiating this Agreement and the other agreements referred to herein.

(c) Board Membership. With respect to all regular elections of directors during the Employment Period, the Company shall nominate, and use its reasonable efforts to cause the election of, Executive to serve as a member of the Board. Effective upon the termination or expiration of the Employment Period, Executive shall resign as a director of the Company and its affiliates, as the case may be.

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(d) Termination.

(i)Events of Termination. Executives employment with the Company shall cease upon:

(A)Executives death.

(B)Executives voluntary retirement.

(C) Executives permanent disability, which means his incapacity due to physical or mental illness such that he is unable to perform the essential functions of his previously assigned duties for a period of six months in any twelve month period and such permanent incapacity has been determined to exist by either (x) the Company’s disability insurance carrier or (y) by the Board in good faith based on competent medical advice in the event that the Company does not maintain disability insurance on Executive.

(D) Termination by the Company by the delivery to Executive of a written notice from the Board or the CEO that Executive has been terminated (Notice of Termination) with or without Cause. Cause shall mean:

(1) Executives (aa) conviction of a felony; (bb) Executives commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Subsidiaries; (cc) Executives misappropriation of material funds or assets of the Company for personal use; or (dd) Executives engagement in unlawful harassment or other discrimination with respect to the employees of the Company or its Subsidiaries;

(2) Executives continued substantial and repeated neglect of his duties, after written notice thereof from the Board, and such neglect has not been cured within 30 days after Executive receives notice thereof from the Board;

(3) Executives gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company;

(4) Executives engaging in conduct constituting a breach of Sections 2 or 3 hereof that is not cured in full within 15 days, and is materially and demonstrably injurious to the Company, after notice of default thereof, from the Company, as determined by a court of law.

In order for the termination to be effective: Executive must be notified in writing (which writing shall specify the cause in reasonable detail) of any termination of his employment for Cause. Executive will then have the right, within ten days of receipt of such notice, to file a written request for review by the Company. In such case, Executive will be given the opportunity to be heard, personally or by counsel, by the Board and a majority of the Directors must thereafter confirm that such termination is for Cause. If the Directors do not provide such confirmation, the termination shall be treated as other than for Cause. Notwithstanding anything to the contrary contained in this paragraph, Executive shall have the right after termination has occurred to appeal any determination by the Board that such termination was for Cause in accordance with the provisions of Section 7(f) hereof.

The delivery by the Company of notice to Executive that it does not intend to renew this Agreement as provided in Section 1(d) shall constitute a termination by the Company without Cause unless such notice fulfills the requirements of Section 1(d)(i)(D)(1), (2), (3) or (4) above.

(E) Executives voluntary resignation by the delivery to the Company and the Board of at least 30 days written notice from Executive that Executive has resigned with or without Good Reason. Good Reason shall mean Executives resignation from employment with the Company within 30 days after the occurrence of any one of the following:

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(1) the failure of the Company to pay an amount owing to Executive hereunder after Executive has provided the Company and the Board with written notice of such failure and such payment has not thereafter been made within 15 days of the delivery of such written notice;

(2) the relocation of Executive from the corporate headquarters metropolitan area (as of the date of this agreement) without his consent.

The delivery by Executive of notice to the Company that he does not intend to renew this Agreement as provided in Section 1(d) shall constitute a resignation by Executive without Good Reason unless such notice fulfills the requirements of Section 1(d)(i)(E)(1)or (2) above.

(ii) Date of Termination. Date of Termination means (i) if the employment is terminated for Cause, or by Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the employment is terminated other than for Cause or Disability, the Date of Termination shall be the date on which the Employer notifies the Employee of such termination and (iii) if the Employees employment is terminated by reason of death or disability, the date of Termination shall be the date of death or the disability effective date, as the case may be.

(iii) Rights on Termination.

(A) In the event that termination is by the Company without Cause (including by operation of the last paragraph of Section 1(d)(i)(D) above) or by Executive with Good Reason, the Company will continue, for a period of eighteen (18) months commencing on the effective date of the termination (the Severance Period), to pay Executive a monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates. During the Severance Period, the Company will also pay for Executives existing Company insurance coverage. The payments of Annual Base Salary and insurance premiums in accordance with this Section 1(d)(iii)(A) are collectively referred to as Severance Payments. This Section 1(d)(iii)(A) shall not apply unless the Company and Executive have executed a contingent mutual release in a form mutually acceptable to both the Company and Executive and is subject to paragraph (e) below. In addition, the Company will pay to Executive in a lump sum any accrued but unused vacation time.

(B) If the Company terminates Executives employment for Cause, or if Executive resigns without Good Reason (including by operation of the last paragraph of Section 1(d)(i)(E)), the Company’s obligations to pay any compensation or benefits under this Agreement (other than accrued but unused vacation time which shall be paid to Executive in a lump sum payment) and all vesting under all stock and stock options held by Executive will cease effective as of the date of termination. Executives right to receive any other health or other benefits, if any, will be determined under the provisions of applicable plans, programs or other coverages.

(C) If Executives employment terminates because of Executives death or permanent disability, then Executive or his estate shall be entitled to any disability income or life insurance payments from any insurance policies (other than any key man life insurance policy) paid for by the Company. In addition, if such death or disability occurs while Executive is employed hereunder, for a period of six (6) months commencing on the date of such death or such disability is established, Executive or his estate shall be entitled to payment of his monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates.

Notwithstanding the foregoing, the Company’s obligation to Executive for severance pay or other rights under either subparagraphs (A) or (B) above (the Severance Pay) shall cease if Executive is found by a court of law to be in material violation of the provisions of Sections 2 or 3 hereof. Until such time as Executive has received all of his Severance Payments, he will be entitled to continue to receive any health, life, accident and disability insurance benefits provided by the Company to Executive under this Agreement.

(e) Involuntary Termination after “Change of Control.”

In the event of a "Change of Control" as defined below, the Company shall have the right to terminate Executive's employment and this Agreement at will. Should the Company exercise this option to involuntarily terminate Executive during the pendency of this Agreement for any reason other than as specified in Section 1(d)(i)(D) within twelve (12) months following a defined Change of Control, Executive shall be entitled to an immediate cash payment equal in amount to twelve (12) months of compensation based upon a monthly proration of his Form W-2 earning from Company in the year preceding such termination and (ii) the fair value of eighteen months of Executive's then current fringe benefits provided by the Company.

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In the event there is a Change of Control during the pendency of this Agreement, and Company gives Executive notice of intent to not thereafter renew the Agreement for a successive term, should Executive be involuntarily terminated from employment after expiration of the Agreement and within twelve (12) months following the Change of Control, Executive shall be entitled to an immediate cash payment in the amount set forth in the preceding paragraph. The contractual right to such payment is expressly agreed to be a covenant which shall survive expiration of this Agreement, and be enforceable hereunder.

For purposes of this Agreement, a "Change of Control" shall be deemed to have taken place if: (i) a third person, including a "group" as determined in accordance with Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having fifty percent (50%) or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) as a result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board or any successor to Company.

(f) Mitigation. The Company’s obligation to continue to provide Executive with the Severance Payments pursuant to Section 1(c)(iii)(A) above and the benefits pursuant to the second sentence of Section 1(d)(iii)(C) above shall cease if Executive becomes employed as a senior executive by a third party.

(g) Liquidated Damages. The parties acknowledge and agree that damages which will result to Executive for termination by the Company without Cause shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination. Executive agrees that, except for such other payments and benefits to which Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, Executive will execute a contingent mutual release of claims in a form reasonably satisfactory to both the Company and Executive.

(h) Term of Employment. Unless Executives employment under this Agreement is sooner terminated as a result of Executives termination in accordance with the provisions of Section 1(c) above, Executives employment under this Agreement shall commence on September 14, 2012 and shall terminate on September 13, 2017 (the Service Term); provided, however, that Executives employment under this Agreement, and the Service Term, shall be automatically renewed for additional two-year periods commencing on September 14, 2017 and, thereafter, on each successive anniversary of such date unless either the Company or Executive notify the other party in writing within ninety (90) days prior to any such September 14th anniversary that it or he desires not to renew Executives employment under this Agreement. All references herein to Service Term shall include any renewals thereof after September 13, 2017.

2. Confidential Information; Proprietary Information, etc.

(a) Obligation to Maintain Confidentiality. Executive acknowledges that any Proprietary Information disclosed or made available to Executive or obtained, observed or known by Executive as a direct or indirect consequence of his employment with or performance of services for the Company or any of its Affiliates during the course of his performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) and during the period in which Executive is receiving Severance Payments, are the property of the Company and its Affiliates. Therefore, Executive agrees that he will not at any time (whether during or after Executives term of employment) disclose or permit to be disclosed to any Person or, directly or indirectly, utilize for his own account or permit to be utilized by any Person any Proprietary Information or Records for any reason whatsoever without the Boards consent, unless and to the extent that (except as otherwise provided in the definition of Proprietary Information) the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executives acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, as a condition to receipt of the next or final payment of compensation, or at any other time the Company may request in writing (whether during or after Executives term of employment), all Records which he may then possess or have under his control. Executive further agrees that any property situated on the Company’s or its Affiliates premises and owned by the Company or its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company or its Affiliates and their personnel at any time with or without notice. Nothing in this Section 2(a) shall be construed to prevent Executive from using his general knowledge and experience in future employment so long as Executive complies with this Section 2(a) and the other restrictions contained in this Agreement.

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(b)Ownership of Property. Executive acknowledges that all inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the Company’s or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by the Company or any of its Affiliates (including any of the foregoing that constitutes any Proprietary Information or Records) (Work Product) belong to the Company or such Affiliate and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or such Affiliate. Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Executive hereby assigns and agrees to assign to Company or such Affiliate all right, title and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after Executives term of employment) to establish and confirm the Company’s or its Affiliates ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments). Notwithstanding anything contained in this Section 2(b) to the contrary, the Company’s ownership of Work Product does not apply to any invention that Executive develops entirely on his own time without using the equipment, supplies or facilities of the Company or its Affiliates or Subsidiaries or any Proprietary Information (including trade secrets), except that the Company’s ownership of Work Product does include those inventions that: (a) relate to the business of the Company or its Affiliates or Subsidiaries or to the actual or demonstrably anticipated research or development relating to the Company’s business; or (b) result from any work that Executive performs for the Company or its Affiliates or Subsidiaries.

(c)Third Party Information. Executive understands that the Company and its Affiliates will receive from third parties confidential or proprietary information (Third Party Information) subject to a duty on the Company’s and its Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Executives employment and thereafter, and without in any way limiting the provisions of Sections 2(a) and 2(b) above, Executive shall hold Third Party Information in the strictest confidence and shall not disclose to anyone (other than personnel of the Company or its Affiliates who need to know such information in connection with their work for the Company or its Affiliates) or use, except in connection with his work for the Company or its Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.

(d)Use of Information of Prior Employers, etc. Executive will abide by any enforceable obligations contained in any agreements that Executive has entered into with his prior employers or other parties to whom Executive has an obligation of confidentiality.

(e)Compelled Disclosure. If Executive is required by law or governmental regulation or by subpoena or other valid legal process to disclose any Proprietary Information or Third Party Information to any Person, Executive will immediately provide the Company with written notice of the applicable law, regulation or process so that the Company may seek a protective order or other appropriate remedy. Executive will cooperate fully with the Company and the Company’s Representatives in any attempt by the Company to obtain any such protective order or other remedy. If the Company elects not to seek, or is unsuccessful in obtaining, any such protective order or other remedy in connection with any requirement that Executive disclose Proprietary Information or Third Party Information, and if Executive furnishes the Company with a written opinion of reputable legal counsel acceptable to the Company confirming that the disclosure of such Proprietary Information or Third Party Information is legally required, then Executive may disclose such Proprietary Information or Third Party Information to the extent legally required; provided, however, that Executive will use his reasonable best efforts to ensure that such Proprietary Information is treated confidentially by each Person to whom it is disclosed.

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3. Nonsolicitation.

(a) Nonsolicitation. As long as Executive is an employee of the Company or any Affiliate thereof, and for eighteen (18) months thereafter, Executive shall not directly or indirectly through another entity: (i) induce or attempt to induce any employee of the Company or any Affiliate to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any Affiliate and any employee thereof; (ii) hire or employ any person who was an employee of the Company or any Affiliate at any time during the nine (9) month period immediately preceding the date of such Executives termination; (iii) induce or attempt to induce any customer, client, supplier, licensee or other business relation of the Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way interfere with the relationship between any such customer, client, supplier, licensee or business relation and the Company or any Affiliate; (iv) call on, solicit or service any Person who was a customer or client of the Company or any Affiliate or (v) call on, solicit or service any Person who was Prospective Client for any purpose which directly or indirectly competes with the business of the Company. For purposes hereof, a Prospective Client means any Person whom the Company or any of its Affiliates has entertained discussions with to become a client or customer at any time during the twelve (12) month period immediately preceding the date of such Executives termination.

(b)Acknowledgment. Executive acknowledges that in the course of his employment with the Company and its Affiliates, he has and will become familiar with the trade secrets and other Proprietary Information of the Company and its Affiliates. It is specifically recognized by Executive that his services to the Company and its Subsidiaries are special, unique and of extraordinary value, that the Company has a protectable interest in prohibiting Executive as provided in this Section 3, that money damages are insufficient to protect such interests, that there is adequate consideration being provided to Executive hereunder, that such prohibitions are necessary and appropriate without regard to payments being made to Executive hereunder and that the Company would not enter this Agreement with Executive without the restriction of this Section 3. Executive further acknowledges that the restrictions contained in this Section 3 do not impose an undue hardship on him and, since he has general business skills which may be used in industries other than that in which the Company and its Subsidiaries conduct their business, do not deprive Executive of his livelihood. Executive further acknowledges that the provisions of this Section 3 are separate and independent of the other sections of this Agreement.

