UNITED STATES
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 quarter ended September 30, 2008
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number 333-141060
AMERICAN EXPLORATION CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 98-0518266
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 110, 1915 - 27 Avenue NE Calgary Alberta T2E 7E4
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (403) 735-5009
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X]
Number of shares outstanding of the registrant's class of common stock as
October 21, 2008: 90,650,000
Authorized share capital of the registrant: 100,000,000 common shares, par value
of $0.001
The Company recorded $nil revenue for the nine months ended September 30, 2008.
FORWARD-LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS PREDICTIONS, PROJECTIONS AND OTHER
STATEMENTS ABOUT THE FUTURE THAT ARE INTENDED TO BE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (COLLECTIVELY, "FORWARD-LOOKING STATEMENTS"). FORWARD-LOOKING STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES. A NUMBER OF IMPORTANT FACTORS COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS. IN ASSESSING FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY
REPORT ON FORM 10-Q, READERS ARE URGED TO READ CAREFULLY ALL CAUTIONARY
STATEMENTS - INCLUDING THOSE CONTAINED IN OTHER SECTIONS OF THIS QUARTERLY
REPORT ON FORM 10-Q. AMONG SAID RISKS AND UNCERTAINTIES IS THE RISK THAT THE
COMPANY WILL NOT SUCCESSFULLY EXECUTE ITS BUSINESS PLAN, THAT ITS MANAGEMENT IS
ADEQUATE TO CARRY OUT ITS BUSINESS PLAN AND THAT THERE WILL BE ADEQUATE CAPITAL
OR THEY MAY BE UNSUCCESSUFL FOR TECHNICAL, ECONOMIC OR OTHER REASONS.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Page Number
-----------
Balance Sheets.................................................... 3
Statements of Operations.......................................... 4
Statement of Stockholder's Equity................................. 5
Statements of Cash Flows.......................................... 6
Notes to the Financial Statements................................. 7
2
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
BALANCE SHEETS
September 30, December 31,
2008 2007
--------- ---------
(unaudited)
ASSETS
Current assets
Cash $ 2,481 $ 35,550
--------- ---------
Total current assets 2,481 35,550
Website, net of accumulated amortization (Note 7) -- 1,567
--------- ---------
Total assets $ 2,481 $ 37,117
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current liabilities
Accounts payable & accrued liabilities $ 1,350 $ 3,000
Due to director 5,000 --
--------- ---------
Total current liabilities 6,350 3,000
--------- ---------
Stockholders' (deficiency) equity (Note 4,5)
Authorized:
100,000,000 common shares Par value $0.001
Issued and outstanding:
90,650,000 commons hares 90,650 90,650
Additional paid-in capital 12,600 12,600
Deficit accumulated during the development stage (107,119) (69,133)
--------- ---------
Total stockholders' (deficiency) equity (3,869) 34,117
--------- ---------
Total liabilities and stockholders' (deficiency) equity $ 2,481 $ 37,117
========= =========
The accompanying notes are an integral part of these financial statements.
3
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(unaudited)
Cumulative Amounts
From Date of
Three Months Three Months Nine Months Nine Months Incorporation on
ended ended ended ended May 11, 2006 to
September 30, September 30, September 30, September 30, September 30,
2008 2007 2008 2007 2008
----------- ----------- ----------- ----------- -----------
REVENUE $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES
Amortization -- 201 406 609 1,277
General & Administrative 9,493 2,961 18,919 32,413 50,991
Marketing -- -- 17,500 18,010 52,110
Organization -- -- -- -- 1,500
Website -- -- -- -- 500
----------- ----------- ----------- ----------- -----------
Loss from operations (9,493) (3,162) (36,825) (51,032) (106,378)
Write-down of website (1,161) -- (1,161) -- (1,161)
Foreign exchange gain -- -- -- -- 420
----------- ----------- ----------- ----------- -----------
Loss before income taxes (10,654) (3,162) (37,986) (51,032) (107,119)
Provision for income taxes -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net loss $ (10,654) $ (3,162) $ (37,986) $ (51,032) $ (107,119)
=========== =========== =========== =========== ===========
Basic and diluted loss per
Common share (1) -- -- -- --
=========== =========== =========== ===========
Weighted average number
of common shares
outstanding (Note 4) 90,650,000 90,650,000 90,650,000 90,650,000
=========== =========== =========== ===========
- ----------
(1) less than $0.01
The accompanying notes are an integral part of these financial statements.
