##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER 001-31900
 AMERICAN OIL & GAS, INC.
  Nevada
(State or other jurisdiction of 
incorporation or organization)
    
    88-0451554
(I.R.S. Employer
Identification Number)
 th
 Title of Each Class:
    
    Name of Each Exchange on Which Registered:Common Stock, $.001 par value per share
    
    American Stock Exchange
 
 o þ
 o þ
 þ 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
 June 30, 2007
 March 10, 2008
 DOCUMENTS INCORPORATED BY REFERENCE:




---



##### 



AMERICAN OIL & GAS, INC.
FORM 10-K
TABLE OF CONTENTS
 PagePART IItem 1:
    
    Business
    
    
    3Item 1A:
    
    Risk Factors
    
    
    9Item 1B:
    
    Unresolved Staff Comments
    
    
    12Item 2:
    
    Properties
    
    
    12Item 3:
    
    Legal Proceedings
    
    
    18Item 4:
    
    Submission of Matters to a Vote of Security Holders
    
    
    18PART IIItem 5:
    
    Market for the Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    18Item 6:
    
    Selected Consolidated Financial Data
    
    
    20Item 7:
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    22Item 7A:
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 8:
    
    Financial Statements and Supplementary Data
    
    
    F-1Item 9:
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    32Item 9A:
    
    Controls and Procedures
    
    
    32Item 9B:
    
    Other Information
    
    
    35PART IIIItem 10:
    
    Directors, Executive Officers and Corporate Governance
    
    
    35Item 11:
    
    Executive Compensation
    
    
    35Item 12:
    
    Securities Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    35Item 13:
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    35Item 14:
    
    Principal Accountant Fees and Services
    
    
    35PART IVItem 15:
    
    Exhibits, Financial Statement Schedules
    
    
    35Exhibit 3 (i)Exhibit 10.24Subsidiary ListConsent of Independent Petroleum Engineers and GeologistsConsent of Independent Registered Public Accounting FirmCertification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     1




---



##### Table of Contents



PART I
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
   
    
    our business and growth strategies,
    
    our oil and natural gas reserve estimates,
    
    our ability to successfully and economically explore for and develop oil and gas
resources,
    
    our exploration and development drilling prospects, inventories, projects and
programs,
    
    availability and costs of drilling rigs and field services,
    
    anticipated trends in our business,
    
    our future results of operations,
    
    our liquidity and ability to finance our exploration and development activities,
    
    market conditions in the oil and gas industry,
    
    our ability to make and integrate acquisitions, and
    
    the impact of environmental and other governmental regulation.
   
    
    the failure to obtain sufficient capital resources to fund our operations,
    
    an inability to replace our reserves through exploration and development activities,
    
    unsuccessful drilling activities,
    
    a decline in oil or natural gas production or oil or natural gas prices,
    
    incorrect estimates of required capital expenditures,
    
    increases in the cost of drilling, completion and gas gathering or other costs of
production and operations,
    
    impact of environmental and other governmental regulation, including delays in
obtaining permits,
    
    hazardous and risky drilling operations, and
    
    an inability to meet growth projections.
   2




---



##### Table of Contents



Item 1: Business
  
    
    Approximately 124,000 gross (69,000 net) acres in the Douglas Project area, located
in the southern Powder River Basin, Wyoming which includes approximately 56,000 gross
(36,000 net) acres in the Fetter Prospect,
    
    Approximately 131,000 gross (49,000 net) acres in the Krejci Project, located in
Niobrara County, Wyoming, and
    
    Approximately 79,000 gross (30,000 net) acres in the Goliath Project, located in the
Williston Basin, North Dakota.
   Competition
  Proved Reserves
 st st
 At December 31,2007
    
    
    2006
    
    
    2005 *Proved oil reserves (bbls)
    
    
    96,399
    
    
    
    91,850
    
    
    
    554,702Proved NGL reserves (bbls)
    
    
    53,933
    
    
    
    **
    
    
    
    **Proved natural gas reserves (mcf)
    
    
    1,307,159
    
    
    
    809,847
    
    
    
    378,213Future net cash flows (before income taxes)
    
    $
    13,727,358
    
    
    $
    6,428,667
    
    
    $
    26,565,846PV-10 Value
    
    $
    8,362,799
    
    
    $
    4,692,808
    
    
    $
    13,798,930
 *
    
    Approximately 90% of the reserves PV-10 value at December 31, 2005 related to our Big Sky project,
which we sold on March 31, 2006.**
    
    At December 31, 2006 and 2005, NGL (i.e., natural gas liquids) estimated to be recovered from
the produced natural gas were not significant and not separately estimated.  3




---



##### Table of Contents



Reconciliation of Standardized Measure to PV-10 Value
  At December 31,2007
    
    
    2006
    
    
    2005Standardized measure of discounted future net cash flows
    
    $
    8,304,799
    
    
    $
    4,598,000
    
    
    $
    13,709,930Add present value of future income tax discounted at 10%
    
    
    58,000
    
    
    
    94,808
    
    
    
    89,000PV-10 Value
    
    $
    8,362,799
    
    
    $
    4,692,808
    
    
    $
    13,798,930
 Customers
  Environmental Matters
    4




---



##### Table of Contents



Employees
   5




---



##### Table of Contents



Website and Codes of Ethics
 http://www.americanog.com th
 Glossary of Abbreviations and Terms
  AMI
 Bbl
 Bbl/d
 Bc/d
 Bcf
 Bcfe
 Boe
 Btu or British thermal unit
 Capital Expenditures
 Carried Working Interest.
 Completion
 Condensate.
 Developed Acreage
 Development Well
 Drill Spacing Unit.
  6




---



##### Table of Contents



Exploitation.
 Exploration
 Exploratory Well
 Field.
 Finding and Development Costs
 Gross Acres.
 Gross Wells
 Lease.
 Lease Net Acres.
 Mcf.
 Mcf/d
 Mcfe
 MMcf
 Net Acres.
 Net Wells.
 Operator.
 Participant Group
  7




---



##### Table of Contents



PV-10 value
 Productive well
 Prospect
 Proved developed reserves
 Proved reserves
 Proved undeveloped reserves (PUD
 Re-entry
 Reserves
 Reservoir.
 Royalty
 SEC.
 Undeveloped Acreage
 Working Interest
  8




---



##### Table of Contents



Title to Properties
  
 Item 1A: Risk Factors
  Risks related to our industry, business and strategy
 We have a limited operating history in the oil and gas business, and we cannot predict our
future operations with any certainty.
  Our development and exploration operations require substantial capital, and we may be unable
to obtain needed capital or financing on satisfactory terms, which could lead to a loss of
properties and a decline in our natural gas and oil reserves.
  Oil and natural gas prices are volatile and a decline in oil and natural gas prices can
significantly affect our financial results and impede our growth.
   9




---



##### Table of Contents



We have incurred losses from operations in the past and may do so in the future.
  We may be unable to find additional reserves.
  Our short-term investments consist primarily of auction rate securities that are affected by
the current poor credit market which, if conditions worsen, could result in material losses.
    We could be adversely impacted by changes in the oil and gas market.
  Oil and gas operations are inherently risky.
  We are subject to extensive government regulations.
  
    
    the prevention of waste,
    
    the discharge of materials into the environment,
    
    the conservation of oil and natural gas,
    
    pollution,
    
    permits for drilling operations,
    
    drilling bonds, and
    
    reports concerning operations, spacing of wells, and the unitization and pooling of
properties.
  10




---



##### Table of Contents



New government regulation and environmental risks could increase our costs.
  Our prices may be impacted adversely by new taxes.
  Shortages of rigs, equipment, supplies and personnel could delay or otherwise adversely affect
our cost of operations or our ability to operate according to our business plans.
  Shortages of transportation services and processing facilities may result in our receiving a
discount in the price we receive for oil and natural gas sales or may adversely affect our ability
to sell our oil and natural gas.
  Risks Related to our Common Stock
 Our common stock is illiquid, so investors may not be able to sell any significant number of
shares of our stock at prevailing market prices.
   11




---



##### Table of Contents



Our stock price and trading volume may be volatile, which could result in losses for our
stockholders.
  
    
    actual or anticipated quarterly variations in our operating results;
    
    changes in expectations as to our future financial performance or changes in financial
estimates, if any;
    
    announcements relating to our business or the business of our competitors;
    
    conditions generally affecting the oil and natural gas industry;
    
    the success of our operating strategy; and
    
    the operating and stock performance of other comparable companies.
  We may issue preferred stock with rights that are preferential to, and could cause a decrease
in the value of, our common stock.
  
    
    the establishment of dividends which must be paid prior to declaring or paying
dividends or other distributions to our common stockholders;
    
    greater or preferential liquidation rights which could negatively affect the rights
of common stockholders; and
    
    the right to convert the preferred stock at a rate or price which would have a
dilutive effect on the outstanding shares of common stock.
 
 Item 1B: Unresolved Staff Comments
  
 Item 2: Properties
 Oil and Natural Gas Assets
   12




---



##### Table of Contents



Douglas Project Area  Fetter Project (Powder River Basin, Wyoming)
        13




---



##### Table of Contents



Douglas Project Area  West Douglas Project (Powder River Basin, Wyoming)
   Krejci Oil Project (Powder River Basin, Wyoming)
    Goliath Project (Williston Basin, North Dakota)
    14




---



##### Table of Contents



Oil and Gas Drilling Activities
    Oil and Gas Wells
  Productive Wells as of December 31, 2007Gross (a)
    
    
    Net (b)Location
    
    Oil
    
    
    Gas
    
    
    Total
    
    
    Oil
    
    
    Gas
    
    
    TotalWyoming
    
    
    4
    
    
    
    6
    
    
    
    10
    
    
    
    1.99
    
    
    
    3.09
    
    
    
    5.08North Dakota
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    .95
    
    
    
    
    
    
    
    .95Total
    
    
    10
    
    
    
    6
    
    
    
    16
    
    
    
    2.94
    
    
    
    3.09
    
    
    
    6.03
 (a)
    
    The number of gross wells is the total number of wells in which a working interest is owned.(b)
    
    The number of net wells is the sum of fractional working interests we own in gross wells
expressed as whole numbers and fractions thereof.  15




---



##### Table of Contents



Oil and Gas Interests
  Developed
    
    
    UndevelopedState
    
    Gross Acres
    
    
    Net Acres
    
    
    Gross Acres
    
    
    Net AcresWyoming
    
    
    3,840
    
    
    
    1,866
    
    
    
    324,870
    
    
    
    138,907North Dakota
    
    
    3,040
    
    
    
    800
    
    
    
    103,332
    
    
    
    32,648Other neighboring states
    
    
    
    
    
    
    
    
    
    
    67,644
    
    
    
    48,106Total
    
    
    6,880
    
    
    
    2,666
    
    
    
    495,846
    
    
    
    219,661
  Net Undeveloped AcresYear of
    
    
    Fee
    
    
    State
    
    
    Federal
    
    
    Total forExpiration
    
    
    Leases
    
    
    Leases
    
    
    Leases
    
    
    All LeasesWyoming
    
    
    2008
    
    
    
    2,412
    
    
    
    1,291
    
    
    
    10,907
    
    
    
    14,610
    *2009
    
    
    
    13,703
    
    
    
    598
    
    
    
    1,375
    
    
    
    15,6762010
    
    
    
    12,952
    
    
    
    2,959
    
    
    
    5,224
    
    
    
    21,1352011
    
    
    
    8,800
    
    
    
    3,213
    
    
    
    35,323
    
    
    
    47,3362012
    
    
    
    2,922
    
    
    
    1,977
    
    
    
    3,061
    
    
    
    7,9602013
    
    
    
    660
    
    
    
    
    
    
    
    3,486
    
    
    
    4,1462014
    
    
    
    
    
    
    
    
    
    
    
    6,594
    
    
    
    6,5942015
    
    
    
    
    
    
    
    
    
    
    
    3,936
    
    
    
    3,9362016
    
    
    
    
    
    
    
    
    
    
    
    11,295
    
    
    
    11,2952017
    
    
    
    
    
    
    
    
    
    
    
    1,650
    
    
    
