##### 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 March 31, 2010
 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 o
    
    Non-accelerated filer þ *
    
    Smaller reporting company o(*Do not check if a smaller reporting company)
 o þ




---



##### 



AMERICAN OIL & GAS INC.
FORM 10-Q
INDEX
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets  March 31, 2010 and December
31, 2009
    
    
    3Condensed Consolidated Statements of Income  Three Months Ended March 31,
2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows  Three Months Ended March
31, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risks
    
    
    16Item 4. Controls and Procedures
    
    
    16PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    17Item 6. Exhibits
    
    
    17Signatures
    
    
    17Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




---



##### Table of Contents



PART I
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 AMERICAN OIL & GAS INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    73,892,442
    
    
    $
    40,632,284Short-term investment
    
    
    2,950,000
    
    
    
    2,925,000Accounts receivable
    
    
    2,591,235
    
    
    
    564,533Materials and supplies inventory
    
    
    1,076,645
    
    
    
    1,269,774Prepaid expenses
    
    
    124,390
    
    
    
    149,991Current deferred tax assets
    
    
    76,763
    
    
    
    Total current assets
    
    
    80,711,475
    
    
    
    45,541,582PROPERTY AND EQUIPMENT, AT COSTOil and gas properties, full cost method (including unevaluated costs
of $54,766,939 at 3/31/10 and $35,611,363 at 12/31/09)
    
    
    64,076,308
    
    
    
    44,454,942Other property and equipment
    
    
    423,216
    
    
    
    406,273Total property and equipment
    
    
    64,499,524
    
    
    
    44,861,215Less-accumulated depreciation, depletion and amortization
    
    
    (6,037,247
    )
    
    
    (5,771,547
    )Net property and equipment
    
    
    58,462,277
    
    
    
    39,089,668OTHER ASSETSDrilling prepayments
    
    
    285,900
    
    
    
    Intangible asset, net of accumulated amortization
    
    
    15,000
    
    
    
    60,000Other
    
    
    80,652
    
    
    
    80,652$
    139,555,304
    
    
    $
    84,771,902LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities
    
    $
    6,778,145
    
    
    $
    1,032,248Income taxes payable
    
    
    200,000
    
    
    
    Total current liabilities
    
    
    6,978,145
    
    
    
    1,032,248LONG-TERM LIABILITIESAsset retirement obligations
    
    
    117,466
    
    
    
    436,487Deferred income taxes
    
    
    6,606,763
    
    
    
    Total long-term liabilities
    
    
    6,724,229
    
    
    
    436,487COMMITMENTS AND CONTINGENCIES(Note 11)STOCKHOLDERS EQUITYPreferred stock, $.001 par value, authorized 24,100,000 shares; no
outstanding shares at 03/31/10 and 12/31/09
    
    
    
    
    
    
    Common stock, $.001 par value, authorized 100,000,000 shares; issued and
outstanding - 57,700,856 shares at 3/31/10, 57,472,399 shares at 12/31/09
    
    
    57,701
    
    
    
    57,472Additional paid-in capital
    
    
    136,795,414
    
    
    
    122,267,594Accumulated deficit
    
    
    (11,062,185
    )
    
    
    (39,096,899
    )Accumulated other comprehensive income
    
    
    62,000
    
    
    
    75,000Total equity
    
    
    125,852,930
    
    
    
    83,303,167$
    139,555,304
    
    
    $
    84,771,902
   3




---



##### Table of Contents



AMERICAN OIL & GAS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
 (UNAUDITED)
 Three months endedMarch 31,2010
    
    
    2009REVENUESOil and gas sales
    
    $
    859,971
    
    
    $
    305,674OPERATING EXPENSESLease operating
    
    
    241,409
    
    
    
    299,675General and administrative
    
    
    2,002,729
    
    
    
    1,631,546Depletion, depreciation and amortization
    
    
    310,701
    
    
    
    177,143Impairments
    
    
    
    
    
    
    2,100,000Accretion of asset retirement obligation
    
    
    10,213
    
    
    
    9,6532,565,052
    
    
    
    4,218,017GAIN ON SALE OF OIL & GAS PROPERTIES
    
    
    36,400,000
    
    
    
    INCOME (LOSS) FROM OPERATIONS
    
    
    34,694,919
    
    
    
    (3,912,343
    )OTHER INCOME (LOSS)Investment income
    
    
    31,795
    
    
    
    20,98031,795
    
    
    
    20,980INCOME (LOSS) BEFORE INCOME TAXES
    
    
    34,726,714
    
    
    
    (3,891,363
    )Income tax provision  current
    
    
    200,000
    
    
    
    Income tax provision  deferred
    
    
    6,492,000
    
    
    
    NET INCOME (LOSS)
    
