UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549











QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF
1934.




For
the quarterly period ended March 31, 2008





333-52812


(Commission
File Number)





American
Energy Production, Inc.


(Exact
name of registrant as specified in its charter)




Delaware
            
            74-2945581(State
      or other jurisdiction of incorporation)
            
            (IRS Employer Identification
      Number)




6073 Hwy 281 South, Mineral
Wells, TX


(Address of principal executive
offices including zip code)





(210)
410-8158


(Registrant’s telephone number,
including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.


Large accelerated filer o                                      Accelerated
filer o


Non-accelerated filer   o                                    
Smaller reporting company þ


(Do
not check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes 
o  No 
þ





As of May
1, 2008, the Registrant had 20,363,389 shares outstanding of its $0.001 par
value common stock.


-1-





American
Energy Production, Inc. and Subsidiaries


Form 10-Q
Index


March 31,
2008




PagePart I-Financial Information
            3Item 1. Financial Statements
            3Consolidated Balance Sheets at March 31, 2008 (Unaudited) and
      December 31, 2007 (Audited)
            4Consolidated Statements of Operations for the Three Months
      Ended March 31, 2008 and 2007 (Unaudited)
            6Consolidated Statements of Cash Flows for the Three Months
      Ended March 31, 2008 and 2007 (Unaudited)
            7Notes to Consolidated Financial Statements
      (Unaudited)
            8Item 2. Management's Discussion and Analysis of Financial
      Condition and Results of Operations
            14Item 4T. Controls and Procedures
            18Part II-Other Information
            20Item 5. Other Information
            20Item 6. Exhibits
            21Signatures
            22








-2-





PART I


FINANCIAL
INFORMATION


Item
1-Consolidated Financial Statements (Unaudited)


-3-


American
Energy Production, Inc. and Subsidiaries


Consolidated
Balance Sheets





ASSETS(Unaudited)
            
            
            (Audited)3/31/2008
            
            
            12/31/2007Current
      AssetsCash
            
            $
            160,435
            
            
            $
            133,220Accounts
      receivable
            
            
            1,205
            
            
            
            1,205Due
      from related parties
            
            
            -
            
            
            
            -Other
      current assets
            
            
            316
            
            
            
            316Total
      Current Assets
            
            
            161,955
            
            
            
            134,740Property
      and equipment, net
            
            
            4,388,685
            
            
            
            4,365,765Other
      AssetsDevelopment
      programs - related party
            
            
            111,573
            
            
            
            104,392Other
            
            
            168,780
            
            
            
            168,379Total
      Other Assets
            
            
            280,353
            
            
            
            272,771Total
      Assets
            
            
            4,830,993
            
            
            
            4,773,277LIABILITIESCurrent
      LiabilitiesAccounts
      payable
            
            $
            340,404
            
            
            $
            373,403Other
      current liabilities
            
            
            175,616
            
            
            
            175,548Due
      to related parties
            
            
            2,005,441
            
            
            
            1,707,759Note
      payable
            
            
            2,127,440
            
            
            
            2,023,714Accrued
      interest payable
            
            
            820,090
            
            
            
            778,486Accrued
      payroll taxes and penalties
            
            
            82,146
            
            
            
            80,346Lease
      payable
            
            
            16,131
            
            
            
            16,131Total
      Current Liabilities
            
            
            5,567,268
            
            
            
            5,155,387Asset
      Retirement Obligations
            
            
            530,382
            
            
            
            524,488Total
      Liabilities
            
            $
            6,097,650
            
            
            $
            5,679,875




See
accompanying notes to unaudited consolidated financial statements.


-4-


American
Energy Production, Inc.


Consolidated
Balance Sheets (Continued)





Commitments
      and Contingencies (Note 8)Stockholders'
      Deficit(Unaudited)
            
            
            (Audited)3/31/2008
            
            
            12/31/2007Convertible
      preferred stock, Series A, $0.0001 par value,5,000,000
      shares authorized, 3,500,000 shares
            
            $
            350
            
            
            $
            350Common
      stock, $0.0001 par value,500,000,000
      shares authorized, 20,360,389 and 19,767,055 shares,
      respectively
            
            
            2,036
            
            
            
            1,977Common
      stock issuable, $0.0001 par value, 3,000 and 596,000 shares
      respectively
            
            
            0
            
            
            
            60Additional
      paid in capital
            
            
            24,067,655
            
            
            
            24,067,655Accumulated
      deficit
            
            
            (24,434,698
            )
            
            
            (24,074,640
            )(364,657
            )
            
            
            (4,599
            )Less:  Subscription
      Receivable
            
            
            (902,000
            )
            
            
            (902,000
            )Total
      Stockholders' Deficit
            
            
            (1,266,657
            )
            
            
            (906,599
            )Total
      Liabilities and Stockholders' Deficit
            
            $
            4,830,993
            
            
            $
            4,773,277







See
accompanying notes to unaudited consolidated financial statements.


