##### Table of Contents



United States Securities and Exchange Commission
Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 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. 1-31900
 AMERICAN OIL & GAS, INC.
  Nevada
    
    88-0451554(State or jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1050 17th Street, Suite 2400, Denver, CO
    
    80265(Address of principal executive offices)
    
    (Zip Code)
 (303) 991-0173
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o*
(*Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



AMERICAN OIL & GAS, INC.
FORM 10-Q
INDEX
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets  June 30, 2009 and December
31, 2008
    
    
    3Condensed Consolidated Statements of Income  Three and Six Months Ended
June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows  Six Months Ended June 30,
2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risks
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    20Item 6. Exhibits
    
    
    20Signatures
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 AMERICAN OIL & GAS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2009
    
    
    2008(UNAUDITED)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    13,753,376
    
    
    $
    23,269,725Short-term investment
    
    
    3,950,000
    
    
    
    5,450,000Accounts receivable
    
    
    476,673
    
    
    
    1,186,749Materials and supplies inventory
    
    
    1,757,148
    
    
    
    1,236,591Prepaid expenses
    
    
    115,389
    
    
    
    133,360Total current assets
    
    
    20,052,586
    
    
    
    31,276,425PROPERTY AND EQUIPMENT, AT COSTOil and gas properties, full cost method (including unevaluated costs
of $35,059,051 at 6/30/09 and $31,837,965 at 12/31/08)
    
    
    43,943,574
    
    
    
    40,456,632Other property and equipment
    
    
    399,472
    
    
    
    366,354Total property and equipment
    
    
    44,343,046
    
    
    
    40,822,986Less-accumulated depreciation, depletion and amortization
    
    
    (5,352,893
    )
    
    
    (4,980,578
    )Net property and equipment
    
    
    38,990,153
    
    
    
    35,842,408OTHER ASSETSDeferred income tax assets (net of valuation allowance, Note 7)
    
    
    
    
    
    
    Intangible asset, net of accumulated amortization
    
    
    150,000
    
    
    
    240,000Other
    
    
    30,385
    
    
    
    30,385$
    59,223,124
    
    
    $
    67,389,218LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities
    
    $
    981,525
    
    
    $
    4,286,618Income taxes payable
    
    
    
    
    
    
    104,000Total current liabilities
    
    
    981,525
    
    
    
    4,390,618LONG-TERM LIABILITIESAsset retirement obligations
    
    
    492,114
    
    
    
    430,686COMMITMENTS AND CONTINGENCIES(Note 10)STOCKHOLDERS EQUITYCommon stock, $.001 par value, authorized 100,000,000 shares; issued and
outstanding: 48,307,399 shares at 6/30/09 and 47,875,899 shares at 12/31/08
    
    
    48,307
    
    
    
    47,876Additional paid-in capital
    
    
    91,873,178
    
    
    
    91,275,557Accumulated deficit
    
    
    (34,247,000
    )
    
    
    (28,755,519
    )Accumulated other comprehensive income
    
    
    75,000
    
    
    
    57,749,485
    
    
    
    62,567,914$
    59,223,124
    
    
    $
    67,389,218
   3




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AMERICAN OIL & GAS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
 (UNAUDITED)
 Three months ended
    
    
    Six months endedJune 30
    
    
    June 302009
    
    
    2008
    
    
    2009
    
    
    2008REVENUES:Oil and gas sales
    
    $
    517,478
    
    
    $
    937,361
    
    
    $
    823,152
    
    
    $
    1,445,165OPERATING EXPENSES:Lease operating
    
    
    270,250
    
    
    
    295,830
    
    
    
    569,925
    
    
    
    550,605General and administrative
    
    
    1,412,805
    
    
    
    1,101,105
    
    
    
    3,042,351
    
    
    
    2,491,313Depletion, depreciation and amortization
    
    
    285,172
    
    
    
    484,087
    
    
    
    462,315
    
    
    
    837,591Impairment of oil & gas properties
    
    
    
    
    
    
    
    
    
    
    2,100,000
    
    
    
    Impairment of materials and supplies inventory
    
    
    156,139
    
    
    