(c)Enforcement, etc. If, at the time of enforcement of Section 2 or 3 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances as determined by the court shall be substituted for the stated period, scope or area. Because Executives services are unique, because Executive has access to Proprietary Information and for the other reasons set forth herein, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, without limiting the generality of Section 7(g), in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof.

(d) Submission to Jurisdiction. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New Yorkin any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement in any other court. The parties hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

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GENERAL PROVISIONS

4. Definitions.

Affiliate of any Person means any other Person which directly or indirectly controls, is controlled by or is under common control with such Person.

Board means the Company’s board of directors or the board of directors or similar management body of any successor of the Company.

Proprietary Information means any and all data and information concerning the business affairs of the Company or any of its Affiliates and not generally known in the industry in which the Company or any of its Affiliates is or may become engaged, and any other information concerning any matters affecting or relating to the Company’s or its Affiliates businesses, but in any event Proprietary Information shall include, any of the Company’s and its Affiliates past, present or prospective business opportunities, including information concerning acquisition opportunities in or reasonably related to the Company’s or its Affiliates businesses or industries, customers, customer lists, clients, client lists, the prices the Company and its Affiliates obtain or have obtained from the sale of, or at which they sell or have sold, their products, unit volume of sales to past or present customers and clients, or any other information concerning the business of the Company and its Affiliates, their manner of operation, their plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets, information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the foregoing matters will be deemed confidential, material or important. Proprietary Information does not include any information which Executive has obtained from a Person other than an employee of the Company, which was disclosed to him without a breach of a duty of confidentiality.

Records means (i) any and all procedure manuals, books, records and accounts; (ii) all property of the Company and its Affiliates, including papers, note books, tapes and similar repositories containing Proprietary Information; (iii) all invoices and commission reports; (iv) customer lists partial and/or complete; (v) data layouts, magnetic tape layouts, diskette layouts, etc.; (vi) samples; (vii) promotional letters, brochures and advertising materials; (viii) displays and display materials; (ix) correspondence and old or current proposals to any former, present or prospective customer of the Company and its Affiliates; (x) information concerning revenues and profitability and any other financial conditions of the Company and its Affiliates; (xi) information concerning the Company and its Affiliates which was input by Executive or at his direction, under his supervision or with his knowledge, including on any floppy disk, diskette, cassette or similar device used in, or in connection with, any computer, recording devices or typewriter; (xii) data, account information or other matters furnished by customers of the Company and its Affiliates; and (xiii) all copies of any of the foregoing data, documents or devices whether in the form of carbon copies, photo copies, copies of floppy disks, diskettes, tapes or in any other manner whatsoever.

Person means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

Subsidiary means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

5. Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class United States mail (postage prepaid, return receipt requested) or sent by reputable overnight courier service (charges prepaid) or by facsimile to the recipient at the address below indicated:

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If to Executive:
	Richard Ross
	108-18 Queens Blvd.
	Forest Hills, New York 11375
	Tel No.: (718) 408-2323
If to the Company:

108-18 Queens Blvd.

Forest Hills, New York 11375

Attention: Chief Executive Officer

Tel No.: (718) 408-2323

Fax No.: (718) 408-1471

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

6. Executives Representations and Warranties. Executive represents and warrants that he has full and authority to enter into this Agreement and fully to perform his obligations hereunder, that he is not subject to any non-competition agreement, and that his past, present and anticipated future activities have not and will not infringe on the proprietary rights of others, including, but not limited to, proprietary information rights or interfere with any agreements he has with any prior employee. Executive further represents and warrants that he is not obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, which would conflict with or result in a breach of this Agreement or which would in any manner interfere with the performance of his duties for the Company.

7. General Provisions.

(a) Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(b) Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

(c) Counterparts; Facsimile Transmission. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Each party to this Agreement agrees that it will be bound by its own telecopied signature and that it accepts the telecopied signature of each other party to this Agreement.

(d) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable and, provided further that, the rights and obligations of the Company may be assigned to any Affiliate of the Company.

(e) Choice of Law; Jurisdiction. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New York in any action or proceeding arising out of or relating to Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Executive hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

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(f) Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

(g) Amendment and Waiver. The provisions of this Agreement may be amended or and waived only with the prior written consent of the Company, Executive and the Investor.

(h) Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief executive office is located, the time period shall be automatically extended to the business day immediately following, such Saturday, Sunday or holiday.

(i) Termination. This Agreement shall survive the termination of Executives employment with the Company and shall remain in full force and effect after such termination.

(j)No Waiver. A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such party would otherwise have on any future occasion. No failure to exercise, nor any delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.

(k)Insurance. The Company, at its discretion, may apply for and procure in its own name for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for healthy men of his age.

(m)Offset. Whenever the Company or any of its Subsidiaries is obligated to pay any sum to Executive or any Affiliate or related person thereof pursuant to this Agreement, any bona fide debts that Executive or such Affiliate or related person owes to the Company or any of its Subsidiaries may be deducted from that sum before payment.

(n)Indemnification and Reimbursement of Payments on Behalf of Executive. The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, provincial, local or foreign withholding taxes, excise taxes, or employment taxes (Taxes) imposed with respect to Executives compensation or other payments from the Company or any of its Subsidiaries or Executives ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, royalties, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock.

(o) Insurance and Indemnification. For the period from the date of this Agreement (as can be afforded) through at least the tenth anniversary of the Employees termination of employment from the Employer, the Employer shall maintain the Employee as an insured party on all directors and officers insurance maintained by the Employer for the benefit of its directors and officers on at least the same basis as all other covered individuals and provide the Employee with at least the same corporate indemnification as it provides to the peer executives of the Employer.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

NATIVE AMERICAN ENERGY GROUP, INC.
By:	/s/ Richard Ross
	Richard Ross
	Chief Communications Officer and Corporate Secretary
By:	/s/ Joseph G. D’Arrigo
	Joseph G. D’Arrigo President & Chief Executive Officer

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EX-10.30

EXHIBIT 10.30

NATIVE AMERICAN ENERGY GROUP

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of September 14, 2012, between NATIVE AMERICAN ENERGY GROUP, INC., a Delaware corporation (the “Company”), and LINDA C. CHONTOS (“Executive”).

Recitals

A. The Company and Executive acknowledge that Executive has served the Company in prior years as a duly appointed officer or in an advisory capacity without receiving any salary nearly since inception. Further, regarding EMPLOYMENT AGREEMENTS in general: None of the Company's officers, directors or key employees are currently party to employment agreements with the Company. The Company has no pension, health, annuity, insurance or profit sharing plans; however, the Company may adopt such plans in the future. There are presently no personal benefits available for directors, officers or employees of the Company.

B. The Company and Executive desire to enter into an agreement pursuant to which Executive will be employed as the Administrative Operations Officerof the Company on the terms and conditions set forth in this Agreement.

C. Certain definitions are set forth in Section 4 of this Agreement.

Agreement

The parties hereto agree as follows:

1. Employment. The Company hereby engages Executive to serve as the Administrative Operations Officerof the Company, and Executive agrees to serve the Company, during the Service Term (as defined in Section 1(g) hereof) in the capacities, and subject to the terms and conditions, set forth in this Agreement,each Party expressly revoking any and all prior employment agreements (oral or otherwise), to which the Parties may be mutually subject.

(a) Services. During the Employment Period, Executive shall serve as the Administrative Operations Officerof the Company and shall have the normal duties, responsibilities, functions and authorities customarily exercised by the Administrative Operations Officerof a company of similar size and nature as the Company. During the Employment Period, Executive shall render such administrative, financial and other executive and managerial services to the Company and its affiliates which are consistent with Executive's position as the Board of Directors of the Company (the "Board") may from time to time direct.

During the Employment Period, Executive shall report to the Board and shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. Executive shall perform his duties, responsibilities and functions to the Company hereunder to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply with the Company's policies and procedures in all material respects. In performing his duties and exercising his authority under this Agreement, Executive shall support and implement the business and strategic plans approved from time to time by the Board and shall support and cooperate with the Company's efforts to expand its businesses and operate profitably and in conformity with the business and strategic plans approved by the Board.The Company may also utilize Executive in any other work or activity in furtherance of the business of the Company in which his talents may be applied in a manner commensurate with his position, training, knowledge, skills and abilities.

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During the Employment Period, Executive shall not serve as an officer or director of, or otherwise perform services for compensation for, any other entity unless otherwise agreed to between the Company and the Executive along with the prior written consent of the Board. Executive may serve as an officer or director of or otherwise participate in purely educational, welfare, social, religious and civic organizations so long as such activities do not interfere with Executive's employment. Nothing contained herein shall preclude Executive from (i) engaging in charitable and community activities; (ii) participating in industry and trade organization activities; (iii) managing his and his family's personal investments and affairs; and (iv) delivering lectures, fulfilling speaking engagements or teaching at educational institutions; provided, that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.

(b) Salary, Bonus, Incentive Compensation and Benefits.

(i) Salary.In consideration of the services to be rendered under this Agreement, during the Period of Employment, the Company shall pay Executive a salary, commencing on October 1, 2012, at the minimum rate of forty-eight thousand Dollars ($48,000) per year ("Base Salary"). Executive's Base Salary will be reviewed and increased by the Board (or a committee or designee thereof) on an annual basis from the 1st anniversary of the Commencement Date (or more frequently, should the Board decide to do so), in accordance with the established procedures of the Company, as in effect from time to time, for adjusting salaries for similarly situated employees (such initial annual base salary and the annual base salary as determined and adjusted from time to time by the Board are referred to herein as, the "Base Salary") and, in the sole discretion of the Board (or such committee or designee thereof), such annual Base Salary may be increased, but not decreased, effective as of any date determined by the Board. The Base Salary shall be payable by the Company in regular installments in accordance with the Company's general payroll practices, but in any event no less frequently than monthly. During the period beginning on the Commencement Date and ending September 13, 2017, the Base Salary shall be pro-rated on an annualized basis. For purposes of this Agreement, the Base Salary shall not include any other type of compensation or benefit paid or payable to the Executive. Notwithstanding anything in this Agreement to the contrary, any decrease in Executive's then Base Salary shall be deemed Good Reason.

(ii) Bonuses. During the Period of Employment, Executive shall be eligible to receive an annual incentive bonus (the "Bonus") on terms applicable to Company employees generally. The annual target amount of the Bonus shall be (to be determined). The amount of the Bonus paid shall be determined by Executive's supervisors or the Board in their sole discretion, based on performance objectives established for the Company employees generally for the relevant period. The Bonus will be paid at the same time as bonuses for other executive officers provided that Executive remains employed with the Company through the payment date. The annual target amount of Executive's Bonus will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be increased, but not decreased, in the sole discretion of Company.

(iii) Equity Awards. Executive will be eligible for grants of equity compensation awards under a stock plan maintained by the Company, the 2011 Equity Incentive Plan (the “Plan”), as in effect from time to time, and subject to such terms and conditions as the Company determines, including vesting criteria such as continued service or performance objectives.

The Company shall provide Executive with a combination of restricted stock or units ("restricted stock") and stock options. The specific terms of the restricted stock and the stock options granted under the Plan (including, without limitation, customary anti-dilution and other provisions) will be reflected in separate stock option and restricted stock agreements that will be negotiated by Executive and the Company in good faith prior to the Commencement Date. The terms and conditions of stock options and restricted stock shall otherwise be those set forth under the Plan and shall be consistent with the terms contained in restricted stock and the stock option agreements provided to other key executives of the Company.

Issuance of Incentive Stock Options: The Company will grant 2,000,000 stock options having an exercise price of $0.20 per share which is based on the price at the time of this agreement 9-14-12 ($0.195). Company shall provide, pursuant to the 2011 Equity Incentive Plan, with a 10-year term to be implemented by Company, stock options with vesting as set forth below.

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9-14-13: 500,000 shares

9-14-14: 500,000 shares

9-14-15: 500,000 shares

9-14-16: 500,000 shares

Except for termination of this Agreement for cause pursuant to Section 1(c)(i)(D) any termination of this Agreement by Company shall cause the immediate vesting of any unvested restricted stock, options or warrants awarded hereunder or pursuant to any future award by Company to Executive.

Further stock and stock option allocations awards will be based on a combination of the performance of Executive and the Company.

(iv) Benefits. During the Service Term, Executive shall be entitled to participate in and shall receive all benefits under pension benefit plans provided by the Company (including without limitation participation in any Company incentive, savings and retirement plans, practices, policies and programs) to the extent applicable generally to other peer executives of the Company. In addition, during the Service Term, the Executive and/or the Executives family shall be entitled to participate and shall receive all benefits under welfare plans provided by the Company (including without limitation medical prescriptions, dental, disability, employee life, group life, accidental life and travel accident insurance plans and plans) to the extent and on the same basis applicable generally to other peer executives of the Company. Executive shall be reimbursed for customary travel and other expenses, subject to standard and reasonable documentation requirements. In addition, Executive will receive a stipend of $950 per month for lease of an automobile and other related expenses during the Service Term. Executive shall also be eligible to receive four weeks paid vacation per annum. Any unused vacation time during each fiscal year shall be rolled-over to the following fiscal year to the extent permitted by the Company’s policies for other senior executives of the Company.