-5-




American
Energy Production, Inc. and Subsidiaries Consolidated
Statements of Operations


(Unaudited)





Three
      Months EndedMarch
      31,2008
            
            
            2007RevenuesOil
      sales, net
            
            $
            438,219
            
            
            $
            391,448Operating
      ExpensesCompensation
            
            
            46,243
            
            
            
            46,243Consulting
            
            
            -
            
            
            
            3,260Depreciation,
      depletion and accretion
            
            
            141,301
            
            
            
            132,807Rent
            
            
            11,810
            
            
            
            6,662General
      and administrative
            
            
            47,811
            
            
            
            82,356Production
            
            
            432,137
            
            
            
            681,606Professional
            
            
            50,766
            
            
            
            24,417Taxes
            
            
            24,345
            
            
            
            33,109Total
      Operating Expenses
            
            
            754,413
            
            
            
            1,010,460Operating
      Loss
            
            
            (316,193
            )
            
            
            (619,012
            )Other
      ExpenseInterest
      expense
            
            
            (42,364
            )
            
            
            (2,925
            )Payroll
      tax expense and penalties
            
            
            (1,501
            )
            
            
            (1,501
            )Total
      Other Expense
            
            
            (43,865
            )
            
            
            (4,426
            )Net
      Loss
            
            $
            (360,059
            )
            
            $
            (623,438
            )Net
      Loss Per Share - Basic and Diluted
            
            $
            (0.02
            )
            
            $
            (0.03
            )Weighted
      average Shares Outstanding
            
            
            20,363,386
            
            
            
            19,770,055




See
accompanying notes to unaudited consolidated financial statements


-6-


American
Energy Production, Inc. and Subsidiaries


Consolidated
Statements of Cash Flows


(Unaudited)





Three
      Months EndedMarch
      31,2008
            
            
            2007Cash
      Flows From Operating Activities:Net
      loss
            
            $
            (360,059
            )
            
            $
            (623,438
            )Adjustments
      to reconcile net loss tonet
      cash provided by operations:Depreciation
      expense
            
            
            115,506
            
            
            
            106,269Depletion
      expense
            
            
            19,901
            
            
            
            20,701Accretion
      expense
            
            
            5,894
            
            
            
            5,838Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            -
            
            
            
            47Other
      current assets
            
            
            -
            
            
            
            3,759Other
      assets
            
            
            (402
            )
            
            
            3,536Accounts
      payable
            
            
            (32,999
            )
            
            
            3,158Other
      current liabilities
            
            
            68
            
            
            
            17,189Due
      from related party
            
            
            -
            
            
            
            88,229Due
      to related party
            
            
            297,682
            
            
            
            422,968Accrued
      interest payable
            
            
            41,604
            
            
            
            2,453Accrued
      payroll taxes payable
            
            
            1,800
            
            
            
            (28
            )Net
      Cash Provided By Operating Activities
            
            
            88,996
            
            
            
            50,680Cash
      Flows From Investing Activities:Investment
      in property and equipment
            
            
            (158,326
            )
            
            
            (32,313
            )Payments
      for development programs - related party
            
            
            (7,180
            )
            
            
            (10,520
            )Net
      Cash Used In Investing Activities
            
            
            (165,506
            )
            
            
            (42,833
            )Cash
      Flows From Financing Activities:Proceeds
      from note payable
            
            
            103,725
            
            
            
            -Repayment
      of note payable
            
            
            -
            
            
            
            (6,362
            )Net
      Cash Provided By (used In) Financing Activities
            
            
            103,725
            
            
            
            (6,362
            )Net
      Increase in Cash
            
            
            27,215
            
            
            
            1,486Cash
      at Beginning of Period
            
            
            133,220
            
            
            
            106,902Cash
      at End of Period
            
            $
            160,435
            
            
            $
            108,388Cash
      interest paid
            
            $
            -
            
            
            $
            -





See
accompanying notes to unaudited consolidated financial statements


-7-
 American EnergyProduction, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Unaudited)





1.           HISTORY
AND NATURE OF BUSINESS





Basis
of Presentation and Concentration





The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
of Regulation S-K.  They do not include all information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. However, except as disclosed herein,
there has been no material change in the information disclosed in the notes to
the consolidated financial statements at December 31, 2007 included in the
Company's Form 10-KSB (“2007 10-KSB”) filed with the Securities and Exchange
Commission (“SEC”) on March 31, 2008. The interim consolidated unaudited
financial statements should be read in conjunction with those consolidated
financial statements included in the 2007 10-KSB.




In the
opinion of Management, all adjustments considered necessary for a fair
presentation, consisting solely of normal recurring adjustments, have been made.
However, the Company’s March 31, 2007 10-Q filing was not on a consolidated
basis due to the Company’s Business Development Company (“BDC “) reporting
status at that time and as discussed under BDC Conversion below, the March 31,
2007 amounts disclosed in this form 10-Q have been retrospectively applied to be
comparable with the March 31, 2008 amounts.  Operating results for the
three months ended March 31, 2008 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2008.




2.  HISTORY
AND NATURE OF BUSINESS





American
Energy Production, Inc. (“American Energy”, “the Company”, “we”, “us”, “our”
“its”) is a publicly traded oil and gas company that is engaged primarily in the
acquiring, developing, producing, exploring and selling of oil and natural gas.
The Company traditionally has acquired oil and gas companies that have the
potential for increased oil and natural gas production utilizing new
technologies, well workovers and fracture stimulation systems. Additionally, the
Company has expanded its scope of business to include the drilling of new wells
with its own equipment through its wholly-owned subsidiary
companies.




The
Company’s wholly-owned subsidiaries are primarily involved in three areas of oil
and gas operations.




1.
Leasing programs.




2.
Production acquisitions




3.
Drilling and producing with proven and emerging technologies.




The
Company believes that for the foreseeable future, the world will be highly
dependent on oil and natural gas. Currently, alternative fuels are far more
expensive than fossil fuels and because of the politically unstable conditions
of many of the energy producing regions of the world.  As a result,
the Company believes that oil and natural gas will remain a key yet volatile
component of the world energy future and furthermore, with the ever increasing
world demand for energy, the domestic production of oil and gas will play an
even greater role in America’s future then it already has to date.


