UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended MARCH 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ________________ to ______________________
Commission File Number: 0-26402
THE AMERICAN ENERGY GROUP, LTD.
(Exact name of registrant as specified in its charter)
NEVADA 87-0448843
(state or other jurisdiction (IRS Employer identification Number)
of incorporation or organization)
P O BOX 489 SIMONTON, TEXAS 77476
(Address of principal executive offices) (Zip code)
(281)-346-2652
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check-mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check-mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
13,332,753 Common Shares
SEC Form 10-Q
The American Energy Group, LTD. Page 1 of 5
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Company files herewith the Unaudited Consolidated Financial Statements for
the three months ended March 31, 1997, presented with the Audited Consolidated
Financial Statements of the Company for the fiscal year ended June 30, 1996. In
the opinion of Management, the Financial Statements with the related notes
reflect a fair presentation of the financial condition of the Registrant for the
period stated.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL INFORMATION
The following information should be read in conjunction with the consolidated
financial statements of the Company, attached to this report.
The Company is in the development stage. It has, and where appropriate,
continues to add to an inventory of properties to explore and/or develop. It has
not had significant revenue from the production of oil and gas. The Company has
financed its operations to date through private placement of equity securities
and borrowing from lenders, including banks and shareholders. In the Quarter
ending March 31, 1997, the Company raised $256,000 in this manner, and used the
proceeds for reduction of debt, overhead, general operations, and maintenance of
properties.
The Company utilizes the full cost method of accounting for its oil and gas
properties. Under this method, all costs associated with the acquisition,
exploration and development of oil and gas properties are capitalized in a "full
cost pool". Cost included in the full cost pool are charged to operations as
depreciation, depletion and amortization using the units of production method
based on the ratio of current production to estimated proven reserves as defined
by regulations promulgated by the U.S. Securities and Exchange Commission. Gain
or loss on disposition of oil and gas properties are not recognized unless they
would materially alter the relationship between the capitalized costs and the
estimated proved reserves. Disposition of properties are reflected in the full
cost pool. The full cost method of accounting limits the costs the Company may
capitalize by requiring the Company to recognize a valuation allowance to the
extent that capitalized cost of its oil and gas properties in its full cost
pool, net of accumulated depreciation, depletion and amortization and any
related deferred income taxes, exceed the future net revenues of proved oil and
gas reserves plus the lower of cost or estimated fair market value of
un-evaluated properties, net of federal income tax. This limitation is normally
referred to as the "ceiling test limitation." The Company is in the development
stage and its properties are included in the un-evaluated category.
In 1995, the Company acquired a 52% working interest in a field in Harris
County, Texas from a corporation that was a general partner in partnerships that
had been formed to develop the oil and gas properties. Under the terms of the
agreement, the Company acquired its interest by assuming the
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/97 PAGE 2 OF 5
<PAGE>
obligations of the general partner, including drilling obligations with respect
to the properties. The Company made an offer to the remaining partners in the
partnership to buy their interest in the partnership for the amount of their
investment plus interest and gave the partners until September 15, 1995 to
accept or reject the offer. Partners representing a 42% working interest in the
field accepted and were delivered notes totaling $485,020 which are currently
delinquent and unpaid.
RESULTS OF OPERATIONS
In the Quarter ended March 31, 1997, the field operations of the Company
consisted of performing tasks necessary to maintain the existing leases and the
completion of six wells in a pilot developmental drilling program. Company
management was also involved in researching and identifying possible sources of
equity capital. The Company generated an operating profit for the quarter of
$11,295. Total Revenue of the Company in the Quarter was $99,186, comprised of
$97,636 in oil sales to the Company's share of the production and $1,550 in
interest income from cash deposits. The Company incurred a loss of $227,449 on
revenues of $12,861 in the prior year's Quarter ended March 31, 1996, as revised
in the Companys June 30, 1996 Audited Financial Statements. This Quarter's
results reflect an increase from the prior Quarter ended December 31, 1996,
where the Company incurred a loss of $74,934 on revenues of $48,384. The Company
attributes the change in revenues to the increase in oil sales.
As of March 31, 1997, the Company was significantly engaged in its principal
business activity of drilling and producing wells. The Company had previously
financed field maintenance operations through loans and private investment
capital infusions, and has begun to produce income through the sale of oil since
the beginning of the quarter. During the quarter, it incurred general and
administrative costs associated with the acquisition of assets and management of
the Company's affairs. Costs incurred in connection with the acquisition and
development of oil and gas properties have been capitalized in accordance with
the full cost method of accounting for oil and gas properties.
The Company does not anticipate having significant oil and gas revenues until it
is able to substantially complete the development programs in the fields that it
has acquired. Revenues from current joint venture drilling operations and the
infusion of private investment capital have increased since the end of the
quarter, and are expected to continue that trend.
Most of the Company's wells remain in a shut in status due to the need for
additional work. Reservoir studies cannot be completed until this evaluation
stage has been completed. The necessary capital for this process is expected to
be derived from operating revenue and investment capital described in the
preceeding paragraph.
The Company expended its liquid reserves in acquiring and maintaining its
properties and general corporate overhead costs. The capital originally
committed by the end of the quarter was not received, causing the Company to
operate on funds borrowed and existing investment funds. During the quarter
ending March 31, 1997, the Company received $256,000 through private placements
of its stock. The Company is currently exploring alternative means of financing
until a revenue stream is developed which is sufficient to cover all operational
expenses.
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/97 PAGE 3 OF 5
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its President, Bradley J. Simmons, have been served with a civil
lawsuit filed by the Securities and Exchange Commission which alleges securities
fraud and stock manipulation regarding actions of the Company in 1995. The
Company and Mr. Simmons intend to vigorously refute these allegations and have
retained legal counsel to represent them in this litigation. The magnitude of
the financial impact of this litigation has yet to be determined.
In addition, the Company has been served with three lawsuits involving the
collection of three of the Promissorry Notes utilized to purchase the working
interests in the fields in Harris County, Texas as described in Item II in this
filing. The Company is currently exploring potential legal defenses and third
party litigation which could affect these legal actions.
