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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 March 31, 2005
 OR o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 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)
 Registrants telephone number, including area code (303) 991-0173 Check whether the issuer (i) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 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 þ No o (APPLICABLE ONLY TO CORPORATE ISSUERS) State the number of shares outstanding of each of the issuers classes of common equity as of
the latest practicable date: The total shares of $.001 Par Value Common Stock outstanding at May 19, 2005 was 35,776,202 Transitional Small Business Disclosure Format (Check One)      Yes o No þ




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AMERICAN OIL & GAS, INC.
FORM 10-QSB
INDEX PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Balance Sheets  March 31, 2005 (Unaudited) and December 31, 2004
    
    
    3Statements of Operations - Three Months Ended March 31, 2005 and March 31, 2004 (Unaudited)
    
    
    4Statements of Cash Flows - Three Months Ended March 31, 2005 and March 31, 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
    
    
    11Item 3. Controls and Procedures
    
    
    14PART II. OTHER INFORMATIONItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    14Item 6. Exhibits
    
    
    15Signatures
    
    
    15Exhibit 31.1 CertificationExhibit 31.2 CertificationExhibit 32.1 CertificationExhibit 32.2 CertificationSection 302 Certification of CEOSection 302 Certification of CFOSection 906 Certification of CEOSection 906 Certification of CFO
  2




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PART I 
 ITEM 1. FINANCIAL STATEMENTS AMERICAN OIL & GAS, INC. 
 BALANCE SHEETS
 3/31/05
    
    
    12/31/04(UNAUDITED)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    4,391,115
    
    
    $
    5,251,889Receivables
    
    
    696,224
    
    
    
    258,848Advances and prepaids
    
    
    48,033
    
    
    
    54,535Total Current Assets
    
    
    5,135,372
    
    
    
    5,565,272PROPERTY AND EQUIPMENT, AT COSTOil and gas properties, full cost method (including unevaluated costs
of $2,157,934 at 3/31/05 and $2,022,367 at 12/31/04)
    
    
    4,739,330
    
    
    
    3,700,892Other property and equipment
    
    
    8,592
    
    
    
    7,221Total property and equipment
    
    
    4,747,922
    
    
    
    3,708,113Less-accumulated depreciation, depletion and amortization
    
    
    (365,258
    )
    
    
    (221,793
    )Net property and equipment
    
    
    4,382,664
    
    
    
    3,486,320$
    9,518,036
    
    
    $
    9,051,592LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities
    
    $
    217,057
    
    
    $
    108,611Preferred dividends payable
    
    
    18,864
    
    
    
    18,020Total current liabilities
    
    
    235,921
    
    
    
    126,631LONG TERM LIABILITIESAsset retirement obligations
    
    
    42,461
    
    
    
    40,702COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYSeries A preferred stock, $.001 par value, authorized 500,000
shares
Issued and outstanding  no shares at 3/31/05 and
67,000 shares at 12/31/04
    
    
    
    
    
    
    67Common
stock, $.001 par value, authorized 100,000,000 shares
Issued and outstanding  29,976,202 shares at 3/31/05
and 29,153,702 shares at 12/31/04
    
    
    29,976
    
    
    
    29,154Additional paid-in capital
    
    
    10,622,982
    
    
    
    10,400,629Deferred compensation
    
    
    (70,625
    )
    
    
    (141,250
    )Accumulated (deficit)
    
    
    (1,342,679
    )
    
    
    (1,404,341
    )9,239,654
    
    
    
    8,884,259$
    9,518,036
    
    
    $
    9,051,592
 The accompanying notes are an integral part of the financial statements. 3




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AMERICAN OIL & GAS, INC. 
 STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three
    
    
    ThreeMonths
    
    
    MonthsEnded
    
    
    Ended3/31/05
    
    
    3/31/04REVENUESOil and gas sales
    
    $
    686,727
    
    
    $
    67,914COSTS AND EXPENSESLease operating
    
    
    37,103
    
    
    
