U.S. Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 10-Q

 

          

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2011

 

 

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

                 For the Transition Period From ____to _____

 

Commission File Number 000-53683

 

 

 

 

 

Nevada (State or other jurisdiction of incorporation or organization)	27-4429450  (I.R.S. employer identification number)
16 Market Square Center 1400 16th Street Suite 400 Denver, CO 80202 Tel: 720.932.8389 Fax: 720.932.8189 (Address of principal executive offices and zip code)    Copies to: Davis Graham & Stubbs LLP 1550 Seventeenth Street, Suite 500 Denver, CO 80202 Phone: (303) 892-7344 Fax: (303) 893-1379

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]                                No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).

Yes [ ]                                No [ ]

 

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

 

Large accelerated filer	£
Non-accelerated filer	£
Accelerated filer	£
Smaller reporting company	S

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

Yes [ ]                              No [X]

 

Number of shares of common stock outstanding as of May 13, 2011: 92,952,085

 

 

 

 

PART I	Page No.
Item 1.  Financial Statements	2
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	13
Item 4.  Controls and Procedures	13
Item 4T. Controls and Procedures	13
PART II
Item 1.  Legal Proceedings	13
Item 1A. Risk Factors	13
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3.  Defaults Upon Senior Securities	13
Item 4.  Submission of Matters to a Vote of Security Holders	13
Item 5.  Other Information	13
Item6.  Exhibits	13

 

 

 

 

 

ITEM 1. FINANCIAL STATEMENTS

 

INDEX TO AMERICAN POWER CORP. FINANCIAL STATEMENTS

 

AMERICAN POWER CORPORATION		PAGE
Balance Sheets			4
Statements of Operations			5
Statement of Stockholders’ Equity			6
Statements of Cash Flows			7
Notes to Financial Statements			8

 

AMERICAN POWER CORP.
(An Exploration Stage Company)
BALANCE SHEETS
ASSETS
CURRENT ASSETS
		March 31, 2011		September 30, 2010
		(Unaudited)		(Audited)
Cash		$729,645		$520,852
Prepaids and deposit		54,953		6,324
Advances to related party		-		18,416
TOTAL CURRENT ASSETS		784,598		545,592
OTHER ASSETS
Mineral property		2,670,500		2,670,500
Equipment - net		3,838		4,480
Website - net		31,165		28,297
TOTAL ASSETS		$3,490,101		$3,248,869
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT   LIABILITIES
Accounts payable and accrued liabilities		$43,802		$18,728
Promissory notes, current portion		200,000		600,000
TOTAL CURRENT LIABILITIES		243,802		618,728
LONG TERM LIABILITIES
Promissory notes, net of current portion, net of debt discount of $935,067 ($1,105,729 September 30, 2010)		1,964,933		1,794,271
TOTAL LIABILITIES		2,208,735		2,412,999
STOCKHOLDERS’   EQUITY
Capital stock
Authorized 500,000,000 shares of common stock, $0.001 par value.        Issued and outstanding 92,034,880 shares of common stock (90,480,000 September 30, 2010)		92,034		90,480
Additional paid in capital		1,926,544		528,098
Stock payable		1,164,743		1,106,410
Accumulated deficit during exploration stage		(1,901,955)		(889,118)
TOTAL STOCKHOLDERS’ EQUITY		1,281,366		835,870
TOTAL LIABILITIES AND STOCKHOLDERS’  EQUITY		$3,490,101		$3,248,869

 

The accompanying notes are an integral part of these financial statements.

 

 

AMERICAN POWER CORP. (An Exploration Stage Company) STATEMENTS OF OPERATIONS (Unaudited)

 

