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

FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2008

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ________________

Commission file number: 000-51519

True North Energy Corporation
(Exact name of registrant as specified in its charter)
 
Nevada
 
98-043482
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
 
2 Allen Center, 1200 Smith Street, 16 th Floor
Houston, Texas 77002
(Address of principal executive offices)
 
(713) 353-3948
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer ¨
 
Accelerated filer ¨
     
Non-accelerated filer ¨
 
Smaller reporting company x
(Do not check if a smaller reporting company)
   

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

As of December 12, 2008, there were 74,183,466 shares of the issuer’s common stock, par value $0.0001, outstanding.

 
 
 

TRUE NORTH ENERGY CORPORATION

FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2008
TABLE OF CONTENTS


   
PAGE
     
 
PART I - FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements (Unaudited)
3
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
12
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
18
     
Item 4T.
Controls and Procedures
18
     
 
PART II - OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
20
     
Item 1A.
Risk Factors
20
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
20
     
Item 3.
Defaults Upon Senior Securities
20
     
Item 4.
Submission of Matter to a Vote of Security Holders
20
     
Item 5.
Other Information
21
     
Item 6.
Exhibits
22
     
 
SIGNATURES
23
 
2

PART I – FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS

   
PAGE
     
Consolidated Balance Sheets as of October 31, 2008 and April 30, 2008 (Unaudited)
 
4
     
Consolidated Statements of Operations for the three and six month periods ended October 31, 2008 and 2007 (Unaudited)
 
5
     
Consolidated Statements of Cash Flows for the six month periods ended October 31, 2008 and 2007 (Unaudited)
 
6
     
Notes to Consolidated Financial Statements (Unaudited)
  
7

3

TRUE NORTH ENERGY CORPORATION
 
Consolidated Balance Sheets
 
(Unaudited)
 
   
October 31,
2008
   
April 30, 
2008
 
             
Assets
           
Current assets:
           
     Cash and cash equivalents
  $ 163,907     $ 228,094  
     Accounts receivable
    68,973       274,669  
     Prepaid expenses and other current assets
    109,512       231,888  
Total current assets
    342,392       734,651  
                 
Oil and gas properties, using successful efforts accounting method, including unproven properties of $2,152,363 and $2,152,068, respectively (net of accumulated amortization of $1,143,658 and $756,879, respectively)
      4,541,263         4,927,747  
Property and equipment, net of accumulated depreciation of $5,979 and $4,611, respectively
    5,245       6,613  
Website development, net of accumulated amortization of $21,140 and $17,150, respectively
    2,786       6,776  
Deferred financing costs, net
    419,451       554,055  
                 
          Total assets
  $ 5,311,137     $ 6,229,842  
                 
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
     Accounts payable
  $ 20,361     $ 105,680  
     Accrued liabilities
    1,051,718       1,157,511  
     Stock compensation payable
    21,528       52,117  
     Current portion of notes payable
    537,029       711,121  
Total current liabilities
    1,630,636       2,026,429  
                 
Notes payable, net of debt discount
    2,807,871       2,707,834  
Asset retirement obligation
    58,403       54,622  
                 
          Total liabilities
    4,496,910       4,788,885  
                 
Commitments and contingencies
    -       -  
                 
Stockholders’ Equity:
               
     Preferred Stock, par value $0.0001; 20,000,000 shares authorized, no shares issued or outstanding
    -       -  
     Common Stock, par value $0.0001; 250,000,000 shares authorized; 71,961,242 and 71,016,758 shares issued and outstanding, respectively
    7,196       7,102  
     Additional paid-in capital
    22,573,442       22,439,642  
     Accumulated deficit
    (21,766,411 )     (21,005,787 )
                 
          Total stockholders’ equity
    814,227       1,440,957  
                 
          Total liabilities and stockholders’ equity
  $ 5,311,137     $ 6,229,842  
 
See notes to consolidated financial statements.

 
4
 

TRUE NORTH ENERGY CORPORATON
 
Consolidated Statements of Operations
 
(Unaudited)
 
   
Three Months Ended
October 31,
   
Six Months Ended
October 31,
 
   
2008
   
2007
   
2008
   
2007
 
                         
Revenues
  $ 274,987     $ 294,453     $ 898,212     $ 294,453  
                                 
Costs and expenses:
                               
Lease operating expenses
    93,523       140,928       200,699       215,888  
Exploration costs
    30,828       310,656       53,584       339,536  
Accretion expense
    1,891       884       3,781       884  
General and administrative expenses:
                               
Compensation and benefits
    62,899       86,295       125,086       9,114,424  
Legal and accounting
    123,031       58,407       263,867       112,831  
Advisory board fees
    (8,875 )     47,307       (6,695 )     36,948  
Investor relations
    9,539       24,052       15,806       42,104  
Other general and administrative expenses
    54,661       86,696       117,759       166,957  
Depreciation, depletion and amortization
    137,804       180,612       392,137       183,290  
Total costs and expenses
    505,301       935,837       1,166,024       10,212,862  
                                 
Loss from operations
    (230,314 )     (641,384 )     (267,812 )     (9,918,409 )
                                 
Other income (expense):
                               
Interest and other income
    -       -       186,050       764  
Interest expense
    (343,265 )     (230,183 )     (678,862 )     (247,659 )
                                 
Loss before income taxes
    (573,579 )     (871,567 )     (760,624 )     (10,165,304 )
                                 
Income taxes
    -       -       -       -  
                                 
Net loss
  $ (573,579 )   $ (871,567 )   $ (760,624 )   $ (10,165,304 )
                                 
Basic and diluted loss per common share
  $ (0.01 )   $ (0.01 )   $ (0.01 )   $ (0.15 )
                                 
Weighted-average common shares outstanding
    71,455,615       67,536,318       71,266,882       66,497,937  

See notes to consolidated financial statements.