ITEM 2. CHANGES IN SECURITIES
A summary of the significant adjustments to the outstanding securities of the
Company in the Quarter ending March 31, 1997, is provided below:
COMMON STOCK
A total of 5,236,050 shares of Common Stock were issued during the quarter,
thereby increasing the total number of outstanding Common Stock to 13,332,753
shares in the following manner:
a. 256,000 shares of Common Stock of the Company were issued through
completion of a Private Placement.
b. 100,000 shares were issued through the acquisition of certain developed
oil and gas properties.
c. Equipment debt of $100,000 was retired through the issuance of 100,000
shares.
d. Convertible Preferred Stock in the amount of 950,810 shares were converted
to Common Stock, at the election of the Preferred shareholders, in the
amount of 4,754,050 shares
e. 26,000 shares were issued to parties involved with the above described
Private Placement for services associated with the offering of the above
shares
CONVERTIBLE PREFERRED STOCK
The number of outstanding Convertible Preferred shares were reduced from
2,128,646.to 1,177,836 shares by conversion of 950,810 shares of Convertible
Preferrred into 4,754,050 shares Common Stock on a "five Common for each one
Convertible Preferred" basis. The remaining Convertible Preferred if converted,
would require issuance of an additional 5,889,180 shares of Common Stock.
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/97 PAGE 4 OF 5
<PAGE>
FULLY DILUTED COMMON STOCK
Fully diluted Common Stock, in the eventuality of 100% conversion of the
outstanding Convertible Preferred shares, when combined with current outstanding
Common Stock would be 19,221,933 shares.
WARRANTS
Warrants representing a total of 258,000 shares of the Company's Common Stock
were issued in connection with the Private Placement during the Quarter ended
March 31, 1997. Warrants representing a total of 3,867,000 shares of the
Company's Common Stock were issued in prior to the Quarter, making a total of
4,125,000 Warrants outstanding. These Warrants are valid for a period of thirty
six (36) months, and are exerciseable at a price of $1.50 per share for the
initial eighteen (18) months following issuance, and exerciseable at a price of
$3.00 through the subsequent eighteen (18) month period. As of the filing of
this report none have been exercised.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITIES HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (249.308 OF THIS CHAPTER)
(a) EXHIBITS
The Financial Statements dated March 31, 1997 (unaudited) and June
30, 1996 (audited) are appended hereto and expressly made a part
hereof as Exhibit A.
(b) REPORTS ON FORM 8-K
None
SIGNATURES
THE AMERICAN ENERGY GROUP, LTD.
5/20/97 B/J/S
Bradley J. Simmons, President
5/20/97 D/L/C
David L. Cox, Secretary
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/97 PAGE 5 OF 5
<PAGE>
EXHIBIT A
TO FORM 10-Q FOR PERIOD ENDED MARCH 31, 1997
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
( DEVELOPMENT STAGE COMPANIES)
FINANCIAL STATEMENTS
JUNE 30, 1996 AND MARCH 31, 1997
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
March 31, 1997 June 30, 1996
(Unaudited) (Audited)
------------ ------------
ASSETS
CURRENT ASSETS
CASH .................................... $ 875,790 $ 424,698
RECEIVABLES - OIL & GAS SALES ........... 42,675 0
RECEIVABLES - OTHER ..................... 17,442 5,188
OTHER CURRENT ASSETS .................... 220 0
------------ ------------
TOTAL CURRENT ASSETS .................... 936,127 429,886
------------ ------------
OIL & GAS PROPERTIES ......................... 5,296,252 3,687,111
------------ ------------
PROPERTY AND EQUIPMENT
DRILLING AND RELATED EQUIPMENT .......... 300,608 281,815
VEHICLES ................................ 73,725 73,725
OFFICE EQUIPMENT ........................ 12,355 12,355
LESS: ACCUMULATED DEPRECIATION .......... (170,050) (129,891)
------------ ------------
NET PROPERTY AND EQUIPMENT .............. 216,638 238,004
------------ ------------
OTHER ASSETS
JOINT VENTURE RECEIVABLES
(NET OF UNCOLLECTIBLES) ................. 4,000 4,000
DEPOSITS ................................ 2,975 2,625
PREPAID INSURANCE ....................... 9,160 0
OPERATING LICENSE ....................... 500 500
------------ ------------
TOTAL OTHER ASSETS ...................... 16,635 7,125
------------ ------------
TOTAL ASSETS ................................. $ 6,465,652 $ 4,362,126
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
March 31, 1997 June 30, 1996
(Unaudited) (Audited)
------------ ------------
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE ........................ 319,635 275,971
ACCRUED LIABILITIES ..................... 171,046 193,090
ADVANCE FROM JV PARTNER ................. 623,338
ADVANCE ON EQUITY ACQUISITION ........... 0 44,985
NOTE PAYABLE - RELATED PARTIES .......... 100,000 110,000
CURRENT PORTION - NOTE PAYABLE
AND LONG TERM LIABILITIES ............... 811,000 1,267,200
------------ ------------
TOTAL CURRENT LIABILITIES ............... 2,025,019 1,891,246
------------ ------------
LONG TERM LIABILITIES ........................ 20,500 20,500
------------ ------------
SHAREHOLDERS EQUITY
CONVERTIBLE PREFERRED STOCK
PAR VALUE $.001 PER SHARE
AUTHORIZED 20,000,000 SHARES
ISSUED AND OUTSTANDING:
AT JUNE 30, 1996: 2,128,646 SHARES
AT MAR 31, 1997: 1,177,836 SHARES ....... 1,178 2,129
COMMON STOCK, PAR VALUE $.001
PER SHARE, AUTHORIZED 80,000,000
SHARES, ISSUED AND OUTSTANDING
AT JUNE 30, 1996: 6,620,203 SHARES
AT MAR 31, 1997: 13,332,753 SHARES ...... 13,332 6,620
PAID IN EXCESS OF PAR VALUE ............. 5,499,833 3,360,186
ACCUMULATED DEFICIT ..................... (1,094,210) (918,555)
------------ ------------
NET SHAREHOLDERS EQUITY ...................... 4,420,133 2,450,380
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS EQUITY ...... $ 6,465,652 $ 4,362,126
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
Three Months Ended Nine Months Ended July 21, 1987
March 31 March 31 Through
March 31, 1997
1997 1996 1997 1996 (Unaudited)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
OIL & GAS SALES ................... $ 97,636 $ 12,861 $ 148,690 $ 34,273 $ 242,791
------------ ------------ ------------ ------------ ------------
EXPENSES
LEASE OPERATING COSTS ............. 17,723 10,512 38,140 55,067 168,599
GEOLOGICAL AND RELATED COSTS ...... 0 0 0 0 54,124
RESEARCH AND DEVELOPMENT COSTS .... 0 0 0 0 25,000
LEGAL AND PROFESSIONAL FEES ....... 20,261 79,343 83,039 156,221 344,559
ADMINISTRATIVE SALARIES ........... 22,269 27,775 73,238 92,372 291,177
OFFICE OVERHEAD EXPENSE ........... 9,822 38,093 21,675 101,198 137,505
TRAVEL COSTS ...................... 3,947 37,821 6,560 70,007 56,825