    1,650Total Wyoming
    
    
    
    
    
    
    41,449
    
    
    
    10,038
    
    
    
    82,851
    
    
    
    134,338North Dakota
    
    
    2008
    
    
    
    9,740
    
    
    
    
    
    
    
    
    
    
    
    9,740
    **2009
    
    
    
    10,134
    
    
    
    457
    
    
    
    
    
    
    
    10,591
    **2010
    
    
    
    9,071
    
    
    
    1,727
    
    
    
    
    
    
    
    10,7982011
    
    
    
    1,279
    
    
    
    
    
    
    
    
    
    
    
    1,2792012
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    72016
    
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    120Total North Dakota
    
    
    
    
    
    
    30,231
    
    
    
    2,184
    
    
    
    120
    
    
    
    32,535Other states
    
    
    2008
    
    
    
    380
    
    
    
    
    
    
    
    
    
    
    
    3802009
    
    
    
    576
    
    
    
    
    
    
    
    
    
    
    
    5762011
    
    
    
    
    
    
    
    
    
    
    
    7,822
    
    
    
    7,8222012
    
    
    
    1,670
    
    
    
    35,230
    
    
    
    
    
    
    
    36,9002016
    
    
    
    272
    
    
    
    
    
    
    
    
    
    
    
    272Total, other states
    
    
    
    
    
    
    2,898
    
    
    
    35,230
    
    
    
    7,822
    
    
    
    45,950Total, all states
    
    
    
    
    
    
    74,578
    
    
    
    47,452
    
    
    
    90,793
    
    
    
    212,823Undeveloped,
held by production
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,838Total
undeveloped
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219,661
 *
    
    We have approximately 1,900 net acres in the Fetter and West Douglas projects expiring in
2008 but under lease
agreements that allow the working interest owners to extend the lease life for one to three years,
at an average cost of approximately $47 per net acre. We plan to extend those leases relating to
our 1,900 net acres.  16




---



##### Table of Contents



**
    
    Of our 9,740 net acres in North Dakota expiring in 2008, approximately 8,047 net acres relate to
lease agreements that give the working interest owners the option to extend the lease life for
typically two years (some for one year, some others for three years) at an average cost of
approximately $51 per acre. The working interest owners plan to extend the leases. Our share of
the extension payments will be approximately $410,000. Of our 10,591 net acres in North Dakota
expiring in 2009, approximately 9,700 net acres relate to lease agreements with similar extension
options (generally for one year, others for two to three years) at a cost of approximately $30 per
acre, equating to a $291,000 cost to us for extending the lease life of our 9,700 net acres.    Year
    
    Rental Obligation2008
    
    $
    247,1422009
    
    
    239,2462010
    
    
    212,4792011
    
    
    90,2082012
    
    
    46,355Thereafter
    
    
    89,136
  17




---



##### Table of Contents



Production Volumes, Sales Prices and Production Costs
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Production:Natural gas (MMcf)
    
    
    139.6
    
    
    
    48.2
    
    
    
    59.7Oil (Bbls)
    
    
    17,267
    
    
    
    34,578
    
    
    
    78,954Total equivalents (Bbls)
    
    
    40,532
    
    
    
    42,603
    
    
    
    88,910Average Sales Price Per Unit:Natural gas (per Mcf)
    
    $
    6.09
    
    
    $
    7.53
    
    
    $
    7.31Oil (per Bbl)
    
    $
    64.11
    
    
    $
    54.79
    
    
    $
    53.89Weighted average (per Boe)
    
    $
    48.27
    
    
    $
    52.97
    
    
    $
    52.77Expenses (per Boe)
    
    $
    15.94
    
    
    $
    6.83
    
    
    $
    2.77
 Office Facilities
 th
 Annual RentalYear
    
    Amount2008
    
    $
    152,5642009
    
    $
    155,9862010
    
    $
    159,4082011
    
    $
    162,8202012
    
    $
    166,252Thereafter
    
    $
    69,866
 
 Item 3: Legal Proceedings
  
 Item 4: Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5: Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 Market Information
   18




---



##### Table of Contents



Common Stock PriceHigh
    
    
    Low2006Quarter ended March 31, 2006
    
    $
    5.29
    
    
    $
    3.20Quarter ended June 30, 2006
    
    $
    5.19
    
    
    $
    4.10Quarter ended September 30, 2006
    
    $
    6.55
    
    
    $
    4.57Quarter ended December 31, 2006
    
    $
    8.01
    
    
    $
    4.702007Quarter ended March 31, 2007
    
    $
    6.33
    
    
    $
    5.19Quarter ended June 30, 2007
    
    $
    6.78
    
    
    $
    4.30Quarter ended September 30, 2007
    
    $
    6.84
    
    
    $
    5.39Quarter ended December 31, 2007
    
    $
    7.70
    
    
    $
    5.55
  Holders
  Dividend Policy
  Issuer Purchases of Equity Securities
  Performance Graph
   19




---



##### Table of Contents



1/17/03
    
    
    12/31/03
    
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07American Oil & Gas, Inc.
    
    $
    100.00
    
    
    $
    275.59
    
    
    $
    1,082.68
    
    
    $
    1,594.49
    
    
    $
    2,562.99
    
    
    $
    2,283.46S&P Small Cap 600-Energy
    
    $
    100.00
    
    
    $
    131.55
    
    
    $
    200.88
    
    
    $
    305.69
    
    
    $
    359.57
    
    
    $
    443.74S&P 500
    
    $
    100.00
    
    
    $
    125.23
    
    
    $
    138.50
    
    
    $
    145.09
    
    
    $
    166.82
    
    
    $
    175.39
 
 Item 6: Selected Consolidated Financial Data
  Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(in thousands, except per share data)Statement of Operations Data:Production Revenues
    
    $
    1,957
    
    
    $
    2,257
    
    
    $
    4,691
    
    
    $
    746
    
    
    $
    98Service fee and other revenues
    
    
    12
    
    
    
    1,530
    
    
    
    
    
    
    
    
    
    
    
    Operating expenses:Lease operating expenses
    
    
    646
    
    
    
    291
    
    
    
    246
    
    
    
    80
    
    
    
    38Impairment expense
    
    
    
    
    
    
    4,360
    
    
    
    
    
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    1,267
    
    
    
    1,153
    
    
    
    1,532
    
    
    
    188
    
    
    
    33Accretion of asset retirement obligation
    
    
    24
    
    
    
    11
    
    
    
    6
    
    
    
    5
    
    
    
    3General and administrative
    
    
    4,308
    
    
    
    4,009
    
    
    
    2,032
    
    
    
    945
    
    
    
    825Total operating expenses
    
    
    6,245
    
    
    
    9,824
    
    
    
    3,816
    
    
    
    1,218
    
    
    
    899Operating income (loss)
    
    
    (4,276
    )
    
    
    (6,037
    )
    
    
    875
    
    
    
    (472
    )
    
    
    (801
    )Other income (expense)Investment income
    
    
    1,021
    
    
    
    393
    
    
    
    204
    
    
    
    34
    
    
    
    
  20




---



##### Table of Contents



Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(in thousands, except per share data)Gain (loss) on sale of securities
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impairment of securities investment
    
    
    (952
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of oil and gas properties
    
    
    
    
    
    
    7,159
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total other income (expense)
    
    
    48
    
    
    
    7,552
    
    
    
    204
    
    
    
    34
    
    
    
    Income (loss) before income taxes
    
    
    (4,228
    )
    
    
    1,515
    
    
    
    1,079
    
    
    
    (438
    )
    
    
    (801
    )Income tax provision
    
    
    1,485
    
    
    
    (304
    )
    
    
    (46
    )
    
    
    
    
    
    
    Net Income (loss)
    
    
    (2,743
    )
    
    
    1,211
    
    
    
    1,033
    
    
    
    (438
    )
    
    
    (801
    )Less: deemed dividend on warrant
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Less: dividends on preferred stock
    
    
    (603
    )
    
    
    (1,080
    )
    
    
    (479
    )
    
    
    (62
    )
    
    
    (18
    )Net Income (loss) attributable to common
stockholders
    
    $
    (3,796
    )
    
    $
    131
    
    
    $
    554
    
    
    $
    (500
    )
    
    $
    (819
    )Income (loss) per common share:Basic
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    (0.02
    )
    
    $
    (0.03
    )Diluted
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    (0.02
    )
    
    $
    (0.03
    )Weighted average number of common shares
outstanding:Basic
    
    
    44,384
    
    
    
    37,429
    
    
    
    34,148
    
    
    
    25,211
    
    
    
    23,781Diluted
    
    
    44,384
    
    
    
    38,142
    
    
    
    34,956
    
    
    
    25,211
    
    
    
    23,781Selected Cash Flow and Other Financial Data:Net income (loss)
    
    $
    (2,743
    )
    
    $
    1,211
    
    
    $
    1,033
    
    
    $
    (438
    )
    
    $
    (801
    )Less gains on sales of oil and gas
properties
    
    
    
    
    
    
    (7,159
    )
    
    
    
    
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    1,267
    
    
    
    1,153
    
    
    
    1,532
    
    
    
    188
    
    
    
    33Impairment
    
    
    
    
    
    
    4,360
    
    
    
    
    
    
    
    
    
    
    
    Net loss on sales of securities
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other non-cash items
    
    
    582
    
    
    
    308
    
    
    
    466
    
    
    
    411
    
    
    
    237Changes in current assets and liabilities
    
    
    (292
    )
    
    
    1,496
    
    
    
    (1,163
    )
    
    
    (567
    )
    
    
    (67
    )Net cash provided (used) by operating
activities
    
    $
    (1,171
    )
    
    $
    1,369
    
    
    $
    1,868
    
    
    $
    (406
    )
    
    $
    (598
    )Purchases of short-term investments in
securities
    
    $
    28,750
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Cash proceeds from sale of short-term
investments
    
    $
    12,361
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital expenditures
    
    $
    16,214
    
    
    $
    16,152
    
    
    $
    14,147
    
    
    $
    2,895
    
    
    $
    1,734Cash proceeds from sales of oil and gas
properties
    
    $
    777
    
    
    $
    16,067
    
    
    $
    
    
    
    $
    1,582
    
    
    $
    Balance Sheet Data:Cash and cash equivalents
    
    $
    2,388
    
    
    $
    7,488
    
    
    $
    6,023
    
    
    $
    5,252
    
    
    $
    1,066Other current assets
    
    
    19,408
    
    
    
    10,013
    
    
    
    1,679
    
    
    
    313
    
    
    
    113Oil and natural gas properties, net of
accumulated depreciation, depletion,
amortization and impairment
    
    
    53,402
    
    
    
    38,869
    
    
    
    24,921
    
    
    
    3,481
    
    
    
    1,924Other property and equipment, net of
depreciation
    
    
    230
    
    
    
    252
    
    
    
    58
    
    
    
    6
    
    
    
    7Other assets
    
    
    12,663
    
    
    
    12,514
    
    
    
    13,094
    
    
    
    
    
    
    
    Total assets
    
    $
    88,091
    
    
    $
    69,136
    
    
    $
    45,775
    
    
    $
    9,052
    
    
    $
    3,110Current liabilities
    
    
    1,831
    
    
    
    4,656
    
    
    
    1,434
    
    
    
    127
    
    
    
    426Long term liabilities
    
    
    1,383
    
    
    
    2,392
    
    
    
    2,010
    
    
    
    41
    
    
    
    31Stockholders equity
    
    
    84,877
    
    
    
    62,088
    
    
    
    42,331
    
    
    
    8,884
    
    
    
    2,653Total liabilities and
stockholders equity
    
    $
    88,091
    
    
    $
    69,136
    
    
    $
    45,775
    
    
    $
    9,052
    
    
    $
    3,110
  21




---



##### Table of Contents



Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Overview
     Approximate
    
    
    Expected netExpected
    
    
    working
    
    
    capitalProject
    
    2008 wells
    
    
    interest
    
    
    required(in millions)Fetter project  Converse County, WY
    
    
    3-6
    
    
    
    70
    %
    
    $
    11-21Krejci project  Niobrara County, WY
    
    
    1-2
    
    
    
