U.S. Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q
 
[X]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the Quarterly Period Ended December 31, 2010

 
[ ] 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
                 For the Transition Period From ____to _____

Commission File Number 000-53683
 
AMERICAN POWER CORP.

Nevada
(State or other jurisdiction of
incorporation or organization)
27-4429450
 (I.R.S. employer
identification number)
 
16 Market Square Center
1400 16th Street Suite 400
Denver, CO 80202
Tel: 720.932.8389
Fax: 720.222.5151
(Address of principal executive offices)
 
 Copies to:
JPF Securities Law, LLC
Box 523
East Granby, CT 06026
Phone: (646) 807-9094
Fax: (980) 422-0334
(Address of principal executive offices and zip code)
 
Indicate by check mark if the registrant is a well-know seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [  ]                                No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act
Yes [  ]                                No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]                                No [  ]
 
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).
Yes [  ]                                No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 if Regulation S-K (229.405 of this Chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy of information statements incorporated by reference in Part III of this Form 10-Q or any amendments to this Form 10-Q.
Yes [  ]                                No [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer 
¨
Non-accelerated filer 
¨ (Do not check if a smaller reporting company) 
Accelerated filer 
¨
Smaller reporting company 
x

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the exchange act).
Yes [  ]                                No [X]

Number of shares of common stock outstanding as of February 14, 2011: 91,075,238
 
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
 
The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are subject to the "safe harbor" created by the Private Securities Litigation Reform Act of 1995.

 
 

 
 
PART I  
 Page No.
   
Item 1.  Financial Statements                                                                
2
   
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
10
   
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
12
   
Item 4.  Controls and Procedures
12
   
Item 4T. Controls and Procedures
12
   
PART II                      
 
 Item 1.  Legal Proceedings
13
   
 Item 1A. Risk Factors
13
   
 Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
13
   
 Item 3.  Defaults Upon Senior Securities
13
   
 Item 4.  Submission of Matters to a Vote of Security Holders
13
   
 Item 5.  Other Information
13
   
 Item 6.  Exhibits                                                                                                                                         
13
   

 
2

 
 
ITEM 1. FINANCIAL STATEMENTS
 
INDEX TO AMERICAN POWER CORP. FINANCIAL STATEMENTS
 
AMERICAN POWER CORPORATION
 
PAGE
 
       
Balance Sheets
   
4
 
         
Statements of Operations
   
5
 
         
Statement of Stockholders’ Equity  
   
6
 
         
Statements of Cash Flows
   
7
 
         
Notes to Financial Statements
   
8
 
 
 
3

 
 
AMERICAN POWER CORP.
 
(An Exploration Stage Company)
 
BALANCE SHEETS
 
   
   
December 31, 2010
   
September 30, 2010
 
   
(Unaudited)
   
(Audited)
 
             
ASSETS
           
CURRENT ASSETS
           
Cash
  $ 167,337     $ 520,852  
Prepaids and deposit
    57,550       6,324  
Advances to related party
    5,727       18,416  
TOTAL CURRENT ASSETS
    230,614       545,592  
                 
OTHER ASSETS
               
Mineral property
    2,670,500       2,670,500  
Equipment - net
    4,148       4,480  
Website - net
    31,735       28,297  
TOTAL ASSETS
  $ 2,936,997     $ 3,248,869  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
CURRENT  LIABILITIES
               
Accounts payable and accrued liabilities
  $ 13,678     $ 18,728  
Promissory notes, current portion
    400,000       600,000  
TOTAL CURRENT LIABILITIES
    413,678       618,728  
                 
LONG TERM LIABILITIES
               
Promissory notes, net of current portion, net of debt discount of $1,017,236
    1,882,764       1,794,271  
TOTAL LIABILITIES
    2,296,442       2,412,999  
                 
STOCKHOLDERS’  EQUITY
               
Capital stock
               
Authorized
               
     500,000,000 shares of common stock, $0.001 par value
               
Issued and outstanding
               
     91,075,238 shares of common stock (90,480,000 September 30, 2010)
    91,075       90,480  
        Additional paid in capital
    1,027,503       528,098  
        Stock payable
    871,410       1,106,410  
Accumulated deficit during exploration stage
    (1,349,433 )     (889,118 )
TOTAL STOCKHOLDERS’ EQUITY
    640,555       835,870  
TOTAL LIABILITIES AND STOCKHOLDERS’  EQUITY
  $ 2,936,997     $ 3,248,869  
                 
The accompanying notes are an integral part of these financial statements.
 
