UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 – Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended ~~September~~March 3031, ~~2009~~2010

333-52812

(Commission File Number)

American Energy Production, Inc.

(Exact name of registrant as specified in its charter)

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

6073 Hwy 281 South, Mineral Wells, TX 76067

(Address of principal executive offices including zip code)

(940) 445-0698

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x X No o_____

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

Large accelerated filer o [ ] Accelerated filer o [ ]

Non-accelerated filer o [ ] Smaller reporting company x[X]

(Do not check if a smaller reporting company)

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

As of ~~November~~ 13June 25, ~~2009~~2010, the ~~Registrant~~registrant had 5962,~~594~~616,~~526~~748 common shares outstanding and issuable of its $0.0001 par value common stock, including 23,350,677 classified as issuable.

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American Energy Production, Inc. and Subsidiaries

Form 10-Q Index

~~September 30~~March 31, ~~2009~~2010

	Page
Part I-Financial Information	3
Item 1. Financial Statements	3
Consolidated Balance Sheets at September 30, 2009 (Unaudited) and December 31, 2008	3
Consolidated Balance Sheets at March 31, 2010 (Unaudited) and
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008 (Unaudited)	4
December 31, 2009	3
Consolidated Statements of Cash Flows for the Three and Nine MonthsEnded September 30, 2009 and 2008 (Unaudited)	5
Consolidated Statements of Operations for the Three Months
Ended March 31, 2010 and 2009 (Unaudited)	4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2010 and 2009 (Unaudited)	5
Notes to Consolidated Financial Statements (Unaudited)	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations	18
Item 4T. Controls and Procedures	22
Part II-Other Information
Item 6. Exhibits	24
Signatures	25

-2-

PART I ~~FINANCIAL INFORMATION~~I

FINANCIAL INFORMATION

Item 1-Consolidated Financial Statements (Unaudited)

American Energy Production, Inc. and Subsidiaries

Consolidated Balance Sheets

ASSETS
	Unaudited
	3/31/2010			12/31/2009
	9/30/2009			12/31/2008
	(Unaudited)
Current Assets
Cash	$	4924,~~627~~053		$	8847,~~937~~284
Accounts receivable		~~33,553~~-			-32,523
Due from related party		5,733			-
Other receivable		36,800			-
Other current assets		-			146
Due from related party		37,755			-
Total Current Assets		88,913			89,083
Trading securities		66,015			-
Property and equipment, net		3,643,454			4,011,903
Available-for-sale marketable equity securities		318,864			-
Other Assets
Total Current Assets		483,487			79,807
Development programs - related party		142,275			134,092
Oil and Gas Properties and Equipment, net		3,390,803			3,773,071
Other		82			1,188
Total Assets	$	3,874,290		$	3,852,878
Total Other Assets		142,357			135,280
Total Assets	$	3,874,722		$	4,236,266
LIABILITIES
Current Liabilities
Accounts payable	$	1994,~~218~~964		$	~~312~~109,~~903~~542
Other current liabilities		12,204			11,855
Bank account deficit		-			682
Due to related parties		149,910			3,295,763
Other current liabilities		3,549			12,481
Notes payable		125,421			2,115,062
Due to related parties		308,146			291,449
Accrued interest payable		-			946,385
Notes payable		75,487			134,171
Accrued payroll taxes and penalties		15,665			84,161
Accrued interest payable		-			900
Lease payable		-			16,131
Accrued payroll taxes and penalties		11,495			12,148
Total Current Liabilities		~~322~~493,~~418~~641			6561,~~782,260~~373
Long-Term Liabilities
Deferred other income		484,455			-
Asset retirement obligations		151,660			532,046
Asset retirement obligations		526,323			509,155
Total Long-Term Liabilities		151,660			532,046
Total Long-Term Liabilities		1,010,778			509,155
Total Liabilities	$	645,301		$	1,093,419
Total Liabilities	$	1,333,196		$	7,291,415
Commitments and Contingencies (Note 11)
Commitments and Contingencies (Note 9)
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY (DEFICIT)
Convertible preferred stock, Series A, $0.0001 par value,
Convertible preferred stock, Series A, $0.0001 par value, 5,000,000
5,000,000 shares authorized, no shares issued and outstanding	$	-		$	-
shares authorized, none and 3,500,000 shares outstanding, respectively	$	-		$	350
Common stock, $0.0001 par value, 500,000,000 shares authorized,
36,243,849 and 20,360,349 shares outstanding, respectively		3,624			2,037
39,266,071 shares outstanding, respectively		3,927			3,927
Common stock issuable, 23,350,677 shares and none issuable and outstanding, respectively		2,335			-
Common stock issuable, $0.0001 par value, 23,350,677 shares
Additional paid in capital		30,781,018			24,067,655
issuable and outstanding, respectively		2,335			2,335
Accumulated deficit		(27,343,451	)		(26,223,191	)
Additional paid in capital		30,856,699			30,860,716
		3,443,526			(2,153,149	)
Accumulated deficit		(26,689,636	)		(27,232,519	)
Less: Subscription Receivable		(902,000	)		(902,000	)
Accumulated other comprehensive loss		(69,336	)		-
Total Stockholders' Equity (Deficit)		2,541,526			(3,055,150	)
		4,103,989			3,634,459
Total Liabilities and Stockholders' Equity (Deficit)	$	3,874,722		$	4,236,266
Less: Subscription Receivable		(875,000	)		(875,000	)
Total Stockholders' Equity		3,228,989			2,759,459
Total Liabilities and Stockholders' Equity	$	3,874,290		$	3,852,878

See accompanying notes to unaudited consolidated financial statements.

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American Energy Production, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2009			2008			2009			2008
	2010			2009
Revenues:
Oil sales, net	$	319,279		$	539,132		$	815,123		$	1,530,796
Oil and natural gas sales, net	$	254,286		$	230,936
Operating Expenses
Compensation		62,493			4657,~~243~~078			~~287,053~~			~~138,727~~
Consulting		-20,965			-1,500			~~43,496~~			-
Depreciation, depletion and accretion		~~121~~84,~~899~~821			~~148~~134,~~760~~415			~~385,617~~			~~441,611~~
Rent		1,~~539~~000			221,~~920~~740			~~4,939~~			~~45,182~~
General and administrative		3929,~~946~~312			6627,~~452~~445			~~111,438~~			~~185,204~~
Production		~~330~~272,~~544~~367			~~755~~290,~~724~~656			~~921,645~~			~~1,813,817~~
Professional		1033,~~078~~401			1529,~~600~~290			~~81,690~~			~~92,700~~
Taxes		24,769			13,508			67,362			75,584
Research and development		5,997			-
Total Operating Expenses		591,268			1,069,208			1,903,240			2,770,476
Business taxes		23,903			30,057
Operating Loss		(271,989	)		(530,076	)		(1,088,117	)		(1,239,680	)
Total Operating Expenses		534,259			572,181
Other Income (Expense)
Operating Loss		(279,973	)		(341,245	)
Other income (expense)		(28,096	)		2,574			53,785			2,877
Other Income (Expense)
Interest expense		(939	)		(42,903	)		(85,930	)		(127,711	)
Other income		664			100
Payroll tax expense and penalties		-			(1,501	)		-			(4,503	)
Interest expense		(639	)		(42,161	)
Total Other Income (Expense)		(29,035	)		(41,831	)		(32,145	)		(129,337	)
Payroll tax expense and penalties		-			(1,501	)
Net Loss	$	(301,024	)	$	(571,907	)	$	(1,120,262	)	$	(1,369,017	)
Realized loss on trading securities		(4,109	)		-
Net Loss Per Share - Basic and Diluted	$	(0.01	)	$	(0.03	)	$	(0.02	)	$	(0.07	)
Unrealized gain on trading securities		33			-
Weighted average Shares Outstanding		59,438,651			20,360,389			51,877,025			20,363,377
Gain on sale of subsidiary		826,907			-
Total Other Income (Expense)		822,856			(43,562	)
Net Income (Loss)	$	542,883		$	(384,807	)
Comprehensive Income (Loss)
Unrealized loss on available for sale securities - net		(69,336	)		-
Total Comprehensive Income (Loss)	$	473,547		$	(384,807	)
Basic and Diluted earnings per share:
Net income (loss) - basic and diluted earnings per share	$	542,883		$	(384,807	)
Weighted average shares outstanding:
Weighted average shares for basic earnings per share		62,616,748			20,360,389
Effect of dilutive stock options		6,682,446			-
Weighted average shares for dilutive earnings per share		69,299,194			20,360,389
Earnings Per Share:
Basic	$	0.01		$	(0.02	)
Diluted	$	0.01		$	(0.02	)

See accompanying notes to unaudited consolidated financial statements

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American Energy Production, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2009			2008
	2010			2009
Cash Flows From Operating Activities:
Net loss	$	(1,120,262	)	$	(1,369,017	)
Net income (loss)	$	542,883		$	(384,807	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Adjustments to reconcile net income (net loss) to net cash used in operating activities:
Depreciation expense		~~311~~64,~~769~~075			~~364~~109,~~223~~798
Depletion expense		5616,~~680~~198			5918,~~706~~894
Accretion expense		174,~~168~~548			175,~~682~~723
Stock options issued for compensation		104,990			-
Realized loss on trading securities		4,109			-
Stock options issued for consulting		41,996			-
Unrealized gain on trading securities		(33	)		-
Write off of payroll taxes and penalties		(69,851	)		-
Gain on sale of subsidiary		(826,907	)		-
Common stock issued for oil and gas equipment		1,750			-
Changes in operating assets and liabilities:
Accounts receivable		(3312,~~553~~082	)		-(19,369	)
Due from related party		(5,733	)		-
Other current assets		-			145
Other current assets		146			-
Trading securities		(137,219	)		-
Other assets		~~1,106~~-			(~~89,387~~536	)
Accounts payable		22(14,~~604~~578	)		~~(54~~20,~~000~~853	)
Other current liabilities		349			87,911
Bank account deficit		(682	)		-
Due to related party		484,317			1,023,685
Other current liabilities		(8,265	)		492
Accrued interest payable		83,677			125,553
Due from related party		(37,755	)		-
Accrued payroll taxes payable		1,356			2,314
Due to related party		16,697			187,473
Net Cash Provided By (Used In) Operating Activities		(101,491	)		168,670
Accrued interest payable		(900	)		41,569
Accrued payroll taxes payable		1,129			153
Net Cash Used In Operating Activities		(388,782	)		(19,612	)
Cash Flows From Investing Activities:
Investment in property and equipment		-			(222,605	)
Investment in oil and gas properties and equipment		(56,279	)		-
Payments for development programs - related party		(8,183	)		(22,604	)
Cash proceeds from sale of subsidiary, net of cash sold		413,386			-
Purchase of oil lease		-			-
Sale of trading securities		67,128			-
Net Cash Used In Investing Activities		(8,183	)		(245,208	)
Increase in development program costs		-			(6,037	)
Net Cash Provided By (Used In) Investing Activities		424,235			(6,037	)
Cash Flows From Financing Activities:
Proceeds from sale of common stock		~~60,005~~-			~~103~~1,~~000~~500
Proceeds from issuance of notes payable		14,505			-
Repayment of notes payable		(58,684	)		(1,214	)
Repayment of note payable		(4,146	)		(12,028	)
Net Cash (Used In ) Provided By Financing Activities		(58,684	)		286
Net Cash Provided By Financing Activities		70,364			90,972
Net Decrease in Cash		(23,231	)		(25,363	)
Net (Decrease) Increase in Cash		(39,310	)		14,434
Cash at Beginning of Period		47,284			88,937
Cash at Beginning of Period		88,937			133,220
Cash at End of Period	$	24,053		$	63,574
Cash at End of Period	$	49,627		$	147,654
Supplemental disclosure of cash flow information
Income taxes paid	$	-		$	-
Cash interest paid	$	-		$	-
Supplemental disclosure of non-cash investing and financing activities
Conversion of note payable and accrued interest to common stock	$	535,000		$	-
Unrealized loss on available-for-sale securities	$	69,336		$	-
Conversion of due to related parties and accrued interest to common stock	$	714,260		$	-
Sale of Production Resources, Inc.:
Related party gain included in stockholders’ equity from conversion of note payable and accrued interest to common stock	$	1,965,000		$	-
Net assets disposed from sale, net of cash sold	$	23,093		$	-
Related party gain included in stockholders’ equity from conversion of due to related parties and accrued interest to common stock	$	2,623,408		$	-
Other receivable received from sale	$	36,800		$	-
Capital contribution from forgiveness of accrued interest by related party	$	378,027		$	-
Capital contribution from forgiveness of accrued compensation by related party	$	292,500		$	-

See accompanying notes to unaudited consolidated financial statements

-5-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

1. BASIS AND PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q of Regulation S-K. They do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements at December 31, ~~2008~~2009 included in the Company's Form 10-K (“~~2008~~2009 10-K”) filed with the Securities and Exchange Commission (“SEC”) on May 614, ~~2009~~2010. The interim unaudited consolidated financial statements should be read in conjunction with those consolidated financial statements included in the ~~2008~~2009 10-K.

In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~ 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2009~~2010.

2. HISTORY AND NATURE OF ~~BUSINESS~~OPERATIONS

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

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

1. Leasing programs.

2. Production acquisitions.

3. Drilling and producing with proven and emerging technologies.

3The Company believes that for the foreseeable future, the world will be highly dependent on oil and natural gas. Currently, alternative fuels are far more expensive than fossil fuels and because of the politically unstable conditions of many of the energy producing regions of the world. ~~SUMMARY OF~~As ~~SIGNIFICANT~~a ~~ACCOUNTING~~result, ~~POLICIES~~the Company believes that oil and natural gas will remain a key yet volatile component of the world energy future and furthermore, with the ever increasing world demand for energy, the domestic production of oil and gas will play an even greater role in America’s future then it already has to date.

~~Going Concern~~The Company determined in 2009 to diversify from only its oil and gas operations into a working gold mine operation. On August 6, 2009, the Company announced that it has executed a non-binding Letter of Intent (“LOI”) for the acquisition of Dorado Gold, LLC and Master Petroleum, LLC, both California limited liability companies (together “Dorado”). Dorado owns 100% of certain placer gold mining claims, land and equipment (the “Joint Properties”) 25 miles north of Weaverville, California. Additionally, on the same date as the LOI was executed, AENP and Dorado executed a 120 day Operating Agreement to jointly participate in the exploration, evaluation, development and mining of gold and other minerals within the Joint Properties (“Gold Venture”). AENP will bear 100% of all expenses during operations of the Gold Venture and AENP and Dorado will each receive fifty percent (50%) of product or revenues after expenses and AENP will manage the Gold Venture. The acquisition of Dorado by AENP is subject to AENP’s sole evaluation of the results after the 120 day Gold Venture period is completed.