    45
    %
    
    $
    2-4Goliath project  Williams County, ND
    
    
    1-2
    
    
    
    50
    %
    
    $
    2-4Total drilling activity
    
    
    5-10
    
    
    
    
    
    
    $
    15-29
  22




---



##### Table of Contents



Liquidity and Capital Resources
     .
   23




---



##### Table of Contents



Net Cash Provided By Operating Activities
  Net Cash Used In Investing Activities
     Net Cash Provided By Financing Activities
  Results of Operations
 Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
   24




---



##### Table of Contents



Oil and Gas Operations
  Year ended December 31,2007
    
    
    2006Oil sold (barrels)
    
    
    17,267
    
    
    
    34,578Average oil price
    
    $
    64.11
    
    
    $
    54.79Oil revenue
    
    $
    1,107,054
    
    
    $
    1,894,386Gas sold (mcf)
    
    
    139,590
    
    
    
    48,149Average gas price
    
    $
    6.09
    
    
    $
    7.53Gas revenue
    
    $
    849,454
    
    
    $
    362,453Total oil and gas revenues
    
    $
    1,956,508
    
    
    $
    2,256,839Less lease operating expenses
    
    
    (646,000
    )
    
    
    (290,803
    )Less oil & gas amortization expense
    
    
    (1,021,817
    )
    
    
    (937,821
    )Less accretion of discount
    
    
    (23,767
    )
    
    
    (11,213
    )Less impairments
    
    
    
    
    
    
    (4,360,000
    )Producing revenues less direct expenses
    
    
    264,924
    
    
    
    (3,342,998
    )Less intangible asset amortization
    
    
    (180,000
    )
    
    
    (180,000
    )Less depreciation of office facilities
    
    
    (65,225
    )
    
    
    (35,412
    )Less general and administrative expenses
    
    
    (4,307,997
    )
    
    
    (4,009,019
    )Add service fee revenue and other revenues
    
    
    12,000
    
    
    
    1,530,000Income (loss) from operations
    
    $
    (4,276,298
    )
    
    $
    (6,037,429
    )Total barrels of oil equivalent (boe) sold
    
    
    40,532
    
    
    
    42,603Lease operating expense per boe sold
    
    $
    15.94
    
    
    $
    6.83Amortization expense per boe sold
    
    $
    25.21
    
    
    $
    22.01
 Impairments
   General and Administrative Expenses
   25




---



##### Table of Contents



Service Fee Revenue in 2006
  Gains on Sales in 2006 of Oil and Gas Properties
  Big Sky
    
    
    Bear Creek
    
    
    Goliath
    
    
    TotalsContract sales price
    
    $
    11,500,000
    
    
    $
    1,080,000
    
    
    $
    6,165,520
    
    
    $
    18,745,520Effective date adjustments
    
    
    (821,496
    )
    
    
    
    
    
    
    
    
    
    
    (821,496
    )Adjusted sales price
    
    
    10,678,504
    
    
    
    1,080,000
    
    
    
    6,165,520
    
    
    
    17,924,024Allocated capitalized
costs using the relative
fair market value method
required under full cost
accounting
    
    
    (6,416,650
    )
    
    
    (648,443
    )
    
    
    (3,699,461
    )
    
    
    (10,764,554
    )Recognized gains on sales
of oil and gas properties
    
    $
    4,261,854
    
    
    $
    431,557
    
    
    $
    2,466,059
    
    
    $
    7,159,470
 Investment Income
  Income Taxes
  Dividends
  Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
   26




---



##### Table of Contents



Oil and Gas Operations
  Year ended December 31,2006
    
    
    2005Oil sold (barrels)
    
    
    34,578
    
    
    
    78,954Average oil price
    
    $
    54.79
    
    
    $
    53.89Oil revenue
    
    $
    1,894,386
    
    
    $
    4,254,944Gas sold (mcf)
    
    
    48,149
    
    
    
    59,733Average gas price
    
    $
    7.53
    
    
    $
    7.31Gas revenue
    
    $
    362,453
    
    
    $
    436,437Total oil and gas revenues
    
    $
    2,256,839
    
    
    $
    4,691,381Less lease operating expenses
    
    
    (290,803
    )
    
    
    (246,134
    )Less oil & gas amortization expense
    
    
    (937,821
    )
    
    
    (1,406,856
    )Less accretion of discount
    
    
    (11,213
    )
    
    
    (5,608
    )Less impairments
    
    
    (4,360,000
    )
    
    
    Producing revenues less direct expenses
    
    
    (3,342,998
    )
    
    
    3,032,783Less intangible asset amortization
    
    
    (180,000
    )
    
    
    (120,000
    )Less depreciation of office facilities
    
    
    (35,412
    )
    
    
    (5,555
    )Less general and administrative expenses
    
    
    (4,009,019
    )
    
    
    (2,032,256
    )Add service fee revenue
    
    
    1,530,000
    
    
    
    Income (loss) from operations
    
    $
    (6,037,429
    )
    
    $
    874,972Total barrels of oil equivalent (boe)
sold
    
    
    42,603
    
    
    
    88,910Lease operating expense per boe sold
    
    $
    6.83
    
    
    $
    2.77Amortization expense per boe sold
    
    $
    22.01
    
    
    $
    15.82
 General and administrative expenses
  Investment Income
  Income Taxes
   27




---



##### Table of Contents



Preferred Dividends
  Critical Accounting Policies and Estimates
 Full Cost Accounting Method
  Revenue Recognition
  Natural Gas Imbalances
   28




---



##### Table of Contents



Asset Retirement Obligation
  Income Taxes
  Stock-based Compensation
 Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 Recently Issued Accounting Pronouncements
 Accounting for Certain Hybrid Financial
Instruments
 Accounting for Servicing of Financial Assets
 Accounting for Uncertainty in Income
Taxes
  29




---



##### Table of Contents



Fair Value Measurements
 Employers Accounting for Defined Benefit
Pensions and other Postretirement Plans
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Non-controlling Interests in Consolidated Financial
Statements  an amendment of ARB 51
 Business Combinations
 
 Item 7A: Quantitative and Qualitative Disclosures about Market Risk
 Commodity Price Risk
  Operating Cost Risk
    30




---



##### Table of Contents



Interest Rate Risk
 Our exposure to market risks for changes in interest rates relates primarily to our $17,250,000 in short-term
investments in auction market preferred stock or ARMS, and the recent borrowing of $8,600,000 secured by those ARMS.
Both the ARMS dividend rate and the relate notes interest rate are factors of short-term index rates, such as LIBOR.
An immediate 20% increase in short-term interest rates would have an insignificant increase in dividend income and be
substantially offset by the increase in interest expense on the recent borrowing.  31




---



##### Table of Contents



Item 8: Financial Statements and Supplementary Data
 AMERICAN OIL & GAS, INC.
INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    F-3Consolidated Statements of Operations for years ended
December 31, 2007, 2006 and 2005
    
    
    F-4Consolidated Statements of Cash Flows for years ended
December 31, 2007, 2006 and 2005
    
    
    F-5Consolidated Statements of Stockholders Equity and
Comprehensive Income for years ended December 31, 2007, 2006
and 2005
    
    
    F-6Notes to Consolidated Financial Statements
    
    F-7 to F-27
 F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors

American Oil & Gas, Inc. We have audited the consolidated balance sheets of American Oil & Gas, Inc. and subsidiaries as of December 31, 2007
and 2006, and the related consolidated statements of operations, comprehensive income, stockholders equity and cash
flows for each of the three years in the period ended December 31, 2007. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of American Oil & Gas, Inc. as of December 31, 2007 and 2006, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally
accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), American Oil & Gas, Inc.s internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) and our report dated March 14, 2008 expressed an unqualified opinion on the
effectiveness of American Oil & Gas, Inc.s internal control over financial reporting. /s/ HEIN& ASSOCIATES LLP Denver, Colorado

March 14, 2008  F-2




---



##### Table of Contents



AMERICAN OIL & GAS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 AS OF DECEMBER 31, 2007 AND 2006
 2007
    
    
    2006ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    2,388,219
    
    
    $
    7,488,474Short-term investments
    
    
    18,302,900
    
    
    
    8,456,400Trade receivables
    
    
    566,789
    
    
    
    336,188Receivable for sale of oil and gas properties
    
    
    
    
    
    
    777,461Prepaid expenses
    
    
    149,440
    
    
    
    402,287Inventory
    
    
    40,904
    
    
    
    40,904Current deferred tax assets
    
    
    347,658
    
    
    
    Total current assets
    
    
    21,795,910
    
    
    
    17,501,714PROPERTY AND EQUIPMENT, AT COSTOil and gas properties, full cost method (including
unevaluated costs of $40,937,747 at 12/31/07 and
$33,263,390 at 12/31/06)
    
    
    56,987,732
    
    
    
    41,424,253Other property and equipment
    
    
    338,614
    
    
    
    295,485Total property and equipment
    
    
    57,326,346
    
    
    
    41,719,738Less accumulated depreciation, depletion and amortization
    
    
    (3,694,805
    )
    
    
    (2,598,581
    )Net property and equipment
    
    
    53,631,541
    
    
    
    39,121,157INTANGIBLE AND OTHER ASSETSGoodwill
    
    
    11,670,468
    
    
    
    11,670,468Other intangible asset
    
    
    420,000
    
    
    
    600,000Drilling prepayments
    
    
    542,876
    
    
    
    233,058Other assets
    
    
    30,385
    
    
    
    10,000$
    88,091,180
    
    
    $
    69,136,397LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities
    
    $
    1,568,806
    
    
    $
    1,964,000Asset retirement obligations
    
    
    
    
    
    
    40,321Deferred income taxes
    
    
    
    
    
    
    2,172,785Preferred dividends payable
    
    
    261,648
    
    
    
    479,342Total current liabilities
    
    
    1,830,454
    
    
    
    4,656,448LONG-TERM LIABILITIESAsset retirement obligations
    
    
    323,369
    
    
    
    194,947Deferred income taxes
    
    
    1,060,003
    
    
    
    2,197,329Total long-term liabilities
    
    
    1,383,372
    
    
    
    2,392,276COMMITMENTS AND CONTINGENCIES(Note 13)STOCKHOLDERS EQUITYSeries AA preferred stock, $.001 par value, authorized
400,000 shares; issued and outstanding: 138,000 shares
at 12/31/07 and 250,000 shares at 12/31/06; redemption
value of $7,713,648 at 12/31/07 and $13,979,342 at
12/31/06
    
    
    138
    
    
    
    250Common stock, $.001 par value, authorized 100,000,000
shares; issued and outstanding shares: 46,434,063 at
12/31/07 and 38,927,114 at 12/31/06
    
    
    46,434
    
    
    
    38,927Additional paid-in capital
    
    
    89,426,687
    
    
    
    59,174,874Accumulated deficit
    
    
    (4,595,905
    )
    
    
    (799,993
    )Accumulated other comprehensive income
    
    
    
    
    
    
    3,673,615Total equity
    
    
    84,877,354
    
    
    
    62,087,673$
    88,091,180
    
    
    $
    69,136,397
   F-3




---



##### Table of Contents



AMERICAN OIL & GAS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
 2007
    
    
    2006
    
    
    2005REVENUESOil and gas sales
    
    $
    1,956,508
    
    
    $
    2,256,839
    
    
    $
    4,691,381Service fee and other revenues
    
    
    12,000
    
    
    
    1,530,000
    
    
    
    Total revenues
    
    
    1,968,508
    
    
    
    3,786,839
    
    
    
    4,691,381OPERATING EXPENSESLease operating
    
    
    646,000
    
    
    
    290,803
    
    
    
    246,134General and administrative
    
    
    4,307,997
    
    
    
    4,009,019
    
    
    
    2,032,256Depletion, depreciation and amortization
    
    
    1,267,042
    
    
    
    1,153,233
    
    
    
    1,532,411Accretion of asset retirement obligation
    
    
    23,767
    
    
    
    11,213
    
    
    
    5,608Impairments
    
    
    
    
    
    
    4,360,000
    
    
    
    Total operating expenses
    
    
    6,244,806
    
    
    
    9,824,268
    
    
    