DEPRECIATION ...................... 541 21,220 1,623 41,692 5,018
GENERAL ADMINISTRATIVE EXPENSE .... 11,778 0 51,300 0 131,548
------------ ------------ ------------ ------------ ------------
TOTAL EXPENSE ..................... 86,341 214,764 275,575 516,557 1,214,355
------------ ------------ ------------ ------------ ------------
NET OPERATING PROFIT (LOSS) ............ 11,295 (201,903) (126,885) (482,284) (971,564)
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
INTEREST INCOME ................... 1,550 2,360 4,077 7,718 26,429
INTEREST EXPENSE .................. (9,750) (27,906) (52,847) (60,470) (146,685)
DEBT FORGIVENESS .................. 0 0 0 0 (2,390)
------------ ------------ ------------ ------------ ------------
NET OTHER INCOME (EXPENSE) ........ (8,200) (25,546) (48,770) (52,752) (122,646)
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE TAX ........... 3,095 (227,449) (175,655) (535,036) (1,094,210)
FEDERAL INCOME TAX ................ 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) FOR PERIOD ........... $ 3,095 ($ 227,449) ($ 175,655) ($ 535,036) ($ 1,094,210)
============ ============ ============ ============ ============
EARNINGS (LOSS) PER SHARE .............. $ 0.000 ($ 0.031) ($ 0.013) ($ 0.051) ($ 0.082)
============ ============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Nine Months Cumulative
ended ended through
March 31 March 31 March 31
1997 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) ........................................ ($ 175,655) ($ 153,524) ($ 1,094,210)
Adjustments to Reconcile Net Loss to Cash
Provided by (Used in) Operating Activities:
Depreciation ............................................. 40,159 54,333 117,020
Less amount capitalized to oil & gas properties .......... (38,536) (12,642) (112,002)
Common stock issued for services rendered ................ -- -- 10,000
(Increase) decrease in receivables ....................... (54,929) 10,761 (46,594)
(Increase) decrease in other assets ...................... (9,510) -- (9,363)
(Increase) decrease in other current assets .............. -220 903
(Increase) decrease in joint venture receivables ......... -- -- 69,479
(Increase) decrease in deposits .......................... -- -- 1,777
Increase (decrease) in accounts payable .................. 43,664 35,619 (2,073)
Increase (decrease) in accrued liabilities and
other current liabilities .............................. 242,763 47,492 480,676
------------ ------------ ------------
Cash Provided by (Used in) Operating Activities ....... 47,736 (17,058) (585,510)
------------ ------------ ------------
Cash Flows from Investing Activities:
Expenditures for oil and gas properties .................. (1,807,451) (351,876) (3,151,581)
Expenditures for other property and equipment ............ (18,793) -- (74,036)
Proceeds from sale of oil and gas properties ............. -- -- 5,190
------------ ------------ ------------
Cash Provided By (Used in) Investing Activities ....... (1,826,244) (351,876) (3,220,427)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from notes payable and
long-term liabilities .................................. 114,550 280,485 1,145,750
Proceeds from the issuance of common stock ............... 1,631,000 -- 2,799,729
Expenditures for offering costs .......................... -- -- (114,918)
Proceeds from the issuance of convertible
voting preferred stock ................................. -- -- 102,000
Payments on notes payable and long-term liabilities ...... (377,200) (59,211) (469,002)
------------ ------------ ------------
Cash Provided By (Used in) Financing Activities ....... 1,368,350 221,274 3,463,559
------------ ------------ ------------
Net Increase (Decrease) in Cash ............................ (410,158) (147,660) (342,378)
Cash and Cash Equivalents Beginning of Period .............. 424,698 472,493 0
Cash Acquired in Purchase Transaction ...................... 861,250 -- 1,218,168
------------ ------------ ------------
Cash and Cash Equivalents end of Period .................... $ 875,790 $ 324,833 $ 875,790
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION ON JULY 21, 1987 THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
Convertible Voting Capital in
Common Stock Preferred Stock Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at inception on July 21, 1987 ....... -- $ 0 -- $ 0 $ 0 $ 0
July 21, 1987 common stock issued to a
Utah corporatin for cash
contributed at $0.001 per share ........ 1,000,000 1,000 -- -- -- --
Net (loss) for the period ended June 30, 1988 -- -- -- -- -- (25,353)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1988 ...................... 1,000,000 1,000 0 0 0 (25,353)
September 26, 1988 common stock issued to
retire payable to a related entity at
$0.007 per share ....................... 366,250 366 -- -- 24,134 --
October 25, 1988 common stock issued to an
individual for cash contributed at
$0.05 per share ........................ 200,000 200 -- -- 9,800 --
June 1989 common stock issued for cash
contributed by holders of stock
warrants at $0.025 per share ........... 1,531,863 1,532 -- -- 36,764 --
Net (loss) for the year ended
June 30, 1989 .......................... -- -- -- -- -- (1,561)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30,1989 ....................... 3,098,113 3,098 0 0 70,698 (26,914)
Common stock issued for cash contributed
by holders of stock warrants at $0.12
per share .............................. 16,009 16 -- -- 1,966 --
Costs related to securities offering ........ -- -- -- -- (14,750) --
Common stock issued as director fees
at $0.05 per share ..................... 3,000 3 -- -- 148 --
Net (loss) for the year ended June 30, 1990 . -- -- -- -- -- (12,113)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1990 ...................... 3,117,122 $ 3,117 0 0 $ 58,062 ($ 39,027)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION ON JULY 21, 1987 THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
Convertible Voting Capital in
Common Stock Preferred Stock Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1990 ...................... 3,117,122 $ 3,117 -- -- $ 58,062 ($ 39,027)
Common stock for directors fees at
$0.05 per share ........................ 3,630 4 -- -- 178 --
10 for 1 reverse common stock split ......... (2,808,677) -- -- -- -- --
1 for 10 forward common stock split ......... 2,808,677 -- -- -- -- --
Net (loss) for the year ended June 30, 1991 . -- -- -- -- -- (65,397)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1991 ...................... 3,120,752 3,121 0 0 58,240 (104,424)
Common stock issued for payment of geologic
services at $0.50 per share ............ 80,000 80 -- -- 39,920 --