 
 
4

 
 
AMERICAN POWER CORP.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
 
               
Cumulative results
 
               
from inception
 
   
Three Months Ended
   
Three Months Ended
   
(August 7, 2007) to
 
   
December 31, 2010
   
December 31, 2009
   
December 31, 2010
 
REVENUES
                 
                   
Revenues
  $ -     $ -     $ -  
Total revenues
    -       -       -  
                         
EXPENSES
                       
                         
Office and general
    41,940       954       139,292  
Management fees
    292,500       -       491,164  
Professional fees
    22,276       5,500       113,127  
Gain on debt forgiveness
    -       -       8,000  
Exploration costs
    15,107       -       15,107  
Total expenses
    (371,823 )     (6,454 )     (766,690 )
                         
OTHER INCOME (EXPENSE)
                       
Interest expense
    (88,492 )     -       (285,866 )
Loss on debt settlement
    -       -       (237,807 )
Total other expenses
    (88,492 )     -       (523,673 )
                         
NET LOSS
  $ (460,315 )   $ (6,454 )   $ (1,274,363 )
                         
BASIC LOSS PER COMMON SHARE
                       
  $ (0.01 )   $ (0.00 )        
                         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- BASIC
                       
                       
    91,042,888       87,380,000          
 
The accompanying notes are an integral part of these financial statements.
 
 
5

 
 
AMERICAN POWER CORP.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
From inception (August 7, 2007) to December 31, 2010
(Unaudited)
   
Common Stock
                               
   
Number of shares
   
Amount
   
Additional Paid-in Capital
   
Share Subscription Receivable
   
Stock Payable
   
Deficit accumulated during the exploration stage
   
Total
 
                                           
Balance, August 7, 2007 (Inception)
    -     $ -     $ -     $ -     $ -     $ -     $ -  
Common stock issued for cash at $0.001per share on August 13, 2007
    44,200,000       44,200       -       (8,500 )     -       (35,700 )     -  
Net loss
                                            (2,525 )     (2,525 )
Balance, September 30, 2007
    44,200,000       44,200       -       (8,500 )     -       (38,225 )     (2,525 )
                                                         
Subscription Receivable
    -       -       -       8,500       -       -       8,500  
Common stock issued for cash at $0.03per share July and August 2008
    43,180,000       43,180       -       -       -       (39,370 )     3,810  
Net loss
                                            (12,964 )     (12,964 )
Balance, September 30, 2008
    87,380,000       87,380       -       -       -       (90,559 )     (3,179 )
                                                         
Net loss
                                    -       (21,338 )     (21,338 )
Balance, September 30, 2009
    87,380,000       87,380       -       -       -       (111,897 )     (24,517 )
                                                         
Forgiveness of debt by former director
            -       16,198       -       -       -       16,198  
Common Stock, issued for mineral property at $0.05 per share April 9, 2010
    2,300,000       2,300       112,700       -       -       -       115,000  
Common stock issued for cash at $0.50per share June 25, 2010
    800,000       800       399,200       -               -       400,000  
Common stock  to be issued on debt totalling $208,603 (including interest of $8,603) conversion at $0.50 per share September 10, 2010
        -       -       -       -       446,410       -       446,410  
Common stock to be issued for services at $0.96 per share at September 30, 2010
    -       -       -       -       160,000       -       160,000  
Private placement received in advance
    -       -       -       -       500,000       -       500,000  
Net loss
                                            (777,221 )     (777,221 )
Balance,  September 30, 2010
    90,480,000       90,480       528,098       -       1,106,410       (889,118 )     835,870  
                                                         