    3,816,409INCOME (LOSS) FROM OPERATIONS
    
    
    (4,276,298
    )
    
    
    (6,037,429
    )
    
    
    874,972OTHER INCOMEGains on sales of oil and gas properties
    
    
    
    
    
    
    7,159,470
    
    
    
    Gain (loss) on sale of securities
    
    
    (14,518
    )
    
    
    
    
    
    
    Impairment of securities investment
    
    
    (952,100
    )
    
    
    
    
    
    
    Interest expense
    
    
    (6,162
    )
    
    
    
    
    
    
    Investment income
    
    
    1,020,712
    
    
    
    392,930
    
    
    
    204,244Total other income
    
    
    47,932
    
    
    
    7,552,400
    
    
    
    204,244INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (4,228,366
    )
    
    
    1,514,971
    
    
    
    1,079,216Income tax expense current
    
    
    
    
    
    
    
    
    
    
    Income tax expense (reduction) deferred
    
    
    (1,484,984
    )
    
    
    303,748
    
    
    
    46,245NET INCOME (LOSS)
    
    
    (2,743,382
    )
    
    
    1,211,223
    
    
    
    1,032,971Less dividends on preferred stock
    
    
    (602,530
    )
    
    
    (1,080,000
    )
    
    
    (479,342
    )Less deemed dividends on warrant extensions
    
    
    (450,000
    )
    
    
    
    
    
    
    NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
    
    $
    (3,795,912
    )
    
    $
    131,223
    
    
    $
    553,629NET INCOME (LOSS) PER COMMON SHARE:Basic
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    0.02Diluted
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    0.02Weighted average common shares outstanding:Basic
    
    
    44,383,861
    
    
    
    37,428,506
    
    
    
    34,148,065Diluted
    
    
    44,383,861
    
    
    
    38,142,011
    
    
    
    34,955,624
   F-4




---



##### Table of Contents



AMERICAN OIL & GAS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
 2007
    
    
    2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    (2,743,382
    )
    
    $
    1,211,223
    
    
    $
    1,032,971Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:Gains on sales of oil and gas properties
    
    
    
    
    
    
    (7,159,470
    )
    
    
    Service fee received in the form of a convertible note
    
    
    
    
    
    
    (1,530,000
    )
    
    
    Depletion, depreciation and amortization
    
    
    1,267,042
    
    
    
    1,153,233
    
    
    
    1,532,411Accretion of asset retirement obligation
    
    
    23,767
    
    
    
    11,213
    
    
    
    5,608Deferred income taxes
    
    
    (1,484,984
    )
    
    
    303,748
    
    
    
    46,245Share-based compensation
    
    
    1,091,677
    
    
    
    1,522,219
    
    
    
    413,764Impairment provision
    
    
    
    
    
    
    4,360,000
    
    
    
    Unrealized loss on investment in securities
    
    
    952,100
    
    
    
    
    
    
    
    Net loss on sales of securities
    
    
    14,518
    
    
    
    
    
    
    
    Changes in current assets and current liabilities:Decrease (increase) in trade receivables
    
    
    (230,601
    )
    
    
    1,145,355
    
    
    
    (1,222,695
    )Decrease (increase) in yard inventory
    
    
    
    
    
    
    
    
    
    
    (40,904
    )Decrease (increase) in advances and prepaid expenses
    
    
    252,847
    
    
    
    (245,812
    )
    
    
    (745,425
    )Increase (decrease) in accounts payable and accrued
liabilities
    
    
    (314,090
    )
    
    
    596,935
    
    
    
    845,933Net cash provided (used) by operating activities
    
    
    (1,171,106
    )
    
    
    1,368,644
    
    
    
    1,867,908CASH FLOWS FROM INVESTING ACTIVITIESCash purchases of short-term investments in securities
    
    
    (28,750,000
    )
    
    
    
    
    
    
    Cash proceeds from sale of short-term investments
    
    
    12,360,482
    
    
    
    
    
    
    
    Cash proceeds from sales of oil and gas properties
    
    
    777,461
    
    
    
    16,066,563
    
    
    
    Cash paid for oil and gas properties
    
    
    (15,841,067
    )
    
    
    (15,913,075
    )
    
    
    (14,091,540
    )Cash paid for office equipment and software
    
    
    (43,129
    )
    
    
    (229,178
    )
    
    
    (55,913
    )Drilling prepayments and other long-term assets
    
    
    (330,203
    )
    
    
    (10,000
    )
    
    
    Net cash used in investing activities
    
    
    (31,826,456
    )
    
    
    (85,690
    )
    
    
    (14,147,453
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from sale of preferred stock
    
    
    
    
    
    
    
    
    
    
    13,499,927Proceeds from sale of common stock
    
    
    28,506,602
    
    
    
    
    
    
    
    Cash paid for stock offering and issuance costs
    
    
    (1,956,465
    )
    
    
    (2,283
    )
    
    
    (584,980
    )Proceeds from warrant exercise
    
    
    705,025
    
    
    
    55,508
    
    
    
    152,600Proceeds from employee stock option exercise
    
    
    642,145
    
    
    
    24,800
    
    
    
    Proceeds from stock option exercises by a consultant
    
    
    
    
    
    
    104,673
    
    
    
    Preferred dividends paid in cash
    
    
    
    
    
    
    
    
    
    
    (18,864
    )Cash received from acquired company
    
    
    
    
    
    
    
    
    
    
    1,795Net cash provided by financing activities
    
    
    27,897,307
    
    
    
    182,698
    
    
    
    13,050,478NET INCREASE (DECREASE) IN CASH
    
    
    (5,100,255
    )
    
    
    1,465,652
    
    
    
    770,933CASH, BEGINNING OF YEAR
    
    
    7,488,474
    
    
    
    6,022,822
    
    
    
    5,251,889CASH, END OF YEAR
    
    $
    2,388,219
    
    
    $
    7,488,474
    
    
    $
    6,022,822
   F-5




---



##### Table of Contents



AMERICAN OIL & GAS, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
 FOR YEARS ENDED DECEMBER 31 2007, 2006 AND 2005
 Additional
    
    
    Comprehensive IncomePreferred
    
    
    Stock
    
    
    Common
    
    
    Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Accumulated
    
    
    TotalShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Other Income
    
    
    EquityDecember 31, 2004 Balances
    
    
    67,000
    
    
    $
    67
    
    
    
    29,153,702
    
    
    $
    29,154
    
    
    $
    10,339,039
    
    
    $
    (1,484,001
    )
    
    
    
    
    
    
    8,884,259Series A Preferred Stock conversion
    
    
    (67,000
    )
    
    
    (67
    )
    
    
    670,000
    
    
    
    670
    
    
    
    (603
    )
    
    
    
    
    
    
    
    
    
    
    Sale of Series AA Preferred Stock
    
    
    250,000
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    13,499,677
    
    
    
    
    
    
    
    
    
    
    
    13,499,927Costs of preferred stock offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,160,524
    )
    
    
    
    
    
    
    
    
    
    
    (1,160,524
    )Warrants issued for placement costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    575,544
    
    
    
    
    
    
    
    
    
    
    
    575,544Stock issued for Tower merger
    
    
    
    
    
    
    
    
    
    
    5,800,000
    
    
    
    5,800
    
    
    
    15,190,200
    
    
    
    
    
    
    
    
    
    
    
    15,196,000Shares issued for oil prospect
    
    
    
    
    
    
    
    
    
    
    675,000
    
    
    
    675
    
    
    
    4,184,325
    
    
    
    
    
    
    
    
    
    
    
    4,185,000Shares issued to Director
    
    
    
    
    
    
    
    
    
    
    37,500
    
    
    
    37
    
    
    
    195,212
    
    
    
    
    
    
    
    
    
    
    
    195,249Warrants exercised at $1.09 / share
    
    
    
    
    
    
    
    
    
    
    140,000
    
    
    
    140
    
    
    
    152,460
    
    
    
    
    
    
    
    
    
    
    
    152,600Options for investor relations service
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,264
    
    
    
    
    
    
    
    
    
    
    
    77,264Warrants for oil project consulting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,564
    
    
    
    
    
    
    
    
    
    
    
    31,564Deferred compensation recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,250
    
    
    
    
    
    
    
    
    
    
    
    141,250Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,032,971
    
    
    
    
    
    
    
    1,032,971Dividends, Series A Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (844
    )
    
    
    
    
    
    
    (844
    )Accrued dividends, Series AA Pref.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (479,342
    )
    
    
    
    
    
    
    (479,342
    )December 31, 2005 Balances
    
    
    250,000
    
    
    $
    250
    
    
    
    36,476,202
    
    
    $
    36,476
    
    
    $
    43,225,408
    
    
    $
    (931,216
    )
    
    
    
    
    
    $
    42,330,918Accrued dividends, Series AA Pref.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,080,000
    )
    
    
    
    
    
    
    (1,080,000
    )Series AA preferred stock dividends
paid in common stock
    
    
    
    
    
    
    
    
    
    
    239,493
    
    
    
    240
    
    
    
    1,079,760
    
    
    
    
    
    
    
    
    
    
    
    1,080,000Shares issued for oil and gas properties
    
    
    
    
    
    
    
    
    
    
    2,050,000
    
    
    
    2.050
    
    
    
    13,074,667
    
    
    
    
    
    
    
    
    
    
    
    13,076,717Shares to new employees
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    20
    
    
    
    96,280
    
    
    
    
    
    
    
    
    
    
    
    96,300Stock option exercised by employee
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    10
    
    
    
    24,790
    
    
    
    
    
    
    
    
    
    
    
    24,800Stock options exercised by consultant
    
    
    
    
    
    
    
    
    
    
    32,010
    
    
    
    32
    
    
    
    104,641
    
    
    
    
    
    
    
    
    
    
    
    104,673Warrants exercised
    
    
    
    
    
    
    
    
    
    
    46,004
    
    
    
    46
    
    
    
    55,462
    
    
    
    
    
    
    
    
    
    
    
    55,508Shares issued for consulting services
    
    
    
    
    
    
    
    
    
    
    26,405
    
    
    
    26
    
    
    
    123,285
    
    
    
    
    
    
    
    
    
    
    
    123,311Deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    27,000
    
    
    
    27
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    Deferred compensation recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,820
    
    
    
    
    
    
    
    
    
    
    
    71,820Stock option compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,230,788
    
    
    
    
    
    
    
    
    
    
    
    1.230.788Warrant issued for properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,000
    
    
    
    
    
    
    
    
    
    
    
    88,000Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,211,223Unrealized gain on short-term
investment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,673,615Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,884,838December 31, 2006 Balances
    
    
    250,000
    
    
    $
    250
    
    
    
    38,927,114
    
    
    $
    38,927
    
    
    $
    59,174,874
    
    
    $
    (799,993
    )
    
    $
    3,673,615
    
    
    $
    62,087,673Conversion of preferred to common
    
    
    (112,000
    )
    
    
    (112
    )
    
    
    1,008,000
    
    
    
    1,008
    
    
    
    (896
    )
    
    
    
    
    
    
    
    
    
    
    Accrued dividends, Series AA Pref.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (602,530
    )
    
    
    
    
    
    
    (602,530
    )Series AA preferred stock dividends
paid in common stock
    
    
    
    
    
    
    
    
    
    
    131,155
    
    
    
    131
    
    
    
    820,093
    
    
    
    
    
    
    
    
    
    
    
    820,224Sale of stock at $4.75/share for cash
    
    
    
    
    
    
    
    
    
    
    6,001,390
    
    
    
    6,001
    
    
    
    28,500,601
    
    
    
    
    
    
    
    
    
    
    
    28,506,602Cash paid for stock offering costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,956,465
    )
    
    
    
    
    
    
    
    
    
    
    (1,956,465
    )Exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    134,300
    
    
    
    134
    
    
    
    642,011
    
    
    
    
    
    
    
    
    
    
    
    642,145Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    117,504
    
    
    
    118
    
    
    
    704,907
    
    
    
    
    
    
    
    
    
    
    
    705,025Deemed dividends on warrant extensions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,000
    
    
    
    (450,000
    )
    
    
    
    
    
    
    Share-based compensation:Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    914,301
    
    
    
    
    