    20,212General and administrative
    
    
    466,707
    
    
    
    189,189Depletion, depreciation and amortization
    
    
    144,489
    
    
    
    20,512Total costs and expenses
    
    
    648,299
    
    
    
    229,913INCOME (LOSS) FROM OPERATIONS
    
    
    38,428
    
    
    
    (161,999
    )OTHER INCOMEInvestment income
    
    
    23,234
    
    
    
    NET INCOME (LOSS) BEFORE INCOME TAXES
    
    
    61,662
    
    
    
    (161,999
    )Provision for income tax
    
    
    22,692
    
    
    
    Tax benefit of net operating loss carryforward
    
    
    (22,692
    )
    
    
    NET INCOME (LOSS)
    
    
    61,662
    
    
    
    (161,999
    )Less dividends on preferred stock
    
    
    844
    
    
    
    15,326NET
INCOME (LOSS) TO COMMONSTOCKHOLDERS-BASIC AND DILUTED
    
    $
    60,818
    
    
    $
    (177,325
    )NET INCOME (LOSS) PER COMMONSHARE-BASIC AND DILUTED
    
    $
    
    
    
    $
    (0.01
    )BASIC WEIGHTED AVERAGECOMMON SHARES OUTSTANDING
    
    
    29,880,702
    
    
    
    25,894,883DILUTED WEIGHTED AVERAGECOMMON SHARES OUTSTANDING
    
    
    30,373,702
    
    
    
    25,894,883
 The accompanying notes are an integral part of the financial statements. 4




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AMERICAN OIL & GAS, INC. 
 STATEMENTS OF CASH FLOWS  UNAUDITED
 3/31/05
    
    
    3/31/04CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    61,662
    
    
    $
    (161,999
    )Adjustments to reconcile net (loss) to
net cash (used) by operating activitiesStock issued for services
    
    
    41,500
    
    
    
    10,500Options issued for services
    
    
    19,316
    
    
    
    Deferred compensation
    
    
    70,625
    
    
    
    70,625Accretion of asset retirement obligation
    
    
    1,025
    
    
    
    347Depletion, depreciation and amortization
    
    
    143,465
    
    
    
    20,165Changes in assets and liabilities(Increase) decrease in receivables
    
    
    (437,376
    )
    
    
    9,936Decrease in advances and prepaids
    
    
    6,502
    
    
    
    21,094Increase in A/P and accrued liabilities
    
    
    108,446
    
    
    
    (51,116
    )Net cash provided (used) by operating activities
    
    
    15,165
    
    
    
    (80,448
    )CASH FLOWS FROM INVESTING ACTIVITIESCash paid for office equipment
    
    
    (1,371
    )
    
    
    Proceeds from sale of oil and gas properties
    
    
    
    
    
    
    326,247Cash paid for oil and gas properties
    
    
    (1,027,168
    )
    
    
    (113,982
    )Net cash (used) provided by investing activities
    
    
    (1,028,539
    )
    
    
    212,265CASH FLOWS FROM FINANCING ACTIVITIESProceeds from sale of common stock
    
    
    
    
    
    
    1,525,000Proceeds from exercise of common stock warrants
    
    
    152,600
    
    
    
    Cash paid for offering costs
    
    
    
    
    
    
    (7,431
    )Net cash provided by financing activities
    
    
    152,600
    
    
    
    1,517,569NET INCREASE IN CASH
    
    
    (860,774
    )
    
    
    1,649,386CASH, BEGINNING OF PERIODS
    
    
    5,251,889
    
    
    
    1,066,458CASH, END OF PERIODS
    
    $
    4,391,115
    
    
    $
    2,715,844SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATIONCash paid for interest
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIESStock issued for services
    