    $
    28,034,714
    
    
    $
    (3,891,363
    )NET INCOME (LOSS) PER SHARE:Basic
    
    $
    0.49
    
    
    $
    (0.08
    )Diluted
    
    $
    0.46
    
    
    $
    (0.08
    )
   4




---



##### Table of Contents



AMERICAN
OIL & GAS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED)
 Three months endedMarch 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    28,034,714
    
    
    $
    (3,891,363
    )Adjustments to reconcile net income (loss) to
net cash from operating activities:Gain on sale of oil and gas assets
    
    
    (36,400,000
    )
    
    
    Deferred income taxes
    
    
    6,492,000
    
    
    
    Impairment of oil and gas properties
    
    
    
    
    
    
    2,100,000Share-based compensation expenses
    
    
    315,499
    
    
    
    395,442Depletion, depreciation and amortization
    
    
    310,701
    
    
    
    177,143Accretion of asset retirement obligations
    
    
    10,213
    
    
    
    9,653Changes in assets and liabilities:Decrease (increase) in receivables
    
    
    (76,704
    )
    
    
    349,350Decrease (increase) in prepaid expenses
    
    
    25,601
    
    
    
    (2,013
    )Decrease (increase) in inventory
    
    
    
    
    
    
    (676,696
    )Increase (decrease) in accounts payable and accrued liabilities
    
    
    1,887,778
    
    
    
    30,919Net cash provided by (used in) operating activities
    
    
    599,802
    
    
    
    (1,507,565
    )CASH FLOWS FROM INVESTING ACTIVITIESCash proceeds from sale of oil and gas properties
    
    
    46,181,289
    
    
    
    Cash paid for oil and gas property acquisition, exploration &
development
    
    
    (13,621,890
    )
    
    
    (6,235,762
    )Drilling prepayments
    
    
    (285,900
    )Proceeds from redemptions and sales of short-term investments
    
    
    
    
    
    
    200,000Cash paid for office equipment
    
    
    (16,943
    )
    
    
    Net cash provided (used) by investing activities
    
    
    32,256,556
    
    
    
    (6,035,762
    )CASH FLOWS FROM FINANCING ACTIVITIESEmployee exercises of stock options
    
    
    403,800
    
    
    
    Net cash provided by financing activities
    
    
    403,800
    
    
    
    NET INCREASE (DECREASE) IN CASH
    
    
    33,260,158
    
    
    
    (7,543,327
    )CASH, BEGINNING OF PERIODS
    
    
    40,632,284
    
    
    
    23,269,725CASH, END OF PERIODS
    
    $
    73,892,442
    
    
    $
    15,726,398SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    
    
    
    $
    Cash paid for income taxes
    
    $
    
    
    
    $
    130,000SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
AND FINANCING ACTIVITIESOil and gas properties acquired for stock
    
    $
    13,804,000
    
    
    $
    Net increase (decrease) in payables for capital expenditures
    
    $
    4,058,119
    
    
    $
    (2,627,680
    )Supplies inventory used in new wells
    
    $
    193,129
    
    
    $
    
   5




---



##### Table of Contents



AMERICAN OIL & GAS INC.
 
 Notes to Condensed Consolidated Financial Statements
 (UNAUDITED)
 March 31, 2010
 NOTE 1  COMPANY AND BUSINESS
   NOTE 2  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
   USE OF ESTIMATES
 SIGNIFICANT ACCOUNTING POLICIES
    6




---



##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
 GAS BALANCING
 INVENTORY
 RECLASSIFICATION 
 ASSET RETIREMENT OBLIGATIONS 
 Three-month PeriodEnded March 31,2010
    
    
    2009Asset retirement obligation, beginning of period
    
    $
    436,488
    
    
    $
    430,686Liabilities incurred
    
    
    14,259
    
    
    
    8,811Liabilities settled
    
    
    (341,709
    )
    
    
    Accretion
    
    
    10,213
    
    
    
    9,653Revisions in estimated liabilities
    
    
    (1,785
    )
    
    
    (8,536
    )Asset retirement obligation, end of period
    
    $
    117,466
    
    
    $
    440,614Current portion of obligation, end of period
    
    $
    
    
    
    $
    
 NET INCOME (LOSS) PER SHARE
 NOTE 3  PROPERTY AND EQUIPMENT
  March 31,
    
    
    December 31,2010
    
    
    2009Oil and gas properties, full cost methodUnevaluated costs, not yet subject to amortization
    
    $
    54,766,939
    
    
    $
    35,611,363Evaluated costs
    
    
    9,309,369
    
    
    
    8,843,57964,076,308
    
    
    
    44,454,942Less accumulated amortization
    
    
    (5,756,016
    )
    
    
    (5,510,016
    )Net carrying value of oil and gas properties
    
    
    58,320,292
    
    
    