4
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
Deficit
Accumulated
Common Stock Additional During the Total
---------------------- Paid in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Inception, May 11, 2006 -- $ -- $ -- $ -- $ --
Initial capitalization,
sale of common stock to
Directors on May 11, 2006 63,000,000 63,000 (58,500) 4,500
Private placement closed
September 30, 2006 27,650,000 27,650 71,100 98,750
Net loss for the year -- -- -- (9,055) (9,055)
---------- ------- -------- --------- --------
Balance December 31, 2006 90,650,000 90,650 12,600 (9,055) 94,195
Net loss for the year -- -- -- (60,078) (60,078)
---------- ------- -------- --------- --------
Balance December 31, 2007 90,650,000 90,650 12,600 (69,133) 34,117
Net loss for the period -- -- -- (37,986) (37,986)
---------- ------- -------- --------- --------
Balance September 30, 2008 90,650,000 $90,650 $ 12,600 $(107,119) $ (3,869)
========== ======= ======== ========= ========
The accompanying notes are an integral part of these financial statements.
5
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(unaudited)
Cumulative Amounts
From Date of
Nine Months Nine Months Incorporation on
ended ended May 11, 2006 to
September 30, September 30, September 30,
2008 2007 2008
--------- --------- ---------
OPERATING ACTIVITIES
Net loss for the period $ (37,986) $ (41,539) $(107,119)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities
Amortization expense 406 609 1,277
Write-down of website 1,161 -- 1,161
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities (1,650) -- 1,350
Due to director 5,000 -- 5,000
--------- --------- ---------
Net cash used in operating activities (33,069) (40,930) (98,331)
--------- --------- ---------
INVESTING ACTIVITIES
Website -- (138) (2,438)
--------- --------- ---------
Net cash used in investing activities -- (138) (2,438)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock -- -- 103,250
--------- --------- ---------
Net cash provided by financing activities -- -- 103,250
--------- --------- ---------
(Decrease) increase in cash during the period (33,069) (41,068) 2,481
Cash, beginning of the period 35,550 91,959 --
--------- --------- ---------
Cash, end of the period $ 2,481 $ 50,891 $ 2,481
========= ========= =========
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes $ -- $ -- $ --
Cash paid for interest $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements.
6
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2008
(unaudited)
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 a development 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.
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
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 is 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.
7
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2008
(unaudited)
NOTE 2. (CONTINUED)
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 carryforwards. 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.
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.
8
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2008
(unaudited)
NOTE 2. (CONTINUED)
WEBSITE COSTS
Website costs consist of software development costs, which represent capitalized
costs of design, configuration, coding, installation and testing of the
Company's website up to its initial implementation. Upon implementation in
December 2006, the asset is being amortized to expense over its estimated useful
life of three years using the straight-line method. Ongoing website
post-implementation costs of operation, including training and application
maintenance, will be charged to expense as incurred. See Note 7.
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
September 30, 2008 of $(107,119). The Company intends to fund operations through
sales and equity financing arrangements, which may be insufficient to fund its
capital expenditures, working capital and other cash requirements for the year
ended December 31, 2008.
The ability of the Company to emerge from the development 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:
* The Company has completed an SB-2 Registration Statement and obtained
a trading symbol for its common shares on the OTCBB.
* Management intends to raise additional funds through public or private
placement offerings.