    $
    41,500
    
    
    $
    10,500Stock based deferred compensation
    
    $
    70,625
    
    
    $
    70,625Warrants issued for oil and gas consulting services
    
    $
    10,536
    
    
    $
    Options issued for services
    
    $
    19,316
    
    
    $
    
 The accompanying notes are an integral part of the financial statements. 5




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AMERICAN OIL & GAS, INC. 
 Notes to Financial Statements
(UNAUDITED)
March 31, 2005
 The accompanying interim financial statements of American Oil & Gas, Inc. are unaudited. In
the opinion of management, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for the interim period.
The results of operations for the period ended March 31, 2005 are not necessarily indicative of the
operating results for the entire year. We have prepared the financial statements included herein pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Certain information and footnote
disclosure normally included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and regulations. We
believe the disclosures made are adequate to make the information not misleading and recommend that
these condensed financial statements be read in conjunction with the financial statements and notes
included in our Form 10-KSB for the year ended December 31, 2004. Nature of Business The Company is an independent energy company engaged in the exploration, development and
acquisition of crude oil and natural gas reserves and production in the western United States. The Companys fiscal year end is December 31. 
 Note 1  Significant Accounting Policies USE OF ESTIMATES- The preparation of financial statements in conformity with generally
accepted accounting principles requires us 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 reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS- For purposes of reporting cash flows, we consider as cash equivalents all
highly liquid investments with a maturity of three months or less at the time of purchase. At
March 31, 2005, there were no cash equivalents. At March 31, 2005, $693,450 of the cash balance is
specifically allocated to the drilling, completion and connection of oil and gas wells in our
Krejci oil project located in Niobrara County, Wyoming. OIL AND GAS PROPERTIES The Company follows the full cost method of accounting for oil and
gas operations. Under this method, all costs related to the exploration for, and development of,
oil and gas reserves are capitalized on a country-by-country basis. Costs include lease
acquisition costs, geological and geophysical expenses, overhead directly related to exploration
and development activities and costs of drilling both productive and non-productive wells.
Proceeds from the sale of properties are applied against capitalized costs, without any gain or
loss being recognized, unless such a sale would significantly alter the rate of depletion and
depreciation. DEPLETION, DEPRECIATION AND AMORTIZATION Depletion of exploration and development costs and
depreciation of production equipment is provided using the unit-of-production method based upon
estimated proven oil and gas reserves. The costs of significant unevaluated properties 6




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are excluded from costs subject to depletion. For depletion and depreciation purposes,
relative volumes of oil and gas production and reserves are converted at the energy equivalent
conversion rate of six thousand cubic feet of natural gas to one barrel of crude oil. CEILING TEST- In applying the full cost method, the Company performs a ceiling test whereby
the carrying value of oil and gas properties and production equipment, net of recorded future
income taxes and the accumulated provision for site restoration and abandonment costs, is compared
annually to an estimate of future net cash flow from the production of proven reserves. Costs
related to undeveloped oil and gas properties are excluded from the ceiling tests. Discounted net
cash flow is estimated using year end prices, less estimated future general and administrative
expenses, financing costs and income taxes. Should this comparison indicate an excess carrying
value, the excess is charged against earnings. REVENUE RECOGNITION- The Company recognizes oil and gas revenues from its interests in
producing wells as oil and gas is produced and sold from these wells. The Company has no gas
balancing arrangements in place. Natural gas sold is not significantly different for the Companys
product entitlement. IMPAIRMENT The Company has adopted SFAS No. 144 Accounting for the Impairment or Disposal
of Long-Lived Assets, which requires that long-lived assets to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Oil and gas properties accounted for using the full cost method of
accounting, a method utilized by the Company, are excluded from this requirement, but will continue
to be subject to the ceiling test limitations. SHARE BASED COMPENSATION In October 1995, the Financial Accounting Standards Board (FASB)
issued SFAS 123, Accounting for Stock-Based Compensation, effective for fiscal years beginning
after December 15, 1995. This statement defines a fair value method of accounting for employee
stock options and encourages entities to adopt that method of accounting for its stock compensation
plans. SFAS 123 allows an entity to continue to measure compensation costs for these plans using
the intrinsic value based method of accounting as prescribed in Accounting Pronouncement Bulletin
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). We have elected to continue to
account for our employee stock compensation plan as prescribed under APB 25. Had compensation cost
for our stock-based compensation plan been determined based on the fair value at the grant dates
for awards under the plan consistent with the method prescribed in SFAS 123, our net income/(loss)
and income/(loss) per share for the quarters ended March 31, 2005, and 2004 would have been
adjusted to the pro-forma amounts indicated below. 3-31-05
    
