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U.S. Securities And Exchange Commission
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission File No. 0-31547
 AMERICAN OIL & GAS, INC.
  Nevada
    
    88-0451554(State or jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1050 17th Street, Suite 1850, Denver, CO
    
    80265(Address of principal executive offices)
    
    (Zip Code)
 (303) 991-0173
 þ o
 o þ
    o þ
   1




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AMERICAN OIL & GAS, INC.
FORM 10-QSB
INDEX
 PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Balance Sheets  September 30, 2005 (Unaudited) and December 31, 2004
    
    
    3Statements of Operations  Three and Nine Months Ended
September 30, 2005 and September 30, 2004 (Unaudited)
    
    
    4Statements of Cash Flows  Nine Months Ended September 30,
2005 and September 30, 2004 (Unaudited)
    
    
    5Notes to Financial Statements
    
    
    6Summary of Significant Accounting Policies
    
    
    6Item 2.
    
    Managements Plan of Operation and Discussion and Analysis
of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Controls and Procedures
    
    
    16PART II.
    
    OTHER INFORMATIONItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 6.
    
    Exhibits
    
    
    17Signatures
    
    
    
    
    17Purchase and Sale Agreement - Goliath Project302 Certification of CEO302 Certification of CFO906 Certification of CEO906 Certification of CFO




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PART I
 
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN OIL & GAS, INC.
 
 BALANCE SHEETS
 9/30/05
    
    
    12/31/04(UNAUDITED)ASSETSCURRENT ASSETSCash and
cash equivalents (Note 1)
    
    $
    13,830,597
    
    
    $
    5,251,889Receivables
    
    
    722,010
    
    
    
    258,848Advances and prepaids
    
    
    10,833
    
    
    
    54,535Total Current Assets
    
    
    14,563,440
    
    
    
    5,565,272PROPERTY AND EQUIPMENT, AT COSTOil and gas properties, full cost method (including unevaluated costs
of $8,199,397 at 9/30/05 and $2,022,367 at 12/31/04)
    
    
    13,664,558
    
    
    
    3,700,892Other property and equipment
    
    
    13,481
    
    
    
    7,221Total property and equipment
    
    
    13,678,039
    
    
    
    3,708,113Less-accumulated depreciation, depletion and amortization
    
    
    (1,246,643
    )
    
    
    (221,793
    )Net property and equipment
    
    
    12,431,396
    
    
    
    3,486,320$
    26,994,836
    
    
    $
    9,051,592LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities
    
    $
    3,154,283
    
    
    $
    108,611Preferred dividends payable
    
    
    207,123
    
    
    
    18,020Total current liabilities
    
    
    3,361,406
    
    
    
    126,631LONG TERM LIABILITIESAsset retirement obligations
    
    
    46,260
    
    
    
    40,702COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYSeries A preferred stock, $.001 par value, authorized 500,000
shares
Issued and outstanding  no shares at 9/30/05 and
67,000 shares at 12/31/04
    
    
    
    
    
    
    67Series AA preferred stock, $.001 par value, authorized 400,000
shares
Issued and outstanding  250,000 shares at 9/30/05 and
no shares at 12/31/04
    
    
    250
    
    
    
    Common stock, $.001 par value, authorized 100,000,000 shares
Issued and outstanding  35,801,202 shares at 9/30/05
and 29,153,702 shares at 12/31/04
    
    
    35,801
    
    
    
    29,154Additional paid-in capital
    
    
    24,195,858
    
    
    
    10,400,629Deferred compensation
    
    
    
    
    
    
    (141,250
    )Accumulated (deficit)
    
    
    (644,739
    )
    
    
    (1,404,341
    )23,587,170
    
    
    
    8,884,259$
    26,994,836
    
    
    $
    9,051,592
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AMERICAN OIL & GAS, INC.
 
 STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three
    
    
    Three
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended9/30/05
    
    
    9/30/04
    
    
    9/30/05
    
    
    9/30/04REVENUESOil and gas sales
    
    $
    1,529,288
    
    
    $
    259,781
    
    
    $
    3,455,057
    
    
    $
    407,458OPERATING EXPENSESLease operating
    
    
    60,363
    
    
    
    31,383
    
    
    
    154,866
    
    
    
    66,306General and administrative
    
    
    504,469
    
    
    
    217,588
    
    
    
    1,636,478
    
    
    
    640,401Depletion, depreciation and amortization
    
    
    506,921
    
    
    
    62,756
    
    
    
    1,025,979
    
    
    
    104,3201,071,753
    
    
    
    311,727
    
    
    
    2,817,323
    
    
    
    811,027OTHER INCOMEInvestment income
    
    
    80,993
    
    
    
    6,221
    
    
    
    121,868
    
    
    
    7,139NET INCOME (LOSS) BEFORE INCOME TAXES
    
    
    538,528
    
    
    
    (45,725
    )
    
    
    759,602
    
    
    