Net (loss) for the year ended June 30, 1992 . -- -- -- -- -- (1,419)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1992 ...................... 3,200,752 3,201 0 0 98,160 (105,843)
Net (loss) for the year ended June 30, 1993 . -- -- -- -- -- (18)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1993 ...................... 3,200,752 3,201 0 0 98,160 (105,861)
Common stock issued for payment of
long-term liability at $0.003
per share .............................. 1,500,000 1,500 -- -- 3,000 --
Net (loss) for the year ended
June 30, 1994 .......................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1994 ...................... 4,700,752 $ 4,701 0 0 $ 101,160 ($ 105,861)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
7
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION ON JULY 21, 1987 THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
Convertible Voting Capital in
Common Stock Preferred Stock Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 ...................... 4,700,752 $ 4,701 -- -- $ 101,160 ($ 105,861)
Common stock issued by American Energy for
acquisition of oil and gas properties
at $0.50 per share ..................... 511,560 511 -- -- 173,489 --
Preferred stock issued to acquire Simmons
Oil Company, Inc. and susidiaries at
$0.50 per share ........................ -- -- 2,074,521 2,075 1,042,074 --
Common stock issued for drilling services
at $1.00 per share ..................... 13,395 13 -- -- 13,382 --
Common stock issued to officers at $0.10
per share .............................. 55,000 55 -- -- 5,445 --
Preferred stock issued for cash
contributed at $1.36 per share ......... -- -- 75,000 75 101,925 --
Common stock issued upon conversion of
preferred shares ....................... 234,625 235 (46,925) (47) (188) --
Preferred stock cancelled in settlement
of litigation .......................... -- -- (129,375) (129) 129 --
Preferred stock issued in satisfaction of
notes payable at $1.36 per share ....... -- -- 212,500 212 288,788 --
Common stock issued in satisfaction of
notes payable at $1.35 per share ....... 256,000 256 -- -- 345,744 --
Common stock issued for bonding service
at $0.44 per share ..................... 469,996 470 -- -- 206,110 --
Common stock issued for cash
contributions at $2.00 per share ....... 333,000 333 -- -- 632,867 --
Common stock issued for legal services
rendered at $0.33 per share ............ 12,500 13 -- -- 4,155 --
Cancellation of common stock of original
shareholder ............................ (800,000) (800) -- -- 800 --
Common stock issued for acquisition of
Hycarbex at $0.50 per share ............ 120,000 120 -- -- 59,880 --
Net (loss) for the year ended
June 30, 1995 .......................... -- -- -- -- -- (309,108)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1995 ...................... 5,906,828 $ 5,907 2,185,721 $ 2,186 $ 2,975,760 ($ 414,969)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
8
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION ON JULY 21, 1987 THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
Convertible Voting Capital in
Common Stock Preferred Stock Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 ...................... 5,906,828 $ 5,907 2,185,721 $ 2,186 $ 2,975,760 ($ 414,969)
Common stock issued upon conversion
of preferred shares .................... 285,375 285 (57,075) (57) (228) --
Charge stock issuance costs to the
proceeds of the offering ............... -- -- -- -- (114,918) --
Common stock issued for cash contributions
at $1.00 per share ..................... 500,000 500 -- -- 499,500 --
Cancellation of common stock ................ (72,000) (72) -- -- 72 --
Net (loss) for the year ended
June 30,1996 ........................... -- -- -- -- -- (503,586)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1996 ...................... 6,620,203 6,620 2,128,646 2,129 3,360,186 (918,555)
----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash contributions
at $1.00 per share ..................... 475,000 475 -- -- 474,525 --
Net (loss) for the three months ended
September 30, 1996 ..................... -- -- -- -- -- (103,816)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 1996 ................. 7,095,203 $ 7,095 2,128,646 $ 2,129 $ 3,834,711 ($1,022,371)
----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash
contributions at $1.00 per share ....... 814,000 814 -- -- 740,596 --
Common stock issued to acquire oil & gas
properties ............................. 187,500 187 -- -- 374,812
Net (loss) for the three months ended
December 31, 1996 ...................... -- -- -- -- -- (74,934)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 .................. 8,096,703 $ 8,096 2,128,646 $ 2,129 $ 4,950,119 ($1,097,305)
----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash
contributions at $1.00 per share ....... 256,000 256 -- -- 327,743
Common stock issued to acquire oil & gas
properties ............................. 100,000 100 -- -- 99,900
Common stock issued upon conversion of
preferred shares ....................... 4,754,050 4,754 (950,810) (951) (3,803)
Common stock issued for offering costs
incurred ............................... 26,000 26 -- -- 25,974
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
9
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION ON JULY 21, 1987 THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
Convertible Voting Capital in
Common Stock Preferred Stock Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued in satisfaction of
notes payable at $1.00 per share ....... 100,000 100 -- -- 99,900 --
Net income for the three months ended
March 31, 1997 ......................... -- -- -- -- -- 3,095
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 ..................... 13,332,753 $ 13,332 1,177,836 $ 1,178 $ 5,499,833 ($1,094,210)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS
10
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. ORGANIZATION
The American Energy Group, Ltd. (the Company) was incorporated in the state of
Nevada on July 21, 1987 as Dimension Industries, Inc. Since incorporation, the
Company has had several name changes including DIM, Inc. and Belize-American
Corp. Internationale with the name change to The American Energy Group, Ltd.
effective November 18, 1994.
Effective September 30, 1994, the Company entered into an agreement to acquire
all of the issued and outstanding common stock of Simmons Oil Company, Inc.
(Simmons), a Texas Corporation, in exchange for the issuance of certain
convertible voting preferred stock (see Note 6). The acquisition included wholly
owned subsidiaries of Simmons, Sequoia Operating Company, Inc. and Simmons
Drilling Company, Inc. The acquisition was recorded at the net book value of
Simmons of $1,044,149 which approximates fair value.