    
    3-31-04Net income/(loss)  as reported
    
    $
    61,662
    
    
    $
    (161,999
    )Add stock based compensation included in reported
net income/(loss)
    
    
    19,316
    
    
    
    Deduct stock based compensation expense
determined under the fair value method
    
    
    (51,915
    )
    
    
    Pro forma net income/loss)
    
    $
    29,063
    
    
    $
    (161,999
    )Net income/(loss) per share:As reported
    
    $
    
    
    
    $
    (0.01
    )Pro forma
    
    $
    
    
    
    $
    (0.01
    )
 7




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The calculated value of stock options granted under these plans, following calculation methods
prescribed by SFAS 123, uses the Black-Scholes stock option pricing model with the following
assumptions used: 3-31-05
    
    3-31-04Expected option life-years
    
    5
    
    Risk-free interest rate
    
    2.60%
    
    Dividend yield
    
    0
    
    Volatility
    
    46.79%
    
    
 There were no options granted during the quarter ended March 31, 2004. INCOME TAXES- We have adopted the provisions of SFAS No. 109, Accounting for Income Taxes.
SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. ASSET
RETIREMENT OBLIGATION- In 2001, the FASB issued SFAS 143, Accounting for Asset Retirement Obligations. SFAS 143
addresses financial accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. This statement requires
companies to record the present value of obligations associated with the retirement of tangible
long-lived assets in the period in which it is incurred. The liability is capitalized as part of
the related long-lived assets carrying amount. Over time, accretion of the liability is
recognized as an operating expense and the capitalized cost is depreciated over the expected useful
life of the related asset. Our asset retirement obligations (ARO) relate primarily to the
plugging, dismantlement, removal, site reclamation and similar activities of our oil and gas
properties. We have adopted the provisions of SFAS 143 to record the ARO associated with all wells in which we
own an interest on the date such obligation arose. Depreciation of the related asset, and
accretion of the ARO on wells from which production has commenced, has been calculated using the
estimate of the life of the wells based on a reserve study prepared by an independent reserve
engineering firm. The amounts recognized upon adoption are based upon numerous estimates and
assumptions, including future retirement costs, future recoverable quantities of oil and gas,
future inflation rates and the credit-adjusted risk-free interest rate. The information below
reflects the change in the ARO during the quarter ended March 31, 2005: Asset retirement obligation beginning of year
    
    $
    40,702Liabilities incurred
    
    
    734Accretion
    
    
    1,025Asset retirement obligation at March 31, 2005
    
    $
    42,461
 NET EARNNGS (LOSS) PER SHARE- Basic earnings per share are computed by dividing earnings
available to common stockholders by the weighted number of common shares outstanding during the
period. Diluted earnings per share reflect per share amounts that would have resulted if dilutive
potential common stock had been converted to common stock. The following reconciles amounts
reported in the financial statements. 8




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At March 31, 2004, all outstanding options and warrants were excluded from the computation of
diluted loss per share for the quarter then ended, as the effect of the assumed exercises of these
options and warrants was antidilutive. The following is a reconciliation of the numerators and denominators used in the calculations
of basic and diluted earnings per share for the quarter ended March 31, 2005: PerNet
    
    
    
    
    
    
    ShareMarch 31, 2005
    
    Income
    
    
    Shares
    
    
    AmountBasic earnings per share:Net income and share amounts
    
    $
    61,662
    
    
    