		Three Months Ended March 31,								Six Months Ended March 31,								Cumulative results from inception (August 7, 2007) to March 31, 2011
			2011				2010				2011				2010
REVENUES
Revenues		$	—				—			$	—				—			$	—
Total revenues			—				—				—				—				—
EXPENSES
Office and general			87,703				5,649				129,643				6,603				226,995
Management fees			320,833				—				613,333				—				811,997
Professional fees			31,168				8,488				53,444				13,988				144,295
Gain on debt forgiveness			—				—				—				—				(8,000	)
Exploration costs			30,649								45,756				—				45,756
Total expenses			(470,353	)			(14,137	)			(842,176	)			(20,591	)			(1,221,043	)
OTHER INCOME (EXPENSE)
Interest expense			(82,169	)			—				(170,661	)			—				(368,035	)
Loss on debt settlement			—				—				—				—				(237,807	)
Total other expenses			(82,169	)			—				(170,661	)			—				(605,842	)
NET LOSS		$	(552,522	)		$	(14,137	)		$	(1,012,837	)		$	(20,591	)		$	(1,826,885	)
BASIC LOSS PER COMMON SHARE
		$	(0.01	)		$	(0.00	)		$	(0.01	)		$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- BASIC
			91,603,914				8,627,000				91,320,318				8,627,000

 

The accompanying notes are an integral part of these financial statements.

 

 

 

AMERICAN POWER CORP.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
From inception (August 7, 2007) to March 31, 2011
(Unaudited)
		Common Stock
		Number of shares				Amount				Additional Paid-in Capital				Share Subscription Receivable				Stock Payable				Deficit accumulated during the exploration stage				Total
Balance, August 7, 2007 (Inception)			—			$	—			$	—			$	—			$	—			$	—			$	—
Common stock issued for cash at $0.001 per share on August 13, 2007			44,200,000				44,200				—				(8,500	)			—				(35,700	)			—
Net loss																							(2,525	)			(2,525	)
Balance, September 30, 2007			44,200,000				44,200				—				(8,500	)			—				(38,225	)			(2,525	)
Subscription Receivable			—				—				—				8,500				—				—				8,500
Common stock issued for cash at $0.03 per share July and August 2008			43,180,000				43,180				—				—				—				(39,370	)			3,810
Net loss																							(12,964	)			(12,964	)
Balance, September 30, 2008			87,380,000				87,380				—				—				—				(90,559	)			(3,179	)
Net loss																			—				(21,338	)			(21,338	)
Balance, September 30, 2009			87,380,000				87,380				—				—				—				(111,897	)			(24,517	)
Forgiveness of debt by former director							—				16,198				—				—				—				16,198
Common Stock, issued for mineral property at $0.05 per share April 9, 2010			2,300,000				2,300				112,700				—				—				—				115,000
Common stock issued for cash at $0.50 per share June 25, 2010			800,000				800				399,200				—								—				400,000
Common stock  to be issued on debt totalling $208,603 (including interest of $8,603) conversion at $0.50 per share September 10, 2010			—				—				—				—				446,410				—				446,410
Common stock to be issued for services at $0.96 per share at September 30, 2010			—				—				—				—				160,000				—				160,000
Private placement received in advance			—				—				—				—				500,000				—				500,000
Net loss																							(777,221	)			(777,221	)
Balance,   September 30, 2010			90,480,000				90,480				528,098				—				1,106,410				(889,118	)			835,870
Common stock issued for 595,238 units at $0.84 per unit on October 5, 2010			595,238				595				499,405				—				(500,000	)			—				—
Common stock issued for 449,438 units at $0.89 per unit on January 25, 2011			449,438				449				399,551				—				—				—				400,000
Common stock issued for 510,204 units at $0.98 per unit on February 23, 2011			510,204				510				499,490				—				—				—				500,000
Common stock to be issued for services at March 31, 2011			—				—				—				—				558,333				—				558,333
Net loss			—				—				—				—				—				(1,012,837	)			(1,012,837	)
Balance,   March 31, 2011			92,034,880			$	92,034			$	1,926,544			$	—			$	1,164,743			$	(1,901,955	)		$	1,281,366
The accompanying notes are an integral part of these financial statements

 

 

 

 

 