    
    
    
    
    156,139
    
    
    
    Accretion of asset retirement obligation
    
    
    10,567
    
    
    
    8,247
    
    
    
    20,220
    
    
    
    16,3322,134,933
    
    
    
    1,889,269
    
    
    
    6,350,950
    
    
    
    3,895,841LOSS FROM OPERATIONS
    
    
    (1,617,455
    )
    
    
    (951,908
    )
    
    
    (5,527,798
    )
    
    
    (2,450,676
    )OTHER INCOME (LOSS):Investment income
    
    
    17,337
    
    
    
    149,520
    
    
    
    38,317
    
    
    
    373,231Gain (loss) on sale of securities
    
    
    
    
    
    
    (38,368
    )
    
    
    
    
    
    
    (369,172
    )Impairment of short-term investments
    
    
    
    
    
    
    (116,000
    )
    
    
    
    
    
    
    (116,000
    )Interest expense
    
    
    
    
    
    
    (65,123
    )
    
    
    
    
    
    
    (88,647
    )17,337
    
    
    
    (69,971
    )
    
    
    38,317
    
    
    
    (200,588
    )LOSS BEFORE INCOME TAXES
    
    
    (1,600,118
    )
    
    
    (1,021,879
    )
    
    
    (5,489,481
    )
    
    
    (2,651,264
    )Income tax expense-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense (reduction) -deferred
    
    
    
    
    
    
    (522,000
    )
    
    
    
    
    
    
    (980,000
    )NET LOSS
    
    
    (1,600,118
    )
    
    
    (499,879
    )
    
    
    (5,489,481
    )
    
    
    (1,671,264
    )Less dividends on preferred stock
    
    
    
    
    
    
    (145,215
    )
    
    
    
    
    
    
    (294,255
    )Less deemed dividends on warrants extension
    
    
    
    
    
    
    (300,000
    )
    
    
    (2,000
    )
    
    
    (300,000
    )NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
    
    
    (1,600,118
    )
    
    $
    (945,094
    )
    
    $
    (5,491,481
    )
    
    $
    (2,265,519
    )NET LOSS PER COMMON SHARE:Basic and diluted
    
    $
    (0.03
    )
    
    $
    (.02
    )
    
    $
    (0.11
    )
    
    $
    (.05
    )Weighted average common shares outstanding:Basic and diluted
    
    
    48,307,399
    
    
    
    46,522,849
    
    
    
    48,273,382
    
    
    
    46,500,670
   4




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AMERICAN OIL & GAS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 UNAUDITED
 Six months endedJune 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (5,489,481
    )
    
    $
    (1,671,264
    )Adjustments to reconcile net loss to
net cash provided by operating activities:Impairment of oil and gas properties
    
    
    2,100,000
    
    
    
    Share-based compensation expenses
    
    
    596,052
    
    
    
    516,498Depletion, depreciation and amortization
    
    
    462,315
    
    
    
    837,591Impairment of materials and supplies inventory
    
    
    156,139
    
    
    
    Accretion of asset retirement obligations
    
    
    20,220
    
    
    
    16,332Realized loss on sale of short-term investments
    
    
    
    
    
    
    369,172Impairment on short-term investments
    
    
    
    
    
    
    116,000Deferred income taxes
    
    
    
    
    
    
    (980,000
    )Changes in assets and liabilities:Decrease (increase) in receivables
    
    
    352,328
    
    
    
    (242,730
    )Decrease (increase) in prepaid expenses
    
    
    17,971
    
    
    
    49,312Decrease (increase) in inventory
    
    
    (676,696
    )
    
    
    Increase (decrease) in accounts payable and accrued liabilities
    
    
    (126,256
    )
    
    
    46,033Net cash provided (used) by operating activities
    
    
    (2,587,408
    )
    
    
    (943,056
    )CASH FLOWS FROM INVESTING ACTIVITIESCash paid for oil and gas properties
    
    
    (8,470,823
    )
    
    
    (7,499,179
    )Proceeds from redemptions of auction-rate preferred shares
    
    
    1,575,000
    
    
    