-8-




3.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Going
Concern





As
reflected in the accompanying financial statements, the Company has a net loss
of $360,059 for the three months ended March 31, 2008.  Additionally,
at March 31, 2008, the Company has minimal cash, has a negative working capital
balance of $5,405,313, a stockholders’ deficit of $1,266,657 and is subject to
certain contingencies as discussed in Notes 1 and 7, which could have a material
impact on the Company’s financial condition and operations. The ability of the
Company to continue as a going concern is dependent on the Company’s ability to
raise capital and generate sufficient revenues and cash flow from its business
plan as an oil and gas operating company.  The financial statements
included in this report do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.





The time
required for us to become profitable is highly uncertain, and we cannot assure
you that we will achieve or sustain profitability or generate sufficient cash
flow from operations to meet our planned capital expenditures, working capital
and debt service requirements. If required, our ability to obtain additional
financing from other sources also depends on many factors beyond our control,
including the state of the capital markets and the prospects for our business.
The necessary additional financing may not be available to us or may be
available only on terms that would result in further dilution to the current
owners of our common stock.





Management
believes that as a result of the one-for-twenty five reverse stock split
recently approved by the shareholders of the Company, the Company will have
several options available to obtain financing from third parties in order to
carry out the business plan of the Company.





Principles
of Consolidation





The
accompanying consolidated financial statements as of March 31, 2008 include the
general accounts of American Energy and its wholly-owned subsidiaries Bend Arch
Petroleum, Inc., Production Resources, Inc., Oil America Group, Inc. and AMEP
Strategic Investments, Inc.  All significant intercompany
transactions, accounts and balances have been eliminated.





Net
Loss per Common Share




Basic
loss per share is computed only on the weighted average number of common shares
outstanding during the respective periods.




BDC
Conversion




As a
result of the Company’s conversion from a BDC company to an oil and gas
operating company, the change in accounting is considered a change in accounting
principle. As a result, in accordance with Statement of Financial Accounting
Standard 154, "Accounting for Changes and Error Corrections," which requires
that a change in accounting principle be retrospectively applied to all prior
periods presented, the Company’s financial statements are presented on an
operating and consolidated basis for all current and prior periods presented on
a retrospective basis without regard to the BDC method of
accounting.  The Company does not believe that withdrawing its
election to be regulated as a BDC will have any impact on its federal income tax
status, because the Company never elected to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code. Instead, the
Company has always been subject to corporate level federal income tax on its
income (without regard to any distributions it makes to its shareholders) as a
“regular” corporation under Subchapter C of the Internal Revenue
Code.


-9-




Reclassifications





Certain
amounts in the March 31, 2007 financial statements have been reclassified to
conform to the March 31, 2008 presentation.




4.
            PROPERTY
      AND EQUIPMENT




Property
and equipment is comprised of the following:





March
      31,
            
            
            December
      31,2008
            
            
            2007Oil
      and gas properties, successful efforts method
            
            $
            4,320,602
            
            
            $
            4,320,602Other
      property and equipment
            
            
            1,678,588
            
            
            
            1,520,262Total
            
            
            5,999,180
            
            
            
            5,840,864Less:
      Accumulated depreciation and depletion
            
            
            1,610,505
            
            
            
            1,475,099Property
      and equipment, net
            
            $
            4,388,685
            
            
            $
            4,365,765




5.     DEBT




Significant
changes in our debt for the three months ended March 31, 2008 were as
follows:




Effective
March 15, 2008, Bent Arch Petroleum, Inc. (“Bend Arch”), a wholly-owned
subsidiary of the Company executed a Third Modification and Extension Agreement
(the “Third Extension”) in relation to a $2,000,000 promissory note accruing
interest at 8% (“Note”) that was to become due and payable on March 31,
2008.  The Note is with Proco Operating Co., (“Proco”) a company
controlled by the brother of the Company’s Chief Executive
Officer.  The purpose of the Note is to secure payment for oil and gas
leases and wells located in Comanche and Eastland counties in the State of Texas
sold to Bend Arch by Proco on June 15, 2004.  As of March 31, 2008,
the Company has accrued $678,137 of accrued interest on the Promissory Note and
is included as a component of accrued interest payable in the accompanying
unaudited consolidated financial statements.




In March
2008, the Company purchased oilfield property and equipment for a price of
$150,000.  The terms included a cash payment of $47,000 and a note
payable for the balance of $103,000.  As of March 31, 2008, the
Company has not completed the documentation of the note payable with the
specific payment terms and the $103,000 has been classified as a component of
Notes Payable in the accompanying unaudited consolidated financial
statements.




6.  ASSET
RETIREMENT OBLIGATIONS




The
following represents a reconciliation of the asset retirement obligations for
the period from January 1, 2007 to March 31, 2008:





Asset
      retirement obligations at beginning of period
            
            $
            524,488Revision
      to estimate and additions
            
            
            -Liabilities
      settled during the period
            
            
            -Accretion
      of discount
            
            
            5,894Asset
      retirement obligations at end of period
            
            $
            530,382


-10-


7.  STOCKHOLDERS’
EQUITY




Capital
Structure





We are
authorized to issue up to 500,000,000 shares of our common stock, $0.0001 par
value per share, of which 20,360,389 were issued and outstanding as of March 31,
2008.  Additionally, as of March 31, 2008, 3,000 shares were
issuable.




We are
authorized to issue up to 5,000,000 shares of our preferred stock, $0.0001 par
value per share, of which 3,500,000 were issued and outstanding as of March 31,
2008.  All of the preferred stock is held by the Chief Executive
Officer of the Company.





