U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended March 31, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to _______
COMMISSION FILE NO. 333-141060
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
______________________________________________
(Name of small business issuer in its charter)
NEVADA 98-0518266
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
407 2ND STREET SW, CALGARY, ALBERTA, CANADA T2P 2Y3
___________________________________________________
(Address of principal executive offices)
(403) 233-8484
___________________________
(Issuer's telephone number)
Securities registered pursuant to Name of each exchange on which
Section 12(b) of the Act: registered:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001
(Title of Class)
Indicate by checkmark whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No[ ]
Indicate by check mark whether the registrant is a large accelerated filed, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Applicable Only to Issuer Involved in Bankruptcy Proceedings During the
Preceding Five Years.
N/A
Indicate by checkmark whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act
of 1934 after the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
Applicable Only to Corporate Registrants
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most practicable date:
Class Outstanding as of May 13, 2009
Common Stock, $0.001 54,862,500*
*Increased from 36,575,000 shares of common stock to 54,862,500 shares of common
stock based upon the forward stock split of 1.5 shares for each one share issued
and outstanding effected on the market as of Monday, April 13, 2009.
-2-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
Form 10-Q
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets 4
Statements of Operations 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 24
Item 4. Controls and Procedures 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds 26
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits 27
-3-
PART I
ITEM 1. FINANCIAL STATEMENTS
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
Quarter Ended March 31, 2009
(unaudited)
BALANCE SHEETS
MARCH 31, 2009 DECEMBER 31, 2008
______________ _________________
(Unaudited) (Audited)
ASSETS
Current Assets
Cash - CDN converted to USD $ 5,710 $ 8,176
Cash - USD 42,083 152,656
__________ _________
Total Current Assets in USD 47,793 160,832
__________ _________
Website (note 7) 8,900 9,725
Option to purchase oil and gas lease (note 8) 1,106,250 781,250
__________ _________
1,115,150 790,525
Total Assets $1,162,943 $ 951,807
========== =========
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Accounts Payable $ 16,736 $ 8,417
Due to director (note 5) 0.000 5000
__________ _________
Total Liabilities $ 16,736 $ 13,417
__________ _________
Stockholders Equity
Authorized:
150,000,000 Common shares Par value $0.001
Issued and Outstanding:
54,862,500 and 137,475,000 respectively (note 4) 54,863 137,475
Additional Paid in Capital 1,378,387 965,775
Deficit accumulated during exploration stage (287,043) (164,861)
__________ _________
Total Stockholders' Equity $1,146,207 $ 938,389
__________ _________
Total Liabilities & Stockholders' Equity (Deficiency) $1,162,943 $ 951,807
========== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-4-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
Quarter Ended March 31, 2008
(unaudited)
STATEMENTS OF OPERATIONS
Cumulative
Amounts from date
Three Months Three Months of Incorporation on
Ended Ended May 11, 2006 to
March 31, 2009 March 31, 2008 March 31, 2009
______________ ______________ ___________________
(Unaudited) (Unaudited) (Unaudited)
REVENUE - - -
OPERATING EXPENSES
Professional Fees (79,276) (124,140)
Amortization (825) (203) (2,377)
Advertising - (6,030)
General & Administrative (42,082) (5,219) (97,212)
Marketing - (17,500) (54,326)
Organization - (1,500)
Website - (500)
Other Income Expense - (1,161)
__________ _________ __________
Loss from Operations (122,183) (22,922) (287,043)
__________ _________ __________
Provision for Income Taxes - - -
NET LOSS (122,183) (22,922) (287,043)
========== ========= ==========
Basic and diluted loss per common share 0 0 0
Weighted avg number of common share o/s (note 4) 54,862,500 6,475,000 54,862,500
========== ========= ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-5-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
Quarter Ended March 31, 2009
(unaudited)
STATEMENTS OF CASH FLOW
Cumulative
Amounts from date
Three Months Three Months of Incorporation on
Ended Ended May 11, 2006 to
March 31, 2009 March 31, 2008 March 31, 2009
______________ ______________ ___________________
(Unaudited) (Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net Loss for the period (122,291) (22,922) (287,246)
__________ _________ __________
ADJUSTMENT TO RECONCILE NET LOSS TO CASH USED BY
OPERATING ACTIVITIES
Amortization Expense 875 203 2,377
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities 8,319 (2,000) 16,736
Write down of obsolete website - 1,161