    29,880,702
    
    
    $
    Dilutive SecuritiesStock options
    
    
    
    
    
    
    493,000Warrants
    
    
    
    
    
    
    119,650Diluted earnings per share:Net income and assumed
share conversion
    
    $
    61,662
    
    
    
    30,373,702
    
    
    $
    
 RECENT ACCOUNTING PRONOUNCEMENTS In
December 2004, the FASB issued SFAS 123(R), Share-Based Payment, which is a revision of
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS
123(R) is effective for public
companies for annual periods beginning after December 15, 2005, supersedes APB Opinion 25,
Accounting for Stock Issued to Employees, and amends SFAS 95, Statement of Cash Flows. SFAS
123(R) requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values. Pro-forma disclosure
is no longer an alternative. We expect the adoption will have an effect on the financial
statements similar to the pro-forma effects reported above. In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assets, which changes the
guidance in APB 29, Accounting for Nonmonetary Transactions. This Statement amends APB 29 to
eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with
a general exception for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the entity are expected
to change significantly as a result of the exchange. SFAS 153 is effective during fiscal years
beginning after June 15, 2005. We do not believe the adoption of SFAS 153 will have a material
impact on our financial statements. The Securities and Exchange Commission has issued Staff Accounting Bulletin (SAB) No. 106
regarding the application of SFAS 143, Accounting for Asset Retirement Obligations, on oil and
gas producing entities that use the full cost accounting method. It states that after adoption of
SFAS 143, the future cash outflows associated with settling asset retirement obligations that have
been accrued on the balance sheet should be excluded from the present value of estimated future net
cash flows used for the full cost ceiling test calculation. We have complied with the provisions
of SAB 106. 9




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Note 2  Property and Equipment Property and equipment at March 31, 2005 consisted of the following: Oil and gas properties, full cost methodUnevaluated costs, not subject to amortization or
ceiling test
    
    $
    2,157,381Evaluated costs
    
    
    2,547,823Asset retirement costs
    
    
    34,1264,739,330Furniture and equipment
    
    
    8,5924,747,922Less accumulated depreciation, depletion and amortization
    
    
    (365,258
    )Property and equipment
    
    $
    4,382,664
 Note 3  Preferred Stock On August 18, 2003, the Board of Directors authorized and established a Series A of the
Companys preferred stock. In October 2003, a total of $770,500 in gross proceeds was received
from two accredited investors through the sale of 67,000 8% Series A preferred shares at a price of
$11.50 per share. The preferred shares automatically convert at an equivalent rate of $1.15 per
common share into 670,000 common shares in October 2005, or if our common stock trades at or above
$2.50 for a period of 15 calendar days. On January 5, 2005, our common stock traded above $2.50
for the 15th calendar day and, accordingly, the outstanding preferred shares converted
into 670,000 shares of common stock. Note 4 - Common Stock On January 13, 2005, warrants to purchase 90,000 shares of the Companys common stock were
exercised at an exercise price of $1.09 per share. We received proceeds of $98,100 in conjunction
with this exercise. On March 1, 2005, warrants to purchase 50,000 shares of the Companys common stock were
exercised at an exercise price of $1.09 per share. We received proceeds of $54,500 in conjunction
with this exercise. During the quarter ended March 31, 2005, 12,500 shares of common stock were issued to a
Director for Serving as Director, Designated Financial Expert and as Chairman of the Audit
Committee. The shares were paid to a company wholly owned by the Director, and the shares were
valued at $41,500 based on the non-discounted trading price of the Companys stock as of the date
of issuance. Note 5 - Related Party Transactions During the quarter ended March 31, 2005, we reimbursed Tower Colombia Corporation (TCC) for
our share of oil and gas related expenditures and administrative related expenditures in the amount
of $85,942. We also paid a total of $8,508, for the quarter ended March 31, 2005, to Tower Energy
Corporation (TEC) primarily for our share of the office lease where we share office space with
TCC and TEC. Patrick OBrien, our Chief Executive Officer and Chairman, and Kendell Tholstrom,
another of our directors, together owned a majority of TCC at the end of the quarter ended March
31, 2005 and Patrick D OBrien owns 50% of TEC. On March 23, 2005, we signed a letter of intent to acquire 100% of the outstanding common
stock of TCC in exchange for 5.8 million shares of restricted common stock and on April 21, 2005,
we 10




