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, 1999
[ ] 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 of (IRS Employer identification Number)
incorporation or organization)
P O BOX 489 SIMONTON, TEXAS 77476
(Address of rincipal 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.
32,841,828 COMMON SHARES
SEC Form 10-Q
The American Energy Group,
LTD.
Page 1 of 9
<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, 1999 and 1998, presented with the Audited
Consolidated Financial Statements for the twelve months (Fiscal Year) ended June
30, 1998. 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 has emerged from the development stage. It has engaged in the
drilling of development wells and the recompletion of existing wells on its
inventory of properties acquired in previous quarters. It has not yet 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 existing shareholders. Management
anticipates an increasing revenue stream from the properties as further
development funded through substantial equity investment received by the Company
continues. Because the Company's properties are predominantly oil related (as
opposed to natural gas related), the fluctuation in oil prices will continue to
have a significant impact on the Company's prospective revenues and revenue
stream from oil sales.
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". Costs 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 is not recognized unless it
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 costs 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
non-evaluated properties, net of federal income tax.
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/99 PAGE 2 OF 9
<PAGE>
PAKISTAN OPERATIONS
During the quarter ended March 31, 1999, the Company, through its wholly owned
subsidiary, Hycarbex-American Energy, Inc., began drilling operations on its
Jacobabad Concession. In early February, following two months of drillsite
construction and rig mobilization, the David #1 well was spudded. The wellsite
spudding ceremony on February 6th was attended by high ranking Pakistan
Government officials and American Energy officers and directors. By Mid March,
the company had encountered downhole and mechanical conditions short of the
target depth which made it necessary to plug the original wellbore and move the
drillsite. On April 6th, the replacement well, the David #1A was spudded
approximately 160 feet from the original wellbore. In late April, during the
drilling and testing of the David 1A well, dangerous levels of hydrogen sulfide
gas and loss of circulation were encountered, and the company elected to plug
the well to prevent possible further release of the dangerous gas. The Company's
original plan was to continue drilling to deeper formations than the depth where
these drilling problems were encountered. However, the circumstances encountered
made this impossible without considerable and unreasonable risks to wellsite
personnel.
In the initial four years in which the Company has held the Jacobabad Concession
in the Middle Indus Basin of central Pakistan, it has expended in excess of $7.0
Million in acquisition, geological, seismic, drilling and associated costs. The
Company had deposited $1.1 Million in a segregated bank account in Islamabad,
Pakistan, as a reserve for estimated site preparation and drilling costs on the
David #1 well. Costs have exceeded this number due to the conditions
encountered. Based upon the results of these newly drilled wells, the Company is
currently conducting evaluations of geological and geophysical data on the area,
logistics, mobilization, and other associated matters to devise a sound plan for
success. As of the time of this filing, the further evaluation and drilling
preparations for another exploratory well are underway. This is a significant
undertaking by the Company.
TEXAS GULF COAST DRILLING AND OPERATIONS
In the Quarter ended March 31, 1999, the Company, through its wholly owned
subsidiary, The American Energy Operating Corp., engaged in drilling, reworking,
and plugging operations on its two principal oil fields, Boling Dome Field and
Blue Ridge Field in Fort Bend County, Texas. Two new development wells were
drilled in March. Both wells were drilled in the Blue Ridge Field. At the time
of the filing this report, both wells are in various stages of completion.
Production facilities were being constructed for these new additions. During the
quarter, workover operations were conducted on 3 wells in the Boling Field,
restoring all three back to production. In addition, five previously existing
wellbores in Boling Field were plugged and abandoned.
Subsequent to the quarter ended March 31, 1999, two additional wells have been
drilled in the Blue Ridge Field, and at the time of the filing this report, both
wells are in various stages of completion. Reworking and workover operations on
previously shut in wells continues on a weekly basis on various wells in both
fields, as the recent increase in oil price has prompted the Company to resume
these operations. Oil prices during the quarter ended March 31, 1999 dropped to
as low as $10 per barrel. At the time of the filing of this report, the price
which the Company receives for its oil have increased to $15 per barrel. While
there is no guarantee of future oil pricing, Company management has initiated
renewed active field operations in its Texas Gulf Coast oil fields to attempt to
restore
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/99 PAGE 3 OF 9
<PAGE>
production on previously shut in wells and continue drilling additional in-field
development wells as capital budgets permit.
In April, 1999, the Company executed a Letter of Intent with Maverick Drilling
Company, Inc., an Austin, Texas, based drilling company which owns five drilling
rigs and associated drilling equipment. For the past three years, Maverick has
conducted all contract drilling operations for the Company in its Texas Gulf
Coast oil fields, and continues to do so. Final terms of the purchase have not
been disclosed, and are subject to complete due diligence by both parties.