    
    
    
    
    
    
    914,301Deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    109,600
    
    
    
    110
    
    
    
    (110
    )
    
    
    
    
    
    
    
    
    
    
    Accrued stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,176
    
    
    
    
    
    
    
    
    
    
    
    148,176Common stock granted & issued
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    5
    
    
    
    29,195
    
    
    
    
    
    
    
    
    
    
    
    29,200Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,743,382
    )Decline in unrealized gain on short-
term investment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,673,615
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,416,997
    )December 31, 2007 Balances
    
    
    138,000
    
    
    $
    138
    
    
    
    46,434,063
    
    
    $
    46,434
    
    
    $
    89,426,687
    
    
    $
    (4,595,905
    )
    
    $
    
    
    
    $
    84,877,354
   F-6




---



##### Table of Contents



AMERICAN OIL & GAS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005
 NOTE 1  ORGANIZATION AND BASIS OF PRESENTATION
 ORGANIZATION
      BASIS OF PRESENTATION
  
    
    estimates of proven (i.e., reasonably certain) oil and gas reserve quantities, which
affect the calculations of amortization and impairment of capitalized costs of oil and
gas properties;
    
    estimates of the fair value of oil and gas properties we own, particularly
properties that we have not yet explored, or fully explored, by drilling and completing
wells;
    
    estimates of the fair value of stock options at date of grant; and
    
    the assumption required by GAAP that proved reserves and generally proved reserve
value for measuring capitalized cost impairment be based on the prices of oil and gas
at the end of the reporting period.
   F-7




---



##### Table of Contents



NOTE 2  SIGNIFICANT ACCOUNTING POLICIES
 CASH AND CASH EQUIVALENTS 
 FAIR VALUE 
 SHORT-TERM INVESTMENTS 
 ACCOUNTS RECEIVABLE AND CREDIT POLICIES 
 ASSET RETIREMENT OBLIGATIONS 
  2007
    
    
    2006Asset retirement obligation beginning of year
    
    $
    235,268
    
    
    $
    117,011Liabilities incurred
    
    
    162,733
    
    
    
    81,831Liabilities settled
    
    
    (22,898
    )
    
    
    (7,745
    )Accretion
    
    
    23,767
    
    
    
    11,213Revisions in estimated liabilities
    
    
    (75,501
    )
    
    
    32,958Asset retirement obligation end of year
    
    $
    323,369
    
    
    $
    235,268Current portion of obligation end of year
    
    $
    
    
    
    $
    40,321
 OIL AND GAS PROPERTIES 
  F-8




---



##### Table of Contents



OTHER PROPERTY AND EQUIPMENT 
 IMPAIRMENT  Accounting for the
Impairment and Disposal of Long-Lived Assets,
 BUSINESS COMBINATIONS Business Combinations
  F-9




---



##### Table of Contents



GOODWILL Goodwill and Other Intangible
Assets
  OTHER INTANGIBLE ASSETS
 INCOME TAXES Accounting
for Income Taxes
 REVENUE RECOGNITION AND GAS BALANCING
 NET INCOME (LOSS) PER SHARE
 CONCENTRATION OF CREDIT RISK 
 SHARE-BASED COMPENSATION  Share-Based
Payment
   F-10




---



##### Table of Contents



OFF BALANCE SHEET ARRANGEMENTS 
 SEGMENT REPORTING  Disclosure about Segments of an Enterprise and Related
Information
 COMPREHENSIVE INCOME 
 RECLASSIFICATION 
 RECENT ACCOUNTING PRONOUNCEMENTS
 Accounting for Certain Hybrid Financial
Instruments
 Accounting for Servicing of Financial Assets
 Accounting for Uncertainty in Income
Taxes
 Fair Value Measurements
 Employers Accounting for Defined Benefit
Pensions and other Postretirement Plans
  F-11




---



##### Table of Contents



The Fair Value Option for Financial Assets and
Financial Liabilities
 Non-controlling Interests in Consolidated Financial
Statements  an amendment of ARB 51
 Business Combinations
 NOTE 3  PROPERTY AND EQUIPMENT
  2007
    
    
    2006
    
    
    2005Oil and gas properties, full cost methodUnevaluated costs, not subject to amortization
    
    $
    40,937,747
    
    
    $
    33,263,390
    
    
    $
    17,843,133Evaluated costs
    
    
    15,774,514
    
    
    
    7,958,908
    
    
    
    8,600,696Asset retirement costs
    
    
    275,471
    
    
    
    201,955
    
    
    
    104,09356,987,732
    
    
    
    41,424,253
    
    
    
    26,547,922Furniture, equipment and software
    
    
    338,614
    
    
    
    295,485
    
    
    
    68,02357,326,346
    
    
    
    41,719,738
    
    
    
    26,615,945Less accumulated depreciation, depletion and
amortization
    
    
    (3,694,805
    )
    
    
    (2,598,581
    )
    
    
    (1,636,246
    )Property and equipment
    
    $
    53,631,541
    
    
    $
    39,121,157
    
    
    $
    24,979,699
 Unevaluated Oil and Gas Properties
  Net CostsYear Incurred
    
    IncurredYear ended December 31, 2007
    
    $
    13,026,504Year ended December 31, 2006
    
    
    15,308,590Year ended December 31, 2005
    
    
    11,957,919Prior to 2005
    
    
    644,734$
    40,937,747
   F-12




---



##### Table of Contents



Approximate Acres 12/31/07Capitalized Costs (in millions)
    
    
    (Unaudited)Project (State)
    
    12/31/06
    
    
    Net Change
    
    
    12/31/07
    
    
    Gross
    
    
    Lease Net*
    
    
    Our Net *Fetter Project, Powder River Basin (WY)
    
    $
    18.7
    
    
    $
    (4.3
    )
    
    $
    14.4
    
    
    
    53,125
    
    
    
    50,730
    
    
    
    34,811West Douglas Project, Powder River Basin
(WY)
    
    
    3.7
    
    
    
    0.5
    
    
    
    4.2
    
    
    
    53,808
    
    
    
    49,743
    
    
    
    20,722Douglas Project, Powder River Basin (WY)
    
    
    0.8
    
    
    
    0.1
    
    
    
    0.9
    
    
    
    14,231
    
    
    
    13,912
    
    
    
    11,636Krejci Oil Project, Powder River Basin (WY)
    
    
    2.3
    
    
    
    6.9
    
    
    
    9.2
    
    
    
    129,314
    
    
    
    124,565
    
    
    
    48,743Goliath Project, Williston Basin (ND)
    
    
    6.6
    
    
    
    0.4
    
    
    
    7.0
    
    
    
    77,508
    
    
    
    59,117
    
    
    
    29,559Other projects
    
    
    1.2
    
    
    
    4.0
    
    
    
    5.2
    
    
    
    167,860
    
    
    
    151,055
    
    
    
    74,190Total unevaluated costs and acres
    
    $
    33.3
    
    
    $
    7.6
    
    
    $
    40.9
    
    
    
    495,846
    
    
    
    449,122
    
    
    
    219,661
 *
    
    Lease net acres represent the proportion of gross surface acreage for which we and our working
interest partners have leased the underlying mineral rights for exploration and production. Our
net acres amount is the product of the lease net acres times our average effective working
interest percentage. For the Fetter project, the average effective working interest is that which
we effectively will own once RTA earns its 25% working interest in Fetter unevaluated acreage by
completing two wells drilled at Fetter in 2007. Two wells have been completed, and we expect RTA
to finish completion of the third well by April 30, 2008. The West Douglas Project acreage extends
to its east within four miles of the Fetter Project acreage. The Douglas Project acreage lies
largely in the townships immediately north of the Fetter acreage. After RTA earns its 50%
working interest in West Douglas acreage by completing a well drilled in late 2007, our effective
working interest in West Douglas acreage will average 41.7%.      F-13




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Property acquisition costs, unproved properties
    
    $
    4,395,467
    
    
    $
    19,887,879
    
    
    $
    13,906,210Property acquisition costs, proved properties
    
    
    
    
    
    
    163,569
    
    
    
    210,000Exploration costs
    
    
    11,364,497
    
    
    
    9,285,354
    
    
    
    7,011,666Asset retirement costs
    
    
    73,516
    
    
    
    86,649
    
    
    
    70,701Development costs
    
    
    
    
    
    
    691,626
    
    
    
    2,932,459$
    15,833,480
    
    
    $
    30,115,077
    
    
    $
    24,131,036
   Significant Property Sales in 2006
     Big Sky
    
    
    Bear Creek
    
    
    Goliath
    
    
    TotalsContract sales price
    
    $
    11,500,000
    
    
    $
    1,080,000
    
    
    $
    6,165,520
    
    
    $
    18,745,520Effective date adjustments
    
    
    (821,496
    )
    
    
    
    
    
    
    
    
    
    
    (821,496
    )Adjusted sales price
    
    
    10,678,504
    
    
    
    1,080,000
    
    
    
    6,165,520
    
    
    
    17,924,024Allocated capitalized
costs using the relative
fair market value method
required under full cost
accounting
    
    
    (6,416,650
    )
    
    
    (648,443
    )
    
    
    (3,699,461
    )
    
    
    (10,764,554
    )Recognized gains on sales
of oil and gas properties
    
    $
    4,261,854
    
    
    $
    431,557
    
    
    $
    2,466,059
    
    
    $
    7,159,470
  F-14




---



##### Table of Contents



Significant Property Acquisitions in 2006
    Impairment of Oil and Gas Properties
   Amortization Rate
   2007
    
    
    2006
    
    
    2005Amortization of costs for evaluated oil and gas properties
    
    $
    1,021,817
    
    
    $
    937,821
    
    
    $
    1,406,856Depreciation of office equipment, furniture and software
    
    
    65,225
    
    
    
    35,412
    
    
    
    5,555Amortization of Other Intangible Asset (Note 5)
    
    
    180,000
    
    
    
    180,000
    
    
    
    120,000Total DD&A expense
    
    $
    1,267,042
    
    
    $
    1,153,233
    
    
    $
    1,532,411
  F-15




---



##### Table of Contents



NOTE 4  SHORT-TERM INVESTMENTS
  As of December 31,2007
    
    
    2006PetroHunter common shares owned
    
    
    4,445,000
    
    
    
    5,220,000Average cost per share
    
    $
    0.43
    
    
    $
    0.50Fair value per share
    
    $
    0.22
    
    
    $
    1.62Carrying value (at fair value)
    
    $
    977,900
    
    
    $
    8,456,400Auction-rate securities at fair value
    
    
    17,325,000
    
    
    
    Total, short-term investments
    
    $
    18,302,900
    
    
    $
    8,456,400
 PetroHunter Common Stock
   Auction-rate Securities
 At December 31, 2007, we had invested in twelve AAA credit-rated, variable-coupon preferred stocks in closed-end
mutual funds. These auction market preferred shares (AMPS) normally provide liquidity via an auction process
occurring every 7 days or every 28 days, at which time the dividend rate is reset. Dividends on these securities are
paid on the day after the scheduled auction date. We classified these auction-rate securities at December 31, 2007 as
trading securities under SFAS 115. Since these securities trade at their par values, no gains or losses are recorded.
At December 31, 2007, the fair value of these investments approximated the cost at which we acquired the securities. Recently, these auctions and similar auctions have had insufficient bids to buy the AMPS from those wishing to
sell, as further discussed in Note 14, Subsequent Events. F-16




---



##### Table of Contents



NOTE 5  GOODWILL AND OTHER INTANGIBLE ASSET
   NOTE 6  INCOME TAXES
 We account for income taxes under the provisions of SFAS No. 109, Accounting for Income Taxes,which provides
for an asset and liability approach in accounting for income taxes. Under this approach, deferred tax assets and
liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributable
to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts calculated for income tax purposes.  2007
    
    
    2006
    
    
    2005Current taxes
    
    $
    
    
    
    $
    
    
    
    $
    Deferred taxes
    
    
    (1,484,984
    )
    
    
    303,748
    
    
    
    46,245Valuation allowance
    
    
    
    
    
    
    
    
    
    
    Income tax expense (reduction)
    
    $
    (1,484,984
    )
    