* Management has changed the focus of the Company's operations to oil
and gas exploration and development form the provision of engineering
services to generate revenue. There can be no assurances, however,
that management's expectations of future revenues will be realized.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
9
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2008
(unaudited)
NOTE 4. STOCKHOLDERS' EQUITY
AUTHORIZED
The Company is authorized to issue 100,000,000 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 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.
On May 11, 2006 (inception), the Company issued 63,000,000 shares of its common
stock to its Directors for cash of $4,500. See Note 5.
On September 30, 2006, the Company closed a private placement for 27,650,000
common shares at a price of $0.05 per share, or an aggregate of $98,750. The
Company accepted subscriptions from 38 offshore non-affiliated investors.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company's neither owns nor leases any real or personal property. The
Company's Directors provides office space free of charge. The officers and
directors of the Company are involved in other business activities and may, in
the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
On May 11, 2006 (inception), the Company issued 63,000,000 shares of its common
stock to its Directors for cash of $4,500. See Note 4.
The amount due to a director of $5,000 has no repayment terms, is unsecured
without interest and is for reimbursement of company operating expenses. The
company plans to pay the amount within the next 12 months.
10
AMERICAN EXPLORATION CORPORATION
(formerly - MINHAS ENERGY CONSULTANTS, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2008
(unaudited)
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 December 31, 2007, the Company has a net operating loss carry forward of
approximately $69,133, of which $9,055 will expire by December 31, 2026 and the
balance of $60,078 by December 31, 2027.
NOTE 7. 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.
NOTE 8. OPERATING LEASES AND OTHER COMMITMENTS:
The Company currently has no operating lease commitments or any other
commitments.
11
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
GENERAL OVERVIEW
American Exploration Corporation (formerly Minhas Energy Consultants, Inc.) was
incorporated on May 11, 2006, in the State of Nevada. Our principal executive
offices are located at Suite 110, 1915 - 27 Avenue NE Calgary Alberta T2E 7E4.
Our telephone number is (403) 735-5009. We are a development stage company with
no revenue and limited operations to date.
Our shares of common stock are traded on the over-the-counter market and quoted
on the over-the-counter bulletin board. Prior to August 19, 2008 our shares
traded under the symbol "MHAS".
On August 6, 2008, we completed a merger with our wholly-owned subsidiary,
American Exploration Corporation, a Nevada corporation. Pursuant to the merger,
we changed our name from "Minhas Energy Consultants, Inc." to "American
Exploration Corporation" to better reflect the anticipated future business of
our company. We currently do not have any other subsidiaries.
On August 18, 2008, we effected a forward stock split of our 6,475,000 issued
and outstanding common shares on a fourteen to one basis, resulting in
90,650,000 shares. We did not make any changes to our authorized share capital
structure, which remains at 100,000,000 shares of common stock with a par value
of $0.001.
Effective August 19, 2008, our trading symbol changed to "AEXP" and our CUSIP
for our common shares changed to 02576P 104.
There can be no assurance that we will generate revenues in the future, or that
we will be able to operate profitably in the future, if at all. We have incurred
net losses in each fiscal year since inception of our operations. Since becoming
incorporated, we have not made any significant purchase or sale of assets, nor
have we been involved in any mergers, acquisitions or consolidations. Our
company has never declared bankruptcy, it has never been in receivership, and it
has never been involved in any legal action or proceedings.
Subsequent to our incorporation, we focused our operations on providing
professional engineering consulting services to the oil and gas industry,
specifically on reservoir and petroleum engineering and engineering services
related to the procurement and construction of infrastructure for the production
and distribution of oil and gas. We have not been successful in obtaining any
contracts and we now have minimal cash for our operations.
Subsequent to the second quarter, our management has been analyzing the various
alternatives available to our company to ensure our survival and to preserve our
shareholder's investment in our common shares. This analysis has included
sourcing additional forms of financing to continue our business as is, or
mergers and/or acquisitions which would likely involve a change of business. At
this stage in our operations, we believe either course is acceptable, as our
operations have not been profitable and our future prospects for our business
are not good without further significant financing.