Except
for the issuance of common stock that was classified as issuable at December 31,
2007 (see below), there were no changes in the common stock, common stock
issuable or preferred stock outstanding balances for the three months ended
March 31, 2008.




Common
Stock Issuable:





On
December 13, 2007, the Company received $89,000 of proceeds from the sale of
593,334 shares of its $0.0001 par value common stock at $.15 per share and was
classified as common stock issuable at December 31, 2007.  In January
2008, the shares of common stock were issued by the transfer agent and have been
reflected as common stock in the accompanying unaudited consolidated financial
statements.




8.     COMMITMENTS
AND CONTINGENCIES





From time
to time we may become subject to proceedings, lawsuits and other claims in the
ordinary course of business including proceedings related to environmental and
other matters.  Such matters are subject to many uncertainties, and
outcomes are not predictable with assurance.





The
Company is subject to various lawsuits and unasserted claims from vendors for
non-payment of accounts payable plus related legal fees. Excluding legal fees,
which cannot be estimated, the Company has included all amounts in its accounts
payable and accrued expenses as of March 31, 2008.





Prior to
September 30, 2007, the Company and certain of its wholly-owned subsidiaries
were delinquent in the filing of franchise tax reports with the State of Texas
and the State of Delaware and as a result, the Company and certain of its
wholly-owned subsidiaries were not in good standing.  The Company and
its wholly-owned subsidiaries have filed the required reports and as a result,
management anticipates that the Company and all of its wholly-owned subsidiaries
will be declared in good standing in the near future.  However, as of
March 31, 2008, the Company and certain wholly-owned subsidiaries were still not
in good standing even though the required reports have been
filed.  Management is investigating the reason for the delay in
receiving a good standing status and is confident that this will be obtained in
the near future.  However, the Company may face certain penalties and
interest due to the delinquent status of the reports before they were
filed.


-11-


On March
20, 2008, the Company submitted an offer of settlement to the SEC staff,
pursuant to which it would consent, without admitting or denying the findings,
to the entry of an order by the SEC instituting public administrative and
cease-and-desist proceedings and imposing sanctions (the “Order”).




In
summary, the Order finds that since electing to be regulated as a business
development company (“BDC”) in January 2004, the Company has, among other
things, issued senior securities without the required asset coverage, issued
warrants without approval of its shareholders, issued prohibited non-voting
stock, issued securities for services, failed to make and keep required
records, and
failed to establish a majority of non-interested directors on its board of
directors. As a result, the Company violated certain provisions of the
Investment Act of 1940 (the “1940 Act”). In addition, the Company failed to
obtain a fidelity bond and implement a compliance program as required under the
1940 Act. Finally, the Company failed to comply with certain provisions for
exemption from registration under the 1933 Act as related to Rule 609 of
Regulation E because it did not file required offering status reports in
connection with a securities offering commenced in January 2004.




In
determining the Order, the SEC considered remedial acts promptly undertaken by
the Company and cooperation afforded the SEC staff. The Order would
require:


•
              The
      Company cease and desist from committing or causing any violations and any
      future violations of the 1940 Act. The 1940 Act is only available to BDC
      companies and does not apply to the Company in its current structure as an
      oil and gas operating
company.
 •
                The
      Regulation E exemption of the Company is permanently suspended. Regulation
      E is only available to BDC companies and does not apply to the Company in
      its current structure as an oil and gas operating
      company.


The
Company has reached an agreement in principle with the staff of the SEC
regarding its offer of settlement, subject to approval by the Commission.
Although the ultimate outcome of the settlement negotiations cannot be predicted
with certainty, under the settlement as currently proposed, the Company would
not incur any fines or other penalties, and no action would be taken against any
individuals.




9.     RELATED
PARTY TRANSACTIONS





We
currently do not have a lease and we are not paying rent on our space. It is
being provided to the Company by the Chief Executive Officer free of
charge.





Due to Related
      Parties:March
      31,
            
            
            December
      31,2008
            
            
            2007Due
      to Chief Executive Officer from salary andrental
      agreement with Company.
            
            $
            400,425
            
            
            $
            306,425Due
      to Chief Executive Officer from advancesand
      rental agreement with Bend Arch
            
            
            783,203
            
            
            
            704,703Due
      to Operator of oil and gas properties
            
            
            821,813
            
            
            
            696,631Total
      Due To Related Parties
            
            $
            2,005,441
            
            
            $
            1,707,759





-12-





Effective
July 1, 2003, the Company entered into a salary and equipment rental agreement
with its Chief Executive Officer.  As of January 1, 2005, the $3,500
per month equipment rental agreement with the Chief Executive Officer was
terminated. As of December 31, 2007, the Company owed the Chief Executive
Officer $306,425 for unpaid amounts under the agreement.  During the
three months ended March 31, 2008, the Company accrued but did not pay $30,000
for compensation due to the CEO and the CEO personally advanced $64,000 of funds
on behalf of the Company.  As a result, the accrued balance as of
March 31, 2008 is $400,425 and is classified as a component of Due To Related
Parties in the accompanying unaudited consolidated financial
statements.





As of
December 31, 2007, the Chief Executive Officer of the Company was owed $704,703
for advances and unpaid equipment rental charges made on behalf of Bend Arch,
the Company’s wholly-owned subsidiary.  During the three months ended
March 31, 2008, the Chief Executive Officer personally advanced $70,500 of funds
to Bend Arch; the Company recorded $13,500 for equipment rental charges and
repaid $5,500 to the Chief Executive Officer.  As a result, the
accrued balance as of March 31, 2008 is $783,203 and is classified as a
component of Due To Related Parties in the accompanying unaudited consolidated
financial statements.