(v) Relocation Benefits. The Company will pay or reimburse Executive for the expenses incurred by Executive in connection with (a) the relocation of Executive, Executives family and household to the area of the Company’s headquarter and (b) the establishment of Executives new residence in the area of the Company’s headquarters, which expenses shall include but not be limited to, travel expenses, mortgage fees and closing costs, subject to standard and reasonable documentation requirements. If the Internal Revenue Service or any state or local taxing authority takes the position that the relocation expenses paid or reimbursed subject to this Section 1(b)(iv) results in the receipt of taxable income to Executive, such expenses shall include an amount equal to the aggregate Federal, state and local income and employment taxes imposed on Executive as a direct result of such payment or reimbursement. The maximum amount the Company will pay or reimburse for relocation expenses pursuant to this Section 1(b)(iv) is $180,000, this limit excluding any additional amounts the Company will reimburse Executive for any taxes due on any portion of this relocation reimbursement because that reimbursement has been deemed taxable income to the Executive.

(vi) Expenses. During the Employment Period, the Company shall promptly reimburse Executive for all reasonable business expenses incurred by him in the course of performing his duties and responsibilities under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. The Company will promptly reimburse Executive for reasonable expenses incurred for tax return preparation, tax advice, financial planning and legal expenses incurred in connection with negotiating this Agreement and the other agreements referred to herein.

(c) Termination.

(i)Events of Termination. Executives employment with the Company shall cease upon:

(A)Executives death.

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(B)Executives voluntary retirement.

(C) Executives permanent disability, which means his incapacity due to physical or mental illness such that he is unable to perform the essential functions of his previously assigned duties for a period of six months in any twelve month period and such permanent incapacity has been determined to exist by either (x) the Company’s disability insurance carrier or (y) by the Board in good faith based on competent medical advice in the event that the Company does not maintain disability insurance on Executive.

(D) Termination by the Company by the delivery to Executive of a written notice from the Board or the CEO that Executive has been terminated (Notice of Termination) with or without Cause. Cause shall mean:

(1) Executives (aa) conviction of a felony; (bb) Executives commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Subsidiaries; (cc) Executives misappropriation of material funds or assets of the Company for personal use; or (dd) Executives engagement in unlawful harassment or other discrimination with respect to the employees of the Company or its Subsidiaries;

(2) Executives continued substantial and repeated neglect of his duties, after written notice thereof from the Board, and such neglect has not been cured within 30 days after Executive receives notice thereof from the Board;

(3) Executives gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company;

(4) Executives engaging in conduct constituting a breach of Sections 2 or 3 hereof that is not cured in full within 15 days, and is materially and demonstrably injurious to the Company, after notice of default thereof, from the Company, as determined by a court of law.

In order for the termination to be effective: Executive must be notified in writing (which writing shall specify the cause in reasonable detail) of any termination of his employment for Cause. Executive will then have the right, within ten days of receipt of such notice, to file a written request for review by the Company. In such case, Executive will be given the opportunity to be heard, personally or by counsel, by the Board and a majority of the Directors must thereafter confirm that such termination is for Cause. If the Directors do not provide such confirmation, the termination shall be treated as other than for Cause. Notwithstanding anything to the contrary contained in this paragraph, Executive shall have the right after termination has occurred to appeal any determination by the Board that such termination was for Cause in accordance with the provisions of Section 7(f) hereof.

The delivery by the Company of notice to Executive that it does not intend to renew this Agreement as provided in Section 1(h) shall constitute a termination by the Company without Cause unless such notice fulfills the requirements of Section 1(c)(i)(D)(1), (2), (3) or (4) above.

(E) Executives voluntary resignation by the delivery to the Company and the Board of at least 30 days written notice from Executive that Executive has resigned with or without Good Reason. Good Reason shall mean Executives resignation from employment with the Company within 30 days after the occurrence of any one of the following:

(1) the failure of the Company to pay an amount owing to Executive hereunder after Executive has provided the Company and the Board with written notice of such failure and such payment has not thereafter been made within 15 days of the delivery of such written notice;

(2) the relocation of Executive from the corporate headquarters metropolitan area (as of the date of this agreement) without his consent.

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The delivery by Executive of notice to the Company that he does not intend to renew this Agreement as provided in Section 1(g) shall constitute a resignation by Executive without Good Reason unless such notice fulfills the requirements of Section 1(c)(i)(E)(1)or (2) above.

(ii) Date of Termination. Date of Termination means (i) if the employment is terminated for Cause, or by Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the employment is terminated other than for Cause or Disability, the Date of Termination shall be the date on which the Employer notifies the Employee of such termination and (iii) if the Employees employment is terminated by reason of death or disability, the date of Termination shall be the date of death or the disability effective date, as the case may be.

(iii) Rights on Termination.

(A) In the event that termination is by the Company without Cause (including by operation of the last paragraph of Section 1(c)(i)(D) above) or by Executive with Good Reason, the Company will continue, for a period of eighteen (18) months commencing on the effective date of the termination (the Severance Period), to pay Executive a monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates. During the Severance Period, the Company will also pay for Executives existing Company insurance coverage. The payments of Annual Base Salary and insurance premiums in accordance with this Section 1(c)(iii)(A) are collectively referred to as Severance Payments. This Section 1(c)(iii)(A) shall not apply unless the Company and Executive have executed a contingent mutual release in a form mutually acceptable to both the Company and Executive and is subject to paragraph (e) below. In addition, the Company will pay to Executive in a lump sum any accrued but unused vacation time.

(B) If the Company terminates Executives employment for Cause, or if Executive resigns without Good Reason (including by operation of the last paragraph of Section 1(c)(i)(E)), the Company’s obligations to pay any compensation or benefits under this Agreement (other than accrued but unused vacation time which shall be paid to Executive in a lump sum payment) and all vesting under all stock and stock options held by Executive will cease effective as of the date of termination. Executives right to receive any other health or other benefits, if any, will be determined under the provisions of applicable plans, programs or other coverages.

(C) If Executives employment terminates because of Executives death or permanent disability, then Executive or his estate shall be entitled to any disability income or life insurance payments from any insurance policies (other than any key man life insurance policy) paid for by the Company. In addition, if such death or disability occurs while Executive is employed hereunder, for a period of six (6) months commencing on the date of such death or such disability is established, Executive or his estate shall be entitled to payment of his monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates.

Notwithstanding the foregoing, the Company’s obligation to Executive for severance pay or other rights under either subparagraphs (A) or (B) above (the Severance Pay) shall cease if Executive is found by a court of law to be in material violation of the provisions of Sections 2 or 3 hereof. Until such time as Executive has received all of his Severance Payments, he will be entitled to continue to receive any health, life, accident and disability insurance benefits provided by the Company to Executive under this Agreement.

(d) Involuntary Termination after “Change of Control.”
 

In the event of a "Change of Control" as defined below, the Company shall have the right to terminate Executive's employment and this Agreement at will. Should the Company exercise this option to involuntarily terminate Executive during the pendency of this Agreement for any reason other than as specified in Section 1(c)(i)(D) within twelve (12) months following a defined Change of Control, Executive shall be entitled to an immediate cash payment equal in amount to twelve (12) months of compensation based upon a monthly proration of his Form W-2 earning from Company in the year preceding such termination and (ii) the fair value of eighteen months of Executive's then current fringe benefits provided by the Company.
 

In the event there is a Change of Control during the pendency of this Agreement, and Company gives Executive notice of intent to not thereafter renew the Agreement for a successive term, should Executive be involuntarily terminated from employment after expiration of the Agreement and within twelve (12) months following the Change of Control, Executive shall be entitled to an immediate cash payment in the amount set forth in the preceding paragraph. The contractual right to such payment is expressly agreed to be a covenant which shall survive expiration of this Agreement, and be enforceable hereunder.

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For purposes of this Agreement, a "Change of Control" shall be deemed to have taken place if: (i) a third person, including a "group" as determined in accordance with Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having fifty percent (50%) or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) as a result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board or any successor to Company.

(e) Mitigation. The Company’s obligation to continue to provide Executive with the Severance Payments pursuant to Section 1(c)(iii)(A) above and the benefits pursuant to the second sentence of Section 1(c)(iii)(C) above shall cease if Executive becomes employed as a senior executive by a third party.

(f) Liquidated Damages. The parties acknowledge and agree that damages which will result to Executive for termination by the Company without Cause shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination. Executive agrees that, except for such other payments and benefits to which Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, Executive will execute a contingent mutual release of claims in a form reasonably satisfactory to both the Company and Executive.

(g) Term of Employment. Unless Executives employment under this Agreement is sooner terminated as a result of Executives termination in accordance with the provisions of Section 1(c) above, Executives employment under this Agreement shall commence on September 14, 2012 and shall terminate on September 13, 2017 (the Service Term); provided, however, that Executives employment under this Agreement, and the Service Term, shall be automatically renewed for additional two-year periods commencing on September 14, 2017 and, thereafter, on each successive anniversary of such date unless either the Company or Executive notify the other party in writing within ninety (90) days prior to any such September 14th anniversary that it or he desires not to renew Executives employment under this Agreement. All references herein to Service Term shall include any renewals thereof after September 13, 2017.

2. Confidential Information; Proprietary Information, etc.

(a) Obligation to Maintain Confidentiality. Executive acknowledges that any Proprietary Information disclosed or made available to Executive or obtained, observed or known by Executive as a direct or indirect consequence of his employment with or performance of services for the Company or any of its Affiliates during the course of his performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) and during the period in which Executive is receiving Severance Payments, are the property of the Company and its Affiliates. Therefore, Executive agrees that he will not at any time (whether during or after Executives term of employment) disclose or permit to be disclosed to any Person or, directly or indirectly, utilize for his own account or permit to be utilized by any Person any Proprietary Information or Records for any reason whatsoever without the Boards consent, unless and to the extent that (except as otherwise provided in the definition of Proprietary Information) the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executives acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, as a condition to receipt of the next or final payment of compensation, or at any other time the Company may request in writing (whether during or after Executives term of employment), all Records which he may then possess or have under his control. Executive further agrees that any property situated on the Company’s or its Affiliates premises and owned by the Company or its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company or its Affiliates and their personnel at any time with or without notice. Nothing in this Section 2(a) shall be construed to prevent Executive from using his general knowledge and experience in future employment so long as Executive complies with this Section 2(a) and the other restrictions contained in this Agreement.

6

(b)Ownership of Property. Executive acknowledges that all inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the Company’s or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by the Company or any of its Affiliates (including any of the foregoing that constitutes any Proprietary Information or Records) (Work Product) belong to the Company or such Affiliate and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or such Affiliate. Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Executive hereby assigns and agrees to assign to Company or such Affiliate all right, title and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after Executives term of employment) to establish and confirm the Company’s or its Affiliates ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments). Notwithstanding anything contained in this Section 2(b) to the contrary, the Company’s ownership of Work Product does not apply to any invention that Executive develops entirely on his own time without using the equipment, supplies or facilities of the Company or its Affiliates or Subsidiaries or any Proprietary Information (including trade secrets), except that the Company’s ownership of Work Product does include those inventions that: (a) relate to the business of the Company or its Affiliates or Subsidiaries or to the actual or demonstrably anticipated research or development relating to the Company’s business; or (b) result from any work that Executive performs for the Company or its Affiliates or Subsidiaries.

(c)Third Party Information. Executive understands that the Company and its Affiliates will receive from third parties confidential or proprietary information (Third Party Information) subject to a duty on the Company’s and its Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Executives employment and thereafter, and without in any way limiting the provisions of Sections 2(a) and 2(b) above, Executive shall hold Third Party Information in the strictest confidence and shall not disclose to anyone (other than personnel of the Company or its Affiliates who need to know such information in connection with their work for the Company or its Affiliates) or use, except in connection with his work for the Company or its Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.

(d)Use of Information of Prior Employers, etc. Executive will abide by any enforceable obligations contained in any agreements that Executive has entered into with his prior employers or other parties to whom Executive has an obligation of confidentiality.

(e)Compelled Disclosure. If Executive is required by law or governmental regulation or by subpoena or other valid legal process to disclose any Proprietary Information or Third Party Information to any Person, Executive will immediately provide the Company with written notice of the applicable law, regulation or process so that the Company may seek a protective order or other appropriate remedy. Executive will cooperate fully with the Company and the Company’s Representatives in any attempt by the Company to obtain any such protective order or other remedy. If the Company elects not to seek, or is unsuccessful in obtaining, any such protective order or other remedy in connection with any requirement that Executive disclose Proprietary Information or Third Party Information, and if Executive furnishes the Company with a written opinion of reputable legal counsel acceptable to the Company confirming that the disclosure of such Proprietary Information or Third Party Information is legally required, then Executive may disclose such Proprietary Information or Third Party Information to the extent legally required; provided, however, that Executive will use his reasonable best efforts to ensure that such Proprietary Information is treated confidentially by each Person to whom it is disclosed.

7

3. Nonsolicitation.

(a) Nonsolicitation. As long as Executive is an employee of the Company or any Affiliate thereof, and for eighteen (18) months thereafter, Executive shall not directly or indirectly through another entity: (i) induce or attempt to induce any employee of the Company or any Affiliate to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any Affiliate and any employee thereof; (ii) hire or employ any person who was an employee of the Company or any Affiliate at any time during the nine (9) month period immediately preceding the date of such Executives termination; (iii) induce or attempt to induce any customer, client, supplier, licensee or other business relation of the Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way interfere with the relationship between any such customer, client, supplier, licensee or business relation and the Company or any Affiliate; (iv) call on, solicit or service any Person who was a customer or client of the Company or any Affiliate or (v) call on, solicit or service any Person who was Prospective Client for any purpose which directly or indirectly competes with the business of the Company. For purposes hereof, a Prospective Client means any Person whom the Company or any of its Affiliates has entertained discussions with to become a client or customer at any time during the twelve (12) month period immediately preceding the date of such Executives termination.