During the year ended June 30, 1995, the Company incorporated additional
subsidiaries including American Energy-Deckers Prairie, Inc., The American
Energy Operating Corp., Tomball American Energy, Inc., Cypress-American Energy,
Inc., Dayton North Field-American Energy, Inc. and Nash Dome Field-American
Energy, Inc. In addition, in May 1995, the Company acquired all of the issued
and outstanding common stock of Hycarbex, Inc. (Hycarbex), a Texas corporation,
in exchange for common stock of the Company (see Note 7), a 1% overriding
royalty on the Pakistan Project and a future $200,000 production payment if
certain conditions are met. In April 1995, the name of that Company was changed
to Hycarbex-American Energy, Inc. All of these companies are collectively
referred to as "the Companies".
The Company and its subsidiaries are principally in the business of acquisition,
exploration and development of oil and gas properties with the ultimate goal of
production and operation of those properties and the contracting of those
services to other unrelated businesses.
b. DEVELOPMENT STAGE AND CONTINUED EXISTENCE
As of March 31, 1997, the activities of the Companies have not yet produced
significant revenues from operations. Accordingly, the Companies are considered
as still in the development stage with the accompanying consolidated financial
statements reflecting the results of operations, changes in stockholders equity
and cash flows for the period from inception on July 21, 1987 through March 31,
1997. In addition, the accompanying consolidated financial statements have been
prepared assuming the Companies will continue as going concerns. The Companies,
including the newly acquired and organized subsidiaries, have suffered recurring
losses from operations and have a working capital deficiency that raises doubt
about the Companies ability to continue as going concerns.
11
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
b. DEVELOPMENT STAGE AND CONTINUED EXISTENCE (CONTINUED)
The recovery of assets and continuation of future operations are dependent upon
the Companies ability to obtain additional debt or equity financing and their
ability to generate revenues sufficient to continue pursuing their business
purpose. Management is actively pursuing additional equity and debt financing
sources to finance future operations and anticipates the realization of more
significant revenues from oil and gas production in the near future.
c. ACCOUNTING METHODS
The Company's consolidated financial statements are prepared using the accrual
method of accounting. The full cost method is used in accounting for oil and gas
properties. Accordingly, all costs associated with acquisition, exploration, and
development of oil and gas reserves, including directly related overhead costs,
are capitalized. In addition, depreciation on property and equipment used in oil
and gas exploration and interest costs incurred with respect to financing oil
and gas acquisition and exploration activities is capitalized in accordance with
full cost accounting. Capitalized interest for the year ended June 30, 1996 was
$7,469. All capitalized costs of oil and gas properties will be amortized on the
unit-of-production method using estimates of proved reserves. Investments in
unproved properties and major development projects are not amortized until
proved reserves associated with the projects can be determined or until
impairment occurs. As of March 31, 1997, none of the Companies oil and gas
properties had any proved oil and gas reserves. In addition, significant
production of oil and gas from those properties had only begun. Accordingly,
there has been no amortization of the capitalized costs of the Companies oil and
gas properties as of March 31, 1997. It has also been determined that the
exploration and development activities of the Companies has not resulted in the
impairment of the capitalized costs of these unproved oil and gas properties.
The acquisition of Simmons Oil Company, Inc. and it's subsidiaries has been
accounted for using the purchase method. Accordingly, the accompanying
consolidated financial statements for the period up until the date of
acquisition, September 30, 1994, do not include the financial position, the
results of operations or cash flows of the Simmons companies for those periods.
The acquisition of Hycarbex, Inc. has been accounted for using the
pooling-of-interests method. Hycarbex had no assets or liabilities or results of
operations through the date of the acquisition and, therefore, had no effect on
the consolidated financial statements through April 6, 1995.
12
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
d. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the Company and its wholly owned
subsidiaries as detailed previously. All significant intercompany accounts and
transactions have been eliminated in consolidation.
e. CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
f. PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation on drilling and related
equipment, vehicles and office equipment is provided using the straight-line
method over expected useful lives of five to seven years. For the year ended
June 30; 1996, the Companies incurred total depreciation expense of $53,069 of
which $50,906 was capitalized as costs of oil and gas properties. For the
quarter ended March 31, 1997, the Companies incurred total depreciation expense
of $13,386 of which $12,845 was capitalized as costs of oil and gas properties.
g. EARNINGS AND LOSS PER SHARE OF COMMON STOCK
The loss per share of common stock is based on the weighted average number of
shares issued and outstanding at the date of the consolidated financial
statements. The earnings per share of common stock is based on the weighted
average number of shares issued and outstanding on a fully diluted basis at the
date of the consolidated financial statements.
NOTE 2 - OIL AND GAS PROPERTIES
At the time the Company acquired Simmons Oil Company, Inc. and its subsidiaries,
those companies had ownership interests in oil and gas prospects located in
Texas. These properties contained oil and gas leases on which existing wells had
been shut-in and abandoned and had additional sites available for further
exploration and development.
On March 10, 1995, American Energy - Deckers Prairie, Inc., a wholly owned
subsidiary of the Company, entered into an agreement with an unrelated entity to
accept the transfer of all right, title and interest to certain oil and gas
leases located in the state of Texas along with all personal property and
equipment located on and used in connection this those leases. In exchange,
American Energy - Deckers
13
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 2 - OIL AND GAS PROPERTIES (CONTINUED)
Prairie, Inc. assumed all contractual covenants related to those oil and gas
leases. The selling entity had previously sold working interests in these leases
totaling from 33% to 48% depending on the property. As part of the acquisition
agreement, American Energy - Deckers Prairie, Inc. agreed to purchase the
working interests from the individual holders for the amount of their original
investment plus interest at 7% from the date of their investment, evidenced by a
"Drilling Investor Note" to each investor, due and payable on September 15,
1995. Each working interest holder had the option to retain his working interest
or sell it to American Energy-Deckers Prairie, Inc. The agreement also specified
that American Energy-Deckers Prairie, Inc. was to pay a total of $24,000 plus
interest to three working interest holders representing a 12% working interest
ownership which was done prior to June 30, 1995. The commitment to repay the
Drilling Investor Notes was secured by a financial guaranty bond. Subsequent to
June 30,1995, and as of the due date of the promissory notes, September 15,
1995, working interest holders representing Drilling Investor Notes totaling
$485,020, including accrued interest, had notified the Companies of their desire
to sell their working interests and execute on the respective promissory notes.
