Attached files

file filename
EX-3.2 - BYLAWS - Africa Growth Corpbylaws.htm
EX-5.1 - OPINION OF THOMAS CRAFT, JR. P.L. - Africa Growth Corpopinion.htm
EX-4.1 - SPECIMEN STOCK CERTIFICATE - Africa Growth Corpstkcert.htm
EX-23.1 - CONSENT OF GBH CPAS, PC - Africa Growth Corpconsentgbh.htm
EX-2.1 - SEPARATION AND DISTRIBUTION AGREEMENT - Africa Growth Corpsepanddist.htm
EX-3.1 - ARTICLES OF INCORPORATION - Africa Growth Corpartofincorp.htm
EX-21.1 - LIST OF SUBSIDIARIES - Africa Growth Corpsubs.htm
EX-23.2 - CONSENT OF THOMAS CRAFT, JR. P.L. - Africa Growth Corpconsentcraft.htm
As filed with the Securities and Exchange Commission on September 21, 2010
Registration No. 333-_______
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Brenham Oil & Gas Corp.
(Exact name of registrant as specified in its charter)

 
Nevada
1311
27-2413875
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
     
 
601 Cien Street, Suite 235
Kemah, TX 77565-3077
(281) 334-9479
Chairman of the Board and CEO, Daniel Dror
601 Cien Street, Suite 235
Kemah, TX 77565-3077
(281) 334-9479
Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 

Copies to:

Thomas J. Craft, Jr., P.L.
5420 North Ocean Drive-Suite 2102
Singer Island, FL 33404-2545
(561) 317-7036

Approximate date of commencement of proposed sale to the public: As soon as practicable after the registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box.  ¨
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨
          
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. (Check one):

Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer  o
(Do not check if a smaller reporting company)
Smaller reporting company  þ
 
 
 

 
CALCULATION OF REGISTRATION FEE
                 
                 
 
Title of each Class of
 Security being registered
 
 
Amount to be
 Registered (1)
 
 
Proposed Maximum
 Offering Price
 Per Share
 
 
Proposed Maximum
 Aggregate Offering
 Price (2)
 
 
Amount of
 Registration Fee (3)
 
 
Shares of Common Stock, $0.0001 par value
 
10,297,019
 
$N/A
 
$454
 
$1.00
 
(1) This registration statement relates to shares of common stock, par value $0.0001 per share, of Brenham Oil & Gas Corp., which will be distributed pursuant to a spin-off transaction to holders of common stock of American International Industries, Inc. The amount of the Registrant’s common stock to be registered is 10,297,019 shares of common stock. To the extent additional shares of common stock may be issued or become issuable as a result of a stock split, stock dividend, or similar transaction involving the common stock while this registration statement is in effect, this registration statement hereby is deemed to cover all such additional shares of common stock in accordance with Rule 416 under the Securities Act of 1933. In connection with the spin-off, one share of the Registrant's common stock will be distributed for each share of AMIN common stock outstanding on the record date for the spin-off.
(2) Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(f)(2) and Rule 457(h)(1) under the Securities Act, based on the book value of the common stock as of June 30, 2010, the most recent practicable date
(3) Calculated by multiplying 0.00003930 by the proposed maximum aggregate offering price. Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that the Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 
 

 

The information in this prospectus is not complete and may be changed. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
Subject to Completion, dated September 21, 2010
 
PRELIMINARY PROSPECTUS

Brenham Oil & Gas Corp.

10,297,019 Shares of Common Stock, Par Value $0.0001 Per Share

This prospectus is being furnished to you as a stockholder of American International Industries, Inc., a Nevada corporation (“AMIN” or “American”) in connection with the spin-off of Brenham Oil & Gas Corp., a Nevada corporation (“Brenham,” the “Registrant” or the “Company”) to its stockholders. In this prospectus, we refer to these persons as selling stockholders. We will not receive any proceeds from the sale of any shares by the selling stockholders.

We are currently a 54% owned subsidiary of AMIN. On February 21, 2010, AMIN determined to spin-off Brenham Oil & Gas Corp. through a dividend distribution to AMIN’s stockholders of 10,297,019 shares of Brenham’s common stock. The spin-off distribution was completed on July 21, 2010, to stockholders of AMIN common stock on the record date of June 16, 2010 (the “Record Date”). As a result of the spin-off, Brenham became a separate public company.
 
            There is no current trading market for the Company’s common stock. An active and liquid trading market for Brenham’s common stock may not develop nor may any trading market that may develop be sustained after this offering.
 
No vote of AMIN stockholders is required in connection with the Brenham spin-off. Neither AMIN nor the Company is asking you for a proxy, and you are not requested to send us a proxy. AMIN stockholders will not be required to pay any consideration for the shares of common stock of the Company they receive in the spin-off transaction, and they will not be required to surrender or exchange shares of their AMIN common stock or take any other action in connection with the spin-off.
 
In reviewing this prospectus, you should carefully consider the matters described under the caption "Risk Factors" beginning on page 9 of this prospectus. These securities are speculative and involve a high degree of risk.

 

 
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is September 21, 2010
 




 
 

 

TABLE OF CONTENTS

 
Page
PROSPECTUS SUMMARY
5
QUESTIONS AND ANSWERS ABOUT AMIN AND THE SPIN-OFF TRANSACTION
7
RISK FACTORS
9
   RISK FACTORS RELATED TO THE SPIN-OFF TRANSACTION
10
   RISK FACTORS RELATED TO BRENHAM’S BUSINESS
11
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
18
THE SPIN-OFF TRANSACTION
18
   BACKGROUND
18
   THE NUMBER OF SHARES YOU WILL RECEIVE IN THE BRENHAM SPIN-OFF
18
   INFORMATION REGARDING SELLING STOCKHOLDERS 19
   WHEN AND HOW YOU WILL RECEIVE THE DIVIDEND
19
   RESULTS OF THE SPIN-OFF TRANSACTION
19
   MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF
19
   MARKET FOR COMMON STOCK FOR BRENHAM
20
   REASONS FOR THE SPIN-OFF TRANSACTION
21
USE OF PROCEEDS
21
DETERMINATION OF OFFERING PRICE
21
DIVIDEND POLICY
22
CERTAIN INFORMATION WITH RESPECT TO BRENHAM
22
   CORPORATE INFORMATION
22
   OUR PRESENT OPERATIONS
22
   OUR BUSINESS PLAN
22
   THE INDUSTRY IN AFRICA
22
   OUR BUSINESS STRATEGY
22
   OUR COMPETITIVE STRENGTHS
23
   COMPETITION
24
   ENVIRONMENTAL MATTERS AND REGULATIONS
24
   OTHER REGULATION RELATED TO THE OIL AND GAS INDUSTRY
27
FINANCIAL STATEMENTS
29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
43
DIRECTORS AND EXECUTIVE OFFICERS
46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
48
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
49
PLAN OF DISTRIBUTION
50
DESCRIPTION OF CAPITAL STOCK
50
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
52
LEGAL MATTERS
54
EXPERTS
54
WHERE YOU CAN FIND ADDITIONAL INFORMATION   54
 INFORMATION NOT REQUIRED IN PROSPECTUS 55



You should rely only on the information contained in this document and any free writing prospectus we provide to you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell securities. The information in this document may only be accurate on the date of this document.

 
 

 
PROSPECTUS SUMMARY
This summary highlights certain information appearing elsewhere in this prospectus. As this is a summary, it does not contain all of the information that you should consider in making an investment decision. You should read the entire prospectus carefully, including the information under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Plan of Operations" and our consolidated financial statements and the related notes included in this prospectus, before investing. Unless otherwise stated in this prospectus, references to "Brenham," "we," "us" "our Company" or the “Registrant” refer to Brenham Oil & Gas Corp. Although we believe that the estimates and projections included in this prospectus are based on reasonable assumptions, investors should be aware that these estimates and projections are subject to many risks and uncertainties as described in "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements."

The Separation and Distribution
 
        On April 8, 2010, American International Industries, Inc. (“AMIN” or “American”) announced its intention to separate a portion of its ownership in Brenham Oil & Gas, Inc., a Texas corporation, from the remainder of its business. In connection with this spin-off transaction, Brenham Oil and Gas Corp, a Nevada corporation was incorporated on April 21, 2010 and Brenham Oil & Gas Inc., a Texas corporation became a wholly-owned subsidiary of Brenham, the Nevada corporation.
 
        On April 8, 2010, the board of directors of American approved the distribution of 10,297,019 of our shares of common stock on a pro rata, one-for-one basis, to the stockholders of AMIN as of the Record Date. Following the distribution, AMIN retained approximately 54% of our common stock.
 
Our Post-Separation Relationship with AMIN
 
        We entered into a Separation and Distribution Agreement with AMIN, effective April 21, 2010, which we refer to in this prospectus as the “Separation and Distribution Agreement.” This agreement provides for the allocation between the Company and AMIN of AMIN’s assets, liabilities and obligations attributable to periods prior to, at and after the separation of the Company from AMIN and also govern certain relationships between us and AMIN as a result of the separation. For additional information regarding the Separation and Distribution Agreement, see the sections entitled “Risk Factors - Risks Related to the Spin-Off Transaction” and “The Spin-Off Transaction.”

Reasons for the Separation
 
        American’s board of directors believes that separating a significant portion of Brenham Oil & Gas Corp. from the remainder of American is in the best interests of American and its stockholders because such separation is expected to:
  • improve strategic planning, increase management focus and streamline decision-making by providing the flexibility to implement the unique strategic plans of each company and to respond more effectively to different financial needs of each company and the changing economic environment;
  • allow American and the Company to adopt the capital structure, investment policy and dividend policy best suited to each business’ financial profile and business needs, as well as resolve the current competition for capital among American and its investors; and
  • create an independent equity structure for the Company that will facilitate our ability to fund our business plan of acquiring a portfolio of oil and gas  assets in the United States and international locations with an initial focus on Africa.
The American board of directors considered a number of potentially negative factors in evaluating the separation, including risks relating to the creation of a new public company and possible increased costs and one-time separation costs, but concluded that the potential benefits of the separation outweighed these factors. For more information, see the sections entitled “The Distribution — Reasons for the Distribution” and “Risk Factors” included elsewhere in this prospectus.

Corporate Information

Brenham Oil & Gas Inc. was incorporated under the laws of the State of Texas in November 1997 and became a wholly-owned subsidiary of American International Industries, Inc. in November 1997. On April 21, 2010, Brenham Oil & Gas Corp was incorporated in Nevada and Brenham Oil & Gas Inc., a Texas corporation became a wholly-owned subsidiary of Brenham.

        On April 8, 2010, the board of directors of American approved the distribution of 10,297,019 shares of Brenham's common stock, on a pro rata 1 for 1 basis, to the stockholders of AMIN, which distribution was completed on July 21, 2010. Following the distribution, AMIN retained approximately 54% of our common stock.
 
5

 
Our principal executive offices are located at 601 Cien Street, Suite 235, Kemah, Texas 77565, which are the executive offices of American and are provided to us on a rent-free basis. The telephone number of our principal executive offices is (281) 334-9479. Our web site is www.brenhamoilandgas.com. The information on our web site does not constitute part of this prospectus.

Our Present Operations

At present, our sole asset is a passive oil and gas mineral royalty interest covering a twenty-four acre tract of land located in Washington County, Texas. The royalty interest is leased by Anadarko Petroleum Corporation for a term continuing until the covered minerals are no longer produced in paying quantities from the leased property. Royalties on the covered minerals produced are paid to Brenham as follows: (i) for oil and gas and other liquid hydrocarbons, and (ii) for gas (including casing head gas) the royalty is one-sixth of the net proceeds realized by Anadarko Petroleum Corporation on the sale thereof, less a proportionate part of ad valorem taxes and production, severance, or other excise taxes.

Our Business Plan

Our business objective is to become an independent, oil and gas-focused exploration and production company with the intent to acquire oil and gas-related assets in the United States and international locations, with an initial focus on Africa (hereinafter “Potential Prospects”). We believe that an experienced management team, equipped with industry data, newly available seismic technologies, industry contacts and adequate funding, could acquire Potential Prospects that could be competitive with other relevant oil and gas companies. After considering numerous global oil and gas-producing regions in which to focus our exploration and development efforts, we decided that an initial focus on Africa was appropriate due to the largely unrealized hydrocarbon potential offered within this region. We believe that we can be successful in acquiring an inventory of such Potential Prospects and that our potential asset portfolio could be commercially viable.

Prior to joining Brenham, certain persons on our management team gained significant experience in the assembly of oil and gas asset portfolios in Africa. On February 20, 2010, Scott Gaille agreed to join our management team in the position of President. Mr. Gaille has over 15 years of experience in the oil industry and has traveled to and participated in petroleum transactions in several African nations, assembling asset portfolios for other companies in Africa. Our management team also includes Rogers Hardy, who has experience in the oil and gas industry. See more detailed disclosure under “Directors and Executive Officers” below.

 
6

 
Questions and Answers about AMIN and the Spin-Off Transaction

Why are the spin-offs structured as dividends?
 
AMIN believes that a tax-free distribution of shares of Brenham to AMIN stockholders is a tax-efficient way to separate Brenham from AMIN in a manner that will create long-term value for AMIN stockholders.
 
How did the Brenham spin-off occur?
 
 
AMIN distributed to its stockholders via dividend 10,297,019 outstanding shares of common stock of Brenham owned by AMIN, approximately 10% of the common stock of Brenham outstanding immediately prior to the spin-off.
 
How many shares of Brenham did you receive?
 
 
As determined by the AMIN Board of Directors prior to the distribution date, for every share of AMIN common stock held by you as of the Record Date, you received one share of common stock of Brenham.
 
What is the Record Date for the Brenham spin-off?
 
 
The Record Date for determining stockholders entitled to receive the shares of Brenham in the spin-off was the close of business on June 16, 2010.

What is the distribution date for the Brenham Spin-off?
 
The distribution date for distributing the shares of common stock of Brenham under the spin-off was July 21, 2010.
 
What are the U.S. federal income tax consequences of the spin-off to AMIN stockholders?
 
 
AMIN believes that the spin-off qualifies as transactions that are generally tax free for U.S. federal income tax purposes under Sections 355 and/or 368(a)(1)(D) of the Code, for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income, upon the receipt of shares of Brenham common stock pursuant to the spin-off. For more information, see "The Separation — Material U.S. Federal Income Tax Consequences of the Spin-Off," included elsewhere in this prospectus.
 
What is the relationships between AMIN and Brenham following the spin-off?
 
 
Prior to the spin-off, we were a wholly-owned subsidiary of AMIN. Following the spin-off, we became a majority-owned subsidiary of AMIN. See "Certain Relationships and Related Party Transactions—Relationships Between AMIN and Brenham."
 
Will I receive physical certificates representing shares of common stock of Brenham?
 
 
In connection with the spin-off transaction, Brenham issued physical certificates representing shares of its common stock to stockholders of AMIN as of the Record Date with the assistance of its transfer agent who also acts as the distribution agent. For AMIN stockholders who have shares in “street name” AMIN electronically issued shares to your bank or brokerage firm on your behalf.
 
Where will I be able to trade shares of the common stock of Brenham?
 
 
At present, there is no public market for the common stock of Brenham. We anticipate that we will become subject to quotation on the OTC Bulletin Board following this registration statement being declared effective by the SEC.
 
Will the number of AMIN shares I own change as a result of the spin-off?
 
 
No. The number of shares of AMIN common stock you own will not change as a result of the spin-off.
 
What will happen to the listing of AMIN common stock?
 
 
Nothing. AMIN common stock will continue to be traded on OTC Bulletin Board under the symbol "AMIN."
 
Which businesses will be retained by AMIN following the spin-off?
 
 
Following the spin-off, AMIN primarily will be engaged in the business and operations relating to (i) Northeastern Plastics; (ii) Shumate Energy Technologies (iii) Delta Seaboard International; and (iv) Downhole Completion Products. However, Brenham will continue to be a majority owned subsidiary controlled by AMIN.
 
7

 
Questions and Answers about AMIN and the Spin-Off Transaction (continued)

 

 
Are there risks to owning Brenham common stock?
 
 
Yes. Our business is subject to both general and specific risks relating to our business, leverage, relationship with AMIN and being a separate publicly traded company. Our business is also subject to risks relating to the separation. These risks are described in the "Risk Factors" section of this prospectus beginning on page 9.  You are encouraged to read that section carefully.
 
Where can AMIN stockholders get more information?
 