Maverick is owned and controlled by one of the Company's directors, Don Henrich,
and the Company has retained independent consulting firms to conduct due
diligence, financial review, appraisals, and independent opinions as to the
fairness of any transaction contemplated by the Board of Directors.
With the exception of historical information, the matters discussed in this
Report contain forward looking statements that involve risks and uncertainties.
Although the Company believes that its expectations are based upon reasonable
assumptions, it can give no assurance that its goals will be achieved. Important
factors that could cause actual results to differ materially from those in the
forward looking statements contained in this report include the time and extent
of changes in commodity prices for oil and gas, increases in the cost of
conducting operations, including remedial operations, the extent of the
Company's success in discovering, developing and producing reserves, political
conditions, including those in Pakistan and other areas in which the Company
possesses properties, condition of capital and equity markets, changes in
environmental laws and other laws affecting the ability of the Company to
explore for and produce oil and gas and the cost of so doing and other factors
which are described in this Report.
RESULTS OF OPERATIONS
In the quarter ended March 31, 1999, the field operations of the Company
consisted of performing tasks necessary to maintain the existing leases and the
drilling and completion of wells drilled in pilot developmental drilling
projects. Significant information pertaining to the results of the quarter
include:
REVENUES AND EARNINGS
In the quarter ended March 31, 1999, the Company incurred a net operating profit
of $1,271, with oil & gas sales of $85,614 as compared to a net operating profit
of $8,024 on oil & gas sales of $98,784 in the prior fiscal year's quarter ended
March 31, 1998. This reflects a decrease of approximately thirteen (13%) percent
in comparative quarter's oil and gas sales in comparison with the prior year's
Quarter ending March 31, 1998. This has been due to a comparable decline in the
weighted average price per barrel of oil sales in the comparative quarters, as
well as the company's election to shut in most of its primary production for
maintenance and repairs. The average price per barrel of oil sold by the Company
in the quarter ending March 31, 1998 was $14.05, as compared to $11.76 in the
current quarter ending March 31, 1999, reflecting a reduction in oil price per
barrel of in excess of sixteen (16%) percent. The Company has begun renewed
drilling and recompletion activities in this quarter. The results of this
activity are expected to be more accurately reflected in the Company's future
financial information and performance.
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/99 PAGE 4 OF 9
<PAGE>
The Company, with the inclusion of other income, foreign and domestic
administrative expenses, and including interest, reported net loss of $183,868
in the quarter ended March 31, 1999 versus a net loss of $66,048 in the prior
fiscal year's quarter ended March 31, 1998.
As of March 31, 1999, 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, but has begun to produce income through the sale of oil since
the beginning of the new fiscal year. 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, if successful, in
the fields that it has acquired. The pricing of oil, the Company's sole revenue
source in terms of product sales, has considerable impact on the prospective
revenues and profitability of the Company. Revenues from recent acquisitions,
drilling, and completion operations and the utilization of infusions of private
investment capital in drilling and completion operations have helped increase
these revenues, but the projects have yet to be fully developed and are still
far from completion.
TOTAL ASSETS / SHAREHOLDER'S EQUITY
In the quarter ended March 31, 1999, Total Assets of the Company increased to
$22,598,857, reflecting an overall increase of over eight percent (8.3%) for the
nine months beginning from the fiscal year ended June 30, 1998, which at that
time totaled $20,864,635.
Net Shareholders Equity increased to $21,326,202 as of March 31, 1999, from
$17,476,355 as of June 30, 1998. This reflects an increase of $3,849,847, or
approximately twenty two percent (22%) for the nine months beginning from the
fiscal year ended June 30, 1998. This is attributed to a combination of the sale
of common stock, reduction of trade payables through the issuance of common
stock, the exercise of certain of the Company's warrants and the acquisition of
properties through the issuance of common stock..
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the quarter ended March 31, 1999, the Company reached a settlement with the
Securities and Exchange Commission (SEC) in a civil lawsuit filed by the SEC on
April 24, 1997, against the company and its President, Bradley J. Simmons. In
the lawsuit, the SEC sought civil penalties, injunctive relief and a bar against
Mr. Simmons from serving as an officer and director of any publicly traded
company based on allegations that specific press releases issued and filings
made by the Company in 1995 contained misleading statements or omitted material
information and thereby violated certain provisions of the Securities Act of
1933 and the Securities Exchange Act of 1934. The Company and Mr. Simmons agreed
to the settlement without admitting or denying the allegations in
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/99 PAGE 5 OF 9
<PAGE>
the SEC's lawsuit in order to avoid further costs of protracted litigation and
disruption to the Company. The terms of the settlement were incorporated in a
final judgement entered by the Court on January 15, 1999. Under the terms of the
final judgement, the Company and Mr. Simmons agreed to a permanent injunction
prohibiting them from engaging in violations of certain specified anti-fraud and
reporting provisions in the federal securities laws. Although Mr. Simmons agreed
to pay a civil penalty in the amount of $60,000.00, the final judgement imposes
no bar upon Mr. Simmons and he remains an officer and director of the Company.