 
5
 
 
TRUE NORTH ENERGY CORPORATON
 
Consolidated Statements of Cash Flows
 
(Unaudited)

   
Six Months Ended
October 31,
 
   
2008
   
2007
 
             
Cash flows from operating activities:
           
Net loss
  $ (760,624 )   $ (10,165,304 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation, depletion and amortization
    392,137       183,290  
Stock-based compensation
    103,305       8,957,280  
Amortization of debt discount
    269,253       106,713  
Amortization of deferred financing costs
    134,604       50,893  
Accretion expense
    3,781       884  
Changes in operating assets and liabilities:
               
Accounts receivable
    205,696       (324,847 )
Prepaid expenses and other
    122,376       196,673  
Accounts payable
    (85,319 )     209,835  
Accrued liabilities
    (105,793 )     563,490  
                 
Net cash provided by (used in) operating activities
    279,416       (221,093 )
                 
Cash flows from investing activities:
               
Additions to oil and gas properties
    (295 )     (2,667,102 )
                 
Net cash used in investing activities
    (295 )     (2,667,102 )
                 
Cash flows from financing activities:
               
Proceeds from issuance of notes payable
    -       4,250,000  
Increase in deferred financing costs
    -       (557,007 )
Principal payments on notes payable
    (343,308 )     (418,069 )
                 
Net cash provided by (used in) financing activities
    (343,308 )     3,274,924  
                 
Net increase (decrease) in cash and cash equivalents
    (64,187 )     386,729  
                 
Cash and cash equivalents, beginning of period
    228,094       267,845  
                 
Cash and cash equivalents, end of period
  $ 163,907     $ 654,574  
                 
Supplemental disclosure of cash flow information:
               
Cash paid for interest
  $ 293,317     $ 15,506  
Income taxes
    -       -  
                 
Non-cash investing and financing activities:
               
Common stock issued for oil and gas leases
  $ -     $ 1,988,626  
Discount on notes for relative fair value
    -       781,624  
Discount on notes for overriding royalty interest granted to lenders
    -       200,000  
 
See notes to consolidated financial statements.
 
 
6
 
 
TRUE NORTH ENERGY CORPORATION
Notes to Consolidated Financial Statements

NOTE 1 – NATURE OF OPERATIONS

The accompanying unaudited interim consolidated financial statements of True North Energy Corporation (“True North” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission.  These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-KSB previously filed with the Securities and Exchange Commission.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.  Notes to the consolidated financial statements that would substantially duplicate the disclosure contained in the Company’s audited consolidated financial statements for the year ended April 30, 2008 as reported in Form 10-KSB have been omitted.

Certain reclassifications have been made to the prior year financial statements to conform with the current presentation.

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which implies that True North will continue to realize its assets and discharge its liabilities in the normal course of business.  The continuation of True North as a going concern is dependent upon many factors including, but not limited to, continued financial support from its shareholders, receipt of additional financing when and as needed to finance its ongoing business, and the attainment of profitable operations.

True North has had minimal revenues and has accumulated losses since its inception on February 1, 2006.  The Company will require additional financing in order to execute its business plan.  There can be no assurance that such financing will be available to the Company as and when needed or, if available, the reasonableness of the terms of such financing. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relative to the recoverability or classification of recorded assets or liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from these estimates.

Significant estimates include volumes of oil and natural gas reserves used in calculating depletion of proved oil and gas properties, future net revenues and abandonment obligations, impairment of proved and unproved properties, future income taxes and related assets and liabilities, the fair value of various common stock, warrants and option transactions, and contingencies. Oil and natural gas reserve estimates, which are the basis for unit-of-production depletion and the calculation of impairment, have numerous inherent uncertainties. The accuracy of any reserve estimate is a function of the quality of available data, the engineering and geological interpretation and judgment. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. In addition, reserve estimates are vulnerable to changes in wellhead prices of crude oil and gas. Such prices have been volatile in the past and can be expected to be volatile in the future.  

 
7
 

These significant estimates are based on current assumptions that may be materially effected by changes to future economic conditions such as the market prices received for sales of volumes of oil and gas, interest rates, the fair value of the Company’s common stock and corresponding volatility, and the Company’s ability to generate future taxable income. Future changes to these assumptions may affect these significant estimates materially in the near term.

Oil and gas properties

The Company accounts for its oil and gas operations using the successful efforts method of accounting. Under this method, all costs associated with property acquisitions, successful exploratory wells, all development wells, including dry hole development wells, and asset retirement obligation assets are capitalized. Additionally, interest is capitalized while wells are being drilled and the underlying property is in development. Costs of exploratory wells are capitalized pending determination of whether each well has resulted in the discovery of proved reserves. Oil and gas mineral leasehold costs are capitalized as incurred. Items charged to expense generally include geological and geophysical costs, costs of unsuccessful exploratory wells, and oil and gas production costs. Capitalized costs of proved properties including associated salvage are depleted on a field-by-field (common reservoir) basis using the units-of-production method based upon proved producing oil and gas reserves. Dispositions of oil and gas properties are accounted for as adjustments to capitalized costs with gain or loss recognized upon sale. A gain (loss) is recognized to the extent the sales price exceeds or is less than original cost or the carrying value, net of impairment. Oil and gas properties are also subject to impairment at the end of each reporting period. Unproved property costs are excluded from depletable costs until the related properties are developed.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, “ Accounting for the Impairment and Disposal of Long-Lived Assets” (“SFAS No. 144.”).” If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated future undiscounted net cash flows, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value. The fair value used to calculate the impairment for a producing oil and gas field that produces from a common reservoir is first determined by comparing the undiscounted future net cash flows associated with total proved properties to the carrying value of the underlying evaluated property. If the cost of the underlying evaluated property is in excess of the undiscounted future net cash flows, the future net cash flows are used discounted at 10%, which the company believes approximates fair value, to determine the amount of impairment.
 