 
If you have any questions relating to the spin-off, you should contact:
 
Brenham Oil & Gas Corp.
Investor Relations
601 Cien Street, Suite 235
Kemah, TX 77565-3077
Tel: (281) 334-9479
Fax: (281) 334-9508
info@brenhamoil.com
 
8

 
RISK FACTORS

An investment in our common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, together with all of the other information contained in this prospectus, including the financial statements and the related notes appearing at the end of this prospectus before deciding to invest in our common stock. If any of the following risks actually occurs, our business, business prospects, financial condition, plan of operations or cash flows could be materially adversely affected. In any such case, to the extent that a trading market develops for our common stock, the trading price of our common stock could decline, and you could lose all or part of your investment. The risks below are not the only ones facing our Company. Additional risks not currently known to us or that we currently deem immaterial may also adversely affect us. This prospectus also contains forward-looking statements, estimates and projections that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks described below.
 
RISK FACTORS RELATING TO OUR SPIN-OFF FROM AMIN
 
After our spin-off from AMIN, we may be unable to make the changes necessary to operate effectively as a separate public entity.
 
Following our spin-off from AMIN, AMIN will have no obligation to provide financial, operational or organizational assistance to us. As a separate public entity, we will be subject to, and responsible for, regulatory compliance, including periodic public filings with the SEC, as well as generally applicable tax and accounting rules. We may be unable to successfully implement the changes necessary to operate as an independent public entity.
 
We expect to incur increased costs relating to operating as an independent company that could adversely affect our cash flow and results of operations.
 
We expect that the obligations of being a public company, including substantial public reporting and related auditor fees and obligations will require new expenditures, place new demands on our management and may require the hiring of additional personnel. We may need to implement additional systems that require new expenditures in order to adequately function as a public company. Such expenditures could adversely affect our business, financial condition and plan of operations.
 
If the spin-off transaction were to fail to qualify as a transaction that is generally tax free for U.S. federal income tax purposes under Sections 355 and/or 368(a)(1)(D) of the Code, AMIN, Brenham and AMIN stockholders may be subject to significant tax liabilities.
 
AMIN expects that the spin-off transaction qualifies generally as tax free for U.S. federal income tax purposes under Sections 355 and/or 368(a)(1)(D) of the Code. If the spin-off transaction were to fail to qualify as a transaction that is generally tax free for U.S. federal income tax purposes under Sections 355 and/or 368(a)(1)(D) of the Code, then AMIN generally would recognize a gain in an amount equal to the excess of (i) the fair market value of the Brenham common stock distributed to the AMIN stockholders in such taxable spin-off over (ii) AMIN's tax basis in the common stock of Brenham. In addition, each AMIN stockholder who received Brenham common stock in such taxable spin-off generally would be treated as having received a taxable distribution in an amount equal to the fair market value of the Brenham common stock received in such spin-off, which would be taxable as a dividend to the extent of the stockholder's ratable share of AMIN's current and accumulated earnings and profits (as increased to reflect any current income, including any gain, recognized by AMIN on the taxable spin-off). The balance, if any, of the distribution would be treated as a nontaxable return of capital to the extent of the AMIN stockholder's tax basis in its AMIN stock, with any remaining amount being taxed as capital gain. For more information, see "The Spin-Off Transaction - Material U.S. Federal Income Tax Consequences of the Spin-Off," included elsewhere in this prospectus.
 
Certain transactions in AMIN or Brenham equity securities could cause the spin-off transactions to be taxable to AMIN
 
Current U.S. federal income tax law creates a presumption that the spin-off of Brenham would be taxable to AMIN, but not to its stockholders, if such spin-off is part of a "plan or series of related transactions" pursuant to which one or more persons acquire directly or indirectly stock representing a 50% or greater interest (by vote or value) in AMIN or Brenham. Acquisitions that occur during the four-year period that begins two years before the date of a spin-off are presumed to occur pursuant to a plan or series of related transactions, unless it is established that the acquisition is not pursuant to a plan or series of transactions that includes the spin-off. U.S. Treasury regulations currently in effect generally provide that whether an acquisition and a spin-off are part of a plan is determined based on all of the facts and circumstances, including, but not limited to, specific factors described in the Treasury regulations. In addition, the Treasury regulations provide several "safe harbors" for acquisitions that are not considered to be part of a plan.
 
 
9

 
These rules will limit our ability and the ability of AMIN during the two-year period following the spin-off to enter into certain transactions that might be advantageous to them and their respective stockholders, particularly issuing equity securities to satisfy financing needs, repurchasing equity securities, and, under certain circumstances, acquiring businesses or assets with equity securities or agreeing to be acquired.
 
As a result of these rules, even if the Brenham spin-off otherwise qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes, transactions involving Brenham or AMIN equity securities (including transactions by certain significant stockholders) could cause AMIN to recognize taxable gain with respect to the stock of Brenham as described above.
 
The market price and trading volume of Brenham securities may be limited or volatile and may face negative pressure.
 
There is currently no trading market for Brenham’s shares of common stock. Investors may decide to dispose of some or all of the Brenham’s common stock that they receive in the Brenham spin-off. Brenham’s common stock issued in the Brenham spin-off will be trading publicly for the first time following the effective date of this registration statement. Until, and possibly even after, orderly trading markets develop for these securities, there may be significant fluctuations in price. It is not possible to accurately predict how investors in Brenham's securities will behave after a trading market develops. The market price for Brenham’s common stock following the Brenham spin-off may be more volatile than the market price of AMIN’s common stock before the spin-off. The market price of Brenham's common stock could fluctuate significantly for many reasons, including the risks identified in this prospectus or reasons unrelated to our performance. These factors may result in short- or long-term negative pressure on the value of the Brenham’s common stock.
 
The spin-off transaction was not the result of arm's length negotiations.
 
The spin-off transaction agreement was established by AMIN, in consultation with Brenham, with the intention of maximizing the value to current AMIN’s stockholders. Accordingly, the terms for us may not be as favorable as would have resulted from negotiations among unrelated third parties.

An active and liquid trading market for our common stock may not develop or be sustained.

Prior to this registration statement, our common stock was not traded on any market. An active and liquid trading market for our common stock may not develop or be sustained after this registration statement is declared effective by the SEC. Liquid and active trading markets usually result in less price volatility and more efficiency in carrying out investors' purchase and sale orders. The market price of our common stock could vary significantly as a result of a number of factors, some of which are beyond our control. In the event of a drop in the market price of our common stock, you could lose a substantial part or all of your investment in and/or value of our common stock.
 
Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.

Our stock price may be volatile. The stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including, but not limited to:

  • the price of oil and gas and natural gas;
  • the success of our exploration and development operations, and the costs associated with these efforts;
  • regulatory developments in the United States and foreign countries where we operate;
  • the recruitment or departure of key personnel;
  • quarterly or annual variations in our financial results or those of companies that are perceived to be similar to us;
  • market conditions in the industries in which we compete and issuance of new or changed securities;
  • analysts' reports or recommendations;
  • the failure of securities analysts to cover our common stock or changes in financial estimates by analysts;
  • the inability to meet the financial estimates of analysts who follow our common stock;
  • the issuance of any additional securities by us;
  • investor perception of our Company and of the industry in which we compete; and
  • general economic, political and market conditions.

 
10

 
A substantial number of shares of our common stock may be sold into the market at any time. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

All of the shares being registered pursuant to this registration statement will be freely tradable without restrictions or further registration under the federal securities laws, unless purchased by our "affiliates" as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). The remaining shares of common stock outstanding after the effective date of this registration statement are restricted securities as defined in Rule 144 under the Securities Act. Restricted securities may be sold in the U.S. public market only if registered under the Securities Act or if they qualify for an exemption from registration, including by reason of Rules 144 or 701 under the Securities Act. All of our restricted shares will be eligible for sale in the public market beginning after the effective date, provided that such restricted shares have been held for at least six months, subject in certain circumstances to the volume, manner of sale and other limitations under Rule 144. Sales of a substantial number of shares of our common stock, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

The concentration of our capital stock ownership among our largest stockholders, and their affiliates, will limit your ability to influence corporate matters.

Our largest stockholder AMIN will own more than 50% of our outstanding common stock. Consequently, this stockholder will have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership will limit your ability to influence corporate matters, and as a result, actions may be taken that you may not view as beneficial.

Provisions of our articles of incorporation and by-laws could discourage potential acquisition proposals and could deter or prevent a change in control.

Some provisions in our articles of incorporation and by-laws, as well as statutes, may have the effect of delaying, deferring or preventing a change in control. These provisions, including those providing for the possible issuance of shares of our preferred stock, which may be divided into series and with the preferences, limitations and relative rights to be determined by the Board of Directors, and the right of the board of directors to amend the by-laws, may make it more difficult for other persons, without the approval of our board of directors, to make a tender offer or otherwise acquire a substantial number of shares of our common stock or to launch other takeover attempts that a stockholder might consider to be in his or her best interest. These provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock.
 
Risks Relating to Our Business

We have no prospects and proven reserves and the areas that we decide to seek for prospects, explore and eventually drill may not yield oil and gas in commercial quantities or quality, or at all.

At present, we have no prospects and no proven reserves. We have not yet identified prospects and those Potential Prospects may not be commercially viable even if available seismic and geological information indicate the potential presence of oil and gas. However, the areas we may decide to drill may not yield oil and gas in commercial quantities or quality, or at all. Potential prospects will require substantial seismic data reprocessing and interpretation. Even when properly used and interpreted, 2-D and 3-D seismic data and visualization techniques are only tools used to assist geoscientists in identifying subsurface structures and hydrocarbon indicators and do not enable the interpreter to know whether hydrocarbons are, in fact, present in those structures. We therefore do not know if any of our Potential Prospects will contain oil and gas in sufficient quantities or quality to recover drilling and completion costs or to be economically viable. Even if oil and gas is found on our Potential Prospects in commercial quantities, construction costs of oil and gas pipelines or floating production systems, as applicable, and transportation costs may prevent such prospects from being economically viable.

We may face substantial uncertainties in connection with any Potential Prospects, so you should not place undue reliance on any of our plans of operation.

In this prospectus we provide statements in connection with our plan of operation. These statements may face substantial uncertainties, as the accuracy of these statements is a function of the availability of certain data, geological interpretation and judgment. To date, we have not yet identified any Potential Prospects. Any analogies drawn by us from other companies’ wells, prospects or producing fields may not prove to be accurate indicators of the success of developing reserves from our Potential Prospects. Furthermore, we have no way of evaluating the accuracy of the to-be-acquired data from wells or prospects produced by other parties which we may use.

 
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It is possible that none of the future wells will find underground accumulations of oil and gas. Any significant variance between actual results and our assumptions could then materially affect the quantities of oil and gas attributable to any potential properties.
 
Identifying Potential Prospects and drilling wells is speculative, often involving significant costs that may be more than we expect, and may not result in any discoveries of future production or reserves. Any material inaccuracies in future drilling costs, estimates or underlying assumptions will materially affect our plan of operation and business objectives.

Seeking Potential Prospects, exploring for and developing oil and gas reserves involves a high degree of operational and financial risk, which precludes definitive statements as to the time required and costs involved in reaching certain objectives. The budgeted costs of seeking prospects, drilling, completing and operating wells are often exceeded and can increase significantly when drilling costs rise due to a tightening in the supply of various types of oil and gas field equipment and related services. Potential Prospects may be unsuccessful for many reasons, including geological conditions, weather, cost overruns, equipment shortages and mechanical difficulties. Exploratory wells bear a much greater risk of loss than development wells. Moreover, the successful drilling of an oil and gas well does not necessarily result in a profit on investment. A variety of factors, both geological and market-related, can cause a well to become uneconomic or only marginally economic. Initial costs associated with identifying Potential Prospects and drilling wells require significant additional exploration and development, regulatory approval and commitments of resources prior to commercial development. If our actual costs are significantly more than any estimated costs, we may not be able to continue our plan of operation and/or business objectives and we would be forced to modify our plan of operation.

Our unidentified Potential Prospects and drilling locations may be scheduled out over several years, making them susceptible to uncertainties that could materially affect the occurrence or timing of any drilling.

Our management team has not yet identified any Potential Prospects and future drilling locations. Our ability to identify, drill and develop these locations depends on a number of factors, including the availability of equipment and capital, seasonal conditions, regulatory approvals, oil and gas prices, costs and drilling results. The final determination on whether to drill any of these Potential Prospects and future drilling locations will be dependent upon the factors described elsewhere in this prospectus.  Due to these uncertainties, we do not know if any unidentified prospect and future drilling location we may identify will be drilled within a reasonable timeframe or at all or if we will be able to economically produce oil and gas from these or any other potential drilling locations. As such, our actual drilling activities may be materially different from certain expectations, which could adversely affect our plan of operation and future financial condition.
 
We expect not to be the operator on all of our future Potential Prospects, and, therefore, we will not be able to control the timing of exploration or development efforts, associated costs, or the rate of production of any non-operated assets.

We expect that we will not be the operator on all potential wells. As we carry out our exploration and development programs, we may enter into arrangements with respect to future prospects that result in a greater proportion of our prospects being operated by others. As a result, we may have limited ability to exercise influence over the operations of the future prospects operated by our potential partners. Dependence on third party operators could prevent us from realizing certain return targets for those co-operated prospects. The success and timing of identifying prospects, exploration and development activities will depend on a number of factors that will be largely outside of our control, including:
  • the timing and amount of capital expenditures;
  • the co-operator's expertise and financial resources;
  • approval of other participants in drilling wells;
  • selection of technology; and
  • the rate of production of reserves, if any.
        This limited ability to exercise control over the operations of some of our Potential Prospects may cause a material adverse effect on our results of operations and financial condition.
 
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We have no operating history and our future performance is uncertain.

We are an exploration stage company and will continue to be so until commencement of substantial production of oil and gas, which will depend upon successful drilling results, additional and timely capital funding, and access to suitable infrastructure. Further, we will not be able to commence our exploration and drilling program unless and until we have entered into certain agreements with other oil and gas  companies and/or governments of respective countries. Companies such as ours, in their initial stages of exploration face substantial business risks and may suffer significant losses. We will generate substantial net losses and negative cash flows from operating activities and expect to continue to incur substantial net losses for many years to come. We will face challenges and uncertainties in financial planning as a result of uncertainties regarding the nature, scope and results of our future activities. New companies must develop successful business relationships, establish operating procedures, hire staff, install management information and other systems, establish facilities and obtain licenses, as well as take other measures necessary to conduct their intended business activities. We may not be successful in implementing our business strategies or in completing the development of the infrastructure necessary to conduct our business as planned. In the event that one or more of our plans is not completed, is delayed or terminated, our operating results will be adversely affected and our operations will differ materially from the activities described in this prospectus. As a result of industry factors or factors relating specifically to us, we may have to change our methods of conducting business, which may cause a material adverse effect on our future results of operations and financial conditions.

We are dependent on certain members of our management and technical team.

Investors in our common stock must rely upon the ability, expertise, judgment and discretion of our management and the success of our technical team in identifying Potential Prospects and in discovering and developing oil and gas reserves. Our performance and success are dependent, in part, upon key members of our management and technical team, and the departure of such key persons could be detrimental to our future success. In making a decision to invest in our common stock, you must be willing to rely to a significant extent on our management's experience, discretion and judgment. A significant percentage of the common stock of our Company is held by members of our management and technical team. There can be no assurance that our management and technical team will remain in place. The loss of any of our management and technical team members could have a material adverse effect on our results of operations and financial condition, as well as on the market price of our common stock. See "Management."

Our future development and exploration operations require substantial capital, and we may be unable to obtain needed capital or financing on satisfactory terms, which would prevent us from fully developing our business and generating revenues.
 
The oil and gas industry is capital intensive and we anticipate that we will need to raise significant amounts of capital to meet our funding requirements. We expect our capital outlays and operating expenditures to increase substantially over at least the next several years as we start our operations. Identifying Potential Prospects, exploration and production plans and obtaining seismic data are very expensive, and we expect that we will need to raise substantial additional capital, through future private or public equity offerings, strategic alliances or debt financing, before we achieve commercialization of any of our Potential Prospects.
 
Our future capital requirements will depend on many factors, including:

  • the scope, rate of progress and cost of our exploration and production activities;
  • oil and gas and natural gas prices;
  • our ability to locate and acquire Potential Prospects;
  • our ability to produce oil and gas or natural gas from those reserves;
  • the terms and timing of any drilling and other production-related arrangements that we may enter into;
  • the cost and timing of governmental approvals and/or concessions; and
  • the effects of competition by larger companies operating in the oil and gas  industry.
We do not currently have any commitments for future external funding and we do not expect to generate any significant revenue from production for several years after commencing our drilling program. Additional financing may not be available on favorable terms, or at all. Even if we succeed in selling additional securities to raise funds, at such time the ownership percentage of our existing stockholders would be diluted, and new investors may demand rights, preferences or privileges senior to those of existing stockholders. If we raise additional capital through debt financing, the financing may involve covenants that restrict our business activities. If we choose to offer interests in our prospects to third-party operators, we may lose operating control over such prospects.
 