(b)Acknowledgment. Executive acknowledges that in the course of his employment with the Company and its Affiliates, he has and will become familiar with the trade secrets and other Proprietary Information of the Company and its Affiliates. It is specifically recognized by Executive that his services to the Company and its Subsidiaries are special, unique and of extraordinary value, that the Company has a protectable interest in prohibiting Executive as provided in this Section 3, that money damages are insufficient to protect such interests, that there is adequate consideration being provided to Executive hereunder, that such prohibitions are necessary and appropriate without regard to payments being made to Executive hereunder and that the Company would not enter this Agreement with Executive without the restriction of this Section 3. Executive further acknowledges that the restrictions contained in this Section 3 do not impose an undue hardship on him and, since he has general business skills which may be used in industries other than that in which the Company and its Subsidiaries conduct their business, do not deprive Executive of his livelihood. Executive further acknowledges that the provisions of this Section 3 are separate and independent of the other sections of this Agreement.

(c)Enforcement, etc. If, at the time of enforcement of Section 2 or 3 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances as determined by the court shall be substituted for the stated period, scope or area. Because Executives services are unique, because Executive has access to Proprietary Information and for the other reasons set forth herein, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, without limiting the generality of Section 7(g), in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof.

(d) Submission to Jurisdiction. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New Yorkin any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement in any other court. The parties hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

8

 GENERAL PROVISIONS

4. Definitions.
 

Affiliate of any Person means any other Person which directly or indirectly controls, is controlled by or is under common control with such Person.

Board means the Company’s board of directors or the board of directors or similar management body of any successor of the Company.

Proprietary Information means any and all data and information concerning the business affairs of the Company or any of its Affiliates and not generally known in the industry in which the Company or any of its Affiliates is or may become engaged, and any other information concerning any matters affecting or relating to the Company’s or its Affiliates businesses, but in any event Proprietary Information shall include, any of the Company’s and its Affiliates past, present or prospective business opportunities, including information concerning acquisition opportunities in or reasonably related to the Company’s or its Affiliates businesses or industries, customers, customer lists, clients, client lists, the prices the Company and its Affiliates obtain or have obtained from the sale of, or at which they sell or have sold, their products, unit volume of sales to past or present customers and clients, or any other information concerning the business of the Company and its Affiliates, their manner of operation, their plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets, information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the foregoing matters will be deemed confidential, material or important. Proprietary Information does not include any information which Executive has obtained from a Person other than an employee of the Company, which was disclosed to him without a breach of a duty of confidentiality.

Records means (i) any and all procedure manuals, books, records and accounts; (ii) all property of the Company and its Affiliates, including papers, note books, tapes and similar repositories containing Proprietary Information; (iii) all invoices and commission reports; (iv) customer lists partial and/or complete; (v) data layouts, magnetic tape layouts, diskette layouts, etc.; (vi) samples; (vii) promotional letters, brochures and advertising materials; (viii) displays and display materials; (ix) correspondence and old or current proposals to any former, present or prospective customer of the Company and its Affiliates; (x) information concerning revenues and profitability and any other financial conditions of the Company and its Affiliates; (xi) information concerning the Company and its Affiliates which was input by Executive or at his direction, under his supervision or with his knowledge, including on any floppy disk, diskette, cassette or similar device used in, or in connection with, any computer, recording devices or typewriter; (xii) data, account information or other matters furnished by customers of the Company and its Affiliates; and (xiii) all copies of any of the foregoing data, documents or devices whether in the form of carbon copies, photo copies, copies of floppy disks, diskettes, tapes or in any other manner whatsoever.

Person means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

Subsidiary means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

5. Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class United States mail (postage prepaid, return receipt requested) or sent by reputable overnight courier service (charges prepaid) or by facsimile to the recipient at the address below indicated:

9

If to Executive:
	Linda C. Chontos
	108-18 Queens Blvd.
	Forest Hills, New York 11375
	Tel No.: (718) 408-2323
If to the Company:

108-18 Queens Blvd.

Forest Hills, New York 11375

Attention: Chief Executive Officer

Tel No.: (718) 408-2323

Fax No.: (718) 408-1471

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

6. Executives Representations and Warranties. Executive represents and warrants that he has full and authority to enter into this Agreement and fully to perform his obligations hereunder, that he is not subject to any non-competition agreement, and that his past, present and anticipated future activities have not and will not infringe on the proprietary rights of others, including, but not limited to, proprietary information rights or interfere with any agreements he has with any prior employee. Executive further represents and warrants that he is not obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, which would conflict with or result in a breach of this Agreement or which would in any manner interfere with the performance of his duties for the Company.

7. General Provisions.

(a) Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(b) Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

(c) Counterparts; Facsimile Transmission. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Each party to this Agreement agrees that it will be bound by its own telecopied signature and that it accepts the telecopied signature of each other party to this Agreement.

(d) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable and, provided further that, the rights and obligations of the Company may be assigned to any Affiliate of the Company.

(e) Choice of Law; Jurisdiction. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in New York in any action or proceeding arising out of or relating to Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Executive hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

10

(f) Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

(g) Amendment and Waiver. The provisions of this Agreement may be amended or and waived only with the prior written consent of the Company, Executive and the Investor.

(h) Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief executive office is located, the time period shall be automatically extended to the business day immediately following, such Saturday, Sunday or holiday.

(i) Termination. This Agreement shall survive the termination of Executives employment with the Company and shall remain in full force and effect after such termination.

(j)No Waiver. A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such party would otherwise have on any future occasion. No failure to exercise, nor any delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.

(k)Insurance. The Company, at its discretion, may apply for and procure in its own name for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for healthy men of his age.

(m)Offset. Whenever the Company or any of its Subsidiaries is obligated to pay any sum to Executive or any Affiliate or related person thereof pursuant to this Agreement, any bona fide debts that Executive or such Affiliate or related person owes to the Company or any of its Subsidiaries may be deducted from that sum before payment.

(n)Indemnification and Reimbursement of Payments on Behalf of Executive. The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, provincial, local or foreign withholding taxes, excise taxes, or employment taxes (Taxes) imposed with respect to Executives compensation or other payments from the Company or any of its Subsidiaries or Executives ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, royalties, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock.

(o) Insurance and Indemnification. For the period from the date of this Agreement (as can be afforded) through at least the tenth anniversary of the Employees termination of employment from the Employer, the Employer shall maintain the Employee as an insured party on all directors and officers insurance maintained by the Employer for the benefit of its directors and officers on at least the same basis as all other covered individuals and provide the Employee with at least the same corporate indemnification as it provides to the peer executives of the Employer.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

NATIVE AMERICAN ENERGY GROUP, INC.
By:	/s/ Linda C. Chontos
	Linda C. Chontos Administrative Operations Officer
By:	/s/ Richard Ross
	Richard Ross Corporate Secretary

12

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Joseph G. D’Arrigo, certify that:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2012 of Native American Energy Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 20, 2013	/s/ Joseph G. D’Arrigo
	Joseph G. D’Arrigo
	Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Raj S. Nanvaan, certify that:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2012 of Native American Energy Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 20, 2013	/s/ Raj S. Nanvaan
	Raj S. Nanvaan
	Chief Financial Officer (Principal Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Native American Energy Group, Inc. on Form 10-K for the year ended December 31, 2012, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Joseph G. D’Arrigo, Principal Executive Officer and Raj S. Nanvaan, Principal Accounting Officer of Native American Energy Group, Inc., certify to the best of our knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) Such Annual Report on Form 10-K for the year ending December 31, 2012, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in such Annual Report on Form 10-K for the year ending December 31, 2012, fairly presents, in all material respects, the financial condition and results of operations of Native American Energy Group, Inc.

Date: May 20, 2013	/s/ Joseph G. D’Arrigo
	Joseph G. D’Arrigo
	Chief Executive Officer (Principal Executive Officer)

Date: May 20, 2013	/s/ Raj S. Nanvaan
	Joseph G. D’Arrigo
	Chief Financial Officer (Principal Accounting Officer)

XML

PROPERTY AND EQUIPMENT (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Total	$ 1,282,628	$ 1,282,628
Less accumulated depreciation	(818,926)	(665,171)
Net	463,702	617,457
Field Equipment [Member]
Total	1,116,585	1,116,585
Office Equipment [Member]
Total	40,283	40,283
Furniture and Fixtures [Member]
Total	31,704	31,704
Transportation Equipment [Member]
Total	54,250	54,250
Leasehold Improvements [Member]
Total	$ 39,806	$ 39,806

XML

DERIVATIVE LIABILITIES (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012
Derivative Liabilities Details Narrative
Fair value of described embedded derivative	$ 141,407
Non-cash non-operating loss on derivative liability	50,549
Fair value of the described embedded derivatives	491,370
Fair value of the derivative liability to market resulting in non-cash, non-operating loss	$ 99,416

XML

CAPITAL LEASES AND NOTES PAYABLE (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Sub-total	$ 139,239	$ 539,093
Less current portion	139,239	524,252
Long term portion	0	14,841
December 2015 [Member]
Sub-total	17,950	17,804
April 2013 [Member]
Sub-total	14,788	14,788
July 2013 [Member]
Sub-total	37,001	37,001
March 2012 [Member]
Sub-total	$ 69,500	$ 469,500

XML

STOCKHOLDERS' EQUITY (Details Narrative) (USD $)	12 Months Ended			95 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012
Stockholders Equity Details Narrative
Common stock, shares issued	38,716,299	35,128,580		38,716,299
Common stock, shares outstanding	38,716,299	33,389,830		38,716,299
Common stock issued for services (in shares)	1,110,000	3,860,000	1,643,000
Common stock issued for services exercise price, minimum		$ 0.20	$ 0.18
Common stock issued for services exercise price, maximum		$ 0.87	$ 1.18
Common stock issued for services	$ 494,399	$ 3,014,100		$ 12,689,425
Common stock issued in settlement of ligation			1,300,000
Common stock issued in settlement notes payable			37,500
Net common stock returned and cancelled in connection with amendment to licensing agreement (in shares)	1,900,000

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CONVERTIBLE DEBENTURES (Details)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2012 Embedded Derivative Financial Instruments One [Member]
Dividend yield:	0.00%	0.00%
Volatility	371.27%	299.97%
Risk free rate:	0.96%	0.14%

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DERIVATIVE LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2012

Embedded Derivative Convertible Debentures

Fair value 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	%

Embedded Derivative Convertible Debentures One

Fair value of the embedded derivative

The fair value of the described embedded derivative of $141,407 at December 31, 2012 was determined using the Binomial Lattice Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	170.02	%
Risk free rate:	0.05	%

Embedded Derivative Settlement Agreement

Fair value 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	410.17% to 422.12 %
Risk free rate:	0.41% to .76 %

Embedded Derivative Settlement One Agreement

Fair value of the embedded derivative

The fair value of the described embedded derivatives of $491,370 at December 31, 2012 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 %

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RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)	12 Months Ended		95 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
Contributions by major shareholders			$ 1,315,963
Joseph D Arrigo and Family [Member]
Related Party Transaction, Due from (to) Related Party	16,550		16,550
Raj Nanvaan [Member]
Related Party Transaction, Due from (to) Related Party	$ 36,418		$ 36,418

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 19. SUBSEQUENT EVENTS

Related Party Transaction: The Company borrowed $18,950 from an officer of the Company in January 2013.

In February & March 2013, we issued and sold to 3 investors 125,000 shares of our common stock at a per share purchase price of $0.10 for proceeds of $12,500. In February 2013, we issued 200,000 shares of common stock to a law firm as collateral against an outstanding payable.

In May 2013, the Company moved its principal offices to 61-43 186th Street Suite 507 Fresh Meadows, NY 11365.

In March 2012, we issued 355,719 shares and 430,467 warrants in accordance with the settlement agreement executed with High Capital Funding LLC on December 26, 2012 as per Note 12 – Notes Payable Bridge – Settlement Agreement.

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LOANS PAYABLE (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Total	$ 1,261,468	$ 1,265,819
Less current portion	1,261,468	1,265,819
Long term portion
Loan One [Member]
Total	130,000	130,000
Loan Two [Member]
Total	593,000	509,568
Loan Three [Member]
Total	130,000	97,368
Loan Four [Member]
Total	$ 408,468	$ 528,883

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SECURITY DEPOSITS (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2012
Security Deposit	$ 50,000	$ 0
Forfeiture Of Security Deposit	$ 8,590

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SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $)	12 Months Ended								95 Months Ended
	Dec. 31, 2005	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007	Dec. 31, 2006	Dec. 31, 2012
Net loss	$ (579,779)	$ (4,072,286)	$ (6,767,737)	$ (4,003,071)	$ (9,144,034)	$ (5,111,099)	$ (905,809)	$ (763,264)	$ (31,347,079)
Non Cash Impairment Charge Net Of Tax			690,552	2,500,000
Non Cash Impairment Charge Per Share			$ 0.02	$ 0.13
Unproved Properties Carrying Value			0	0
Stock-based compensation expense		162,500	0						162,500
Advertising Expense		$ 0	$ 0						$ 0

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NOTES PAYABLE-BRIDGE (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2011
Notes Payable-Bridge Details Narrative
Units issued	$ 750,000
Interest expense	371,693
Fair Value Of Warrants Issued	$ 37,498
Dividend yield	0.00%
Volatility	371.27%
Risk free rate	0.96%

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INCOME TAXES (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012
Income Taxes Details Narrative
Net operating loss carry forward	$ 7,200,000
Net operating loss carry forward expiring	2031

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STOCK OPTIONS AND WARRANTS (Details 3) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Warrants Outstanding	4,587,694	798,000
Warrants Outstanding Weighted Average Remaining Contractual Life (Years)	3 years 28 days
Warrants Exercisable - Weighted Average Exercise Price	$ 0.38
Warrants Exercisable - Number Exercisable	4,587,694
Warrants Outstanding Weighted Average Exercise Price	$ 0.38
Warrant One [Member]
Warrants Outstanding Exercise Price	$ 0.001
Warrants Outstanding	2,092,188
Warrants Outstanding Weighted Average Remaining Contractual Life (Years)	4 years 6 months 7 days
Warrants Exercisable - Weighted Average Exercise Price	$ 0.001
Warrants Exercisable - Number Exercisable	2,092,188
Warrants Outstanding Weighted Average Exercise Price	$ 0.001
Warrant Two [Member]
Warrants Outstanding Exercise Price	$ 0.60
Warrants Outstanding	150,000
Warrants Outstanding Weighted Average Remaining Contractual Life (Years)	4 years 2 months 1 day
Warrants Exercisable - Weighted Average Exercise Price	$ 0.60
Warrants Exercisable - Number Exercisable	150,000
Warrants Outstanding Weighted Average Exercise Price	$ 0.60
Warrant Three [Member]
Warrants Outstanding Exercise Price	$ 0.70
Warrants Outstanding	2,345,506
Warrants Outstanding Weighted Average Remaining Contractual Life (Years)	1 year 8 months 22 days
Warrants Exercisable - Weighted Average Exercise Price	$ 0.70
Warrants Exercisable - Number Exercisable	2,345,506
Warrants Outstanding Weighted Average Exercise Price	$ 0.70

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CONVERTIBLE DEBENTURES (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012
Convertible Debentures Details Narrative
Interest expense	$ 27,901

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OIL AND GAS PROPERTIES, UNEVALUATED

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

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.