The final judgement imposes no civil penalty on the Company. Moreover, it adopts
a remedy previously implemented by the Company on its own initiative to insure
the accuracy and adequacy of its public disclosures, namely, the establishment
of an independent Disclosure Committee to oversee all such public disclosures in
the future. The function of the Disclosure Committee is to monitor and review
the content of each proposed public disclosure in light of the nature and
materiality of the information being published. The composition of the
Disclosure Committee is subject to strict criteria and the Company is required
to continue its existence for a minimum of four years. The parties agreed that
this was an appropriate remedial effort to enhance the quality of the Company's
public disclosures.
The Company and its wholly owned subsidiary, Hycarbex-American Energy, Inc. were
named in a lawsuit filed by Alpha Tech International, Inc. in Cause No.
1999-10941 in the 11th Judicial District Court of Harris County, Texas. In the
lawsuit Alpha Tech International, Inc. is seeking recovery of cash, common
stock, and an overriding royalty in the Company's Pakistan Concession as a
finder's fee under a 1996 agreement in which Alpha Tech International, Inc. was
to be compensated if successful in raising working capital for the Company from
certain named third parties. The Company and its subsidiary have denied any
liability under the Agreement.
ITEM 2. CHANGES IN SECURITIES
A summary of the significant adjustments to the outstanding securities of the
Company in the quarter ending March 31, 1999, is provided below:
COMMON STOCK
A net increase of 1,155,923 shares of Common Stock occurred during the quarter,
thereby increasing the total number of outstanding Common Stock to 32,841,828
shares in the following manner:
During the quarter ended March 31,1999, two individual investors acquired a
total of 900,000 shares of common stock of the Company in an ongoing private
placement of shares at an average purchase price of $1.66 per share. When
completed, the private placement average purchase price, including sales prior
to the current quarter, is anticipated to be approximately $2.26 per share. The
Company received $1,500,000 in proceeds in these transactions. The Company
believes that the persons had knowledge and experience in financial and business
matters which allowed them to evaluate the merits and risk of the purchase of
these securities of the Company, and that the person was knowledgeable about the
Company's operations and financial condition. These transactions were effected
by the Company in reliance upon exemptions from registration under the
Securities Act of 1933 as amended
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/99 PAGE 6 OF 9
<PAGE>
(the "Act") as provided in Section 4(2) thereof. Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities.
From time to time during the quarter ended March 31,1999, various holders of the
Company's convertible preferred stock exercised their conversion rights whereby
46,900 shares of convertible preferred stock were converted into common stock of
the Company at a conversion ratio of five shares of common stock in exchange for
each one share of convertible preferred stock. A total of 234,500 shares of
common stock were issued. The Company did not receive any proceeds in the
conversion. The Company believes that each of the persons had knowledge and
experience in financial and business matters which allowed them to evaluate the
merits and risk of the purchase of these securities of the Company, and that
each person was knowledgeable about the Company's operations and financial
condition. These transactions were effected by the Company in reliance upon
exemptions from registration under the Securities Act of 1933 as amended (the
"Act") as provided in Section 4(2) thereof. Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities.
During the quarter ended March 31, 1999, the Company has engaged a technical
consultant in various services for the Company. In conjunction with retaining
their services in the quarter ended March 31, 1999, the Company issued 21,423
shares of Common Stock to this firm. The Company believes that the consultant
had knowledge and experience in financial and business matters which allowed
them to evaluate the merits and risk of the receipt of these securities of the
Company. In such capacity they were knowledgeable about the Company's operations
and financial condition. These transactions were effected by the Company in
reliance upon exemptions from registration under the Securities Act of 1933 as
amended (the "Act") as provided in Section 4(2) thereof. Each certificate issued
for unregistered securities contained a legend stating that the securities have
not been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities.
CONVERTIBLE PREFERRED STOCK
The number of outstanding Convertible Preferred shares was reduced from 148,358
shares to 101,458 shares by conversion of 46,900 shares of Convertible Preferred
into 234,500 shares of Common Stock on a "five Common for each one Convertible
Preferred" basis. The remaining Convertible Preferred shares, if converted,
would require issuance of an additional 507,290 shares of Common Stock.