AMERICAN POWER CORP.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
		Six Months Ended March 31, 2011				Six Months Ended March 31, 2010				Cumulative results from inception (August 7, 2007) to March 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(1,012,837	)		$	(20,591	)		$	(1,826,885	)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation and amortization			5,528				—				8,899
Stock-based compensation			558,333				—				718,333
Accretion of debt discount			170,662				—				368,036
Gain on extinguishment of debt			—				—				(8,000	)
Loss on extinguishment of debt			—				—				237,807
(Increase) in prepaid expenses			(48,629	)			(761	)			(54,953	)
Decrease in advances to/from  related party			18,416				—				—
Increase in accounts payable and accrued liabilities			25,074				6,268				51,802
NET CASH USED IN OPERATING ACTIVITIES			(283,453	)			(15,084	)			(504,961	)
CASH FLOWS FROM INVESTING ACTIVITIES
Website			(7,754	)			(8,012	)			(38,945	)
Equipment			—				(1,363	)			(4,957	)
Mineral property			—				—				(350,000	)
NET CASH USED IN INVESTING ACTIVITIES			(7,754	)			(9,375	)			(393,902	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock			900,000				—				1,812,310
Loans from related party			—				27,116				16,198
Proceeds from notes payable			—				—				200,000
Payment on promissory note			(400,000	)			—				(400,000	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			500,000				27,116				1,628,508
NET INCREASE IN CASH			208,793				2,657				729,645
CASH, BEGINNING OF PERIOD			520,852				147				—
CASH, END OF PERIOD		$	729,645			$	2,804			$	729,645
Supplemental cash flow information and noncash financing activities:
Common stock payable for property acquisition		$	—			$	—			$	115,000
Promissory notes issued for property		$	—			$	—			$	2,405,500
Forgiveness of debt by former director		$	—			$	16,198			$	16,198
Common stock issued to satisfy common stock payable		$	500,000			$	—			$	500,000
Conversion of debt totalling $208,603, (including interest of $8,603) for common stock		$	—			$	—			$	446,410
The accompanying notes are an integral part of these financial statements

 

 

 

AMERICAN POWER CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

March 31, 2011

(Unaudited)

 

NOTE 1 –FINANCIAL STATEMENTS

 

Pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q, the financial statements, footnote disclosures and other information normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. The financial statements contained in this report are unaudited but, in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments necessary for a fair presentation of the financial statements. The results of operations for any interim period are not necessarily indicative of results for the full year. The balance sheet at September 30, 2010 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

 

NOTE 2 – GOING CONCERN

 

The Company’s financial statements as of March 31, 2011 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. For the six months ended March 31, 2011, and from inception (August 7, 2007) to March 31, 2011, the Company had a net loss of $1,012,837 and $1,826,885, respectively.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Stock based compensation

The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.

 

For non-employee stock-based compensation, the Company has adopted ASC Topic 505 “Equity-Based Payments to Non-Employees”, which requires stock-based compensation related to non-employees to be accounted for based on the fair value of the related stock or options or the fair value of the services on the grant date, whichever is more readily determinable in accordance with ASC Topic 505.

 

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less

 

Use of Estimates and Assumptions

Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

 

 

 

 

AMERICAN POWER CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

March 31, 2011

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -(continued)

 

Net Loss per Share

Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period.  Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company.  Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.

 

Fair Value of Financial Instruments

The carrying amounts of the financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to the short maturities of these financial instruments. The notes payable are also considered financial instruments whose carrying amounts approximate fair values.

 

Fixed Assets

Fixed assets are stated at cost.  Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed.  At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts.  Gains or losses from retirements or sales are credited or charged to income.

 

The Company’s fixed assets consist of computer equipment, which is valued at cost and depreciated using the straight-line method over a period of four years.

 

NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

 

There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the second quarter of fiscal 2011, or which are expected to impact future periods, which were not already adopted and disclosed in prior periods.

 

NOTE 5 - CAPITAL STOCK

 

On October 5, 2010, the Company entered into a Private Placement Subscription for Non U.S. Subscribers with Black Sands Holdings, Inc., to subscribe to and purchase 595,238 units valued at $0.84 per unit for an aggregate purchase price of $500,000.  Each unit comprises one share of common stock and one warrant of the Company.  Each warrant entitles the holder to purchase one additional share of common stock of the Company at an exercise price of $1.26 per share for a period of three years.

 

During the quarter ended December 31, 2010, the Company recorded $265,000 for stock-based compensation payable related to 250,000 shares of common stock earned by Mr. Alvaro Valencia, CEO and Director of the Company. On October 31, 2010, under the Independent Consultant Agreement between the Company and the CEO, 250,000 shares of common stock vested and were valued based on the closing price of our shares of common stock on October 31, 2010.