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STOCK OPTIONS AND WARRANTS (Details 4) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Warrants outstanding, Number of Shares	798,000
Granted, Number of Shares	3,789,694	798,000
Exercised, Number of Shares
Cancelled or expired, Number of Shares
Warrants outstanding, Number of Shares	4,587,694	798,000
Warrants Outstanding, Average Price Per Share	$ 0.38	$ 0.11
Granted, Average Price Per Share	$ 0.43	$ 0.11
Exercised, Average Price Per Share
Cancelled or expired, Average Price Per Share

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Accounts Payable and Accrued Expenses	$ 2,044,142	$ 2,192,317
Accrued interest	386,226	238,053
Accounts payable and accrued expenses	$ 2,430,368	$ 2,430,370

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Schedule of Accounts Payable and Accrued Liabilities

Accounts payable and accrued expenses are comprised of the following:

	2012		2011
Accounts payable and accrued expenses	$	2,044,142	$	2,192,317
Accrued interest		386,226		238,053
	$	2,430,368	$	2,430,370

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PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Property, Plant and Equipment

Property and equipment are comprised of the following:

	2012		2011
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		(818,926)		(665,171)
Net	$	463,702	$	617,457

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COMMITMENTS AND OBLIGATIONS (Details Narrative) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2008	Dec. 31, 2007
Commitments And Obligations
Additional paid in capital	$ 26,793,922	$ 23,137,767	$ 120,857,000	$ 171,500,000

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012
Common stock issued in settlement of debt (in shares)	281,650
Convertible Debt, Current	$ 50,000
Gain on settlement of debt	253,220
Notes Payable [Member]
Convertible Debt, Current	50,000
Accounts Payable [Member]
Convertible Debt, Current	$ 387,100

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CONVERTIBLE DEBENTURES (Tables)

12 Months Ended

Dec. 31, 2012

Convertible Debentures

Fair Value Of Embedded Derivative Instruments

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	%

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CAPITAL LEASES AND NOTES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2012

Capital Leases And Notes Payable

Schedule of Debt

Notes payable are comprised of the following:

	2012		2011
Note payable, due in monthly installments of $589 including interest of 24.9% due to mature in December 2015, secured by equipment. Currently in default.	$	17,950	$	17,804
Note payable, due in monthly installments of $369 including interest of 2.9%, due to mature in April 2013, secured by related equipment. Currently in default	$	14,788	$	14,788
Note payable, due in monthly installments of $1,022 including interest of 18.89%, due to mature in July 2013, secured by related equipment. Currently in default	$	37,001	$	37,001
Note payable, due in March 2012 at 0% interest., currently in default		69,500		469,500
Sub-total		139,239		539,093
Less current portion		139,239		524,252
Long term portion	$	-0-	$	14,841

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GOING CONCERN MATTERS

12 Months Ended

Dec. 31, 2012

Going Concern Matters

Note 2. GOING CONCERN MATTERS

The Company has incurred a net loss of $4,072,286 and $6,767,737 for the years ended December 31, 2012 and 2011, respectively. The Company has incurred significant losses and has an accumulated deficit of $31,331,949 at December 31, 2012. 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.

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LOANS PAYABLE (Tables)

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Schedule of Short-term Debt

Loans payable are comprised of the following:

	2012		2011
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, net of debt discount of $-0- and $83,432, respectively. Currently in default		593,000		509,568
Loan payable, bearing 12% per annum through February 29, 2012; 15% thereafter, secured by certain oil and gas properties; due April 29, 2012, net of debt discount of $-0- and $32,632, respectively.		130,000		97,368
Various loans payable, with interest rates from 4% to 20% per annum, unsecured, currently in default ($52,918 and $103,133 related party loans, respectively), net of debt discount of $-0- and $69,245, respectively.		408,468		528,883
Total		1,261,468		1,265,819
Less current portion		1,261,468		1,265,819
Long term portion	$	-	$	-

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PROPERTY AND EQUIPMENT (Details Narrative) (USD $)	12 Months Ended		95 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Depreciation and amortization	$ 153,755	$ 159,594	$ 537,486

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DERIVATIVE LIABILITIES (Details)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2012 Embedded Derivative Convertible Debentures	Dec. 31, 2012 Embedded Derivative Convertible Debentures One	Dec. 31, 2012 Embedded Derivative Settlement Agreement	Dec. 31, 2012 Embedded Derivative Settlement Agreement Minimum [Member]	Dec. 31, 2012 Embedded Derivative Settlement Agreement Maximum [Member]	Dec. 31, 2012 Embedded Derivative Settlement One Agreement	Dec. 31, 2012 Embedded Derivative Settlement One Agreement Minimum [Member]	Dec. 31, 2012 Embedded Derivative Settlement One Agreement Maximum [Member]
Dividend yield:	0.00%	0.00%	0.00%	0.00%			0.00%
Volatility	371.27%	299.97%	170.02%		410.17%	422.12%	396.42%
Risk free rate:	0.96%	0.14%	5.00%		0.41%	0.76%		0.36%	0.77%

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2012	Dec. 31, 2011
ASSETS
Cash	$ 4,957	$ 17,735
Accounts receivable		15,213
Prepaid expenses	80,822	34,923
Total current assets	85,779	67,871
Other property plant and equipment, net	463,702	617,457
Other assets:
Collateral on surety bonds	175,381	175,030
Security deposits	2,500	52,093
Total other assets	177,881	227,123
Total assets	727,362	912,451
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses	2,430,368	2,430,370
Put liability		100,000
Capital leases and notes payable, short term	139,239	524,252
Convertible debentures, net of debt discounts	27,901
Notes payable, bridge, net of debt discounts	750,000	680,755
Loans payable, net of debt discounts	1,261,468	1,265,819
Total current liabilities	4,608,976	5,001,196
Long term debt:
Notes payable		14,841
Derivative liabilities	632,777
Total long term debt	632,777	14,841
Total liabilities	5,241,753	5,016,037
Commitments and contingencies
Stockholders' deficit:
Preferred stock
Common stock, par value $0.001; 1,000,000,000 shares authorized, 38,716,299 and 35,128,580 shares issued as of December 31, 2012 and 2011, respectively; 38,716,299 and 33,389,830 shares outstanding as of December 31, 2012 and 2011, respectively	38,716	33,390
Additional paid in capital	26,793,922	23,137,767
Common stock subscription
Deficit accumulated during development stage	(31,347,079)	(27,274,793)
Total stockholders' deficit	(4,514,391)	(4,103,586)
Total liabilities and stockholders' deficit	727,362	912,451
Series A Convertible Preferred stock
Stockholders' deficit:
Preferred stock	50	50
Series B Callable Preferred stock
Stockholders' deficit:
Preferred stock

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PUT LIABILITY (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012
Put Liability
Reclassification Of Put Liability To Equity	$ 100,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended		95 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (4,072,286)	$ (6,767,737)	$ (31,347,079)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	153,755	159,594	673,072
Impairment losses		690,552	7,829,119
Amortization of debt discount	27,901		27,901
Losses on repossession of fixed assets			56,622
Equity based compensation	448,500	3,199,692	12,668,701
Gain on settlement of debt	(663,220)	(62,002)	(725,222)
Loss on debt modification	426,980		426,980
Common stock issued in connection with debt		374,769	374,769
Common stock issued in settlement of litigation	375,779		375,779
Non cash interest expense	87,514		87,514
Loss on change in fair value of derivatives	149,965		149,965
Fair value of vesting employee options	162,500		162,500
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	185,306	75,789	261,095
Preferred stock issued for services			400,000
(Increase) decrease in:
Accounts receivable	15,213	(15,213)
Licensing	(407)		(30,407)
Guarantee fees			(4,357)
Surety bond	(351)	(327)	(171,024)
Deposits	50,000	106,497	(2,093)
Increase (decrease) in:
Accounts payable and accrued expenses	741,725	1,327,157	3,506,180
Net cash (used in) operating activities	(529,723)	(911,229)	(3,898,582)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in oil and gas properties		(780,387)	(1,986,949)
Purchase of property and equipment		(124,910)	(2,784,883)
Net cash (used in) investing activities		(905,297)	(4,771,832)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and subscriptions	539,750	224,400	1,817,975
Proceeds from sale of royalty interest			2,923,570
Proceeds from loans payable	86,000	987,183	2,752,591
Proceeds from notes payable		750,000	951,964
Proceeds from convertible debentures	50,000		50,000
Contributions by major shareholders			1,315,963
Payments of capital leases			(497,102)
Payments on loans payable	(156,912)	(130,150)	(552,337)
Payments of notes payable	(1,893)	(3,000)	(87,253)
Net cash provided by financing activities	516,945	1,828,433	8,675,371
Net (decrease) increase in cash and cash equivalents	(12,778)	11,907	4,957
Cash and cash equivalents, beginning of the period	17,735	5,828
Cash and cash equivalents, end of period	4,957	17,735	4,957
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	494,399	3,014,100	12,689,425
Common stock issued for licensing			2,000,002
Common stock issued for conversion of debt	173,890	1,500	1,700,148
Preferred stock issued for services rendered			400,000
Fair value of warrants issued in connection with settlement agreement	223,849		223,849
Fair value of warrants issuable for interest expense	29,334		29,334
Fair value of common stock issuable for interest expense	$ 17,323		$ 17,323

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STOCK OPTIONS AND WARRANTS (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Employee Stock Option [Member]
Options outstanding - Number Of Shares (in shares)
Granted - Number Of Shares (in shares)	10,000,000
Exercised - Number Of Shares (in shares)
Cancelled or expired - Number Of Shares (in shares)
Options outstanding - Number Of Shares (in shares)	10,000,000
Options outstanding - Average Price Per Share (in dollars per share)
Granted - Average Price Per Share (in dollars per share)	$ 0.92
Exercised - Average Price Per Share (in dollars per share)
Cancelled or expired - Average Price Per Share (in dollars per share)
Options outstanding - Average Price Per Share (in dollars per share)	$ 0.92
Non Employee Stock Option [Member]
Options outstanding - Number Of Shares (in shares)
Granted - Number Of Shares (in shares)	1,000,000
Exercised - Number Of Shares (in shares)
Cancelled or expired - Number Of Shares (in shares)
Options outstanding - Number Of Shares (in shares)	1,000,000
Options outstanding - Average Price Per Share (in dollars per share)
Granted - Average Price Per Share (in dollars per share)	$ 0.20
Exercised - Average Price Per Share (in dollars per share)
Cancelled or expired - Average Price Per Share (in dollars per share)
Options outstanding - Average Price Per Share (in dollars per share)	$ 0.20
Non Employee Stock Option One [Member]
Options outstanding - Number Of Shares (in shares)	1,000,000
Options outstanding - Average Price Per Share (in dollars per share)	$ 0.20

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes Tables

Net deferred tax asset non current

Due to significant changes in the Company’s ownership, the future use of its existing net operating losses may be limited. Components of deferred tax assets as of December 31, 2011 are as follows:

Noncurrent:
Net operating loss carry forward	$	2,520,000
Valuation allowance		(2,520,000)
Net deferred tax asset	$	-

Reconciliation of federal statutory income tax rate to our effective income tax rate

The total provision differs from the amount that would be obtained by applying the federal statutory rate of 35% to income before income taxes, as follows:

Expected tax provision (benefit)	$	(2,520,000	)
Effect of:
State income taxes, net of federal benefit		-
Net operating loss carry forward		2,625,000
Decrease in valuation allowance		(105,000	)
Graduated rates		-
	$	2,520,000

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INCOME TAXES (Details) (USD $)	Dec. 31, 2012
Net operating loss carry forward	$ 7,200,000
Valuation allowance	(2,520,000)
Non Current
Net operating loss carry forward	2,520,000
Valuation allowance	(2,520,000)
Net deferred tax asset

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 16. 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 December 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.

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.

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SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
Significant Accounting Policies Details
Net operating loss carry forwards expiring through 2031	$ 7,200,000
Net operating loss carry forwards Expiry date	Expiring through 2031
Tax Asset	2,520,000
Less valuation allowance	(2,520,000)
Balance

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INCOME TAXES

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 18. 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 bases 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 are insignificant.