For unproved property costs, management reviews these investments for impairment on a property-by-property basis at each reporting period or if a triggering event should occur that may suggest that impairment may be required.

Major Customers

The Company sold all of its oil and gas production for the three and six months ended October 31, 2008 to a single purchaser.  However, because there is a ready market for the sale of oil and gas and alternate purchasers of oil and gas are readily available at similar prices, the Company believes that the loss of this purchaser would not have a material adverse effect on its financial results.

Earnings per share

Basic earnings per share is computed using the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilutive effects of common stock equivalents such as options, warrants and convertible securities. Due to the Company incurring a net loss during the three and six months ended October 31, 2008 and 2007, basic and diluted loss per share are the same as all potentially dilutive common stock equivalents are anti-dilutive.

 
8
 

Recently Issued Accounting Pronouncements
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) establishes principles and requirements to recognize the assets acquired and liabilities assumed in an acquisition transaction and determines what information to disclose to investors regarding the business combination. SFAS No. 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning after December 15, 2008. The Company does not expect a material impact from SFAS No. 141(R) on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements – amendments of ARB No. 51.” SFAS No. 160 states that accounting and reporting for minority interests will be recharacterized as non-controlling interests and classified as a component of equity.  The statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners.  SFAS No. 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding non-controlling interest in one or more subsidiaries or that deconsolidate a subsidiary.  This statement is effective as of the beginning of an entity’s first fiscal year beginning after December 15, 2008. The Company currently has no subsidiary subject to this standard and does not expect a material impact from SFAS No. 160 on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. The provisions of SFAS 161 are effective for the fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of adopting SFAS 161 on its consolidated financial statement disclosures. 
 
On May 9, 2008 the FASB issued FASB Staff Position APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” APB 14-1 requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The guidance will result in companies recognizing higher interest expense in the statement of operations due to amortization of the discount that results from separating the liability and equity components. APB 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting APB 14-1 on its consolidated financial statements.

In June 2008, the FASB ratified the consensus reached on Emerging Issues Task Force ("EITF") Issue No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock ("EITF No. 07-05"). EITF No. 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity's own stock, which would qualify as a scope exception under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption for an existing instrument is not permitted. The Company is currently evaluating the impact of adopting EITF No. 07-05 and does not expect adoption to have a material impact on its consolidated financial statements.

NOTE 4 – OIL AND GAS PROPERTIES

The Company is engaged in the acquisition, exploration, development and production of oil and gas in Alaska, Colorado and Texas.  The Company first became an oil and gas exploration and development company in February 2006, but until September 2007 had no developed reserves or production, and had not realized any revenues from its operations.

Alaska Properties

True North’s principal Alaska assets consist of oil and gas leases covering approximately 34,910 acres in the Cook Inlet and Beaufort Sea (“North Slope”) areas of Alaska.  The Company currently holds a 100% working interest in its Alaska leases but may elect to sell a portion of these interests at some point in the future. The Cook Inlet leases provide for a net revenue interest of 87.5% prior to an overriding 5% royalty. The North Slope leases provide for a net revenue interest of approximately 83.3% prior to an overriding 5% royalty. The Cook Inlet leases have expiration dates ranging from November 27, 2010 to September 30, 2013 and the North Slope leases expire on March 1, 2012, unless such leases are held by production or drilling activity.

 
9
 

Colorado Properties

In June 2007 True North acquired certain non-producing oil and gas interests and properties in northwest Colorado in an area covering more than 17,000 acres. The Company holds a 100% working interest in the underlying oil and gas leases, which expire in 2016.  True North continues to refine its development plans for the area.

Texas Properties

In September 2007 the Company acquired interests in two Texas oil and gas leases covering approximately 1,150 acres.  These assets include two producing wells as well as three additional exploration prospects located in Brazoria County, Texas.  The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of the Texas assets had occurred as of May 1, 2007.  The pro forma information is presented for information purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition of the Texas assets been consummated as of that time, nor is it intended to be a projection of future results.

   
Three Months Ended October 31
   
Six Months Ended October 31
 
   
2008
   
2007
   
2008
   
2007
 
                         
Revenues
  $ 274,987     $ 530,927     $ 898,212     $ 1,220,569  
Net loss
    (521,720 )     (1,043,909 )     (738,687 )     (10,457,031 )
                                 
Loss per share – basic and diluted
  $ (0.01 )   $ (0.02 )   $ (0.01 )   $
(0.15
)

NOTE 5 – STOCK-BASED COMPENSATION

True North recognized stock-based compensation expenses of $51,125 and $57,307 during the three months ended October 31, 2008 and 2007 for services provided by members of the Company’s advisory board and other third parties.  As of October 31, 2008 the Company issued an aggregate of 250,000 shares of common stock to its five advisory board members representing payment of the annual fee due them for the twelve months ended October 5, 2008. Also during October, the Company issued an aggregate of 25,000 shares of common stock to its five advisory board members representing payment of the quarterly fee due them for the three months ended October 31, 2008.  As of September 30, 2008 the Company issued 462,291 shares of common stock to Prime Natural Resources, Inc. (“Prime”), representing payment of the stock fee due to Prime for the three-month period ended September 30, 2008 under the terms of the June 30, 2008 Consulting Agreement therewith.