 

During the quarter ended March 31, 2011, the Company recorded $293,333 for stock-based compensation payable related to 250,000 shares of common stock earned by Mr. Alvaro Valencia, CEO and Director of the Company. On January 31, 2011, under the Independent Consultant Agreement between the Company and the CEO, 250,000 shares of common stock vested and were valued based on the closing price of our shares of common stock on January 31, 2011. At September 30, 2010, December 31, 2010 and March 31, 2011, 166,667 shares of common stock were recorded in stock payable on the balance sheet and at an estimated value based on the closing price our shares of common stock at September 30, 2010, December 31, 2010 and March 31, 2011, respectively.

 

On January 25, 2011, the Company entered into a Private Placement Subscription for Non U.S. Subscribers with Black Sands Holdings, Inc., to subscribe to and purchase 449,438 units valued at $0.89 per unit for an aggregate purchase price of $400,000.  Each unit comprises one share of common stock and one warrant of the Company.  Each warrant entitles the holder to purchase one additional share of common stock of the Company at an exercise price of $1.34 per share for a period of three years.

 

On February 23, 2011, the Company entered into a Private Placement Subscription for Non U.S. Subscribers with Black Sands Holdings, Inc., to subscribe to and purchase 510,204 units valued at $0.98 per unit for an aggregate purchase price of $500,000.  Each unit comprises one share of common stock and one warrant of the Company.  Each warrant entitles the holder to purchase one additional share of common stock of the Company at an exercise price of $1.47 per share for a period of three years.

   

NOTE 6 – SUBSEQUENT EVENTS

 

On April 5, 2011, the Company issued 417,205 shares to settle the debt to equity conversion agreement entered into during the prior year, as a means of settling an outstanding loan and interest amount of $208,603. The fair value of the shares was $446,410, of which $237,807 was recognized as a loss on debt settlement in the statement of operations in the prior year.

Additionally on April 5, 2011, the Company issued a total of 500,000 shares to Mr. Alvaro Valencia, CEO and Director of the Company, as per his Independent Consultant Agreement. These shares were previously recorded as a stock payable.

 

 

 

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Note Regarding Forward-Looking Statements

 

This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to Company or Company’s management identify forward-looking statements. Such statements reflect the current view of Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the risks contained in the section of operations and results of operations, and any businesses that Company may acquire.) Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although Company believes that the expectations reflected in the forward-looking statements are reasonable, Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.

 

Overview

 

American Power Corp (which we refer to herein as the “Company”, “us” or “we”) was incorporated in the State of Nevada as a for-profit company on August 7, 2007. We are an exploration stage company whose intended business purpose is coal, oil and natural gas exploration, development and production. At the time of our incorporation, we were incorporated under the name “Teen Glow Makeup, Inc.” and our original business plan was to create a line of affordable teen makeup for girls. On November 20, 2009, Johannes Petersen acquired the majority of the shares of our issued and outstanding common stock in accordance with two stock purchases agreements by and between Mr. Petersen and Ms. Pamela Hutchinson, and Ms. Andrea Mizushima, respectively. On March 31, 2010, we changed our intended business purpose to that of coal, oil and natural gas exploration, development and production.

 

Our current primary business focus is to acquire, explore and develop coal, oil and gas exploration properties in the United States of North America, with a particular focus on the Rocky Mountain region. On March 30, 2010, our Board of Directors approved the proposal to change the Company’s name and to effect a 340 for 1 forward stock split. The Certificate of Change for the forward stock split was filed with and approved by the Nevada Secretary of State on April 28, 2010. Also on April 28, 2010, Articles of Amendment were filed and approved with the Nevada Secretary of State to change the name of the Corporation to American Power Corp. The Articles of Amendment also changed the authorized amount of capital stock to Five Hundred Million (500,000,000) shares of Common Stock, par value $0.001.

 

Business Description and Plan of Operation

 

Our plan of operation is to acquire and explore mineral properties and prospects in order to ascertain whether they possess economic quantities of coal and/or hydrocarbons in accordance with available funds. There can be no assurance that an economic coal and/or hydrocarbon reserve exists on any of the exploration prospects we acquire until appropriate exploration work is completed.