    11,450,000Proceeds from sales of short-term investments
    
    
    
    
    
    
    683,728Cash paid for office equipment
    
    
    (33,118
    )
    
    
    (15,468
    )Net cash provided (used) by investing activities
    
    
    (6,928,941
    )
    
    
    4,619,081CASH FLOWS FROM FINANCING ACTIVITIESProceeds from short-term borrowing
    
    
    
    
    
    
    8,600,000Repayment of short-term borrowings
    
    
    
    
    
    
    (8,600,000
    )Net cash provided by financing activities
    
    
    
    
    
    
    NET INCREASE (DECREASE) IN CASH
    
    
    (9,516,349
    )
    
    
    3,676,025CASH, BEGINNING OF PERIODS
    
    
    23,269,725
    
    
    
    2,388,219CASH, END OF PERIODS
    
    $
    13,753,376
    
    
    $
    6,064,244SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    
    
    
    $
    88,647Cash paid for income taxes
    
    $
    130,000
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING
ACTIVITIESNet increase in payables for capital expenditures
    
    $
    
    
    
    $
    3,096,248Share-based compensation expenses
    
    $
    596,052
    
    
    $
    516,498Drilling prepayments applied to drilling costs
    
    $
    
    
    
    $
    542,876Preferred dividends paid in shares of common stock
    
    $
    
    
    
    $
    298,080Conversion of preferred stock into common stock
    
    $
    
    
    
    $
    600,048
   5




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AMERICAN OIL & GAS, INC.
 
 Notes to Condensed Consolidated Financial Statements
 (UNAUDITED)
 June 30, 2009
 NOTE 1  COMPANY AND BUSINESS
   NOTE 2  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
   USE OF ESTIMATES
 SIGNIFICANT ACCOUNTING POLICIES
   RECENT ACCOUNTING PRONOUNCEMENTS
 
    
    FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly,
  6




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
    
    FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instrumentand
 
    
    FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairment.
  Subsequent Events
 SUBSEQUENT EVENTS
  GAS BALANCING
 INVENTORY
 RECLASSIFICATION 
 NET INCOME (LOSS) PER SHARE
   7




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NOTE 3  PROPERTY AND EQUIPMENT
  Oil and gas properties, full cost methodUnevaluated costs, not subject to amortization
    
    $
    35,059,051Evaluated costs
    
    
    8,884,52343,943,574Less accumulated depreciation , depletion and amortization
    
    
    (5,130,016
    )Net carrying value of oil and gas properties
    
    
    38,813,558Office equipment, furniture and software (net of $222,877
accumulated depreciation and amortization)
    
    
    176,595Property and equipment
    
    $
    38,990,153
  Capitalized Costs (in millions)Project (State)
    
    12/31/08
    
    
    Net Change
    
    
    6/30/09Fetter Project, Powder River Basin (WY)
    
    $
    14.7
    
    
    $
    0.2
    
    
    $
    14.9Goliath Project, Williston Basin (ND)
    
    
    7.7
    
    
    
    0.7
    
    
    
    8.4Bigfoot
    
    
    3.3
    
    
    
    1.4
    
    
    
    4.7Krejci Oil Project, Powder River Basin (WY)
    
    
    2.7
    
    
    
    (0.3
    )
    
    
    2.4Other unevaluated costs
    
    
    3.5
    
    
    
    1.2
    
    
    
    4.7Total unevaluated costs
    
    
    31.9
    
    
    
    3.2
    
    
    
    35.1Evaluated costs, net of accumulated DD&A
    
    
    3.8
    
    
    
    (0.1
    )
    
    
    3.7Total, oil and gas properties
    
    $
    35.7
    
    
    $
    3.1
    
    
    $
    38.8
   Purchase of working interests in oil and gas properties
   8




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Impairment
  Amortization
  Six-month PeriodEnded June 30,2009
    
    
    2008Amortization of costs for evaluated oil and gas properties
    
    $
    334,000
    
    
    $
    710,000Amortization of Intangible Asset
    
    
    90,000
    
    
    