As of September 15, 1995 and subsequently, the Companies have been unable to
satisfy this obligation and the financial guaranty bond securing the payment of
the Drilling Investor Notes has not been enforced. The Company has received
three lawsuits invloving the enforcement of these obligations.
Effective May 1, 1995, the Company acquired certain oil and gas leases and
certain drilled and equipped wells for $55,000 from an unrelated entity.
On April 3, 1995, the Company entered into an agreement with an unrelated entity
(which is also the same entity providing financial guaranty and surety bonds on
oil and gas property acquisitions) for the sale of common stock and joint
venture investments of up to approximately $20,000,000 in the exploration,
development and production of the Companies oil and gas properties. The
agreement was amended and extended several times, including the addition of the
Company agreeing to sell an undivided 50% working interest in certain oil and
gas properties for $1,000,000. As of June 30, 1995 and subsequently, the
Companies had not received any funds in conjunction with this transaction nor
has any working interest ownership been conveyed to this entity. Accordingly, no
aspects of this transaction have been reflected in the accompanying consolidated
financial statements.
On April 6,1995, Hycarbex entered into a concession agreement with and was
issued an exploration license by the President and the Federal Government of the
Islamic Republic of Pakistan. This agreement and license relate to oil and gas
property known as the Jacobabad Block (Block 2768-4) and entitles Hycarbex to a
95% working interest in the property. The exploration license has been issued
for a period of three years. During the first year Hycarbex is required to
expend a minimum of $26,000 processing and interpreting data already available.
Hycarbex in the second year is required to expend a minimum of $525,000
performing seismic work, evaluating and interpreting the data from the seismic
work performed. Hycarbex must expend a minimum of $3,200,000 drilling one
exploratory well in the third
14
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 2 - OIL AND GAS PROPERTIES (CONTINUED)
year. In the event Hycarbex does not commit to undertake the drilling of the
exploratory well, the license shall expire at the end of the second year.
The concession agreement also required Hycarbex to provide a bank guaranty for
$551,000 which was done by an unrelated surety company. That surety company
received common stock of the Company as compensation for providing the bond as
described in Note 7.
NOTE 3 - NOTE PAYABLE - RELATED PARTY
As of March 31, 1997, the Companies had a note payable in the amount of $100,000
due to an individual who is a major shareholder and director of the Companies.
This note payable bears interest at a rate of 11% and matured on January 19,
1996. In addition, the Companies have assigned to this individual a 1 %
overriding royalty in all domestic oil and gas properties of the Companies. This
obligation has been reflected as a current liability in the accompanying
consolidated financial statements.
NOTE 4 - NOTES PAYABLE AND LONG-TERM LIABILITIES
The following is a summary of notes payable and long-term liabilities as of
March 31, 1997 and June 30, 1996:
MARCH 31, 1997 JUNE 30, 1996
--------------- ---------------
5.25% notes payable to a financial
institution, due November 1, 1995;
secured by certificates of deposit
totaling $300,000 (see Note 2) ............. 0 $ 300,000
10% note payable, due in monthly
installments of $1,900 with a balloon
payment of $30,803 due August 1, 1996;
secured by natural gas gathering system .... $ 37,667 $ 37,667
Note payable to an individual bearing
no interest and due on demand; unsecured ... $ 50,000 $ 50,000
Note payable bearing no interest;
payable at $0.50 per foot drilled with
the rig securing this obligation, any
unpaid balance due June 1, 1998 ............ $ 20,500 $ 20,500
(continued on following page)
15
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 4 - NOTES PAYABLE AND LONG-TERM LIABILITIES (continued)
MARCH 31, 1997 JUNE 30, 1996
--------------- ---------------
15% note payable, interest payable
quarterly secured by drilling
equipment, due September 30, 1997 .......... $ 0 $ 80,000
Notes payable for purchase of oil
and gas property, 7% interest, due
and payable September 15, 1995 ............. $ 533,333 $ 533,333
Note payable upon demand, unsecured
made by unrelated party, 10% interest ...... $ 190,000 $ 190,000
16% note payable, due July 16, 1996,
Secured by equipment and oil & gas
properties and guarantee agreement
with company officer ....................... $ 0 $ 76,200
--------------- ---------------
$ 831,500 $ 1,087,700
Less: Current portion of notes
payable and long term
liabilities .......................... (811,000) (1,267,200)
--------------- ---------------
Long-Term Liabilities ...................... $ 20,500 $ 20,500
=============== ===============
NOTE 5 - BUILDING AND PROPERTY ACQUISITION
On September 30, 1995, the Company entered into a agreement with an unrelated
party to acquire 6.6725 acres of land including all buildings and improvements
located in Cypress, Texas for $1,167,500. $5,000 was paid at the time of
execution of the agreement with the remaining unpaid principal balance due in
full on September 30, 1996. The Company defaulted on its note and relinquished
the building to the owner without penalty. The Company has back interest payable
in the amount of $10,000 as of March 31, 1997.
16
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 6 - CONVERTIBLE VOTING PREFERRED STOCK
On October 31, 1994, the Board of Directors of the company approved the increase
in the number of authorized shares of preferred stock from 2,500,000 to
20,000,000. An amendment to the articles of incorporation was subsequently filed
with the State of Nevada.
On September 22, 1994, the Board of Directors of the Company also approved the
issuance of 2,074,521 shares of the authorized preferred stock of the Company,
to be issued in a series, to be known as the "Convertible Voting Preferred
Stock, $.025 Non Cumulative Dividend". A corresponding certificate of issuance
was filed with the state of Nevada. Holders of these shares are entitled to a
non cumulative, preferential dividend of $.025 per share per annum, when
declared by the Board of Directors, payable from the surplus, net profits or
assets of the Company. At any time after September 30, 1999, the Board of
Directors of the Company may elect to redeem this Convertible Voting Preferred
Stock at a redemption price of $.50 per share. Each share of this Convertible
Voting Preferred Stock shall be convertible into five shares of the common stock
of the Company.
Under the conversion privileges of these shares, the holder may elect to convert
20% of the Convertible Voting Preferred Stock prior to September 30, 1995 and an
additional 20% every year thereafter until September 30, 1999. The right to
convert shall terminate if not exercised on or before September 30, 1999. Each
share of this Convertible Voting Preferred Stock shall be entitled to one
shareholder vote. These 2,074,521 shares were issued pursuant to the acquisition
by the Company of Simmons Oil Company, inc. and its subsidiaries. One share of
Convertible Voting Preferred Stock was issued for every four shares of common
stock of Simmons Oil Company, Inc.