FX Adjustment March 31, 2009 (108)
FX adjustment from prior period 203 203
Loan due to director - 5,000
__________ _________ __________
Net Cash used in operating activities (113,009) (24,719) (261,769)
INVESTING ACTIVITIES
Website - (10,000)
Previous website - (2,438)
Operating Lease (325,000) (1,106,250)
__________ _________ __________
Net cash used in investing activities (325,000) 0 (1,118,688)
FINANCING ACTIVITIES
Proceeds from issuance of common stock - 103,250
Private Placements November 2008 - 1,000,000
Private Placements January 2009 325,000 325,000
__________ _________ __________
Net cash provided by financing activities 325,000 1,428,250
(Decrease) Increase in cash during period (113,039) (24,719) 47,793
Cash, beginning of period 160,832 35,550 0
Cash, end of period 47,793 10,831 47,793
========== ========= ==========
Supplemental information:
Taxes paid 0 0 0
Interest paid 0 0 0
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-6-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
Quarter Ended March 31, 2008
(unaudited)
STATEMENTS OF STOCKHOLDER'S EQUITY
Deficit
Common Stock Additional Accumulated Total
________________________ Paid in During the Stockholder's
Shares Amount Capital Exploration Equity
Stage
_____________________________________________________________________________________________________________
Inception May 11, 2006 - - - - -
Initial capitalization, sale of
of common stock to directors on
May 11,2006 $0.0005/share 94,500,000 $ 94,500 $ (90,000) $ 4,500
Private Placement closed
September 30, 2006 0.0024/shr 41,475,000 41,475 57,275 98,750
Net loss for the year - - - (9,055) (9,055)
___________ ________ __________ _________ __________
Inception May 11, 2006 135,975,000 135,975 (32,725) (9,055) (9,055)
Net loss for the year - - - (60,078) (60,078)
___________ ________ __________ _________ __________
Balance December 31, 2007 135,975,000 135,975 (32,725) (69,133) 34,117
Private Placement closed
November 19, 2008 $0.692/shr 1,350,000 1,350 898,650 900,000
Private Placement closed
November 24, 2008 $0.689/shr 150,000 150 99,850 100,000
Net loss for the year - - - (95,728) (95,728)
___________ ________ __________ _________ __________
Balance December 31, 2008 137,475,000 137,475 965,775 (164,861) 938,389
Private Placement closed
January 2009 $0.667/shr 300,000 300 199,700 200,000
Private Placement closed
January 2009 $0.667shr 187,500 188 124,812 125,000
Forgiven loan from director - - 5,000 - 5,000
Cancellation of shares (83,100,000) (83,100) 83,100
Net loss for period - - - (122,183) (122,183)
___________ ________ __________ _________ __________
Balance March 31, 2009 54,862,000 54,863 1,378,387 (287,043) 1,146,207
========== ======== ========== ========= ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-7-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
The Company was originally incorporated under the laws of the state of Nevada on
May 11, 2006. The Company has limited operations and in accordance with SFAS #7,
is considered an Exploration stage company, and has had no revenues from
operations to date.
Initial operations have included capital formation, organization, target market
identification and marketing plans. On August 6, 2008 the Company merged with
its wholly owned subsidiary and changed its name to American Exploration
Corporation. Concurrent with the name change, management is planning to change
the focus of operations from the provision consulting engineering services to
the oil and gas industry to oil and gas exploration and development.
An extension was granted on the original option agreement to purchase the
mineral leases. The original amounts of $781,250 to conduct due diligence
increased by $325,000 due to the extension of the due diligence period. The
balance of $2,343,750 remains the same. The original date of November 17, 2008
to complete due diligence has been extended to April 30th, 2009. The original
spud date of May 31, 2009 remains the same. Two private placements were
completed for a total of $325,000 in February 2009. $200,000 was raised on
February 11, 2009 and $125,000 was raised on February 18, 2009.
BASIS OF PRESENTATION
In the opinion of management, the accompanying balance sheets and related
interim statements of income, cash flows, and stockholders' equity include all
adjustments, consisting only of normal recurring items, necessary for their fair
presentation in conformity with accounting principles generally accepted in the
United States of America ("U.S. GAAP"). Preparing financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue, and expenses. Actual results and outcomes may
differ from management's estimates and assumptions.
Interim results are not necessarily indicative of results for a full year. The
information included in this Form 10-Q should be read in conjunction with
information included in the Form 10-K.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The relevant accounting policies and procedures are listed below.
ACCOUNTING BASIS
The basis is generally accepted accounting principles.
EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
-8-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
earnings (loss) per share and diluted earnings (loss) per share. The Company has
adopted the provisions of SFAS No. 128 effective its inception. The basic
earnings (loss) per share are calculated by dividing the Company's net income
available to common shareholders by the weighted average number of common shares
during the year. The diluted earnings (loss) per share is calculated by dividing
the Company's net income (loss) available to common shareholders by the diluted
weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of
shares adjusted as of the first of the year for any potentially dilutive debt or
equity.
The Company has not issued any options or warrants or similar securities since
inception. However, warrants were included in the recent private placement
totaling 500,000 shares if fully exercised within one year of issue.
DIVIDENDS
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting and net operating loss carry forwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
-9-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
ADVERTISING COSTS
The Company's policy regarding advertising is to expense advertising when
incurred. No advertising expenses had been incurred as of March 31, 2009.
WEBSITE COSTS
Website costs consist of software costs, which represent capitalized costs of
design, configuration, coding, installation and testing of the Company's website
up to its initial implementation. In December 2006, a website was purchased and
was amortized over its estimated useful life of three years using the
straight-line method. In the fourth quarter of 2008 it was written down to 0
since it was an asset of the former company, Minhas Energy Consultants, Inc. At
the same time, a new website was purchased for the new company, American
Exploration Corporation. The price was $10,000 and it will also be amortized
over a useful life of 3 years on a straight line basis. Ongoing website
post-implementation costs of operation, including training and application
maintenance, will be charged to expense as incurred. See Note 7.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, DETERMINING
WHETHER INSTRUMENTS GRANTED IN SHARE-BASED PAYMENT TRANSACTIONS ARE
PARTICIPATING SECURITIES, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the
computation of earnings per share under the two-class method as described in
FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share."
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited. We
are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF
-10-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
03-6-1 would have material effect on our consolidated financial position and
results of operations if adopted.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation
of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company's financial position, statements of operations, or cash flows at this
time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162
sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB's amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company's financial position, statements of operations, or cash flows at
this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities--an
amendment of FASB Statement No. 133. This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company has not yet
adopted the provisions of SFAS No. 161, but does not expect it to have a
material impact on its consolidated financial position, results of operations or
cash flows.
-11-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular,
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behavior may not be widely available by December 31, 2007. Accordingly,
the staff will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. The Company currently uses the
simplified method for "plain vanilla" share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This statement
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This statement improves
comparability by eliminating that diversity. This statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this statement
is the same as that of the related Statement 141 (revised 2007). The Company
will adopt this Statement beginning March 1, 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.
-12-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations'. This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in Statement 141. This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.
This statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The effective date of this statement is the same as that of
the related FASB Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements. The Company will adopt this statement beginning March 1,
2009. It is not believed that this will have an impact on the Company's
consolidated financial position, results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities--Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many financial
instruments and certain other items at fair value. This option is available to
all entities. Most of the provisions in FAS 159 are elective; however, an
amendment to FAS 115 Accounting for Certain Investments in Debt and Equity
Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not report
net income. SFAS No. 159 is effective as of the beginning of an entity's first
fiscal year that begins after November 15, 2007. Early adoption is permitted as
of the beginning of the previous fiscal year provided that the entity makes that
choice in the first 120 days of that fiscal year and also elects to apply the
provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS
No. 159 beginning March 1, 2008 and is currently evaluating the potential impact
the adoption of this pronouncement will have on its consolidated financial
statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
-13-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this statement does not require any
new fair value measurements. However, for some entities, the application of this
statement will change current practice. This statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including financial statements for an interim
period within that fiscal year. The Company will adopt this statement March 1,
2008, and it is not believed that this will have an impact on the Company's
consolidated financial position, results of operations or cash flows.
CONCENTRATIONS OF RISKS - CASH BALANCES
The Company maintains its cash in institutions insured by the Federal Deposit
Insurance Corporation (FDIC). This government corporation insured balances up to
$100,000 through October 13, 2008. As of October 14, 2008 all non-interest
bearing transaction deposit accounts at an FDIC-insured institution, including
all personal and business checking deposit accounts that do not earn interest,
are fully insured for the entire amount in the deposit account. This unlimited
insurance coverage is temporary and will remain in effect for participating
institutions until December 31, 2009.
All other deposit accounts at FDIC-insured institutions are insured up to at
least $250,000 per depositor until December 31, 2009. On January 1, 2010, FDIC
deposit insurance for all deposit accounts, except for certain retirement
accounts, will return to at least $100,000 per depositor. Insurance coverage for
certain retirement accounts, which include all IRA deposit accounts, will remain
at $250,000 per depositor.