Stock compensation payable as of October 31, 2008 includes $1,528 of stock compensation expenses associated with 17,760 shares earned by members of the Company’s advisory board through that date that are not issuable by the Company until October 2009.  Stock compensation payable as of October 31, 2008 also includes $20,000 of stock compensation expenses associated with 262,605 shares earned by  Prime through that date that are not issuable by the Company until December 2008.

NOTE 6 – SUBSEQUENT EVENTS

As of November 24, 2008 the Company entered into an Omnibus Amendment (the “Amendment”) with Valens Offshore SPV I, Ltd. (“Valens Offshore I”), Valens Offshore SPV II, Corp. (“Valens Offshore II”), Valens U.S. SPV I, LLC (“Valens US”), PSource Structured Debt Limited (“PSource”) and LV Administrative Services, Inc. for the purpose of amending certain terms of (i) that certain Amended and Restated Secured Term Note, dated as of March 31, 2008 issued by the Companies in favor of Valens Offshore II (as further amended, restated, modified and/or supplemented from time to time, the “First March 2008 Amended and Restated Term Note”) and (ii) that certain Amended and Restated Secured Term Note, dated as of March 31, 2008 issued by the Companies in favor of Valens US and subsequently assigned in part to Valens Offshore I and PSource (as further amended, restated, modified and/or supplemented from time to time, the “Second March 2008 Amended and Restated Term Note”, together with the First March 2008 Amended and Restated Term Note, the “March Term Notes” and each, a “March Term Note”).

The Amendment was required as a result of the temporary, Hurricane Ike-related shutdown of our producing oil and gas wells in Brazoria County, Texas. As a consequence of this temporary shutdown, the Company was unable to make the payments due in November and December 2008 on its March Term Notes. Following the storm, workover costs totaling approximately $75,000 were incurred to restore the Devon Fee #1 well to operation.  That well, which was restored to production on November 1, 2008, currently is producing at pre-shut in rates.

 
10
 

In consideration of the payment of an aggregate of 2,222,224 shares of True North Energy Corporation common stock, the holders of the March Term Notes allowed us to defer the cash payments due to them on November 3, 2008 and December 1, 2008 until the earlier of (i) the maturity date for the March Term Notes or (ii) the date upon which all of the obligations rising under any March Term Note shall be declared due and payable or are otherwise paid in full. From and after January 1, 2009, regularly scheduled monthly amount payments under each March Term Note shall be due and payable in accordance with the terms of such applicable March Term Note. The stock payments are being treated as additional interest expense under the March Term Notes.

 
11
 

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

Forward Looking Statements

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language.  Our actual results may differ significantly from those projected in the forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Description of Business – Risk Factors” section in our Annual Report on Form 10-KSB for the year ended April 30, 2008.  You should carefully review the risks described in our Annual Report and in other documents we file from time to time with the Securities and Exchange Commission.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.  These factors include, among others:
 
        ·        The risks associated with oil and gas exploration;
 
·
Our ability to raise capital to fund capital expenditures;
 
·
Our ability to find, acquire, market, develop and produce new properties;
 
·
Oil and gas price volatility;
 
·
Uncertainties in the estimation of proved reserves and in the projection of future rates of production and timing of development expenditures;
 
·
Operating hazards attendant to the natural gas and oil business;
 
·
Downhole drilling and completion risks that are generally not recoverable from third parties or insurance;
 
·
Availability and cost of material and equipment;
 
·
Delays in anticipated start-up dates;
 
·
Actions or inactions of third-party operators of our properties;
 
·
Our ability to find and retain skilled personnel;
 
·
Regulatory developments;
 
·
Environmental risks; and
 
·
General economic conditions.

All references in this Form 10-Q to the “Company,” “True North,” “we,” “us” or “our” are to True North Energy Corporation.  All references to share amounts in this Form 10-Q give retroactive effect to a 5:1 forward stock split that was affected by the Company on April 18, 2006.

General Overview

We are engaged in the acquisition, exploration, development and production of oil and gas properties in Alaska, Colorado and Texas. We first became an oil and gas exploration and development company in February 2006, but until the September 19, 2007 closing of a Purchase and Sale Agreement with Prime Natural Resources, Inc. (“Prime”), had no developed reserves or production, and had not realized any revenues from our operations. We were incorporated in Nevada in April 2004 under the name Ameriprint International Ltd. to engage in the business of providing printing and packaging solutions to entities of all sizes and to specialize in providing templated, low cost, quality printing of high volume, high turnover print materials. We conducted minimal operations in this area and discontinued these operations in January 2006.

 
12
 

Going Concern

In its report as of and for the year ended April 30, 2008 dated July 29, 2008, our auditors, Malone and Bailey, PC, expressed an opinion that there is substantial doubt about our ability to continue as a going concern.  Our consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.  We have generated minimal revenues since our inception. We have an accumulated deficit of $21,766,411 as of October 31, 2008.  Our continuation as a going concern is dependent upon future events, including our ability to raise additional capital and to generate positive cash flows.

