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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, 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
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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  March 31, 2009 and December
31, 2008
    
    
    3Condensed Consolidated Statements of Income  Three Months Ended March 31,
2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows  Three Months Ended March
31, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risks
    
    
    15Item 4. Controls and Procedures
    
    
    16PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    17Item 6. Exhibits
    
    
    17Signatures
    
    
    18EX-31.1EX-31.2EX-32.1EX-32.2
   2




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PART I
 
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN OIL & GAS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2009
    
    
    2008(UNAUDITED)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    15,726,398
    
    
    $
    23,269,725Short-term
investments
    
    
    5,000,000
    
    
    
    5,450,000Accounts receivable
    
    
    757,399
    
    
    
    1,186,749Materials and supplies inventory
    
    
    1,913.287
    
    
    
    1,236,591Prepaid expenses
    
    
    135,373
    
    
    
    133,360Total current assets
    
    
    23,532,457
    
    
    
    31,276,425PROPERTY AND EQUIPMENT, AT COSTOil and gas properties, full cost method (including unevaluated costs
of $33,915,965 at 3/31/09 and $31,837,965 at 12/31/08)
    
    
    42,044,989
    
    
    
    40,456,632Other property and equipment
    
    
    366,354
    
    
    
    366,354Total property and equipment
    
    
    42,411,343
    
    
    
    40,822,986Less-accumulated depreciation, depletion and amortization
    
    
    (5,112,721
    )
    
    
    (4,980,578
    )Net property and equipment
    
    
    37,298,622
    
    
    
    35,842,408OTHER ASSETSDeferred income tax assets (net of valuation allowance, Note 6)
    
    
    
    
    
    
    Intangible asset, net of accumulated amortization
    
    
    195,000
    
    
    
    240,000Other
    
    
    30,385
    
    
    
    30,385$
    61,056,464
    
    
    $
    67,389,218LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities
    
    $
    1,793,857
    
    
    $
    4,286,618Income taxes payable
    
    
    
    
    
    
    104,000Total current liabilities
    
    
    1,793,857
    
    
    
    4,390,618LONG-TERM LIABILITIESAsset retirement obligations
    
    
    440,614
    
    
    
    430,686COMMITMENTS AND CONTINGENCIES(Note 9)STOCKHOLDERS EQUITYCommon stock, $.001 par value, authorized 100,000,000 shares; issued and
outstanding - 48,307,399 shares at 3/31/09 and 47,875,899 shares at 12/31/08
    
    
    48,307
    
    
    
    47,876Additional paid-in capital
    
    
    91,670,568
    
    
    
    91,275,557Accumulated deficit
    
    
    (32,646,882
    )
    
    
    (28,755,519
    )Accumulated other comprehensive income (loss)
    
    
    (250,000
    )
    
    
    58,821,993
    
    
    
    62,567,914$
    61,056,464
    
    
    $
    67,389,218
   3




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AMERICAN OIL & GAS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
 (UNAUDITED)
 Three months endedMarch 31,2009
    
    
    2008REVENUESOil and gas sales
    
    $
    305,674
    
    
    $
    507,804OPERATING EXPENSESLease operating
    
    
    299,675
    
    
    
    254,775General and administrative
    
    
    1,629,546
    
    
    
    1,390,208Depletion, depreciation and amortization
    
    
    177,143
    
    
    
    353,504Impairments
    
    
    2,100,000
    
    
    
    Accretion of asset retirement obligation
    
    
    9,653
    
    
    
    8,0854,216,017
    
    
    
    2,006,572LOSS FROM OPERATIONS
    
    
    (3,910,343
    )
    
    
    (1,498,768
    )OTHER INCOME (LOSS)Investment income
    
    
    20,980
    
    
    
    223,711Gain (loss) on sale of securities
    
    
    
    
    
    
    (330,804
    )Interest expense
    
    
    
    
    
    
    (23,524
    )20,980
    
    
    
    (130,617
    )LOSS BEFORE INCOME TAXES
    
    
    (3,889,363
    )
    
    
    (1,629,385
    )Income tax expense-current
    
    
    
    
    
    
    Income tax expense (reduction) -deferred
    
    
    
    
    
    
    (458,000
    )NET LOSS
    
    
    (3,889,363
    )
    
    
    (1,171,385
    )Less dividends on preferred stock
    
    
    
    
    
    
    (149,040
    )Less deemed dividend on warrant re-pricing
    
    
    (2,000
    )
    
    
    NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
    
    $
    (3,891,363
    )
    