WARRANTS
Prior to the quarter ended March 31, 1999, outstanding warrants totaled
12,700,000. Total outstanding Warrants as of March 31,1999 were 14,875,000,
ranging in exercise price from $1.25 to $5.31 per share and in term from one
year to seven years. In the quarter ended March 31, 1999, no warrants were
exercised and a total of 2,175,000 warrants were issued to various parties
involved with the Company as described below:
In the quarter ended March 31, 1999, a total of 2,125,000 warrants were issued
to directors, officers, and employees of the Company. These Warrants are
exercisable on the basis of one share of Common
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/99 PAGE 7 OF 9
<PAGE>
Stock for each Warrant, at exercise prices of between $2.50 and $3.00 per share
for a seven year period. The Company believes that each of the persons had
knowledge and experience in financial and business matters which allowed them to
evaluate the merits and risk of the receipt of these securities of the Company.
In such capacity they were knowledgeable about the Company's operations and
financial condition. These transactions were effected by the Company in reliance
upon exemptions from registration under the Securities Act of 1933 as amended
(the "Act") as provided in Section 4(2) thereof. Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities.
During the fiscal year, the Company has engaged certain technical consultants in
various contracts. In conjunction with retaining their services in the quarter
ended March 31, 1999, the Company has issued 50,000 warrants with an exercise
price of $3.00 per share and an expiration date in January, 2006. The Company
believes that each of the persons had knowledge and experience in financial and
business matters which allowed them to evaluate the merits and risk of the
receipt of these securities of the Company. In such capacity they were
knowledgeable about the Company's operations and financial condition. These
transactions were effected by the Company in reliance upon exemptions from
registration under the Securities Act of 1933 as amended (the "Act") as provided
in Section 4(2) thereof. Each certificate issued for unregistered securities
contained a legend stating that the securities have not been registered under
the Act and setting forth the restrictions on the transferability and the sale
of the securities. No underwriter participated in, nor did the Company pay any
commissions or fees to any underwriter in connection with any of these
transactions. None of the transactions involved a public offering.
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
CHANGES IN BOARD OF DIRECTORS
In the Quarter ended March 31, 1999, an additional individual joined the Board
of Directors, Mr. Manfred Welser. Mr. Welser is a shareholder of the Company who
resides in Zurich, Switzerland. On May 17th, Mr. Welser was elected by the Board
of Directors to serve as Chairman. Mr. Welser succeeds Bradley J. Simmons, who
remains as Director, President, and CEO of the Company.
Subsequent to the Quarter ended March 31, 1999, an additional individual was
appointed to the Board of Directors, Mr. Eli D. Bebout. Mr. Bebout is a resident
of Wyoming, and became the seventh member of the American Energy Board of
Directors.
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/99 PAGE 8 OF 9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (249.308 OF THIS CHAPTER)
(A) EXHIBITS
The Consolidated Financial Statements dated March 31, 1999 and 1998
(unaudited), and June 30, 1998 (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.
3/20/99 B/J/S
Bradley J. Simmons, President
3/20/99 L/F/G
Linda F. Gann, Secretary
SEC FORM 10-Q
THE AMERICAN ENERGY GROUP, LTD. 3/31/99 PAGE 9 OF 9
<PAGE>
EXHIBIT A
TO FORM 10-Q FOR PERIOD ENDED MARCH 31, 1999
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998 (UNAUDITED)
AND JUNE 30, 1998 (AUDITED)
F-1
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 JUNE 30, 1998
(UNAUDITED) (AUDITED)
---------------- -------------
ASSETS
CURRENT ASSETS
CASH ...................................... $ 1,099,884 $ 3,214,205
RECEIVABLES ............................... 40,341 8,984
RECEIVABLES - RELATED PARTY ............... 206,192 0
INVESTMENTS ............................... 340 3,300
OTHER CURRENT ASSETS ...................... 102,493 113,118
------------ ------------
TOTAL CURRENT ASSETS ...................... 1,449,250 3,339,607
------------ ------------
OIL & GAS PROPERTIES USING
FULL COST ACCOUNTING
PROPERTIES BEING AMORTIZED ................ 14,005,118 12,203,925
PROPERTIES NOT SUBJECT
TO AMORTIZATION ......................... 6,604,462 5,433,328
ACCUMULATED AMORTIZATION .................. (421,994) (303,927)
------------ ------------
NET OIL AND GAS PROPERTIES .............. 20,187,586 17,333,326