At December 31, 2012, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $7,200,000 expiring in the year 2031 that may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Due to significant changes in the Company’s ownership, the future use of its existing net operating losses may be limited. Components of deferred tax assets as of December 31, 2011 are as follows:

Noncurrent:
Net operating loss carry forward	$	2,520,000
Valuation allowance		(2,520,000	)
Net deferred tax asset	$	-

The total provision differs from the amount that would be obtained by applying the federal statutory rate of 35% to income before income taxes, as follows:

Expected tax provision (benefit)	$	(2,520,000	)
Effect of:
State income taxes, net of federal benefit		-
Net operating loss carry forward		2,625,000
Decrease in valuation allowance		(105,000	)
Graduated rates		-
	$	2,520,000

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SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

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 our wholly owned subsidiaries, NAEG Alaska Corporation (“NAEG Alaska”), a Delaware corporation incorporated in 2005 that was formerly known as Fowler Oil & Gas Corporation and NAEG CBM Operations LLC (“NAEG Operations”), an Alaskan limited liability company formed in August 2006 that was formerly known as Fowler Oil & Gas Alaska. 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 December 31, 2012, the Company has accumulated losses of $31,347,079.

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.

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.

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. 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.

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. 

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 year ended December 31, 2012 and 2011. 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 years ended December 31, 2012 and 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 year 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.

In March 2010, the Company executed an amendment to their original agreement with Windaus Energy Inc. (of Canada), whereby the Company acquired manufacturing, marketing, sales, sublicensing and distribution rights to bring to the U.S. market Windaus’ Vertical Axis Wind Turbine Energy Systems.

During the year ended December 31, 2010, the Company management performed an evaluation of its licensing agreement for purposes of determining the implied fair value of the asset at December 31, 2010. The test indicated that the recorded remaining book value of its licensing agreement exceeded its fair value for the year ended December 31, 2010. As a result, upon completion of the assessment, management recorded a non-cash impairment charge of $2,500,000, net of tax, or $0.13 per share during the year ended December 31, 2010 to reduce the carrying value of licensing agreement to $-0-. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.

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. 

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.

Comprehensive Income

The Company does not have any items of comprehensive income in any of the periods presented.

Revenue Recognition

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

Stock-based compensation

The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to its employees and directors, including employee stock options and restricted stock awards. The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of our common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company’s statements of operations.

Total stock-based compensation expense for the years ended December 31, 2012 and 2011 amounted to $162,500 and $-0-, respectively.

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.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2012 and 2011. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses are $-0- for the years ended December 31, 2012, 2011 and from January 18, 2005 (date of inception) through December 31, 2012.

Income Taxes

The Company has adopted 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 are insignificant.

At December 31, 2012, the significant components of the deferred tax assets (liabilities) are summarized below:

Net operating loss carry forwards expiring through 2031	$	7,200,000
Tax Asset		2,520,000
Less valuation allowance		(2,520,000	)
Balance	$	—

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 years ended December 31, 2012 and 2011.

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. Effective December 31, 2010 and extending through December 31, 2012, all non-interest-bearing transaction accounts are fully insured by the Federal Deposit Insurance Corporation (FDIC), regardless of the balance of the account. 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.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	21,000,000	1,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, shares issued	38,716,299	35,128,580
Common stock, shares outstanding	38,716,299	33,389,830
Series A Convertible Preferred stock
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred Stock Shares Designated	1,000,000	1,000,000
Preferred stock, shares issued	500,000	500,000
Preferred Stock, Shares Outstanding	500,000	500,000
Series B Callable Preferred stock
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred Stock Shares Designated	5,750,000	5,750,000
Preferred stock, shares issued	0	0
Preferred Stock, Shares Outstanding	0	0

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LOANS PAYABLE

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 11. LOANS PAYABLE

Loans payable are comprised of the following:

	2012		2011
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, net of debt discount of $-0- and $83,432, respectively. Currently in default		593,000		509,568
Loan payable, bearing 12% per annum through February 29, 2012; 15% thereafter, secured by certain oil and gas properties; due April 29, 2012, net of debt discount of $-0- and $32,632, respectively.		130,000		97,368
Various loans payable, with interest rates from 4% to 20% per annum, unsecured, currently in default ($52,918 and $103,133 related party loans, respectively), net of debt discount of $-0- and $69,245, respectively.		408,468		528,883
Total		1,261,468		1,265,819
Less current portion		1,261,468		1,265,819
Long term portion	$	-	$	-

In connection with the issuance of debt on November 8, 2011, the Company issued an aggregate of 593,000 warrants to purchase the Company's common stock at $0.001 per share for five years from the date of issuance. The aggregate fair value of $157,130 was determined using the Black Scholes option pricing model based on the following assumptions: dividend yield: 0%; volatility: 369.88% to 375.20% and risk free rate of 0.96%. The determined fair value of the issued warrants are amortized ratably over the term of the loan. See discussion of settlement agreement the Company entered into on October 26, 2012 in Note 12 below.

In connection with the issuance of debt on December 12, 2011, the Company issued an aggregate of 55,000 warrants to purchase the Company's common stock at $0.001 per share for five years from date of issuance and 75,000 shares of the Company's common stock. The aggregate fair value of the warrants of $15,300 was determined using the Black Scholes option pricing model based on the following assumptions: dividend yield: 0%; volatility: 364.69% to 366.74% and risk free rate of 0.96%. The total determined fair value of the issued warrants and common stock of $37,800 is amortized ratably over the term of the loan. See discussion of settlement agreement the Company entered into on October 26, 2012 in Note 12 below.

During the year ended December 31, 2012, the Company issued 92,390 shares of its common stock in settlement of $50,000 notes payable and related accrued interest recognizing a gain on settlement of debt of $36,956.

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DOCUMENT AND ENTITY INFORMATION (USD $)	12 Months Ended
	Dec. 31, 2012	May 20, 2013	Jun. 30, 2012
Entity Registrant Name	Native American Energy Group, Inc.
Entity Central Index Key	0001499501
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 10,189,314
Entity Common Stock, Shares Outstanding		40,522,018
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2012

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NOTES PAYABLE-BRIDGE

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 12. 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 year ended December 31, 2011, the Company has amortized $371,693 to interest expense.

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%.

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 11) and the loan note holder of a note issued on December 12, 2011 for $130,000 (Note 11) agreed not to 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.
d.	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 13 below)

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended		95 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
Condensed Consolidated Statements Of Operations
REVENUE	$ 26,702	$ 111,606	$ 200,508
Operating expenses:
Selling, general and administrative	1,758,749	5,293,927	19,323,669
Impairment of undeveloped properties		690,552	5,410,802
Impairment of acquired licenses			2,500,000
Loss on repossession of fixed assets			56,622
Litigation settlement	1,757,182	247,438	2,173,620
Depreciation and amortization	153,755	159,594	537,486
Total operating expenses	3,669,686	6,391,511	30,002,199
Loss from operations	(3,642,984)	(6,279,905)	(29,801,691)
Other income (expense):
Interest income	350	327	26,803
Loss on change in fair value of debt derivative	(149,965)		(149,965)
Gain on settlement of debt	663,220	62,002	725,222
Loss on debt modification	(426,980)		(426,980)
Other income	6,016		126,174
Interest expense	(511,943)	(550,161)	(1,836,642)
Loss before provision for income taxes	(4,072,286)	(6,767,737)	(31,347,079)
Provision for income taxes (benefit)
NET LOSS	$ (4,072,286)	$ (6,767,737)	$ (31,347,079)
Net loss per common share, basic and diluted	$ (0.11)	$ (0.22)
Weighted average number of outstanding shares, basic and diluted	36,117,215	30,469,062

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SECURITY DEPOSITS

12 Months Ended

Dec. 31, 2012

Security Deposits

Note 6. SECURITY DEPOSITS

The Company had an aggregate of -0- and $50,000 as of December 31, 2012 and 2011, respectively, deposited in two financial institutions as collateral for posted surety bonds with various governmental agencies in Alaska and Montana as assurance for possible well-site reclamation, if required. The Company is obligated to maintain a surety bond in conjunction with certain drilling permits. In March 2011 and in September 2012, the Company cancelled two of its oil and gas surety bonds in the aggregate amount $150,000 issued to the Alaska Oil & Gas Conservation Commission (“AOGCC”) and the Matanuska-Susitna Borough Planning Commission (“Mat-Su Borough”) for its Kircher Unit state and borough drilling permits in Alaska. As a result of the bond terminations, the financial institution returned the $150,000 cash collateral to the Company. In the event that the Company re-applies for the state and borough drilling permits with the AOGCC and the Mat-Su Borough, it will be required to re-post bonds in the amount of $100,000 and $50,000, respectively. During the year ended December 31, 2011, the Company forfeited an $8,590 deposit held as security for its corporate office lease in New York.

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SURETY BONDS

12 Months Ended

Dec. 31, 2012

Surety Bonds

Note 5. SURETY BONDS

The Company has an aggregate of $175,381 and $175,030, as of December 31, 2012 and 2011, 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.

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STOCK OPTIONS AND WARRANTS

12 Months Ended

Dec. 31, 2012

Stock Options And Warrants

Note 17. 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 December 31, 2012:

		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		9.71	$	0.20		-	$	-
	2.00		4,000,000		4.71		2.00		-		-
			10,000,000		7.71	$	0.92		-	$	-

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

			Average
	Number of		Price
	Shares		Per Share
Options outstanding at December 31, 2010		-	$	-
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
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

On September 14, 2012, the Company granted employee options to purchase an aggregate of 10,000,000 shares of the Company’s common stock to directors, officers and employees. The option grants are vesting at 25% per year, fully vest in four years and the exercise prices from $0.20 to $2.00 per share for five to ten years.

The fair value for these awards was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions, assuming no expected dividends:

Expected volatility	433.11	%
Risk-free interest rate	0.72% to 1.88	%
Dividend yield	—	%

During the year ended December 31, 2012, the Company charged the vesting fair value of employee options of $162,500 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 December 31, 2012:

		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		1,000,000		1.71	$	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, 2010		-	$	-
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
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

On September 14, 2012, the Company granted non-employee options to purchase 1,000,000 shares of the Company’s common stock to a consultant. The option grant vest at a rate of 50% per year and fully vest in two years with an exercise price of $0.20 per share.

Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock at December 31, 2012:

		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		2,092,188		4.52	$	0.001		2,092,188	$	0.001
	0.60		150,000		4.17		0.60		150,000		0.60
	0.70		2,345,506		1.73		0.70		2,345,506		0.70
			4,587,694		3.08	$	0.38		4,587,694	$	0.38

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

			Average
	Number of		Price
	Shares		Per Share
Warrants outstanding at December 31, 2010		-	$	-
Granted		798,000		0.11
Exercised		-		-
Cancelled or expired		-		-
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

In November 2011, in connection with the issuance of bridge notes payable as described above, the Company issued an aggregate of 150,000 warrants to purchase the Company's common stock at $0.60 per share expiring five years from the date of issuance. The fair value of the warrants was determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-	%
Volatility	371.27	%
Risk free rate:	0.96	%

The aggregate fair value of $37,198 was charged to period operations in 2011.

In November and December 2011, in connection with the issuance of notes payable as described above, the Company issued an aggregate of 648,000 warrants to purchase the Company's common stock at $0.001 per share expiring five years from the date of issuance. The fair value of the warrants was determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-	%
Volatility	364.69% to 375.20	%
Risk free rate:	0.96	%

The aggregate fair value of $172,430 was recorded as a debt discount and amortized over the term of the note payable.

As per the Settlement Agreement entered into on January 27, 2012 and as previously reported in the 8-K filing with the Securities and Exchange Commission on January 31, 2012, on June 21, 2012, the Company issued an aggregate of 2,345,506 warrants to purchase the Company's common stock exercisable at $0.70 per share for two years from the date of issuance within 30 calendar days of the removal of the global lock by DTC. The Global Lock was removed by DTC on June 21, 2012. The Company recorded the estimated fair value of $1,381,403 as a charge to current period operations in 2012. The estimated fair value was determined using the Black Scholes option pricing method with the following assumptions: Dividend yield- 0%, risk free rate-0.12%, volatility- 431.55%, expected life-contract life.

As per the Settlement Agreement entered into on October 26, 2012, the Company issued an aggregate of 1,444,188 warrants to purchase the Company’s common stock at $0.001 for five years. The Company recorded the estimated fair value of $223,849 as a charge to current period operations in 2012 as loan modification expense. The estimated fair value was determined using the Binomial Lattice option pricing method with the following assumptions: Dividend yield- 0%, risk free rate-0.41%, volatility- 422.12%, expected life-contract life.

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DERIVATIVE LIABILITIES

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 13. 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 12 above. A summary of the derivative liabilities are as follows:

Convertible Debentures

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.

The fair value of the described embedded derivative of $141,407 at December 31, 2012 was determined using the Binomial Lattice Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	170.02	%
Risk free rate:	0.05	%

At December 31, 2012, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating loss of $50,549 for the year ended December 31, 2012.

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 $491,370 at December 31, 2012 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 December 31, 2012, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating loss of $99,416 for the year ended December 31, 2012.

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CONVERTIBLE DEBENTURES

12 Months Ended

Dec. 31, 2012

Convertible Debentures

Note 9. Convertible Debentures

On September 21, 2012, the Company issued two $25,000 Convertible Debenture Notes that mature 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 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 year ended December 31, 2012, the Company amortized $27,901 to current period operations as interest expense.