 

Coal, oil and gas exploration is typically conducted in phases. Each subsequent phase of exploration work is recommended by a geologist based on the results from the most recent phase of exploration. We have yet to acquire exploration properties, upon which we will commence the initial phase of exploration.  We have acquired an assignment of certain contractual rights in coal and minerals located in Judith Basin County, Montana, collectively described as the “Pace Coal Project”, however these rights are speculative in nature and additional exploration work is required to determine their value. In that regard, an exploration drilling program consisting of three phases has been planned for the Pace Coal Project this year. Once we have completed each phase of the exploration drilling program, we will make a decision as to whether or not we proceed with the development of the Pace Coal Project based upon the analysis of the results of that program. Even if we complete our proposed exploration program on the Pace Coal Project or on other properties that we acquire in the future, and we are successful in identifying the presence of coal and/or hydrocarbons, we will have to spend substantial funds on further drilling, engineering studies, environmental and mine feasibility studies before we will know if we have a commercially viable coal, oil and gas deposit or reserve.

 

Market Overview for Plan of Operation

 

Coal production in the United States in 2010 reached a level of 1,085.3 million short tons (1,074.9 million short tons in 2009) according to data from the Energy Information Administration (EIA), an increase of 0.9% from the 2009 level. In spite of this increase, coal production in 2010 is still 7.4% lower than the level reached in 2008 (1,171.8 million short tons).

 

Coal consumption in the United States in 2010 reached a level of 1,048.3 million short tons (997.5 million short tons in 2009), an increase of 5.1% from the 2009 level, with all of the coal-consuming sectors experiencing higher consumption for the year, with the only exception of the commercial and institutional sector. Although all sectors had increases, the electric power sector (electric utilities and independent power producers), which consumed about 93% of all coal in the US in 2010, has been and continues to be the overriding force for determining total domestic coal consumption. In 2010, coal consumption for the electric power sector reached 975.6 million short tons, an increase of 4.5% from the 2009 level (933.6 million short tons). Coal consumption in the non-electric power sector (comprised of other industrial, coking coal, and the commercial and institutional sectors) increased 13.1% in 2010, after experiencing declines for five consecutive years. Coal consumption at coke plants increased by 37.6% to end 2010 at 21.1 million short tons (15.3 million short tons in 2009).

 

Total coal stockpiles have begun to return to pre-recession levels, decreasing in 2010 by 8.4% to end the year at 224.3 million short tons, after posting a record level of 244.8 million short tons in 2009.

 

Domestic coal prices continued to increase, rising for the seventh consecutive year.. According to data for 2010, the average price of coal delivered to the electric power sector increased by 4.2% to $2.22 per million Btu over the 2009 level. The average delivered price of coal to the other industrial sector decreased by 1.0% to an average price of $64.24 per short ton in 2010 while the delivered price of coal to US coke plants increased by 7.4% to reach an average price of $153.59 per short ton. The average delivered price of coal to the commercial and institutional sector decreased in 2010 by 9.1% to $88.42 per short ton.

 

Western Region (includes Montana)

 

The Western Region is the largest coal-producing region in the US, concentrating 54.6% of total US coal production in 2010. Coal production in this region increased by 1.1% in 2010 to a total of 591.6 million short tons.

 

In 2010, Montana, the second largest coal-producing State in the Western Region, produced a total of 44.7 million short tons, an increase of 13.3% over the 2009 level.

 

Results of Operations for the Six and Three Months ended March 31, 2011 and 2010

 

Revenues

 

The Company has yet to generate any revenues.

 

 

 

Expenses

 

Six months ended March 31, 2011 compared to the Six months ended March 31, 2010

 

We had a net loss of $1,012,837 for the six months ended March 31, 2011, which was $992,246 greater than the net loss of $20,591 for the six months ended March 31, 2010. This increase in net loss in the current period is primarily the result of an increase in share-based compensation to our CEO, office and general expenses, an increase in professional and management fees and mineral property exploration costs. Interest expense of $170,661 for the six months ended March 31, 2011, as compared to nil for the 2010 period, is accretion related to debt discount recorded on the promissory notes. For the six months ended March 31, 2010, the promissory notes were not outstanding and, as such, no interest expense was recorded.