During the year ended June 30, 1995, the Company issued an additional 75,000
shares of Convertible Voting Preferred Stock in exchange for cash contributions
totaling $102,000 at a price of $1.36 per share as established by the Board of
Directors. In addition, 212,500 shares of Convertible Voting Preferred Stock
were issued to individuals during the year ended June 30, 1995 in satisfaction
of notes payable totaling $289,000. The per share price at which these
transactions took place was also at a rate of $1.36 per share as determined by
the Board of Directors. These shares were issued on the same basis and
convertible and voting terms as the Convertible Voting Preferred shares issued
in conjunction with the Simmons acquisition.
The Company resolved a dispute with one of the original shareholders of Simmons
Oil Company, Inc. during the year ended June 30, 1995 which resulted in the
surrender and cancellation of 129,375 shares of Convertible Voting Preferred
Stock previously issued in conjunction with the acquisition of Simmons Oil
Company, Inc. and subsidiaries.During the year ended June 30, 1995, several
holders of shares of the Convertible Voting Preferred Stock elected to convert
20% of their shares into common stock of the Company in accordance with the
conversion provisions. Accordingly, 46,925 shares of the
17
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 6 - CONVERTIBLE VOTING PREFERRED STOCK (CONTINUED)
Convertible Voting Preferred Stock was converted into 234,625 shares of the
Company's common stock.
In the quarter ended September 30, 1995, a total of 10,000 Convertible Preferred
shares were converted into 50,000 shares of Common Stock of the Company, thereby
increasing the Common shares to 5,956,828 and reducing the number of outstanding
Convertible shares to 2,175,721 shares.
A total of 38,575 Convertible Preferred shares were converted into 192,875
shares of Common Stock of the Company in the Quarter ended December 31, 1995. An
adjustment of 72,000 shares correction of error in previously issued stock was
implemented, thereby increasing the Common shares outstanding by a net total of
120,875 shares to 6,077,703 outstanding Common and reducing the number of
outstanding Convertible Preferred shares to 2,137,146.
In the quarter ended March 31, 1996, a total of 6,000 Convertible Preferred
shares were converted into 30,000 shares of the Common Stock of the Company,
thereby increasing the Common shares to 6,107,703 and reducing the number of
outstanding Convertible shares to 2,131,146 shares.(see Note 7.)
In the quarter ended June 30, 1996, a total of 8,500 Convertible Preferred
shares were converted into 42,500 shares of the Common Stock of the Company,
thereby increasing the Common shares to 6,620,203 and reducing the number of
outstanding Convertible shares to 2,128,646 shares.(see Note 7.)
In the Quarters ended September 30, 1996 and December 31, 1996, no Convertible
Preferred shares were converted, and the number of outstanding Convertible
shares remained at 2,128,646 shares.
In the Quarter ended March 31, 1997, a total of 950,810 Convertible Preferred
shares were converted into 4,754,050 shares of Common Stock of the Company,
thereby leaving a remainder of 1,177,836 shares of Convertible Preferred Stock.
If converted, these Convertible Preferred shares would convert into 5,889,180
additional shares of Common Stock..
NOTE 7- COMMON STOCK
At inception, July 21, 1987, the Company issued 1,000,000 shares of common stock
to its incorporating corporation, Dimension Industries, Inc., a Utah
corporation, for a $1,000 cash contribution.
The Company issued 366,250 shares of common stock in retiring a $25,000 payable
related to the acquisition of the carburetor enhancement units, net of other
expenditures. The per share price of $.067 was determined by the Board of
Directors at the time of the transaction.
18
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 7 - COMMON STOCK (CONTINUED)
On October 25, 1988, the Company issued 200,000 shares of common stock
individual as compensation for a $10,000 cash contribution which represents a
per share price of $.05 as determined by the Board of Directors.
In April 1989, the Company filed an offering with the Securities and Exchange
Commission in accordance with Form S-18 regarding 1,566,250 common shares then
outstanding and an additional 1,566,250 common stock purchase warrants to enable
the holders to acquire a corresponding number of common shares for $0.025 to
$0.25 depending on when the warrants were exercised. That registration statement
became effective April 23, 1989. As of June 30, 1989, warrants representing
1,531,863 shares had been exercised at $0.025 for total proceeds to the Company
of $38,281. Subsequently, additional warrants representing 16,009 shares of
common stock were exercised with net proceeds to the Company of $1,982.
The Company had agreed to issue up to 125 shares of common stock to its
directors quarterly as compensation starting with the fourth quarter of 1988.
Through the year ended June 30, 1993, a total of 6,630 shares of restricted
common stock had been issued to directors of the Company in accordance with this
agreement. This Agreement was terminated prior to June 30, 1993 and is no longer
in force.
On January 11,1991, the shareholders of the Company approved a reverse common
stock split exchanging ten shares of common stock for one share of common stock.
This reduced the total number of outstanding shares of common stock from
3,120,752 to 312,075. The shareholders of the Company, in June 1991, authorized
a forward split of the Company's common stock on a ten-for-one basis. This
increased the total number of outstanding shares of common stock from 312,075 to
3,120,752 issued and outstanding as of June 30, 1991.
In August 1991, the Board of Directors of the Company authorized and the Company
issued 80,000 shares of the Company's restricted common stock as payment in full
for $40,000 of geologic services provided. This transaction was in settlement
for an outstanding liability from a prior period.
During the year ended June 30, 1994, the Company issued 1,500,000 shares of
common stock in satisfaction a $4,500 long-term liability.
During the year ended June 30, 1995, the Board of Directors authorized
cancellation of 800,000 of the common shares issued pursuant to a mutual
agreement between the parties involved.
During the year ended June 30, 1995, the Company compensated officers and
directors by issuing them 55,000 shares of common stock for services rendered
valued at $5,500 or $0.10 per share.
19
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 7 - COMMON STOCK (CONTINUED)
In September 1994, the Company issued to two individuals, one of which was an
officer and director of the Company, 511,560 shares of common stock for oil and
gas properties valued at $174,000, representing $0.34 per share as determined by
the Board of Directors.
During the year ended June 30, 1995, the Company issued 13,395 shares of common
stock as payment for $13,395 of drilling services which is the equivalent of
$1.00 per share as determined by the Board of Directors.