Business Strategy

We plan to grow our business onshore in the U.S. through a balance of drilling and acquisition. We will focus our efforts regionally to achieve economies of scale with predictable risk and bases of production. Our principal goals are to provide the Company and our shareholders with opportunity, growth and value.

After examining the fundamentals of the North American energy market over the last two years, we have positioned ourselves to pursue the strategies described above based on the following beliefs about the energy industry:

 
·
production depletion rates in North America will accelerate;
 
 
·
finding, development and operating costs will continue to increase; and
 
 
·
conventional oil and gas production will soon reach a peak from which there will be no recovery, regardless of higher prices or improved technology.

We believe that these trends are becoming more and more evident each day.  The major oil and gas companies have de-emphasized their search for new conventional oil and gas reserves in North America. As a result of the increased depletion rates and reduced discovery efforts, North American conventional production has declined by one-third of previous levels. It is our belief that emerging oil and gas companies, such as us, can effectively position themselves to take advantage of this opportunity. To that end, we have adopted the following objectives:

 
·
Lease potentially significant productive acreage in under-explored, neglected, but still highly productive basins such as the Cook Inlet and Beaufort Sea areas in Alaska;
 
 
·
Lease as much of the potentially productive natural gas acreage in unconventional gas plays that we can identify;
 
 
·
Focus exclusively onshore in North America (and away from geopolitical unrest) where we can benefit from the highly trained and experienced workforce, large available seismic and well control database, and readily available drilling and production technologies;

 
·
Acquire all of the existing conventional natural gas and oil production and reserves we can afford; and
 
 
·
Engage in low to medium risk exploration and development of oil and gas reserves with sophisticated, industry-leading partners.

We believe that natural gas demand is likely to steadily increase as the U.S. economy grows and as natural gas is increasingly seen as the most practical way to reduce greenhouse gas emissions and reduce the risk of climate change. We believe these factors will lead to continuing natural gas price strength in the years to come. Better technologies applied to unconventional reservoirs in a time of structurally higher natural gas prices will result in the discovery and development of significant new natural gas reserves.

 
13
 
As a result of these trends, we have expanded our focus beyond just Alaska. During the past two years we have aggressively pursued new unconventional gas resource plays with potentially substantial upsides. We believe that this course of action will allow us to be well positioned for future success. Our June 2007 Colorado acquisition is an example of this strategy. Our tactics to execute our strategies and achieve our goals and objectives include:
 
 
·
Increasing development of internally generated prospects and opportunities;
 
 
·
Funding prospects developed by proven geoscientists;
 
 
·
Completing negotiated acquisitions of proved properties;
 
 
·
Maintaining tight control of general and administrative and geological and geophysical costs by keeping employee levels low and outsourcing as much of our activities as possible;
 
 
·
Designing creative deal structures to access acreage, seismic data, prospects and capital;
 
 
·
Arranging necessary financing to execute the business plan; and
 
 
·
Using equity ownership incentives to align the interests of our employees and management with that of our shareholders.

As we pursue these objectives, our business will be subject to the risks typically associated with a start-up company in the competitive and volatile oil and gas resources business.

Results of Operations
Three Months Ended October 31, 2008 Compared to the Three Months Ended October 31, 2007

Revenues. Revenues for the three months ended October 31, 2008 and 2007 were $274,987 and $294,453, respectively.  Current period revenues were lower than revenues during both the immediately proceeding three month period as well as the same period of the prior year due to a combination of lower oil and gas prices and decreased production volumes during the period just ended.  The decreases in production resulted from us shutting in our two operating Texas wells during Hurricane Ike, as well as workover procedures performed on our Devon Fee #1 well. The prior year period only includes revenues from September 19, 2007, the acquisition date from Prime of two oil and gas leases in Texas.

Lease operating expenses. Lease operating expenses for the three months ended October 31, 2008 and 2007 were $93,523 and $140,928, respectively.  This decrease of $47,405was principally due to a $55,243 decrease in property and casualty insurance costs resulting from less drilling activity than originally planned in the prior year.  This decrease was partially offset by a $7,838 increase in operating expenses related to the September 19, 2007 acquisition from Prime of two oil and gas leases in Texas not having a full quarter of operations in the prior year period.  Operating expenses would have increased more, but volume driven costs were lower than normal due to the lower production volumes experienced as a result of our wells being shutdown during Hurricane Ike.

Exploration costs. Exploration costs for the three months ended October 31, 2008 and 2007 were $30,828 and $310,656, respectively.  This decrease of $279,828 was due in large part to a $287,468 decrease in dry hole costs associated with management’s election to curtail exploration activities.  The aforementioned decrease was partially offset by a $5,989 increase in delay rentals.

General and administrative expenses. General and administrative expenses for the three months ended October 31, 2008 and 2007 were $241,255 and $302,757, respectively.  This decrease of $61,502 primarily was due to a $56,182 decrease in advisory board fees resulting from the lower per share price of our common stock.  Decreases in compensation and benefits expenses, investor relations costs and printing and postage expenses were offset by an increase of $64,624 in legal and accounting fees.  These fees  increased as a result of  an increase in our accounting and auditing requirements following the acquisition of two producing oil and gas leases in Texas from Prime during September 2007.