~~As reflected~~In inDecember ~~the accompanying unaudited consolidated financial statements~~2009, the ~~Company~~ ~~had~~Gold aVenture ~~net~~was ~~loss~~extended ~~of $1,120,262~~ for ~~the~~one ~~nine~~year ~~months~~through ~~ended~~December ~~September 30~~31, ~~2009~~ ~~as compared to a net loss of $1,369,017 for the nine months ended September 30, 2008~~2010. ~~Additionally,~~As ~~at September 30, 2009, the Company has minimal cash and has a negative working capital balance~~ of ~~$233,505, which could have a material impact on~~ the ~~Company’s~~date ~~financial condition and operations. The negative working capital balance was significantly reduced from a balance~~ of ~~$6,950,142~~ atthis ~~March 31~~report, ~~2009~~no todecision ~~the~~has ~~September~~been ~~30,~~made ~~2009 balance~~ by the ~~write~~Company ~~off of~~in ~~the~~relation ~~obligations~~to ~~discussed below along with~~ the ~~conversion~~LOI ~~of notes payable, accrued interest~~ and ~~due~~a todefinitive ~~related parties to common stock during the three months ended June 30, 2009~~agreement. AsThe ~~a result, the~~ Company ~~has stockholder’s~~believes ~~equity~~this ofworking ~~$2,541,526~~gold atmining ~~September~~operation ~~30,~~will ~~2009~~be ~~as compared to~~ a ~~stockholders’~~ ~~deficit~~hedge ofagainst ~~$3,055,150~~inflation atand ~~December~~will ~~31, 2008. However,~~also ~~the~~help ~~ability~~offset of the ~~Company~~depressed toprice ~~continue~~of asoil ~~a going concern is dependent on the Company’s ability to raise capital~~ and ~~generate~~ ~~sufficient~~natural ~~revenues and cash flow from its business plan as an oil and~~ gas ~~operating~~until ~~company. The~~these ~~financial~~commodities ~~statements~~recover ~~included~~ in ~~this report do not include any adjustments that might be necessary if~~ the ~~Company~~near ~~is unable to continue as a going concern~~future.

-6-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

On July 29, 2009, but effective June 30, 2009 (the “Effective Date”), the Company and certain of its wholly-owned subsidiaries (the “Company”) eliminated certain debt obligations by converting them into $03.~~0001 par value common stock (“Stock”) of the Company.~~ ~~Additionally,~~GOING ~~the Company successfully negotiated and eliminated a substantial amount of obligations that were incurred from a predecessor company and converted an existing preferred stock agreement to Stock.~~CONCERN

As ~~a result~~reflected in the accompanying unaudited consolidated financial statements, the Company had net income of $542,883 for the ~~above~~three ~~restructuring~~months ended March 31, 2010 as compared to a net loss of $384,807 for the ~~Company’s~~three ~~consolidated~~months ~~balance~~ended ~~sheet~~March 31, 2009. However, the Company ~~has~~had ~~eliminated~~an operating loss and the ~~majority~~2010 ofnet ~~its~~income ~~debt~~included ~~and~~a ~~will~~one-time ~~issue~~$826,907 ornon-cash ~~has~~gain ~~issued 33~~from the sale of Production Resources,~~850~~ Inc.,~~678~~ ~~shares~~a offormer ~~Stock~~wholly-owned subsidiary. Without this one-time gain, 23the Company would have had a net loss of $284,~~350~~024. Additionally,~~678~~ ~~from~~at March 31, 2010, the ~~conversion~~Company ofhas ~~debt~~minimal ~~obligations~~ cash and has a negative working capital balance of $10,~~500~~154,~~000~~ ~~from~~which could have a material impact on the ~~conversion~~Company’s ofconsolidated ~~preferred~~financial ~~stock~~condition and operations. ~~See~~The ~~Note~~ability 5of –the ~~Debt~~Company to continue as a going concern is dependent on its ability to raise capital and ~~Note 8~~ –generate ~~Stockholders’~~sufficient ~~Equity~~revenues and cash flow from its business plan as an oil and gas operating company. The unaudited consolidated financial statements included in this report do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

~~Additionally, on~~Management ~~May~~believes ~~11,~~it ~~2009,~~will ~~the~~have ~~Company~~several ~~granted~~options ~~9,800,000~~available ~~non-qualified~~to ~~stock~~obtain ~~options~~financing ~~to purchase~~from ~~the~~third ~~Company’s~~parties ~~$0.0001~~in ~~par~~order ~~value~~to ~~common~~carry ~~stock~~out tothe ~~employees~~business ~~and consultants~~plan of the Company. ~~These~~However, ~~stock~~as ~~options~~of ~~were previously registered in 2008 by~~ the ~~Company~~date onof ~~Form~~these ~~S-8~~unaudited ~~with~~consolidated ~~the~~financial ~~Securities~~statements, ~~and~~no ~~Exchange Commission. The~~agreement ~~stock options were issued~~ with anany ~~exercise~~parties ~~price~~has ~~of $0.015~~been ~~per~~structured ~~share;~~to ~~the~~provide ~~closing price of~~ the ~~Company’s~~required ~~traded stock on the date of grant~~funding. ~~See Note 8 – Stockholders’ Equity.~~

The time required for us to become profitable is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from operations to meet our planned capital expenditures, and working capital ~~and~~ ~~debt service~~ requirements. If required, our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for our business. The necessary additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock. Management believes that as a result of restructuring of the balance sheet as discussed above, the Company will have several options available to obtain financing from third parties in order to carry out the business plan of the Company.

~~Accounting Estimates~~4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~When preparing~~Principles ~~financial statements in conformity with U.S. GAAP, management must make estimates based on future events that affect the reported amounts~~ of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying unaudited consolidated financial statements include going concern, oil and gas properties, property and equipment, the evaluation of whether our assets are impaired, asset retirement obligations, fair value of financial instruments and revenue recognition. We also have other key accounting estimates and policies, but we believe that these other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported results of operations for a given period. The actual amounts could differ materially from such estimates.Consolidation

~~Oil~~The accompanying consolidated financial statements include the general accounts of American Energy and ~~Gas Properties~~its wholly-owned subsidiaries as of March 31, 2010 and all significant intercompany transactions, accounts and balances have been eliminated in consolidation.

~~The Company~~Use ~~uses the successful efforts method~~ of accounting for its oil and gas properties. Costs incurred by the Company related to the acquisition of oil and gas properties and the cost of drilling successful wells are capitalized. Costs to maintain wells and related equipment and lease and well operating costs are charged to expense as incurred. Gains and losses arising from sales of properties are included in income. Unproved properties are assessed periodically for possible impairment.Estimates

~~Property~~When preparing financial statements in conformity with United States Generally Accepted Accounting Principles (“GAAP”), management must make estimates based on future events that affect the reported amounts of assets and ~~Equipment~~ liabilities and, the disclosure of contingent assets and liabilities as of the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying financial statements include valuation of oil and gas properties, valuation and depreciation periods of property and equipment, the evaluation of whether our assets are impaired, asset retirement obligations, valuation of non-cash stock based grants, valuation allowance for deferred tax assets, and the estimate of reserves of oil and gas that are used to develop projected income whereby an appropriate discount rate has been used. We also have other key accounting estimates and policies, but we believe that these other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported results of operations for a given period.

~~The Company’s~~Cash ~~oil~~ and ~~gas~~Cash rig is depreciated over its estimated useful life of ten years, using the straight line method. Vehicles are depreciated over their estimated useful life of three years, using the straight line method. Maintenance, repairs and minor replacements are charged to operations in the year incurred.Equivalents

~~Asset~~Cash ~~Retirement Obligations~~and cash equivalents include all highly liquid investments with a maturity date of three months or less when purchased.

~~The Company~~Accounts accounts for asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations (ASC 410). The asset retirement obligations represent the estimated present value of the amounts expected to be incurred to plug, abandon, and remediate the producing properties at the end of their productive lives, in accordance with state laws, as well as the estimated costs associated with the reclamation of the property surrounding. The Company determines the asset retirement obligations by calculating the present value of estimated cash flows related to the liability. The asset retirement obligations are recorded as a liability at the estimated present value as of the asset’s inception, with an offsetting increase to producing properties included in property and equipment. Periodic accretion of the discount related to the estimated liability is recorded as an expense in the statement of operations. The discount rate utilized by the Company is 4.5% with a twenty (20) year estimate life for the properties.Receivable

Accounts receivable result from the sale of the Company’s products and is reported at net of any allowance for doubtful accounts. The Company estimates its allowance for doubtful accounts based on a specific identification basis and additional allowances as needed based upon historical collections experience. Payment is due upon delivery of the product, unless other arrangements are made. Management reviews the customer accounts on a routine basis to determine if an account should be charged off. Payments from oil and natural gas sales are remitted by customers, to the operator, who is a related party and the operator then remits these payments to the Company. (See Note 12 – Related Party Transactions).

-7-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

The estimated liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells, and a risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligations. Revisions to the asset retirement obligations are recorded with an offsetting change to producing properties, resulting in prospective changes to depletion and depreciation expense and accretion of the discount. Because of the subjectivity of assumptions and the relatively long lives of most of the wells, the costs to ultimately retire the Company’s wells may vary significantly from prior estimates.Investments

The Company invests in various marketable equity instruments and accounts for such investments in accordance with ASC 320 “Investments – Debt and Equity Securities”.

Certain securities that the Company may invest in may be determined to be non-marketable. Non-marketable securities where the Company owns less than 20% of the investee are accounted for at cost pursuant to ASC topic 323-10 “Investments - Equity Method and Joint Ventures”.

Management determines the appropriate classification of its investments at the time of acquisition and reevaluates such determination at each balance sheet date. Trading securities that the Company may hold are treated in accordance with ASC 320 with any unrealized gains and losses included in earnings. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. Investments classified as held-to-maturity are carried at amortized cost. In determining realized gains and losses, the cost of the securities sold is based on the specific identification method.

The Company periodically reviews its investments in marketable and non-marketable securities and impairs any securities whose value is considered non-recoverable. The Company's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. GAAP requires the exercise of judgment in making this assessment for qualitative information, rather than the application of fixed mathematical criteria. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, and other factors specific to the individual investment. The Company's assessment involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments. The Company recorded no impairment charges for securities during the three months ended March 31, 2010.

Oil and Gas Properties and Equipment

The Company uses the successful efforts method of accounting for its oil and gas properties. Unproved properties are assessed periodically for possible impairment. Costs incurred by the Company related to the acquisition of proved and unproved oil and gas properties and the cost of drilling only successful wells are capitalized. Costs to maintain wells and related equipment and lease and well operating costs on proved properties are charged to expense as incurred. Gains and losses arising from sales of properties are included in other income (expense). Proved oil and gas properties are depleted using the units-of-production method based on total proved reserves.

The Company’s oil and gas rigs are depreciated over its estimated useful life of ten years, using the straight line method. Vehicles are depreciated over their estimated useful life of three years, using the straight line method. Repairs and maintenance are expensed in the year incurred, while renewals and betterments are generally capitalized. Expenditures less than $1,000, including contract labor, are expensed to operations in the year incurred.

Accounting for the Impairment of Long-Lived Assets

We account for the impairment of long-lived assets in accordance ~~SFAS~~ASC ~~No.~~360-10 ~~144~~“Property, ~~Accounting~~ ~~for~~Plant ~~the~~and ~~Impairment or Disposal of Long-Lived Assets (ASC 360)~~Equipment”, which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to the undiscounted cash flow that the asset or asset group is expected to generate. If such assets or asset groups are considered to be impaired, the loss recognized is the amount by which the carrying amount of the property, if any, exceeds its fair market value. ~~Based upon the Company’s evaluation, no impairment was determined for the nine months ended September 30, 2009 and 2008.~~

Asset Retirement Obligations

The Company accounts for asset retirement obligations in accordance with ASC 410“Asset Retirement and Environmental Obligations”. The asset retirement obligations represent the estimated present value of the amounts expected to be incurred to plug, abandon, and remediate the producing properties at the end of their productive lives, in accordance with state laws, as well as the estimated costs associated with the reclamation of the surrounding property. The Company determines the asset retirement obligations by calculating the present value of estimated cash flows related to the liability. The asset retirement obligations are recorded as a liability at the estimated present value as at the asset’s inception, with an offsetting increase to the producing properties asset. Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value and is classified as an expense in the consolidated statement of operations. The discount rate utilized by the Company is 4.5% with a range of ten to twenty year estimated life for the properties.

-8-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2010

(Unaudited)

The estimated liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells, and a risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligations. Revisions to the asset retirement obligations are recorded with an offsetting change to producing properties, resulting in prospective changes to depletion and depreciation expense and accretion of the discounted liability. Because of the subjectivity of assumptions and the relatively long lives of most of the wells, the costs to ultimately retire the Company’s wells may vary significantly from prior estimates.

Environmental Matters

Our operations are subject to evolving federal, state and local environmental laws and regulations related to the discharge of materials into the environment. Our process is not expected to produce harmful levels of emissions or waste by-products. However, these laws and regulations would require us to remove or mitigate the environmental effects of the disposal or release of substances at our site should they occur. Compliance with such laws and regulations can be costly. Additionally, governmental authorities may enforce the laws and regulations with a variety of civil and criminal enforcement measures, including monetary penalties and remediation requirements. We are not aware of any area of non-compliance with federal, state or local environmental laws and regulations.