-14-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal
course of business. The Company has net losses for the period from inception to
March 31, 2009 of $(287,043). The Company intends to fund initial operations
through equity financing arrangements. In fact some financing agreements are in
progress and are noted in Note 8.
The ability of the Company to emerge from the exploration stage is dependent
upon the Company's successful efforts to raise sufficient capital and then
attaining profitable operations. In response to these problems, management has
planned the following actions:
o The Company has completed an SB-2 Registration Statement and obtained
a trading symbol for its common shares on the OTCBB.
o Management intends to raise additional funds through public or private
placement offerings.
o Management has changed the focus of the Company's operations to oil
and gas exploration and development from the provision of engineering
services to generate revenue. There can be no assurances, however,
that management's expectations of future revenues will be realized.
NOTE 4. STOCKHOLDERS' EQUITY
AUTHORIZED
The Company is authorized to issue 150,000,000 shares of $0.001 par value common
stock. All common stock shares have equal voting rights, are non-assessable and
have one vote per share. Voting rights are not cumulative.
ISSUED AND OUTSTANDING
On May 11, 2006 (inception), the Company issued 4,500,000 shares of its common
stock to its Directors for cash of $4,500. See Note 5 (pre-forward split 14:1).
On September 30, 2006, the Company closed a private placement for 1,975,000
common shares at a price of $0.05 per share, or an aggregate of $98,750
(pre-forward split 14:1). The Company accepted subscriptions from 38 offshore
non-affiliated investors.
On August 18, 2008, the Company affected a 14 for 1 forward stock split of its
issued and outstanding par value $0.001 common shares. 6,475,000 outstanding
common shares prior to the split resulted in 90,650,000 shares subsequent to the
split. All comparative share numbers have been adjusted to reflect the forward
split.
-15-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
On November 19th and 24th, 2008, the Company closed two private placements for
900,000 and 100,000 shares respectively, at a price of $1.00 for a total of
$1,000,000. Included with each share in these private placements was one-half
non-transferable share purchase warrant in the capital of the company. Each
whole warrant entitles the subscriber to purchase one additional share of the
company 12 months from the date of issuance at an exercise price of $2.00 per
warrant share. As of December 31st/2008, there were 91,650,000 shares
outstanding; when the warrants may be exercised, outstanding shares will
increase by 500,000 shares.
In February of 2009 the company raised $325,000 in a private placement
increasing the number of shares outstanding to 91,975,000. Two private
placements were completed for a total of $325,000 in February 2009. $200,000 was
raised on February 11, 2009 and $125,000 was raised on February 18, 2009.
On March 21, 2009 our prior executive officers and founders agreed to return an
aggregate 55,400,000 shares of our common stock. They did not receive any
compensation from the cancellation and return to treasury. Total issued and
outstanding as of March 31, 2009 is reduced to 36,575,000 shares outstanding.
On April 13, 2009 a 1.5:1 stock split took effect leaving 54,862,500 shares
outstanding.
NOTE 5. RELATED PARTY TRANSACTIONS
The $5,000 amount loaned to the company from a director was forgiven as of
January 1st, 2009 as per written letter.
-16-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 6. INCOME TAXES
Net deferred tax assets are $nil. Realization of deferred tax assets is
dependent upon sufficient future taxable income during the period that
deductible temporary differences and carry-forwards are expected to be available
to reduce taxable income. As the achievement of required future taxable income
is uncertain, the Company recorded a 100% valuation allowance. Management
believes it is likely that any deferred tax assets will not be realized.
As of March 31, 2009, the Company has a net operating loss carry forward of
approximately $287,043, of which $9,055 will expire by December 31, 2026 and the
balance of $277,988 by December 31, 2027.
NOTE 7. REPLACEMENT OF WEBSITE
Former Minhas website:
________________________________________________________________________________
ACCUMULATED
COST AMORTIZATION WRITE-DOWN NET BOOK VALUE
Website costs $ 2,438 $ 1,277 $ 1,161 $ -
________________________________________________________________________________
Website costs are amortized on a straight line basis over 3 years, its estimated
useful life.
In the third quarter of 2008, the website was written down to nil.
NEW AMERICAN EXPLORATION CORP WEBSITE:
________________________________________________________________________________
ACCUMULATED NET BOOK VALUE
COST AMORTIZATION
Website Costs $10,000 $1,100.00 $8,900
________________________________________________________________________________
Once the company embarked on a new business front in the fourth quarter of 2008,
a new website was constructed to better reflect this new business. This website
is being amortized on a straight line basis over its estimated useful life of 3
years. See WWW.AMERICANEXPLORATIONCORP.COM.
