Marketable Securities

9 Months Ended

Sep. 30, 2011

3.	Marketable Securities

As of September 30, 2011 and December 31, 2010, the Company held the following marketable securities that were classified as available for sale:

			Gains in
			Accumulated
	Fair		Other
	Value		Comprehensive
	Measurement		Income
September 30, 2011
Noncurrent assets:

Common stock and warrants – related party	$	78,095	$	52,549

Total available-for-sale marketable securities	$	78,095	$	52,549

December 31, 2010
Noncurrent assets:

Common stock and warrants – related party	$	197,453	$	172,818

Total available-for-sale marketable securities	$	197,453	$	172,818

In June 2010, the Company purchased 500,000 units of Passport Energy Inc. (formerly Covenant Resources Inc.) (“Passport”), a Canadian resources company traded on the Canadian National Stock Exchange, at a purchase price of $0.05 per unit. Each unit consisted of one share of common stock and a warrant to purchase an additional share of Passport’s common stock at a purchase price of $0.05 per share. The warrants have a two-year life and expire on June 23, 2012. Total consideration paid to acquire the common shares and warrants was $24,635 (CDN$25,000). During 2011, the Company subsequently paid an additional $911 to Passport in connection with the shares. Management considers the investment in Passport as “available for sale” but has no intention of liquidating the investments during the upcoming twelve-month period. Accordingly, the marketable securities have been classified as noncurrent assets. The Passport warrants to purchase common stock are calculated using the Black-Scholes Option Pricing Model, with the following assumptions at September 30, 2011;

Risk free interest rate		0.17	%
Expected volatility of common stock		123	%
Dividend yield	$	0.00
Expected life of warrants	0.67 years

A marketability discount was applied to the Passport shares and warrants.

At Passport's December 2010 Annual General Meeting, Passport increased its number of directors to eight, one of whom is the Company's President and another of whom is the Company’s Vice President of Operations. As a result, the investment in Passport is classified as a related party asset. Passport's name change occurred in December 2010.

There were no sales of marketable securities during the three-month or nine-month periods ended September 30, 2011 and 2010.

American Eagle Energy Inc. 10-Q