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, 2000
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|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission File Number: 0-26402
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THE AMERICAN ENERGY GROUP, LTD.
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(Exact name of registrant as specified in its charter)
NEVADA 87-0448843
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(state or other jurisdiction of IRS Employer
incorporation or organization) Identification Number)
P O BOX 489 SIMONTON, TEXAS 77476
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(Address of principal executive offices) (Zip code)
(281)-346-2652
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(Registrant's telephone number, including area code)
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(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.
34,928,895 COMMON SHARES
SEC Form 10-Q
The American Energy Group, LTD. Page 1 of 11
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Company has included herewith the unaudited consolidated financial
statements for the three and nine months ended March 31, 2000 and 1999,
presented with the audited consolidated financial statements for the twelve
months (Fiscal Year) ended June 30, 1999. 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.
As of March 31, 2000, the Company was engaged in its principal activity of
developmental drilling of new wells and reworking operations on existing wells
situated on its Texas oil and gas properties. The Company, through its wholly
owned subsidiary, Hycarbex-American Energy, Inc., likewise holds an oil and gas
exploration license near Jacobabad, Pakistan, but activities during the quarter
in connection with the Pakistan concession were limited to preparations for
drilling activities which will not occur until mid to later in year 2000,
subject to obtaining additional financing for the project. (See "PAKISTAN
OPERATIONS")
Historically, the Company has financed all of its operations and the operations
of its subsidiaries with the proceeds of loans and the sale of privately placed
securities. While the Company currently has an increasing revenue stream from
the sale of oil produced from its Texas properties, outside funds derived from
future loans, sales of securities or other outside sources will be necessary to
generate the working capital needed for continued development of both its
domestic and international properties until such development reaches a stage
where revenues from existing operations are sufficient to complete the
development of these properties. Additionally, the Company has entered into an
agreement with Northern Lights Energy, Ltd. to sell all of the Texas oil and gas
leases, equipment and the stock of its operating subsidiary for four million
dollars, which agreement is subject to both satisfactory due diligence by the
purchaser and approval by the Company's shareholders. If such a sale is
consummated, certain of the sale proceeds will be utilized for development of
Pakistan concession but the Company's sole source of revenues from existing
operations would terminate with the sale. Subsequent to such a sale, the funding
of ongoing operations could only be accomplished by utilizing a cash reserve
from the sale proceeds or funds derived from future loans, sales of securities
or other outside sources. (See " EVENTS AFFECTING CAPITAL RESOURCES AND MATERIAL
ASSETS")
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
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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 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-evaluation properties, net of federal income
tax. In the event the anticipated sale of the Texas oil and gas leases is
consummated, the Company will realize a net loss on its books of $11,643,873
based upon the difference between the book value of the assets to be sold of
$15,643,873 and the sale price of $4,000,000. The Company's financial statements
currently reflect $8,428,554 in capitalized costs related to the Pakistan
concession.
TEXAS GULF COAST OPERATIONS
The Company currently owns and operates a total of 107 existing wellbores in two
producing oil fields, the Blue Ridge Field and the Boling Dome Field, each of
which are within fifty (50) miles of the Houston, Texas metropolitan area. Most
of these existing wells were drilled by other oil companies prior to the
Company's acquisition of the properties and were inactive at the time of such
acquisition. During the three (3) months ending March 31, 2000, the Company,
through its operating subsidiary, The American Energy Operating Corp., drilled
and successfully completed one (1) new developmental well in the Blue Ridge
Field.
In addition to new developmental wells already drilled by the Company, the
Company continued its ongoing efforts to rework and reactivate certain of the
existing inactive wells present on the Texas leases at the time of acquisition.