 
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Our working capital needs are difficult to forecast and may vary significantly, which could require us to seek additional financing that we may not be able to obtain on satisfactory terms, or at all.
 
Our working capital needs are difficult to predict with degree of certainty. This difficulty is due primarily to working capital requirements related to our plan of operation, among other things, the costs associated with identifying and acquiring Potential Prospects, the timing and costs related to our exploration and development efforts, the availability of personnel and equipment necessary for such efforts, fluctuations in the price of oil and gas, the costs and timing of regulatory approvals and the number of Potential Prospects we determine to pursue,. We may therefore be subject to significant and rapid increases in our working capital needs that could require us to seek additional financing sources and there can be no assurance in our ability to secure additional financing at acceptable terms, if at all. Restrictions in any debt agreements that we may enter into may impair our ability to obtain other sources of financing.
 
We will be dependent upon our ability to enter into arrangements for financing with third parties.
 
Our ability to pursue Potential Prospects will depend upon our ability to identify and enter into financing arrangements with potential sources of financing. This will include strategic relationships with existing oil and gas development and exploration companies, public or private sales of our shares or debt and other sources and joint ventures with third parties. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed.
 
Current economic and credit conditions could adversely affect our plan of operations.
 
Our ability to secure additional financing and satisfy our financial obligations under indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to the prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond our control. The prolonged continuation or worsening of current credit market conditions would have a material adverse affect on our ability to secure financing on favorable terms, if at all.
A substantial or extended decline in oil and gas prices may adversely affect our business, financial condition and future results of operations.

The price that we will receive for our potential oil and gas production will significantly affect our future revenue, profitability, access to capital and future growth rate. Historically, the oil and gas markets have been volatile and will likely continue to be volatile in the future. The prices that we will receive for our production and the levels of our future production depend on numerous factors. These factors include, but are not limited to, the following:

  • changes in supply and demand for oil and gas and natural gas;
  • the actions of the Organization of the Petroleum Exporting Countries ("OPEC");
  • the price and quantity of imports of foreign oil and gas and natural gas;
  • speculation as to the future price of oil and gas and the speculative trading of oil and gas futures contracts;
  • global economic conditions;
  • political and economic conditions, including embargoes, in oil and gas-producing countries or affecting other oil and gas-producing activities, particularly in the Middle East, Africa, Russia and South America;
  • the continued threat of terrorism and the impact of military and other action, including U.S. military operations in the Middle East;
  • the level of global oil and gas exploration and production activity;
  • the level of global oil and gas inventories and oil and gas refining capacities;
  • weather conditions and other natural disasters;
  • technological advances affecting energy consumption;
  • domestic and foreign governmental regulations;
  • proximity and capacity of oil and gas pipelines and other transportation facilities;
  • the price and availability of competitors' supplies of oil and gas; and
  • the price and availability of alternative fuels.
A substantial or extended decline in oil and gas prices may materially and adversely affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.
 
 
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We may become subject to numerous risks inherent to the exploration and production of oil and gas.

Oil and gas exploration and production activities involve many risks that a combination of experience, knowledge and careful evaluation may not be able to overcome. Our future success will depend on the success of our exploration and production activities and on the future existence of the infrastructure that will allow us to take advantage of our findings. As a result, our oil and gas exploration and production activities are subject to numerous risks, including the risk that drilling will not result in commercially viable oil and gas production. Our decisions to purchase, explore, develop or otherwise exploit prospects or properties will depend in part on the evaluation of seismic data through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations.
 
Furthermore, the marketability of expected oil and gas production from our Potential Prospects will also be affected by numerous factors. These factors include, but are not limited to, market fluctuations of prices, proximity, capacity and availability of pipelines, the availability of processing facilities, equipment availability and government regulations (including, without limitation, regulations relating to prices, taxes, royalties, allowable production, importing and exporting of oil and gas, environmental protection and climate change). The effect of these factors, individually or jointly, may result in us not receiving an adequate return on invested capital.

In the event that our prospects are developed and become operational, they may not produce oil and gas in commercial quantities or at the costs anticipated, and our projects may cease production, in part or entirely, in certain circumstances. Drilling programs may become uneconomic as a result of an increase in operating costs to produce oil and gas. Our actual operating costs may differ materially from our current estimates. Moreover, it is possible that other developments, such as increasingly strict environmental, health and safety laws and regulations and enforcement policies thereunder and claims for damages to property or persons resulting from our operations, could result in substantial costs and liabilities, delays, an inability to complete our drilling programs or the abandonment of such drilling programs, which could cause a material adverse effect on our results of operations and financial condition.
 
We are subject to drilling and other operational hazards.

The oil and gas business involves a variety of operating risks, including, but not limited to:

  • blowouts, cratering and explosions;
  • mechanical and equipment problems;
  • uncontrolled flows of oil and gas or well fluids;
  • fires;
  • marine hazards with respect to offshore operations;
  • formations with abnormal pressures;
  • pollution and other environmental risks; and
  • natural disasters.
        Any of these events could result in loss of human life, significant damage to property, environmental damage, impairment of our operations and substantial losses. In accordance with customary industry practice, we expect to maintain insurance against some, but not all, of these risks and losses. The occurrence of any of these events whether or not covered by insurance, could have a material adverse effect on our financial position and results of operations.

The development schedule of oil and gas projects, including the availability and cost of drilling rigs, equipment, supplies, personnel and oil and gas field services, is subject to delays and cost overruns.

Historically, most oil and gas projects have experienced delays and capital cost increases and overruns due to, among other factors, the unavailability or high cost of drilling rigs and other essential equipment, supplies, personnel and oil and gas field services. The cost to develop our Potential Prospects has not been fixed and remains dependent upon a number of factors, including the completion of detailed cost estimates and final engineering, contracting and procurement costs. Construction and operation schedules may not proceed as planned and may experience delays or cost overruns. Any delays may increase the costs of the projects, requiring additional capital, and such capital may not be available in a timely and cost-effective fashion.

 
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Non-U.S. operations may be adversely affected by political and economic circumstances in the countries in which we operate.

Non-U.S. oil and gas exploration, development and production activities are subject to political and economic uncertainties (including but not limited to changes, sometimes frequent or marked, in energy policies or the personnel administering them), expropriation of property, cancellation or modification of contract rights, foreign exchange restrictions, currency fluctuations, royalty and tax increases and other risks arising out of foreign governmental sovereignty over the areas in which our operations are conducted, as well as risks of loss due to civil strife, acts of war, guerrilla activities and insurrection. These risks may be higher in the developing countries in which we conduct our activities, including Africa.

Potential operations in these areas increase our exposure to risks of war, local economic conditions, political disruption, civil disturbance and governmental policies that may:

  • disrupt our operations;
  • restrict the movement of funds or limit repatriation of profits;
  • lead to U.S. government or international sanctions; and
  • limit access to markets for periods of time.
        Countries in Africa have experienced political instability in the past. Disruptions may occur in the future, and losses caused by these disruptions may occur that will not be covered by insurance.

Consequently, our non-U.S. exploration, development and production activities may be substantially affected by factors which could have a material adverse effect on our financial condition and results of operations. Furthermore, in the event of a dispute arising from non-U.S. operations, we may be subject to the exclusive jurisdiction of courts outside the U.S. or may not be successful in subjecting non-U.S. persons to the jurisdiction of courts in the U.S., which could adversely affect the outcome of such dispute.

The oil and gas industry, including the acquisition of exploratory acreage in Africa, is intensely competitive.

The international oil and gas industry, including in the U.S. and Africa, is highly competitive in all aspects, including the exploration for, and the development of, new sources of supply. We expect to operate in a highly competitive environment for acquiring exploratory prospects and hiring and retaining trained personnel. Many of our competitors possess and employ financial, technical and personnel resources substantially greater than us, which can be particularly important in the areas in which we operate. These companies may be able to pay more for productive oil and gas properties and prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or personnel resources permit. Furthermore, these companies may also be better able to withstand the financial pressures of unsuccessful drill attempts, sustained periods of volatility in financial markets and generally adverse global and industry-wide economic conditions, and may be better able to absorb the burdens resulting from changes in relevant laws and regulations, which would adversely affect our competitive position. Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Also, there is substantial competition for available capital for investment in the oil and gas industry. As a result of these and other factors, we may not be able to compete successfully in an intensely competitive industry, which could cause a material adverse effect on our results of operations and financial condition.

Participants in the oil and gas industry are subject to complex laws that can affect the cost, manner or feasibility of doing business.

Exploration and production activities in the oil and gas industry are subject to extensive local, state, federal and international regulations. We may be required to make large expenditures to comply with governmental regulations, particularly in respect of the following matters:

  • licenses for drilling operations;
  • royalty increases, including retroactive claims;
  • drilling and development bonds;
  • reports concerning operations;
  • the spacing of wells;
  • unitization of oil and gas accumulations;
  • remediation or investigation activities for environmental purposes; and
  • taxation.
Under these and other laws and regulations, we could be liable for personal injuries, property damage and other types of damages. Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws and regulations could change in ways that could substantially increase our costs. Any such liabilities, penalties, suspensions, terminations or regulatory changes could have a material adverse effect on our financial condition and results of operations.
 
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Our future operations are subject to numerous environmental, health and safety regulations which may result in material liabilities and costs.

Our future operations will be, subject to various international, foreign, federal, state and local environmental, health and safety laws and regulations governing, among other things, the emission and discharge of pollutants into the ground, air or water, the generation, storage, handling, use and transportation of regulated materials and the health and safety of our employees. We are required to obtain environmental permits from governmental authorities for certain of our operations, including drilling permits for our wells. There is a risk that we will not be in complete compliance with these permits and the environmental laws and regulations to which we are subject at all times. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators, including through the revocation of our permits or the suspension or termination of our operations. If we fail to obtain permits in a timely manner or at all (due to opposition from community or environmental interest groups, governmental delays, or any other reasons), such failure could impede our operations, which could have a material adverse effect on our results of operations and our financial condition.

We could be held liable for all environmental, health and safety costs and liabilities arising out of our actions and omissions as well as those of potential third-party contractors. To the extent we do not address these costs and liabilities or if we are otherwise in breach of our lease requirements, our future leases could be suspended or terminated. We intend to hire third parties to perform the majority of the drilling and other services related to our operations. There is a risk that we may contract with third parties with unsatisfactory environmental, health and safety records or that our contractors may be unwilling or unable to cover any losses associated with their acts and omissions. Accordingly, we could be held liable for all costs and liabilities arising out of the acts or omissions of our contractors, which could have a material adverse effect on our results of operations and financial condition.

We may be required to maintain bonding or insurance coverage for certain risks relating to our operations, including environmental risks. Even under such policies, we may not be insured against certain risks. Our insurance may not cover any or all environmental claims that might arise from our operations or those of our third-party contractors. If a significant accident or other event occurs and is not fully covered by our insurance, or our third-party contractors have not agreed to bear responsibility, such accident or event could have a material adverse effect on our results of operations and our financial condition. In addition, we may not be able to obtain required bonding or insurance coverage at all or in time to meet our anticipated startup schedule for each well, and if we fail to obtain this bonding or coverage, such failure could have a material adverse effect on our results of operations and financial condition.

In addition, we expect continued attention to climate change issues. Various countries and U.S. states and regions have agreed to regulate emissions of greenhouse gases, including methane (a primary component of natural gas) and carbon dioxide, a byproduct of oil and gas and natural gas combustion. The U.S. federal government, as well as the U.S. Environmental Protection Agency, are currently considering national greenhouse gas regulation, each having proposed bills or rules which would require or result in greenhouse gas emissions reductions. Final laws or regulations could be adopted this or next year. The regulation of greenhouse gases in the areas in which we intend to operate could adversely impact our operations.

Environmental, health and safety laws are complex, change frequently and have tended to become increasingly stringent over time. Our costs of complying with current and future environmental, health and safety laws, and our liabilities arising from releases of, or exposure to, regulated substances may adversely affect our results of operations and our financial condition. See "Certain Information With Respect to Brenham - Environmental Matters and Regulation."

We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practices Act ("FCPA") and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties for the purpose of obtaining or retaining business. We do business and may do additional business in the future in countries and regions in which we may face, directly or indirectly, corrupt demands by officials, tribal or insurgent organizations, or private entities. Thus, we face the risk of unauthorized payments or offers of payments by one of our employees or consultants, even though these parties are not always subject to our control. Our existing safeguards and any future improvements may prove to be less than effective, and our employees and consultants may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold us liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains estimates and forward-looking statements, principally in "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Plan of Operation," "Certain Information With Respect to Brenham" and "Business of Brenham." Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Many important factors, in addition to the factors described in this prospectus, may adversely affect our results as indicated in forward-looking statements. You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect.

Our estimates and forward-looking statements may be influenced by the following factors, among others:

  • the volatility of oil and gas prices;
  • potential discovery and development of oil and gas reserves;
  • projected and targeted capital expenditures and other costs, commitments and revenues;
  • current and future government regulation of the oil and gas  industry;
  • changes in environmental laws or the implementation of those laws;
  • competition;
  • our ability to find, acquire or gain access to Potential Prospects;
  • the successful implementation of our potential prospect development and drilling plans;
  • the availability and cost of drilling rigs, production equipment, supplies, personnel and oil and gas field services;
  • the availability and cost of developing appropriate infrastructure around and transportation to our prospects;
  • military operations, terrorist acts, wars or embargoes;
  • the ability to obtain financing;
  • our dependence on our key management personnel and our ability to attract and retain qualified personnel;
  • our vulnerability to severe weather events, especially tropical storms and hurricanes in the U.S. Gulf of Mexico;
  • the cost and availability of adequate insurance coverage; and
  • other risk factors discussed in the "Risk Factors" section of this prospectus.
The words "believe," "may," "will," "aim," "estimate," "continue," "anticipate," "intend," "expect," "plan" and similar words are intended to identify estimates and forward-looking statements.

        Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this prospectus might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, including, but not limited to, the factors mentioned above. Because of these uncertainties, you should not place undue reliance on these forward-looking statements when making an investment decision.

THE SPIN-OFF TRANSACTION
 
Background
 
On April 8, 2010, the Board of Directors of American approved the separation of Brenham into a separate, publicly traded company. The separation was accomplished through the distribution by AMIN of 10,297,019 shares of the common stock of Brenham held by AMIN to holders of AMIN common stock on the Record Date. Following the distributions, AMIN stockholders will own approximately 10% of the outstanding common stock of Brenham. You will not be required to make any payment, surrender or exchange your shares of AMIN common stock or take any other action to receive your shares of Brenham common stock.
 
The Number of Shares You Received in the Brenham Spin-off
 
For every share of AMIN common stock that you owned at the close of business on June 16, 2010, the Record Date, you received one share of common stock of Brenham on the distribution date of July 21, 2010. As described below under "When and How You Received the Dividend.”

 
 
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Information Regarding Selling Stockholders
 
        The shares of common stock are being registered hereunder on behalf of the selling stockholders. Each selling stockholder may from time to time sell any or all of such selling stockholder’s shares that are registered under this prospectus. Because no selling stockholder is obligated to sell shares, and because the selling stockholders may also acquire publicly traded shares of our common stock, we cannot accurately estimate how many shares each selling stockholder will own after the offering.
 
        All expenses incurred with respect to the registration of the common stock covered by this prospectus will be borne by us, but we will not be obligated to pay any underwriting fees, discounts, commissions or other expenses incurred by any selling stockholder in connection with the sale of shares.
 
        None of the selling stockholders is a broker dealer or an affiliate of a broker dealer.
 
        Except as set forth below or in the section “Recent Sales of Unregistered Securities” below, none of the selling stockholders has been an officer or director of the Company since inception, nor has any selling stockholder had a material relationship with the Company.
 
When and How You Received the Dividend
 
AMIN has distributed the shares of Brenham common stock on/or about July 21, 2010, the distribution date. Registrar and Transfer Company, which currently serves as the transfer agent and registrar for AMIN’s common stock, also serves as transfer agent and registrar for the Brenham common stock and as distribution agent in connection with the spin-off.
 
If you owned AMIN common stock as of the close of business on the Record Date, the shares of Brenham common stock that you were entitled to receive in the spin-off should have been issued electronically, as of the distribution date, to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form. Registration in book-entry form refers to a method of recording stock ownership when no physical share certificates are issued to stockholders.
 