Revenue Recognition

~~Revenues from~~The ~~sales~~Company ofsells crude oil and natural gas ~~products~~under ~~are~~short-term ~~recorded~~agreements ~~when~~at ~~deliveries have~~prevailing ~~occurred~~market prices and ~~legal~~revenue ~~ownership~~is ofrecognized at the ~~commodity~~point ~~transfers~~of tosale, ~~the customer. Revenues~~that ~~from~~is, when the ~~production~~crude of oil and natural gas ~~properties~~ inis ~~which~~extracted from the ~~Company~~tanks. Generally, ~~shares~~this anis ~~undivided~~at ~~interest~~the ~~with~~point ~~other producers~~where ~~are~~the ~~recognized~~customer ~~based~~has ontaken title and has assumed the ~~actual~~risks ~~volumes~~and ~~sold~~rewards byof ownership, the ~~Company~~sales ~~during the~~price ~~period~~is fixed or determinable and collectability is reasonable assured.

~~Fair~~Gold ~~Value~~Mine ofOperating ~~Financial Instruments~~Agreement

~~We measure~~The ~~our~~Company ~~financial~~jointly ~~assets~~participates ~~and~~in ~~liabilities~~an inoperating ~~accordance~~agreement ~~SFAS~~for ~~157~~the exploration, ~~Fair~~evaluation, ~~Value~~development ~~Measurements~~ and ~~Disclosures~~ ~~(ASC~~mining ~~820). For~~of ~~certain~~gold ofand ~~our~~other ~~financial instruments,~~minerals ~~including~~with ~~cash,~~an ~~accounts~~unrelated ~~receivable,~~third ~~due~~party. The ~~from~~Company ~~related~~manages ~~party, accounts~~the ~~payable~~gold mine operation, ~~other~~is ~~current~~responsible ~~liabilities,~~for ~~due~~one tohundred ~~related~~percent ~~parties~~(100%) ~~and~~of ~~accrued liabilities~~all expenses, ~~the~~and ~~carrying~~will ~~amounts~~receive ~~approximate~~fifty ~~fair~~percent ~~value~~(50%) ~~due~~of toproduct ~~their~~or ~~short maturities~~revenues after expenses. ~~Amounts~~The ~~recorded~~gold ~~for~~mine ~~other~~operation ~~assets,~~is ~~notes~~in ~~payable, deferred~~the ~~other~~development ~~income~~phase and ~~asset~~no ~~retirement~~revenue ~~obligations~~or ~~also~~product ~~approximate~~has ~~fair value~~been ~~because~~realized ~~current~~from ~~interest~~the ~~rates~~operation. As ~~available~~a toresult, usthe Company has classified expenditures incurred for ~~debt~~the ~~with~~gold ~~similar~~mine ~~terms~~ operations as research and ~~maturities~~development ~~are~~expense ~~substantially~~in the ~~same~~consolidated statement of operations.

Fair Value Measurements of Financial Instruments

We measure our financial assets and liabilities in accordance ASC 820 “Fair Value Measurements and Disclosures”. For certain of our financial instruments, including cash, accounts receivable, due from related party, accounts payable, other current liabilities, due to related parties and accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Amounts recorded for other assets, notes payable, deferred other income and asset retirement obligations also approximate fair value because current interest rates available to us for debt with similar terms and maturities are substantially the same.

Effective January 1, 2008, we adopted accounting guidance for financial assets and liabilities. The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

~~Financial Assets and Liabilities~~-9-

We currently measure and report the fair value liability for asset retirement obligations. The fair value liability for asset retirement obligations has been recorded as determined by calculating the present value of estimated cash flows related to the liability. The following table summarizes our financial liabilities measured at fair value on a recurring basis as of September 30, 2009 (in thousands):

-8-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

	Balance at September 30, 2009		Quoted priced in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
			(Level 1)		(Level 2)		(Level 3)
Liabilities:
Asset Retirement Obligations	$	526,323	$	-	$	-	$	526,323
Total financial liabilities	$	526,323	$	-	$	-	$	526,323

Financial Assets and Liabilities

~~Following~~We iscurrently ameasure ~~roll~~and ~~forward~~report ~~through~~the ~~September~~fair ~~30,~~value ~~2009~~ liability for asset retirement obligations. The fair value liability for asset retirement obligations has been recorded as determined by calculating the present value of estimated cash flows related to the liability. The following table summarizes our financial assets and liabilities measured at fair value ~~measurements~~on ~~using~~a ~~significant~~recurring ~~unobservable~~basis ~~Level~~as ~~3 inputs~~of March 31, 2010:

Balance at December 31, 2008	$	509,155
	Balance at March 31, 2010		Quoted priced in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
Accretion of discount		17,168
			(Level 1)		(Level 2)		(Level 3)
Ending balance at September 30, 2009	$	526,323
Assets:
Trading Securities	$	66,015	$	66,015	$	-	$	-
Available-for-sale marketable equity securities		318,864		318,864		-		-
Total Financial Assets	$	384,879	$	384,879	$	-	$	-
Liabilities:
Asset Retirement Obligations	$	151,660	$	-	$	-	$	151,660
Total Financial Liabilities	$	151,660	$	-	$	-	$	151,660

The following reflects activity through March 31, 2010 of the fair value measurements using significant unobservable Level 3 inputs:

Balance at December 31, 2009	$	532,046
Accretion of discounted liability		4,548
Retirement of liability from sale of PRI		(384,934	)
Ending balance at March 31, 2010	$	151,660

Non-Financial Assets and Liabilities

The Company evaluated and determined that there ~~was~~were no non-financial assets and liabilities as of ~~September~~March 3031, ~~2009~~2010.

Stock-Based Compensation

The Company adopted ~~SFAS~~ASC ~~No.~~718 ~~123R,~~“Compensation – Share- Based ~~Payment (ASC 718)~~Compensation”, as of January 1, 2006, using the modified prospective application method. This statement requires the recognition of compensation expense measured at fair value when we obtain employee services in stock-based payment transactions.

Concentration of Risk

Our financial instruments that are potentially exposed to credit risk consist primarily of cash and accounts receivable for which the carrying amounts approximate fair value. No amounts exceeded federally insured limits as of March 31, 2010. At certain times, our demand deposits held in banks may exceed the federally insured limits. The Company has not experienced any losses related to these deposits.

Impact of Recently Issued Accounting Standards

-9-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2009

(Unaudited)

In April 2009, accounting guidance was released with respect to interim disclosures about fair value of financial instruments to require disclosures about the fair value of financial instruments for interim reporting periods, effective for reporting periods ending after June 15, 2009. We have incorporated required disclosures in these unaudited consolidated financial statements with no effect on our financial position, results of operations or cash flows.

In May 2009, accounting guidance was issued regarding subsequent events, which establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, guidance sets forth the period after the balance sheet date during which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date, and the disclosures that should be made about such events or transactions. This accounting guidance is effective for reporting periods ending after June 15, 2009, and should not result in significant changes in subsequent events that an entity reports, either through recognition or disclosure, in financial statements. Among other things, this guidance requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. We have incorporated required disclosures in these unaudited consolidated financial statements.

In June 2009, the Financial Accounting Standards Board (“FASB”) approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the SEC, have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the quarter ended September 30, 2009.

As a result of the Company’s implementation of the Codification during the quarter ended September 30, 2009, previous references to new accounting standards and literature are no longer applicable. In the current quarter unaudited consolidated financial statements, the Company will provide reference to the both the old and new guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification. New references will use the term Accounting Standards Codification (“ASC”) followed by the relevant ASC section.

Net Income (Loss) per Common Share

The Company computes earnings (loss) per share in accordance with SFAS No. 128 (ASC 260-10), “Earnings per Share.” ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. At September 30, 2009, there were options to purchase 9,800,000 shares of the Company's common stock which may dilute future earnings per share.

4. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

	Sep. 30,		Dec. 31,
	2009		2008
Oil and gas properties, successful efforts method	$	4,283,365	$	4,283,365
Other property and equipment		1,744,067		1,744,067
		6,027,432		6,027,431
Less: Accumulated depreciation and depletion		2,283,978		2,015,528
Property and equipment, net	$	3,643,454	$	4,011,903

-10-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

5.Net ~~DEBT~~Income (Loss) per Common Share

OnThe ~~July 29,~~Company ~~2009,~~computes ~~but~~earnings ~~effective~~(loss) ~~June~~per ~~30,~~share ~~2009~~in ~~(the~~accordance with ASC 260-10 “~~Effective~~Earnings ~~Date~~per Share.”), ~~the~~ASC ~~Company~~260-10 requires presentation of both basic and ~~certain~~ diluted earnings per share (“EPS”) on the face of ~~its~~the ~~wholly-owned~~income ~~subsidiaries~~statement. ~~eliminated~~Basic ~~certain~~EPS ~~debt~~is ~~obligations~~computed by ~~converting~~ ~~them~~dividing ~~into~~net $0income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.~~0001~~ ~~par~~Diluted ~~value~~EPS gives effect to all dilutive potential common ~~stock~~shares asoutstanding ~~follows:~~during the period. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

~~Bend~~At ~~Arch Petroleum,~~March ~~Inc. (“Bend Arch”)~~31, ~~a wholly-owned subsidiary of the Company~~2010, ~~had~~there ~~a $2,000,000~~were ~~Promissory~~options ~~Note (Note”) that was due and payable on December 31, 2009. The Note was issued~~ to ~~Proco~~purchase ~~Operating Co.~~8, ~~Inc. (“Proco”)~~800,000 ~~a company~~shares ~~controlled by the brother~~ of the Company’s ~~Chief~~common ~~Executive~~stock ~~Officer~~at ~~and~~an ~~a director. The~~exercise purpose of the Note was to secure payment for oil and gas leases and wells located in Comanche and Eastland counties in the State of Texas sold to Bend Arch by Proco on June 15, 2004. The Note replaced a $2,000,000 convertible debenture dated January 5, 2004. As of the Effective Date, the Note has been converted into 8,000,000 shares of Stock based upon a conversion price of $0.25015 per share,. The aeffect ~~significant~~of ~~premium~~ options to purchase the ~~market~~Company’s ~~price of~~common ~~the~~stock ~~Stock.~~on ~~Additionally,~~diluted EPS ~~the~~is ~~Note accrued interest at a rate~~ determined through the application of ~~eight~~ ~~percent (8%) per annum and as of~~ the ~~Effective Date~~ treasury stock method, ~~accrued interest was $878,027.~~ ~~An agreement was reached~~ whereby ~~Proco~~proceeds ~~forgave~~received ~~$378,027~~by of the ~~accrued~~Company ~~interest and the remaining $500,000 has been converted into 2,000,000 shares of Stock~~ based ~~upon~~on aassumed exercises ~~conversion~~are hypothetically ~~price~~used ~~of $0.25 per share, a significant premium~~ to repurchase the ~~market~~Company's ~~price~~common ~~of the Stock.~~ stock

~~The Company~~Comprehensive ~~evaluated~~Income ~~the conversion of the Note and the accrued interest in accordance with paragraph 20 of APB 26~~ (~~ASC 470-50-40~~Loss) and recorded a $1,965,000 gain representing the difference between the reacquisition price and the net carrying amount of the extinguished debt and since the gain was from a transaction with a related party, the $1,965,000 was recorded to additional paid in capital as a component of Stockholders’ Equity.

AsComprehensive ~~a result~~income of(loss) ~~the~~includes ~~conversions~~net ~~discussed~~income ~~above,~~(loss) as currently reported by the Company ~~will~~adjusted ~~issue~~for ~~10,000,000 shares~~other ofcomprehensive ~~Stock~~items. Other ~~and~~comprehensive asitems for the Company consists of ~~September~~an ~~30,~~unrealized ~~2009,~~loss ~~these~~related ~~have~~to ~~been~~the ~~recorded~~Company's equity securities accounted for as ~~issuable~~ available-for-sale with changes in ~~the~~fair ~~unaudited~~value ~~consolidated~~recorded ~~financial~~through ~~statements~~stockholders’ equity.

OnLegal ~~April 16,~~Costs ~~2001, the Company leased computer equipment under a 36-month lease that was accounted for as a capital lease in the amount of $21,238. The lease was secured by the computer equipment~~ and perfected by a financing statement; however, the Company liquidated the equipment in 2006 (with the lessor approval) and paid the resulting $4,000 of proceeds to the lessor. As a result of the computer liquidation and other payments, the remaining unpaid balance of principal has been $16,131 since March 31, 2006. The payable is personally guaranteed by the Chief Executive Officer of the Company. In November 2003, a settlement was negotiated with the lessor discussed above to forgive the outstanding principal and accrued interest on the lease payable once the transfer of 4,000 shares (100,000 shares prior to the one-for-twenty five reverse stock split) of the Company’s common stock personally held by the Company’s Chief Executive office occurs. The Chief Executive Officer of the Company transferred these shares on September 15, 2003.Contingencies

~~However, as~~In of the ~~Effective~~normal ~~Date~~course of business, the ~~transaction~~Company ~~has~~incurs ~~not~~costs ~~been~~to ~~finalized~~hire asand ~~the~~retain ~~lessor had~~external ~~not~~legal ~~formerly~~counsel ~~executed~~to ~~the~~advise ~~settlement~~it ~~agreement.~~on regulatory, litigation and other matters. The Company ~~has~~expenses ~~researched~~ these costs as the ~~matter~~related ~~and~~services ~~believes~~are ~~that~~received. ~~consideration~~If ~~was~~a ~~provided~~loss byis ~~the~~considered ~~Company~~probable and ~~accepted~~ by the ~~Lessor~~amount ~~for~~can ~~the~~be ~~settlement~~reasonable ~~and~~estimated, ~~that~~the noCompany ~~further~~recognizes ~~consideration~~an ~~or action~~expense isfor ~~required~~the byestimated loss. If the Company~~. Accordingly,~~ has the ~~$16,131~~potential ~~debt obligation~~to ~~and~~recover ~~$25,029~~a portion of ~~accrued~~the ~~interest~~estimated ~~have~~loss ~~been~~from ~~reclassified~~a tothird ~~Deferred Other Income~~party, the Company makes a ~~component~~separate assessment of ~~Long-Term~~recoverability ~~Liabilities~~and inreduces the ~~unaudited~~estimated ~~consolidated financial~~loss ~~statements.~~if ~~(See~~recovery ~~Note 7~~is –also ~~Deferred~~deemed ~~Other Income)~~probable.