We are focusing our preliminary merger/acquisition analysis on potential
business opportunities within the oil and gas exploration industry. These may be
established business entities or assets such as petroleum leases for which we
will have to explore for hydrocarbons. In certain instances, a target may wish
to become a subsidiary of our company or may wish to contribute assets to our
company or a joint venture rather than merge. We anticipate that any new
acquisition or business opportunity acquired by our company will require
additional financing. There can be no assurance, however, that we will be able
to acquire the financing necessary to enable us to pursue our plan of operation.
If our company requires additional financing and we are unable to acquire such
funds, our business may fail.
In implementing a structure for a particular business acquisition or
opportunity, we may become a party to a merger, consolidation, reorganization,
joint venture, or licensing agreement with another corporation or entity. We may
12
also acquire stock or assets of an existing business. Upon the consummation of a
transaction, it is likely that our present management will no longer be in
control of our company and our existing business will close down. In addition,
it is likely that our officers and directors will, as part of the terms of the
acquisition transaction, resign and be replaced by one or more new officers and
directors.
We anticipate that the selection of a business opportunity in which to
participate will be complex and without certainty of success. Business
opportunities may be available at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.
We may seek a business opportunity with entities who have recently commenced
operations, or entities who wish to utilize the public marketplace in order to
raise additional capital in order to expand business development activities. We
may acquire assets and establish wholly-owned subsidiaries in various businesses
or acquire existing businesses as subsidiaries.
Mr. M. Minhas is undertaking the search for and analysis of new business
opportunities, who is not a professional business analyst. In seeking or
analyzing prospective business opportunities, Mr. Minhas may utilize the
services of outside consultants or advisors.
At this stage, we can provide no assurance that we will be able to locate
compatible business opportunities, what additional financing we will require to
complete a combination or merger with another business opportunity, or whether
the opportunity's operations will be profitable.
As of the date hereof, we have not been successful in raising the funding
necessary to proceed with our business plan for our existing business.
Historically, we have been able to raise a limited amount of capital through
private placements of our equity stock, but we are uncertain about our continued
ability to raise funds privately. Further, we believe that our company may have
more difficulties raising capital for our existing business than for a new
business opportunity. We have held preliminary negotiations with prospective
business entities but have not entered into any formal written agreements for a
business combination or opportunity. If any such agreement is reached, we intend
to disclose such an agreement by filing a current report on Form 8-K with the
Securities and Exchange Commission.
If we are unable to secure adequate capital to continue our business or
alternatively, complete a merger or acquisition, our shareholders will lose some
or all of their investment and our business will likely fail.
If we change our business, we will face the following risks, which are in
addition to those disclosed in our Annual Report on Form 10K for December 31,
2007, which is incorporated for reference to this quarterly report.
WE WILL REQUIRE ADDITIONAL FINANCING. INADEQUATE FINANCING MAY IMPAIR OUR
ABILITY TO COMPETE IN THE MARKETPLACE WHICH MAY RESULT IN THE DISSOLUTION OF OUR
COMPANY.
We require additional financing to complete a suitable merger or combination
with a business opportunity, or acquisition of assets such as exploration
leases. Further, we anticipate that we will not have sufficient capital to fund
our ongoing operations for the next twelve months. We would likely secure any
additional financing necessary through a private placement of our common shares.
There can be no assurance that, if required, any such financing will be
available upon terms and conditions acceptable to us, if at all. Our inability
to obtain additional financing in a sufficient amount when needed and upon terms
and conditions acceptable to us could have a materially adverse effect upon our
company. There can be no assurance that such funds will be available or
available on terms satisfactory to us. If additional funds are raised by issuing
equity securities, further dilution to existing or future shareholders is likely
to result. If adequate funds are not available on acceptable terms when needed,
we may be required to delay, scale back or eliminate the development of any
business opportunity that we acquire. Inadequate funding could also impair our
ability to compete in the marketplace, which may result in the dissolution of
our company.