As of
December 31, 2007, the operator of the Company’s oil and gas properties was owed
$696,631 by the Company.  The operator is Proco and is a related party
as Proco is controlled by the brother of the Company’s Chief Executive
Officer.  During the three months ended March 31, 2008, the Company
increased the amount due to Proco for incurred operator expenses, decreased the
amount owed by $271,252 for accrued and unpaid oil and gas sales, offset by
$110,000 of cash payments from Proco for accrued oil and gas
sales.  As a result, the accrued balance as of March 31, 2008 is
$821,813 and is classified as a component of Due To Related Parties in the
accompanying unaudited consolidated financial statements.


-13-





Item
2. Management's Discussion and Analysis of FinancialCondition
and Results of Operations.





The
following analysis of our financial condition and results of operations
contained in this section should be read in conjunction with our financial
statements and related notes and schedules thereto appearing elsewhere in this
Quarterly Report, as well as the sections entitled "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes and
schedules thereto included in our annual report on Form 10-KSB for the year
ended December 31, 2007 filed with the SEC on March 31, 2008.





This
Quarterly Report, including the Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains forward-looking
statements that involve substantial risks and uncertainties. These
forward-looking statements are not historical facts, but rather are based on
current expectations, estimates and projections about our industry, our beliefs,
and our assumptions. Words such as "anticipates", "expects", "intends", "plans",
"believes", "seeks", and "estimates" and variations of these words and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties, and other factors, some of which are beyond our control and
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements, including
without limitation:




•
            economic
      downturns or recessions may impair our portfolio companies'
      performance;


•
            a
      contraction of available credit and/or an inability to access the equity
      markets could impair our lending and investment
  activities;


•
            the
      risks associated with the possible disruption in the Company's operations
      due to terrorism;


•
            future
      changes in laws or regulations and conditions in our operating areas;
      and•
            the
      risks, uncertainties and other factors we identify from time to time in
      our filings with the Securities and Exchange Commission, including our
      Form 10-Ks, Form 10-Qs and Form
8-Ks.





Although
we believe that the assumptions on which these forward-looking statements are
based are reasonable, any of those assumptions could prove to be inaccurate and
as a result, the forward-looking statements based on those assumptions also
could be inaccurate. In light of these and other uncertainties, the inclusion of
a projection or forward-looking statement in this Quarterly Report should not be
regarded as a representation by us that our plans and objectives will be
achieved. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this Quarterly Report. We
undertake no obligation to update such statements to reflect subsequent
events.





OVERVIEW





American
Energy Production, Inc. (“American Energy”, “the Company”, “we”, “us”,
“our”)  is a publicly traded oil and gas company that is engaged
primarily in the acquiring, developing, producing, exploring and selling of oil
and natural gas. The Company traditionally has acquired oil and gas companies
that have the potential for increased oil and natural gas production utilizing
new technologies, well workovers and fracture stimulation systems.  We
have expanded our scope of business to include the drilling of new wells with
its own equipment through our wholly-owned subsidiary companies.




Our
subsidiaries are primarily involved in three areas of oil and gas
operations.




1.
Leasing Programs.


2.
Production Acquisitions


3.
Drilling and Producing with Proven and Emerging Technologies.




We
believe that for the foreseeable future, the world will be highly dependent on
oil and natural gas. Currently, alternative fuels are far more expensive than
fossil fuels and because of the politically unstable conditions of many of the
energy producing regions of the world.  We believe that oil and
natural gas will remain a key yet volatile component of the world energy future
and furthermore, that with the ever increasing world demand for energy, the
domestic production of oil and gas will play an even greater role in America’s
future then it already has to date.




As
reflected in the accompanying consolidated financial statements, the Company has
a net loss of $360,059 for the three months ended March 31, 2008. Additionally,
the Company has a negative working capital balance of $5,405,313 and a
stockholders’ deficit of $1,266,657 at March 31, 2008 and is subject to certain
contingencies as discussed in Notes 1 and 7 to the accompanying unaudited
consolidated financial statements, which could have a material impact on the
Company’s financial condition and operations. The ability of the Company to
continue as a going concern is dependent on the Company’s ability to raise
capital and generate sufficient revenues and cash flow from its business plan as
an oil and gas operating company.  The financial statements included
in this report do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern. -14-





The time
required for us to become profitable is highly uncertain, and we cannot assure
you that we will achieve or sustain profitability or generate sufficient cash
flow from operations to meet our planned capital expenditures, working capital
and debt service requirements. If required, our ability to obtain additional
financing from other sources also depends on many factors beyond our control,
including the state of the capital markets and the prospects for our business.
The necessary additional financing may not be available to us or may be
available only on terms that would result in further dilution to the current
owners of our common stock.





RECENT
DEVELOPMENTS




Effective
March 15, 2008, Bent Arch Petroleum, Inc. (“Bend Arch”), a wholly-owned
subsidiary of the Company executed a Third Modification and Extension Agreement
(the “Third Extension”) in relation to a $2,000,000 promissory note accruing
interest at 8% (“Note”) that was to become due and payable on March 31,
2008.  The Note is with Proco Operating Co., (“Proco”) a company
controlled by the brother of the Company’s Chief Executive
Officer.  The purpose of the Note is to secure payment for oil and gas
leases and wells located in Comanche and Eastland counties in the State of Texas
sold to Bend Arch by Proco on June 15, 2004.