~~On October~~Income 28, 2005, Bend Arch entered into a $25,000 line of credit facility with a financial institution for working capital purposes. The line of credit is secured by a company unrestricted certificate of deposit held by the financial institution and bears simple interest per annum at a variable rate which is 3.25% as of September 30, 2009. As of September 30, 2009, the outstanding balance is $23,073 and is included in the Note Payable balance in the accompanying unaudited consolidated financial statements.Taxes

InIncome ~~March 2008,~~taxes ~~the~~are ~~Company~~accounted ~~purchased~~for ~~oilfield~~under ~~property~~the asset and ~~equipment~~liability ~~for~~method aof ~~price~~ASC ~~of $150,000~~740 “Income Taxes”. ~~The~~Under ~~terms~~ASC ~~included~~740, adeferred ~~cash~~tax ~~payment~~assets ~~of $47,000~~ and aliabilities ~~note payable~~are recognized for the ~~balance~~future oftax ~~$103,000. During~~consequences ~~the~~attributable ~~nine~~to ~~months~~differences ~~ended September~~between ~~30, 2008,~~ the ~~Company~~financial ~~paid~~statement ~~down~~carrying ~~$12,000~~amounts of ~~principal~~existing assets and ~~the~~liabilities ~~balance is~~and ~~$91,000~~their asrespective oftax ~~June~~bases. Deferred ~~30,~~tax ~~2009~~assets and ~~classified~~liabilities asare ameasured ~~component~~using ofenacted ~~Note~~tax ~~Payable~~rates ~~in the~~expected ~~accompanying~~to ~~unaudited~~apply ~~consolidated~~to ~~financial~~taxable ~~statements. As~~income ~~of September~~in ~~30,~~the ~~2009,~~years noin ~~formal~~which ~~agreement~~those oftemporary ~~the~~differences ~~terms~~are ofexpected ~~the~~to ~~note~~be ~~payable~~recovered ~~had been~~or ~~finalized~~settled. Under ~~and~~ASC 740, the ~~Company~~effect ~~has~~on adeferred ~~verbal~~tax ~~agreement~~assets toand ~~pay~~liabilities ~~the~~of ~~principal back at~~ a ~~rate~~change ofin ~~$10,000~~tax ~~monthly. It~~rates is ~~anticipated~~recognized ~~that~~in aincome ~~formal agreement~~in ~~will~~the beperiod ~~negotiated~~that ~~and~~includes ~~finalized in~~ the ~~future~~enactment date.

InEffective ~~July 2009~~January 1, 2007, the Company ~~received~~adopted ~~$10,000~~provisions of ~~proceeds~~ASC ~~from~~740, aSections ~~short-term~~25 ~~note~~through ~~from~~60 ~~an unrelated~~“Accounting ~~third~~for ~~party~~Uncertainty in Income Taxes". AsThese ofsections ~~September~~provide ~~30,~~detailed ~~2009~~guidance for the financial statement recognition, nomeasurement ~~formal~~and ~~agreement~~ disclosure of uncertain tax positions recognized in the ~~terms~~financial ofstatements. Tax positions must meet a “more-likely-than-not” recognition threshold at the ~~note~~effective ~~payable~~date ~~had~~to ~~been~~be ~~finalized~~recognized upon the adoption of ASC 740 and in subsequent periods. Upon the adoption of ASC 740, the Company~~. It~~ ishad ~~anticipated~~no ~~that~~unrecognized atax ~~more~~benefits. ~~formal~~During ~~agreement~~the ~~will~~years ~~be negotiated~~ended December 31, 2009 and ~~finalized~~2008, inno ~~the~~adjustments ~~future~~were recognized for uncertain tax benefits. All years from 2006 through 2009 are still subject to audit.

The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the outcomes of such matters. In addition, when applicable, the Company will adjust tax expense to reflect the Company’s ongoing assessments of such matters which require judgment and can materially increase or decrease its effective rate as well as impact operating results.

The number of years with open tax audits varies depending on the tax jurisdiction. The Company’s major taxing jurisdictions include the United States.

Impact of Recently Issued Accounting Standards

In September 2009, the FASB has published ASU No. 2009-12, “Fair Value Measurements and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU amends Subtopic 820-10, “Fair Value Measurements and Disclosures – Overall”, to permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This ASU also requires new disclosures, by major category of investments including the attributes of investments within the scope of this amendment to the Codification. The guidance in this Update is effective for interim and annual periods ending after December 15, 2009. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

-11-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

AsIn ~~a result~~October ~~of these transactions~~2009, the ~~Company~~FASB has published ASU 2009-13, “Revenue Recognition (Topic 605)-Multiple Deliverable Revenue Arrangements”, which addresses the ~~following~~accounting ~~remaining~~for ~~debt outstanding~~multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. Specifically, this guidance amends the criteria in Subtopic 605-25, “Revenue Recognition-Multiple-Element Arrangements”, for separating consideration in multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for determining the selling price of ~~September~~a 30deliverable, ~~2009~~which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method and also requires expanded disclosures. The guidance in this update is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The adoption of this standard is not expected to have any impact on the Company’s consolidated financial position and results of operations.

$25,000 Line of Credit, dated October 28, 2005, bearing simple variable interest at 3.25% per annum and due on February 28, 2008.	$	24,421
$10,000 Note, dated July of 2009, not formalized and not bearing interest		10,000
$103,000 Note, dated March of 2008, not formalized and not bearing interest		91,000
	$	125,421

In January 2010, the FASB has published ASU 2010-01 “Equity (Topic 505) - Accounting for Distributions to Shareholders with Components of Stock and Cash—a consensus of the FASB Emerging Issues Task Force,” as codified in ASC 505. ASU No. 2010-01 clarifies the treatment of certain distributions to shareholders that have both stock and cash components. The stock portion of such distributions is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009 and should be applied on a retrospective basis. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

6In January 2010, the FASB has published ASU 2010-06 “Fair Value Measurements and Disclosures (Topic 820): - Improving Disclosures about Fair Value Measurements”. ASU No. 2010-06 clarifies improve disclosure requirement related to fair value measurements and disclosures – Overall Subtopic (Subtopic 820-10) of the FASB Accounting Standards Codification. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure about purchase, sales, issuances, and settlement in the roll forward of activity in Level 3 fair value measurements. ~~ASSET RETIREMENT~~Those ~~OBLIGATIONS~~disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

~~The following~~In ~~represents~~February 2010, athe ~~reconciliation~~FASB ofissued ASU 2010-09 which requires that an SEC filer, as defined, evaluate subsequent events through the ~~asset~~date ~~retirement~~that ~~obligations~~the financial statements are issued. The update also removed the requirement for an SEC filer to disclose the ~~nine~~date ~~months~~through ~~ended~~which ~~September~~subsequent 30events have been evaluated in originally issued and revised financial statements. The adoption of this guidance on January 1, ~~2009:~~2010 did not have a material effect on the Company’s consolidated financial statements.

Asset retirement obligations at December 31, 2008	$	509,155
Revision to estimate and additions		-
Other adjustments		-
Liabilities settled during the period		-
Accretion of discount		17,168
Asset retirement obligation at end of period	$	526,323

5. SALE OF SUBSIDIARY

7Effective March 1, 2010, the Company executed a definitive agreement (the “Transaction”) with Emerald Bay Energy, Inc., a publicly traded Calgary based Energy Company and a private third party (together the “Purchasers”) for the sale of its wholly owned subsidiary Production Resources, Inc. (“PRI”). ~~DEFERRED OTHER~~The ~~INCOME~~sale price is $850,000 USD comprised of a combination of $425,000 USD value of Emerald Bay Energy (“EBY”) restricted stock and $425,000 USD cash from a private third party. Additionally, the Company would retain a 1% overriding royalty on any oil or natural gas formation below 1,200 feet deep. The Transaction was subject to the final approval of the TSX Venture Exchange (“TSX”).

~~On April~~The 16$425,000 ~~2001,~~USD ~~the~~worth ~~Company~~of ~~leased~~EBY ~~computer~~restricted ~~equipment~~common ~~under~~stock ato ~~36-month~~be ~~lease that~~issued ~~was~~to ~~accounted~~the ~~for~~Company aswas aset ~~capital~~at ~~lease in the amount of~~ $~~21,238~~0. ~~The~~08 ~~lease~~per ~~was~~share ~~secured~~CDN bybased ~~the~~upon ~~computer equipment and perfected by a financing statement; however,~~ the ~~Company~~exchange ~~liquidated~~rate ~~the equipment~~between inCanadian ~~2006 (with the lessor approval)~~ and ~~paid~~United ~~the~~States ~~resulting~~Dollars ~~$4,000~~as of ~~proceeds~~ to the ~~lessor. As~~date ~~a result~~ of ~~the~~Closing ~~computer~~when ~~liquidation and other payments,~~ the ~~remaining~~TSX ~~unpaid~~gave ~~balance~~final ~~of principal has been $16,131 since March 31, 2006~~approval. ~~The payable is personally guaranteed by the Chief Executive Officer of the Company. In November 2003~~However, ~~a settlement was negotiated with~~ the ~~lessor~~Transaction ~~discussed~~specified ~~above~~that toin ~~forgive~~ the ~~outstanding~~event ~~principal and~~that ~~accrued interest on~~ the ~~lease~~EBY ~~payable~~restricted ~~once~~stock ~~the~~amount ~~transfer of 4,000 shares (100,000 shares prior~~ to ~~the~~be ~~one-for-twenty~~issued ~~five~~resulted ~~reverse~~in ~~stock~~ownership ~~split) of the Company’s common stock personally held~~ by the Company’s ~~Chief~~of ~~Executive~~ten ~~office occurs. The~~percent ~~Chief~~(10%) ~~Executive~~or ~~Officer~~more of the ~~Company~~outstanding ~~transferred these~~ shares onof ~~September 15~~EBY, ~~2003.~~then ~~However,~~the asEBY ofStock ~~the~~amount ~~Effective~~would ~~Date,~~be ~~the~~reduced ~~transaction has~~to ~~not~~an ~~been~~amount ~~finalized~~of asEBY ~~the~~shares ~~lessor~~which ~~had~~does not ~~formerly~~exceed ~~executed the settlement agreement~~9.97% ~~The~~of ~~Company has researched~~ the ~~matter~~total ~~and~~outstanding ~~believes~~common ~~that~~shares ~~consideration was~~of ~~provided~~EBY ~~by the Company~~ and ~~accepted by~~ the ~~Lessor~~resulting ~~for~~shortfall ~~the~~in ~~settlement and that no further consideration or action is required by~~ the ~~Company. Accordingly,~~ ~~the~~ $16425,~~131~~000 ~~debt~~USD ~~obligation~~value ~~and $25,029~~ of ~~accrued~~ ~~interest~~the ~~have~~EBY ~~been~~Stock ~~reclassified~~amount toof ~~Deferred~~the ~~Other~~purchase ~~Income,~~price awould ~~component~~be ~~of Long-Term~~paid ~~Liabilities~~to in the ~~unaudited consolidated financial statements. Currently, the~~ Company ~~intends~~in tocash ~~write~~as ~~this~~consulting ~~amount~~services ~~off by~~fees ~~December~~under ~~31,~~an ~~2009~~eighteen (~~See~~18) ~~Note~~month 5consulting ~~– Debt)~~agreement.

AsEffective ofMarch ~~the Effective~~8, ~~Date~~2010, the ~~Company~~TSX ~~has~~approved ~~recorded~~the ~~$122,671~~Transaction ofand ~~accrued~~under ~~interest~~the ~~for previously~~terms ~~issued~~of ~~convertible~~the ~~debentures~~definitive agreement, 5. ~~Several~~0 ~~convertible debenture~~million ~~holders~~shares ~~previously~~of ~~elected~~EBY restricted common stock were issued to ~~convert~~the ~~all~~Company orwith a ~~portion~~transaction ofdate ~~the convertible~~value ~~debentures~~of ~~into~~$388,200, ~~common~~along ~~stock. However~~with $425,000 ~~the~~USD ~~conversion~~cash ~~did not~~and ~~include~~an ~~accrued~~eighteen ~~interest~~(18) ~~that~~month ~~was~~consulting ~~specified~~agreement intotaling ~~the~~$36,800 ~~convertible~~USD ~~debenture documentation~~for a total sales price of $850,000 USD. ~~The~~Additionally, the Company ~~has~~will ~~researched~~also ~~the~~retain ~~matter~~a ~~and~~1% ~~believes that~~gross nooverriding ~~further~~royalty ~~common~~on ~~stock~~any ~~will~~oil beor ~~issued~~natural ~~for~~gas ~~these conversions~~formation below 1,200 feet. ~~Accordingly,~~The ~~the~~ $~~122~~36,~~671~~800 ofUSD ~~accrued~~consulting ~~interest~~agreement has been ~~reclassified~~ totreated ~~Deferred~~in ~~Other~~substance ~~Income,~~as a ~~component~~part of ~~Long-Term~~the ~~Liabilities~~sale ~~in the~~of ~~unaudited~~PRI ~~consolidated~~and ~~financial~~a ~~statements. Currently,~~receivable for the ~~Company~~ ~~intends~~entire toconsulting ~~write~~agreement ~~this~~has ~~amount~~been ~~off~~recorded byas ~~December~~of ~~31,~~the ~~2009~~transaction date.

As a result of the ~~Effective~~ ~~Date~~Transaction, the Company ~~had~~has recorded ~~approximately~~a ~~$262,000~~gain ofon ~~accounts payable~~sale ~~from the predecessor company, Communicate Now.com, Inc. Since these trade accounts payable have been outstanding for an extended period~~ of ~~time~~ ~~with~~subsidiary noin ~~communication between~~ the ~~Company~~amount ~~and any~~ of ~~the vendors~~$826,907 ~~the Company~~which ~~commenced~~is ~~the~~classified ~~process~~as ofa ~~eliminating~~component ~~the liabilities from its records. As~~ of ~~the~~other ~~Effective~~income ~~Date,~~(expense) ~~these~~in ~~accounts payable have been removed from~~ the ~~Company’s~~accompanying unaudited consolidated financial statements. ~~Additionally,~~If ~~the Company determined additional accounts payable~~ in the ~~amount~~future ofthe ~~approximately~~Company ~~$54,000~~receives ~~were~~royalty ~~not~~payments ~~valid~~on ~~and~~formations ~~should~~below ~~be eliminated. Accordingly~~1,200 asfeet, of the ~~Effective~~Company ~~Date,~~will ~~accounts~~classify ~~payable has~~the ~~been~~payments ~~reduced~~as ~~by $316,289 and has been reclassified to Deferred Other Income,~~ a component of ~~Long-Term~~other ~~Liabilities~~income ~~in the unaudited consolidated financial statements~~(expense). ~~Currently, the Company intends to write this amount off by December 31, 2009.~~

-12-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

~~8. STOCKHOLDERS’ EQUITY~~The $826,907 gain on the sale of subsidiary is comprised of the following:

Capital Structure

Assets sold (includes $11,614 of cash)	$	(414,493	)
Liabilities sold		391,400
Consideration received		850,000
Gain on sale of subsidiary	$	826,907

~~The Company~~Unaudited ispro ~~authorized~~forma tofinancial ~~issue~~information uphas tobeen ~~500,000,000~~prepared ~~shares~~as ofif ~~common~~the ~~stock,~~Transaction ~~$0.0001 par~~had ~~value~~occurred ~~per~~at ~~share,~~the ofbeginning ~~which 36,243,849 were issued and outstanding as~~ of ~~September~~ ~~30,~~the ~~2009~~periods presented. ~~Additionally,~~The ~~the~~pro ~~Company~~forma ~~has~~data ~~23,350,677~~presented ~~shares issuable~~is asbased ofon ~~September~~numerous ~~30,~~assumptions ~~2009~~and asis ~~discussed~~not ~~below. In~~necessarily ~~total,~~indicative ~~the Company~~of ~~has~~future ~~59,594,526~~results ~~shares~~of ~~outstanding and issuable at September 30, 2009~~operations.