------------ ------------
PROPERTY AND EQUIPMENT
DRILLING AND RELATED EQUIPMENT ............ 300,495 246,494
VEHICLES .................................. 126,146 126,146
OFFICE EQUIPMENT .......................... 47,870 34,839
LESS: ACCUMULATED DEPRECIATION ............ (273,220) (218,627)
------------ ------------
NET PROPERTY AND EQUIPMENT ................ 201,291 188,852
------------ ------------
OTHER ASSETS
NET RESTRICTED CASH/PAKISTAN OPERATIONS ... 690,040 0
DEPOSITS AND OTHER ASSETS ................. 70,690 2,850
TOTAL OTHER ASSETS ........................ 760,730 2,850
------------ ------------
TOTAL ASSETS ................................. $ 22,598,857 $ 20,864,635
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
F-2
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 JUNE 30, 1998
(UNAUDITED) (AUDITED)
---------------- --------------
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE .......................... 345,896 2,366,880
ACCRUED LIABILITIES ....................... 303,630 322,723
LEASE OBLIGATIONS-CURRENT ................. 6,943 6,985
NOTES PAYABLE-CURRENT ..................... 357,155 250,876
------------ ------------
TOTAL CURRENT LIABILITIES ................. 1,013,624 2,947,464
------------ ------------
LONG TERM LIABILITIES
NOTES PAYABLE AND LONG TERM DEBT .......... 250,871 428,280
CAPITAL LEASE OBLIGATIONS ................. 8,160 12,536
------------ ------------
TOTAL LONG TERM LIABILITIES ............... 259,031 440,816
------------ ------------
TOTAL LIABILITIES ......................... 1,272,655 3,388,280
------------ ------------
SHAREHOLDERS EQUITY
CONVERTIBLE PREFERRED STOCK
PAR VALUE $.001 PER SHARE
AUTHORIZED 20,000,000 SHARES
ISSUED AND OUTSTANDING:
AT JUNE 30, 1998: 535,462 SHARES
AT MAR 31, 1999: 101,458 SHARES ........... 101 535
COMMON STOCK, PAR VALUE $.001
PER SHARE, AUTHORIZED 80,000,000
SHARES, ISSUED AND OUTSTANDING
AT JUNE 30, 1998: 28,927,872 SHARES
AT MAR 31, 1999: 32,841,828 SHARES ........ 32,841 28,928
PAID IN EXCESS OF PAR VALUE ............... 23,447,402 19,050,101
ACCUMULATED DEFICIT ....................... (2,154,142) (1,603,209)
------------ ------------
NET SHAREHOLDERS EQUITY ................... 21,326,202 17,476,355
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS
EQUITY ....................................... $ 22,598,857 $ 20,864,635
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
OIL & GAS SALES .................. $ 85,614 $ 98,784 $ 245,909 $ 482,536
LEASE OPERATING & PRODUCTION COSTS 84,343 90,760 213,448 199,402
--------- --------- --------- ---------
GROSS PROFIT (LOSS) ............ 1,271 8,024 32,461 283,134
--------- --------- --------- ---------
EXPENSES
LEGAL AND PROFESSIONAL FEES ...... 83,360 60,899 344,998 166,222
ADMINISTRATIVE SALARIES .......... 27,900 18,900 71,425 84,516
OFFICE OVERHEAD EXPENSE .......... 13,807 9,416 47,802 28,376
FRANCHISE TAXES .................. 18,750 12,737 26,250 28,778
DEPRECIATION ..................... 4,127 1,100 12,381 3,308
GENERAL ADMINISTRATIVE EXPENSE ... 36,008 25,875 95,044 92,447
--------- --------- --------- ---------
TOTAL EXPENSE .................... 183,952 128,927 597,900 403,647
--------- --------- --------- ---------
NET OPERATING PROFIT (LOSS) ......... (182,681) (120,903) (565,439) (120,513)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
INTEREST INCOME .................. 0 43,231 21,172 79,556
LOSS ON INVESTMENTS .............. 0 (3,000) (3,373) (40,947)
INTEREST EXPENSE ................. (1,187) 0 (3,293) (1,247)
DEBT FORGIVENESS ................. 0 14,624 0 101,905
--------- --------- --------- ---------
NET OTHER INCOME (EXPENSE) ....... (1,187) 54,855 14,506 139,267
--------- --------- --------- ---------
NET INCOME (LOSS) BEFORE TAX ........ (183,868) (66,048) (550,933) 18,754
FEDERAL INCOME TAX ............... 0 0 0 0
--------- --------- --------- ---------
NET INCOME (LOSS) FOR PERIOD ........ ($183,868) ($ 66,048) ($550,933) $ 18,754
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE ........... ($ 0.006) ($ 0.002) ($ 0.018) $ 0.001
========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE IN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31 MARCH 31
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................................. ($550,933) ($66,408)
Adjustments to Reconcile Net Loss to Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization ...................................... 158,931 91,216
Less amount capitalized to oil & gas properties .................... (39,165) (19,514)
(Increase) decrease in receivables ................................. (31,357) 22,492
(Increase) decrease in deposits and other assets ................... (191,897) (92,000)
(Increase) decrease in other current assets ........................ 2,960 (14,139)