    38,944,926Cost of other property and equipment
    
    
    423,216
    
    
    
    406,273Less accumulated depreciation and amortization
    
    
    (281,231
    )
    
    
    (261,531
    )Net property and equipment
    
    $
    58,462,277
    
    
    $
    39,089,668
  7




---



##### Table of Contents



Sale of Oil & Gas Property
    Unevaluated Oil and Gas Properties
  Ceiling Impairment
   8




---



##### Table of Contents



Three-month PeriodEnded March 31,2010
    
    
    2009Amortization of costs for evaluated oil and gas properties
    
    $
    246,000
    
    
    $
    113,000Amortization of Intangible Asset
    
    
    45,000
    
    
    
    45,000Depreciation of office equipment, furniture and software
    
    
    19,701
    
    
    
    19,143Total DD&A expense
    
    $
    310,701
    
    
    $
    177,143
 NOTE 4  SIGNIFICANT CHANGES IN PROVED RESERVE ESTIMATES
  Oil (bbls)
    
    
    Gas (mcf)Proved reserves at December 31, 2009
    
    
    147,510
    
    
    
    956,550Less proved reserves of properties sold 3/31/10
    
    
    (22,957
    )
    
    
    (392,601
    )Less production, quarter ended 3/31/10
    
    
    (7,820
    )
    
    
    (45,490
    )Proved reserve additions, three Tong Trust sites*
    
    
    394,131
    
    
    
    908,609Other additions & net revisions
    
    
    106,554
    
    
    
    109,388Proved reserves at March 31, 2010
    
    
    617,418
    
    
    
    1,536,456Percentage net change in proved reserves
    
    
    319
    %
    
    
    61
    %
 *
    
    The three Tong Trust sites are the drill site of the Tong Trust 1-20H well and two
offsetting drill sites for which proved undeveloped reserves were assigned as of
March 31, 2010. In mid-March 2010, the Tong Trust 1-20H well began producing after
fracture stimulation. NOTE 5  SHORT-TERM INVESTMENTS
      9




---



##### Table of Contents



NOTE 6  FAIR VALUE MEASUREMENTS
 Fair Value Measurements and Disclosures
  
    
    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.
  Level 1
    
    
    Level 2
    
    
    Level 3Total
    
    
    inputs
    
    
    inputs
    
    
    inputsAs of December 31, 2009Assets:Short-term
investments available
for sale:Auction Rate
Preferred Shares
(ARPS)
    
    $
    2,925,000
    
    
    $
    
    
    
    $
    
    
    
    $
    2,925,000Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    As of March 31, 2010Assets:Short-term
investments available
for sale:Auction Rate
Preferred Shares
(ARPS)
    
    $
    2,950,000
    
    
    $
    
    
    
    $
    1,200,000
    
    
    $
    1,750,000Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  10




---



##### Table of Contents



NOTE 7  INCOME TAXES
 Accounting for Income
Taxes,
   Accounting for
Uncertainty in Income Taxes
   11




---



##### Table of Contents



NOTE 8  EQUITY
 Common Stock
  
    
    On January 26, 2010, we issued to each of our three independent directors 7,519 shares
of common stock pursuant to our 2006 Stock Incentive Plan, with 2,506 shares vesting
immediately and 5,013 shares vesting when the individual is no longer a director.
    
    In February 2010, our Vice-President of Land earned on the third anniversary of his
employment 4,000 shares of our common stock.
    
    A Director exercised his option, buying 12,500 shares of our common stock, at a $2.38
exercise price per share.
    
    Our CFO exercised his option, buying 68,000 shares of our common stock, at an exercise
price of $2.00 per share.
    
    Four non-officer employees exercised options to purchase a total of 121,400 shares of
our common stock, at an exercise price of $2.00 per share.
    
    For the quarter ended March 31, 2010, Additional Paid-In Capital increased by $315,499
for recognition, in accordance with SFAS 123R, of share-based compensation consisting of
(i) $174,762 in share-based compensation related to stock options, (ii) $50,734 related to
accruals for granted stock vesting after grant and (iii) $90,003 relating to stock granted
to directors with limited vesting restrictions.
    