    $
    303,748
    
    
    $
    46,245Income (loss) before income taxes
    
    $
    (4,228,366
    )
    
    $
    1,514,971
    
    
    $
    1,079,216Effective income tax rate
    
    
    35.1
    %
    
    
    20.0
    %
    
    
    4.3
    %
  2007
    
    
    2006
    
    
    2005Federal statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    1.5
    %
    
    
    3.1
    %
    
    
    3.5
    %Permanent differences:Compensation using qualified stock options
    
    
    (3.3
    %)Excess percentage depletion
    
    
    1.5
    %
    
    
    (22.0
    %)
    
    
    Other
    
    
    0.1
    %
    
    
    7.7
    %
    
    
    2.9
    %Change in average state tax rate
    
    
    0.3
    %
    
    
    (3.8
    %)
    
    
    Increase (decrease) in valuation allowance
    
    
    
    
    
    
    
    
    
    
    (37.1
    %)Effective income tax rate
    
    
    35.1
    %
    
    
    20.0
    %
    
    
    4.3
    %
  F-17




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Current deferred tax asset (liability):Unrealized gain (loss) on investment in PetroHunter (Note
4)
    
    $
    347,658
    
    
    $
    (2,172,785
    )
    
    $
    Less asset valuation allowance
    
    
    
    
    
    
    
    
    
    
    Current deferred tax asset (liability)
    
    $
    347,658
    
    
    $
    (2,172,785
    )
    
    $
    Long-term deferred tax assets (liabilities):Deferred tax assets:Federal and state net operating loss carryovers
    
    $
    5,731,713
    
    
    $
    1,219,868
    
    
    $
    1,462,000Oil and gas property amortization
    
    
    454,771
    
    
    
    753,000
    
    
    
    443,000Compensation using non-qualified stock options
    
    
    341,452
    
    
    
    118,369
    
    
    
    29,000Other
    
    
    
    
    
    
    88,080
    
    
    
    6,527,936
    
    
    
    2,179,317
    
    
    
    1,934,000Less: valuation allowance
    
    
    
    
    
    
    
    
    
    
    Long-term deferred tax asset
    
    $
    6,527,936
    
    
    $
    2,179,317
    
    
    $
    1,934,000Deferred tax liabilities:Intangible drilling costs and other exploration costs
capitalized for financial reporting purposes
    
    $
    (7,572,033
    )
    
    $
    (4,376,646
    )
    
    $
    (3,530,323
    )Other
    
    
    (15,906
    )
    
    
    
    
    
    
    (297,258
    )Total long-term deferred tax liabilities
    
    
    (7,587,939
    )
    
    
    (4,376,646
    )
    
    
    (3,827,581
    )Long-term deferred tax asset
    
    
    6,527,936
    
    
    
    2,179,317
    
    
    
    1,934,000Net long-term deferred tax asset (liability)
    
    $
    (1,060,003
    )
    
    $
    (2,197,329
    )
    
    $
    (1,893,581
    )
  We file annual US federal income tax returns and have filed annual income tax returns for the states of Colorado,
Montana, North Dakota and Utah. We primarily do business in Wyoming but Wyoming does not impose corporate income
taxes. We believe we are no longer subject to income tax examinations by tax authorities for years before 2003 for
Colorado and for 2004 for all other returns. Our income tax returns and supporting records have never been examined by
tax authorities. On January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes(FIN 48). We found no
significant uncertain tax positions as of any date in 2007. Our policy is to recognize accrued interest related to unrecognized tax benefits in interest expense and to
recognize tax penalties in operating expense. However, given our substantial net operating loss carryforwards at the
federal and state levels, we do not anticipate any interest expense or penalties charged for any examining agents tax
adjustments of returns prior to 2007 since such adjustments would very likely simply reduce our net operating loss
carryforwards. NOTE 7  ADOPTION OF SFAS 123(R) SHARE-BASED PAYMENT
 Share-Based Payment,
     F-18




---



##### Table of Contents



2005Net income (loss)  as reported
    
    $
    553,629Add stock based compensation included in reported net loss
    
    
    413,764Deduct stock based compensation expense determined under the fair value method
    
    
    (841,566
    )Pro forma net loss
    
    $
    125,827Net income (loss) per common share  Basic:As reported
    
    $
    0.02Pro forma
    
    $
    Net income (loss) per common share  Diluted:As reported
    
    $
    0.02Pro forma
    
    $
    
  2007
    
    2006
    
2005Modified
    
    Black-
    
    Black-Pricing Model:
    
    Binomial
    
    Scholes
    
    ScholesExpected option life (in years)
    
    4-5
    
    5-8
    
    5.0Risk-free interest rate
    
    4.7%-5.1%
    
    4.5% to 5.2%
    
    2.6% to 4.5%Dividend yield
    
    0%
    
    N/A
    
    N/AAnnual Volatility over option life
    
    35%
    
    33% to 63%
    
    47% to 78%Volatility in black-out periods
    
    0%
    
    33% to 63%
    
    47% to 78%Pre-vesting forfeiture rate
    
    0%
    
    0%
    
    0%Intrinsic value/share that urges
exercise
    
    $2.00 to $2.16
    
    n/a for this model
    
    n/a for this model
   NOTE 8  STOCKHOLDERS EQUITY
 PREFERRED STOCK
   F-19




---



##### Table of Contents



Series AA Convertible Preferred Stock
    Series A Convertible Preferred Stock
  COMMON STOCK
  
    
    On September 1, 2006, we issued 2,050,000 shares of our common stock to SunStone Oil
and Gas, LLC in exchange for Sunstones 25% working interests in the Fetter project,
increasing our Fetter ownership interests from 67.5% to 92.5%.
    
    During 2005 we issued 37,500 shares and during 2004 we issued 50,000 shares of our
common stock to a Director for serving as Director, Designated Financial Expert and as
Chairman of the Audit Committee. The shares were paid to a company wholly owned by the
Director, and the shares were valued at $195,249 and $85,126, respectively, based on
the non-discounted trading price of our common stock as of the date of issuance.
 WARRANTS
    F-20




---



##### Table of Contents



Common
    
    
    Exercise
    
    
    ExpirationIssue Date
    
    Shares
    
    
    Price
    
    
    DateJuly 22, 2005
    
    
    554,376
    
    
    $
    6.00
    
    
    June 30, 2008July 22, 2005
    
    
    281,250
    
    
    $
    6.00
    
    
    July 21, 2008September 15, 2003
    
    
    20,000
    
    
    $
    1.15
    
    
    September 15, 2008July 23, 2003 to September 24, 2003
    
    
    54,850
    
    
    $
    0.75
    
    
    July 24, 2008 to September 24, 2008910,476
   Common
    
    
    Exercise
    
    
    ExpirationIssue Date
    
    Shares
    
    
    Price
    
    
    DateJuly 22, 2005
    
    
    671,880
    
    
    $
    6.00
    
    
    December 31, 2007July 22, 2005
    
    
    281,250
    
    
    $
    6.00
    
    
    July 21, 2008September 15, 2003
    
    
    20,000
    
    
    $
    1.15
    
    
    September 15, 2008July 23, 2003 to September 24, 2003
    
    
    54,850
    
    
    $
    0.75
    
    
    July 24, 2008 to September 24, 2008August 10, 2006
    
    
    100,000
    
    
    $
    4.90
    
    
    April 9, 20071,127,980
  STOCK OPTIONS
   Stock Options as of December 31, 2007
 Commitments and Contingencies
  F-21




---



##### Table of Contents



Number of
    
    
    Weighted Avg.Shares
    
    
    Exercise PriceOptions outstanding  December 31, 2004 (176,000 exercisable)
    
    
    403,000
    
    
    $
    1.25Options granted during 2005
    
    
    1,056,010
    
    
    $
    3.58Options outstanding  December 31, 2005 (640,009 exercisable)
    
    
    1,459,010
    
    
    $
    2.94Options granted during 2006
    
    
    769,000
    
    
    $
    4.83Less options exercised during 2006
    
    
    (42,010
    )
    
    $
    3.27Options outstanding  December 31, 2006 (985,498 exercisable)
    
    
    2,186,000
    
    
    $
    3.60Options granted during 2007
    
    
    699,000
    
    
    $
    5.89Less options forfeited during 2007
    
    
    (235,700
    )
    
    $
    5.03Less options exercised during 2007
    
    
    (134,300
    )
    
    $
    4.78Options outstanding  December 31, 2007 (1,359,500 exercisable)
    
    
    2,515,000
    
    
    $
    4.04
   Exercise
    
    
    
    
    Remainingprice
    
    
    
    
    contractual
    
    
    Number of sharesper share
    
    
    
    
    life (years)
    
    
    Outstanding
    
    
    Exercisable$
    1.25
    
    
    
    
    
    2.1
    
    
    
    403,000
    
    
    
    403,000$
    2.38
    
    
    
    
    
    3.0
    
    
    
    100,000
    
    
    
    100,000$
    2.48
    
    
    
    
    
    3.0
    
    
    
    80,000
    
    
    
    80,000$
    3.66
    
    
    
    
    
    4.8
    
    
    
    750,000
    
    
    
    375,000$
    4.30
    
    
    
    
    
    4.9
    
    
    
    9,000
    
    
    
    6,000$
    4.57
    
    
    
    
    
    5.1
    
    
    
    9,000
    
    
    
    3,000$
    4.66
    
    
    
    
    
    4.3
    
    
    
    20,000
    
    
    
    $
    4.95
    
    
    
    
    
    8.5
    
    
    
    250,000
    
    
    
    90,000$
    4.98
    
    
    
    
    
    5.8
    
    
    
    200,000
    
    
    
    90,000$
    5.15
    
    
    
    
    
    6.4
    
    
    
    30,000
    
    
    
    $
    5.80
    
    
    
    
    
    4.6
    
    
    
    60,000
    
    
    
    35,000$
    5.84
    
    
    
    
    
    7.4
    
    
    
    400,000
    
    
    
    80,000$
    6.03
    
    
    
    
    
    5.1
    
    
    
    195,000
    
    
    
    97,500$
    6.70
    
    
    
    
    
    6.6
    
    
    
    9,000
    
    
    
    2,515,000
    
    
    
    1,359,500Weighted Ave. remaining contractual life
    
    
    
    
    
    5.2 years
    
    4.3 yearsAggregate intrinsic value, December 31, 2007
    
    
    
    
    
    $
    4,420,670
    
    
    $
    3,286,984
  SHARE-BASED COMPENSATION EXPENSE
  2007
    
    
    2006
    
    
    2005Share-based compensation expense:For stock option grants
    
    $
    914,300
    
    
    $
    1,230,788
    
    
    $
    77,264For stock granted but in escrow or unvested
    
    
    148,177
    
    
    
    71,846
    
    
    
    141,250For stock granted with immediate vesting
    
    
    29,200
    
    
    
    219,585
    
    
    
    195,250Total
    
    $
    1,091,677
    
    
    $
    1,522,219
    
    
    $
    413,764Total
share-based compensation for income tax returns
    
    $
    187,424
    
    
    $
    52,700
    
    
    $
    
  F-22




---



##### Table of Contents




    
    On February 12, 2007, we granted and issued 5,000 shares of common stock to our
new Vice President of Land. The shares were valued at $29,200 reflecting the $5.84 per share
closing price of the stock at the date of grant. We also granted him 20,000 additional
 shares that vest 4,000 shares per year on February 12, 2008 through 2012.
 
    
    On June 15, 2007, we granted and issued in escrow 100,000 shares of common stock
for our new Vice President of Exploration. The shares vest after five years of employment
or upon a change of control of the Company.
 