13
WE HAVE A LIMITED OPERATING HISTORY AND IF WE ARE NOT SUCCESSFUL IN CONTINUING
TO GROW OUR BUSINESS, THEN WE MAY HAVE TO SCALE BACK OR EVEN CEASE OUR ONGOING
BUSINESS OPERATIONS.
We have a limited operating history on which to base an evaluation of our
business and prospects. Our prospects must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies
seeking to acquire or establish a new business opportunity. Some of these risks
and uncertainties relate to our ability to identify, secure and complete an
acquisition of a suitable business opportunity.
We cannot be sure that we will be successful in addressing these risks and
uncertainties and our failure to do so could have a materially adverse effect on
our financial condition. In addition, our operating results are dependent to a
large degree upon factors outside of our control. There are no assurances that
we will be successful in addressing these risks, and failure to do so may
adversely affect our business.
It is unlikely that we will generate any or significant revenues while we seek a
suitable business opportunity. Our short and long-term prospects depend upon our
ability to select and secure a suitable business opportunity. In order for us to
make a profit, we will need to successfully acquire a new business opportunity
in order to generate revenues in an amount sufficient to cover any and all
future costs and expenses in connection with any such business opportunity. Even
if we become profitable, we may not sustain or increase our profits on a
quarterly or annual basis in the future.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS, PLACE
OUR COMPANY AT A COMPETITIVE DISADVANTAGE IN IDENTIFYING POSSIBLE BUSINESS
OPPORTUNITIES AND SUCCESSFULLY COMPLETING A BUSINESS COMBINATION.
We are, and will continue to be, an insignificant participant amongst numerous
other companies seeking a suitable business opportunity or business combination.
A large number of established and well-financed entities, including venture
capital firms, are actively seeking suitable business opportunities or business
combinations, which may also be desirable target candidates for us. Virtually
all such entities have significantly greater financial resources, technical
expertise and managerial capabilities than we do. We are, consequently, at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination or acquisition. We will also
compete with numerous other small public companies seeking suitable business
opportunities or business combinations.
THE SUCCESS OF A POTENTIAL MERGER OR COMBINATION WILL DEPEND TO A GREAT EXTENT
ON THE OPERATIONS, FINANCIAL CONDITION AND MANAGEMENT OF ANY IDENTIFIED BUSINESS
OPPORTUNITY.
The ultimate success of our business will depend to a great extent on the
operations, financial condition and management of any identified business
opportunity. In the event that we complete a business combination or otherwise
acquire a business opportunity, the success of our operations may be dependent
upon management of the successor firm or venture partner firm, together with a
number of other factors beyond our control.
We have no arrangement, agreement, or understanding with respect to acquiring a
business opportunity or engaging in a business combination with any private
entity. Accordingly, we may enter into a business combination with a business
opportunity having no significant operating history, losses, limited or no
potential for earnings, limited assets, negative net worth or other negative
characteristics.
Although we have entered into preliminary negotiations with prospective business
entities, we have not entered into any formal written agreements for a business
combination or opportunity. There can be no assurance that we will successfully
identify and evaluate suitable business opportunities or conclude a business
combination. There is no assurance that we will be able to negotiate the
acquisition of a business opportunity or a business combination on terms
favorable to us. We have not established a specific length of operating history
or a specified level of earnings, assets, net worth or other criteria which we
will require a target business opportunity to have achieved, and without which
14
we would not consider a business combination in any form with such business
opportunity. Accordingly, we may enter into a business combination with a
business opportunity having no significant operating history, losses, limited or
no potential for earnings, limited assets, negative net worth or other negative
characteristics.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT MAY REDUCE OR ELIMINATE THE
PARTICIPATION OF OUR PRESENT OFFICERS AND DIRECTORS IN THE FUTURE AFFAIRS OF OUR
COMPANY.