    Effective March 31, 2010 with the closing of the sale of certain Powder River Basin oil
and gas properties, we increased Additional Paid-In Capital by $13,804,000 in recognition
of the sale fulfilling all obligations of North Finn LLC for its right to receive 2,900,000
restricted shares of our common stock, as discussed further in Note 3. We issued the shares to North Finn LLC subsequent to March 31, 2010.
 Warrants
  Stock Options
  Other Comprehensive Income
  NOTE 9  EARNINGS PER SHARE
  For the three-month period endedMarch 31, 2010
    
    
    March 31, 2009Net income (loss)
    
    $
    28,034,714
    
    
    $
    (3,891,363
    )Adjustments for dilution
    
    
    
    
    
    
    Net loss adjusted for effects of dilution
    
    $
    28,034,714
    
    
    $
    (3,891,363
    )Basic Weighted Ave. Common Shares
    
    
    57,583,788
    
    
    
    48,238,988Add dilutive effects of options and warrants
    
    
    4,004,377
    
    
    
    Diluted Weighted Ave. Common Shares
Outstanding
    
    
    61,588,165
    
    
    
    48,238,988Net income (loss) per common share  basic
    
    $
    0.49
    
    
    $
    (0.08
    )Net income (loss) per common share  diluted
    
    $
    0.46
    
    
    $
    (0.08
    )
  12




---



##### Table of Contents



NOTE 10  MATERIAL RELATED PARTY TRANSACTIONS
  NOTE 11 COMMITMENTS AND CONTINGENCIES
  
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        13




---



##### Table of Contents



Results of Operations
  The Quarter Ended March 31, 2010 Compared with the Quarter Ended March 31, 2009
   Three months endedMarch 31,2010
    
    
    2009Oil sold (barrels)
    
    
    7,820
    
    
    
    3,778Average oil price
    
    $
    71.14
    
    
    $
    33.83Oil revenue
    
    $
    556,342
    
    
    $
    127,809Gas sold (mcf)
    
    
    45,490
    
    
    
    51,414Average gas price
    
    $
    6.67
    
    
    $
    3.46Gas revenue
    
    $
    303,629
    
    
    $
    177,865
 Three months endedMarch 31,2010
    
    
    2009Total oil and gas revenues
    
    $
    859,971
    
    
    $
    305,674Less lease operating expenses
    
    
    (241,409
    )
    
    
    (299,675
    )Less oil & gas amortization expense
    
    
    (246,000
    )
    
    
    (113,000
    )Less accretion of asset retirement obligation
    
    
    (10,213
    )
    
    
    (9,653
    )Less impairment of oil and gas assets
    
    
    
    
    
    
    (2,100,000
    )Plus gain on sale of oil and gas properties
    
    
    36,400,000
    
    
    
    Income (loss) from oil & gas operations
    
    
    36,762,349
    
    
    
    (2,216,654
    )Less depreciation of office facilities
    
    
    (19,701
    )
    
    
    (19,143
    )Less amortization of other intangible asset
    
    
    (45,000
    )
    
    
    (45,000
    )Less general and administrative expenses
    
    
    (2,002,729
    )
    
    
    (1,631,546
    )Income (loss) from operations
    
    
    34,694,919
    
    
    $
    (3,912,343
    )Total barrels of oil equivalent (boe) sold
    
    
    15,402
    
    
    
    12,347Revenue per boe sold
    
    $
    55.84
    
    
    $
    24.76Lease operating expense per boe sold
    
    $
    15.67
    
    
    $
    24.27Amortization expense per boe sold
    
    $
    15.97
    
    
    $
    9.15
  14




---



##### Table of Contents



Three months endedPro Forma Revenues and Expenses
    
    March 31,(excluding properties sold on 3/31/10)
    
    2010
    
    
    2009Oil sold (barrels)
    
    
    3,553
    
    
    
    1,875Average oil price
    
    $
    73.64
    
    
    $
    32.34Oil revenue
    
    $
    261,626
    
    
    $
    60,642Gas sold (mcf)
    
    
    5,855
    
    
    
    3,291Average gas price
    
    $
    6.17
    
    
    $
    8.03Gas revenue
    
    $
    36,149
    
    
    $
    26,420Total oil and gas revenues
    
    $
    297,775
    
    
    $
    87,062Less lease operating expenses
    
    
    (67,426
    )
    
    
    (93,448
    )Revenues net of lease operating expenses
    
    $
    230,349
    
    
    $
    (6,386
    )
   Liquidity and Capital Resources
    Net Cash Provided (Used) By Operating Activities
 Net Cash Provided (Used) In Investing Activities
 Net Cash Provided By Financing Activities
  15




---



##### Table of Contents



Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 Commodity Price Risk
   Operating Cost Risk
   Interest Rate Risk
  
 Item 4.
    
    CONTROLS AND PROCEDURES
     16




---



##### Table of Contents



PART II
 OTHER INFORMATION
 
 Item 1A.
    
    RISK FACTORS
  
 Item 6.
    
    EXHIBITS
 Exhibit No.
    
    Description31.1
    
    
    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
 
 SIGNATURES
  Signatures
    
    Title
    
    Date/s/ Pat OBrien

Patrick D. OBrien
    
    Chief Executive Officer and Chairman of The Board of Directors
    
    May 17, 2010/s/ Joseph B. Feiten

Joseph B. Feiten
    
    Chief Financial Officer (principal financial officer and
principal accounting officer)
    
    May 17, 2010
  17