Commencing on or shortly after the distribution date, if you hold physical stock certificates that represent your shares of AMIN common stock and you are the registered holder of the AMIN shares represented by those certificates, the transfer agent, acting as distribution agent, mailed to physical stock certificates issued in your name. If you have any questions concerning the mechanics of having shares of Brenham common stock registered in book-entry form, you are encouraged to contact Registrar and Transfer Company, 10 Commerce Drive, Cranford, NJ 07016-3572, by phone at (800) 456-0596, or by e-mail at reboyle@rtco.com
 
Most AMIN stockholders hold their shares of AMIN common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the stock in "street name" and ownership would be recorded on the bank or brokerage firm's books. If you hold your AMIN common stock through a bank or brokerage firm, your bank or brokerage firm credited your account for the shares of common stock of the Brenham that you were entitled to receive in the spin-offs. If you have any questions concerning the mechanics of having shares of Brenham common stock held in "street name," you are encouraged to contact your bank or brokerage firm.
 
Results of the Spin-Off Transaction
 
After the spin-off, while we become a separate public company, no trading market exists nor will any trading market commence until after the effective date of this registration statement. Immediately following the spin-off, based on the number of registered stockholders of AMIN common stock on June 16, 2010, the Record Date, we expect to have approximately 1,200 stockholders. The spin-off will not affect the number of outstanding shares of AMIN common stock or any rights of AMIN stockholders.
 
Material U.S. Federal Income Tax Consequences of the Spin-Off
 
Subject to the limitations and qualifications described herein, the discussion entitled " Certain U.S. Federal Income Tax Consequences: Each of the Spin-Offs Qualifies as a Transaction that Is Generally Tax Free under Sections 355 and/or 368(a)(1)(D) of the Code " is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), final, temporary or proposed U.S. Treasury regulations promulgated thereunder,  judicial opinions, published positions of the IRS and all other applicable authorities, all as in effect as of the date of this document and all of which are subject to change, possibly with retroactive effect. Any such change could affect the accuracy of the statements and conclusions set forth in this document.
 
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For purposes of this discussion, the term "U.S. holder" means a beneficial owner of AMIN common stock that is, for U.S. federal income tax purposes:
  • an individual who is a citizen or resident of the United States;
  • a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof, or the District of Columbia;
  • an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
  • a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
If an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes holds AMIN common stock, the tax treatment of a partner in such entity generally will depend on the status of the partners and the activities of the partnership. If you are a partner in a partnership holding AMIN common stock, please consult your tax advisor.
 
        This discussion only addresses holders of AMIN common stock that are U.S. holders and hold such stock as a capital asset within the meaning of Section 1221 of the Code. Further, this summary does not address all aspects of U.S. federal income taxation that may be relevant to a holder in light of the holder's particular circumstances or that may be applicable to holders subject to special treatment under U.S. federal income tax law (including, for example, persons that are not U.S. holders, financial institutions, dealers in securities, traders in securities that elect mark-to-market treatment, insurance companies, mutual funds, tax-exempt organizations, partnerships or other flow-through entities and their partners or members, U.S. expatriates, holders liable for the alternative minimum tax, holders whose functional currency is not the U.S. dollar, and holders who hold their AMIN common stock as part of a hedge, straddle, constructive sale or conversion transaction, or holders who acquired AMIN common stock pursuant to the exercise of employee stock options or otherwise as compensation). This discussion does not address the tax consequences to any person who actually or constructively owns more than 5% of AMIN common stock. In addition, no information is provided herein with respect to the tax consequences of the spin-off under applicable state, local or non-U.S. laws or federal laws other than those pertaining to the federal income tax.
 
AMIN STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE SPIN-OFF TO THEM, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE AND LOCAL, FOREIGN AND OTHER TAX LAWS.
 
Certain U.S. Federal Income Tax Consequences: The Spin-Off Qualifies as a Transaction that Is Generally Tax Free under Sections 355 and/or 368(a)(1)(D) of the Code
 
The U.S. federal income tax consequences of the spin-off are as follows:
  • no gain or loss will be recognized by, and no amount will be includible in the income of AMIN as a result of the spin-off, other than gain or income arising in connection with certain internal restructurings undertaken in connection with the spin-off and with respect to any "excess loss account" or "intercompany transaction" required to be taken into account by AMIN under U.S. Treasury regulations relating to consolidated federal income tax returns;
  • an AMIN stockholder will not recognize income, gain, or loss as a result of the receipt of Brenham common stock pursuant to the spin-off;
  • an AMIN stockholder's aggregate tax basis in such stockholder's Brenham common stock received in the spin-off will equal such stockholder's aggregate tax basis in its AMIN common stock immediately before the spin-off, allocated between the AMIN common stock and the common stock of Brenham in proportion to their relative fair market values on the date of the spin-off;
  • an AMIN stockholder's holding period for Brenham common stock received in the spin-off will include the holding period for that stockholder's AMIN common stock.
If an AMIN stockholder holds different blocks of AMIN common stock (generally, shares of AMIN common stock acquired on different dates or at different prices), such holder should consult its tax advisor regarding the determination of the basis and holding period of shares of Brenham common stock received in the spin-off in respect of particular blocks of AMIN common stock.
 
U.S. Treasury regulations require AMIN stockholders who receive Brenham common stock in the spin-off to attach to their U.S. federal income tax returns for the year in which the Brenham stock is received a detailed statement setting forth such data as may be appropriate to demonstrate the applicability of Section 355 of the Code to the spin-off.
 
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THE FOREGOING IS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF UNDER CURRENT LAW. THE FOREGOING DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OF OTHER JURISDICTIONS OR THAT MAY APPLY TO PARTICULAR CATEGORIES OF STOCKHOLDERS. EACH AMIN STOCKHOLDER SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE SPIN-OFF TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.
 
Market for Common Stock of Brenham
 
        There is presently no public market for our common stock. We will seek to have our common stock quoted on the OTC Bulletin Board as soon as practicable after the effective date of this registration statement. As of the date of this prospectus, there are 99,977,093 issued and outstanding shares of our common stock, of which 10,297,019 are being registered in this registration statement.
 
        We intend to request a registered broker-dealer to apply to have our common stock listed on the OTC Bulletin Board upon the effectiveness of the registration statement of which this prospectus forms a part. However, we can provide no assurance that our shares will be traded on the OTC Bulletin Board or, if traded, that a trading market will materialize or be sustained.
 
        The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system.
 
Reasons for the Spin-Off Transaction
 
During the fall of 2009, AMIN's management, in reviewing the strategic agendas and prospects of its various businesses, concluded that a separation of Brenham into a separately traded public company would best facilitate the business objective and growth potentials of its businesses. After deliberations by AMIN’s Board of Directors, the Board on April 8, 2010, approved the spin-off transaction. Among the factors considered in arriving at this determination were:
  • Brenham generally faces different strategic and competitive challenges. As a result, AMIN management and the AMIN Board determined that, in Brenham's current configuration, when facing strategic and operating issues for a particular business objective, whether having to do with transactional alternatives, capital investment, new business initiatives, compensation or otherwise, had the potential to lead to different decisions than might be made by standalone companies. AMIN concluded, therefore, that the current structure may not be the most responsive to the immediate needs of Brenham’s business objectives and that the spin-off will enhance the success of Brenham’s business objectives by enabling AMIN and Brenham to resolve the problems that arise from the operation of different business objectives  within the AMIN holding structure.
  • The lack of a liquid equity currency linked directly to the Brenham business constrained Brenham’s ability to transact in its own industry and to provide equity-based incentive programs for employees that were entirely dependent on the performance of the specific business.
  • The creation of an independent equity structure for the Company that will facilitate our ability to fund our business plan of acquiring a portfolio of oil and gas  assets in the United States and international locations with an initial focus on Africa.
        Because AMIN concluded that the separation of Brenham would over time enhance Brenham’s operating performance, open up strategic alternatives that may otherwise not have been readily available to them, and facilitate investor understanding and better target investor demand, AMIN believes that following the spin-off, the common stock of Brenham’s publicly traded common stock will have a higher aggregate market value than would AMIN if it were to remain in its current configuration. No assurances, however, can be given that such higher aggregate market value will be achieved. The AMIN Board of Directors believes that such value increase would further facilitate growth of Brenham’s separate business by reducing the costs of equity compensation and acquisitions undertaken with equity consideration, in each case resulting in a real and substantial benefit for Brenham.

USE OF PROCEEDS

We will receive no proceeds from the spin-off as a special dividend to AMIN’s non-affiliated stockholders.

 
DETERMINATION OF OFFERING PRICE
 
No consideration was paid for the shares of common stock distributed in the spin-off.
 
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DIVIDEND POLICY

        At the present time, we intend to retain all of our future earnings, if any, generated by our operations for the development and growth of our business. The decision to pay dividends is at the discretion of our board of directors and depends on our financial condition, results of operations, capital requirements and other factors that our board of directors deems relevant.

CERTAIN INFORMATION WITH RESPECT TO BRENHAM

Corporate Information

        We were incorporated pursuant to the laws of the State of Texas as Brenham Oil & Gas Inc. in November 1997 and became a wholly-owned subsidiary of American International Industries, Inc. in November 1997. In connection with this spin-off transaction, Brenham Oil and Gas Corp, a Nevada corporation, was incorporated on April 21, 2010 and Brenham Oil & Gas Inc., a Texas corporation, became a wholly-owned subsidiary of Brenham, the Nevada corporation.

        On April 8, 2010, the board of directors of American approved the distribution of 10,297,019 shares of common stock, on a pro rata 1 for 1 basis, to the stockholders of AMIN. Following the distribution, AMIN retained approximately 54% of our common stock.
 
        Our principal executive offices are located at 601 Cien Street, Suite 235, Kemah, Texas 77565-3077, which are the executive offices of American, and are provided to us on a rent-free basis. The telephone number of our principal executive offices is (281) 334-9479. Our web site is www.brenhamoilandgas.com. The information on our web site does not constitute part of this prospectus.
 
Our Present Operations
 
        At present, our sole asset is a passive oil and gas mineral royalty interest covering a twenty-four acre tract of land located in Washington County, Texas. The royalty interest is leased by Anadarko Petroleum Corporation for a term continuing until the covered minerals are no longer produced in paying quantities from the leased premises. Royalties on the covered minerals produced are paid to Brenham Oil & Gas as follows: (i) for oil and gas and other liquid hydrocarbons, and (ii) for gas (including casing head gas) the royalty is one-sixth of the net proceeds realized by Anadarko Petroleum Corporation on the sale thereof, less a proportionate part of ad valorem taxes and production, severance, or other excise taxes.

Our Business Plan

Our business objective is to become an independent, oil and gas-focused exploration and production company with the intent to acquire oil and gas-related assets in the United States and international locations, with an initial focus on Africa. We believe that with our experienced management and technical team, equipped with industry data, newly available seismic technologies, industry contacts and adequate funding, we could acquire Potential Prospects that could be competitive with those of other oil and gas companies. After considering numerous global oil and gas-producing regions in which to focus our exploration and development efforts, we decided that an initial focus on Africa was appropriate due to the largely unrealized hydrocarbon potential offered within this region. We believe that we can be successful in acquiring such Potential Prospects inventory and that our potential asset portfolio could be commercially viable, provided that we can secure sufficient financing at acceptable terms and conditions.

Prior to joining Brenham, certain persons on our management team played a significant role in the assembly of oil and gas asset portfolios in Africa. On February 20, 2010, Scott Gaille agreed to join our management team in the position of President. Mr. Gaille has over 15 years of experience in the oil industry and has traveled to and participated in petroleum transactions in several African nations, assembling asset portfolios for other companies in Africa. Our management team also includes Rogers Hardy, who has experience in the oil and gas industry. See more detailed disclosure under “Directors and Executive Officers” below.

The Industry in Africa

Due to continued commercial discoveries of large hydrocarbon accumulations, Africa is a focus area for the global oil and gas industry. Nigeria, Angola, Equatorial Guinea and Ghana, have proven to be among the most prolific countries in the region. Companies with significant operations in the Africa region include Anadarko, BP, Chevron, Eni, Exxon Mobil, Noble Energy Inc., Petrobras, Shell, TOTAL and Tullow Oil and Gas, all of which have substantially greater financial and personnel resources than us with established operations in Africa.

Our Business Strategy

We plan to focus on locating and acquiring high-potential oil prospects domestically and internationally, with an initial focus on Africa. To date, we have not yet identified and acquired any Potential Prospects.
 
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Focus near-term U.S. Gulf of Mexico and West Africa

We are planning to focus our near-term activities in Africa. We may also plan to participate as non-operator in the drilling of exploratory, appraisal and development wells in other prospective areas, both in the United States and internationally.

Maintain financial flexibility

We intend to use the proceeds from any capital raising activity and/or future offering to fund the exploration, appraisal and initial development of Potential Prospects. As our asset base develops, we plan to utilize a broader range of financing alternatives and strategies to fund our business plan, which will require substantial amounts of additional capital.
 
Our Competitive Strengths

Seeking well-defined prospect potential

We believe a data-intensive approach to Potential Prospect analysis, coupled with the expertise of our management team, will allow us to capture a portion of the attractive Potential Prospects available in our target regions. Notwithstanding the foregoing, as of the date of this prospectus, we have not yet identified any Potential Prospects.

We believe that there exist Potential Prospects within our targeted regions that may offer substantial, commercially viable resource potential due to similarities in the geologic profile to that of comparative prospects that have been successful. However, any analogies drawn by us from other wells, prospects or producing fields may not prove to be accurate indicators of the success of developing reserves from our Potential Prospects. Reference is being made to the subsection of this prospectus titled, "Risk Factors - We have no proved reserves and areas that we decide to drill may not yield oil and gas in commercial quantities or quality, or at all." We believe that our intention to use a data-intensive approach will enable us to obtain a competitive advantage in imaging the Potential Prospect region. We have not yet identified any Potential Prospects.
 
Our Business Plan Provides for Participation in the Oil Sector in Africa

We will endeavor to obtain a position in the offshore oil areas of Africa, based on our management team’s assessments of global hydrocarbon trends and resource potential. Our assessments will be based upon by our interpretation of seismic data, which we have not yet obtained, but which we intent to obtain in the future, together with the international operating experience of our management and technical teams and an in-depth evaluation of regional political risk and economic conditions.  To date, we have no contractual rights in any area in Africa or elsewhere, and we are dependent upon our ability to acquire such rights. If we are not issued licenses by the applicable licensing authorities within each country, in all likelihood we will not be able to commence exploration, development and production operations. While we have not yet identified any Potential Prospects, our management team is seeking to identify such opportunities. Analogies drawn by us from other wells, prospects or producing fields may not prove to be accurate indicators of the success of developing reserves from our Potential Prospects.

Long-term strategic relationships with industry leading oil and gas companies

We intend to develop and enter into long-term strategic relationships with other oil and gas companies. We believe that in the long-term, such alliances create a platform for organic exploration and development activities that will combine our exploration expertise with the recognized overall expertise of more established oil and gas companies.

Approach to data

Our Potential Prospect identification process is based upon a top-down and bottom-up approach.  The “top down” process seeks to utilize our management team’s prior experience of comparing petroleum licenses in a region for purposes of generating a “short-list” of blocks. The “bottom up” process seeks to obtain narrowly focused, prospect-specific data on a block-by-block basis. We intend to acquire and review the seismic data to complement management’s experience. We believe our approach has the potential to translate into a successful acquisition of high-quality prospects and expect that this approach will translate into drilling locations.

Proven track record of management

We are led by a management team that has significant experience in oil and gas, assembling portfolios of oil and gas assets. In addition, our management team has an established base of relationships with governments, national and international oil and gas companies, service companies and independent oil and gas companies, all of which we believe enhance our competitiveness.
 
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Competition

The oil and gas industry is highly competitive. We will encounter strong competition from other independent operators and from major oil and gas companies in acquiring properties and securing trained personnel. Many, if virtually all, of these competitors have financial and technical resources and personnel substantially larger than ours. As a result, our competitors should be able to pay more for desirable oil and gas properties, or to evaluate, bid for and purchase a greater number of properties than our financial or personnel resources will permit. Furthermore, these companies may also be better able to withstand the financial pressures of unsuccessful drill attempts, sustained periods of volatility in financial markets and generally adverse global and industry-wide economic conditions, and may be better able to absorb the burdens resulting from changes in relevant laws and regulations, which would adversely affect our competitive position.
 
        We are also affected by competition for drilling rigs and the availability of related equipment. To the extent that in the future we acquire and develop undeveloped properties, higher commodity prices generally increase the demand for drilling rigs, supplies, services, equipment and crews, and can lead to shortages of, and increasing costs for, drilling equipment, services and personnel. Over the past three years, oil and gas companies have experienced higher drilling and operating costs. Shortages of, or increasing costs for, experienced drilling crews and equipment and services could restrict our ability to drill wells and conduct our operations.