In March
2008, the Company purchased oilfield property and equipment for a price of
$150,000.  The terms included a cash payment of $47,000 and a note
payable for the balance of $103,000.  As of March 31, 2008, the
Company has not completed the documentation of the note payable with the
specific payment terms and the $103,000 has been classified as a component of
Notes Payable in the accompanying unaudited consolidated financial
statements.




On March
20, 2008, the Company submitted an offer of settlement to the SEC staff,
pursuant to which it would consent, without admitting or denying the findings,
to the entry of an order by the SEC instituting public administrative and
cease-and-desist proceedings and imposing sanctions (the “Order”).




In
summary, the Order finds that since electing to be regulated as a business
development company (“BDC”) in January 2004, the Company has, among other
things, issued senior securities without the required asset coverage, issued
warrants without approval of its shareholders, issued prohibited non-voting
stock, issued securities for services, failed to make and keep required
records, and
failed to establish a majority of non-interested directors on its board of
directors. As a result, the Company violated certain provisions of the
Investment Act of 1940 (the “1940 Act”). In addition, the Company failed to
obtain a fidelity bond and implement a compliance program as required under the
1940 Act. Finally, the Company failed to comply with certain provisions for
exemption from registration under the 1933 Act as related to Rule 609 of
Regulation E because it did not file required offering status reports in
connection with a securities offering commenced in January 2004.




In
determining the Order, the SEC considered remedial acts promptly undertaken by
the Company and cooperation afforded the SEC staff. The Order would
require:


•
              The
      Company cease and desist from committing or causing any violations and any
      future violations of the 1940 Act. The 1940 Act is only available to BDC
      companies and does not apply to the Company in its current structure as an
      oil and gas operating company. •
                The
      Regulation E exemption of the Company is permanently suspended. Regulation
      E is only available to BDC companies and does not apply to the Company in
      its current structure as an oil and gas operating
      company.






The
Company has reached an agreement in principle with the staff of the SEC
regarding its offer of settlement, subject to approval by the Commission.
Although the ultimate outcome of the settlement negotiations cannot be predicted
with certainty, under the settlement as currently proposed, the Company would
not incur any fines or other penalties, and no action would be taken against any
individuals.




RESULTS
OF OPERATIONS





The
following discussion of the results of operations should be read in conjunction
with our unaudited consolidated financial statements and notes thereto for the
periods presented included in this Form 10-Q.




-15-


Three Months ended March 31,
2008 compared to Three Months Ended March 31, 2007.





Three
      Months EndedMarch
      31,2008
            
            
            2007Revenues:Oil
      sales, net
            
            $
            438,219
            
            
            $
            391,448Operating
      ExpensesCompensation
            
            
            46,243
            
            
            
            46,243Consulting
            
            
            -
            
            
            
            3,260Depreciation,
      depletion and accretion
            
            
            141,301
            
            
            
            132,807Rent
            
            
            11,810
            
            
            
            6,662General
      and administrative
            
            
            47,811
            
            
            
            82,356Production
            
            
            432,137
            
            
            
            681,606Professional
            
            
            50,766
            
            
            
            24,417Taxes
            
            
            24,345
            
            
            
            33,109Total
      Operating Expenses
            
            
            754,413
            
            
            
            1,010,460Operating
      Loss
            
            
            (316,193
            )
            
            
            (619,012
            )Other
      Income (Expense)Other
      income
            
            
            -
            
            
            
            -Gain
      on sale of propertiesInterest
      expense
            
            
            (42,364
            )
            
            
            (2,925
            )Payroll
      tax expense and penalties
            
            
            (1,501
            )
            
            
            (1,501
            )Total
      Other Income (Expense)
            
            
            (43,865
            )
            
            
            (4,426
            )Net
      Loss
            
            $
            (360,059
            )
            
            $
            (623,438
            )


Revenues:





Revenues
decreased $46,771 or1 2%, to $438,219 for 2008 from $391,448 for
2007.  The increase was primarily due to increases market pricing for
oil and gas.




Operating
Expenses:





Operating
expenses decreased $256,047, or 25%, to $754,413 for 2008 from $1,010,460 for
2007.  The decrease was primarily the result of a $249,269 decrease in
production.  The decrease in production expense was primarily from the
Company not being able to focus on its oil and gas operations because of
insufficient operating cash.





-16-


Other Income
(Expense):





Other
income (expense) increased $39,439 of expense, or 891% to $43,865 of expense for
2008 from 4,426 of expense for 2007.  The increase was primarily for
interest expense related to notes payable.





Liquidity
and Capital Resources





Cash and
cash equivalents were $160,435 at March 31, 2008 as compared to $133,220 at
December 31, 2007, and working capital deficit was $5,405,315 at March 31, 2008
as compared to a working capital deficit of $5,020,647 at December 31,
2007.  The increase in the working capital deficit was primarily from
a $297,682 increase in due to related parties and $103,725 increase in notes
payable.





Operating
Activities





Cash
provided by operating activities was $88,996 for the three months ended March
31, 2008 compared to cash provided of $50,680 for the three months ended March
31, 2007.  The increase in cash provided by operations from 2007 to
2008 was primarily from a decrease of the net loss, offset by a decrease in due
to related parties and due from related parties.





Investing
Activities





Cash used
in investing activities was $165,506 for the three months ended March 31, 2008
compared to cash used of $42,833 for the three months ended March 31,
2007.  The increase in cash used resulted primarily from an increase
in the investment in property and equipment.