(Increase) decrease in restricted cash ............................. (863,727) --
Increase (decrease) in accounts payable ............................ (1,841,450) (88,550)
Increase (decrease) in accrued liabilities and
other current liabilities ........................................ (19,093) (234,356)
----------- -----------
Cash Provided by (Used in) Operating Activities ................. (3,375,731) (401,259)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for oil and gas properties ............................ (2,043,761) (5,354,050)
Expenditures for other property and equipment ...................... (68,032) (2,824)
----------- -----------
Cash Provided By (Used in) Investing Activities ................. (2,111,793) (5,356,874)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and
long-term liabilities ............................................ -- --
Proceeds from the issuance of common stock ......................... 3,455,000 6,965,000
Proceeds from the issuance of convertible
voting preferred stock ........................................... -- --
Payments on notes payable and long-term liabilities ................ (81,797) (161,808)
----------- -----------
Cash Provided By (Used in) Financing Activities ................. 3,373,203 6,803,192
----------- -----------
NET INCREASE (DECREASE) IN CASH ...................................... (2,114,321) 1,045,059
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD ........................ 3,214,205 3,132,294
----------- -----------
CASH AND CASH EQUIVALENTS END OF PERIOD .............................. $ 1,099,884 $ 4,177,353
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-5
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JUNE 30, 1998 THROUGH MARCH 31, 1999
<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, 1998 ............ 28,927,872 $ 28,928 535,462 $ 535 $ 19,050,101 ($ 1,603,209)
============ ============ ============ ============ ============ ============
Common stock issued for cash
at $3.00 per share ............... 135,000 135 -- -- 404,865 --
Common stock issued for cash
at $3.5 per share ................ 428,572 429 -- -- 1,499,571 --
Common stock issued for
oil & gas properties
at $3.50 per share ............... 140,000 140 -- -- 489,860 --
Common stock issued for
retirement of accounts payable
at $3.50 per share ............... 39,441 39 -- -- 138,425 --
Common stock issued upon
conversion of preferred shares ... 108,320 108 (21,664) (21) (87) --
Net loss for the quarter
ended September 30, 1998 ......... -- -- -- -- -- (122,585)
------------ ------------ ------------ ------------ ------------ ------------
Balance, September 30, 1998 ....... 29,779,205 $ 29,779 513,798 $ 514 $ 21,582,735 ($ 1,725,794)
============ ============ ============ ============ ============ ============
Common stock issued for
services at $1.38 per share ...... 18,200 18 -- -- 25,098 --
Common stock issued for
oil & gas properties
at $3.50 per share ............... 54,000 54 -- -- 188,945 --
Common stock issued for
services at $3.00 per share ...... 35,000 35 -- -- 104,965 --
Cancellation of common stock ....... (27,700) (28) -- -- 28 --
Common stock issued upon
conversion of preferred shares ... 1,827,200 1,827 (365,440) (366) (1,462) --
Net loss for the quarter
ended December 31, 1998 .......... -- -- -- -- -- (244,480)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 ........ 31,685,905 $ 31,685 148,358 $ 148 $ 21,900,309 ($ 1,970,274)
============ ============ ============ ============ ============ ============
Common stock issued for
services at $2.25 per share ...... 21,423 22 -- -- 48,180 --
Common stock issued for cash
in private placement ............ 900,000 900 -- -- 1,499,100 --
Common stock issued upon
conversion of preferred shares ... 234,500 234 (46,900) (47) (187) --
Net loss for the quarter
ended March 31, 1999 ............. -- -- -- -- -- (183,868)
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1999 ........... 32,841,828 $ 32,841 101,458 $ 101 $ 23,447,402 ($ 2,154,142)
============ ============ ============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-6
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND JUNE 30, 1998
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, 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
During the year ended June 30, 1998, the Companies began production from its oil
and gas leases located in the State of Texas and has recognized the
corresponding revenues. Accordingly, the Companies are no longer considered to
be in the development stage with the accompanying consolidated financial
statements no longer reflecting the results of operations, changes in
stockholders' equity and cash flows for the period from inception on July 21,
1987 through March 31, 1999.