A business combination or acquisition of a business opportunity involving the
issuance of our common shares may result in new or incoming shareholders
obtaining a controlling interest in our company. Any such business combination
or acquisition of a business opportunity may require management of our company
to sell or transfer all or a portion of the common shares in the capital of our
company that they hold or resign as members of our Board of Directors. The
resulting change in our control could result in removal of one or more of our
present officers and directors, and a corresponding reduction in, or elimination
of, their participation in the future affairs of our company.
A FAILURE TO MANAGE GROWTH EFFECTIVELY COULD HAVE A MATERIALLY ADVERSE EFFECT ON
OUR BUSINESS.
Our ability to achieve any growth upon the acquisition of a suitable business
opportunity or business combination will be dependent upon a number of factors
including, but not limited to, our ability to hire, train and assimilate
management and other employees and the adequacy of our financial resources. In
addition, there can be no assurance that we will be able to manage successfully
any business opportunity or business combination. Failure to manage anticipated
growth effectively and efficiently could have a materially adverse effect on our
business.
PLAN OF OPERATION
The following discussion of the plan of operation, financial condition, results
of operations, cash flows and changes in financial position of our Company
should be read in conjunction with our most recent financial statements and
notes appearing elsewhere in this Form 10-Q; and our 10KSB for December 31,
2007.
Our immediate priority is to either secure suitable financing to continue with
our existing business or change our business and conclude a merger, acquisition
or combination with a business prospect. This is critical to to ensure our
survival and to preserve our shareholder's investment in our common shares. At
this stage in our operations, we believe either course is acceptable, as our
operations have not been profitable and our company will fail without further
significant financing. We currently have a working capital deficiency of $3,869.
We believe we require a minimum of $20,000 to meet our statutory obligations and
$50-75,000 to continue with our existing business. Our director has indicated
that he is willing to lend our company minimum funds to enable us meet our
statutory corporate and reporting obligations for the next 12 months through
unsecured, no interest loans. During the third quarter, he lent our company
$5,000.
Concurrent with our search for additional financing for our existing business,
we are also actively seeking business opportunities with established business
entities for the merger of a target business with our company. In certain
instances, a target business may wish to become a subsidiary of our company or
may wish to contribute assets to our company rather than merge. We anticipate
that any new acquisition or business opportunities by our company will require
additional financing and that we will close our existing business. There can be
no assurance, however, that we will be able to acquire the financing necessary
to enable us to pursue this new plan. If our company requires additional
financing and we are unable to acquire such funds, our business may fail.
At this stage, we cannot quantify what additional financing we will require to
complete a combination or merger with another business opportunity, or whether
the opportunity's operations will be profitable.
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RESULTS OF OPERATIONS
Our company posted losses of $10,654 for the three months ended September 30,
2008 compared to $3,162 for the three months ended September 30, 2007. For the
nine month period we posted losses of $37,986 compared to $51,032 for the
comparable period. From inception to September 30, 2008 we have incurred losses
of $107,119. The principal components of our losses for the nine months ended
September, 2008 included general and administrative costs of $18,919, marketing
expenses of $17,500 and amortization of our website of $406. We also wrote off
the balance of our website of $1,161 to reflect the change in our business
focus. This compares to general and administrative costs of $32,413, marketing
expenses of $18,010 and amortization of $609 in the comparable period in 2007.
LIQUIDITY AND CASH RESOURCES
At September 30, 2008, we had a working capital deficiency of $3,869, compared
to working capital of $32,550 at December 31, 2007. At September 30, 2008, our
total assets consisted of cash of $2,481, compared to cash of $35,550 and
property and equipment of $1,567 at December 31, 2007.