Financing
Activities





Cash used
in financing activities was $103,725 for the three months ended March 31, 2008
compared to $6,362 of cash used in financing activities for the three months
ended March 31, 2007. The 2008 amount is from the issuance of a note payable for
the purchase of property and equipment and the 2007 amount is from the repayment
of a note payable.





Our
principal uses of cash to date have been for operating activities and we have
funded our operations previously primarily by incurring indebtedness in the form
of convertible debentures and issuing common stock.  Our debt
obligations pose a significant liquidity risk to our business and stockholders
by requiring us to dedicate a substantial portion of our cash flow to principal
and interest payments on our debt obligations, thereby reducing the availability
of our cash flow to fund working capital, capital expenditures and other
corporate requirements.  Additionally, these debt obligations may
impede us from obtaining additional financing in the future for working capital,
capital expenditures and other corporate requirements and may make us more
vulnerable to a downturn in our business and limit our flexibility to plan for,
or react to, changes in our business.





Debt





Significant
changes in our debt for the three months ended March 31, 2008 were as
follows:




Effective
March 15, 2008, Bent Arch Petroleum, Inc. (“Bend Arch”), a wholly-owned
subsidiary of the Company executed a Third Modification and Extension Agreement
(the “Third Extension”) in relation to a $2,000,000 promissory note accruing
interest at 8% (“Note”) that was to become due and payable on March 31,
2008.  The Note is with Proco Operating Co., (“Proco”) a company
controlled by the brother of the Company’s Chief Executive
Officer.  The purpose of the Note is to secure payment for oil and gas
leases and wells located in Comanche and Eastland counties in the State of Texas
sold to Bend Arch by Proco on June 15, 2004.


-17-




In March
2008, the Company purchased oilfield property and equipment for a price of
$150,000.  The terms included a cash payment of $47,000 and a note
payable for the balance of $103,000.  As of March 31, 2008, the
Company has not completed the documentation of the note payable with the
specific payment terms and the $103,000 has been classified as a component of
Notes Payable in the accompanying unaudited consolidated financial
statements.




Equity
Financing





There was
no equity financing for the three months ended March 31, 2008 and 2007,
respectively.





Liquidity




To
continue with our business plan, we will require additional working capital as
we have not been generating sufficient cash from operations to fund our
operating activities through the end of fiscal 2008.  The ability of
the Company to continue as a going concern is dependent on the Company’s ability
to raise capital and generate revenues and cash flow from its business plan as
an oil and gas operating company.




Our
ability to obtain additional financing depends on many factors beyond our
control, including the state of the capital markets, the market price of our
common stock and the prospects for our business.  Additionally, any
necessary additional financing may not be available to us or may be available
only on terms that would result in further dilution to the current owners of our
common stock. Failure to obtain commitments for interim financing and subsequent
project financing, would have a material adverse effect on our business, results
of operations and financial condition. If the financing we require to sustain
our working capital needs is unavailable or insufficient or we do not receive
the necessary financing, we may be unable to continue as a going
concern.





Management
believes that as a result of the one-for-twenty five reverse stock split
recently approved by the shareholders of the Company, the Company will have
several options available to obtain financing from third parties in order to
carry out the business plan of the Company.





Off-Balance
Sheet Arrangements





We have
no off-balance sheet arrangements.




Item
4T.  Controls and Procedures




Under the
supervision and with the participation of our senior management, consisting of
our chief executive officer and our chief financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended, as of the end of the period covered
by this report (the "Evaluation Date").  Based on that evaluation, the
Company’s management, including our chief executive officer and chief financial
officer, concluded that as of the Evaluation Date our disclosure controls and
procedures are not effective to ensure that the information relating to us
required to be disclosed in our Securities and Exchange Commission ("SEC")
reports (i) is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms, and (ii) is accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding required
disclosure.





Management's Quarterly
Report on Internal Control Over Financial Reporting. (a) The Company's
management is responsible for establishing and maintaining an adequate system of
internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f)).  Our management, including our principal executive officer
and principal accounting officer, conducted an evaluation of the effectiveness
of our internal control over financial reporting using the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control—Integrated Framework.  Based on its evaluation, our
management concluded that there is a material weakness in our internal control
over financial reporting.  A material weakness is a deficiency, or a
combination of control deficiencies, in internal control over financial
reporting such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will not be
prevented or detected on a timely basis.


-18-





The
material weakness(s) identified are:


1.
              The
      Company does not have a full time Accounting Controller or Chief Financial
      Officer and utilizes part time consultants to perform these critical
      responsibilities.  This lack of full time accounting staff
      results in a lack of segregation of duties and accounting technical
      expertise necessary for an effective system of internal
      control.


Additionally,
management determined during its internal control assessment the following
weakness(s), while not considered material, are items that should be considered
by the Board of Directors for resolution in the near future:





1.
            The
      management of oil and gas leases including a schedule of oil and gas lease
      agreements and related documents to ensure that the Company has rights to
      Oil and Gas, expiration and renewal dates, contractual payments regarding
      royalties, taxes, improvements, etc.   This ensures correct
      oil and gas capital accounts, revenues and related expenses are calculated
      correctly by Accounting.  Additionally, the CFO should review
      all Oil and gas lease agreements.


2.
            The
      Company should take steps to require that oil and gas expenditures are
      properly classified into the proper categories such as acquisition costs
      and intangible and tangible drilling costs.  Without this, the
      Company cannot properly determine the proper recording and disclosure of
      oil and gas expenditures.


3.
            The
      Company should take steps to enhance the security for bank wire
      transfers.  Currently, the Subsidiary President’s and CEO
      provide instruction to the bookkeepers to initiate a wire
      transfer.  As a security enhancement, the Bank should be
      required to obtain approval from the CEO or CFO to make the wire
      transfer.