-17-
AMERICAN EXPLORATION CORPORATION
(F.K.A. Minhas Energy Consultants, Inc.)
(An Exploration Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
NOTE 8. SUBSEQUENT EVENTS
Between March 31, 2009 and the submission of these financial statements events
of significance took place. On March 26, 2009 our Board of Directors authorized
and approved a forward stock split of 1.5:1 to be enacted on April 13, 2009. The
number of shares outstanding at that time will be 54,862,500. All income tax
returns were prepared for past years such that the company is now up to date.
Current terms of the Option Agreement require spudding a well on or before
October 1, 2009.
-18-
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use of terms such as "may," "will," "expect," "believe," "anticipate,"
"estimate," "approximate" or "continue," or the negative thereof. We intend that
such forward-looking statements be subject to the safe harbors for such
statements. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could cause actual
results and events to differ materially from historical results of operations
and events and those presently anticipated or projected. We disclaim any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
American Exploration Corporation was incorporated under the laws of the State of
Nevada on May 11, 2006 under the name of Minhas Energy Consultants, Inc.
Previously, we were engaged in the business of providing professional
engineering consulting services to the oil and gas industry, including clients
such as petroleum and natural gas companies, oil service companies, utilities
and manufacturing companies with petroleum and/or natural gas interests and
government agencies. After the effective date of March 14, 2007 of our
registration statement filed with the Securities and Exchange Commission on
March 5, 2007, we commenced trading on the Over-the-Counter Bulletin Board.
On August 6, 2008, with the approval of our Board of Directors, we merged with
our subsidiary, American Exploration Corporation, and amended our Articles of
Incorporation to change our name to "American Exploration Corporation". We
currently are a natural resource exploration and production company currently
engaged in the exploration, acquisition and development of oil and gas
properties in the United States and within North America. Effective at the
opening for trading on August 19, 2008, our trading symbol for our shares trade
on the Over-the-Counter Bulletin Board changed to "AEXP.OB".
Please note that throughout this Quarterly Report, and unless otherwise noted,
the words "we," "our," "us," the "Company," or "American Exploration," refers to
American Exploration Corporation.
-19-
RECENT DEVELOPMENTS
APRIL 2009 FORWARD STOCK SPLIT
On March 26, 2009, our Board of Directors authorized and approved a forward
stock split of 1.5 for one (1.5:1) of our total issued and outstanding shares of
common stock (the "Forward Stock Split"). The Forward Stock Split will be
effectuated based on market conditions and upon a determination by our Board of
Directors that the 2009 Forward Stock Split was in our best interests and of the
shareholders. Certain factors were discussed among the members of the Board of
Directors concerning the need for the Forward Stock Split, including the
increased potential for financing. The intent of the Forward Stock Split is to
increase the marketability of our common stock.
The Forward Stock Split was effectuated on April 13, 2009 upon filing the
appropriate documentation with NASDAQ. The Forward Stock Split increased our
total issued and outstanding shares of common stock from 36,575,000 to
approximately 54,862,500 shares of common stock. The common stock will continue
to be $0.001 par value.
AMENDMENT TO ARTICLES OF INCORPORATION
On March 26, 2009, our Board of Directors approved the filing with the Nevada
Secretary of State an amendment to our Articles of Incorporation to increase our
authorized capital structure commensurate with the increase of our shares
pursuant to the Reverse Stock Split. Therefore, as of the date of this Quarterly
Report, our authorized capital structure has been increased from 100,000,000
shares of common stock to 150,000,000 shares of common stock, par value of
$0.001.
CURRENT BUSINESS OPERATIONS
We are a start-up natural resource exploration and production company which
intends to engage in the exploration, acquisition and development of oil and gas
properties in the United States and within North America. Our primary focus is
the proposed acquisition of a 100% of the working interest and 75% of the net
revenue interest in certain contiguous leases (the "Leases") located in
Mississippi owned by Westrock Land Corp., a private Texas corporation
("Westrock"). We believe we have identified a prospect with an over-thickened
Haynesville Shale gas reservoir situated below the properties covered by these
Leases.