Common stock issued for 595,238 units at $0.84 per unit on October 5, 2010
    595,238       595       499,405       -       (500,000 )     -       -  
Common stock to be issued for services at December 31, 2010
    -       -       -       -       265,000       -       265,000  
Net loss
    -       -       -       -       -       (460,315 )     (460,315 )
Balance,  December 31,  2010
    91,075,238     $ 91,075     $ 1,027,503     $ -     $ 871,410     $ (1,349,433 )   $ 640,555  
                                                         
 
The accompanying notes are an integral part of these financial statements.

 
6

 
 
AMERICAN POWER CORP.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
   
Three Months Ended December 31, 2010
   
Three Months Ended December 31, 2009
   
Cumulative results from inception (August 7, 2007) to December 31, 2010
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net loss
  $ (460,315 )   $ (6,454 )   $ (1,274,363 )
Adjustment to reconcile net loss to net cash
                       
used in operating activities
                       
Depreciation and amortization
    2,784       -       6,155  
Stock-based compensation
    265,000       -       425,000  
Accretion of debt discount
    88,493       -       285,866  
Gain on extinguishment of debt
    -       -       (8,000 )
Loss on extinguishment of debt
    -       -       237,807  
(Increase) in prepaid expenses
    (51,226 )     -       (57,551 )
Decrease (increase) in advances to related party
    12,689       4,790       (5,727 )
Increase in accounts payable and accrued liabilities
    (5,050 )     1,666       21,680  
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    (147,625 )     2       (369,133 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Website
    (5,890 )     -       (37,081 )
Equipment
    -       -       (4,957 )
Mineral property
    -       -       (350,000 )
NET CASH USED IN INVESTING ACTIVITIES
    (5,890 )     -       (392,038 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Proceeds from sale of common stock
    -       -       912,310  
Loans from related party
    -       -       16,198  
Proceeds from notes payable
    -       -       200,000  
Payment on promissory note
    (200,000 )     -       (200,000 )
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    (200,000 )     -       928,508  
                         
NET INCREASE ( DECREASE) IN CASH
    (353,515 )     2       167,337  
                         
CASH, BEGINNING OF PERIOD
    520,852       147       -  
                         
CASH, END OF PERIOD
  $ 167,337     $ 149     $ 167,337  
                         
Supplemental cash flow information and noncash financing activities:
                 
Common stock payable for property acquisition
  $ -     $ -     $ 115,000  
Promissory notes issued for property
  $ -     $ -     $ 2,405,500  
Forgiveness of debt by former director
  $ -     $ -     $ 16,198  
Common stock issued to satisfy common stock payable
  $ 500,000     $ -     $ 500,000  
Conversion of debt totalling $208,603, (including interest of $8,603) for common stock
  $ -     $ -     $ 446,410  
 
The accompanying notes are an integral part of these financial statements
 
 
7

 
 
AMERICAN POWER CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2010
(Unaudited)

NOTE 1 –FINANCIAL STATEMENTS

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

NOTE 2 – GOING CONCERN

The Company’s financial statements as of December 31, 2010 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. For the three months ended December 31, 2010, and from inception (August 7, 2010) to December 31, 2010, the Company had a net loss of $460,315 and $1,274,363, respectively.

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

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

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

 
8

 
 
AMERICAN POWER CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2010
(Unaudited)

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

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

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

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


NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

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

NOTE 5 - CAPITAL STOCK

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

During the quarter ended December 31, 2010, the Company recorded $265,000 for stock-based compensation payable related to 250,000 shares of common stock earned by Mr. Alvaro Valencia, CEO and Director of the Company.  On October 31, 2010, under the Independent Consultant Agreement between the Company and the CEO, 250,000 shares of common stock vested and were valued based on the closing price of our shares of common stock on October 31, 2010.  At September 30, 2010 and December 31, 2010, 166,667 shares of common stock were recorded in stock payable on the balance sheet and at an estimated value based on the closing price our shares of common stock at September 30, 2010 and December 31, 2010, respectively.
 