Competition is also strong for attractive oil and gas producing properties, undeveloped leases and drilling rights, and we cannot assure you that we will be able to compete satisfactorily when attempting to make further acquisitions.

Environmental Matters and Regulation

General

Our future operations may become subject to various stringent and complex international, foreign, federal, state and local environmental, health and safety laws and regulations governing matters including the emission and discharge of pollutants into the ground, air or water; the generation, storage, handling, use and transportation of regulated materials; and the health and safety of our employees. These laws and regulations may, among other things:

  • require the acquisition of various permits before drilling commences;
  • enjoin some or all of the operations of facilities deemed not in compliance with permits;
  • restrict the types, quantities and concentration of various substances that can be released into the environment in connection with oil and gas and natural gas drilling, production and transportation activities;
  • limit or prohibit drilling activities in certain locations lying within protected or otherwise sensitive areas; and
  • require remedial measures to mitigate pollution from our operations.
These laws and regulations may also restrict the rate of oil and gas and natural gas production below the rate that would otherwise be possible. Compliance with these laws can be costly; the regulatory burden on the oil and gas industry increases the cost of doing business in the industry and consequently affects profitability.

Moreover, public interest in the protection of the environment has increased in recent years. Offshore drilling in some areas has been opposed by environmental groups and, in other areas, has been restricted. Our operations could be adversely affected to the extent laws are enacted or other governmental action is taken that prohibits or restricts offshore drilling or imposes environmental requirements that result in increased costs to the oil and gas  industry in general, such as more stringent or costly waste handling, disposal or cleanup requirements.

The following is a summary of some of the existing laws or regulatory issues to which we and our business operations are or may be subject to in the future.

Oil and Gas Pollution Act of 1990

The U.S. Oil and Gas Pollution Act of 1990 ("OPA") and regulations thereunder impose liability on responsible parties for damages resulting from oil and gas spills into or upon navigable waters or in the exclusive economic zone of the U.S. Liability under the OPA is strict, joint and several and potentially unlimited. A "responsible party" under the OPA includes the lessee or permittee of the area in which an offshore facility is located. The OPA also requires the lessee or permittee of the offshore area in which a covered offshore facility is located to establish and maintain evidence of financial responsibility to cover potential liabilities related to an oil and gas spill for which such person would be statutorily responsible in an amount that depends on the risk represented by the quantity or quality of oil and gas handled by such facility. The MMS of the U.S. Department of the Interior ("DOI") has promulgated regulations that implement the financial responsibility requirements of the OPA. A failure to comply with the OPA's requirements or inadequate cooperation during a spill response action may subject a responsible party to civil, administrative and/or criminal enforcement actions.
 
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Clean Water Act

The U.S. Federal Water Pollution Control Act of 1972, as amended ("CWA"), imposes restrictions and controls on the discharge of pollutants, produced waters and other oil and gas and natural gas wastes into waters of the U.S. These controls have become more stringent over the years, and it is possible that additional restrictions will be imposed in the future. Under the CWA, permits must be obtained to discharge pollutants into regulated waters. In addition, certain state regulations and the general permits issued under the federal National Pollutant Discharge Elimination System program prohibit discharge of produced waters and sand, drilling fluids, drill cuttings and certain other substances related to the oil and gas industry into certain coastal and offshore waters. The CWA provides for civil, criminal and administrative penalties for unauthorized discharges of oil and gas and other hazardous substances and imposes liability on parties responsible for those discharges for the costs of cleaning up related damage and for natural resource damages resulting from the release. Comparable state statutes impose liabilities and authorize penalties in the case of an unauthorized discharge of petroleum or its derivatives, or other hazardous substances, into state waters.
 
Marine Protected Areas

Executive Order 13158, issued in 2000, directs federal agencies to safeguard existing Marine Protected Areas ("MPAs") in the U.S. and establish new MPAs. The order requires federal agencies to avoid harm to MPAs to the extent permitted by law and to the maximum extent practicable. It also directs the U.S. Environmental Protection Agency ("EPA") to propose regulations under the CWA to ensure appropriate levels of protection for the marine environment. This order and related CWA regulations have the potential to adversely affect our operations by restricting areas in which we may carry out future development and exploration projects and/or causing us to incur increased operating expenses.

Consideration of Environmental Issues in Connection with Governmental Approvals

Our operations will frequently require licenses, permits and other governmental approvals. Several federal statutes, including the Outer Continental Shelf Lands Act ("OCSLA"), the National Environmental Policy Act ("NEPA"), and the Coastal Zone Management Act ("CZMA") require federal agencies to evaluate environmental issues in connection with granting such approvals or taking other major agency actions. OCSLA, for instance, requires the DOI to evaluate whether certain proposed activities would cause serious harm or damage to the marine, coastal or human environment, and gives the DOI authority to refuse to issue, suspend or revoke permits and licenses allowing such activities in certain circumstances, including when there is a threat of serious harm or damage to the marine, coastal or human environment. Similarly, NEPA requires DOI and other federal agencies to evaluate major agency actions having the potential to significantly impact the environment. In the course of such evaluations, an agency must prepare an environmental assessment and, potentially, an environmental impact statement. CZMA, on the other hand, aids states in developing a coastal management program to protect the coastal environment from growing demands associated with various uses, including offshore oil and gas and natural gas development. In obtaining various approvals from the DOI, we will have to certify that we will conduct our activities in a manner consistent with any applicable CZMA program. Violation of these requirements may result in civil, administrative or criminal penalties.

Naturally Occurring Radioactive Materials

Wastes containing naturally occurring radioactive materials ("NORM"), may also be generated in connection with our operations. Certain oil and gas and natural gas exploration and production activities may enhance the radioactivity of NORM. In the U.S., NORM is subject primarily to regulation under individual state radiation control regulations. In addition, NORM handling and management activities are governed by regulations promulgated by the Occupational Safety and Health Administration. These regulations impose certain requirements concerning worker protection; the treatment, storage and disposal of NORM waste; the management of waste piles, containers and tanks containing NORM; and restrictions on the uses of land with NORM contamination.

Resource Conservation and Recovery Act

The U.S. Resource Conservation and Recovery Act, ("RCRA"), and comparable state statutes regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the EPA, individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own more stringent requirements. Drilling fluids, produced waters, and most of the other wastes associated with the exploration, development and production of crude oil and gas or natural gas are currently exempt from RCRA's requirements pertaining to hazardous waste and are regulated under RCRA's non-hazardous waste and other regulatory provisions. A similar exemption is contained in many of the state counterparts to RCRA. At various times in the past, proposals have been made to amend RCRA to rescind the exemption that excludes oil and gas and natural gas exploration and production wastes from regulation as hazardous waste. Accordingly, it is possible that certain oil and gas and natural gas exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change could result in an increase in our costs to manage and dispose of wastes, which could have a material adverse effect on our results of operations and financial position. Also, in the course of our operations, we expect to generate some amounts of ordinary industrial wastes, such as waste solvents and waste oil and gas that may be regulated as hazardous wastes.

 
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Air Pollution Control

The U.S. Clean Air Act ("CAA") and state air pollution laws adopted to fulfill its mandates provide a framework for national, state and local efforts to protect air quality. Our operations will utilize equipment that emits air pollutants subject to federal and state air pollution control laws. These laws require utilization of air emissions abatement equipment to achieve prescribed emissions limitations and ambient air quality standards, as well as operating permits for existing equipment and construction permits for new and modified equipment. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the CAA and associated state laws and regulations, including the suspension or termination of permits and monetary fines.

Superfund

The U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), also known as "Superfund," imposes joint and several liability for response costs at certain contaminated properties and damages to natural resources, without regard to fault or the legality of the original act, on some classes of persons who are considered to be responsible for the release of a hazardous substance into the environment. These persons include the current or past owner or operator of the site where the release occurred and anyone who disposed or arranged for the disposal of a hazardous substance at the site. CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur.

Protected Species and Habitats

The federal Endangered Species Act, the federal Marine Mammal Protection Act, and similar federal and state wildlife protection laws prohibit or restrict activities that could adversely impact protected plant and animal species or habitats. Oil and gas and natural gas exploration and production activities could be prohibited or delayed in areas where such protected species or habitats may be located, or expensive mitigation may be required to accommodate such activities.

Climate Change

Climate change regulation has gained momentum in recent years internationally and domestically at the federal, regional, state and local levels. Various U.S. regions and states have already adopted binding climate change legislation. In addition, federal climate change regulation appears imminent. For example, in June 2009, the U.S. House of Representatives approved the American Clean Energy and Security Act of 2009 which, if adopted into law, would require significant reductions in emissions of greenhouse gases via a federal cap-and-trade system to which a variety of emitters, including certain electricity generators and certain producers and importers of specified fuels, would be subject. The U.S. Senate is currently working on companion bills, which could soon result in federal binding legislation. The EPA, in a parallel track, is also proposing greenhouse gas regulation. In April 2009, the EPA proposed its so-called "endangerment finding", i.e., a determination under the CAA that greenhouse gases contribute to air pollution which may endanger public health or welfare. In September 2009, the EPA proposed two rules—one which would regulate greenhouse gas emissions from vehicles and a second which provides that once the endangerment finding and the vehicle rule are finalized, greenhouse gas emissions from various facilities and other stationary sources would be regulated under the CAA. These EPA rules are expected to be finalized on or before March 2010, at which time Congress and President Obama may pass their own federal greenhouse gas legislation.

On the international level, various nations, including Angola and Gabon, have committed to reducing their greenhouse gas emissions pursuant to the Kyoto Protocol. The international community is meeting in December 2009 to negotiate a successor agreement to that protocol which by its terms expires in 2012. Passage of a successor international agreement, US federal climate change regulation or laws or climate change regulation in other regions in which we conduct business could have an adverse effect on our results of operations, financial condition and demand for oil and gas and natural gas.

Health and Safety

Our operations may become subject to the requirements of the federal Occupational Safety and Health Act ("OSH Act") and comparable state statutes. These laws and their implementing regulations strictly govern the protection of the health and safety of employees. The OSH Act hazard communication standard, EPA community right-to-know regulations under Title III of the Superfund Amendments and Reauthorization Act of 1986 and similar state statutes require that we organize and/or disclose information about hazardous materials used or produced in our operations. Such laws and regulations also require us to ensure our workplaces meet minimum safety standards and provide for compensation to employees injured as a result of our failure to meet these standards as well as civil and/or criminal penalties in certain circumstances.

 
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Accidental spills or releases may occur in the course of our future operations, and we cannot assure you that we will not incur substantial costs and liabilities as a result, including costs relating to claims for damage to property and persons. Moreover, environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. Accordingly, we cannot assure you that we have been or will be at all times in compliance with such laws, or that environmental laws and regulations will not change or become more stringent in the future in a manner that could have a material adverse effect on our financial condition, results of operations or ability to make distributions to you.

Other Regulation Related to the Oil and Gas Industry

The oil and gas industry is regulated by numerous federal, state and local authorities. Legislation affecting the oil and gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue rules and regulations binding on the oil and gas industry and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on the oil and gas industry may increase our cost of doing business by increasing the future cost of transporting our production to market, these burdens generally do not affect us any differently or to any greater or lesser extent than they affect other companies in the industry with similar types, quantities and locations of production.

Homeland Security Regulations

The Department of Homeland Security Appropriations Act of 2007 requires the Department of Homeland Security ("DHS") to issue regulations establishing risk-based performance standards for the security of chemical and industrial facilities, including oil and gas and natural gas facilities that are deemed to present "high levels of security risk." The DHS is currently in the process of adopting regulations that will determine whether our operations may in the future be subject to DHS-mandated security requirements. Presently, it is not possible to accurately estimate the costs we could incur, directly or indirectly, to comply with any such facility security laws or regulations, but such expenditures could be substantial.

Development and Production

Development and production operations are subject to various types of regulation at federal, state and local levels. These types of regulation include requiring permits for the drilling of wells, the posting of bonds in connection with various types of activities and filing reports concerning operations. U.S. laws under which we operate may also regulate one or more of the following:

  • the location of wells;
  • the method of drilling and casing wells;
  • the surface use and restoration of properties upon which wells are drilled;
  • the plugging and abandoning of wells; and
  • notice to surface owners and other third parties.
U.S. Coast Guard and the U.S. Customs Service

The transportation of drilling rigs to the sites of our prospects in the U.S. Gulf of Mexico and our operation of such drilling rigs is subject to the rules and regulations of the U.S. Coast Guard and the U.S. Customs Service. Such regulation sets safety standards, authorizes investigations into vessel operations and accidents and governs the passage of vessels into U.S. territory. We are required by these agencies to obtain various permits, licenses and certificates with respect to our operations.

International Laws and Regulations

Our exploration and production activities that may occur in other nations, including those in Africa, are subject to the laws and regulations of such nations. These regulations may govern licensing for drilling operations, mandatory involvement of local partners in our operations, taxation of our revenues, safety and environmental matters and our ability to operate in such jurisdictions as a foreign participant.

Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws and regulations could change in ways that could substantially increase our costs.

Employees

As of September 1, 2010, we had 3 employees. All employees are currently located in the U.S. None of these employees are represented by labor unions or covered by any collective bargaining agreement. We believe that relations with our employees are satisfactory.
 
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Offices
 
       We currently utilize approximately 1,500 square feet of office space at the offices of American located at 601 Cien Street, Suite 235, Kemah, TX 77565-3077, which are provided to us by American on a rent-free basis.

Legal Proceedings

       We are not party to any legal proceedings. However, from time to time in the future we may be subject to various lawsuits, claims and proceedings that arise in the normal course of business, including employment, commercial, environmental, safety and health matters. It is not presently possible to determine whether any such matters will have a material adverse effect on our consolidated financial position, results of operations, or liquidity.

 
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FINANCIAL STATEMENTS
 
The audited consolidated financial statements for the years ended December 31, 2009 and 2008 and the unaudited consolidated financial statements for the six months ended June 30, 2010 and 2009 and are included with this prospectus as follows.

   
   Page
   
Report of Independent Registered Public Accounting Firm
  30
Consolidated Balance Sheets as of December 31, 2009 and 2008
  31
Consolidated Statements of Operations for the Years Ended December 31, 2009 and 2008 and for the Period from November 1997 (inception) to December 31, 2009
  32
Consolidated Statements of Changes in Stockholders’ Equity for the Period from November 1997 (inception) to December 31, 2009
  33
Consolidated Statements of Cash Flow for the Years Ended December 31, 2009 and 2008 and for the Period from November 1997 (inception) to December 31, 2009
  34
Notes to Consolidated Financial Statements
  35
Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009 (Unaudited)
  38
Consolidated Statements of Operations for the Six Months Ended June 30, 2010 and 2009 and for the Period from November 1997 (inception) to June 30, 2010 (Unaudited)
  39
Consolidated Statements of Cash Flow for the Six Months Ended June 30, 2010 and 2009 and for the Period from November 1997 (inception) to June 30, 2010 (Unaudited)
  40
Notes to Consolidated Financial Statements (Unaudited)
  41


 
29

 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
Brenham Oil & Gas Corp.
(An Exploration Stage Company)
Kemah, Texas

We have audited the accompanying consolidated balance sheets of Brenham Oil & Gas Corp. (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholder’s equity and cash flows for the years then ended and for the period from November 7, 1997 (inception) to December 31, 2009.  These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Brenham Oil & Gas Corp., as of December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for the years then ended and for the period from November 7, 1997 (inception) to December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.



/s/ GBH CPAs, PC

GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
September 21, 2010

 
30

 

BRENHAM OIL & GAS CORP.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS

   
December 31,
 
   
2009
   
2008
 
ASSETS
           
             
Cash and cash equivalents
  $ 6,908     $ 6,332  
Receivable – related party
    79,439       79,709  
Total assets
  $ 86,347     $ 86,041  
                 
LIABILITIES AND STOCKHOLDER'S EQUITY
               
                 
Current liabilities
               
Accounts payable
  $ -     $ 1,381  
Total liabilities
    -       1,381  
                 
Commitments and contingencies      -        -  
                 
Stockholder's equity:
               
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding
  $ -     $ -  
Common stock, $0.0001 par value, 200,000,000 shares authorized,
               
64,977,093 shares issued and outstanding
    6,498       6,498  
Additional paid-in capital
    (5,498 )     (5,498 )
Accumulated earnings, during the exploration stage
    85,347       83,660  
Total stockholder's equity
    86,347       84,660  
Total liabilities and stockholder's equity
  $ 86,347     $ 86,041  


See accompanying notes to the consolidated financial statements.