WESTROCK OPTION AGREEMENT
Effective on November 3, 2008, our Board of Directors authorized the execution
of an option agreement (the "Option Agreement") with Westrock. Westrock owns all
right, title and interest in and to approximately 5,000 net acres in oil and gas
Leases located in Mississippi. We have an option to acquire 100% of the working
interest and 75% of the net revenue interest in the Leases at $625.00 per net
acre for a total purchase price of approximately $3,125,000. Current terms of
the Option Agreement require spudding a well on or before October 1, 2009; the
effective date of the conveyance of the revenue interest in the Leases to us is
no later than May 15, 2009 with a final payment of the remaining balance of
$2,018,750. The contiguous acreage involves several landowners, with mineral
lease expiry ranging from June through to September of 2011.
-20-
RESULTS OF OPERATION
FOR THE PERIOD FROM
THREE MONTH PERIOD MAY 11, 2006
ENDED MARCH 31, (INCEPTION) TO
2009 AND 2008 MARCH 31, 2009
________________________________________________________________________________
STATEMENT OF OPERATIONS DATA
OPERATING EXPENSES
Professional fees $ 79,276 $ -0- $124,140
Amortization 825 203 2,377
Advertising -0- -0- 6,030
General and administrative 42,082 5,219 97,212
Marketing -0- 17,500 54,326
Organization -0- -0- 1,500
Website -0- -0- 500
Other income expense -0- -0- 1,161
NET LOSS ($122,183) ($22,922) ($287,043)
We have incurred recurring losses to date. Our financial statements have been
prepared assuming that we will continue as a going concern and, accordingly, do
not include adjustments relating to the recoverability and realization of assets
and classification of liabilities that might be necessary should we be unable to
continue in operation.
We expect we will require additional capital to meet our long term operating
requirements. We expect to raise additional capital through, among other things,
the sale of equity or debt securities.
THREE MONTH PERIOD ENDED MARCH 31, 2009 COMPARED TO THREE MONTH PERIOD ENDED
MARCH 31, 2008.
Our net loss for the three month period ended March 31, 2009 was ($122,183)
compared to a net loss of ($22,922) during the three month period ended March
31, 2008 (an increase of $99,261). During the three month periods ended March
31, 2009 and 2008, we did not generate any revenue.
-21-
During the three month period ended March 31, 2009, we incurred operating
expenses of approximately $122,183 compared to $22,922 incurred during the three
month period ended March 31, 2008 (an increase of $99,261). These general and
administrative expenses incurred during the three month period ended March 31,
2009 consisted of: (i) professional fees of $79,276 (2008: $-0-); (ii)
amortization of $825 (2008: $203); (iii) general and administrative of $42,082
(2008: $5,219); and (iv) marketing of $-0- (2008: $17,500).
Operating expenses incurred during the three month period ended March 31, 2009
compared to three month period ended March 31, 2008 increased primarily due to
the incurrence of professional fees and general and administrative expenses
associated with the increased scope and scale of our business operations.
General and administrative expenses generally include corporate overhead,
financial and administrative contracted services, marketing, and consulting
costs.
Our net loss during the three month period ended March 31, 2009 was ($122,183)
or ($0.00) per share compared to a net loss of ($22,922) or ($0.00) per share
during the three month period ended March 31, 2008. The weighted average number
of shares outstanding was 54,862,500 for the three month period ended March 31,
2009 compared to 6,475,000 for the three month period ended March 31, 2008.
LIQUIDITY AND CAPITAL RESOURCES
AS AT MARCH 31, 2009
As at the three month period ended March 31, 2009, our current assets were
$47,793 and our current liabilities were $16,736, which resulted in a working
capital deficiency of ($31,057). As at the three month period ended March 31,
2009, current assets were comprised of: (i) $5,710 in cash consisting of
Canadian dollars converted to U.S. dollars; and (ii) $42,083 in cash consisting
of U.S. Dollars. As at the three month period ended March 31, 2009, current
liabilities were comprised of $16,736 in accounts payable.
As at the three month period ended March 31, 2009, our total assets were
$1,162,943 comprised of: (i) $47,793 in current assets; (ii) $8,900 in website;
and (iii) $1,106,250 in valuation of option to purchase the interest in the
Leases. The slight increase in total assets during the three month period ended
March 31, 2009 from fiscal year ended December 31, 2008 was primarily due to the
valuation of the option to purchase the interest in the Leases.
As at the three month period ended March 31, 2009, our total liabilities were
$16,736 comprised entirely of current liabilities. The slight increase in
liabilities during the three month period ended March 31, 2009 from fiscal year
ended December 31, 2008 was primarily due to an increase in accounts.