The Company is authorized to issue up to 5,000,000 shares of preferred stock, $0.0001 par value per share, of which none were issued and outstanding as of September 30, 2009.

	(Unaudited)
	Three Months Ended
	March 31,
	2010			2009
Revenues	$	152,157		$	145,976
Net Loss	$	(279,511	)	$	(335,115	)
Net Loss Per Share - Basic and Diluted	$	(0.00	)	$	(0.02	)

~~The Company is authorized to issue up to 10,000,000 shares of common stock under the 2008 Non-Qualified Stock Option Plan (the “Plan”)~~6. ~~The~~ Plan is to assist the Company in securing and retaining Key Participants of outstanding ability by making it possible to offer them an increased incentive to join or continue in the service of the Company and to increase their efforts for its welfare through participation in the ownership and growth of the Company. As of September 30, 2009, 9,800,000 stock options have been granted under the Plan and issued by the Company.INVESTMENTS

~~Common Stock~~The following represents information about available-for sales securities held with loss positions as of March 31, 2010:

Effective April 1, 2009, the Company issued 50,000 shares of Stock to an unrelated third party for oil and gas related equipment. The Stock was valued at $1,750 or $0.035 per share, the closing trading price of the Stock on April 1, 2009.

Securities in loss positions less than 12 months:		Cost				Aggregate Unrealized losses				Aggregate Fair Value
Equity securities		$	388,200			$	69,336			$	318,864

~~Effective May~~As ~~11,~~a ~~2009,~~result of the ~~Company~~sale ~~received~~of ~~$50,000~~PRI ofdiscussed ~~proceeds~~previously ~~from~~under ~~the~~Note ~~sale~~5 – Sale of Subsidiary, the Company received 5,000,000 shares of ~~Stock~~EBY atrestricted common stock with a cost basis of $~~0.01~~388,200 ~~per~~on ~~share~~March 31, 2010. The EBY closing stock price on March 31, 2010 was $0.01065 CDN per share ~~price~~ and with an exchange rate of .98112, the valuation was ~~determined~~$318,864 ~~based~~USD ~~upon~~for athe ~~33%~~5,000,000 ~~discount~~shares toowned by the ~~closing~~Company. In ~~market~~accordance ~~price~~with of ASC 320 “Investments – Debt and Equity Securities”, the Company has valued the investment at $0318,864 which is classified as available for sale equity securities in the accompanying unaudited consolidated financial statements at March 31, 2010.~~015~~ As ~~per~~a ~~share~~result onof the valuation, the Company recorded a $69,336 unrealized loss on available for sale ~~date~~equity securities in the stockholders’ equity section of ~~May~~the 11unaudited consolidated financial statements as of March 31, ~~2009~~2010.

~~Effective June~~Using 30the cash proceeds received from the sale of PRI, ~~2009~~the Company opened up a brokerage account in March 2010 and purchased certain equity securities with the principal intent of selling them in the near future. In accordance with ASC 320, the ~~Chief~~Company ~~Executive~~evaluated ~~Officer~~the ~~elected~~investment securities and determined that they meet the criteria to ~~convert~~be 3classified as trading securities. The original cost basis of these investments was $71,~~500~~237 and subsequently,~~000~~ ~~shares~~ the Company sold these equity securities for $67,128 resulting in a $4,109 realized loss. The Company then utilized the proceeds and purchased $65,982 of new securities and the difference of $01,146 was transferred to a money market account.~~0001~~ As ~~par~~of March 31, 2010, the Company has classified the $1,146 in the money market account as cash in the accompanying unaudited consolidated financial statements. As of March 31, 2010, the $65,982 cost basis of the equity securities owned by the Company had a market value ~~preferred~~of ~~stock~~$66,015 ~~into~~and 10is classified as trading securities,~~500~~ a component of current assets in the accompanying unaudited consolidated financial statements. Additionally,~~000~~ ~~shares~~$33 representing the difference between the market value at March 31, 2010 of ~~Stock~~$66,015 ~~per~~and the ~~terms~~ historical cost of $65,982 represents an unrealized gain on trading securities. In accordance with ASC 320, gains and losses on trading securities are included in current income and the ~~preferred~~Company ~~stock~~has classified the realized loss on trading securities of $4,109 and unrealized gain of $33 as components of other income (expense) in the accompanying unaudited consolidated financial statements.

Effective September 6, 2009, the Company received $10,005 from the sale of 333,500 shares of stock at $0.03 per share. The $0.03 per share price was determined based upon a 33% discount to the closing market price of $.0105 per share on the sale date of September 6, 2009.

As a result of the above, the Company has 36,243,849 outstanding shares at September 30, 2009.

Common Stock Issuable:

On the Effective Date, the Company and certain of its wholly-owned subsidiaries eliminated certain debt obligations by converting them into Stock of the Company.

Bend Arch had a $2,000,000 Note that was due and payable on December 31, 2009. The Note was issued to Proco, a company controlled by the brother of the Company’s Chief Executive Officer and a director. The purpose of the Note was to secure payment for oil and gas leases and wells located in Comanche and Eastland counties in the State of Texas sold to Bend Arch by Proco on June 15, 2004. The Note replaced a $2,000,000 convertible debenture dated January 5, 2004. As of the Effective Date, the Note has been converted into 8,000,000 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock. These shares are recorded as issuable at September 30, 2009. Additionally, the Note accrued interest at a rate of eight percent (8%) per annum and as of the Effective Date, accrued interest was $878,027. An agreement was reached whereby Proco forgave $378,027 of the accrued interest and the remaining $500,000 has been converted into 2,000,000 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock. These shares have been recorded as issuable at September 30, 2009.

-13-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

~~Effective July 1, 2003, the Company entered into a salary and equipment rental agreement with its Chief Executive Officer~~7. As ofOIL ~~January~~AND 1,GAS ~~2005,~~PROPERTIES ~~the~~AND $3,500 per month equipment rental agreement with the Chief Executive Officer was terminated. As of the Effective Date, the Company owed the Chief Executive Officer $593,735 for unpaid amounts under the salary and equipment rental agreement and has been converted into 2,374,940 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock. These shares have been recorded as issuable at September 30, 2009.EQUIPMENT

AsOil ofand ~~the Effective~~gas ~~Date,~~properties ~~Bend Arch, the Company’s wholly-owned subsidiary, owed the Chief Executive Officer $1,007,715 for previous advances~~ and equipment ~~rental~~is ~~charges at~~comprised ~~$4,500 per month. This amount has been converted into 4,030,860 shares~~ of ~~Stock based upon a conversion price of $0.25 per share, a significant premium to~~ the ~~market price of the Stock. These shares have been recorded as issuable at September 30, 2009.~~following:

As of the Effective Date, the operator of the Company’s oil and gas properties was owed $1,736,219 for services as the operator of the Company’s oil and gas production activities. The operator is Proco and is a related party as Proco is controlled by the brother of the Company’s Chief Executive Officer. This amount has been converted into 6,944,877 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock. These shares have been recorded as issuable at September 30, 2009.

	Mar. 31,		Dec. 31,
	2010		2009
Oil and gas properties, successful efforts method	$	3,245,199	$	4,283,365
Other property and equipment		1,804,746		1,776,905
		5,049,945		6,060,270
Less: Accumulated depreciation and depletion		1,659,142		2,287,199
Oil and gas properties and equipment, net	$	3,390,803	$	3,773,071

~~As a result of the above, the Company has 23,350,677 shares classified as issuable at September 30, 2009~~8. DEBT

~~Preferred Stock:~~Notes Payable

The Company is authorized to issue up to 5,000,000 shares of preferred stock, $0.0001 par value per share, of which 3,500,000 were issued and outstanding as of the Effective Date. All of the preferred stock outstanding was held by the Chief Executive Officer of the Company. Under the terms of the designation, these Series A shares are not entitled to dividends and are convertible, at the option of the holder into three times as many common shares as Series A preferred that are held. There are no liquidation rights or preferences to Series A preferred stock holders as compared to any other class of stock. These shares are non-voting, however, the holders, as a class may elect two directors.

	Mar. 31,		Dec. 31,
	2010		2009
$25,000 Line of Credit, dated October 28, 2005, bearing simple variable interest at 6.75% per annum and due on January 25, 2010.	$	-	$	23,684
$124,487 Note, dated March 27, 2008, not formalized and not bearing interest		75,487		100,487
$10,000 Note, dated June 30, 2009, bearing interest at 18% per annum and due December 31, 2009.		-		10,000
	$	75,487	$	134,171

AsOn ofOctober ~~the Effective~~28, ~~Date~~2005, ~~the~~Bend ~~holder~~Arch ~~elected~~entered tointo ~~convert~~a $25,000 line of credit facility with a financial institution for working capital purposes. The line of credit was secured by a certificate of deposit held by the ~~preferred~~financial ~~stock~~institution and ~~the Company~~was ~~issued~~bearing 10simple interest per annum at a variable rate which was 3.25% as of December 31,~~500~~ 2009. In January 2010,~~000~~ ~~shares~~the Company paid the outstanding balance in full and is no longer outstanding as of ~~Stock~~March 31, 2010.

~~Stock Options:~~On March 27, 2008, the Company purchased oilfield property and equipment for a price of $159,487. The terms included a cash payment of $35,000 and a note payable for the balance of $124,487. In 2008, the Company paid down $24,000 of principal and the balance was $100,487 as of December 31, 2009. In January 2010, the Company paid down $25,000 of principal and the balance is $75,487 as of March 31, 2010 and classified as a component of Note Payable in the accompanying unaudited consolidated financial statements. As of March 31, 2010, no formal agreement of the terms of the note payable had been finalized and the Company has a verbal agreement to pay the principal back at a rate of $10,000 monthly when sufficient cash flow is available.

On ~~May 11~~June 30, 2009, the Company ~~granted~~received 9$10,~~800,~~000 ~~non~~of proceeds from a short-~~qualified~~term ~~stock~~note ~~options~~from an unrelated third party. The terms included interest at a rate of 18% per annum, a December 31, 2009 maturity date, and a late payment charge equal to ~~employees~~ 5% of the unpaid balance and ~~consultants~~interest ~~under~~at the ~~Plan~~lesser of a) 18% or b) as ~~described~~permitted ~~above~~by law. OfAs ~~the~~of 9December 31,~~800~~ 2009,~~000 stock~~ ~~options~~the ~~granted,~~Company ~~7,000,000~~had ~~were~~accrued ~~issued~~$900 of accrued interest related to ~~employees~~the note payable and 2the note payable had not been repaid and was considered in default. In March 2010,~~800~~ the Company repaid the entire principal balance of $10,000 ~~were issued~~and toaccrued ~~consultants. All~~interest of $900 and the ~~options~~short-term ~~were~~note ~~vested~~is ~~100%~~no ~~upon~~longer ~~the grant~~outstanding ~~date~~as of ~~May~~March 1131, ~~2009~~2010.

~~The Company evaluated the stock options in accordance with SFAS 123R (ASC 718) and utilized the Black Scholes method to determine valuation~~9. AsASSET aRETIREMENT ~~result of our analysis, the total value for the stock option issuance was $146,986 recorded as $104,990 of compensation expense and $41,996 as consulting expense.~~OBLIGATIONS

The Company records an asset retirement obligation (“ARO”) associated with the retirement of its proved oil and gas properties as a liability in the period in which a legal obligation is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated proved properties asset. The ARO is recorded at fair value, excluding salvage values, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate.

The Company used the following in the calculation:

Stock Price (grant date)	$	0.015
Exercise Price	$	0.015
Expected Life (between vesting period and term of warrants)		5.00
Volatility		348	%
Annual Rate of Quarterly Dividends		0.00	%
Risk Free Interest Rate (10 year T-bill rate)		3.17	%

-14-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

~~9. COMMITMENTS~~The ~~AND CONTINGENCIES~~following represents a reconciliation of the asset retirement obligations for the three months ended March 31, 2010:

Asset retirement obligations at December 31, 2009	$	532,046
Retirement of liability for sale of PRI		(384,934	)
Accretion of discount		4,548
Asset retirement obligation at end of period	$	151,660

10. STOCKHOLDERS’ EQUITY

Capital Structure

The Company is authorized to issue up to 5,000,000 shares of preferred stock, at $0.0001 par value per share, of which none were issued and outstanding as of March 31, 2010.

The Company is authorized to issue up to 500,000,000 shares of common stock, at $0.0001 par value per share, of which 39,266,071 shares were issued and outstanding at March 31, 2010. Additionally, the Company has 23,350,677 shares issuable at March 31, 2010. In total, the Company has 62,616,748 shares outstanding and issuable at March 31, 2010.

The Company is authorized to issue up to 10,000,000 shares of common stock under the 2008 Non-Qualified Stock Option Plan (the “Plan”). The Plan is to assist the Company in securing and retaining key participants of outstanding ability by making it possible to offer them an increased incentive to join or continue in the service of the Company and to increase their efforts for its welfare through participation in the ownership and growth of the Company. As of March 31, 2010, 9,800,000 stock options have been granted under the Plan and issued by the Company and 8,800,000 stock options are outstanding.