 
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Depreciation, depletion and amortization. Depreciation, depletion and amortization for the three months ended October 31, 2008 and 2007 totaled $137,804 and $180,612, respectively.  The decrease of $42,808 was due largely to a decrease in depletion expenses resulting from decreased production volumes while our wells were shutdown during Hurricane Ike. This decrease would have been larger except that the two oil and gas leases in Texas did not have a full quarter of operations in the prior year period.

Interest expense. Interest expense for the three months ended October 31, 2008 and 2007 was $343,265 and $230,183, respectively.  The increase in interest expense of $113,082 resulted from the borrowings issued to finance the Prime acquisition being outstanding for all of the three months ended October 31, 2008 versus just a portion of the prior year period.

Net loss. We incurred a net loss for the three months ended October 31, 2008 and 2007 of $573,579 and $871,567, respectively, specifically due to the reasons discussed above.

Results of Operations
Six Months Ended October 31, 2008 Compared to the Six Months Ended October 31, 2007

Revenues. Revenues for the six months ended October 31, 2008 and 2007 were $898,212 and 294,453, respectively.  The increase in revenues was due to the September 19, 2007 acquisition from Prime of two oil and gas leases in Texas being included in the full six month 2008 period, but only included for one and a half months of the 2007 period.

Lease operating expenses. Lease operating expenses for the six months ended October 31, 2008 and 2007 were $200,699 and $215,888, respectively.  This decrease was due to an $110,487 decrease in property and casualty insurance costs resulting from less drilling activity than originally planned in the prior year.  This decrease was offset by a $95,298 increase in operating expenses related to the September 19, 2007 acquisition from Prime of two oil and gas leases in Texas not having a full six months of operations in the prior year period.  Operating expenses would have increased more, but volume driven costs were lower than normal due to lower production as a result of our wells being shutdown during Hurricane Ike.

Exploration costs. Exploration costs for the six months ended October 31, 2008 and 2007 were $53,584 and $339,536, respectively.  This decrease of $285,952 principally was due to a $287,468 decrease in dry hole costs as a result of management’s election to curtail exploration activities.  The aforementioned decrease was offset by a $15,304 increase in delay rentals.

General and administrative expenses. General and administrative expenses for the six months ended October 31, 2008 and 2007 were $515,823 and $9,473,264, respectively.  The decrease in general and administrative costs of $8,957,441 was primarily due to a $8,989,338 decrease in compensation and benefits from the prior year period.  Approximately $8.9 million of the decrease related to prior year stock-based compensation expenses recognized in connection with the purchase of 15.5 million shares of common stock by our chief executive officer from True North’s principal shareholder.  This decrease was offset by an increase of $151,036 in legal and accounting fees, which increased due to our increased accounting and auditing needs following the acquisition of two Texas producing oil and gas leases from Prime during September 2007.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the six months ended October 31, 2008 and 2007 totaled $392,137 and $183,290, respectively.  Substantially all of the increase of $208,847 resulted from  depletion of our two oil and gas leases acquired from Prime.

Interest and other income.   Interest and other income for the six months ended October 31, 2008 and 2007 totaled $186,050 and $764, respectively.  During July 2008 we received an insurance premium refund of $186,050 as a result of a premium audit of our control of well insurance policy.  The premium refund resulted from our drilling fewer wells than originally anticipated, as well as the fact that all of the wells drilled were plugged and abandoned.

Interest expense. Interest expense for the six months ended October 31, 2008 and 2007 was $678,862 and $247,659, respectively.  The increase in interest expense of $431,203 resulted from the notes payable issued to finance the Prime acquisition being outstanding for the full six month 2008 period, as compared to just one and a half months during the corresponding period of the prior year.  Interest expense associated with notes payable for the six months ended October 31, 2008 and 2007 was $275,005 and $23,869, respectively, an increase of $251,136. Amortization of debt discount associated with these notes payable increased by $195,540 (from  $73,713 in the 2007 period to 269,253 in the 2008 period).  Amortization of deferred finance costs during the six months ended October 31, 2008 and 2007 totaled  $134,604 and $50,893, respectively.  This increase of $83,711 resulted from the new borrowings being outstanding for a greater period of time during the current year period.
 
Net loss. We incurred a net loss for the six months ended October 31, 2008 and 2007 of $760,624 and $10,165,304, respectively, specifically due to the reasons discussed above.

 
15
 

Liquidity and Capital Resources

At October 31, 2008, we had a working capital deficit of $1,288,244 compared to a working capital deficit of $1,291,778 at April 30, 2008. Current liabilities decreased to $1,630,636 at October 31, 2008 from $2,026,429 at April 30, 2008.  This decrease resulted from repayment of several obligations combined with a reduction in the current portion of notes payable as a result of an amendment to the repayment terms of our notes payable. We reduced our total debt by $74,055 through debt repayments, net of the amortization of related debt discounts.  Current assets decreased to $342,392 at October 31, 2008 from $734,651 at April 30, 2008 due largely to a $205,696 decrease in accounts receivable.  This decrease in accounts receivable resulted from lower prices and production volumes on oil and gas sales not yet collected.  Prepaid expenses and other current assets also decreased $122,376 due to a decrease in prepaid insurance costs. Cash and cash equivalents decreased to $163,907 at October 31, 2008 from $228,094 at April 30, 2007.

Net cash provided by operating activities totaled $279,416 for the six months ended October 31, 2008 compared to net cash used in operating activities of $221,093 for the six months ended October 31, 2007. This increase is due to the prior year period only having one and a half months of revenue producing operations, while the current year period includes the results from the two producing oil and gas leases acquired from Prime in September 2007 for the full six month period.  The current year period also included the receipt of an $186,050 insurance policy premium refund.