Stockholders' equity increased from $938,389 for fiscal year ended December 31,
2008 to stockholders' equity of $1,146,207 for the three month period ended
March 31, 2009.
-22-
CASH FLOWS FROM OPERATING ACTIVITIES
We have not generated positive cash flows from operating activities. For the
three month period ended March 31, 2009, net cash flows used in operating
activities was ($113,009), consisting primarily of a net loss of ($122,291). Net
cash flows used in operating activities was changed by: (i) $875 in amortization
expense; (ii) $8,319 relating to accounts payable and accrued liabilities; (iii)
$203 as FX adjustment from prior period and (iv) ($108) as FX adjustment March
31, 2009. For the three month period ended March 31, 2008, net cash flows used
in operating activities was ($24,719), consisting primarily of a net loss of
($22,922). Net cash flows used in operating activities was changed by: (i) $203
in amortization expense; and (ii) ($2,000) in accounts payable and accrued
liabilities
CASH FLOWS FROM INVESTING ACTIVITIES
For the three month period ended March 31, 2009, net cash flows used in
investing activities was $325,000 consisting of investment in Leases. For the
three month period ended March 31, 2008, net cash flows used in investing
activities was $-0-.
CASH FLOWS FROM FINANCING ACTIVITIES
We have financed our operations primarily from either advancements or the
issuance of equity and debt instruments. For the three month period ended March
31, 2009, net cash flows provided from financing activities was $325,000
compared to $-0- for the three month period ended March 31, 2008. Cash flows
from financing activities for the three month period ended March 31, 2009
consisted of $325,000 in proceeds from private placement offering.
We expect that working capital requirements will continue to be funded through a
combination of our existing funds and further issuances of securities. Our
working capital requirements are expected to increase in line with the growth of
our business.
PLAN OF OPERATION AND FUNDING
Existing working capital, further advances and debt instruments, and anticipated
cash flow are expected to be adequate to fund our operations over the next six
months. We have no lines of credit or other bank financing arrangements.
Generally, we have financed operations to date through the proceeds of the
private placement of equity and debt instruments. In connection with our
business plan, management anticipates additional increases in operating expenses
and capital expenditures relating to: (i) oil and gas operating properties; (ii)
possible drilling initiatives on current Lease and future properties; and (iii)
future property acquisitions. We intend to finance these expenses with further
issuances of securities, and debt issuances. Thereafter, we expect we will need
to raise additional capital and generate revenues to meet long-term operating
requirements. Additional issuances of equity or convertible debt securities will
result in dilution to our current shareholders. Further, such securities might
have rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations.
-23-
During the three month period ended March 31, 2009, we completed a private
placement under Regulation S consisting of 325,000 Pre-Forward Stock Split units
and received gross proceeds of $325,000 (487,500 Units Post-Forward Stock
Split).
MATERIAL COMMITMENTS
During fiscal year ended December 31, 2008, an aggregate of $5,000 was due and
owing to one of our directors, which director has provided us with written
documentation dated January 1, 2009 forgiving the debt.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve
months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
GOING CONCERN
The independent auditors' report accompanying our December 31, 2008 and December
31, 2007 financial statements contains an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern. The
financial statements have been prepared "assuming that we will continue as a
going concern," which contemplates that we will realize our assets and satisfy
our liabilities and commitments in the ordinary course of business.
ITEM III. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk represents the risk of loss that may impact our financial position,
results of operations or cash flows due to adverse change in foreign currency
and interest rates.
EXCHANGE RATE
Our reporting currency is United States Dollars ("USD"). In the event we acquire
any properties outside of the United States, the fluctuation of exchange rates
may have positive or negative impacts on our results of operations. However,
since all of our properties are currently located within the United States, any
potential revenue and expenses will be denominated in U.S. Dollar, and the net
income effect of appreciation and devaluation of the currency against the U.S.
Dollar would be limited to our costs of acquisition of property.
-24-
INTEREST RATE
Interest rates in the United States are generally controlled. Any potential
future loans will relate mainly to acquisition of properties and will be mainly
short-term. However our debt may be likely to rise in connection with expansion
and if interest rates were to rise at the same time, this could become a
significant impact on our operating and financing activities. We have not
entered into derivative contracts either to hedge existing risks of for
speculative purposes.
ITEM IV. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We have performed an evaluation under the supervision and with the participation
of our management, including our Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), of the effectiveness of our disclosure controls and
procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act). Based on that evaluation, our management, including our CEO and CFO,
concluded that our disclosure controls and procedures were effective as of March
31, 2009 to provide reasonable assurance that information required to be
disclosed by us in the reports filed or submitted by us under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms.