There were no changes in the preferred stock, common stock, common stock issuable and subscription receivable outstanding balances during the three months ended March 31, 2010.

Stock Options:

There was no activity for stock options during the three month period ending March 31, 2010 and the terms of options to purchase our common stock are summarized below:

Options Outstanding			Options Exercisable
Range of Exercise Prices	Number Outstanding at March 31, 2010	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number Exercisable at March 31, 2010	Weighted Average Exercise Price
$0.015	8,800,000	9.11 Years	$0.015	8,800,000	$0.015

11. COMMITMENTS AND CONTINGENCIES

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

~~Prior~~The ~~to December 31, 2007, the~~ Company and certain of its wholly-owned subsidiaries ~~were~~ are delinquent in the filing of franchise tax reports with the State of Texas and the State of Delaware and as a result, the Company and certain of its wholly-owned subsidiaries ~~were~~are not in good standing. ~~The~~As ~~Company and its wholly-owned subsidiaries have filed the required reports for both 12-31-07 and 12-31-08 and as~~ a result, ~~management anticipates that~~ the Company and ~~all~~certain of its wholly-owned subsidiaries ~~will be declared in good standing in the near future. However, the Company has not received notice that all of the filings have been accepted and as a result,~~ may face certain penalties and interest due to the delinquent status of the reports ~~before~~and ~~they~~not ~~were filed~~being in good standing.

As of the Effective Date, the Company had recorded $83,812 of unpaid federal payroll taxes and employee withholdings and related penalties and interest. These unpaid federal taxes are entirely from CommunicateNow.com (Communicate”), the predecessor company. The previous Chief Executive Officer of Communicate structured a settlement payment agreement with the Internal Revenue Service and has personally paid the balance of the obligation down to $13,961 as of the Effective Date. Accordingly, the Company has reduced the balance recorded to $13,961 as of the Effective Date and the difference of $69,851 has been recorded to Other Income in the unaudited consolidated financial statements at September 30, 2009. Since the previous Chief Executive Officer is no longer affiliated with the Company in any way and is not a related party, the Company determined that this was not a capital transaction and should be recorded to Other Income. The remaining balance of $13,961 is included as accrued payroll taxes and penalties in the Company’s unaudited consolidated financial statements because of potential federal tax liens against the Company until the balance is paid in full.

From May 2004 to March 2005, the Company issued 108,000 shares of common stock (2,700,000 shares prior to the one-for-twenty five reverse stock split) in exchange for a $27,000 subscription receivable. As of September 30, 2009, the subscription receivable is still outstanding and no resolution of this matter has been completed.

In December 2005 and January 2006, the Company determined that certain issuances of common stock had not been properly disclosed in reports made by the Company’s transfer agent. The Company discussed these items with the transfer agent and the transactions have been reconciled and recorded properly in the Company records. However, the Company believes that two of these transactions, an unauthorized issuance by the transfer agent of 600,000 shares (15,000,000 shares prior to the one-for-twenty five reverse stock split) and an additional unauthorized issuance of 100,000 shares (2,500,000 shares prior to the one-for-twenty five reverse stock split), should be reimbursed to the Company by either the third party who received the shares or the transfer agent. The Company has recorded the fair market valuation of the two transactions in the amount of $875,000 as a subscription receivable as of September 30, 2009 and is in discussions with both the third party and the transfer agent to resolve the issue. As of the date of these financial statements, no resolution of the matter has been completed.

10. RELATED PARTY TRANSACTIONS

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

Effective July 1, 2003, the Company entered into a salary and equipment rental agreement with its Chief Executive Officer. As of January 1, 2005, the $3,500 per month equipment rental agreement with the Chief Executive Officer was terminated. As of the Effective Date, the Company owed the Chief Executive Officer $593,735 for unpaid amounts under the agreement which has been converted into 2,374,940 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock.

As of the Effective Date, Bend Arch, the Company’s wholly-owned subsidiary, owed the Chief Executive Officer $1,007,715 for previous advances and equipment rental charges at $4,500 per month. This amount has been converted into 4,030,860 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock.

As of the Effective Date, we owed the operator of the Company’s oil and gas properties $1,736,219 for services as the operator of the Company’s oil and gas production activities. The operator is Proco and is a related party as Proco is controlled by the brother of the Company’s Chief Executive Officer. This amount has been converted into 6,944,877 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock.

The Company evaluated the conversion of each of the above due to related party and the accrued interest in accordance with paragraph 20 of APB 26 (ASC 470-50-40) and recorded an aggregate $2,623,408 gain representing the difference between the reacquisition price and the net carrying amount of the extinguished debt. Since the gain was from transactions with related parties, the $2,623,408 was recorded to additional paid in capital as a component of Stockholders’ Equity.

As of the Effective Date, the President of Oil America Group, Inc. (“OAG”) was owed $292,500 for unpaid salary per an agreement effective January 1, 2005. The agreement is for annual compensation of $65,000 and none of this amount has been paid since the inception of the agreement. The unpaid salary of $292,500 has been forgiven by the President of OAG as of the Effective Date. As a result of the transaction and since the President of OAG is an officer of the Company and is a related party, the $292,500 of accrued compensation forgiven was classified as a capital transaction and recorded to additional paid in capital.

-15-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~September 30~~March 31, ~~2009~~2010

(Unaudited)

As of December 31, 2009, the Company had recorded $12,191 of unpaid federal payroll taxes and employee withholdings and related penalties and interest. These unpaid federal taxes are entirely from CommunicateNow.com (Communicate”), the predecessor company. The previous Chief Executive Officer of Communicate structured a settlement payment agreement with the Internal Revenue Service and has personally paid the balance ~~outstanding~~of ~~for~~the ~~Due~~obligation. As ~~from~~of March 31, 2010, the balance has been paid down to $11,495 and the difference of $596 has been recorded to ~~Related~~Other ~~Parties~~Income in the accompanying unaudited consolidated financial statements at ~~September~~March 3031, ~~2009~~2010. Since the previous Chief Executive Officer is no longer affiliated with the Company in any way and is not a related party, the Company determined that this was not a capital transaction and should be recorded to Other Income. The remaining balance of $11,495 is included as ~~follows~~accrued payroll taxes and penalties in the Company’s accompanying unaudited consolidated financial statements because of potential federal tax liens against the Company until the balance is paid in full.

Due from Related Party:
	Sep. 30,		Dec. 31,
	2009		2008
Due from Operator of oil and gas properties	$	5,733	$	-
Total Due From Related Party	$	5,733	$	-

In December 2005 and January 2006, the Company determined that certain issuances of common stock had not been properly disclosed in reports made by the Company’s transfer agent. The Company discussed these items with the transfer agent and the transactions have been reconciled and recorded properly in the Company records. However, the Company believes that two of these transactions, an unauthorized issuance by the transfer agent of 600,000 shares (15,000,000 shares prior to the one-for-twenty five reverse stock split) and an additional unauthorized issuance of 100,000 shares (2,500,000 shares prior to the one-for-twenty five reverse stock split), should be reimbursed to the Company by either the third party who received the shares or the transfer agent. The Company has recorded the fair market valuation of the two transactions in the amount of $875,000 as a subscription receivable as of March 31, 2010 and is in discussions with both the third party and the transfer agent to resolve the issue. As of the date of these unaudited consolidated financial statements, no resolution of the matter has been completed.

~~The operator of the Company’s oil and gas properties owed Bend Arch $5,733 for services related to the Company’s oil and gas production activities~~12. ~~The~~RELATED ~~operator~~PARTY is Proco and is a related party as Proco is controlled by the brother of the Company’s Chief Executive Officer. As of September 30, 2009, the amount is recorded as a component of Due from Related Party in the accompanying unaudited consolidated financial statements.TRANSACTIONS

Due to Related Parties:
	Sep. 30,		Dec. 31,
	2009		2008
Due to Chief Executive Officer from advances and salary agreement with Company.	$	37,300	$	555,125
Due to Chief Executive Officer from advances and rental agreement with Bend Arch		89,860		932,561
Due to Chief Executive officer from advances to Oil America Group, Inc.		1,500		-
Due to President of Oil America Group, Inc. from advances and salary agreement with Company		21,500		276,250
Total Due To Related Parties	$	149,910	$	3,483,236

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

AsThe ~~a result of the previously discussed conversion to Stock (see Note 5- Debt), the~~ balance ofoutstanding ~~the~~for Due tofrom ~~related~~Related ~~parties~~Party ~~was~~is ~~zero~~ as ~~of June 30, 2009. For the three months ended September 30, 2009, the following transactions occurred related to Due To Related Parties~~follows:

Under the July 1, 2003 salary and equipment rental agreement with the Chief Executive Officer, the Company accrued $30,000 for salary obligation, the Chief Executive Officer advanced $11,500 to the Company and the Company repaid $4,500 of the amount advanced to the Chief Executive Officer. As of September 30, 2009, the amount outstanding is $37,300 and is recorded as a component of Due to Related Parties in the accompanying unaudited consolidated financial statements.

Due from Related Party:
	Mar. 31,		Dec. 31,
	2010		2009
Due from Operator of oil and gas properties	$	37,755	$	-
Total Due From Related Party	$	37,755	$	-

~~Under~~The Company was owed by the ~~previous~~ operator of its oil and gas properties $437,~~500~~755 ~~per~~as ~~month~~of ~~equipment~~March ~~rental~~31, ~~agreement~~2010 ~~between~~for services related to the Company’s oil and ~~Bend~~ ~~Arch,~~gas ~~Bend~~production ~~Arch~~activities. The ~~accrued~~operator ~~$13,500~~is ~~per~~Proco ~~the~~Operating ~~agreement~~Co., ~~the~~Inc. ~~Chief~~(“Proco”) ~~Executive officer~~and ~~advanced~~is ~~$96,500~~a torelated ~~Bend~~party ~~Arch~~as ~~and~~Proco ~~Bend~~is ~~Arch~~controlled ~~repaid~~by ~~$19,240~~the tobrother of the Company’s Chief Executive Officer. As of ~~September~~March 3031, ~~2009~~2010, the amount ~~outstanding~~ is ~~$89,860 and is~~ recorded as a component of Due tofrom Related ~~Parties~~Party in the accompanying unaudited consolidated financial statements.

~~The~~Since ~~Chief Executive~~November ~~Office advanced $~~1,~~500~~ 2003, the Company and Proco have had an operating agreement for Proco to ~~OAG~~operate the Company’s oil and asnatural ofgas ~~September~~production ~~30,~~activities. The ~~2009,~~term of the ~~amount~~ operating agreement is ~~recorded~~equal asto athe ~~component~~term of ~~Due~~the oil and gas leases held by the Company. In general, Proco incurs costs which are billed to ~~Related~~the ~~Parties~~Company inand Proco markets and sells oil and natural gas and collects payments from customers. Such payments are then remitted to the ~~accompanying unaudited~~Company. Proco ~~consolidated~~has ~~financial~~a ~~statements~~First and preferred lien on the leasehold interests of the Company against any amounts due to Proco by the Company.

~~Under~~The ~~a salary~~balance ~~agreement~~outstanding ~~with the President of OAG, $16,500 was accrued~~ for ~~salary by OAG. Additionally, the President advanced OAG $5,000. As of September 30, 2009, the amount outstanding is $21,500 and is recorded as a component of~~ Due to Related Parties is inas ~~the accompanying unaudited consolidated financial statements~~follows.

Due to Related Parties:
	Mar. 31,		Dec. 31,
	2010		2009
Due to CEO for advances and salary agreement with Company	$	96,130	$	93,150
Due to CEO for advances and rental agreement with subsidiary Bend Arch		137,060		131,060
Due to CEO for advances to subsidiary OAG		12,700		12,700
Due to President of subsidiary OAG for advances and salary agreement with Company		62,256		46,700
Due to Operator of oil and gas properties		-		4,995
Total Due To Related Parties	$	308,146	$	288,605

-16-

American Energy Production, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2010

(Unaudited)

For the period from January 1, 2010 to March 31, 2010, the following transactions occurred related to Due To Related Parties:

Effective July 1, 2003, the Company entered into a salary and equipment rental agreement with its Chief Executive Officer for a salary of $120,000 annually and a $3,500 per month equipment rental agreement. As of January 1, 2005, the $3,500 per month equipment rental agreement with the Chief Executive Officer was terminated. As of December 31, 2009, the Company owed the Chief Executive Officer $93,150 for unpaid amounts under the agreement. For the three month period ending March 31, 2010, the Company accrued $30,000 for salary obligation, the Chief Executive Officer advanced $8,065 to the Company and the Company repaid $35,085 of the amount advanced to the Chief Executive Officer. As of March 31, 2010, the amount outstanding is $96,130 and is recorded as a component of Due to Related Parties in the accompanying unaudited consolidated financial statements.

Under the previous $4,500 per month equipment rental agreement between the Company and Bend Arch, Bend Arch owed the Chief Executive Officer $131,060 as of December 31, 2009. For the three month period ending March 31, 2010, Bend Arch accrued $13,500 per the agreement, the Chief Executive Officer advanced $15,700 to Bend Arch and Bend Arch repaid $23,200 to the Chief Executive Officer. As of March 31, 2010, the amount outstanding is $137,060 and is recorded as a component of Due to Related Parties in the accompanying unaudited consolidated financial statements.

Effective January 1, 2005, Oil America Group, Inc. (“OAG”) entered into a salary agreement with its President for a salary of 65,000 annually. As of December 31, 2009, the OAG owed the President $49,544 comprised of $32,500 of accrued salary, $14,200 for advances made by the President to OAG $2,844 for expenses the President paid on behalf of OAG. For the three month period ending March 31, 2010, OAG accrued $16,250 for salary due to the President and repaid the President $5,000 for previous advances. Additionally, the President sold OAG a vehicle for a purchase price of $2,500 and OAG paid the President $2,000 of the purchase price with the remaining $500 accrued as of March 31, 2010. As a result of the transactions discussed above, OAG owes the President $62,256 as of March 31, 2010 and this amount is recorded as a component of Due to Related Parties in the accompanying unaudited consolidated financial statements.

13. SUBSEQUENT EVENTS

Management evaluated all activity of the Company through the issue date of the Company’s unaudited consolidated financial statements and concluded no subsequent events have occurred that would require recognition in the unaudited consolidated financial statements.