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completed the acquisition of TCC. In conjunction with the merger, Pat OBrien continues in
his role as Chief Executive Officer and as Chairman of American. Mr. OBrien was the president of
TCC. Bob Solomon, formerly Vice President of TCC, became Vice President of American and will be
responsible for oil and gas economic and financial evaluations and the acquisition and disposition
of oil and gas assets. Kendell Tholstrom, formerly Vice President of TCC, continues his role as a
Director of American, and became Vice-President of American. Mr. Tholstrom is responsible for oil
and gas operations. We obtained a fairness opinion from an independent investment banking firm
prior to closing. On March 23, 2005, we approved and entered into an agreement with TCC pursuant to which TCC
provides, effective as of January 17, 2005, certain management services, including, but not limited
to, human resource management, asset management services, and accounting and data management
services for a monthly management fee of $30,000. For the quarter ended March 31, 2005, we paid a
total of $75,000 to TCC pursuant to this agreement. This management services agreement terminated
on April 21, 2005, the closing date of the merger between the Company and TCC. Note 6  Subsequent Events On April 21, 2005, we acquired 100% of the outstanding common stock of Tower Colombia
Corporation in exchange for 5.8 million shares of restricted common stock. 
  ITEM 2.
    MANAGEMENTS PLAN OF OPERATION AND DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS This discussion and analysis should be read in conjunction with the accompanying financial
statements and related notes. Our discussion and analysis of our financial condition and results
of operations are based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of
financial statements in conformity with accounting principles generally accepted in the United
States of America requires us to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of any contingent liabilities at the financial statement date
and reported amounts of revenue and expenses during the reporting period. On an on-going basis we
review our estimates and assumptions. Our estimates were based on our historical experience and
other assumptions that we believe to be reasonable under the circumstances. Actual results are
likely to differ from those estimates under different assumptions or conditions, but we do not
believe such differences will materially affect our financial position or results of operations. Our critical accounting policies, the policies we believe are most important to the
presentation of our financial statements and require the most difficult, subjective and complex
judgments, are outlined in our notes to financial statements. This quarterly report contains forward-looking statements. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be forward-looking
statements. These statements relate to future events or to our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as may, should,
expects, plans, anticipates, believes, estimates, predicts, potential or continue
or the negative of such terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. There are a number of factors that
could cause our actual results to differ materially from those indicated by such forward-looking
statements. 11