    90,000Depreciation of office equipment, furniture and software
    
    
    38,315
    
    
    
    37,591Total DD&A expense
    
    $
    462,315
    
    
    $
    837,591
 NOTE 4  ASSET RETIREMENT OBLIGATIONS
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Beginning asset retirement obligation
    
    
    440,615
    
    
    $
    329,771
    
    
    
    430,687
    
    
    $
    323,369Liabilities incurred
    
    
    44,555
    
    
    
    27,072
    
    
    
    53,366
    
    
    
    31,514Liabilities settled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Revisions in estimated liabilities
    
    
    (3,623
    )
    
    
    (27,968
    )
    
    
    (12,159
    )
    
    
    (34,093
    )Accretion
    
    
    10,567
    
    
    
    8,247
    
    
    
    20,220
    
    
    
    16,332Ending asset retirement obligation
    
    
    492,114
    
    
    $
    337,122
    
    
    
    492,114
    
    
    $
    337,122Current portion of obligation, end of period
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 NOTE 5  SHORT-TERM INVESTMENTS
    9




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Par Values ($ thousands)
    
    
    Fair Values ($ thousands)Calamos
    
    
    Other
    
    
    All
    
    
    Calamos
    
    
    Other
    
    
    AllFunds
    
    
    Funds
    
    
    Funds
    
    
    Funds
    
    
    Funds
    
    
    FundsBalance at March 1, 2008
    
    
    11,250
    
    
    
    6,000
    
    
    
    17,250
    
    
    
    11,250
    
    
    
    6,000
    
    
    
    17,250Less redemptions by 12/31/08
    
    
    (8,925
    )
    
    
    (2,575
    )
    
    
    (11,500
    )
    
    
    (8,925
    )
    
    
    (2,575
    )
    
    
    (11,500
    )Other-than-temporary loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (300
    )
    
    
    (300
    )Balance at December 31, 2008
    
    
    2,325
    
    
    
    3,425
    
    
    
    5,750
    
    
    
    2,325
    
    
    
    3,125
    
    
    
    5,450Less redemptions by 3/31/09
    
    
    
    
    
    
    (200
    )
    
    
    (200
    )
    
    
    
    
    
    
    (200
    )
    
    
    (200
    )Temporary loss at 3/31/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    (250
    )Balance at March 31, 2009
    
    
    2,325
    
    
    
    3,225
    
    
    
    5,550
    
    
    
    2,075
    
    
    
    2,925
    
    
    
    5,000Less redemptions by 6/30/09
    
    
    (1,300
    )
    
    
    (75
    )
    
    
    (1,375
    )
    
    
    (1,300
    )
    
    
    (75
    )
    
    
    (1,375
    )Fair value increases by 6/30/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    75
    
    
    
    325Balance at June 30, 2009
    
    
    1,025
    
    
    
    3,150
    
    
    
    4,175
    
    
    
    1,025
    
    
    
    2,925
    
    
    
    3,950Less July 2009 redemptions
    
    
    (325
    )
    
    
    
    
    
    
    (325
    )Less August 2009 redemptions
    
    
    (700
    )
    
    
    
    
    
    
    (700
    )Expected balance, 9/1/2009
    
    
    
    
    
    
    3,150
    
    
    
    3,150
   NOTE 6  FAIR VALUE MEASUREMENTS
   10




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
    
    Level 1  Quoted prices in active markets for identical assets or liabilities
 
    
    Level 2  Quoted prices in active markets for similar assets and liabilities, quoted
prices for identical or similar instruments in markets that are not active, and
model-derived valuations whose inputs are observable or whose significant value drivers
are observable
 
    
    Level 3  Significant inputs to the valuation model which are unobservable.
  Total atJune 30,
    
    
    Level 1
    
    
    Level 2
    
    
    Level 32009
    
    
    inputs
    
    
    inputs
    
    
    inputsFinancial Assets:Short-term investments available for sale:Auction Rate Preferred Shares (ARPS)
    
    $
    3,950,000
    
    
    $
    
    
    
    $
    
    
    
    $
    3,950,000Financial Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   
    
    Those ARPS with reasonable evidence of redemption at par value within six
months after the balance sheet date were valued at par value. At June 30, 2009,
those ARPS were the $325,000 of Calamos ARPS redeemed in July 2009 and the
$700,000 of Calamos ARPS scheduled to be redeemed on August 19, 2009.
 