During the quarter ended March 31, 2000, an average of twenty-eight (28) of the
Company's 107 wells were producing daily with varying production ranging from 2
barrels per day to 55 barrels per day. A small number of these producing wells
flow without mechanical pumping but the majority require mechanical pumping
assistance. Both the number of producing wells and the daily production from
those wells remained stable throughout the quarter. Moderate increases in the
overall daily production rate occurred throughout the quarter as a result of
field work in progress. Quoted oil prices during the quarter, at one point,
exceeded $30.00 per barrel and sales of oil by the Company during the quarter
averaged $27.38 per barrel.
During the quarter ended March 31, Management initiated negotiations with
interested parties for the sale of the Texas oil and gas leases in order to
focus its exploration activities on its Pakistan concession and in order to
raise a portion of the working capital necessary to continue such activities.
Subsequent to the end of the quarter and after consideration of the relative
terms of a number of verbal and written offers to purchase these assets, the
Company entered into an agreement to sell for four million dollars all of the
Texas oil and gas leases, Texas-based equipment
Page 3 of 11
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and the stock of its operating subsidiary, The American Energy Operating Corp.
to Northern Lights Energy, Ltd. The anticipated sale of the Texas oil and gas
leases would eliminate the Company's current source of operating revenues, as
previous exploration activities by the Company on its Pakistan concession were
unsuccessful.
In the event that the Texas oil and gas leases are not sold in the near term,
management anticipates that its domestic fields will continue to experience a
gradual increase in average daily production as additional existing wells are
reactivated and new developmental wells are drilled. Management believes that
such steadily increasing domestic production in an environment of favorable oil
prices would facilitate the generation of a portion of the operating capital
necessary to maintain its ongoing reactivation and development programs.
However, if these oil and gas leases are not sold, as anticipated, management
believes that the Company must continue to raise additional capital through
outside sources in order for the reactivation and development programs to
progress, even if oil prices remain stable at a favorable level, because several
of the Texas leases require continuous development at specified time intervals.
Generally, the failure to comply with these time sensitive development
obligations will result in the automatic forfeiture of the undeveloped portions
of the particular lease. (See "EVENTS AFFECTING CAPITAL RESOURCES AND MATERIAL
ASSETS")
PAKISTAN OPERATIONS
In the initial four years in which Hycarbex-American Energy, Inc. has held the
Jacobabad concession in the Middle Indus Basin of central Pakistan, it has
expended in excess of $8.0 Million in acquisition, geological, seismic, drilling
and associated costs. Hycarbex-American Energy, Inc. has drilled three
exploratory wells on the Jacobabad concession to date without achieving a
commercial discovery, but has encountered natural gas shows in all three wells.
Hycarbex suspended operations on one well pending further testing, plugged one
well due to mechanical and downhole difficulties while drilling, and plugged a
second well due to contact with natural gas containing a high content of
hydrogen sulfide and carbon dioxide. The plugging and abandonment of the David
#1A well in the spring of 1999 due to the contact with hydrogen sulfide and
carbon dioxide triggered a requirement under the exploration license that a
substitute well be drilled. Upon the company's request, the Government of
Pakistan has extended the commencement deadline for the replacement well to June
1, 2000, subject to continued compliance with all other license requirements.
The Company's technical team is evaluating the geological and geophysical data
derived from these wells to optimize the selection of future drillsites on the
approximate one million acres (fifteen hundred square miles) comprising the
concession. Based upon the preliminary testing of the initial well drilled in
1998, the Kharnhak #1, and the geological information obtained while drilling
the second and third exploratory wells, management believes that further
drilling and testing in Pakistan is warranted.