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Overview We are an independent oil and gas exploration and production company, engaged in the
exploration, development and acquisition of crude oil and natural gas reserves and production in
the western United States. The following oil and gas exploration/development project updates
should be read in conjunction with our annual report on Form 10-KSB for our calendar year ended
December 31, 2004. A significant amount of our oil and gas revenues is generated from our Big Sky project. At
March 31, 2005, we owned interests in 13 gross (.70 net) producing wells at our Big Sky project,
and during the quarter ended March 31, 2005, our share of production from these wells was
approximately 14,200 barrels of oil equivalent. We expect to participate in 12 additional wells and
own interests in 25 gross (approximately 1.37 net) wells in our Big Sky project by year-end 2005.
Including the wells drilled through 2005, we anticipate we will have participated in a total of 52
gross (approximately 2.5 net wells) in this project by the end of 2007. Within our approximate 120,000 gross (approximately 83,000 net) acre Douglas project, our
initial focus is on our approximate 51,000 acre Fetter area. On May 7, 2005, we commenced drilling
the first of two planned wells to test the Niobrara and Frontier formations to a total depth of
approximately 11,500 feet in an over-pressured area of the southern Powder River Basin in Wyoming.
The Fetter area has a history of various exploration and development attempts. Numerous wells,
which have been drilled by others over four decades, have encountered and/or produced natural gas
and condensate, including four wells drilled in the 1990s (owned by others) that are still
producing from the Niobrara and Frontier formations. We believe that prior development efforts
were negatively affected by various factors including inordinately long single well drill times,
drilling techniques and delays in connecting wells that resulted in the potential for significant
reservoir damage, and low commodity pricing environments. In February 2005, we signed an agreement with an Oklahoma based exploration and production
company with expertise in the application of under-balanced horizontal drilling (UBHD)
technologies to participate in the drilling of the two new wells to evaluate the Niobrara and
Frontier formations. Under the terms of the agreement, the joint venture participant has brought
in specialized equipment to apply its UBHD drilling technology and experience. The joint venture
participant will pay 60% of the costs to earn a 50% interest in the first well and will pay 30% of
the costs to earn a 25% interest in the second well. Subject to certain additional funding terms,
the joint venture participant will earn a 25% WI in the Fetter area AMI. We will pay 30% to own a
37.5% WI in the first well and will pay 52.5% to own a 56.25% WI in the second well. Subject to
these and other terms of this agreement, we would retain a 56.25% WI in the entire Fetter area AMI. At our approximate 41,000 gross (25,000 net) acre Krejci oil project, field activities remain
temporarily suspended. The private company with whom American entered into an agreement in 2004
has drilled, but not tested, one vertical well targeting the Mowry shale formation. The continual
operations contemplated under the original agreement have not occurred and discussions are ongoing
that are expected to result in the resumption of field activity during the spring or early summer. We continue to pursue a joint venture agreement, farm-out or sale of our Big Horn Basin,
Montana Bear Creek coal-bed methane project and our West Rozel heavy oil project located in Box
Elder County, Utah. We have several parties interested in these projects and we are negotiating
potential deal structures and terms. During April 2005, we drilled an unsuccessful initial test well at our South Glenburn
prospect, located in McHenry County, North Dakota. The South Glenburn Prospect targeted the
Mission Canyon formation at a depth of approximately 4,500 feet. Based on log analysis and drill
stem testing, we 12




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determined that commercial production was not possible from this well-bore and the well was
plugged and abandoned. We currently do not plan to perform any additional drilling activities in
the prospect area. Results of Operations The following discussion should be read in conjunction with the audited financial statements
and notes thereto included in our annual report on Form 10-KSB for the fiscal year ended December
31, 2004; and should further be read in conjunction with the financial statements and notes thereto
included in this report. The quarter ended March 31, 2005 compared with the quarter ended March 31, 2004. We recorded net income of $61,662 (less than $.01 per common share) for the quarter ended
March 31, 2005 (2005), as compared to a net loss of $161,999 ($.01 cent per common share) for the
quarter ended March 31, 2004 (2004). Our revenues from oil and gas production were $686,727 for
the first quarter of 2005, compared to $67,914 for the first quarter of 2004. For 2005, we recorded $625,737 in revenues from the sale of 13,726 barrels of oil (Bbls) for
an average price of $45.59 per Bbl, and $60,990 in revenues from the sale of 10,069 Mcf of natural
gas for an average price of $6.06 per Mcf. For 2004, we recorded $24,021 in revenues from the sale
of 772 Bbls for an average price of $31.12 per Bbl, and $43,893 in revenues from the sale of 12,133
Mcf of natural gas for an average price of $3.62 per Mcf. Lease operating expenses and production
taxes were $37,103 ($2.41 per barrel of oil equivalent (boe) produced) for 2005 and $20,212
($7.23 per boe) for 2004. Net income from oil and gas operations was $649,624 for 2005 and $47,702
for 2004. We recorded depreciation, depletion and amortization expense associated with our oil and
gas operations of $141,022 ($9.15 per boe) for 2005 and $19,292 ($6.90 per boe) for 2004. We recorded $466,707 and $189,189 in general and administrative expenses for 2005 and 2004,
respectively. The increase is primarily attributable costs associated with our merger with Tower
Colombia Corporation of $46,343, an increase of $18,168 associated with an increase in accounting
and audit related expenses, management fees paid to TCC of $75,000, an increase in the amount
charged to Directors expense of $30,913 associated with the value of common stock paid to one of
our Directors, an increase of $31,703 associated with investor relations (of which $19,316 is
attributable to the value for the quarter of stock options granted to an investor relations firm
that is assisting us with our investor relations program), an increase of $28,128 attributable to
increasing the number of employees from one employee for 2004 to three employees for 2005 and other
costs associated with our expanding operations. For 2005, we recorded $23,234 in investment income attributable to our cash balance. We did
not generate any investment income for 2004. Liquidity and Capital Resources At March 31, 2005, we had $4,899,451 in working capital. We anticipate that our current cash position will be sufficient to fund our known cash
requirements for the next 12 months, although we intend to continue financing efforts to support
additional oil and gas opportunities. We anticipate our total cash requirements for the next 12
months to be approximately $5,200,000 to fund drilling operations at our Big Sky Project, to fund
our general and administrative expenses and to fund other known oil and gas related costs such as
land and geological costs. We expect to be able to fund these requirements with existing capital
and expected cash flow from oil and gas operations. We may require additional capital to fund
drilling and other related costs in 13