 
31

 

BRENHAM OIL & GAS CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND FOR
THE PERIOD FROM NOVEMBER 7, 1997 (INCEPTION) TO DECEMBER 31, 2009

    For the Years Ended December 31,    
Inception to
December 31,
 
   
2009
   
2008
   
 2009
 
                   
Revenue
  $ 1,920     $ 4,396     $ 108,043  
                         
Costs and expenses:
                       
    General and administrative
    233       22,451       40,669  
        
                       
Operating income (loss)
    1,687       (18,055 )     67,374  
                         
Other income (expense)
                       
        Interest income
    -       19,134       19,123  
        Interest expense
     -        -       (1,150 )
Total other income
    -       19,134       17,973  
                         
Net income
  $ 1,687     $ 1,079     85,347  
                         
Net income per share - basic and diluted
  $ 0.00     $ 0.00          
                         
Weighted average number of common shares outstanding - basic and diluted
    64,977,093       64,977,093          









See accompanying notes to the consolidated financial statements.

 
32

 

BRENHAM OIL & GAS CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY
FOR THE PERIOD FROM NOVEMBER 7, 1997 (INCEPTION) TO DECEMBER 31, 2009


                           
Additional
             
   
Preferred Stock
   
Common Stock
   
Paid-in
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Earnings
   
Total
 
                                           
Balance at November 7, 1997 (inception)
     -     $  -        -     $ -     $ -     $ -     $ -  
Net income      -       -       -       -       -       -       -  
Balance at December 31, 1997
     -        -        -        -        -        -        -  
Issuance of common shares for cash
    -       -       64,977,093       6,498       (5,498 )     -       1,000  
Net income
    -       -       -       -       -       62,763       62,763  
Balance at December 31, 1998
    -       -       64,977,093       6,498       (5,498 )     62,763       63,763  
Net income
    -       -       -       -       -       4,492       4,492  
Balance at December 31, 1999
    -       -       64,977,093       6,498       (5,498 )     67,255       68,255  
Net income
    -       -       -       -       -       7,495       7,495  
Balance at December 31, 2000
    -       -       64,977,093       6,498       (5,498 )     74,750       75,750  
Net loss
    -       -       -       -       -       (10,007 )     (10,007 )
Balance at December 31, 2001
    -       -       64,977,093       6,498       (5,498 )     64,743       65,743  
Net income
    -       -       -       -       -       -       -  
Balance at December 31, 2002
    -       -       64,977,093       6,498       (5,498 )     64,743       65,743  
Net income
    -       -       -       -       -       -       -  
Balance at December 31, 2003
    -       -       64,977,093       6,498       (5,498 )     64,743       65,743  
Net income
    -       -       -       -       -       9,087       9,087  
Balance at December 31, 2004
    -       -       64,977,093       6,498       (5,498 )     73,830       74,830  
Net income
    -       -       -       -       -       4,727       4,727  
Balance at December 31, 2005
    -       -       64,977,093       6,498       (5,498 )     78,557       79,557  
Net income
    -       -       -       -       -       5,023       5,023  
Balance at December 31, 2006
    -       -       64,977,093       6,498       (5,498 )     83,580       84,580  
Net loss
    -       -       -       -       -       (999 )     (999 )
Balance at December 31, 2007
    -       -       64,977,093       6,498       (5,498 )     82,581       83,581  
Net income
    -       -       -       -       -       1,079       1,079  
Balance at December 31, 2008
    -       -       64,977,093       6,498       (5,498 )     83,660       84,660  
Net income
    -       -       -       -       -       1,687       1,687  
Balance at December 31, 2009
    -     $ -       64,977,093     $ 6,498     $ (5,498 )   $ 85,347     $ 86,347  


See accompanying notes to the consolidated financial statements.

 
33

 

BRENHAM OIL & GAS CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND FOR
THE PERIOD FROM NOVEMBER 7, 1997 (INCEPTION) TO DECEMBER 31, 2009


   
For the Years Ended December 31,
   
Inception to
December 31,
 
   
2009
   
2008
   
2009
 
                   
Cash flows from operating activities:
                 
    Net income
  $ 1,687     $ 1,079     $ 85,347  
    Adjustments to reconcile net income to cash provided by operating activities:
                       
        Changes in current assets and liabilities:
                       
            Accounts payable
    (1,381 )     1,381       -  
Net cash provided by operating activities
    306       2,460       85,347  
                         
Cash flows from investing activities
                       
    Loans to related parties
    270       (2,429     (79,439 )
Net cash used in investing activities
    270       (2,429 )     (79,439 )
                         
Cash flows from financing activities
                       
    Proceeds from sale of common stock
    -       -       1,000  
Net cash provided by financing activities
    -       -       1,000  
                         
Net change in cash
    576       31       6,908  
Cash and cash equivalents, beginning of period
    6,332       6,301       -  
Cash and cash equivalents, end of period
  $ 6,908     $ 6,332     $ 6,908  
                         
Supplemental disclosures:
                       
    Interest paid
  $ -     $ -     $ 1,150  
    Income taxes paid
  $ -     $ -     $ -  
                         

 
See accompanying notes to the consolidated financial statements.

 
34

 
BRENHAM OIL & GAS, CORP.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Organization and Nature of Business

The accompanying consolidated financial statements of Brenham Oil & Gas, Corp. ("Brenham") have been prepared in accordance with accounting principles generally accepted in the United States of America.
 
Brenham Oil & Gas, Inc. was incorporated under the laws of the State of Texas in November 1997 and became a wholly-owned subsidiary of American International Industries, Inc. ("American") in November 1997. On April 21, 2010, the Company was re-domiciled in Nevada as Brenham Oil & Gas Corp. was incorporated in Nevada and Brenham Oil & Gas, Inc., a Texas corporation, became a wholly-owned subsidiary of Brenham. American was issued 64,977,093 shares of common stock of Brenham in connection with the reorganization in exchange for all shares outstanding of Brenham Oil & Gas, Inc. The reorganization has been retroactively applied to the financial statements for all periods presented.
 
Our sole asset is an oil and gas mineral royalty interest covering a twenty-four acre tract of land located in Washington County, Texas, which is carried on the balance sheet at $0.  The royalty interest is currently leased by Anadarko Petroleum Corporation for a term continuing until the covered minerals are no longer produced in paying quantities from the leased premises.
 
Royalties on the covered minerals produced are paid to Brenham as follows: (i) for oil and other liquid hydrocarbons, (ii) for gas (including casing-head gas) the royalty is one-sixth of the net proceeds realized by Anadarko Petroleum Corporation on the sale thereof, less a proportionate part of ad valorem taxes and production, severance, or other excise taxes.  In addition, Brenham is entitled to shut-in royalties of $1 per acre of land for every ninety day period within which one or more of the wells in leased premises, or lands pooled therewith, are capable of producing paying quantities, but such wells are either shut-in production is not being sold. From November 7, 1997 (inception) through December 31, 2009, Brenham has received $108,043 in royalty income, which is in revenue in the consolidated statement of operations.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents
 
Brenham considers all short-term securities purchased with a maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable consist primarily of advances to related parties and are carried at the expected net realizable value.

Income Taxes

Brenham is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized. Interest and penalties associated with income taxes are included in selling, general and administrative expense.
 
 
35

 
Brenham has adopted FIN 48 (ASC 740-10) “Accounting for Uncertainty in Income Taxes” which prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain position may be recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of December 31, 2009, Brenham had not recorded any tax benefits from uncertain tax positions.
 
Earnings Per Share

Earnings per share was computed by dividing the net income by the weighted average number of shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Basic and diluted income per share were the same, as there were no common stock equivalents outstanding.
 
Subsequent Events

Brenham evaluated events occurring between the end of our fiscal year ended December 31, 2009, and the date when the consolidated financial statements were issued.

Recent Accounting Pronouncements

FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” New authoritative accounting guidance under ASC Topic 820,”Fair Value Measurements and Disclosures,” affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction, and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. ASC Topic 820 requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence. The new accounting guidance amended prior guidance to expand certain disclosure requirements. Brenham adopted the new authoritative accounting guidance under ASC Topic 820 during the first quarter of 2009. Adoption of the new guidance did not impact Brenham’s financial statements.

Further new authoritative accounting guidance (Accounting Standards Update No. 2009-5) under ASC Topic 820 provides guidance for measuring the fair value of a liability in circumstances in which a quoted price in an active market for the identical liability is not available.  In such instances, a reporting entity is required to measure fair value utilizing a valuation technique that uses (i) the quoted price of the identical liability when traded as an asset, (ii) quoted prices for similar liabilities or similar liabilities when traded as assets, or (iii) another valuation technique that is consistent with the existing principles of ASC Topic 820, such as an income approach or market approach. The new authoritative accounting guidance also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The forgoing new authoritative accounting guidance under ASC Topic 820 will be effective for Brenham’s financial statements beginning October 1, 2009 and is not expected to have a significant impact on Brenham’s financial statements.

FASB ASC Topic 825 “Financial Instruments.” New authoritative accounting guidance under ASC Topic 825,”Financial Instruments,” requires an entity to provide disclosures about the fair value of financial instruments in interim financial information and amends prior guidance to require those disclosures in summarized financial information at interim reporting periods.

FASB ASC Topic 855, “Subsequent Events.” New authoritative accounting guidance under ASC Topic 855, “Subsequent Events,” establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. ASC Topic 855 defines (i) the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. The new authoritative accounting guidance under ASC Topic 855 became effective for Brenham’s financial statements for periods ending after June 15, 2009 and did not have a significant impact on Brenham’s financial statements.
 
36

 
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“SFAS 168” or ASC 105-10). SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009, and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact American’s results of operations or financial condition. The Codification did not change GAAP; however, it did change the way GAAP is organized and presented. As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. American implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.

In addition to the pronouncements noted above, there were various other accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our financial position, operations or cash flows.
 
Note 2.  Receivables - Related Party

Related party receivables represent amounts owed by Brenham’s parent, American. The receivables are non-interest bearing and are due on demand.
 
Note 3.  Equity

In December 1997, Brenham sold 64,977,093 common shares to a related party for $1,000.

Note 4.  Subsequent Event
 
In April 2010, the stockholder of Brenham, American, entered into a Separation and Distribution Agreement  to spin off Brenham from its parent, American. In conjunction with this transaction, American formed Brenham Oil & Gas, Corp. with authorized common stock of 200,000,000 shares and authorized preferred stock of 10,000,000 shares.  Brenham issued 64,977,093 shares of common stock to American for all shares of Brenham Oil & Gas, Inc., of which American issued as a dividend 10,297,019 shares to the existing stockholders of American. From April 2010 through July 2010, Brenham issued 12,500,000 shares of common stock for cash consideration of $21,500, 500,000 shares for a receivable of $600, and 22,000,000 shares for services valued at $45,467. American maintains control of Brenham through ownership of 54,680,074 shares of Brenham's common stock, representing about 55% of the outstanding shares as of September 21, 2010.
 
 
 
 
 
 
 
 
37

 

BRENHAM OIL & GAS CORP.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)


   
June 30, 2010
   
December 31, 2009
 
             
ASSETS
           
             
Cash and cash equivalents
  $ 6,634     $ 6,908  
Receivable – related party
    65,939       79,439  
Total assets
  $ 72,573     $ 86,347  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current liabilities
               
Accounts payable
  $ 29,215     $ -  
Accounts payable – related party
    17,500       -  
Total liabilities
    46,715       -  
                 
Commitments and contingencies      -        -  
                 
Stockholders' equity:
               
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding
  $ -     $ -  
Common stock, $0.0001 par value, 200,000,000 shares authorized,
               
98,977,093 and 64,977,093 shares issued and outstanding
    9,898       6,498  
Additional paid-in capital
    57,035       (5,498 )
Accumulated earnings (losses) during exploration stage
    (41,075     85,347  
Total stockholders’ equity
    25,858       86,347  
Total liabilities and stockholders' equity
  $ 72,573     $ 86,347  







See accompanying notes to the consolidated financial statements.

 
38

 

BRENHAM OIL & GAS CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
AND FOR THE PERIOD FROM NOVEMBER 7, 2007 (INCEPTION) TO JUNE 30, 2010
(Unaudited)


   
Six months ended June 30,
    Inception to  
   
2010
   
2009
    June 30, 2010  
                   
Revenue
  $ 956     $ 1,018     $ 108,999  
                         
Costs and expenses:
                       
    General and administrative
    127,378       173       168,047  
        
                       
Operating income (loss)
    (126,422 )     845       (59,048 )
                         
Other income (expense)                         
         Interest income     -       -       19,123  
         Interest expense     -       -       (1,150
           Total other income     -       -       17,973  
                         
Net income (loss)
  $ (126,422 )   $ 845     $ (41,075
                         
Net income (loss) per share - basic and diluted
  $ (0.00   $ 0.00          
                         
Weighted average number of common shares outstanding - basic and diluted
    77,982,618       64,977,093          









See accompanying notes to the consolidated financial statements.

 
39

 

BRENHAM OIL & GAS CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
AND FOR THE PERIOD FROM NOVEMBER 7, 2007 (INCEPTION) TO JUNE 30, 2010
(Unaudited)

   
Six months ended June 30,
    Inception to  
   
2010
   
2009
    June 30, 2010  
                   
Cash flows from operating activities:
                 
    Net income (loss)
  $ (126,422 )   $ 845     $ (41,075
    Adjustments to reconcile net loss to cash provided by (used in) operating activities:
                       
        Stock-based compensation     44,433        -       44,433  
        Changes in assets and liabilities:
                       
Accounts payable
    29,215       (1,381 )     29,215  
Net cash provided by (used in) operating activities
    (52,774 )     (536     32,573  
                         
Cash flows from investing activities:
                       
    Repayments from (loans to) related parties
    31,000       270       (48,439 )
Net cash provided by (used in) investing activities
    31,000       270       (48,439 )
                         
Cash flows from financing activities
                       
    Proceeds from sale of common stock
    21,500       -       22,500  
Net cash provided by financing activities
    21,500       -       22,500  
                         
Net change in cash
    (274 )     (266 )     6,634  
Cash and cash equivalents, beginning of period
    6,908       6,332       -  
Cash and cash equivalents, end of period
  $ 6,634     $ 6,066     $ 6,634  
                         
Supplemental disclosures:
                       
    Interest paid
  $ -     $ -     $ 1,150  
    Income taxes paid
  $ -     $ -     $  -  
                         

 
See accompanying notes to the consolidated financial statements.

 
40

 
BRENHAM OIL & GAS, CORP.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Organization and Nature of Business

The accompanying consolidated financial statements of Brenham Oil & Gas, Corp. ("Brenham") have been prepared in accordance with accounting principles generally accepted in the United States of America.
 
Brenham Oil & Gas, Inc. was incorporated under the laws of the State of Texas in November 1997 and became a wholly-owned subsidiary of American International Industries, Inc. ("American") in November 1997. On April 21, 2010, the Company was re-domiciled in Nevada as Brenham Oil & Gas Corp. was incorporated in Nevada and Brenham Oil & Gas, Inc., a Texas corporation, became a wholly-owned subsidiary of Brenham. American was issued 64,977,093 shares of common stock of Brenham in connection with the reorganization in exchange for all shares outstanding of Brenham Oil & Gas, Inc. The reorganization has been retroactively applied to the financial statements for all periods presented.
 
Our sole asset is an oil and gas mineral royalty interest covering a twenty-four acre tract of land located in Washington County, Texas, which is carried on the balance sheet at $0.  The royalty interest is currently leased by Anadarko Petroleum Corporation for a term continuing until the covered minerals are no longer produced in paying quantities from the leased premises.
 
Royalties on the covered minerals produced are paid to Brenham as follows: (i) for oil and other liquid hydrocarbons, (ii) for gas (including casing-head gas) the royalty is one-sixth of the net proceeds realized by Anadarko Petroleum Corporation on the sale thereof, less a proportionate part of ad valorem taxes and production, severance, or other excise taxes.  In addition, Brenham is entitled to shut-in royalties of $1 per acre of land for every ninety day period within which one or more of the wells in leased premises, or lands pooled therewith, are capable of producing paying quantities, but such wells are either shut-in production is not being sold. From November 7, 1997 (inception) through December 31, 2009, Brenham has received $108,999 in royalty income, which is in revenue in the consolidated statement of operations.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
Cash and Cash Equivalents
 
Brenham considers all short-term securities purchased with a maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable consist primarily of advances to related parties and are carried at the expected net realizable value. The receivables are non-interest bearing and are due on demand.

Income Taxes

Brenham is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized. Interest and penalties associated with income taxes are included in selling, general and administrative expense.
 