    
    For the remaining ARPS ($3,150,000 par value) at June 30, 2009, we estimated
fair value based primarily on discounted cash flow analyses reflecting estimates
of when ARPS would be redeemed in the coming years.
    11




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NOTE 7  INCOME TAXES
 Accounting for Income
Taxes,
   Accounting for
Uncertainty in Income Taxes
 NOTE 8  EQUITY
 Common Stock
  
    
    On January 14, 2009, our Board of Directors granted an aggregate of 427,500 shares of
common stock pursuant to the 2006 Stock Incentive Plan to certain employees, officers and
directors of the Company. Of the 427,500 shares, 90,000 vested at grant and the other
337,500 shares vest upon the earlier of January 14, 2014 or a change in control of the
Company.
 
    
    On January 14, 2009, our Board reduced the exercise price from $7.00 per share to $3.50
per share for a warrant issued in April 2008, expiring April 16, 2013, to acquire 50,000
shares of our common stock. The estimated fair value of reducing the exercise price was
$2,000. The exercise price reduction was recognized as a $2,000 deemed dividend,
increasing Additional Paid-In Capital by $2,000.
 
    
    In February 2009, we issued 4,000 shares of common stock to our Vice-President of Land
as required under his employment contract of February 2007.
 
    
    For the quarter ended March 31, 2009, Additional Paid-In Capital increased by $393,442
for recognition, in accordance with SFAS 123R, of share-based compensation consisting of
(i) $259,008 in share-based compensation related to stock options, (ii) $50,734 related to
accruals for granted stock vesting after grant and (iii) $83,700 for the January 14, 2009
granting and immediate vesting of 90,000 shares of common stock.
 
    
    For the quarter ended June 30, 2009, Additional Paid-In Capital increased by $202,610
for recognition, in accordance with SFAS 123R, of share-based compensation consisting of
(i) $151,877 in share-based compensation related to stock options and (ii) $50,733 related
to accruals for granted stock vesting after grant.
  12




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Warrants
  Stock Options
   Other Comprehensive Loss
  NOTE 9  MATERIAL RELATED PARTY TRANSACTIONS
  NOTE 10  COMMITMENTS AND CONTINGENCIES
  North Finn Option
     13




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Overview
  Fetter Project (Powder River Basin, Wyoming)
     14




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Goliath Bakken Project (Williston Basin, North Dakota)
      Krejci Oil Project (Powder River Basin, Wyoming)
   15




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##### Table of Contents



Bigfoot Project (Rocky Mountain Region)
  Results of Operations
  The Quarter Ended June 30, 2009 Compared with the Quarter Ended June 30, 2008
   Three months ended June 30,2009
    
    
    2008Oil sold (barrels)
    
    
    5,401
    
    
    
    4,866Average oil price
    
    $
    44.88
    
    
    $
    114.91Oil revenue
    
    $
    242,383
    
    
    $
    559,135Gas sold (mcf)
    
    
    82,023
    
    
    
    34,712Average gas price
    
    $
    3.35
    
    
    $
    10.90Gas revenue
    
    $
    275,095
    
    
    $
    378,226Total oil and gas revenues
    
    $
    517,478
    
    
    $
    937,361Less lease operating expenses
    
    
    (270,250
    )
    
    
    (295,830
    )Less oil & gas amortization expense
    
    
    (221,000
    )
    
    
    (420,000
    )Less accretion of asset retirement obligation
    
    
    (10,567
    )
    
    
    (8,247
    )Less impairment of materials & supplies inventory
    
    
    (156,139
    )
    
    
    Producing revenues less direct expenses
    
    
    (140,478
    )
    
    
    213,284Less depreciation of office facilities
    
    
    (19,172
    )
    
    
    (19,087
    )Less amortization of other intangible asset
    
    
    (45,000
    )
    