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our identified and in other projects. Accordingly, we may need to
raise additional capital through sale of equity or debt. We have not entered into any commodity swap arrangements or hedging transactions. Although we
have no current plans to do so, we may enter into commodity swap and/or hedging transactions in the
future in conjunction with oil and gas production. We have no off-balance sheet arrangements. We
paid $1,027,168 during the quarter ended March 31, 2005 for drilling and completion costs,
leasehold costs, acquisition of acreage and delay rentals with respect to our identified oil and
gas projects. 
 ITEM 3. CONTROLS AND PROCEDURES In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under
the supervision and with the participation of management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures were effective as of
March 31, 2005 to provide reasonable assurance that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commissions rules and forms. There has been no change in our internal controls over financial reporting that occurred
during the quarter ended March 31, 2005 that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting. 
 PART II.
OTHER INFORMATION 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the quarter ended March 31, 2005, 12,500 shares of common stock were issued to a
Director for serving as Director, Designated Financial Expert and as Chairman of the Audit
Committee. The shares were paid to a company wholly owned by the Director, and the shares were
valued at $41,500 based on the non-discounted trading price of the Companys stock as of the date
of issuance. This issuance was made in reliance on exemptions from registration contained in
Regulation D of the Securities Act of 1933, as amended. On January 13, 2005, warrants to purchase 90,000 shares of the Companys common stock were
exercised at an exercise price of $1.09 per share. The Company received proceeds of $98,100 in
conjunction with this exercise. On March 1, 2005, warrants to purchase 50,000 shares of the Companys common stock were
exercised at an exercise price of $1.09 per share. The Company received proceeds of $54,500 in
conjunction with this exercise. 14




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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)31.1
    
    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 In accordance with the requirements of the Exchange Act, the Registrant has caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized. Signatures
    
    Title
    
    Date/s/ Patrick D. OBrien
    
    Chief Executive Officer and Chairman of The Board of Directors
    
    May 19, 2005Patrick D. OBrien/s/ Andrew P. Calerich
    
    President, Chief Financial Officer and Director
    
    May 19, 2005Andrew P. Calerich
 15




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Exhibit Index Exhibit No.
    
    Description3(i)
    
    Articles of Incorporation of the Company.(1)3(ii)
    
    Bylaws of the Company (as revised on December 12, 2002).(2)31.1
    
    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.