F-7
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND JUNE 30, 1998
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 were previously
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 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, exploration and development activities are capitalized in
accordance with full cost accounting. Capitalized interest for the year ended
June 30, 1998 was $84,448 . No interest was capitalized in the quarter ended
March 31, 1999. In addition, depreciation capitalized during the year ended June
30, 1998 totaled $55,234. Depreciation capitalized during the quarter ended
March 31, 1999 totaled $17,404. All capitalized costs of proved oil and gas
properties subject to amortization are being amortized on the unit-of-production
method using estimates of proved reserves. Investments in unproved properties
and major development projects not subject to amortization are not amortized
until proved reserves associated with the projects can be determined or until
impairment occurs. If the results of an assessment indicate that the properties
are impaired, the amount of the impairment is added to the capitalized costs to
be amortized. As of June 30, 1998, proved oil and gas reserves had been
identified on some of the Companies oil and gas properties with revenues
generated and barrels of oil produced from those properties. Accordingly,
amortization totaling $270,927 has been recognized in the accompanying
consolidated financial statements for the year ended June 30, 1998 and $51,753
for the quarter ended March 31, 1999 on proved and impaired or abandoned 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,
F-8
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND JUNE 30, 1998
therefore, had no effect on the consolidated financial statements through April
6, 1995.
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 quarter ended
March 31, 1999, the Companies incurred total depreciation expense of $21,531 of
which $17,404 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.
h. CERTIFICATES OF DEPOSIT
As of June 30, 1998, the Companies held three certificates of deposit totaling
$313,518 at the same financial institution, all in the name of the Company and
two of the subsidiaries. All three certificates of deposit bear interest at a
rate of 4.25% and matured every 30 days. These certificates of deposit were not
renewed during the quarter ended March 31, 1999.
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
F-9
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND JUNE 30, 1998
for further exploration and development.
NOTE 3 - NOTE PAYABLE - RELATED PARTY
As of June 30, 1996, the Companies had a note payable in the amount of $100,000
due to an individual who is a major shareholder and was a director of the
Company. This note payable had an interest rate of 11% and matured January 19,
1996. This obligation was paid off during the year ended June 30, 1998. In
addition, the Companies have assigned to this individual a 1% overriding royalty
in certain oil and gas properties of the Companies.
NOTE 4 - NOTES PAYABLE AND LONG-TERM DEBT
The following is a summary of notes payable and long-term debt as of June 30,
1998 and March 31, 1999:
MARCH 31 JUNE 30
1999 1998
--------- ---------
Note payable bearing no interest; payable $175,000
the first year and $250,000 annually thereafter until
paid in full; secured by certain oil and gas property
and equipment ....................................... $ 602,489 $ 723,463-
8.5% note payable to a financial institution due in
monthly installments of $950 for 36 months; secured
by two vehicles ..................................... 11,729 19,261
7% notes payable, due September 15, 1995,
secured by working interest in oil and gas properties 38,117 44,117
--------- ---------
Total notes payable and long-term debt .............. $ 652,335 $ 786,841
--------- ---------
Less: Unamortized discount .......................... (44,349) (107,685)
--------- ---------
Net notes payable and long-term debt ................ 607,986 679,156
Less: Current portion of notes payable
and long-term debt .................................. (357,115) (250,876)
--------- ---------
Long-Term Liabilities ............................... $ 250,871 $ 428,280
========= =========
NOTE 5 - CAPITAL LEASE OBLIGATIONS
The Company entered into certain lease agreements during the year ended June 30,
1997 and quarter ended December 31, 1998, relating to office equipment and
portable buildings used in the field which have been accounted for as capital
leases. These leases have terms of from 36 to 60 months with total monthly lease
payments of $694.The following are the scheduled annual payments on these
capital leases:
F-10
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND JUNE 30, 1998
NOTE 5 - CAPITAL LEASE OBLIGATIONS ( CONTINUED)
Year ending June 30
1999 $2,079
2000 $7,429
2001 $3,355
2002 $3,355
2003 $3,076
------
$19,284
Total minimum lease commitments ....................... $ 19,294
Less: Executory costs (such as taxes and insurance)
included in capital lease payments ........... (1,511)
--------
Net minimum lease payments ............................ 17,783
Less: Amount representing interest .................... (2,680)
--------
Total Capital Lease Obligations ....................... 15,103
Current Portion ....................................... (6,943)
--------
Long Term Portion ..................................... $ 8,160
========
NOTE 6 - CONVERTIBLE VOTING PREFERRED STOCK
The number of outstanding Convertible Preferred shares was reduced from 148,358
shares to 101,458 shares by conversion of 46,900 shares of Convertible Preferred
into 234,500 shares of Common Stock on a "five Common for each one Convertible
Preferred" basis. The remaining Convertible Preferred shares, if converted,
would require issuance of an additional 507,290 shares of Common Stock
NOTE 7- COMMON STOCK
During the quarter ended March 31, 1999, a net increase of 1,155,923 shares of
Common Stock of the Company was incurred through a combination of a private
placement, consulting fees, and conversion of Convertible Preferred shares.