    
    (45,000
    )Less general and administrative expenses
    
    
    (1,412,805
    )
    
    
    (1,101,105
    )Income (loss) from operations
    
    $
    (1,617,455
    )
    
    $
    (951,908
    )Total barrels of oil equivalent (boe) sold
    
    
    19,072
    
    
    
    10,651Revenue per boe sold
    
    $
    27.13
    
    
    $
    88.01Lease operating expense per boe sold
    
    $
    14.17
    
    
    $
    27.77Amortization expense per boe sold
    
    $
    11.59
    
    
    $
    39.43
  16




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##### Table of Contents



The Six-month Period ended June 30, 2009 Compared with the Six-month Period ended June 30,
2008
   Six months ended June 30,2009
    
    
    2008Oil sold (barrels)
    
    
    9,179
    
    
    
    7,894Average oil price
    
    $
    40.33
    
    
    $
    102.23Oil revenue
    
    $
    370,192
    
    
    $
    806,966Gas sold (mcf)
    
    
    133,437
    
    
    
    63,928Average gas price
    
    $
    3.39
    
    
    $
    9.98Gas revenue
    
    $
    452,960
    
    
    $
    638,199Total oil and gas revenues
    
    $
    823,152
    
    
    $
    1,445,165Less lease operating expenses
    
    
    (569,925
    )
    
    
    (550,605
    )Less oil & gas amortization expense
    
    
    (334,000
    )
    
    
    (710,000
    )Less accretion of asset retirement obligation
    
    
    (20,220
    )
    
    
    (16,332
    )Less impairment of materials & supplies inventory
    
    
    (156,139
    )
    
    
    Less impairment of oil and gas assets
    
    
    (2,100,000
    )
    
    
    Producing revenues less direct expenses
    
    
    (2,357,132
    )
    
    
    168,228Less depreciation of office facilities
    
    
    (38,315
    )
    
    
    (37,591
    )Less amortization of other intangible asset
    
    
    (90,000
    )
    
    
    (90,000
    )Less general and administrative expenses
    
    
    (3,042,351
    )
    
    
    (2,491,313
    )Income (loss) from operations
    
    $
    (5,527,798
    )
    
    $
    (2,450,676
    )Total barrels of oil equivalent (boe) sold
    
    
    31,419
    
    
    
    18,549Revenue per boe sold
    
    $
    26.20
    
    
    $
    77.91Lease operating expense per boe sold
    
    $
    18.14
    
    
    $
    29.68Amortization expense per boe sold
    
    $
    10.63
    
    
    $
    38.28
  17




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##### Table of Contents



Liquidity and Capital Resources
    Net Cash Used By Operating Activities
 Net Cash Used In Investing Activities
  18




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##### Table of Contents



Net Cash Provided By Financing Activities
 
 Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 Commodity Price Risk
   Operating Cost Risk
   Interest Rate Risk
  
 Item 4.
    
    CONTROLS AND PROCEDURES
   19




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##### Table of Contents



PART II
OTHER INFORMATION
 Item 1.
    
    LEGAL PROCEEDINGS
  
 Item 1A.
    
    RISK FACTORS
  
 Item 6.
    
    EXHIBITS
 Exhibit No.
    
    Description3(iv)
    
    
    Bylaws
of the Company (as revised on June 12, 2009). (Incorporated by
reference from the Companys Current Report on Form 8-K,
filed on June 18, 2009.)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
  20




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##### Table of Contents



SIGNATURES
  Signatures
    
    Title
    
    Date/s/ Patrick D. OBrien

Patrick D. OBrien
    
    Chief Executive Officer and Chairman of The Board of Directors
(principal executive officer)
    
    August 7, 2009/s/ Joseph B. Feiten

Joseph B. Feiten
    
    Chief Financial Officer
(principal financial officer and principal accounting officer)
    
    August 7, 2009
  21




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description3(iv)
    
    
    Bylaws
of the Company (as revised on June 12, 2009). (Incorporated by
reference from the Companys Current Report on Form 8-K,
filed on June 18, 2009.)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
  22