 

Three months ended March 31, 2011 compared to the three months ended March 31, 2010

 

We had a net loss of $470,353 for the three months ended March 31, 2011, which was $456,216 greater than the net loss of $14,137 for the three months ended March 31, 2010. This increase in net loss in the current period is primarily the result of an increase in share-based compensation to our CEO, office and general expenses, an increase in professional and management fees and mineral property exploration costs. Interest expense of $82,169 for the three months ended March 31, 2011, as compared to nil for the 2010 period, is accretion related to debt discount recorded on the promissory notes. For the three months ended March 31, 2010, the promissory notes were not outstanding and, as such, no interest expense was recorded.

 

Liquidity and Capital Resources

 

Our balance sheet as of March 31, 2011, reflects current assets of $784,598 which includes cash of $729,645. Our working capital at March 31, 2011 is $540,796.

 

Working Capital (Deficit)

		At March 31, 2010				At September 30, 2010
Current assets		$	784,598			$	545,592
Current liabilities			243,802				618,728
Working capital (deficit)		$	540,796			$	(73,136	)

 

Operating Activities

 

Net cash flows used in operating activities were $283,453 and $15,084 for the six months ended March 31, 2011 and 2010, respectively. Negative cash flows are primarily attributable to a net loss of $1,012,837 and $20,591 for the six months ended March 31, 2011 and 2010, respectively.

 

Investing Activities

 

Net cash flows used in investing activities were $7,754 and $9,375 for the six months ended March 31, 2011 and 2010, respectively. Negative cash flows for the six months ended March 31, 2011 was due to the website expenditures of $7,754.

 

Financing Activities

 

Net cash flows provided by financing activities were $500,000 and $27,116 for the six months ended March 31, 2011 and 2010, respectively. During the six months ended March 31, 2011 we issued units of comprising shares of our common stock and warrants for total proceeds of $900,000 and made payments of $400,000 on promissory notes.

 

		Six-months Ended
		March 31,
		2011				2010
Net Cash Used in Operating Activities		$	(283,453	)		$	(15,084	)
Net Cash Used in Investing Activities			(7,754	)			(9,375	)
Net Cash Provided by Financing Activities			500,000				27,116
Net Increase (Decrease) in Cash		$	208,793			$	2,657

 

Off-Balance Sheet Arrangements

 

As of 31 March, 2011, we had no existing off-balance sheet arrangements, as defined under SEC rules.

 

 

( 12 )

Table of Contents

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  

Not required by smaller reporting companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and its Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

 

As of March 31, 2011, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

 

The Certifying Officers have also concluded, based on their evaluation of our controls and procedures that as of March 31, 2011, our internal controls over financial reporting are not effective and provide no reasonable assurance of achieving their objective.

 

The Certifying Officers have also concluded that there was no change in our internal controls over financial reporting identified in connection with the evaluation that occurred during our fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II.  OTHER INFORMATION

 

ITEM 1.      LEGAL PROCEEDINGS

 

The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.

 

No director, officer, or affiliate of the issuer and no owner of record or beneficiary of more than 5% of the securities of the issuer, or any security holder is a party adverse to the small business issuer or has a material interest adverse to the small business issuer.

 

 

ITEM 1A.   RISK FACTORS

 

The information to be reported under this item has not changed since the previously filed 10K, for the year ended September 30, 2010.

 

ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Not applicable.

 

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

 

We have not had any default upon senior securities.

 

ITEM 4.      (Removed and Reserved)

 

None

 

ITEM 5.      OTHER INFORMATION

 

We do not have any other information to report.

 

ITEM 6.      EXHIBITS

 

31. 1 CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31. 2 CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32. 1 CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32. 2 CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

 

* Filed herewith

 

 

 

( 13 )

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	AMERICAN POWER CORPORATION  (Registrant)
Date: May 13, 2011	By:	/s/ Alvaro Valencia
		Alvaro Valencia Chief Executive Officer, President and Director
Date: May 13, 2011	By:	/s/ Johannes Petersen
		Johannes Petersen Chief Financial Officer, Secretary, and Director