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STOCK OPTIONS AND WARRANTS (Details 2)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2012 Share Based Awards	Dec. 31, 2012 Share Based Awards Minimum [Member]	Dec. 31, 2012 Share Based Awards Maximum [Member]
Expected volatility	371.27%	433.11%
Risk-free interest rate	0.96%		0.72%	1.88%
Dividend yield	0.00%

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses are comprised of the following:

	2012		2011
Accounts payable and accrued expenses	$	2,044,142	$	2,192,317
Accrued interest		386,226		238,053
	$	2,430,368	$	2,430,370

During the year ended December 31, 2012, the Company issued an aggregate of 281,650 shares of its common stock in settlement of $50,000 of notes payable and $387,100 of accounts payable and accrued interest recognizing a gain on settlement of debt of $253,220.

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PUT LIABILITY

12 Months Ended

Dec. 31, 2012

Put Liability

Note 8. PUT LIABILITY

On June 28, 2011, the Company offered to certain purchasers of the Company’s common stock the right to rescind their previous common stock acquisitions and receive in exchange for any shares relinquished to the Company a payment equal to their original purchase price plus interest at the applicable statutory rate in the state they reside.  The common stock subject to the rescission offers total 2,732,500 common shares and were sold in 2010 and 2011 at prices ranging from $0.08 to $0.10 per share. The rescission offer expired at 5:00 pm (EDT) on August 1, 2011.

On August 1, 2011, we received one acceptance of the rescission offer in the amount of 1,125,000 shares for the return of $100,000. Accordingly, the Company reclassified $100,000 from equity to a put liability as of June 30, 2011.

During the year ended December 31, 2012, the right or rescission as described above expired. Accordingly, the Company reclassified $100,000 from put liability to equity.

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CAPITAL LEASES AND NOTES PAYABLE

12 Months Ended

Dec. 31, 2012

Capital Leases And Notes Payable

Note 10. CAPITAL LEASES AND NOTES PAYABLE

Notes payable are comprised of the following:

	2012		2011
Note payable, due in monthly installments of $589 including interest of 24.9% due to mature in December 2015, secured by equipment. Currently in default.	$	17,950	$	17,804
Note payable, due in monthly installments of $369 including interest of 2.9%, due to mature in April 2013, secured by related equipment. Currently in default	$	14,788	$	14,788
Note payable, due in monthly installments of $1,022 including interest of 18.89%, due to mature in July 2013, secured by related equipment. Currently in default	$	37,001	$	37,001
Note payable, due in March 2012 at 0% interest., currently in default		69,500		469,500
Sub-total		139,239		539,093
Less current portion		139,239		524,252
Long term portion	$	-0-	$	14,841

During the year ended December 31, 2011, the Company was notified by the lender that it will not be held responsible for an installment loan previously in default of $10,109 including accrued interest of $6,703 Accordingly, the Company recorded a gain on settlement of debt of $16,812.

During the year ended December 31, 2012, the Company amended a previously acquired licensing agreement with no remaining carrying value whereby the remaining debt obligation was reduced from $469,500 to $69,500. Accordingly, the Company recognized a gain on settlement of debt of $400,000 to current period operations.

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STOCK OPTIONS AND WARRANTS (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Stock Options And Warrants Details Narrative
Fair value of vesting options	$ 162,500
Aggregate fair value of charge on warrants		$ 37,198

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INCOME TAXES (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2012
Income Taxes Details 1
Expected tax provision (benefit)	$ (2,520,000)
State income taxes, net of federal benefit
Net operating loss carry forward	2,625,000
Decrease in valuation allowance	(105,000)
Graduated rates
Income Tax provision net	$ 2,520,000

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STOCK OPTIONS AND WARRANTS (Details 5)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2012 Fair Value Of Warrant	Dec. 31, 2012 Fair Value Of Warrant One	Dec. 31, 2012 Fair Value Of Warrant One Minimum [Member]	Dec. 31, 2012 Fair Value Of Warrant One Maximum [Member]
Dividend yield:	0.00%	0.00%	0.00%
Volatility	371.27%	371.20%		364.69%	375.20%
Risk free rate:	0.96%	0.96%	0.96%

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STOCK OPTIONS AND WARRANTS (Tables)

12 Months Ended

Dec. 31, 2012

Stock Options And Warrants

Schedule Of Changes In Employee Options Outstanding and Related Prices

The following table summarizes the changes in employee options outstanding and the related prices for the shares of the Company’s common stock at December 31, 2012:

		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		9.71	$	0.20		-	$	-
	2.00		4,000,000		4.71		2.00		-		-
			10,000,000		7.71	$	0.92		-	$	-

Schedule Of Employee Option Issuance

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

			Average
	Number of		Price
	Shares		Per Share
Options outstanding at December 31, 2010		-	$	-
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
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

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair value for these awards was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions, assuming no expected dividends:

Expected volatility	433.11	%
Risk-free interest rate	0.72% to 1.88	%
Dividend yield	—	%

Schedule Of Changes In Non Employee Options Outstanding and Related Prices

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 December 31, 2012:

		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		1,000,000		1.71	$	0.20		-	$	-

Schedule Of Non Employee Option Issuance

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, 2010		-	$	-
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
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

Schedule Of Warrants Outstanding and Related Prices

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock at December 31, 2012:

		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		2,092,188		4.52	$	0.001		2,092,188	$	0.001
	0.60		150,000		4.17		0.60		150,000		0.60
	0.70		2,345,506		1.73		0.70		2,345,506		0.70
			4,587,694		3.08	$	0.38		4,587,694	$	0.38

Schedule Of Warrants Activity

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

			Average
	Number of		Price
	Shares		Per Share
Warrants outstanding at December 31, 2010		-	$	-
Granted		798,000		0.11
Exercised		-		-
Cancelled or expired		-		-
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

Fair value of the warrants

The fair value of the warrants was determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-	%
Volatility	371.27	%
Risk free rate:	0.96	%

The fair value of the warrants was determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:	-0-	%
Volatility	364.69% to 375.20	%
Risk free rate:	0.96	%

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LOANS PAYABLE (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012
Loans Payable [Abstract]
Stock Issued During Period, Shares, Issued for Noncash Consideration	92,390
Convertible Debt, Current	$ 50,000
Gain on settlement of debt	$ 36,956

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COMMITMENTS AND OBLIGATIONS

12 Months Ended

Dec. 31, 2012

Commitments And Obligations

Note 15. 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.

Operating leases

1.	The Company leases office temporary space in New York at approximately $100 per month on a month to month basis.
2.	The Company currently leases a maintenance facility in Montana on a month-to-month basis at $1,500 per month.
3.	The Company currently leases an office/storage facility in Montana on a month-to-month basis at $1,100 per month.

The lease expenses for the Company’s field office, storage and maintenance facilities in Montana have been included on the balance sheet in Oil & Gas Properties.

Consulting agreements

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

Litigation

High Capital Funding, LLC. vs. Native American Energy Group, Inc. - Cause No. DV-12-30

On May 25, 2012, High Capital Funding LLC (“High Capital or Plaintiff”), filed a Complaint for Foreclosure in the Fifteenth Judicial District Court of the State of Montana, Roosevelt County, against the Company alleging that the Company is in default for nonpayment of monies owed under various loans made to the Company from the period beginning July 25, 2012 to December 12, 2012 (“the Loans”) during the Company’s field operations in Montana related to its 5 Well Workover and Enhanced Oil Recovery Program. In the Complaint, Plaintiff sought a judgment against the Company for the unpaid principal and interest owed under such loans. 

On June 27, 2012, the Company filed a motion to dismiss Plaintiff’s complaint on the grounds that Plaintiff’s complaint failed to state a claim upon which relief can be granted (the “Motion”). On July 11, 2012, the Honorable Judge David Cybulski issued an order denying the Motion and allowed the Company 20 additional days to file its answer to the Complaint.

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. In its Answer and Counterclaim, the Company is ultimately seeking damages to be proven at trial which include, but are not limited to; lost revenue from oil production continuing to accrue since September 2011 as a result of Plaintiff’s negligent and untimely remittance of loan proceeds as agreed to by both parties, recovery of various shares of the Company’s restricted common stock and five year exercise warrants for the purchase of the Company’s restricted common stock; and specific performance by the Plaintiff of its obligations under the Loans. On the same date, the Company also filed an “Application for Preliminary Injunction and Temporary Restraining Order” (the “Application”). In its Application, Company is seeking relief including but not limited to, an injunction preventing Plaintiff from transferring common shares or exercising warrants issued as partial consideration for such loans agreements.

On August 21, 2012, Judge David Cybulski issued an order granting the Company’s request for a Temporary Restraining Order, as stated above, and set the date for a show cause hearing for Wednesday, August 29, 2012.

On August 29, 2012, the parties agreed to stipulate in court to the entry of a Temporary Order in resolution to the Company’s Application for a Temporary Restraining Order and Preliminary Injunction. The Temporary Restraining Order and order to Show Cause dated August 22, 2012, was ordered, vacated and dissolved, permitting Plaintiff’s to transfer its Bridge Shares, LTA warrants, and SL3 warrants.

On October 26, 2012, in an effort to avoid further litigation, both parties agreed to terms for a Settlement Agreement. See discussion of Settlement Agreement in Note 12 above. 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.

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 litigations 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.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

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 our wholly owned subsidiaries, NAEG Alaska Corporation (“NAEG Alaska”), a Delaware corporation incorporated in 2005 that was formerly known as Fowler Oil & Gas Corporation and NAEG CBM Operations LLC (“NAEG Operations”), an Alaskan limited liability company formed in August 2006 that was formerly known as Fowler Oil & Gas Alaska. 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 December 31, 2012, the Company has accumulated losses of $31,347,079.

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.

Property, Plant 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.

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. 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.

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. 

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 year ended December 31, 2012 and 2011. 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 years ended December 31, 2012 and 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 year 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.

In March 2010, the Company executed an amendment to their original agreement with Windaus Energy Inc. (of Canada), whereby the Company acquired manufacturing, marketing, sales, sublicensing and distribution rights to bring to the U.S. market Windaus’ Vertical Axis Wind Turbine Energy Systems.

During the year ended December 31, 2010, the Company management performed an evaluation of its licensing agreement for purposes of determining the implied fair value of the asset at December 31, 2010. The test indicated that the recorded remaining book value of its licensing agreement exceeded its fair value for the year ended December 31, 2010. As a result, upon completion of the assessment, management recorded a non-cash impairment charge of $2,500,000, net of tax, or $0.13 per share during the year ended December 31, 2010 to reduce the carrying value of licensing agreement to $-0-. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.

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. 

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.

Comprehensive Income

The Company does not have any items of comprehensive income in any of the periods presented.

Revenue Recognition

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

Stock-based compensation

The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to its employees and directors, including employee stock options and restricted stock awards. The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of our common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company’s statements of operations.

Total stock-based compensation expense for the years ended December 31, 2012 and 2011 amounted to $162,500 and $-0-, respectively.

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.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2012 and 2011. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses are $-0- for the years ended December 31, 2012, 2011 and from January 18, 2005 (date of inception) through December 31, 2012.

Income Taxes

The Company has adopted 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 are insignificant.

At December 31, 2012, the significant components of the deferred tax assets (liabilities) are summarized below:

Net operating loss carry forwards expiring through 2031	$	7,200,000
Tax Asset		2,520,000
Less valuation allowance		(2,520,000)
Balance	$	—

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 years ended December 31, 2012 and 2011.

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. Effective December 31, 2010 and extending through December 31, 2012, all non-interest-bearing transaction accounts are fully insured by the Federal Deposit Insurance Corporation (FDIC), regardless of the balance of the account. 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.

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CAPITAL LEASES AND NOTES PAYABLE (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Capital Leases And Notes Payable
Debt Instrument, Debt Default, Amount		$ 10,109
Debt Default Long Term Debt Accrued Interest		6,703
Gain on settlement of debt	400,000	16,812
Debt Instrument, licensing agreement	69,500
Debt Instrument, licensing agreement, prior balance	$ 469,500

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SURETY BONDS (Details Narrative) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Collateral on surety bonds	$ 175,381	$ 175,030