    
    On June 18, 2007, we granted and issued in escrow 9,600 shares of common stock
for contractor services during the subsequent twelve months. The shares are to be removed
from escrow upon the satisfactory completion of services on June 18, 2008.
  NOTE 9  EARNINGS PER SHARE
  2007
    
    
    2006
    
    
    2005Net income to common stockholders
    
    $
    (3,795,912
    )
    
    $
    131,223
    
    
    $
    553,629Adjustments for dilution
    
    
    
    
    
    
    
    
    
    
    Net income adjusted for effects of dilution
    
    $
    (3,795,912
    )
    
    $
    131,223
    
    
    $
    553,629Basic Weighted Ave. Common Shares
    
    
    44,383,861
    
    
    
    37,428,506
    
    
    
    34,148,065Add dilutive effects of options and warrants
    
    
    
    
    
    
    713,505
    
    
    
    807,559Add dilutive effects of convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    Diluted Weighted Ave. Common Shares Outstanding
    
    
    44,383,861
    
    
    
    38,142,011
    
    
    
    34,955,624Net income per common share  basic
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    0.02Net income per common share  diluted
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    0.02
 NOTE 10  EMPLOYEE BENEFIT PLANS
  NOTE 11  RELATED PARTY TRANSACTIONS
   NOTE 12  SUPPLEMENTAL INFORMATION TO THE STATEMENTS OF CASH FLOWS
 2007
    
    
    2006
    
    
    2005Supplemental Schedule of Cash Flow InformationCash paid for interest expense
    
    $
    6,162
    
    
    $
    
    
    
    $
    Cash paid for income taxes incurred
    
    $
    
    
    
    $
    
    
    
    $
    Supplemental Disclosures of Non-Cash ActivitiesConversion of preferred stock into common stock
    
    $
    6,048,000
    
    
    $
    770,500
    
    
    $
    Share-based compensation expense
    
    $
    1,091,677
    
    
    $
    1,522,219
    
    
    $
    413,764Preferred stock dividends paid in common stock
    
    $
    820,224
    
    
    $
    1,080,000
    
    
    $
    Common stock issued to acquire oil and gas properties
    
    $
    
    
    
    $
    13,079,000
    
    
    $
    4,211,911
  F-23




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Service fee received in the form of a convertible note
    
    $
    
    
    
    $
    1,530,000
    
    
    $
    Oil and gas properties sold in exchange for a convertible note
    
    $
    
    
    
    $
    1,080,000
    
    
    $
    Notes converted into PetroHunter common stock
    
    $
    
    
    
    $
    2,610,000
    
    
    $
    Oil and gas interests exchanged for PetroHunter common stock
    
    $
    270,000
    
    
    $
    
    
    
    $
    Common stock issued to acquire Tower Colombia Corp.
    
    $
    
    
    
    $
    
    
    
    $
    15,196,000Warrants issued for financing costs
    
    $
    
    
    
    $
    
    
    
    $
    575,544Warrants issued for oil and gas property consulting
    
    $
    
    
    
    $
    
    
    
    $
    31,564Warrant issued to acquire oil and gas properties
    
    $
    
    
    
    $
    88,000
    
    
    $
    
 NOTE 13  COMMITMENTS AND CONTINGENCIES
  North Finn Option
    Office Lease
  Office LeaseYear
    
    
    
    
    
    Obligations2008
    
    
    
    
    
    $
    152,5642009
    
    
    
    
    
    
    155,9862010
    
    
    
    
    
    
    159,4082011
    
    
    
    
    
    
    162,8202012
    
    
    
    
    
    
    166,252Thereafter
    
    
    
    
    
    
    69,866
 Delay Rentals
   F-24




---



##### Table of Contents



NOTE 14  SUBSEQUENT EVENTS
    NOTE 15  INFORMATION REGARDING PROVED OIL AND GAS RESERVES (UNAUDITED)
      December 31, 2007
    
    Oil (BBLS)
    
    
    NGL (BBLS)
    
    
    Gas (MCF)Beginning of year
    
    
    91,850
    
    
    
    
    
    
    
    809,847Revisions of previous quantity estimates
    
    
    (32,906
    )
    
    
    23,937
    
    
    
    28,388Extensions, discoveries and improved
recoveries
    
    
    54,722
    
    
    
    30,307
    
    
    
    608,514Sales of reserves in place
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (17,267
    )
    
    
    (311
    )
    
    
    (139,590
    )End of year
    
    
    96,399
    
    
    
    53,933
    
    
    
    1,307,159Proved developed reserves at end of year
    
    
    91,106
    
    
    
    53,933
    
    
    
    1,277,755
    F-25




---



##### Table of Contents



December 31, 2006
    
    Oil (BBLS)
    
    
    Gas (MCF)Beginning of year
    
    
    554,702
    
    
    
    378,213Revisions of Previous quantity estimates
    
    
    (35,347
    )
    
    
    136,378Extensions, discoveries and improved
recoveries
    
    
    76,347
    
    
    
    505,832Sales of reserves in place
    
    
    (469,274
    )
    
    
    (162,387
    )Production
    
    
    (34,578
    )
    
    
    (48,189
    )End of year
    
    
    91,850
    
    
    
    809,847Proved developed reserves at end of year
    
    
    86,361
    
    
    
    713,236
  December 31, 2005
    
    Oil (BBLS)
    
    
    Gas (MCF)Beginning of year
    
    
    321,710
    
    
    
    346,270Revisions of Previous quantity estimates
    
    
    4,208
    
    
    
    18,958Extensions, discoveries and improved
recoveries
    
    
    307,773
    
    
    
    116,067Sales of reserves in place
    
    
    
    
    
    
    (43,585
    )Production
    
    
    (78,989
    )
    
    
    (59,497
    )End of year
    
    
    554,702
    
    
    
    378,213Proved developed reserves at end of year
    
    
    320,698
    
    
    
    307,000
 STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES
  2007
    
    
    2006
    
    
    2005Future cash inflows
    
    $
    19,840,019
    
    
    $
    10,421,519
    
    
    $
    35,159,955Future costs:Production
    
    
    (5,792,739
    )
    
    
    (3,276,852
    )
    
    
    (5,768,802
    )Development
    
    
    (319,922
    )
    
    
    (716,000
    )
    
    
    (2,825,307
    )Future income tax expense
    
    
    (101,000
    )
    
    
    (230,912
    )
    
    
    (706,000
    )Future net cash flows
    
    
    13,626,358
    
    
    
    6,197,755
    
    
    
    25,859,84610% discount factor
    
    
    (5,321,559
    )
    
    
    (1,599,755
    )
    
    
    (12,149,916
    )Standardized measure of
discounted future net cash
flows relating to proved
reserves
    
    $
    8,304,799
    
    
    $
    4,598,000
    
    
    $
    13,709,930
  F-26




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Beginning balance
    
    $
    4,598,000
    
    
    $
    13,709,930
    
    
    $
    5,432,119Sales and transfers of oil and gas produced
    
    
    (1,310,508
    )
    
    
    (1,966,036
    )
    
    
    (4,466,663
    )Net changes in prices and production costs
    
    
    1,228,973
    
    
    
    (1,637,000
    )
    
    
    3,640,869Sales of minerals in place
    
    
    
    
    
    
    (10,800,000
    )
    
    
    (135,472
    )Extensions and discoveries
    
    
    4,549,423
    
    
    
    3,814,000
    
    
    
    6,611,421Development costs incurred during the year
    
    
    716,000
    
    
    
    519,000
    
    
    
    1,649,396Changes in estimated future development
costs
    
    
    0
    
    
    
    0
    
    
    
    (16,255
    )Revisions in previous quantity estimates
    
    
    (1,917,123
    )
    
    
    821,000
    
    
    
    178,586Accretion of discount
    
    
    409,034
    
    
    
    161,000
    
    
    
    565,612Change in income taxes
    
    
    31,000
    
    
    
    (6,200
    )
    
    
    135,000Change in rates of production and other
    
    
    0
    
    
    
    (17,694
    )
    
    
    115,317Ending balance
    
    $
    8,304,799
    
    
    $
    4,598,000
    
    
    $
    13,709,930
  Standardized Measure Changes in 2007.
 Standardized Measure Changes in 2006.
 NOTE 16  SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
 2007
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    395,500
    
    
    $
    416,090
    
    
    $
    780,963
    
    
    $
    375,955Loss from operations
    
    $
    (1,130,305
    )
    
    $
    (1,146,316
    )
    
    $
    (856,508
    )
    
    $
    (1,143,169
    )Net loss
    
    $
    (709,949
    )
    
    $
    (546,043
    )
    
    $
    (268,360
    )
    
    $
    (1,219,030
    )Loss per common share:Basic
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )Diluted
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )
 2006
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    1,570,852
    
    
    $
    1,789,033
    
    
    $
    216,347
    
    
    $
    210,607Income (loss) from operations
    
    $
    (168,752
    )
    
    $
    820,582
    
    
    $
    (1,858,216
    )
    
    $
    (4,831,043
    )Net income (loss)
    
    $
    2,469,655
    
    
    $
    2,231,715
    
    
    $
    (1,261,675
    )
    
    $
    (2,228,472
    )Earnings per common share:Basic
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    (0.04
    )
    
    $
    (0.06
    )Diluted
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    (0.04
    )
    
    $
    (0.06
    )
   F-27




---



##### Table of Contents



Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A: Controls and Procedures
 Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
  
    
    establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934),
and
    
    assessing the effectiveness of internal control over financial reporting.
  
    
    pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets,
    
    provide reasonable assurance that transactions are recorded as to permit preparation
of financial statements in accordance with generally accepted accounting principles,
and that our receipts and expenditures are being made only in accordance with
authorization of our management and board of directors, and
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material
effect on our financial statements.
  32




---



##### Table of Contents



Internal
Control  Integrated Framework.
   Changes in Internal Control over Financial Reporting
     33




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors

American Oil & Gas, Inc. We have audited American Oil & Gas, Inc.s internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). American Oil & Gas, Inc.s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting included in the accompanying Managements Annual Report on Internal Control Over Financial
Reporting(Item 9A). Our responsibility is to express an opinion on the companys internal control over financial
reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A companys internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate. In our opinion, American Oil & Gas, Inc. maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2007, based on criteria established in Internal ControlIntegrated Framework
issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of American Oil & Gas, Inc. as of December 31, 2007 and 2006, and the related
consolidated statements of operations, stockholders equity, cash flows and comprehensive income for each of the three
years in the period ended December 31, 2007 and our report on
those statements dated March 14, 2008 expressed an
unqualified opinion. /s/ HEIN& ASSOCIATES LLP Denver, Colorado

March 14, 2008  34




---



##### Table of Contents



Item 9B: Other Information
  
 PART III
 
 Item 10: Directors, Executive Officers and Corporate Governance
 
  
 Item 11: Executive Compensation
  
 Item 12: Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13: Certain Relationships and Related Transactions, and Director Independence
  
 Item 14: Principal Accountant Fees and Services
  
 PART IV
 
 Item 15: Exhibits, Financial Statement Schedules
  Form 10-K PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    F-3Consolidated Statements of Operations for years ended
December 31, 2007, 2006 and 2005
    
    
    F-4Consolidated Statements of Cash Flows for years ended
December 31, 2007, 2006 and 2005
    
    
    F-5Consolidated Statements of Stockholders Equity and
Comprehensive Income for years ended December 31, 2007,
2006 and 2005
    
    
    F-6Notes to Consolidated Financial Statements
    
    F-7 to F-27
  35




---



##### Table of Contents



Exhibit No.
    