 
NOTE 6 - SUBSEQUENT EVENTS

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

On January 28, 2011, the Company entered into an agreement (the “Agreement”) with Gryphon Partners Canada, Inc (“Gryphon). Pursuant to the Agreement, Gryphon will provide financial and other investment banking advice to the Company in the context of evaluating and entering into a transaction in order to advance the Company’s PACE Coal Project in Montana, including by way of strategic partnership, joint venture, sale of all or part of the asset, strategic financing or other transaction (collectively, the “Transaction”). The Company has agreed to pay Gryphon a work fee of $15,000 per month provided that they are carrying out the responsibilities enumerated in the Agreement. Accordingly, the cumulative gross amount of the work fee paid to Gryphon in connection with the Transaction shall be credited back to the Company and deducted from the proceeds of the transaction fee payable to Gryphon at the time of closing of the Transaction.  Upon closing of the Transaction, a transaction fee equal to 1.50% of the transaction value shall be payable to Grypon, subject to a minimum Transaction Fee of $750,000. In the event that the Transaction is not completed and a break fee or termination fee (the “Break Fee”) is paid to the Company or a Company affiliate, the Company shall pay to Gryphon the lesser of an amount equal to 20% of such break fee or $750,000. Pursuant to the Agreement, the Company shall reimburse Gryphon for all reasonable out-of-pocket expenses not to exceed $50,000, including but not limited to travel and communication expenses, database service expenses, courier charges, the reasonable fees and disbursements of its counsel and any other advisors retained by Gryphon with the consent of the Company, such consent not to be unreasonably withheld. The Agreement shall terminate on the earlier of, the completion of the Transaction or six months from the signing of the Agreement, unless extended by mutual agreement of the parties in writing.
 
 
9

 
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Note Regarding Forward-Looking Statements
 
This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to Company or Company’s management identify forward-looking statements. Such statements reflect the current view of Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the risks contained in the section of operations and results of operations, and any businesses that Company may acquire.) Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

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

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

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

Business Description and Plan of Operation

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

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

Coal production in the United States in 2009 reached a level of 1,074.9 million short tons (808.7 million short tons between January and September of 2010) according to data from the Energy Information Administration (EIA), a decrease of 8.3% from the 2008 level. The decline in coal production in 2009 was the largest percent decline since 1958 (when production declined by 16.7%) and the largest tonnage decline since 1949 (when production declined by 176.1 million short tons).

Coal consumption in the United States in 2009 reached a level of 997.5 million short tons (798.1 million short tons between January and September of 2010), a decrease of 11.0% from the 2008 level, with all of the coal-consuming sectors having lower consumption for the year. Although all sectors had declines, the electric power sector (electric utilities and independent power producers), which consumes about 94% of all coal in the US, is the overriding force for determining total domestic coal consumption. In 2009, the recession’s downward pressure on electricity production resulted in a 10.3% decrease in coal consumption for the sector to end 2009 at 933.6 million short tons (744.0 million short tons between January and September of 2010). Coal consumption in the non-electric power sector (comprised of other industrial, coking coal, and the commercial and institutional sectors) declined for the fifth year in a row in 2009. Coal consumption at coke plants decreased by 30.6% to end 2009 at 15.3 million short tons (15.7 million short tons between January and September of 2010). The decline in US coke production in 2009 was a result of the economic downturn in the year when several steel plants idled production for extended periods of time in response to the world-wide drop in demand for their products.

Total coal stocks increased in 2009 by 19.3% to end the year at a record level of 244.8 million short tons as some consumers, producers and distributors added to their stockpiles.