    $
    (1,320,425
    )NET LOSS PER COMMON SHARE(basic and diluted)
    
    $
    (0.08
    )
    
    $
    (0.03
    )Weighted average common shares outstanding, basic and diluted
    
    
    48,238,988
    
    
    
    46,478,491
   4




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AMERICAN OIL & GAS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 UNAUDITED
 Three months endedMarch 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (3,889,363
    )
    
    $
    (1,171,385
    )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
    
    
    393,442
    
    
    
    266,859Depletion, depreciation and amortization
    
    
    177,143
    
    
    
    353,504Accretion of asset retirement obligations
    
    
    9,653
    
    
    
    8,085Realized loss on sale of short-term investments
    
    
    
    
    
    
    330,804Deferred income taxes
    
    
    
    
    
    
    (458,000
    )Changes in assets and liabilities:Decrease (increase) in receivables
    
    
    349,350
    
    
    
    (42,748
    )Decrease (increase) in prepaid expenses
    
    
    (2,013
    )
    
    
    31,389Decrease (increase) in inventory
    
    
    (676,696
    )
    
    
    Increase (decrease) in accounts payable and accrued liabilities
    
    
    30,919
    
    
    
    91,790Net cash used in operating activities
    
    
    (1,507,565
    )
    
    
    (589,702
    )CASH FLOWS FROM INVESTING ACTIVITIESCash paid for oil and gas properties
    
    
    (6,235,762
    )
    
    
    (2,025,180
    )Proceeds from redemptions and sales of short-term investments
    
    
    200,000
    
    
    
    474,596Cash paid for office equipment
    
    
    
    
    
    
    (6,414
    )Net cash used by investing activities
    
    
    (6,035,762
    )
    
    
    (1,556,998
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from short-term borrowing
    
    
    
    
    
    
    8,600,000Net cash provided by financing activities
    
    
    
    
    
    
    8,600,000NET INCREASE (DECREASE) IN CASH
    
    
    (7,543,327
    )
    
    
    6,453,300CASH, BEGINNING OF PERIODS
    
    
    23,269,725
    
    
    
    2,388,219CASH, END OF PERIODS
    
    $
    15,726,398
    
    
    $
    8,841,519SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    
    
    
    $
    Cash paid for income taxes
    
    $
    130,000
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING
ACTIVITIESNet increase (decrease) in payables for capital expenditures
    
    $
    (2,627,680
    )
    
    $
    1,901,527Preferred dividends paid in shares of common stock
    
    $
    
    
    
    $
    298,080Share-based compensation expenses
    
    $
    393,442
    
    
    $
    266,859Drilling prepayments applied to drilling costs
    
    $
    
    
    
    $
    209,773
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AMERICAN OIL & GAS, INC.
 
 Notes to Condensed Consolidated Financial Statements
 (UNAUDITED)
March 31, 2009
 NOTE 1  COMPANY AND BUSINESS
   NOTE 2  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
   USE OF ESTIMATES
 SIGNIFICANT ACCOUNTING POLICIES
   RECENT ACCOUNTING PRONOUNCEMENTS
  6




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
    
    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,
 
    
    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.
  GAS BALANCING
 INVENTORY
 RECLASSIFICATION 
  Three-month PeriodEnded March 31,2009
    
    
    2008Asset retirement obligation, beginning of period
    
    $
    430,686
    
    
    $
    323,369Liabilities incurred
    
    
    8,811
    
    
    
    4,442Liabilities settled
    
    
    
    
    
    
    Accretion
    
    
    9,653
    
    
    
    8,085Revisions in estimated liabilities
    
    
    (8,536
    )
    
    
    (6,125
    )Asset retirement obligation, end of period
    
    $
    440,614
    
    
    $
    329,771Current portion of obligation, end of period
    
    $
    
    
    
    $
    
 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
    
    $
    33,915,965Evaluated costs
    
    
    8,129,02442,044,989Office equipment, furniture and software
    
    
    366,35442,411,343Less accumulated depreciation, depletion and amortization
    
    
    (5,112,721
    )Property and equipment
    
    $
    37,298,622
    Three-month PeriodEnded March 31,2009
    
    
    2008Amortization of costs for evaluated oil and gas properties
    
    $
    113,000
    
    
    $
    290,000Amortization of Intangible Asset
    
    
    45,000
    
    
    
    45,000Depreciation of office equipment, furniture and software
    
    
    19,143
    
    
    