Earnings Per Share

Earnings per share was computed by dividing the net income by the weighted average number of shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Basic and diluted income per share were the same, as there were no common stock equivalents outstanding.

 
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Note 2.  Equity

In April 2010, the stockholder of Brenham, American, entered into a Separation and Distribution Agreement  to spin off Brenham from its parent, American. In conjunction with this transaction, American formed Brenham Oil & Gas, Corp. with authorized common stock of 200,000,000 shares and authorized preferred stock of 10,000,000 shares.  Brenham issued 64,977,093 shares of common stock to American for all shares of Brenham Oil & Gas, Inc., of which American issued as a dividend 10,297,019 shares to the existing stockholders of American. Brenham issued 12,500,000 shares of common stock for cash consideration of $21,500 and 21,500,000 shares for services valued at $44,433. American maintains control of Brenham through ownership of 54,680,074 shares of Brenham's common stock, representing about 55% of the outstanding shares as of September 21, 2010.
 
Note 3.  Subsequent Event

In July 2010, Brenham issued 500,000 shares for a receivable of $600 and 500,000 shares for services valued at $1,034.
 
42

 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in "Risk Factors," "Cautionary Note Regarding Forward-Looking Statements," "Certain Information With Respect to Brenham" and the other matters set forth in this prospectus. The following discussion of our financial condition and plan of operations should be read in conjunction with our financial statements and the notes thereto included elsewhere in this prospectus, as well the information presented under "Selected Historical and Pro Forma Financial Information." Due to the fact that we have not generated any revenues, we believe that the financial information contained in this prospectus is not indicative of, or comparable to, the financial profile that we expect to have once we begin to generate revenues. Except to the extent required by law, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Overview

        Our business objective is to become an independent, oil and gas-focused exploration and production company with the intent to acquire prospect inventory in the United States and international locations, with an initial focus on Africa  We believe that an experienced management team, equipped with industry-leading data, newly available seismic technologies, industry contacts and adequate funding, could acquire a prospect inventory that could be competitive with other relevant oil and gas companies. After considering numerous global oil and gas-producing regions in which to focus our exploration and development efforts, we decided that an initial focus on Africa was appropriate due to the largely unrealized hydrocarbon potential offered within this region. We believe that we can be successful in assembling such an inventory and that our potential asset portfolio would be attractive. Prior to joining Brenham, certain persons on our management team played a significant role in the assembly of asset portfolios in Africa.

        The discussion of the results of operations represent our historical results. The following discussion may not be indicative of future results.

Year Ended December 31, 2009 vs. 2008

        Net income for the year ended December 31, 2009 was $1,687, compared to $1,079 for the year ended December 31, 2008. Revenue for the year ended December 31, 2009 was $1,920 for oil and gas mineral royalty interest. General and administrative expenses for the year ended December 31, 2009 were $233 and consisted of property taxes and bank charges. Revenue for the year ended December 31, 2008 was $4,396 for oil and gas mineral royalty interest. General and administrative expenses for the year ended December 31, 2008 were $22,451, primarily as a result of property and franchise taxes of $12,881 and bank charges of $9,345. Other income for the year ended December 31, 2008 was $19,134, resulting from interest income from a certificate of deposit.

Six Months Ended June 30, 2010 vs. 2009

        Net loss for the six months ended June 30, 2010 was $126,422 compared to net income of $845 for the six months ended June 30, 2009.  Revenue for the six months ended June 30, 2010 was $956 for oil and gas mineral royalty interest. For the six months ended June 30, 2010, general and administrative expenses were $127,378, and consisted primarily of $82,945 for travel, consulting, and legal expenses associated with the spin-off of Brenham and business trips to Africa to assess Potential Prospects and non-cash stock-based compensation of $44,433. Revenue for the six months ended June 30, 2009 was $1,018 for oil and gas mineral royalty interest. For the six months ended June 30, 2009, general and administrative expenses were $173.
 
Liquidity and Capital Resources

        At December 31, 2009 and 2008, total assets were $86,347 and $86,041, respectively.  At December 31, 2009 and 2008, we had cash of $6,908 and $6,332, respectively, and a related party receivable of $79,439 and $79,709, respectively.

        At June 30, 2010, total assets were $72,573, consisting of cash of $6,634 and a related party receivable of $65,939.
 
 
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        We are an exploration stage company and will continue to be so until commencement of substantial production from our future oil and gas properties, none of which have been identified to date. Future revenue will depend upon successful selection of future prospects, drilling results, additional and timely capital funding at terms and conditions satisfactory to us, of which there can be no assurance, and access to suitable infrastructure. Further, we will not be able to commence our exploration program until we have entered into certain agreements with government agencies of respective countries and/or other oil and gas companies. Until then our primary sources of liquidity are expected to be net proceeds from future offerings and funds from future private and public equity placements and debt funding.
 
        We expect to incur substantial expenses and generate significant operating losses as we pursue our efforts to identify prospects, develop those prospects and as we:

  • purchase and analyze seismic data in order to identify future prospects;
  • opportunistically invest in additional oil and gas leases and concessional licenses;
  • develop our discoveries which we determine to be commercially viable; and
  • incur expenses related to operating as a public company and compliance with regulatory requirements.
        Our future financial condition and liquidity will be impacted by, among other factors, the success of selection of potential prospects, our future exploration and appraisal drilling program, the number of commercially viable oil and gas discoveries made and the quantities of oil and gas discovered, the speed with which we can bring such discoveries to production, and the actual cost of exploration, appraisal and development of our prospects.

        We estimate that we will need to spend approximately $10 million of capital for the year ending December 31, 2010 in order to achieve our 2010 plans. We expect to raise funds through proceeds of future offerings to be sufficient to fund our initial costs in connection with our planned prospect selection program at least through the end of 2011. However, we may require significant additional funds earlier than we currently expect in order to execute our strategy as planned. We may seek additional funding through additional public or private financings. Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing additional equity securities, further dilution to our existing stockholders will result. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our exploration and appraisal drilling programs. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our prospects which we would otherwise develop on our own, or with a majority working interest.

Contractual Obligations

        In the future, we may be party to the following contractual arrangements, which will subject us to further contractual obligations:
  • credit facilities;
  • contracts for the lease of drilling rigs;
  • contracts for the provision of production facilities;
  • infrastructure construction contracts; and
  • long term oil and gas  property lease arrangements.
Off-Balance Sheet Arrangements

        As of June 30, 2010, we did not have any off-balance sheet arrangements.

Critical Accounting Policies

        This discussion of financial condition and results of operations is based upon the information reported in our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of our financial statements. We base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time. Actual audited results may vary from our estimates. Our significant accounting policies are detailed in Note 1 to our consolidated financial statements. We have outlined below certain accounting policies that are of particular importance to the presentation of our financial position and results of operations and require the application of significant judgment or estimates by our management.

 
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Qualitative and Quantitative Disclosures about Market Risk

        The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term "market risks" refers to the risk of loss arising from changes in commodity prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk sensitive instruments will be entered into for purposes of risk management and not for speculation.

        Due to the historical volatility of commodity prices, if and when we commence production, we may enter into various derivative instruments to manage our exposure to volatility of commodity market prices. We may use options (including floors and collars) and fixed price swaps to mitigate the impact of downward swings in commodity prices to our cash flow. All contracts will be settled with cash and would not require the delivery of physical volumes to satisfy settlement. While in times of higher commodity prices this strategy may result in our having lower net cash inflows than we would otherwise have if we had not utilized these instruments, management believes the risk reduction benefits of such a strategy would outweigh the potential costs.

        We may borrow under fixed rate and variable rate debt instruments that give rise to interest rate risk. Our objective in borrowing under fixed or variable rate debt is to satisfy capital requirements while minimizing our costs of capital.

 
45

 
DIRECTORS AND EXECUTIVE OFFICERS

        The following table sets forth certain information concerning our board of directors, executive officers and key employees:

Name
 
Age
 
Position
Daniel Dror
   
70
 
Chairman of the Board and Chief Executive Officer
Sherry L. Couturier
   
49
 
Chief Financial Officer
S. Scott Gaille
   
40
 
Director and President
L. Rogers Hardy
   
65
 
Vice President - Technology
William R. Trojan
   
57
 
Director

Biographical information

Daniel Dror has been our Chief Executive Officer and Chairman of our Board of Directors since the inception of Brenham Oil & Gas, Inc. November 1997. Mr. Daniel Dror has served as Chairman of the Board and Chief Executive Officer of American International Industries, Inc. since September 1997.  Mr. Dror served as Chairman of the Board and Chief Executive Officer of Hammonds Industries, Inc., a public company and formerly a subsidiary of American from June 2007 until December 31, 2008 and resumed this position on December 31, 2009. Hammonds is now known as Delta Seaboard International, Inc. (“Delta”).  From 1994 to 1997, Mr. Dror served as Chairman of the Board and Chief Executive Officer of Microtel International Corp., a public company. From 1982 until 1993, Mr. Dror served as Chairman of the Board and Chief Executive Officer of Kleer-Vu Industries, Inc., a public company.

Sherry L. Couturier, has been the Chief Financial Officer of the Company since July 2010. Ms. Couturier has also been the CFO of AMIN, our parent company since June 1, 2007. Ms. Couturier served as CFO of Hammonds Industries from June 2007 until December 31, 2008 and since December 31, 2009 she has served as a director, VP and CFO of Delta. Ms. Couturier graduated with a B.S. in Accounting from the University of Alabama and has been a Certified Public Accountant since 1986.  She has held positions in both public and industry accounting.  Prior to joining the Company, Sherry worked for El Paso Corporation for 14 years as a supervisor for various accounting departments and as a training and development consultant.

S. Scott Gaille is an executive and attorney experienced in the petroleum industry, business development and regulation.  From July 2008 to the present, Mr. Gaille has been Managing Director of the Sequent Group, which includes among other portfolio companies, Sequent Asset Management, LLC, a multi-family investment firm.  He also has been an Adjunct Professor of Management at Rice University from 2008 to the present, where he teaches International Energy Development to MBA students.  From August 2007 to the present, Mr. Gaille has been President of West & East Africa, a private equity venture he founded that acquired and divested interests in four Sub-Saharan African petroleum licenses.  Previously, Mr. Gaille was Director - Business Development for Occidental Oil & Gas Corporation from July 2004 to August 2007. His responsibilities there included starting and growing new business units in Africa, the Middle East and South America.  Prior to assuming his duties as Director – Business Development, Mr. Gaille held various positions of increasing responsibility in the Oxy commercial and legal departments from October 2001 to July 2004. Before joining Oxy, Mr. Gaille practiced law with the Energy Section of Vinson & Elkins from July 1996 to October 2001 and with the Honorable Chief Judge J. Harvie Wilkinson, III of the United States Court of Appeals for the 4th Circuit, where he served as Judicial Clerk during the court's 1995-1996 judicial term.  Mr. Gaille was an Olin Fellow in Law and Economics at the University of Chicago, where he received his Doctor of Law Degree with High Honors in 1995 and attended undergraduate college at the University of Texas at Austin, where he earned a Bachelor of Arts degree in Government with High Honors and was elected to Phi Beta Kappa.
 
L. Rogers Hardy is a petroleum explorer with 30 years of experience in technical and management roles with, among other companies, Unocal (1984-2000, including Manager, Exploration and Production Technology Group, Vice President Exploration for Indonesia, and Manager Southern Africa and Latin America Group) and Chevron (1974-1980 as a Senior Geophysicist).  He holds a Masters of Geology from San Diego State University (1973) and a Bachelors of Geology from the University of Minnesota (1968).
 
William R. Trojan is a successful explorer with 28 years of experience in technical and management roles with Shell, Unocal, Phillips and ConocoPhillips, including Vice President Worldwide Deepwater Exploration for Phillips and West Africa Exploration Manager for ConocoPhillips. Over the course of his career, he has participated in the discovery of over three billion barrels of oil in the Gulf of Mexico and West Africa. Mr. Trojan holds a Master of Science Degree in Geology from Oregon State University, Corvallis, Oregon and a Bachelor of Science degree in Geology from Westminster College, Salt Lake City, Utah.
 
 
46

Board of Directors

Board Composition

        Our by-laws provide that the board of directors shall consist of not less than 3 directors, nor more than 9 directors, and the number of directors may be changed only by resolution of the board of directors. As of the date of the filing of this registration statement, we will have three directors: Messrs. Dror, Gaille; and Trojan.

        Our board of directors will consist of a single class of directors each serving one year terms.

Committees of the Board of Directors

        At present, our board of directors has no audit committee, no compensation committee and no nominating and governance committee, but may decide to have committees as the board of directors shall determine from time to time.

Code of Business Conduct and Ethics

        Our board of directors has not yet adopted a code of business conduct and ethics applicable to our employees, directors and officers, in accordance with applicable U.S. federal securities laws and the corporate governance rules of any exchange.

Executive Summary Compensation Table

        The following table summarizes the compensation of our executive officers for fiscal years 2009, 2008 and 2007.

Name and Principal Position
 
Year
 
Salary
 ($)
 
Stock Awards
 ($)
 
Non-Equity
 Incentive Plan
Compensation
 ($)
 
All Other
 Compensation
 ($)
 
Total
 ($)
Daniel Dror, CEO &
   
2009
   
0
 
0
   
0
   
0
 
0
 
Chairman
   
2008
   
0
 
0
   
0
   
0
 
0
       
2007
   
0
 
0
   
0
   
0
 
0
                                   
 
Sherry L. Couturier, VP, CFO, and Director
   
2009
   
0
 
0
   
0
   
0
 
0
                                   
 
S. Scott Gaille, President & Director
   
2009
   
0
 
0
   
0
   
0
 
0
                                   
 
L. Rogers Hardy, Vice President
   
2009
   
0
 
0
   
0
   
0
 
0
 
Technology
                               

 
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
Prior to the spin-off transaction, all of Brenham's issued and outstanding shares of common stock were owned by AMIN. After the distribution, AMIN will continue to be the controlling shareholder of Brenham. The following table presents information relating to the expected beneficial ownership of shares of Brenham common stock, based on the completion of the spin-off distribution and subsequent issuance of private placement shares as of September 1, 2010 by (i) each individual or entity owning beneficially more than 5% of the outstanding shares of Brenham common stock, (ii) each director of Brenham (iii) the Chief Executive Officer, the Chief Financial Officer and the other two named executive officers in the Brenham summary compensation table (see "Executive Summary Compensation Table") and (iv) all of Brenham's executive officers and directors as a group.

Title of Class
Name and Address of Beneficial Owner
Amount and Nature of Beneficial Owner
Percent of Class (1)
Common Stock
American International Industries, Inc.
601 Cien Street, Suite 235, Kemah, TX 77565
54,680,074 shares
54.68%
Common Stock
S. Scott Gaille, President and Director
601 Cien Street, Suite 235, Kemah, TX 77565
20,000,000 shares
20.00%
Common Stock
Steven M. Plumb
601 Cien Street, Suite 235, Kemah, TX 77565
7,500,000 shares
7.50%
Common Stock
Daniel Dror II
601 Cien Street, Suite 235, Kemah, TX 77565
5,000,000 shares
5.00%
Common Stock
Sherry L. Couturier, CFO
601 Cien Street, Suite 235, Kemah, TX 77565
885,270 shares
0.88%
Common Stock
L. Rogers Hardy, Vice President Technology
601 Cien Street, Suite 235, Kemah, TX 77565
0 shares
0.00%
Common Stock
William R. Trojan, Director
601 Cien Street, Suite 235, Kemah, TX 77565
0 shares
0.00%
Common Stock
Daniel Dror, CEO and Chairman
601 Cien Street, Suite 235, Kemah, TX 77565
0 shares
0.00%
Common Stock
All officers and directors as a group (5 people)
20,885,270 shares
20.89%
(1)  
Based on 99,977,093 shares issued and outstanding as of September 1, 2010

 
48

 
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
Separation and Distribution Agreement
 
Representation of AMIN on the Brenham Boards of Directors
 
The Separation and Distribution Agreement generally provides that so long as AMIN beneficially owns securities of Brenham representing at least 50% of the total voting power of Brenham's equity securities, AMIN has the right to nominate the majority of the directors serving on the Brenham Board of Directors. Any director nominated by AMIN must be reasonably acceptable to a majority of the directors on the Brenham's Board who were not nominated by Brenham.
 
Relationships Between AMIN and Brenham
 
Following the spin-offs, the relationships between AMIN and Brenham will be governed by the Separation and Distribution Agreement. This agreement is filed as an exhibit to this registration statement on Form S-1, of which this prospectus is a part.
 