Net cash used in investing activities totaled $295 and $2,667,102 for the six months ended October 31, 2008 and 2007, respectively.  This decrease was due to management’s election to curtail investing activities while it evaluates future opportunities and concentrates on raising additional capital resources.

Net cash used in financing activities totaled $343,308 for the six months ended October 31, 2008, consisting entirely of principal payments on notes payable. Net cash provided by financing activities totaled $3,274,924 during the six months ended October 31, 2007and consisted of $4,250,000 from the issuance of notes payable offset by principal payments on notes payable of $418,069 and the payment of deferred finance costs of $557,007.  These notes payable were issued to finance the Prime acquisition in September 2007.

We will require additional financing to fund development costs associated with our existing prospects as well as for any additional lease acquisitions.  No assurance can be given that such additional financing will be available to us as and when needed or, if available, the terms on which it will be available.  No future borrowing or funding sources are available under our existing financing arrangements. 

Entering into our current fiscal year ending April 30, 2009, we had originally planned to spend approximately $5 million on exploration and development activities such as seismic data acquisition, additional lease acquisition, technical studies and participating in joint venture development and exploration drilling.  Given our current capital constraints, combined with the challenging macro-economic environment, we now anticipate expending only minimal amounts on acquisition, exploration and development activities during the remainder of this fiscal year nor do we anticipate drilling on our Alaska properties during the next six months.  Our primary efforts in Alaska will focus on a regulatory approval to permit an exploratory well in the Cook Inlet and exploring opportunities to sell a portion of our Alaskan working interests through an outright sale or a joint venture partnership in an effort to reduce our risk and financial exposure.  We plan to use a similar approach to develop our Colorado acreage.

We may require additional financing to meet our working capital requirements, including the cost of reviewing and negotiating transactions and other ordinary general and administrative costs such as regulatory compliance, investor relations, consulting and advisory services, Internet/web hosting, executive compensation, office and general expenses, professional fees, travel and entertainment, and rent and related expenses. We estimate that the level of working capital needed for these general and administrative costs for the next 12 months will approximate $1 million.  However, this estimate is subject to change, depending on the number of transactions in which we ultimately become involved.  In addition, funding will be required for follow-on development of working interest obligations of any successful exploration prospects.

 
16
 

Oil and gas exploration requires significant outlays of capital and in many situations may offer a limited probability of success. We hope to enhance our chances for success by effectively using available technology, rigorously evaluating sub-surface data, and, to the extent possible, managing dry hole and financial risks.

We intend to rely on synergistic partnering with sophisticated industry partners. The ideal partner would tend to be a regionally focused independent that has a solid grasp on the play's history, and a demonstrated understanding of the technology required to exploit the play. However, there is no assurance that we will be able to successfully negotiate any such partnering agreement or raise the necessary financing to invest in such a venture, or that any such venture will yield us any revenues or profits.

We continue to target selected acquisitions of proved on-shore properties in the United States and Canada. We are biased toward acquisitions of long-lived reserves and intend to target negotiated acquisitions.  By focusing our efforts on negotiated acquisitions, we seek to avoid competitive bidding situations that are the norm for the sale of these assets and typically result in higher sales prices.

We face competition from firms that are well established, successful, better capitalized and, in many instances, willing to pay more for properties than what we might consider prudent.  Our success will depend on the execution of our business plan to:

  
·
identify available transactions;
 
·
quickly evaluate which transactions are most promising; and
 
·
negotiate creative transaction structures.

Presently our staff consists of our two executive officers, John Folnovic and Massimiliano Pozzoni.  We do not expect significant changes in our number of employees during the next twelve months.   We intend to outsource certain technical and administrative functions on an as-needed basis in order to conduct our operating activities. Our management team will select and hire these contractors and manage and evaluate their work performance.

Off-Balance Sheet Arrangements

We have never entered into any off-balance sheet financing arrangements and have not formed any special purpose entities.  We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Effects of Inflation and Changes in Price

Our revenues, future rate of growth, results of operations, financial condition and ability to borrow funds or obtain additional capital, as well as the carrying value of our properties, are substantially dependent upon prevailing prices of oil and natural gas. If the price of oil and natural gas increases (decreases), there could be a corresponding increase (decrease) in the operating cost that we are required to bear for operations, as well as an increase (decrease) in revenues. Inflation has had a minimal effect on the operating activities of the Company.

Recently Issued Accounting Pronouncements
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) establishes principles and requirements to recognize the assets acquired and liabilities assumed in an acquisition transaction and determines what information to disclose to investors regarding the business combination. SFAS No. 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning after December 15, 2008.  We do not expect a material impact from SFAS No. 141(R) on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements – amendments of ARB No. 51.” SFAS No. 160 states that accounting and reporting for minority interests will be recharacterized as non-controlling interests and classified as a component of equity.  The statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners.  SFAS No. 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding non-controlling interest in one or more subsidiaries or that deconsolidate a subsidiary.  This statement is effective as of the beginning of an entity’s first fiscal year beginning after December 15, 2008. We currently have no subsidiary subject to this standard and do not expect a material impact from SFAS No. 160 on our consolidated financial statements.

 
17
 

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. The provisions of SFAS 161 are effective for the fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact of adopting SFAS 161 on our consolidated financial statement disclosures. 
 