(See Consolidated Statement of Stockholders Equity)
NOTE 8- COMMON STOCK WARRANTS
Prior to the quarter ended March 31, 1999, outstanding warrants totaled
12,700,000. Total outstanding Warrants as of March 31,1999 were 14,875,000,
ranging in exercise price from $1.25 to $5.31 per share and in term from one
year to seven years. In the quarter ended March 31, 1999, a total of 2,175,000
warrants were issued to various parties involved with the Company.
F-11
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND JUNE 30, 1998
NOTE 9 - INCOME TAXES
Through March 31, 1999, the Companies have sustained net operating loss
carryforward totaling approximately $2,154,152 that may be offset against future
taxable income through 2012. No tax benefit has been reported in the
accompanying consolidated financial statements, because the potential tax
benefits of the net operating loss carryforward are offset by a valuation
allowance of the same amount.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company leases office space in Simonton, Texas at a monthly cost of $1,033
plus utilities. The lease expires during November 2000 at which time the Company
may lease the space on a month-to-month basis at $1,200 per month.
The Companies have minimum lease and royalty obligations associated with their
oil and gas properties of $77,300 annually.
During the year ended June 30, 1997, the Board of Directors authorized the
establishment of two Management Royalty Pools equal to 1% of the revenues from
domestic oil and gas production and Pakistan oil and gas production,
respectively. The beneficiaries and their ownership in this pool are subject to
variance based upon certain performance criterion.
In May 1997, the Securities and Exchange Commission filed civil charges against
the Company and its President alleging various violations of securities
regulations. In the quarter ended March 31, 1999, the Company and its President
have settled the matter, and the lawsuit has been dismissed.
The Company, through its wholly-owned subsidiary, Hycarbex-American Energy, Inc.
had obtained a one year extension on its Jacobabad Concession in central
Pakistan. In connection with this extension, the Company had deposited a total
of $1,100,000 in one of its Pakistan bank accounts to secure the estimated
drilling and other costs associated with the David #1 well. As of March 31,
1999, $863,727 remained in this account and is reflected, net of related
payables of $173,687, in the current Balance Sheet under the caption "Other
Assets". Drilling was completed for two wells in April, 1999. The Company is
preparing to obtain additional extensions to the Concession.
Subsequent to the Quarter ended March 31, 1999, the Company has entered into a
Letter of Intent to acquire Maverick Drilling Company, Inc., an Austin, Texas
based drilling company. At the time of this writing, the Company is engaged in
due diligence and review of Maverick's inventory and financial information.
Terms have not been disclosed, nor has a closing date been established.
F-12
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND JUNE 30, 1998
Subsequent to the Quarter ended March 31, 1999, the Company has completed the
drilling of two exploratory wells in Pakistan, both of which proved to be
non-commercial and were plugged and abandoned. The Company is currently
conducting extensive geological and geophysical review to determine its next
course of action in this regard.
Subsequent to the Quarter ended March 31, 1999, the Company has added one
additional Board member, increasing the number of Board members to seven. In
addition, a new Chairman of the Board of Directors has been elected. Mr. Manfred
Welser has been named Chairman, succeeding Bradley J. Simmons. Mr. Simmons
remains as President and CEO of the Company.
F-13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,099,884
<SECURITIES> 340
<RECEIVABLES> 40,341
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,449,250
<PP&E> 20,662,097
<DEPRECIATION> 273,220
<TOTAL-ASSETS> 22,598,857
<CURRENT-LIABILITIES> 1,013,624
<BONDS> 0
0
101
<COMMON> 32,841
<OTHER-SE> 21,293,260
<TOTAL-LIABILITY-AND-EQUITY> 22,598,857
<SALES> 85,614
<TOTAL-REVENUES> 85,614
<CGS> 84,343
<TOTAL-COSTS> 268,295
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,187
<INCOME-PRETAX> (183,868)
<INCOME-TAX> 0
<INCOME-CONTINUING> (183,868)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183,868)
<EPS-PRIMARY> (.006)
<EPS-DILUTED> (.005)
</TABLE>