    18,504Total DD&A expense
    
    $
    177,143
    
    
    $
    353,504
 NOTE 4  SHORT-TERM INVESTMENTS
    8




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March 31,
    
    
    December 31,2009
    
    
    2008Total par value
    
    $
    5,550,000
    
    
    $
    5,750,000Carrying value (and estimated fair valuesee Note 5)
    
    $
    5,000,000
    
    
    $
    5,450,000
  NOTE 5  FAIR VALUE MEASUREMENTS
   
    
    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 atMarch 31,
    
    
    Level 1
    
    
    Level 2
    
    
    Level 32009
    
    
    inputs
    
    
    inputs
    
    
    inputsFinancial Assets:Short-term investments
available for sale:Auction Rate Preferred Shares
    
    $
    5,000,000
    
    
    $
    
    
    
    $
    
    
    
    $
    5,000,000Financial Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   9




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NOTE 6  INCOME TAXES
 Accounting for Income
Taxes,
   Accounting for
Uncertainty in Income Taxes
  NOTE 7  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 $2,000 estimated fair value of reducing the exercise price
was recognized as a deemed dividend, increasing Additional Paid-In Capital by the $2,000
value.
    
    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, 2008, 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.
 Warrants
  Common
    
    
    Exercise
    
    
    ExpirationIssue Date
    
    Shares
    
    
    Price
    
    
    DateApril 16, 2008
    
    
    50,000
    
    
    $
    3.50
    
    
    April 16, 2013July 22, 2005
    
    
    835,626
    
    
    $
    6.00
    
    
    September 30, 2009885,626
  10




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Stock Options
  Other Comprehensive Loss
  NOTE 8  MATERIAL RELATED PARTY TRANSACTIONS
  NOTE 9 COMMITMENTS AND CONTINGENCIES
  North Finn Option
     11




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Overview
  Fetter Project (Powder River Basin, Wyoming)
      12




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Goliath Bakken Project (Williston Basin, North Dakota)
    Krejci Oil Project (Powder River Basin, Wyoming)
    13




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Bigfoot Project (Rocky Mountain Region)
  Results of Operations
  The Quarter Ended March 31, 2009 Compared with the Quarter Ended March 31, 2008
   Three months endedMarch 31,2009
    
    
    2008Oil sold (barrels)
    
    
    3,778
    
    
    
    3,028Average oil price
    
    $
    33.83
    
    
    $
    81.84Oil revenue
    
    $
    127,809
    
    
    $
    247,831Gas sold (mcf)
    
    
    51,414
    
    
    
    29,216Average gas price
    
    $
    3.46
    
    
    $
    8.90Gas revenue
    
    $
    177,865
    
    
    $
    259,973Total oil and gas revenues
    
    $
    305,674
    
    
    $
    507,804Less lease operating expenses
    
    
    (299,675
    )
    
    
    (254,775
    )Less oil & gas amortization expense
    
    
    (113,000
    )
    
    
    (290,000
    )Less accretion of asset retirement obligation
    
    
    (9,653
    )
    
    
    (8,085
    )Less impairment of oil and gas assets
    
    
    (2,100,000
    )
    
    
    Producing revenues less direct expenses
    
    
    (2,216,654
    )
    
    
    (45,056
    )Less depreciation of office facilities
    
    
    (19,143
    )
    
    
    (18,504
    )Less amortization of other intangible asset
    
    
    (45,000
    )
    
    
    (45,000
    )Less general and administrative expenses
    
    
    (1,629,546
    )
    
    
    (1,390,208
    )Income (loss) from operations
    
    $
    (3,910,343
    )
    
    $
    (1,498,768
    )Total barrels of oil equivalent (boe) sold
    
    
    12,347
    
    
    
    7,897Revenue per boe sold
    
    $
    24.76
    
    
    $
    64.30Lease operating expense per boe sold
    
    $
    24.27
    
    
    $
    32.26Amortization expense per boe sold
    
    $
    9.15
    
    
    $
    36.72
  14




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Liquidity and Capital Resources
    Net Cash Used By Operating Activities
 Net Cash Used In Investing Activities
 Net Cash Provided By Financing Activities
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 Commodity Price Risk
    15




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Operating Cost Risk
   Interest Rate Risk
  
 Item 4. CONTROLS AND PROCEDURES
     16




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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
  17




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

Patrick D. OBrien
    
    Chief Executive Officer and Chairman of The Board of Directors
    
    May 8, 2009/s/ Joseph B. Feiten

Joseph B. Feiten
    
    Chief Financial Officer
    
    May 8, 2009
  18




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EXHIBIT INDEX
 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
  19