On May 9, 2008 the FASB issued FASB Staff Position APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” APB 14-1 requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The guidance will result in companies recognizing higher interest expense in the statement of operations due to amortization of the discount that results from separating the liability and equity components. APB 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We are currently evaluating the impact of adopting APB 14-1 on our consolidated financial statements.

In June 2008, the FASB ratified the consensus reached on Emerging Issues Task Force ("EITF") Issue No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock ("EITF No. 07-05"). EITF No. 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity's own stock, which would qualify as a scope exception under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption for an existing instrument is not permitted. We are currently evaluating the impact of adopting EITF No. 07-05 and do not expect adoption to have a material impact on our consolidated financial statements.

ITEM 3.
QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4T.
CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Internal Controls

Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to us, including our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes of accounting principles generally accepted in the United States.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework.

Officers’ Certifications

Appearing as exhibits to this quarterly report are “Certifications” of our Chief Executive Officer and Chief Financial Officer. The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the Quarterly Report contains information concerning the Controls Evaluation referred to in the Section 302 Certification. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

 
18
 

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended October 31, 2008 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 
19
 

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

In the ordinary course of our business, we may from time to time become subject to routine litigation or administrative proceedings which are incidental to our business. We are not a party to nor are we aware of any existing, pending or threatened lawsuits or other legal actions involving us.

ITEM 1A.  RISK FACTORS

Not applicable.

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

As of October 31, 2008 we issued an aggregate of 25,000 shares of our common stock to our five advisory board members representing payment of the quarterly fee due them for the quarter ended October 31, 2008. The shares were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended, since the foregoing issuance did not involve a public offering, the recipient had access to information that would be included in a registration statement, the recipient took the shares for investment and not resale, and we took appropriate measures to restrict resale.

As of October 31, 2008 we issued an aggregate of 250,000 shares of our common stock to our five advisory board members representing payment of the annual fee due them for the twelve months ended October 5, 2008. The shares were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended, since the foregoing issuance did not involve a public offering, the recipient had access to information that would be included in a registration statement, the recipient took the shares for investment and not resale, and we took appropriate measures to restrict resale.

As of September 30, 2008 we issued 462,291 shares of our common stock to Prime representing payment of the stock fee due to Prime for the three-month period ended September 30, 2008 under the terms of the June 30, 2008 Consulting Agreement with Prime. The shares were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended, since the foregoing issuance did not involve a public offering, the recipient had access to information that would be included in a registration statement, the recipient took the shares for investment and not resale, and we took appropriate measures to restrict resale.

As of November 24, 2008, we issued an aggregate of 2,222,224 shares of our common stock to four parties pursuant to the Omnibus Amendment of the same date discussed below in Item 5.  The shares were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended, since the foregoing issuance did not involve a public offering, the recipient had access to information that would be included in a registration statement, the recipient took the shares for investment and not resale, and we took appropriate measures to restrict resale.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

 
20
 

ITEM 5.  OTHER INFORMATION

Effective October 5, 2008, we renewed the engagement of our advisory board for an additional one-year period.

As of November 24, 2008 we and our wholly owned subsidiary, ICF Energy Corporation (collectively the “Companies”), entered into an Omnibus Amendment (the “Amendment”) with Valens Offshore SPV I, Ltd. (“Valens Offshore I”), Valens Offshore SPV II, Corp. (“Valens Offshore II”), Valens U.S. SPV I, LLC (“Valens US”), PSource Structured Debt Limited (“PSource”) and LV Administrative Services, Inc. for the purpose of amending certain terms of (i) that certain Amended and Restated Secured Term Note, dated as of March 31, 2008 issued by the Companies in favor of Valens Offshore II (as further amended, restated, modified and/or supplemented from time to time, the “First March 2008 Amended and Restated Term Note”) and (ii) that certain Amended and Restated Secured Term Note, dated as of March 31, 2008 issued by the Companies in favor of Valens US and subsequently assigned in part to Valens Offshore I and PSource (as further amended, restated, modified and/or supplemented from time to time, the “Second March 2008 Amended and Restated Term Note”, together with the First March 2008 Amended and Restated Term Note, the “March Term Notes” and each, a “March Term Note”).

The Amendment was required due to the temporary shutdown of our producing oil and gas wells in Brazoria County, Texas as the result of Hurricane Ike. Due to the temporary shutdown, we were unable to make the payments due on the March Term Notes for November and December 2008. The well has been worked-over and was placed on production November 1, 2008 at the pre-shut in production rate and higher flowing pressure.

In consideration of the payment of an aggregate of 2,222,224 shares of True North Energy Corporation common stock, the holders of the March Term Notes allowed us to defer the cash payments due to them on November 3, 2008 and December 1, 2008 until the earlier of (i) the maturity date for the March Term Notes or (ii) the date upon which all of the obligations rising under any March Term Note shall be declared due and payable or is otherwise paid in full. From and after January 1, 2009, regularly scheduled monthly amount payments under each March Term Note shall be due and payable in accordance with the terms of such applicable March Term Note. The stock payments are being treated as additional interest under the March Term Notes.
 
21
 
ITEM 6.
EXHIBITS
 
Exhibit No.
 
Description
31.1
 
Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer
31.2
 
Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial Officer
32.1
 
Rule 1350 Certification of Chief Executive Officer
32.2
 
Rule 1350 Certification of Chief Financial Officer

 
22
 

SIGNATURES

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

   
TRUE NORTH ENERGY CORPORATION
     
     
Dated:  December 12, 2008
By:
/s/John Folnovic
   
John Folnovic
   
President, Chief Executive Officer

 
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