    (396,430
    )Provision for income tax
    
    
    183,099
    
    
    
    
    
    
    
    258,265
    
    
    
    Tax benefit of net operating loss carryforward
    
    
    (183,099
    )
    
    
    
    
    
    
    (258,265
    )
    
    
    NET INCOME (LOSS)
    
    
    538,528
    
    
    
    (45,725
    )
    
    
    759,602
    
    
    
    (396,430
    )Less dividends on preferred stock
    
    
    207,123
    
    
    
    15,494
    
    
    
    207,123
    
    
    
    46,146NET INCOME (LOSS) TO COMMON
STOCKHOLDERS
    
    $
    331,405
    
    
    $
    (61,219
    )
    
    $
    552,479
    
    
    $
    (442,576
    )NET INCOME (LOSS) PER COMMON
SHARE-BASIC
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.02
    
    
    $
    (0.02
    )NET INCOME (LOSS) PER COMMON
SHARE-DILUTED
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.02
    
    
    $
    (0.02
    )BASIC WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
    
    
    35,788,702
    
    
    
    26,910,740
    
    
    
    33,390,689
    
    
    
    25,539,076DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
    
    
    36,541,452
    
    
    
    26,910,740
    
    
    
    34,307,183
    
    
    
    25,539,076
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AMERICAN OIL & GAS, INC.
 
 STATEMENTS OF CASH FLOWS
 UNAUDITED
 9/30/05
    
    
    9/30/04CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    759,602
    
    
    $
    (396,430
    )Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activitiesStock issued for services
    
    
    195,251
    
    
    
    50,125Options issued for services
    
    
    57,948
    
    
    
    Deferred compensation
    
    
    141,250
    
    
    
    211,875Accretion of asset retirement obligation
    
    
    2,109
    
    
    
    4,498Depletion, depreciation and amortization
    
    
    1,022,807
    
    
    
    99,822Changes in assets and liabilities(Increase) in receivables
    
    
    (463,162
    )
    
    
    (87,977
    )Decrease in advances and prepaids
    
    
    43,702
    
    
    
    57,645
    )Increase (decrease) in A/P and accrued liabilities
    
    
    3,045,671
    
    
    
    (352,321
    )Net cash provided (used) by operating activities
    
    
    4,805,178
    
    
    
    (412,763
    )CASH FLOWS FROM INVESTING ACTIVITIESCash paid for office equipment
    
    
    (1,371
    )
    
    
    Proceeds from the sale of oil and gas properties
    
    
    
    
    
    
    1,582,073Cash paid for oil and gas properties
    
    
    (9,276,463
    )
    
    
    (1,558,240
    )Net cash (used) provided by investing activities
    
    
    (9,277,834
    )
    
    
    23,833CASH FLOWS FROM FINANCING ACTIVITIESProceeds from sale of common stock
    
    
    
    
    
    
    6,025,000Proceeds from sale of preferred stock
    
    
    13,500,000
    
    
    
    Proceeds from exercise of common stock warrants
    
    
    152,600
    
    
    
    25,000Cash received from acquired company
    
    
    1,795
    
    
    
    Preferred dividends paid
    
    
    (18,864
    )
    
    
    (34,040
    )Cash paid for offering costs
    
    
    (584,167
    )
    
    
    (52,430
    )Net cash provided by financing activities
    
    
    13,051,364
    
    
    
    5,963,530NET (DECREASE) INCREASE IN CASH
    
    
    8,578,708
    
    
    
    5,574,600CASH, BEGINNING OF PERIODS
    
    
    5,251,889
    
    
    
    1,066,458CASH, END OF PERIODS
    
    $
    13,830,597
    
    
    $
    6,641,058SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATIONCash paid for interest
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIESStock issued for services
    
    $
    105,251
    
    
    $
    108,025Stock based deferred compensation
    
    $
    141,250
    
    
    $
    211,875Stock issued for acquired company
    
    $
    656,833
    
    
    $
    Warrants issued for oil and gas consulting services
    
    $
    21,072
    
    
    $
    10,537Warrants
issued for placement fees
    
    $
    575,544
    
    
    $
    Options issued for services
    
    $
    38,632
    
    
    $
    
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AMERICAN OIL & GAS, INC.
 