    Description2(1)
    
    Agreement and Plan of Merger with Tower Colombia Corporation
dated effective April 21, 2005. (Incorporated by reference
from the Companys Post-Effective Amendment No. 1 to Form
SB-2, filed on April 27, 2005.)3(i)
    
    Articles of Incorporation of the Company, as amended.3(ii)
    
    Certificate of Designation of Series A Preferred Stock.
(Incorporated by reference from the Companys Amendment No. 2
to Form SB-2, filed on January 31, 2005.)3(iii)
    
    Bylaws of the Company (as revised on December 20, 2007).
(Incorporated by reference from the Companys Current Report
on Form 8-K, filed on December 21, 2007.)3(iv)
    
    Certificate of Designation of Series AA 8% Preferred Stock.
(Incorporated by reference from the Companys Amendment No. 1
to Form S-3, filed on March 6, 2006.)10(i)*
    
    2004 Stock Option Plan. (Incorporated by reference from the
Companys Definitive Proxy Statement, filed on June 16, 2004)10(ii)
    
    Form of Warrant Certificate issued as part of the private
placement completed on July 22, 2005. (Incorporated by
reference from the Companys Registration Statement on Form
S-3, filed on October 4, 2005.)10(iii)
    
    Form of Placement Agent Warrant Certificate issued in
connection with the private placement completed on July 22,
2005. (Incorporated by reference from the Companys
Registration Statement on Form S-3, filed on October 4, 2005.)10(iv)
    
    January 17, 2003 Purchase and Sale Agreement by and between
the Company, Tower Colombia Corporation and North Finn, LLC.
(Incorporated by reference from the Companys Form 8-K, filed
on February 3, 2003.)10(v)
    
    January 17, 2003 Participation Agreement by and between the
Company, Tower, North Finn, and the principals of Tower and
North Finn. (Incorporated by reference from the Companys Form
10-KSB for the calendar ending December 31, 2002, filed on
March 31, 2003.)10(vi)
    
    Model Form Operating Agreement dated February 18, 2003.
(Incorporated by reference from the Companys Form 10-KSB/A,
filed on November 18, 2003.)10(vii)*
    
    Employment Agreement between the Company and Andrew P.
Calerich dated effective April 21, 2005. (Incorporated by
reference from the Companys Post-Effective Amendment No. 1 to
Form SB-2, filed on April 27, 2005.)10(viii)*
    
    Employment Agreement between the Company and Patrick D.
OBrien dated effective April 21, 2005. (Incorporated by
reference from the Companys Post-Effective Amendment No. 1 to
Form SB-2, filed on April 27, 2005.)
  36




---



##### Table of Contents



Exhibit No.
    
    Description10(ix)*
    
    Employment Agreement between the Company and Bobby G. Solomon
dated effective April 21, 2005. (Incorporated by reference
from the Companys Post-Effective Amendment No. 1 to Form
SB-2, filed on April 27, 2005.)10(x)*
    
    Employment Agreement between the Company and Kendell V.
Tholstrom dated effective April 21, 2005. (Incorporated by
reference from the Companys Post-Effective Amendment No. 1 to
Form SB-2, filed on April 27, 2005.)10(xi)
    
    Participation Agreement between the Company and North Finn LLC
dated January 5, 2006. (Incorporated by reference from the
Companys Form 10-KSB for the fiscal year ended December 31,
2005.)10(xii)*
    
    Employment Agreement between the Company and Joseph B. Feiten.
(Incorporated by reference from the Companys Current Report
on Form 8-K filed on August 31, 2006.)10(xiii)*
    
    Stock Option Agreement between the Company and Joseph B.
Feiten. (Incorporated by reference from the Companys Current
Report on Form 8-K filed on August 31, 2006.)10(xiv)
    
    Purchase and Sale Agreement, dated September 1, 2006, between
SunStone Oil & Gas, LLC and the Company. (Incorporated by
reference from the Companys Current Report on Form 8-K filed
on September 6, 2006.)10(xv)
    
    Registration Rights Agreement, dated September 1, 2006, by and
among the Company and the investors listed therein.
(Incorporated by reference from the Companys Current Report
on Form 8-K filed on September 6, 2006.)10(xvi)
    
    Purchase and Sale Agreement dated March 31, 2006 by and
between the Company and Enerplus Resources (USA) Corporation.
(Incorporated by reference from the Companys Quarterly Report
on Form 10-QSB for the period ended September 30, 2006.)10(xvii)
    
    Participation Agreement dated January 17, 2007 among the
Company, Red Technology Alliance LLC and North Finn LLC.
(Incorporated by reference from the Companys Current Report
on Form 8-K filed on January 23, 2007.)10(xviii)*
    
    2006 Stock Incentive Plan (Incorporated by reference to the
Companys Definitive Proxy Statement, as amended, filed on
July 26, 2006)10(xix)
    
    Form of Stock Option Agreement for awards under 2006 Stock
Incentive Plan (Incorporated by reference to the Companys
Current Report on Form 8-K filed on April 5, 2007).10(xx)
    
    Placement Agency Agreement dated April 11, 2007 by and between
the Company and A.G. Edwards & Sons, Inc. and C.K. Cooper &
Company (Incorporated by reference to the Companys Current
Report on Form 8-K filed on April 12, 2007).10(xxi)
    
    Form of Subscription Agreement (Incorporated by reference to
the Companys Current Report on Form 8-K filed on April 12,
2007).
  37




---



##### Table of Contents



Exhibit No.
    
    Description10(xxii)*
    
    Employment Agreement dated June 15, 2007 by and between the
Company and Peter Loeffler (Incorporated by reference to the
Companys Current Report on Form 8-K filed on June 19, 2007).10(xxiii)
    
    Participation Agreement dated June 25, 2007 by and among Red
Technology Alliance, LLC, the Company and North Finn, LLC
(Incorporated by reference to the Companys Current Report on
Form 8-K filed on July 3, 2007).10(xxiv)
    

Promissory
Note and Security Agreement dated March 14, 2008 by and between the
Company and Jefferies Group, Inc.21(i)
    
    Subsidiary List.23(i)
    
    Consent of Independent Petroleum Engineers and Geologists23(ii)
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 *
    
    Management contracts or compensatory plans or arrangements  38




---



##### Table of Contents



SIGNATURES
  American Oil & Gas, Inc./s/ Andrew P. CalerichAndrew P. CalerichPresident  Signature
    
    Title
    
    Date/s/ Patrick D. OBrien
    
    Chief Executive Officer and Chairman
    
    March 14, 2008Patrick D. OBrien
    
    (Principal Executive Officer)/s/ Andrew P. Calerich
    
    President and Director
    
    March 14, 2008Andrew P. Calerich/s/ Joseph B. Feiten
    
    Chief Financial Officer
    
    March 14, 2008Joseph B. Feiten
    
    (Principal Financial Officer)/s/ M.S. (Moni) Minhas
    
    Director
    
    March 14, 2008M.S. (Moni) Minhas/s/ Nick DeMare
    
    Director
    
    March 14, 2008Nick DeMare/s/ Jon R. Whitney
    
    Director
    
    March 14, 2008Jon R. Whitney
  39




---



##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Description2(1)
    
    Agreement and Plan of Merger with Tower Colombia Corporation
dated effective April 21, 2005. (Incorporated by reference
from the Companys Post-Effective Amendment No. 1 to Form
SB-2, filed on April 27, 2005.)3(i)
    
    Articles of Incorporation of the Company, as amended.3(ii)
    
    Certificate of Designation of Series A Preferred Stock.
(Incorporated by reference from the Companys Amendment No. 2
to Form SB-2, filed on January 31, 2005.)3(iii)
    
    Bylaws of the Company (as revised on December 20, 2007).
(Incorporated by reference from the Companys Current Report
on Form 8-K, filed on December 21, 2007.)3(iv)
    
    Certificate of Designation of Series AA 8% Preferred Stock.
(Incorporated by reference from the Companys Amendment No. 1
to Form S-3, filed on March 6, 2006.)10(i)*
    
    2004 Stock Option Plan. (Incorporated by reference from the
Companys Definitive Proxy Statement, filed on June 16, 2004)10(ii)
    
    Form of Warrant Certificate issued as part of the private
placement completed on July 22, 2005. (Incorporated by
reference from the Companys Registration Statement on Form
S-3, filed on October 4, 2005.)10(iii)
    
    Form of Placement Agent Warrant Certificate issued in
connection with the private placement completed on July 22,
2005. (Incorporated by reference from the Companys
Registration Statement on Form S-3, filed on October 4, 2005.)10(iv)
    
    January 17, 2003 Purchase and Sale Agreement by and between
the Company, Tower Colombia Corporation and North Finn, LLC.
(Incorporated by reference from the Companys Form 8-K, filed
on February 3, 2003.)10(v)
    
    January 17, 2003 Participation Agreement by and between the
Company, Tower, North Finn, and the principals of Tower and
North Finn. (Incorporated by reference from the Companys Form
10-KSB for the calendar ending December 31, 2002, filed on
March 31, 2003.)10(vi)
    
    Model Form Operating Agreement dated February 18, 2003.
(Incorporated by reference from the Companys Form 10-KSB/A,
filed on November 18, 2003.)10(vii)*
    
    Employment Agreement between the Company and Andrew P.
Calerich dated effective April 21, 2005. (Incorporated by
reference from the Companys Post-Effective Amendment No. 1 to
Form SB-2, filed on April 27, 2005.)10(viii)*
    
    Employment Agreement between the Company and Patrick D.
OBrien dated effective April 21, 2005. (Incorporated by
reference from the Companys Post-Effective Amendment No. 1 to
Form SB-2, filed on April 27, 2005.)10(ix)*
    
    Employment Agreement between the Company and Bobby G. Solomon
dated effective April 21, 2005. (Incorporated by reference from
the Companys Post-Effective Amendment No. 1 to Form SB-2,
filed on April 27, 2005.)
  40




---



##### Table of Contents



Exhibit No.
    
    Description10(x)*
    
    Employment Agreement between the Company and Kendell V.
Tholstrom dated effective April 21, 2005. (Incorporated by
reference from the Companys Post-Effective Amendment No. 1 to
Form SB-2, filed on April 27, 2005.)10(xi)
    
    Participation Agreement between the Company and North Finn LLC
dated January 5, 2006. (Incorporated by reference from the
Companys Form 10-KSB for the fiscal year ended December 31,
2005.)10(xii)*
    
    Employment Agreement between the Company and Joseph B. Feiten.
(Incorporated by reference from the Companys Current Report on
Form 8-K filed on August 31, 2006.)10(xiii)*
    
    Stock Option Agreement between the Company and Joseph B.
Feiten. (Incorporated by reference from the Companys Current
Report on Form 8-K filed on August 31, 2006.)10(xiv)
    
    Purchase and Sale Agreement, dated September 1, 2006, between
SunStone Oil & Gas, LLC and the Company. (Incorporated by
reference from the Companys Current Report on Form 8-K filed
on September 6, 2006.)10(xv)
    
    Registration Rights Agreement, dated September 1, 2006, by and
among the Company and the investors listed therein.
(Incorporated by reference from the Companys Current Report on
Form 8-K filed on September 6, 2006.)10(xvi)
    
    Purchase and Sale Agreement dated March 31, 2006 by and between
the Company and Enerplus Resources (USA) Corporation.
(Incorporated by reference from the Companys Quarterly Report
on Form 10-QSB for the period ended September 30, 2006.)10(xvii)
    
    Participation Agreement dated January 17, 2007 among the
Company, Red Technology Alliance LLC and North Finn LLC.
(Incorporated by reference from the Companys Current Report on
Form 8-K filed on January 23, 2007.)10(xviii)*
    
    2006 Stock Incentive Plan (Incorporated by reference to the
Companys Definitive Proxy Statement, as amended, filed on
July 26, 2006)10(xix)
    
    Form of Stock Option Agreement for awards under 2006 Stock
Incentive Plan (Incorporated by reference to the Companys
Current Report on Form 8-K filed on April 5, 2007).10(xx)
    
    Placement Agency Agreement dated April 11, 2007 by and between
the Company and A.G. Edwards & Sons, Inc. and C.K. Cooper &
Company (Incorporated by reference to the Companys Current
Report on Form 8-K filed on April 12, 2007).10(xxi)
    
    Form of Subscription Agreement (Incorporated by reference to
the Companys Current Report on Form 8-K filed on April 12,
2007).10(xxii)*
    
    Employment Agreement dated June 15, 2007 by and between the
Company and Peter Loeffler (Incorporated by reference to the
Companys Current Report on Form 8-K filed on June 19, 2007).10(xxiii)
    
    Participation Agreement dated June 25, 2007 by and among Red
Technology Alliance, LLC, the Company and North Finn, LLC
(Incorporated by reference to the Companys Current Report on
Form 8-K filed on July 3, 2007).10(xxiv)
    

Promissory
Note and Security Agreement dated March 14, 2008 by and between the
Company and Jefferies Group, Inc.21(i)
    
    Subsidiary List.
  41




---



##### Table of Contents



Exhibit No.
    
    Description23(i)
    
    Consent of Independent Petroleum Engineers and Geologists23(ii)
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 *
    
    Management contracts or compensatory plans or arrangements  42