Although it was a down year for coal production and consumption in 2009, domestic coal prices continued to increase, rising for the sixth consecutive year. The primary reason that domestic coal prices continued to climb was that a number of coal contracts were signed in 2008 during the dramatic rise of spot coal prices that affected the contract prices. The majority of coal sold in the electric power sector is through long-term contracts (covering a time period of one year or longer), in conjunction with spot purchases to supplement the demand. As contracts expire and are renegotiated the prevailing spot price influences the contract price. According to preliminary data for 2009, coal prices at electric utilities (a subset of the electric power sector) increased for a ninth consecutive year, to $44.72 per short ton, an increase of 8.2% over the 2008 price. Coal prices at independent power producers for 2009 increased to $39.72 per short ton, an increase of 1.9%. The average delivered price of coal to the other industrial sector increased by 2.3% to an average price of $64.87 per short ton in 2009. In 2009 the delivered price of coal to US coke plants increased by 21.1% to reach an average price of $143.04 per short ton. The average delivered price of coal to the commercial and institutional sector increased in 2009 by 12.5% to $97.28 per short ton.

Western Region (includes Montana)

Although the Western Region is the largest coal-producing region in the US, in 2009 coal production declined by 7.7% to a total of 584.5 million short tons and ended a five year increasing production trend. The decrease of 49.1 million short tons resulted in a production level comparable to what was produced in 2005. Only two of the eight States in the Western Region (Alaska and North Dakota) had an increase in coal production for the year. Of all the coal-producing States in the Western Region, Alaska, with one mine, the Usibelli mine, has the smallest level of production. However, in 2009, it had the largest increase in production, 370 thousand short tons, or 25.0% and ended the year with a total of 1.8 million short tons.

In 2009, Montana, the second largest coal-producing State in the Western Region, produced a total of 39.5 million short tons, a decrease of 11.8% or 5.3 million short tons. Although there was an increase in production at Signal Peak Energy’s Bull Mountain mine of 0.6 million short tons, the decreases in coal production at Western Energy’s Rosebud mine of 2.7 million short tons and Decker Coal’s Decker mine of 2.4 million short tons in 2009 accounted for the majority of the decline.

Results of Operations for the Three Months ended December 31, 2010 and 2009
 
Revenues

The Company has yet to generate any revenues.

Expenses

Three months ended December 31, 2010 compared to the three months ended December 31, 2009

We had a net loss of $460,315 for the quarter ended December 31, 2010, which was $453,861 greater than the net loss of $6,454 for the quarter ended December 31, 2009. This change in our results over the two periods is primarily the result of an increase in office and general expenses, an increase in professional and management fees and exploration costs to implement our business plan.  Interest expense of $88,492 for the quarter ended December 31, 2010 ($0, 2009), is accretion of debt discount recorded on the promissory notes. For the quarter ended December 31, 2009, the promissory notes were not outstanding and, as such, no interest expense was recorded.

Liquidity and Capital Resources

Our balance sheet as of December 31, 2010, reflects current assets of $230,614. As we had cash in the amount of $167,337 and a working capital deficit in the amount of $183,064 as of December 31, 2010, we do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.
 
Working Capital
   
At
December 31,
2010
   
At
September
30,
2010
 
             
Current assets
 
$
230,614
   
$
545,592
 
Current liabilities
   
413,678
     
618,728
 
Working capital
 
$
(183,064
)
 
$
(73,136

 
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Operating Activities

Net cash flows used in operating activities were $147,625 and $2 for the three months ended December 31, 2010 and 2009, respectively. Negative cash flows are primarily attributable to a net loss of $460,315 and $6,454 for the three months ended December 31, 2010 and 2009, respectively.

Investing Activities

Net cash flows used in investing activities were $5,890 and $0 for the three months ended December 31, 2010 and 2009, respectively. Negative cash flows for the three months ended December 31, 2010 was due to the website expenditures of $5,890 and the $200,000 mineral property.
 
Financing Activities

Net cash flows used in financing activities were $0 and $0 for the three months ended December 31, 2010 and 2009, respectively.