 Notes to Financial Statements
 (UNAUDITED)
 September 30, 2005
   Nature of Business
   
 Note 1  Significant Accounting Policies
 USE OF ESTIMATES
 CASH EQUIVALENTS
 OIL AND GAS PROPERTIES 
 DEPLETION, DEPRECIATION AND AMORTIZATION 
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CEILING TEST
 REVENUE RECOGNITION
 IMPAIRMENT 
 SHARE BASED COMPENSATION 
 Quarter Ended
    
    
    Nine Months Ended9/30/05
    
    
    9/30/04
    
    
    9/30/05
    
    
    9/30/04Net income/(loss) before preferred dividends  as reported
    
    $
    538,528
    
    
    $
    (45,725
    )
    
    $
    759,602
    
    
    $
    (396,430
    )Add stock based compensation
included in reported net
income/(loss)
    
    
    109,316
    
    
    
    113,804
    
    
    
    285,133
    
    
    
    319,900Deduct stock based
compensation expense
determined under the fair
value method
    
    
    (219,504
    )
    
    
    (208,492
    )
    
    
    (585,333
    )
    
    
    (414,588
    )Pro forma net income/(loss)
    
    $
    428,340
    
    
    $
    (140,413
    )
    
    $
    459,402
    
    
    $
    (491,118
    )Net income/(loss) per share - basic:As reported
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.02
    
    
    $
    (0.02
    )Pro forma
    
    $
    0.01
    
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    (0.02
    )Net
income/(loss) per share - diluted:As reported
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.02
    
    
    $
    (0.02
    )Pro forma
    
    $
    0.01
    
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    (0.02
    )
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INCOME TAXES
 ASSET RETIREMENT OBLIGATION
  Asset retirement obligation beginning of year
    
    $
    40,702Liabilities incurred
    
    
    3,449Accretion
    
    
    2,109Asset retirement obligation at September 30, 2005
    
    $
    46,260
 NET EARNNGS (LOSS) PER SHARE
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PerQuarter ended September 30, 2005
    
    Net Income
    
    
    Shares
    
    
    Share AmountBasic earnings per share:Net income and share amounts
    
    $
    538,528
    
    
    
    35,788,702
    
    
    $
    0.01Dilutive SecuritiesStock options
    
    
    
    
    
    
    733,628Warrants
    
    
    
    
    
    
    19,122Diluted earnings per share:Net income and assumed share
conversion
    
    $
    538,528
    
    
    
    36,541,452
    
    
    $
    0.01
 PerNine Months ended September 30, 2005
    
    Net Income
    
    
    Shares
    
    
    Share AmountBasic earnings per share:Net income and share amounts
    
    $
    759,602
    
    
    
    33,390,689
    
    
    $
    .02Dilutive SecuritiesStock options
    
    
    
    
    
    
    889,417Warrants
    
    
    
    
    
    
    27,077Diluted earnings per share:Net income and assumed share
conversion
    
    $
    759,602
    
    
    
    34,307,183
    
    
    $
    .02
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Note 2  Property and Equipment
  Oil and gas properties, full cost methodUnevaluated costs, not subject to amortization or
ceiling test
    
    $
    8,199,397Evaluated costs
    
    
    5,429,382Asset retirement costs
    
    
    35,77913,664,558Furniture and equipment
    
    
    13,48113,678,039Less accumulated depreciation, depletion and amortization
    
    
    (1,246,643
    )Property and equipment
    
    $
    12,431,396
 Note 3  Common Stock
  Note 4  Preferred Stock
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Note 5  Related Party Transactions
 rd
 rd
  11




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Note 6  Subsequent Events
  
 ITEM 2. MANAGEMENTS PLAN OF OPERATION AND DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    Overview
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Results of Operations
  The quarter ended September 30, 2005 compared with the quarter ended September 30, 2004.
   14




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The nine months ended September 30, 2005 compared with the nine months ended September 30, 2004.
     Liquidity and Capital Resources
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ITEM 3. CONTROLS AND PROCEDURES
   
 PART II.
OTHER INFORMATION
 
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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Item 6. EXHIBITS
 Exhibit No.
    
    Description3(i)
    
    Articles of Incorporation of the Company.(1)3(ii)
    
    Bylaws of the Company (as revised on December 12, 2002).(2)10(viii)
    
    Purchase and Sale Agreement  Goliath Project31.1
    
    302 Certification of Chief Executive Officer31.2
    
    302 Certification of Chief Financial Officer32.1
    
    906 Certification of Chief Executive Officer32.2
    
    906 Certification of Chief Financial Officer
 
 (1)
    
    Incorporated by reference from the Companys Form 10-SB, file number 000-31547, filed on
September 18, 2000.(2)
    
    Incorporated by reference from the Companys Form 10-KSB/A, filed on November 18, 2003. 
 SIGNATURES
  Signatures
    
    Title
    
    Date/s/ Patrick D. OBrien
    
    Chief Executive Officer and Chairman of The Board of Directors
    
    November 15, 2005Patrick D. OBrien/s/ Andrew P. Calerich
    
    President, Chief Financial Officer and Director
    
    November 15, 2005Andrew P. Calerich
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Exhibit No.
    
    Description3(i)
    
    Articles of Incorporation of the Company.(1)3(ii)
    
    Bylaws of the Company (as revised on December 12, 2002).(2)10(viii)
    
    Purchase and Sale Agreement  Goliath Project31.1
    
    302 Certification of Chief Executive Officer31.2
    
    302 Certification of Chief Financial Officer32.1
    
    906 Certification of Chief Executive Officer32.2
    
    906 Certification of Chief Financial Officer