Separation and Distribution Agreement
 
The Separation and Distribution Agreement will set forth the arrangements between AMIN and Brenham regarding the principal transactions necessary to separate Brenham from AMIN, as well as govern certain aspects of the relationship of Brenham with AMIN after the completion of the spin-off.
 
Certain Other Relationships and Related Person Transactions
 
We are subject to the policies and procedures of AMIN regarding the review and approval of related person transactions. Immediately prior to the spin-off, we adopted a policy governing the review and approval of related person transactions. We expect that the policies we implement will require the management of the Company to determine whether any proposed transaction, arrangement or relationship with a related person fell within the definition of "transaction" set forth in Item 404(a) of Regulation S-K under the Securities Act, and if so, will require management to submit such transaction to American’s Audit Committee for approval. American’s Audit Committee, in considering whether to approve related person transactions, would then consider all facts and circumstances that it deemed relevant.

 
49

 
PLAN OF DISTRIBUTION
 
Our shares of common stock were distributed by American pursuant to the declaration and payment of a stock dividend. As of the date of this prospectus, Brenham has 99,977,093 common shares outstanding, of which 10,297,019 shares are being registered in this registration statement.
 
This distribution is not being underwritten by an investment bank or otherwise. The purpose of the spin-off is described in the section of this prospectus entitled "The Spin off Transaction – “Background”; and “Reasons for the Spin off Transaction". AMIN will pay any fees or other expenses incurred in connection with this distribution.

DESCRIPTION OF CAPITAL STOCK
        The following summary of our capital stock and Articles of Incorporation and Bylaws is qualified in its entirety by reference to the provisions of applicable law and to the complete terms of our capital stock contain in our Articles of Incorporation.

Common Stock
 
        We have 200,000,000 shares of Common Stock, $0.0001 par value authorized by our Articles of Incorporation. The holders of the Common Stock are entitled to one vote per share on each matter submitted to a vote at any meeting of stockholders. Shares of Common Stock do not carry cumulative voting rights, and therefore, a majority of the shares of outstanding Common Stock will be able to elect the entire Board of Directors; if they do so, minority stockholders would not be able to elect any persons to the Board of Directors. Our bylaws provide that a majority of our issued and outstanding shares shall constitute a quorum for stockholders meetings except with respect to certain matters for which a greater percentage quorum is required by statute or the bylaws.
 
        Under our articles of incorporation and bylaws, our stockholders have no preemptive rights to acquire additional shares of Common Stock or other securities. The Common Stock is not subject to redemption and carries no subscription or conversion rights. In the event of liquidation of the Company, the shares of Common Stock are entitled to share equally in corporate assets after satisfaction of all liabilities. Holders of Common Stock are entitled to receive such dividends as the Board of Directors may from time to time declare out of funds legally available for the payment of dividends. We seek growth and expansion of our business through the reinvestment of profits, if any, and do not anticipate that we will pay dividends in the foreseeable future.
 
        The Board of Directors has the authority to issue the authorized but unissued shares of Common Stock without action by the stockholders. The issuance of such shares would reduce the percentage ownership held by existing stockholders and may dilute the book value of their shares.
 
Preferred Stock
        Our board of directors will have the authority, subject to the limitations imposed by the Nevada Revised Statutes, without any further vote or action by our stockholders, to issue preferred stock in one or more series and to fix the designations, powers, preferences, limitations and rights of the shares of each series, including:
  • dividend rates;
  • conversion rights;
  • voting rights;
  • terms of redemption and liquidation preferences; and
  • the number of shares constituting each series.
        Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of our common stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of our liquidation, dissolution or winding-up before any payment is made to the holders of shares of our common stock.
 
 
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Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. However, our board of directors may not, other than through an amendment to our amended and restated certificate of incorporation approved by our stockholders, adopt or approve any “rights plan,” “poison pill” or other similar plan, agreement or device designed to prevent or make more difficult a hostile takeover of our company by increasing the cost to a potential acquiror of such a takeover either through the issuance of new rights, shares of our common stock or preferred stock or any other security or device that may be issued to our stockholders other than all stockholders that carry severe redemption provisions, favorable purchase provisions or otherwise. This prohibition means that our board of directors will be prohibited from issuing preferred stock as a defensive mechanism to render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities or the removal of incumbent management.
   
        There are no current agreements or understandings with respect to the issuance of preferred stock and our board of directors has no present intentions to issue any shares of preferred stock.

 
51

 
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

        There is presently no public market for our common stock. We will seek to have our common stock quoted on the OTC Bulletin Board as soon as practicable after the effective date of this registration statement. As of the date of this prospectus, there are 99,977,093 issued and outstanding shares of our common stock, of which 10,297,019 are being registered in this registration statement.
 
        We intend to request a registered broker-dealer to apply to have our common stock listed on the OTC Bulletin Board upon the effectiveness of the registration statement of which this prospectus forms a part. However, we can provide no assurance that our shares will be traded on the OTC Bulletin Board or, if traded, that a trading market will materialize or be sustained.
 
        The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system.
 
Transfer Agent and Registrar

        The transfer agent for our common stock is Registrar and Transfer Company, 10 Commerce Drive, Cranford, NJ 07016. As of September 1, 2010, there were approximately 1,200 stockholders of record.

Dividend

        We do not anticipate declaring or paying any dividends at any time in the foreseeable future

Shares Eligible for Future Sale

        Future sales of substantial amounts of our common stock in the public market could adversely affect market prices prevailing from time to time. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.

        Based on the number of shares of common stock outstanding as of September 1, 2010 after giving effect to the separation from AMIN and the distribution of 10,297,019 shares of common stock to our unaffiliated stockholders, 99,977,093 shares of common stock are outstanding. Of the shares to be outstanding immediately after this offering, the 10,297,019 shares being registered for resale pursuant to this registration statement will be freely tradable without restriction under the Securities Act unless purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act. The remaining 89,680,074 shares of common stock are "restricted securities" under Rule 144.

        These restricted securities may be sold in the public market only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or 701 under the Securities Act, which exemptions are summarized below.

Rule 144

In general, under Rule 144 under the Securities Act, as in effect on the date of this prospectus, a person who is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares of our common stock to be sold for at least six months, would be entitled to sell an unlimited number of shares of our common stock, provided current public information about us is available. In addition, under Rule 144, a person who is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares of our common stock to be sold for at least one year, would be entitled to sell an unlimited number of shares beginning one year after this offering without regard to whether current public information about us is available. Our affiliates who have beneficially owned shares of our common stock for at least six months are entitled to sell within any three month period a number of shares that does not exceed the greater of:

  • 1% of the number of shares of our common stock then outstanding, which will equal approximately 1,000,000 shares immediately after this offering, and
  • the average weekly trading volume in our common stock on the OTC Bulletin Board and/or OTCQB Marketplace, quoted by Pink OTC Markets during the four calendar weeks preceding the date of filing of a Notice of Proposed Sale of Securities Pursuant to Rule 144 with respect to the sale.
 
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        Sales by affiliates under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. Rule 144 also provides that affiliates relying on Rule 144 to sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement.
 
Rule 701

In general, under Rule 701 under the Securities Act, any of our employees, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement is eligible to resell those shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with the various restrictions, including the holding period, contained in Rule 144. As of the date of this registration statement, the Company has not issued any shares of common stock under Rule 701.
 
Registration Rights

We have not entered into any registration rights agreement with certain of our stockholders pursuant to which we would have granted certain of our stockholders and their affiliates certain registration rights with respect to our shares of common stock owned by them. We may from time to time in the future grant registration rights to investors and/or certain stockholders.

Material U.S. Federal Tax Considerations for Non-U.S. Holders

The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of common stock by a beneficial owner that is a "non-U.S. holder." A "non-U.S. holder" is a person or entity that, for U.S. federal income tax purposes, is a:

  • non-resident alien individual, other than certain former citizens and residents of the United States subject to U.S. tax as expatriates,
  • foreign corporation or
  • foreign estate or trust.
A "non-U.S. holder" does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition and is not otherwise a resident of the United States for U.S. federal income tax purposes. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of our common stock.

If a partnership or other pass-through entity (including an entity or arrangement treated as a partnership or other type of pass-through entity for U.S. federal income tax purposes) owns our common stock, the tax treatment of a partner or beneficial owner of such entity may depend upon the status of such owner and the activities of such entity and by certain determinations made at the partner or beneficial owner level. Partners and beneficial owners in partnerships or other pass-through entities that own our common stock should consult their own tax advisors as to the particular U.S. federal income and estate tax consequences applicable to them.

This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. Prospective holders are urged to consult their tax advisors with respect to the particular tax consequences to them of owning and disposing of our common stock, including the consequences under the laws of any state, local or foreign jurisdiction.

Dividends

As discussed under "Dividend Policy" above, we do not currently expect to pay dividends. In the event that we do pay dividends, dividends paid to a non-U.S. holder of our common stock generally will be subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding, a non-U.S. holder will be required to provide an Internal Revenue Service Form W-8BEN certifying its entitlement to benefits under a treaty.

The withholding tax does not apply to dividends paid to a non-U.S. holder that provides an Internal Revenue Service Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. holder's conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. resident, subject to an applicable income tax treaty providing otherwise. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional "branch profits tax" imposed at a rate of 30% (or a lower treaty rate).
 
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Information Reporting Requirements and Backup Withholding

Information returns will be filed with the Internal Revenue Service in connection with payments of dividends and the proceeds from a sale or other disposition of common stock. A non-U.S. holder may have to comply with certification procedures to establish that it is not a United States person in order to avoid information reporting and backup withholding requirements. The certification procedures required to claim a reduced rate of withholding under a treaty will satisfy the certification requirements necessary to avoid the backup withholding as well. The amount of any backup withholding from a payment to a non-U.S. holder will be allowed as a credit against such non-U.S. holder's U.S. federal income tax liability and may entitle such non-U.S. holder to a refund, provided that the required information is furnished to the Internal Revenue Service in a timely manner.
 
Federal Estate Tax

Individual non-U.S. holders and entities the property of which is potentially includible in such an individual's gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, the common stock will be treated as U.S. situs property subject to U.S. federal estate tax.

LEGAL MATTERS

The validity of the shares of our common stock issued in the spin-off will be passed upon by Thomas J. Craft, Jr., P.L.

EXPERTS

The consolidated financial statements of Brenham Oil & Gas Corp. at December 31, 2009 and 2008, appearing in this prospectus and registration statement have been audited by GBH CPAS, PC, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1, which includes exhibits, schedules and amendments, under the Securities Act with respect to this offering of our securities. Although this prospectus, which forms a part of the registration statement, contains all material information included in the registration statement, parts of the registration statement have been omitted as permitted by rules and regulations of the SEC. We refer you to the registration statement and its exhibits for further information about us, our securities and this offering. The registration statement and its exhibits, as well as any other documents that we have filed with the SEC, can be inspected and copied at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549-1004. The public may obtain information about the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at http://www.sec.gov that contains the registration statement and other reports, proxy and information statements and information that we file electronically with the SEC.

After we have completed this offering, we will file annual, quarterly and current reports, proxy statements and other information with the SEC. We intend to make these filings available on our website once the offering is completed. You may read and copy any reports, statements or other information on file at the public reference rooms. You can also request copies of these documents, for a copying fee, by writing to the SEC, or you can review these documents on the SEC's website, as described above. In addition, we will provide electronic or paper copies of our filings free of charge upon request.
 
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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth an itemization of the various costs and expenses, all of which we will pay, in connection with the issuance and distribution of the securities being registered. All of the amounts shown are estimated except the SEC registration fee and the FINRA filing fee:
 
SEC registration fee
 
$
  1  
Accounting fees and expense
   
10,000
 
Legal fees and expenses
   
21,067
 
Transfer Agent and Registrar fees
   
1,104
 
Miscellaneous
   
2,366
 
          Total
 
$
34,538  

Item 14. Indemnification of Directors and Officers.

Our articles of incorporation, by-laws and director indemnification agreements provide that each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was a director or an officer of Brenham or, in the case of a director, is or was serving at our request as a director, officer, or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or trustee or in any other capacity while serving as a director, officer or trustee, shall be indemnified and held harmless by us to the fullest extent authorized by the Nevada General Corporation Law against all expense, liability and loss reasonably incurred or suffered by such.

Section 145 of the Nevada General Corporation Law permits a corporation to indemnify any director or officer of the corporation against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any action, suit or proceeding brought by reason of the fact that such person is or was a director or officer of the corporation, if such person acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, if he or she had no reason to believe his or her conduct was unlawful. In a derivative action, ( i.e ., one brought by or on behalf of the corporation), indemnification may be provided only for expenses actually and reasonably incurred by any director or officer in connection with the defense or settlement of such an action or suit if such person acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification shall be provided if such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine that the defendant is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.
 
        Pursuant to Section 102(b)(7) of the Nevada General Corporation Law, Article Seven of our articles of incorporation eliminates the liability of a director to us for monetary damages for such a breach of fiduciary duty as a director, except for liabilities arising:

  • from any breach of the director's duty of loyalty to us;
  • from acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
  • under Section 174 of the Nevada General Corporation Law; and
  • from any transaction from which the director derived an improper personal benefit.

 
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Item 15. Recent Sales of Unregistered Securities.

Since its inception Brenham issued unregistered securities as follows:

Date
Title
Shares Issued
Persons
Cash or Non Cash Consideration
04/21/2010
Common
64,977,093
American International Industries, Inc.
For contribution of Brenham Oil & Gas Inc. common stock
04/21/2010
Common
20,000,000
Scott Gaille
For Services provided valued at $0.0021 per share
04/21/2010
Common
7,500,000
Steven Plumb
Private sale at $0.0021 per share
05/03/2010
Common
5,000,000
Daniel Dror II
Private sale at $0.0012 per share
07/20/2010
Common
500,000
Dennis Markov
Private sale at $0.0006 per share
 07/20/2010 Common 500,000 Dennis Markov
For Services provided valued at $0.0021 per share
04/21/2010
Common
825,000
Sherry Couturier
For Services provided valued at $0.0021 per share
04/21/2010
Common
420,000
Rebekah Ruthstrom
For Services provided valued at $0.0021 per share
04/21/2010
Common
165,000
Brenda Forbes
For Services provided valued at $0.0021 per share
04/21/2010
Common
90,000
Jennifer Sanchez
For Services provided valued at $0.0021 per share

The Company believes that the issuances and sale of the restricted shares were exempt from registration pursuant to Section 4(2) of the Act as privately negotiated, isolated, non-recurring transactions not involving any public solicitation. The recipients in each case represented their intention to acquire the securities for investment only and not with a view to the distribution thereof. Appropriate restrictive legends are affixed to the stock certificates issued in such transactions. This offering was done with no general solicitation or advertising by the Registrant. The investors in the private placement were business acquaintances of management and the private sale transactions were negotiated between the investors and management individually. All recipients of restricted shares either received adequate information about the Company or had access, through employment, relation and/or business relationships with the Company to such information. Based on an analysis of the above factors, the Registrant has met the requirements to qualify this offering and sale for exemption under Section 4(2) of the Securities Act of 1933.

Item 16. Exhibits and Financial Statement Schedules.
(a)  
The following exhibits are filed as part of this registration statement:
Exhibit
 Number
 
Description of Document
 
2.1
 
Separation and Distribution Agreement
 
3.1
 
Articles of Incorporation of Brenham Oil & Gas Corp.
 
3.2
 
By-laws of the Company
 
4.1
 
Specimen stock certificate
 
5.1
 
Opinion of Thomas Craft, Jr., P.L.
 
21.1
 
List of Subsidiaries
 
23.1
 
Consent of GBH CPAS, PC
 
23.2
 
Consent of Thomas J. Craft, Jr., P.L. (included in Exhibit 5.1)

 
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Item 17. Undertakings.
 
(a) The undersigned registrant hereby undertakes:
 
    (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
    i. To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
    ii. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
                    iii. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
   
    (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
    (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
 
    (4) That in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
     i.  Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
                     ii.  Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
                     iii.  The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
                     iv.  Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b)   The undersigned hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
        
(c)   Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
 
(d)   The undersigned registrant hereby undertakes that:
 
    (1)   For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
 
    (2)   For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
 
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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Kemah, Texas on September 21, 2010.

BRENHAM OIL & GAS CORP.


By: Daniel Dror
Chairman of the Board of Directors
and Chief Executive Officer

               Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities held on the dates indicated.

/s/ DANIEL DROR
Chairman of the Board of Directors and Chief Executive Officer
 (Principal Executive Officer)
September 21, 2010

s/ SHERRY COUTURIER
Chief Financial Officer and Executive Vice President
 (Principal Financial Officer and Principal Accounting Officer)
September 21, 2010


/s/ S. SCOTT GAILLE
Director and President
September 21, 2010