-17-

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

The following analysis of our financial condition and results of operations contained in this section should be read in conjunction with our financial statements and related notes and schedules thereto appearing elsewhere in this Quarterly Report, as well as the sections entitled "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes and schedules thereto included in our annual report on Form 10-K for the year ended December 31, ~~2008~~2009 filed with the SEC on May 614, ~~2009~~2010.

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


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

•

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

•

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

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

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

OVERVIEW

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

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

1. Leasing ~~Programs~~programs.

2. Production ~~Acquisitions.~~acquisitions

3. Drilling and ~~Producing~~producing with ~~Proven~~proven and ~~Emerging~~emerging ~~Technologies~~technologies.

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

We believe that for the foreseeable future, the world will be highly dependent on oil and natural gas. Currently, alternative fuels are far more expensive than fossil fuels and because of the politically unstable conditions of many of the energy producing regions of the world. We believe that oil and natural gas will remain a key yet volatile component of the world energy future and furthermore, that with the ever increasing world demand for energy, the domestic production of oil and gas will play an even greater role in America’s future then it already has to date.-18-

~~As reflected~~The inCompany ~~the~~determined ~~accompanying~~in ~~unaudited~~2009 ~~consolidated~~to ~~financial~~diversify ~~statements,~~from ~~the Company~~only ~~had~~its aoil ~~net~~and ~~loss~~gas ofoperations ~~$1,120,262~~into ~~for~~a ~~the~~working ~~nine~~gold ~~months~~mine ~~ended~~operation. On ~~September~~August 306, 2009, asthe ~~compared~~Company toannounced that it has executed a ~~net~~non-binding ~~loss~~Letter of ~~$1,369,017~~Intent (“LOI”) for the ~~nine~~acquisition ~~months~~of ~~ended~~Dorado ~~September 30~~Gold, ~~2008. Additionally,~~LLC atand ~~September~~Master 30Petroleum, ~~2009~~LLC, ~~the~~both ~~Company~~California ~~has minimal~~limited ~~cash~~liability ~~and~~companies ~~has~~(together a“Dorado”). Dorado ~~negative~~owns ~~working~~100% ~~capital~~of ~~balance~~certain ofplacer ~~$233~~gold mining claims,~~505,~~ ~~which~~land ~~could have~~and aequipment ~~material~~(the ~~impact~~“Joint onProperties”) ~~the~~25 ~~Company’s~~miles ~~financial~~north ~~condition~~of ~~and~~Weaverville, ~~operations~~California. Additionally, ~~The negative~~AENP ~~working~~and ~~capital~~Dorado ~~balance~~executed ~~was~~a ~~significantly~~120 ~~reduced~~day ~~from~~Operating aAgreement ~~balance~~to ~~of $6,950,142~~jointly atparticipate ~~March~~in 31the exploration, ~~2009~~evaluation, todevelopment ~~the~~and ~~September~~mining ~~30,~~of ~~2009~~gold ~~balance~~and byother minerals within the ~~write~~Joint ~~off of~~Properties ~~the~~(“Gold ~~obligations~~Venture”). AENP ~~discussed~~will ~~below~~bear ~~along~~100% ~~with~~of ~~the~~all ~~conversion~~expenses during operations of ~~notes~~the ~~payable, accrued~~Gold ~~interest~~Venture and ~~due~~AENP toand ~~related~~Dorado ~~parties~~will toeach ~~common~~receive ~~stock~~fifty ~~during~~percent ~~the~~(50%) ~~three months~~of ~~ended~~product ~~June~~or ~~30,~~revenues ~~2009. As~~after aexpenses ~~result,~~and ~~the~~AENP ~~Company~~will ~~has stockholder’s~~manage ~~equity~~the ofGold ~~$2,541,526~~Venture. The atacquisition ~~September~~of ~~30,~~Dorado ~~2009~~by asAENP ~~compared~~is subject to ~~a stockholders~~AENP’s ~~deficit~~sole evaluation of ~~$3,055,150~~the atresults ~~December~~after ~~31, 2009. However,~~ the ~~ability~~120 day Gold Venture period is completed. As of the ~~Company~~date toof ~~continue~~this asreport, ~~a going~~no ~~concern~~decision ishas ~~dependent~~been onmade by the Company’s ~~ability~~in relation to ~~raise~~the ~~capital~~acquisition. In ~~and generate~~December ~~sufficient~~2009, ~~revenues~~the ~~and~~Gold ~~cash~~Venture ~~flow~~was ~~from~~extended ~~its~~through ~~business~~December ~~plan~~31, 2010 as anthe ~~oil~~Company ~~and gas~~believes ~~operating~~this ~~company. The~~working ~~financial~~gold ~~statements~~mining ~~included~~operation inwill ~~this report~~be doa ~~not~~hedge ~~include~~against ~~any~~inflation ~~adjustments~~and ~~that~~will ~~might~~also behelp ~~necessary~~offset if the ~~Company~~depressed ~~is unable~~price toof ~~continue~~oil asand anatural ~~going~~gas ~~concern~~until these commodities recover in the near future.

-17-

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

RESULTS OF OPERATIONS

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

American Energy Production, Inc. and Subsidiaries
	Three Months Ended
Statements of Operations
	March 31,
(Unaudited)
	2010			2009
	Three Months Ended						Nine Months Ended
Revenues:
	September 30,						September 30,
Oil and natural gas sales, net	$	254,286		$	230,936
	2009			2008			2009			2008
Operating Expenses
Revenues:
Compensation		62,493			57,078
Oil sales, net	$	319,279		$	539,132		$	815,123		$	1,530,796
Consulting		20,965			1,500
Operating Expenses
Depreciation, depletion and accretion		84,821			134,415
Compensation		62,493			46,243			287,053			138,727
Rent		1,000			1,740
Consulting		-			-			43,496			-
General and administrative		29,312			27,445
Depreciation, depletion and accretion		121,899			148,760			385,617			441,611
Production		272,367			290,656
Rent		1,539			22,920			4,939			45,182
Professional		33,401			29,290
General and administrative		39,946			66,452			111,438			185,204
Research and development		5,997
Production		330,544			755,724			921,645			1,791,468
Business taxes		23,903			30,057
Professional		10,078			15,600			81,690			92,700
Total Operating Expenses		534,259			572,181
Taxes		24,769			13,508			67,362			75,584
Operating Loss		(279,973	)		(341,245	)
Total Operating Expenses		591,268			1,069,208			1,903,240			2,770,477
Other Income (Expense)
Operating Loss		(271,989	)		(530,076	)		(1,088,117	)		(1,239,680	)
Other income		664			100
Other Income (Expense)
Interest expense		(639	)		(42,161	)
Other income (expens)		(28,096	)		2,574			53,785			2,877
Payroll tax expense and penalties		-			(1,501	)
Interest expense		(939	)		(42,903	)		(85,930	)		(127,711	)
Loss on trading securities		(4,076	)		-
Payroll tax expense and penalties		-			(1,501	)		-			(4,503	)
Gain on sale of subsidiary		826,907			-
Total Other Income (Expense)		~~(29~~822,~~035~~856	)		(4143,~~831~~562	)		~~(32,145~~	)		~~(129,337~~	)
Net Loss	$	(301,024	)	$	(571,907	)	$	(1,120,262	)	$	(1,369,017	)
Net Income (Loss)	$	542,883		$	(384,807	)
Weighted average Shares Outstanding		59,438,651			20,360,386			51,877,025			20,363,377
Comprehensive Income (Loss)
Unrealized loss on available for sale securities - net		(69,336	)		-
Total Comprehensive Income (Loss)	$	473,547		$	(384,807	)

-1819-

Comparison of the Three Months ended ~~September 30~~March 31, ~~2009~~2010 ~~compared~~with tothe ~~2008~~three months ended March 31, 2009.

Revenues:

Revenues ~~decreased~~ increased $~~219~~23,~~853~~350 or 41approximately 10%, to $~~319~~254,~~279~~286 for ~~2009~~2010 from $~~539~~230,~~132~~936 for ~~2008~~ 2009. Revenues for ~~2009~~2010 were comprised of $~~226~~176,~~072~~279 of oil sales (32,~~745~~509 barrels of oil at an average price of $6070.3726 per barrel), and $8977,~~594~~906 of natural gas sales (1819,~~085~~136 MCF at an average price of $4.9507 per MCF), ~~$113 of royalties~~ and $3royalties,~~500~~ net of ~~management fees~~$101. Revenues for ~~2008~~2009 were comprised of $~~274~~140,~~343~~780 of oil sales (24,~~416~~131 barrels of oil at an average price of $~~113~~34.5708 per barrel), $~~263~~86,~~934~~656 of natural gas sales (2520,~~258~~994 MCF at an average price of $104.5813 per MCF) and $~~854~~3,500 of royalties. Although oil production volume ~~increased~~decreased significantly by 4439% for ~~2009~~2010 from ~~2008~~2009, revenues ~~decreased~~ increased due to significantly ~~reduced~~increased market pricing for oil ~~and~~(average ~~gas products~~price increase from $34.08 to $70.26 per barrel). Additionally, the revenue amounts only include two months of Production Resource, Inc. (“PRI”) as a result of the sale of effective March 8, 2010.

Operating Expenses:

Operating expenses decreased $~~477~~37,~~940~~922, or 457%, to $~~591~~534,~~268~~259 for ~~2009~~2010 from $1572,~~069,208~~181 for ~~2008~~ 2009. The decrease was primarily related to a reduction in ~~production expense~~depreciation, ~~related~~depletion ~~to the downturn in the oil~~ and ~~gas~~accretion ~~market~~ as ~~well~~a asresult ~~the~~of ~~entire economy. Additionally,~~ the ~~Company~~sale ~~made~~of aPRI ~~concerted~~effective ~~effort~~March to8, ~~reduce expenses everywhere and this resulted in a significant decrease in general and administrative expense~~2010.

Other Income (Expense):

Other income (expense) ~~decreased~~increased $12866,~~795~~418 of ~~expense~~income, or 311,989% to $29822,~~035~~856 of ~~expense~~income for ~~2009~~ 2010 from $4143,~~831~~562 of expense for ~~2008~~2009. The ~~decrease~~increase in ~~expense~~income was primarily from one-time $41826,~~964~~907 ~~reduction~~non-cash ingain ~~interest~~on ~~expense~~sale ~~due~~of tosubsidiary from the ~~conversion~~sale of ~~debt~~ toPRI ~~stock,~~effective ~~offset~~March ~~by a $30~~8,~~670~~ ~~increase in other income~~2010.

~~Nine~~Comprehensive ~~Months~~Income ~~ended September 30, 2009 compared to 2008.~~(Loss):

~~Revenues:~~Comprehensive Income (Loss) increased to $69,336 of expense for 2010 from zero in 2009. The entire increase represents an unrealized loss on available-for-sale equity securities acquired in 2010 with no comparable amount in 2009.

Revenues decreased $715,673 or 47%, to $815,123 for 2009 from $1,530,796 for 2008. Revenues for 2009 were comprised of $531,412 of oil sales (11,152 barrels of oil at an average price of $47.65 per barrel), $267,310 of natural gas sales (59,667 MCF at an average price of $4.48 per MCF), $620 of royalties and $15,782 of management fees. Revenues for 2008 were comprised of $895,957 of oil sales (8,553 barrels of oil at an average price of $104.75 per barrel), $633,323 of natural gas sales (61,067 MCF at an average price of $10.37 per MCF) and $1,517 of royalties. Although oil production volume increased significantly by 30% for 2009 from 2008, revenues decreased due to significantly reduced market pricing for oil and gas products.

Operating Expenses:

Operating expenses decreased $867,236, or 31%, to $1,903,240 for 2009 from $2,770,476 for 2008. The decrease was primarily related to a reduction in production expense related to the downturn in the oil and gas market as well as the entire economy. Additionally, the Company made a concerted effort to reduce expenses everywhere and this resulted in a significant decrease in general and administrative expense. These were offset by an increase in compensation and consulting expense primarily related to a non-cash expense from a Black-Scholes calculation for the issuance of non-qualified stock options in 2009 with no comparable amount in 2008.

Other Income (Expense):

Other income (expense) decreased $97,192 of expense, or 75% to $32,145 of expense for 2009 from $129,337 of expense for 2008. The decrease in expense was primarily from the write off of payroll taxes and penalties from a predecessor company determined to not be payable by the Company and a reduction in interest expense due to the conversion of debt to stock.

Liquidity and Capital Resources

Cash was $4924,~~627~~053 at ~~September~~March 3031, ~~2009~~2010 as compared to $8847,~~937~~284 at December 31, ~~2008~~2009, and working capital deficit was $~~233~~10,~~505~~154 at ~~September~~March 3031, ~~2009~~2010 as compared to a working capital deficit of $6481,~~693,177~~566 at December 31, ~~2008~~2009. The decrease in the working capital deficit was primarily from ~~the~~investments ~~conversion~~in trading securities and available-for-sale marketable equity securities as a result of ~~debt~~ tothe ~~stock~~sale of PRI.

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Operating Activities

Cash used in operating activities was $~~101~~388,~~491~~782 for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~ 2010 compared to cash ~~provided~~used of $~~168~~19,~~670~~612 for the ~~nine~~three months ended ~~September 30~~March 31, ~~2008~~2009. The ~~decrease~~increase in cash ~~provided by operations to cash~~ used in operations from ~~2008~~2009 to ~~2009~~2010 was primarily from a decrease in the change for due to related parties and aaccrued ~~decrease~~interest inpayable ~~other assets~~ for ~~2009~~2010 as compared to an increase in ~~2008~~2009.

Investing Activities

Cash ~~used in~~provided by investing activities was $8424,~~183~~235 for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~ 2010 compared to cash used of $~~245~~6,~~208~~037 for the ~~nine~~three months ended ~~September~~March 3031, ~~2008~~ 2009. The ~~decrease~~increase in cash ~~used~~provided resulted primarily from acash ~~decrease~~proceeds in from the ~~investment~~sale of PRI, offset by investments in ~~property~~oil and ~~equipment~~gas inproperties ~~2008~~and toequipment ~~zero~~and inavailable-for-sale ~~2009~~securities.