   
Three-months Ended
 
   
December 31,
 
   
2010
   
2009
 
             
Net Cash Used in Operating Activities
 
$
(147,625
 
 $
2
 
Net Cash Used in Investing Activities
   
(5,890
   
-
 
Net Cash Provided by Financing Activities
   
(200,000
   
-
 
Net Increase (Decrease) in Cash
 
$
(353,515
 
2
 
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
Not required by smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

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

As of December 31, 2010, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

The Certifying Officers have also concluded, based on their evaluation of our controls and procedures that as of December 31, 2010, our internal controls over financial reporting are not effective and provide no reasonable assurance of achieving their objective.

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

ITEM 4T. CONTROLS AND PROCEDURES
 
(a) Conclusions regarding disclosure controls and procedures. Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management is responsible for establishing and maintaining adequate internal control over financial reporting.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Exchange Act as of December 31, 2010, and, based on their evaluation, as of the end of such period, our disclosure controls and procedures were not effective as of the end of the period covered by the Quarterly Report.
 
(b) Management’s Report On Internal Control Over Financial Reporting. It is management’s responsibility to establish and maintain adequate internal controls over the Company’s financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers and effected by the issuer’s management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•           Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and

•           Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management of the issuer; and

•           Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

As of the end of the period covered by the Quarterly Report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting.
 
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, internal controls over financial reporting were not effective as of the end of the period covered by the Report.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

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

(c) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
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PART II.  OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

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

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

ITEM 1A.   RISK FACTORS

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

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

Quarterly Period

On October 5, 2010, the Company entered into a Private Placement Subscription for Non U.S. Subscribers with Black Sands Holdings, Inc., to subscribe to and purchase 595,238 units valued at $0.84 per unit for an aggregate purchase price of $500,000.  Each unit comprises one share of common stock and one warrant of the Company.  Each warrant entitles the holder to purchase one additional share of common stock of the Company at an exercise price of $1.26 per share for a period of three years. All of the securities issued to the Investor are being issued in reliance upon certain exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Act”), including Section 4(2) and Regulation S of the Securities and Exchange Commission (“SEC”) and from various similar state exemptions.

Interim Period

On January 25, 2011, the Company entered into a Private Placement Subscription For Non U.S. Subscribers with Black Sands Holdings, Inc., to purchase units (each a “Unit”) valued at $.89 per Unit for an aggregate purchase price of four hundred thousand ($400,000) dollars.  Each Unit shall consist of one (1) share of common stock of the Company and one warrant (“Warrant”).  Each Warrant shall entitle the holder to purchase one additional share of Common Stock of the Company, at a strike price equal to 150% of the price of the Unit, for a period of three (3) years. All of the securities issued to the Investor are being issued in reliance upon certain exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Act”), including Section 4(2) and Regulation S of the Securities and Exchange Commission (“SEC”) and from various similar state exemptions.
 
ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

We have not had any default upon senior securities.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.      OTHER INFORMATION

We do not have any other information to report.

ITEM 6.      EXHIBITS

31.1 CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2 CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2 CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

* Filed herewith

Reports on Form 8-K filed

On February 1, 2011, we filed a Current Report on Form 8-K announcing a Private Placement Subscription for Non U.S. Subscribers with Black Sands Holdings, Inc.  An executed copy of the Private Placement Subscription Agreement with Black Sands Holdings, Inc. is attached on the Form 8-K as Exhibit 10.1.

On February 1, 2011, we filed a Current Report on Form 8-K announcing an Engagement Agreement with Gryphon Partners Canada, Inc (“Gryphon). An executed copy of the Gryphon Engagement Agreement is attached on the Form 8-K as Exhibit 10.1.

 
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
     
 
AMERICAN POWER CORPORATION
 (Registrant)
     
Date: February 14, 2011
By:
/s/ Alvaro Valencia
   
Alvaro Valencia
Chief Executive Officer, President and Director
     
     
Date: February 14, 2011
By:  
/s/ Johannes Petersen
 
Johannes Petersen
Chief Financial Officer, Secretary, and Director