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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (USD $)	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Common shares to be issued	Common Stock Subscription	Deficit Accumulated during Development Stage	Total
Beginning Balance, Amount at Jan. 17, 2005
Beginning Balance, Shares at Jan. 17, 2005
Shares outstanding at inception, Shares		30
Shares outstanding at inception, Amount
Sale of common stock, Shares		97,500
Sale of common stock, Amount		98	48,652				48,750
Common stock issued in exchange for services rendered, Shares		920
Common stock issued in exchange for services rendered, Amount		1	459,999				460,000
Contributed capital by majority shareholders			794,682				794,682
Net loss						(579,779)	(579,779)
Ending Balance, Amount at Dec. 31, 2005		99	1,303,333			(579,779)	723,653
Ending Balance, Shares at Dec. 31, 2005		98,450
Sale of common stock, Shares		8,046
Sale of common stock, Amount		8	249,992				250,000
Common stock issued in exchange for services rendered, Shares		136
Common stock issued in exchange for services rendered, Amount			19,500				19,500
Contributed capital by majority shareholders			451,739				451,739
Common stock issued as debt collateral, Shares		20,640
Common stock issued as debt collateral, Amount		20	(20)
Common stock issued in exchange for expenses, Shares		50
Common stock issued in exchange for expenses, Amount			3,000				3,000
Common stock subscription					40,000		40,000
Net loss						(763,264)	(763,264)
Ending Balance, Amount at Dec. 31, 2006		127	2,027,544		40,000	(1,343,043)	724,628
Ending Balance, Shares at Dec. 31, 2006		127,322
Contributed capital by majority shareholders			64,301				64,301
Issuance of common stock for subscription, Shares		5,000
Issuance of common stock for subscription, Amount		5	39,995		(40,000)
Sale of common stock, net, Shares		17,507
Sale of common stock, net, Amount		17	317,358				317,375
Return of common stock issued for collateral, Shares		(20,400)
Return of common stock issued for collateral, Amount		(20)	20
Common stock to be issued for acquisition of Fowler Oil & Gas, Shares				11,765
Common stock to be issued for acquisition of Fowler Oil & Gas, Amount				691,200			691,200
Sale of royalty rights			1,715,000
Cancelation of common stock issued for services, Shares		(20)
Net loss						(905,809)	(905,809)
Ending Balance, Amount at Dec. 31, 2007		129	4,164,218	691,200		(2,248,852)	2,606,695
Ending Balance, Shares at Dec. 31, 2007		129,409		11,765
Contributed capital by majority shareholders			2,754				2,754
Sale of royalty rights			1,208,570				1,208,570
Issuance of common stock for investment in wholly owned subsidiary, Shares		11,765		(11,765)
Issuance of common stock for investment in wholly owned subsidiary, Amount		12	936,187	(691,200)			244,999
Net loss						(5,111,099)	(5,111,099)
Ending Balance, Amount at Dec. 31, 2008		141	6,311,729			(7,359,951)	(1,048,081)
Ending Balance, Shares at Dec. 31, 2008		141,174
Sale of common stock, Shares		490,000
Sale of common stock, Amount		490	104,510				105,000
Contributed capital by majority shareholders			2,486				2,486
Common stock issued in exchange for expenses, Shares		45,000
Common stock issued in exchange for expenses, Amount		45	30,955				31,000
Issuance of common stock for technology license, Shares		2,000
Issuance of common stock for technology license, Amount		2					2
Effective of Merger with Native American Group, Inc. (formerly Flight Management International, Inc.), Shares		351,829
Effective of Merger with Native American Group, Inc. (formerly Flight Management International, Inc.), Amount		352	25,580				25,932
Preferred shares issued in exchange for services, Shares	500,000
Preferred shares issued in exchange for services, Amount	50		399,950				400,000
Common shares issued in exchange for services, Shares		10,000,000
Common shares issued in exchange for services, Amount		10,000	7,990,000				8,000,000
Net loss						(9,144,034)	(9,144,034)
Ending Balance, Amount at Dec. 31, 2009	50	11,030	14,865,210			(16,503,985)	(1,627,695)
Ending Balance, Shares at Dec. 31, 2009	500,000	11,030,003
Sale of common stock, Shares		2,318,900
Sale of common stock, Amount		2,318	290,382				292,700
Common stock issued in exchange for expenses, Shares		1,543,000
Common stock issued in exchange for expenses, Amount		1,543	619,947				621,490
Shares issued for fractional roundup (merger), Shares		4,425
Shares issued for fractional roundup (merger), Amount		4					4
Common stock issued to acquire technology license, Shares		2,000,000
Common stock issued to acquire technology license, Amount		2,000	1,998,000				2,000,000
Common stock issued in settlement of debt, Shares		10,040,702
Common stock issued in settlement of debt, Amount		10,042	1,514,716				1,524,758
Common stock issued in exchange for services, Shares		100,000
Common stock issued in exchange for services, Amount		100	19,900				20,000
Net loss						(4,003,071)	(4,003,071)
Ending Balance, Amount at Dec. 31, 2010	50	27,037	19,308,155			(20,507,056)	(1,171,814)
Ending Balance, Shares at Dec. 31, 2010	500,000	27,037,030
Sale of common stock, Shares		1,892,800
Sale of common stock, Amount		1,893	222,507				224,400
Common stock issued in settlement of debt, Shares		15,000
Common stock issued in settlement of debt, Amount		15	1,485				1,500
Common stock issued in exchange for services, Shares		3,860,000
Common stock issued in exchange for services, Amount		3,860	3,027,840				3,031,700
Common stock issued for expenses, Shares		10,000
Common stock issued for expenses, Amount		10	4,990				5,000
Cancellation of previously issued common shares for services, Shares		(1,000,000)
Cancellation of previously issued common shares for services, Amount		(1,000)	1,000
Common stock issued in connection with issuance of debt, Shares		1,575,000
Common stock issued in connection with issuance of debt, Amount		1,575	461,863				463,438
Fair value of warrants issued for services rendered			37,498				37,498
Fair value of warrants issued in connection with issuance of debt			172,429				172,429
Put liability reclassified outside equity			(100,000)				(100,000)
Net loss						(6,767,737)	(6,767,737)
Ending Balance, Amount at Dec. 31, 2011	50	33,390	23,137,767			(27,274,793)	(4,103,586)
Ending Balance, Shares at Dec. 31, 2011	500,000	33,389,830
Sale of common stock, Shares		2,669,000
Sale of common stock, Amount		2,669	537,081				539,750
Common stock issued in settlement of debt, Shares		281,650
Common stock issued in settlement of debt, Amount		282	173,608				173,890
Common stock issued for services, Shares		1,110,000
Common stock issued for services, Amount		1,110	493,289				494,399
Common stock issued in settlement of litigation, Shares		2,345,506
Common stock issued in settlement of litigation, Amount		2,345	789,871				792,216
Common stock issued in settlement of forbearance agreement subject to reset provisions, Shares		820,313
Common stock issued in settlement of forbearance agreement subject to reset provisions, Amount		820	(820)
Fair value of common stock issuable for interest			17,323				17,323
Net common stock returned and canceled in connection with amendment to licensing agreement, Shares		(1,900,000)
Net common stock returned and canceled in connection with amendment to licensing agreement, Amount		(1,900)	1,900
Fair value of vesting options			162,500				162,500
Expiry of put agreement			100,000				100,000
Fair value of warrant obligation to be issued in settlement of obligation			1,381,403				1,381,403
Net loss						(4,072,286)	(4,072,286)
Ending Balance, Amount at Dec. 31, 2012	$ 50	$ 38,716	$ 26,793,922			$ (31,347,079)	$ (4,514,391)
Ending Balance, Shares at Dec. 31, 2012	500,000	38,716,299

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PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 4. PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following:

	2012			2011
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		(818,926	)		(665,171	)
Net	$	463,702		$	617,457

Depreciation is recorded ratably over the estimated useful lives of five to ten years. Depreciation expense was $153,755 and $159,594 for the year ended December 31, 2012 and 2011, respectively and $673,072 from January 18, 2005 (date of inception) through December 31, 2012 respectively.

In October 2011, we 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.

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STOCK OPTIONS AND WARRANTS (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Employee Stock Option One [Member]
Options Outstanding - Exercise Price	$ 0.2
Options Outstanding - Number Outstanding (in shares)	6,000,000
Options Outstanding - Weighted Average Remaining Contractual Life (in years)	9 years 8 months 15 days
Options Outstanding - Weighted Average Exercise Price	$ 0.2
Options Exercisable - Number Exercisable (in shares)
Options Exercisable - Weighted Average Exercise Price
Employee Stock Option Two [Member]
Options Outstanding - Exercise Price	$ 2.00
Options Outstanding - Number Outstanding (in shares)	4,000,000
Options Outstanding - Weighted Average Remaining Contractual Life (in years)	4 years 8 months 15 days
Options Outstanding - Weighted Average Exercise Price	$ 2.00
Options Exercisable - Number Exercisable (in shares)
Options Exercisable - Weighted Average Exercise Price
Employee Stock Option [Member]
Options Outstanding - Number Outstanding (in shares)	10,000,000
Options Outstanding - Weighted Average Remaining Contractual Life (in years)	7 years 8 months 15 days
Options Outstanding - Weighted Average Exercise Price	$ 0.92
Options Exercisable - Number Exercisable (in shares)
Options Exercisable - Weighted Average Exercise Price
Non Employee Stock Option One [Member]
Options Outstanding - Exercise Price	$ 0.20
Options Outstanding - Number Outstanding (in shares)	1,000,000
Options Outstanding - Weighted Average Remaining Contractual Life (in years)	1 year 8 months 15 days
Options Outstanding - Weighted Average Exercise Price	$ 0.20
Options Exercisable - Number Exercisable (in shares)
Options Exercisable - Weighted Average Exercise Price

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2012

Significant Accounting Policies Tables

Deferred tax assets (liabilities)

At December 31, 2012, the significant components of the deferred tax assets (liabilities) are summarized below:

Net operating loss carry forwards expiring through 2031	$	7,200,000
Tax Asset		2,520,000
Less valuation allowance		(2,520,000)
Balance	$	—

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GOING CONCERN MATTERS (Details Narrative) (USD $)	12 Months Ended								95 Months Ended
	Dec. 31, 2005	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007	Dec. 31, 2006	Dec. 31, 2012
Net loss	$ (579,779)	$ (4,072,286)	$ (6,767,737)	$ (4,003,071)	$ (9,144,034)	$ (5,111,099)	$ (905,809)	$ (763,264)	$ (31,347,079)
Accumulated deficit		$ 31,331,949							$ 31,331,949

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 14. STOCKHOLDERS' EQUITY

Preferred Stock

Amendments to Certificate of Incorporation; Designations of Preferred Stock

On May 8, 2012, the Company filed with the Delaware Secretary of State a Certificate of Amendment to its Certificate of Incorporation establishing a class of blank check preferred stock comprised of 20,000,000 shares, in addition to its 1,000,000,000 authorized common stock and 1,000,000 authorized Series A Convertible Preferred Stock (the “Series A”).

On May 9, 2012, the Company filed a Certificate of Designations designating 5,750,000 of the newly created blank check preferred as Series B Callable Preferred Stock (the “Series B”) and setting forth the rights, powers, designations and preferences of the Series B.

On May 10, 2012, the Company filed a Certificate of Amendment to its Certificate of Designations for the Series A dated September 22, 2009.

The Series A

The general attributes of the Series A is as follows:

Rank. The Series A ranks junior to the Senior B and pari passu with our common stock for liquidation and dividend rights.

Dividends. Holders of the Series A Convertible Preferred Stock shall be entitled to receive dividends when and if declared by the Board of Directors. Notwithstanding the forgoing, no dividends or other distributions shall be made or declared, in cash or in kind, to holders of the Series A or to our common unless and until a dividend of like amount is first paid in full to holders of the Series B.

Voting Rights. Holders of Series A Convertible Preferred Stock will have the right to that number of votes determined by multiplying the number of shares issuable upon conversion of the Series A Convertible Preferred Stock by 1,000.

Conversion. Holders of Series A Convertible Preferred Stock will have the right to convert the Series A Convertible Preferred Stock at the option of the holder, at any time, into same number of common shares, subject to certain fundamental transaction adjustments.

The Series B

The general attributes of the Series B is as follows:

Rank. The Series B ranks senior to the Senior A and our common stock for liquidation and dividend rights.

Dividends. Holders of the Series A shall be entitled to receive cumulative dividends quarterly at the rate of 13% per annum of (as adjusted for subdivisions, combinations, stock dividends, recapitalizations and the like, the “Original Issue Price”) for the first year following the original date of issuance of such share of Series B, and at the rate of 15% per annum of the Original Issue Price for each subsequent year until such share of Series B is redeemed. No dividends or other distributions shall be made or declared, in cash or in kind, to holders of the Series A or our common stockholders unless and until a dividend of like amount is first paid in full to holders of the Series B.

Redemption. The Series B shall not be redeemable by the Company prior to one year after the original date of issuance of each shares, after which time such share may be redeemed by the Company at any time at a redemption price of $1.00 plus all unpaid dividends thereon.

Common stock

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

On October 23, 2009, the Company affected a ten thousand-for-one (10,000 to 1) reverse stock split of its issued and outstanding shares of common stock, $0.001 par value. All references in the consolidated financial statements and the notes to consolidated financial statements, number of shares, and share amounts have been retroactively restated to reflect the forward split.

During the year ended December 31, 2005, the Company issued an aggregate of 920 shares of common stock for services rendered at approximately $500.00 per share.

During the year ended December 31, 2006, the Company issued an aggregate of 186 shares of common stock for services rendered and expenses at approximately $121.97 per share.

During the year ended December 31, 2009, the Company issued an aggregate of 10,045,000 shares of common stock for services rendered and expenses at approximately $0.80 per share.

On October 23, 2009, the Company affected a ten thousand-for-one (10,000 to 1) reverse stock split of its issued and outstanding shares of common stock, $0.001 par value. All references in the consolidated financial statements and the notes to consolidated financial statements, number of shares, and share amounts have been retroactively restated to reflect the forward split.

During the year ended December 31, 2010, the Company converted various outstanding debts including loans, equipment leases and account payables. Pursuant to the various debt conversion agreements and pay-off letters, the Company converted 13 promissory notes and accrued interest, an equipment lease and an account payable totaling $1,524,757 into the Company’s common stock at various conversion prices ranging from $0.07 to $0.80 per share. An aggregate of 10,040,702 shares of common stock were issued in exchange for full release from such debt obligations.

On May 24, 2010, the Company issued 375,000 shares to a consultant for consulting services.

During the year ended December 31, 2010, the Company issued an aggregate of 1,643,000 shares of common stock for services rendered and expenses at between approximately $0.18 and $1.18 per share.

During the year ended December 31, 2010, the Company issued 1,300,000 and 37,500 shares of common stock in settlement of ligation and notes payable, respectively. The common shares are held in escrow awaiting final resolution, therefore are reflected as issued, but not outstanding as of December 31, 2010.

During the year ended December 31, 2011, the Company issued an aggregate of 3,860,000 shares of common stock for services ranging from $0.20 to $0.87 per share.

During the year ended December 31, 2012, the Company issued an aggregate of 1,110,000 shares for services rendered valued at $494,399.

During the year ended December 31, 2012, the Company received and cancelled a net of 1,900,000 shares of common stock in connection with an amendment of a previously acquired license agreement.