MANAGEMENT'S QUARTERLY REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Under the supervision and with the participation of our
management, including our CEO and CFO, we evaluated the effectiveness of our
internal control over financial reporting as of March 31, 2009. In making this
assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO") in Internal
Control-Integrated Framework.
This Quarterly Report does not include an attestation report of our registered
public accounting firm Moore & Stephens regarding internal control over
financial reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this Quarterly Report on Form
10-Q.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
We believe that a controls system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the controls system are
met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives, and our CEO and our CFO have
concluded that these controls and procedures are effective at the "reasonable
assurance" level.
-25-
CHANGES IN INTERNAL CONTROLS
No significant changes were implemented in our internal controls over financial
reporting during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
AUDIT COMMITTEE
Our Board of Directors has not established an audit committee. The respective
role of an audit committee has been conducted by our Board of Directors. We are
contemplating establishment of an audit committee during fiscal year 2009. When
established, the audit committee's primary function will be to provide advice
with respect to our financial matters and to assist our Board of Directors in
fulfilling its oversight responsibilities regarding finance, accounting, and
legal compliance. The audit committee's primary duties and responsibilities will
be to: (i) serve as an independent and objective party to monitor our financial
reporting process and internal control system; (ii) review and appraise the
audit efforts of our independent accountants; (iii) evaluate our quarterly
financial performance as well as its compliance with laws and regulations; (iv)
oversee management's establishment and enforcement of financial policies and
business practices; and (v) provide an open avenue of communication among the
independent accountants, management and our Board of Directors.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management is not aware of any legal proceedings contemplated by any
governmental authority or any other party involving us or our properties. As of
the date of this Quarterly Report, no director, officer or affiliate is (i) a
party adverse to us in any legal proceeding, or (ii) has an adverse interest to
us in any legal proceedings. Management is not aware of any other legal
proceedings pending or that have been threatened against us or our properties.
ITEM IA. RISK FACTORS
No report required.
ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
2009 PRIVATE PLACEMENT
During February 2009, we completed a private placement offering (the "2009
Private Placement Offering"), whereby we issued an aggregate of 325,000 Pre-2009
Forward Stock Split units at $1.00 per unit for proceeds of $325,000 (487,500
units Post-2009 Forward Stock Split). Each unit consists of one share of our
restricted common stock and one-half of one non-transferable share purchase
warrant exercisable at $2.00 Pre-2009 Forward Stock Split ($1.33 Post-2009
Forward Stock Split) per share for a period of twelve months from the date of
share issuance. The 2009 Private Placement Offering was completed in reliance on
Regulation S of the Securities Act. Sales were made to only non-U.S. residents.
The 2009 Private Placement Offering was not registered under the Securities Act
or under any state securities laws and may not be offered or sold without
-26-
registration with the Securities and Exchange Commission or an applicable
exemption from the registration requirements. The per share price of the 2009
Private Placement Offering was arbitrarily determined by our Board of Directors
based upon analysis of certain factors including, but not limited to, stage of
development, industry status, investment climate, perceived investment risks,
our assets and net estimated worth.
2009 FORWARD STOCK SPLIT
On March 26, 2009, our Board of Directors authorized and approved a forward
stock split of 1.5 for one (1.5:1) of our total issued and outstanding shares of
common stock (the "Forward Stock Split"). The Forward Stock Split will be
effectuated based on market conditions and upon a determination by our Board of
Directors that the Forward Stock Split was in our best interests and of the
shareholders. Certain factors were discussed among the members of the Board of
Directors concerning the need for the Forward Stock Split, including the
increased potential for financing. The intent of the Forward Stock Split is to
increase the marketability of our common stock.
The Forward Stock Split was effectuated on April 13, 2009 upon filing the
appropriate documentation with NASDAQ. The Forward Stock Split increased our
total issued and outstanding shares of common stock from 36,575,000 to
approximately 54,862,500 shares of common stock. The common stock will continue
to be $0.001 par value.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No report required.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Securities
Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
31.2 Certification of Chief Financial Officer pursuant to Securities
Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1 Certifications pursuant to Securities Exchange Act of 1934 Rule
13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
-27-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN EXPLORATION CORPOATION
Dated: May 18, 2009
By: /s/ STEVE HARDING
_________________________________
Steve Harding, President and
Chief Executive Officer
Dated: May 18, 2009
By: /s/ BRIAN MANKO
_________________________________
Brian Manko
Chief Financial Officer
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