4.
            The
      Company IT process should be strengthened as there is no disaster recover
      plan, no server, and the company accounting records are maintained through
      a consultant accountant.  The Company should consider the
      purchase and implementation of a server and proper backups off site to
      ensure that accounting information is
  safeguarded.


5.
            The
      Company should take steps to implement a policies and procedures
      manual.





In order
to mitigate all of the above weaknesses(s), to the fullest extent possible, all
financial reports are reviewed by the Chief Executive Officer as well as the
Board of Directors for reasonableness. All unexpected results are investigated.
At any time, if it appears that any control can be implemented to continue to
mitigate such weaknesses, it is immediately implemented. The Company has
retained a third-party accounting and financial consulting firm to assist with
the complex technical oil and gas issues and as soon as our finances allow, we
will hire sufficient accounting staff and implement appropriate procedures as
described above.





This
quarterly report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this quarterly report.





(b)  Changes
in Internal Control over Financial Reporting.  There were no changes
in our internal control over financial reporting that occurred during the last
fiscal quarter that has materially affected or is reasonably likely to
materially affect our internal control over financial reporting







-19-


PART
II -OtherInformation





Item 5. Other
Information




On March
20, 2008, the Company submitted an offer of settlement to the SEC staff,
pursuant to which it would consent, without admitting or denying the findings,
to the entry of an order by the SEC instituting public administrative and
cease-and-desist proceedings and imposing sanctions (the “Order”).




In
summary, the Order finds that since electing to be regulated as a business
development company (“BDC”) in January 2004, the Company has, among other
things, issued senior securities without the required asset coverage, issued
warrants without approval of its shareholders, issued prohibited non-voting
stock, issued securities for services, failed to make and keep required
records, and
failed to establish a majority of non-interested directors on its board of
directors. As a result, the Company violated certain provisions of the
Investment Act of 1940 (the “1940 Act”). In addition, the Company failed to
obtain a fidelity bond and implement a compliance program as required under the
1940 Act. Finally, the Company failed to comply with certain provisions for
exemption from registration under the 1933 Act as related to Rule 609 of
Regulation E because it did not file required offering status reports in
connection with a securities offering commenced in January 2004.




In
determining the Order, the SEC considered remedial acts promptly undertaken by
the Company and cooperation afforded the SEC staff. The Order would
require:


•
                The
      Company cease and desist from committing or causing any violations and any
      future violations of the 1940 Act. The 1940 Act is only available to BDC
      companies and does not apply to the Company in its current structure as an
      oil and gas operating company. •
                  The
      Regulation E exemption of the Company is permanently suspended. Regulation
      E is only available to BDC companies and does not apply to the Company in
      its current structure as an oil and gas operating
      company.


The
Company has reached an agreement in principle with the staff of the SEC
regarding its offer of settlement, subject to approval by the Commission.
Although the ultimate outcome of the settlement negotiations cannot be predicted
with certainty, under the settlement as currently proposed, the Company would
not incur any fines or other penalties, and no action would be taken against any
individuals.




-20-


Item
6.Exhibits





The
following exhibits are filed with this report or are incorporated herein by
reference to a prior filing, in accordance with Rule 12b-32 under the Securities
Exchange Act of 1934.




Exhibit
      No.
            
            Description
      of Exhibit2.1
            
            Certificate
      of Amendment to Articles of Incorporation of American Energy Production,
      Inc. filed with the Delaware Secretary of
    State  (1)3.1
            
            Form
      S-8 Registration Statement under the Securities Act of 1933 filed January
      31, 2003. (1)3.2
            
            Form
      8-A12G for Registration of Certain Classes of Securities Pursuant to
      Section 12 (b) or (g) of the Securities Act of 1934 filed October 10,
      2003. (1)3.3
            
            Definitive
      Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
      filed November 19, 2003. (1)3.4
            
            Form
      N-54 Notification of Election as a Business Development Company dated
      January 12, 2004. (1)3.5
            
            Form
      1-E Notification under Regulation E dated January 14, 2004.
      (1)3.6
            
            Form
      1-E/A Notification under Regulation E dated June 24, 2005.
    (1)3.7
            
            Form
      2-E Notification under Regulation E dated June 27, 2006.
    (1)3.8
            
            Form
      2-E Notification under Regulation E dated December 11, 2006.
      (1)3.9
            
            Definitive
      Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
      filed February 8, 2007. (1)3.10
            
            Form
      N-54C Notification of Withdrawal of Business Development Companies dated
      April 23, 2007. (1)3.11
            
            Definitive
      Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
      filed July 5, 2007. (1)14.1
            
            Code
      of Ethics (1)20.1
            
            Oil
      and Gas property valuation by Blue Ridge Enterprises as of December 31,
      2007 (1)21.1
            
            Subsidiaries
      of American Energy Production, Inc. (1)31.1
            
            Certification of the Chief Executive and Chief Financial
      Officer of American Energy production, Inc. pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*32.1
            
            Certification of the Chief Executive and Chief Financial
      Officer of American Energy Production, Inc. pursuant to Section 906 of the
      Sarbanes- Act of 2002.*


*           Filed
herewith





(1)
            Incorporated
      by reference.





-21-





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed by the following persons on behalf of American Energy
Production, Inc., in the capacities and on the dates indicated.


May
      15, 2008
              By:
              /s/ Charles
      BittersCharles
      BittersChief
      Executive Officer, Principal Executive and Financial Officer,
      Director











-22-