Because we have a working capital deficiency, we have suspended our existing
planned consulting operations and will operate in a corporate maintenance mode
until we either obtain additional financing and/or identify a suitable business
opportunity. Our future operations are dependent upon the identification and
successful completion of additional long-term or permanent equity financing, the
support of creditors and shareholders, and, ultimately, the achievement of
profitable operations. There can be no assurances that we will be successful,
which would in turn significantly affect our ability to roll out our business
plan. If not, we will likely be required to reduce operations or liquidate
assets. We will continue to evaluate our projected expenditures relative to our
available cash and to seek additional means of financing in order to satisfy our
working capital and other cash requirements. We cannot guarantee that additional
funding will be available on favorable terms, if at all. Any further shortfall
will affect our ability to expand or even continue our operations. We cannot
guarantee that additional funding will be available on favorable terms, if at
all.
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities and Exchange Act of 1934, as of
September 31, 2008, we have carried out an evaluation of the effectiveness of
the design and operation of our company's disclosure controls and procedures.
This evaluation was carried out under the supervision and with the participation
of our company's management, being our company's President (Principal Executive
Officer) and Treasurer (Principal Accounting Officer). Based upon the results of
that evaluation, our company's President (Principal Executive Officer) and
Treasurer (Principal Accounting Officer) have concluded that, as of September
30, 2008, our company's disclosure controls and procedures were effective and
provide reasonable assurance that material information related to our company is
recorded, processed and reported in a timely manner.
Our company's management, with the participation of our President (Principal
Executive Officer) and Treasurer (Principal Accounting Officer), is responsible
for the design of internal controls over financial reporting. The fundamental
issue is to ensure all transactions are properly authorized, identified and
entered into a well-designed, robust and clearly understood system on a timely
basis to minimize risk of inaccuracy, failure to fairly reflect transactions,
failure to fairly record transactions necessary to present financial statements
in accordance with generally accepted account principles, unauthorized receipts
and expenditures or the inability to provide assurance that unauthorized
acquisitions or dispositions of assets can be detected. The small size of our
company makes the identification and authorization process relatively simple and
efficient and a process for reviewing internal controls over financial reporting
has been developed. To the extent possible given our company's small size, the
internal control procedures provide for separation of duties for handling,
approving and coding invoices, entering transactions into the accounts, writing
cheques and requests for wire transfers. As of September 30, 2008, our company's
President (Principal Executive Officer) and Treasurer (Principal Accounting
Officer) conclude that our company's system of internal controls is adequate and
comparable to those of issuers of a similar size and nature.
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This quarterly report does not include an attestation report of our company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the SEC that
permit our company to provide only management's report in this quarterly report.
There were no significant changes to our company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any significant deficiencies or material weaknesses
of internal controls that would require corrective action.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Pursuant to Rule 601 of Regulation SB, the following exhibits are included
herein or incorporated by reference.
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation*
3.2 By-laws*
31.1 Certification of CEO Pursuant to 18 U.S.C. ss. 1350, Section 302
31.2 Certification of CFO Pursuant to 18 U.S.C. ss. 1350, Section 302
32.1 Certification Pursuant to 18 U.S.C. ss.1350, Section 906
32.2 Certification Pursuant to 18 U.S.C. ss. 1350, Section 906
- ----------
* Incorporated by reference to our SB2 Registration Statement, File Number
333-141060
(b) Reports on Form 8-K
August 8, 2008 - disclosing our merger with our wholly owned subsidiary and name
change to American Exploration Corporation
August 20, 2008 - disclosing the 14 for 1 forward split of our issued and
outstanding common shares and the trading symbol change to "AEXP"
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 27th of October
2008.
AMERICAN EXPLORATION CORPORATION
Date: October 27, 2008 By: /s/ Monmohan Minhas
----------------------------------------------
Name: Manmohan Minhas
Title: President/CEO, Principal Executive Officer
Date: October 27, 2008 By: /s/ Ravinder Minhas
----------------------------------------------
Name: Ravinder Minhas
Title: Secretary Treasurer, Principal Financial
and Accounting Officer
18