During the year ended June 30, 1995, notes payable totaling $314,000 were
retired by the issuance of 240,000 shares of common stock at prices varying from
$0.34 to $2.00 per share as determined by the Board of Directors.
During the year ended June 30, 1995, the Companies acquired interests in
numerous oil and gas properties through several large transactions. Those
transactions required that there be performance bonds provided by the Companies
in specified amounts. The Companies entered into an arrangement with a company
who would provide the required bonding associated with these transactions in
exchange for the issuance of common stock. Accordingly, the Company issued a
total of 469,996 shares of its common stock valued at $206,583 representing
prices per share of between $0.34 and $0.50 as determined by the Board of
Directors.
During the year ended June 30, 1995, a total of 333,000 shares of common stock
was issued for cash contributions totaling $633,200 in various transactions at
prices per share ranging from $0.34 to $3.50 as determined by the Board of
Directors.
During the year ended June 30, 1995, the Company issued 12,500 shares of common
stock to a former director of the Company for legal services valued at $4,168 or
$0.33 per share as determined by the Board of Directors.
In April 1995, the Company acquired all of the issued and outstanding common
stock of Hycarbex, Inc., a Texas corporation, by issuing 120,000 shares of the
Company's common stock. This transaction was valued at $60,000 or $0.50 per
share as determined by the Board of Directors.
In the quarter ended December 31, 1995, an adjustment of 72,000 shares
correction of error in previously issued stock was implemented, thereby
increasing the Common shares outstanding by a net total of 120,875 shares to
6,077,703 outstanding Common.In the quarter ended March 31, 1996, a total of
6,000 Convertible Preferred shares were converted into 30,000 shares of the
Common Stock of the Company, thereby increasing the Common shares to 6,107,703
and reducing the number of outstanding Convertible shares to 2,131,146 shares.
20
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 7 - COMMON STOCK (CONTINUED)
In the Fiscal Year ended June 30, 1996, the Common shares had increased to
6,620,203 and the number of outstanding Convertible shares were 2,128,646
shares.(see Note 6.). In the quarter ended September 30, 1996, the issuance of
475,000 shares in a Private Placement increased the Common shares outstanding to
7,095,203 shares. In the quarter ended December 31, 1996, the issuance of
814,000 shares in a Private Placement and the issuance of 187,500 shares in the
acquisition of and undeveloped oil & gas lease increased the Common shares
outstanding to 8,096,703 shares.
In the quarter ended March 31, 1997, the Company issued 5,236,050 shares of
Common Stock, comprised of the issuance of 4,754,050 shares in the conversion of
Convertible Preferred shares (SEE NOTE 6 - CONVERTIBLE PREFERRED STOCK), 100,000
shares in retirement of equipment debt, 100,000 shares in the purchase of a
producing oil & gas property, 26,000 shares in conjunction with the Company's
Private Placement of Common Stock, and 256,000 shares in the Private Placement
of Common Stock. The issuance of these shares has increased the outstanding
Common Stock of the Company to a total of 13,332,753 shares.
NOTE 8 - INCOME TAXES
Through March 31, 1997, the Company has sustained cumulative operating losses.
Accordingly, no provision for income tax has been provided for any periods
presented. Also, no benefit for net operating loss carryforward has been
reflected in the accompanying consolidated financial statements since their
realization cannot be assured.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
As discussed in Note 3, the Companies defaulted on the payment of the Drilling
Investor Notes due and payable September 15, 1995 related to the acquisition of
oil and gas leases in Harris County, Texas. Although these notes are secured by
a financial guarantee bond, there is no assurance that the bond can be enforced.
The ultimate effect on the Companies and outcome of the satisfaction of this
obligation cannot be determined.
The Company leases office space in Simonton, Texas from the President and
Director of the Company st a monthly cost of $500 plus utilities. This is a
month to month lease and can be terminated by either party with 30 days notice.
The Companies have minimum lease and royalty obligations associated with their
oil and gas properties of $77,300 annually.
21
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
NOTE 11 - SUBSEQUENT EVENTS
The Company is currently engaged in the completion of an overseas Private
Placement to raise capital. The ultimate outcome of this Placement is yet to be
determined. However, subsequent to March 31, 1997, the Company has received
$2,600,000 of a total $5,000,000 commitment from a overseas investor.
The Company has recently completed the acquisition of seismic in connection with
its Pakistan Concession, thereby fulfilling its second year obligations under
the Exploration License. The total expenditure under this seismic obligation
exceeds $800,000, and funds from the proceeds described above have been used to
pay this obligation.
The Company has also paid the necessary lease delay rentals associated with the
Pakistan Concession as described in NOTE 10.
The Company has received $1,381,250 for the joint venture developmental drilling
in its domestic properties, of which $877,500 has been expended through March
31, 1997, in the drilling and completion of six wells in Fort Bend County,
Texas. The Company incurred a profit in the amount of $205,500 in the drilling
and completing these six wells. In that this is a continuing business of the
Company, subsequent profits, if any, will be reflected in the financial periods
to come.
The Company and its President, Bradley J. Simmons, have been served with a civil
lawsuit filed by the Securities and Exchange Commission which alleges securities
fraud and stock manipulation regarding actions of the Company in 1995. The
Company and Mr. Simmons intend to vigorously refute these allegations and have
retained legal counsel to represent them in this litigation. The magnitude of
the financial impact of this litigation has yet to be determined.
In addition, the Company has been served with three lawsuits involving the
collection of three of the Promissorry Notes utilized to purchase the working
interests in the fields in Harris County, Texas as described in Item II in this
filing. The Company is currently exploring potential legal defenses and third
party litigation which could affect these legal actions.
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORM 10-Q DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 875,790
<SECURITIES> 0
<RECEIVABLES> 60,117
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 936,127
<PP&E> 5,682,940
<DEPRECIATION> 170,050
<TOTAL-ASSETS> 6,465,652
<CURRENT-LIABILITIES> 2,025,019
<BONDS> 0
0
1,178
<COMMON> 13,332
<OTHER-SE> 4,405,623
<TOTAL-LIABILITY-AND-EQUITY> 6,465,652
<SALES> 148,690
<TOTAL-REVENUES> 152,767
<CGS> 38,140
<TOTAL-COSTS> 275,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,847
<INCOME-PRETAX> (175,655)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (175,655)
<EPS-PRIMARY> (0.013)
<EPS-DILUTED> 0
</TABLE>