Financing Activities

Cash ~~provided~~ byused in financing activities was $7058,~~364~~684 for the ~~nine~~three months ended ~~September 30~~March 31, ~~2009~~2010 compared to $~~90,972~~286 cash provided by financing activities for the ~~nine~~ three months ended ~~September~~March 3031, ~~2008~~2009. The ~~reduction~~change ~~from~~was ~~2008~~almost toentirely ~~2009 is primarily~~ from the ~~sale~~repayment of ~~common~~notes ~~stock~~payable in 2010.

Our principal uses of cash to date have been for operating activities and we have funded our operations previously primarily by incurring indebtedness in the form of convertible debentures, notes payable and issuing common stock. During the nine months ended September 30, 2009, the Company significantly reduced its debt obligations through the conversion to common stock and or the write off of balances not determined to be payable.

Debt

On July 29, 2009, but effective June 30, 2009 (the “Effective Date”), the Company and certain of its wholly-owned subsidiaries eliminated certain debt obligations by converting them into $0.0001 par value common stock as follows:

Bend Arch Petroleum, Inc. (“Bend Arch”), a wholly-owned subsidiary of the Company, had a $2,000,000 Promissory Note (Note”) that was due and payable on December 31, 2009. The Note was issued to Proco Operating Co., Inc. (“Proco”), a company controlled by the brother of the Company’s Chief Executive Officer and a director. The purpose of the Note was to secure payment for oil and gas leases and wells located in Comanche and Eastland counties in the State of Texas sold to Bend Arch by Proco on June 15, 2004. The Note replaced a $2,000,000 convertible debenture dated January 5, 2004. As of the Effective Date, the Note has been converted into 8,000,000 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock. Additionally, the Note accrued interest at a rate of eight percent (8%) per annum and as of the Effective Date, accrued interest was $878,027. An agreement was reached whereby Proco forgave $378,027 of the accrued interest and the remaining $500,000 has been converted into 2,000,000 shares of Stock based upon a conversion price of $0.25 per share, a significant premium to the market price of the Stock.

The Company evaluated the conversion of the Note and the accrued interest in accordance with paragraph 20 of APB 26 (ASC 470-50-40) and recorded a $1,965,000 gain representing the difference between the reacquisition price and the net carrying amount of the extinguished debt. Since the gain was from a transaction with a related party, the $1,965,000 was recorded to additional paid in capital as a component of Stockholders’ Equity.

As a result of the conversions discussed above, the Company will issue 10,000,000 shares of Stock and as of September 30, 2009, these have been recorded as issuable in the unaudited consolidated financial statements.

On April 16, 2001, the Company leased computer equipment under a 36-month lease that was accounted for as a capital lease in the amount of $21,238. The lease was secured by the computer equipment and perfected by a financing statement; however, the Company liquidated the equipment in 2006 (with the lessor approval) and paid the resulting $4,000 of proceeds to the lessor. As a result of the computer liquidation and other payments, the remaining unpaid balance of principal has been $16,131 since March 31, 2006. The payable is personally guaranteed by the Chief Executive Officer of the Company. In November 2003, a settlement was negotiated with the lessor discussed above to forgive the outstanding principal and accrued interest on the lease payable once the transfer of 4,000 shares (100,000 shares prior to the one-for-twenty five reverse stock split) of the Company’s common stock personally held by the Company’s Chief Executive office occurs. The Chief Executive Officer of the Company transferred these shares on September 15, 2003.

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~~However, as~~Our ofprincipal ~~the~~uses ~~Effective~~of ~~Date,~~cash ~~the~~to ~~transaction~~date ~~has~~have ~~not~~ been ~~finalized~~for asoperating ~~the~~activities ~~lessor had not formerly executed the settlement agreement. The Company has researched the matter~~ and ~~believes~~we ~~that~~have ~~consideration~~funded ~~was~~our ~~provided~~operations bypreviously ~~the~~primarily ~~Company and accepted~~ by ~~the~~incurring ~~Lessor~~indebtedness ~~for~~in the ~~settlement~~form ~~and~~of ~~that~~convertible ~~no further consideration or action is required by the Company. Accordingly~~debentures, ~~the~~notes ~~$16,131~~payable ~~debt obligation~~ and ~~$25,029~~issuing ofcommon ~~accrued interest have been re-classed to Deferred Other Income, a component of Long-Term Liabilities in the unaudited consolidated financial statements~~stock.

On October 28, 2005, Bend Arch entered into a $25,000 line of credit facility with a financial institution for working capital purposes. The line of credit is secured by a Company unrestricted certificate of deposit held by the financial institution and bears simple interest per annum at a variable rate which is 3.25% as of September 30, 2009. As of September 30, 2009, the outstanding balance is $23,073 and is included in the Note Payable balance in the accompanying unaudited consolidated financial statements.Debt

InNotes March 2008, the Company purchased oilfield property and equipment for a price of $150,000. The terms included a cash payment of $47,000 and a note payable for the balance of $103,000. During the nine months ended September 30, 2008, the Company paid down $12,000 of principal and the balance is $91,000 as of June 30, 2009 and classified as a component of Note Payable in the accompanying unaudited consolidated financial statements. As of September 30, 2009, no formal agreement of the terms of the note payable had been finalized and the Company has a verbal agreement to pay the principal back at a rate of $10,000 monthly. It is anticipated that a formal agreement will be negotiated and finalized in the future.

In July 2009, the Company received $10,000 of proceeds from a short-term note from an unrelated third party. As of September 30, 2009, no formal agreement of the terms of the note payable had been finalized and the Company. It is anticipated that a more formal agreement will be negotiated and finalized in the future.

	Mar.31,		Dec. 31,
	2010		2009
$25,000 Line of Credit, dated October 28, 2005, bearing simple variable interest at 6.75% per annum and due on January 25, 2010.	$	-	$	23,684
$124,487 Note, dated March 27, 2008, not formalized and not bearing interest		75,487		100,487
$10,000 Note, dated June 30, 2009, bearing interest at 18% per annum and due December 31, 2009.		-		10,000
	$	75,487	$	134,171

AsOn October 28, 2005, Bend Arch entered into a ~~result~~ $25,000 line of ~~these~~credit ~~transactions~~facility with a financial institution for working capital purposes. The line of credit was secured by a certificate of deposit held by the financial institution and was bearing simple interest per annum at a variable rate which was 3.25% as of December 31, 2009. In January 2010, the Company ~~has~~paid the ~~following~~outstanding ~~remaining~~balance ~~debt~~in full and is no longer outstanding as of ~~September~~ 30March 31, ~~2009:~~2010.

$25,000 Line of Credit, dated October 28, 2005, bearing simple variable interest at 3.25% per annum and due on February 28, 2008.	$	24,421
$10,000 Note, dated July of 2009, not formalized and not bearing interest		10,000
$103,000 Note, dated March of 2008, not formalized and not bearing interest		91,000
	$	125,421

On March 27, 2008, the Company purchased oilfield property and equipment for a price of $159,487. The terms included a cash payment of $35,000 and a note payable for the balance of $124,487. In 2008, the Company paid down $24,000 of principal and the balance was $100,487 as of December 31, 2009. In January 2010, the Company paid down $25,000 of principal and the balance is $75,487 as of March 31, 2010 and classified as a component of Note Payable in the accompanying unaudited consolidated financial statements. As of March 31, 2010, no formal agreement of the terms of the note payable had been finalized and the Company has a verbal agreement to pay the principal back at a rate of $10,000 monthly when sufficient cash flow is available.

~~Equity Financing~~On June 30, 2009, the Company received $10,000 of proceeds from a short-term note from an unrelated third party. The terms included interest at a rate of 18% per annum, a December 31, 2009 maturity date, and a late payment charge equal to 5% of the unpaid balance and interest at the lesser of a) 18% or b) as permitted by law. As of December 31, 2009, the Company had accrued $900 of accrued interest related to the note payable and the note payable had not been repaid and was considered in default. In March 2010, the Company repaid the entire principal balance of $10,000 and accrued interest of $900 and the short-term note is no longer outstanding as of March 31, 2010.

Effective May 11, 2009, the Company received $50,000 of proceeds from the sale of 5,000,000 shares of Stock at $0.01 per share. The $0.01 per share price was determined based upon a 33% discount to the closing market price of $0.015 per share on the sale date of May 11, 2009.

Effective June 30, 2009, the Chief Executive Officer elected to convert 3,500,000 shares of $0.0001 par value preferred stock into 10,500,000 shares of Stock per the terms of the preferred stock.

Effective September 6, 2009, the Company received $10,005 from the sale of 333,500 shares of stock at $0.03 per share. The $0.03 per share price was determined based upon a 33% discount to the closing market price of $0.105 per share on the sale date of September 6, 2009.

Additionally, the Company will issue 23,350,677 shares of Stock from the conversion of debt obligations.

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Equity Financing

There was no equity financing during the three months ended March 31, 2010.

Liquidity

~~To continue~~Our ~~with~~ability ~~our~~to ~~business~~have ~~plan,~~a wesuccessful ~~will~~oil ~~require~~and ~~additional~~gas ~~working~~company is heavily dependent on securing additional capital ~~as we~~to ~~have~~supplement ~~not~~the ~~been~~anticipated ~~generating~~timeframe ~~sufficient~~required for the oil and gas revenues and cash ~~from~~flows ~~operations~~to be sufficient to ~~fund~~cover our operating ~~activities~~expenses. As ~~through~~a result, we are searching for an alternative means of securing additional capital, which may include the ~~end~~sale of ~~fiscal~~additional ~~2009~~shares of our common stock or the issuance of additional debt securities. ~~The~~Additionally, ~~ability~~we ~~of the~~require ~~Company~~additional tofunds ~~continue~~for asworking acapital ~~going~~and ~~concern~~for growth opportunities. However, there is ~~dependent~~no onassurance ~~the~~that ~~Company’s~~additional ~~ability to~~equity ~~raise~~or ~~capital~~debt ~~and~~financing ~~generate~~will ~~revenues~~be ~~and~~available ~~cash~~on ~~flow~~terms ~~from~~acceptable ~~its~~to ~~business~~our ~~plan~~management ~~as an~~or ~~oil~~that ~~and~~the ~~gas~~additional ~~operating~~financing ~~company~~will be available when we require the funds.

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

Management believes that as a result of restructuring of the balance sheet as discussed above, the Company will have several options available to obtain financing from third parties in order to carry out the business plan of the Company.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 4T. Controls and Procedures

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

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

The material weakness(s) identified are:

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

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

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

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

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

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

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

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

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

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

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PART II - Other Information

Item 6. Exhibits

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

Exhibit No. Description of Exhibit

Exhibit No.		Description of Exhibit
2.1		Certificate of Amendment to Articles of Incorporation of American Energy Production, Inc. filed with the Delaware Secretary of State (1)

3.1		Form S-8 Registration Statement under the Securities Act of 1933 filed January 31, 2003. (1)

3.2		Form 8-A12G for Registration of Certain Classes of Securities Pursuant to Section 12 (b) or (g) of the Securities Act of 1934 filed October 10, 2003. (1)

3.3		Definitive Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934 filed November 19, 2003. (1)

3.4		Form N-54 Notification of Election as a Business Development Company dated January 12, 2004. (1)

3.5		Form 1-E Notification under Regulation E dated January 14, 2004. (1)

3.6		Form 1-E/A Notification under Regulation E dated June 24, 2005. (1)

3.7		Form 2-E Notification under Regulation E dated June 27, 2006. (1)

3.8		Form 2-E Notification under Regulation E dated December 11, 2006. (1)

3.9		Definitive Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934 filed February 8, 2007. (1)

3.10		Form N-54C Notification of Withdrawal of Business Development Companies dated April 23, 2007. (1)

3.11		Definitive Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934 filed July 5, 2007. (1)

3.12		Form S-8 Registration Statement under the Securities Act of 1933 filed September 25, 2008. (1)

14.1		Code of Ethics (1)

20.1		Oil and Gas property valuation by Cullen Thomas Consulting Geologist as of December 31, 2009 (1)

20.2		Consent letter from Cullen Thomas Consulting Geologist for Oil and Gas property valuation as of December 31, 2009 (1)

21.1		Subsidiaries of American Energy Production, Inc. (1)

31.1		Certification of the Chief Executive and Chief Financial Officer of American Energy production, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1		Certification of the Chief Executive and Chief Financial Officer of American Energy Production, Inc. pursuant to Section 906 of the Sarbanes- Act of 2002.*

2.1		Certificate of Amendment to Articles of Incorporation of American Energy Production, Inc. filed with the Delaware Secretary of State (1)
3.1		Form S-8 Registration Statement under the Securities Act of 1933 filed January 31, 2003. (1)
3.2		Form 8-A12G for Registration of Certain Classes of Securities Pursuant to Section 12 (b) or (g) of the Securities Act of 1934 filed October 10, 2003. (1)
3.3		Definitive Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934 filed November 19, 2003. (1)
3.4		Form N-54 Notification of Election as a Business Development Company dated January 12, 2004. (1)
3.5		Form 1-E Notification under Regulation E dated January 14, 2004. (1)
3.6		Form 1-E/A Notification under Regulation E dated June 24, 2005. (1)
3.7		Form 2-E Notification under Regulation E dated June 27, 2006. (1)
3.8		Form 2-E Notification under Regulation E dated December 11, 2006. (1)
3.9		Definitive Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934 filed February 8, 2007. (1)
3.10		Form N-54C Notification of Withdrawal of Business Development Companies dated April 23, 2007. (1)
3.11		Definitive Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934 filed July 5, 2007. (1)
3.12		Form S-8 Registration Statement under the Securities Act of 1933 filed September 25, 2008. (1)
14.1		Code of Ethics (1)
20.1		Oil and Gas property valuation by Blue Ridge Enterprises as of December 31, 2007 (1)
20.2		Oil and Gas property valuation by Blue Ridge Enterprises as of December 31, 2008 (1)
21.1		Subsidiaries of American Energy Production, Inc. (1)
31.1		Certification of the Chief Executive and Chief Financial Officer of American Energy Production, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of the Chief Executive and Chief Financial Officer of American Energy Production, Inc. pursuant to Section 906 of the Sarbanes- Act of 2002.*

* Filed herewith

(1)

Incorporated by reference.

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SIGNATURES

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

Signature	Title	~~Date~~	Date
/s/ Charles Bitters Charles Bitters	Chief Executive Officer, Principal Executive and Financial Officer, Director	~~November 16, 2009~~	June 25, 2010

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