The Company has on deposit in its Pakistan bank account, as a reserve, certain
cash funds for application to the future costs incurred in connection with the
required replacement well to be drilled in calendar 2000. The funds on deposit
are insufficient to cover the anticipated costs of drilling and completing the
well and must be supplemented by additional funds. Management's
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efforts to raise the necessary capital during the quarter ended March 31, 2000
were unsuccessful. Subsequent to March 31, 2000, the Company entered into an
agreement to sell its Texas oil and gas leases, equipment and the stock of its
operating subsidiary for four million dollars. The consummation of the sale is
subject to satisfactory due diligence on the part of the purchaser and
shareholder approval. However, upon execution of the agreement the purchaser
paid $500,000 to the Company for its immediate use in Pakistan. Given the
current June 1 drilling deadline of the next well to be drilled on the Pakistan
concession, additional capital is required in order to meet the anticipated
costs associated with drilling this well. In the event that continued capital
raising efforts are unsuccessful within the current fiscal quarter, the company
will not have sufficient funds to meet the current Pakistan exploration
requirements in a timely manner. Such a lack of funds could cause the Company to
default on its drilling obligations, resulting in the forfeiture of the
Concession due to non-performance. If the drilling deadline is extended by the
Pakistan Government, the closing proceeds from the sale of the Texas oil and gas
leases would provide the capital to commence this required well. There can be no
assurance, however, that such an extension can be obtained or that the sale of
the Texas assets will be consummated. (See "EVENTS AFFECTING CAPITAL RESOURCES
AND MATERIAL ASSETS")
RESULTS OF OPERATIONS
REVENUES AND NET OPERATING PROFITS
In the quarter ended March 31, 2000, the Company incurred a net operating profit
of $218,055, with oil and gas sales of $507,965 as compared to a net operating
loss of $182,681 on oil and gas sales of $85,614 in the prior fiscal year's
quarter ended March 31, 1999. This reflects an increase of Four Hundred Ninety
Three Percent (493%) in revenues and an increase of approximately $400,736 in
net operating profit in comparison with the prior year's quarter ending March
31, 1999.
The increases noted above resulted from the increases in barrels of oil sold
from the Company's Texas properties at prices which were on the average, double
the price obtained in the quarter ending March 31, 2000. The average price per
barrel of oil sold by the Company in the quarter ending March 31, 1999, was
$11.76, as compared to $27.38 per barrel in the quarter ending March 31, 2000.
OIL SALES
During the quarter ending March 31, 2000, the Company sold 18,551 barrels of oil
net to the Company's interest. The Company's net barrels of sales generated
$507,965 and reflects an average daily sales of 204 net barrels of oil per day
("BOPD"); net after deducting landowner royalties.
COMPARISON TO PREVIOUS QUARTER ENDED DECEMBER 31, 1999
As compared with the prior quarter ending December 31, 1999 in the current
fiscal year, the
Page 5 of 11
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Company realized a six and one half (6.5%) percent increase in revenues from oil
sales, as well as an average net oil price increase of sixteen (16%) percent, or
$3.61 per barrel. Net operating profit increased from $175,330 in the prior
quarter ending December 31, 1999 to $218,055, reflecting a net increase of
Twenty Four (24 %) Percent in net operating profits from the prior quarter.
NET INCOME
The Company, with the inclusion of other income, foreign and domestic
administrative expenses, and including interest, reported a net profit of
$216,318 in the quarter ended March 31, 2000, versus a net loss of $183,868 in
the prior fiscal year's quarter ended March 31, 1999 and versus a net profit of
$178,071 in the quarter ended December 31, 1999. Net income increased by
$400,186 from the prior year's comparative quarter, and by $38,247 from the
prior quarter in the current fiscal year. Increases in net daily production and
oil sale prices were the major contributing factors.
TOTAL ASSETS / SHAREHOLDER'S EQUITY
In the quarter ended March 31, 2000, Total Assets of the Company increased to
$24,729,130, In the quarter ended December 31, 1999, Total Assets were
$24,501,692. The portion of the Total Assets attributed to Texas operations is
$15,643,873. In the event that the sale of the Texas-based assets is
consummated, the Company would realize a loss against book value of $11,643,873.
Net Shareholders Equity increased to $21,867,790 as of March 31, 2000, from
$21,733,510 as of December 31, 1999.
EVENTS AFFECTING CAPITAL RESOURCES AND MATERIAL ASSETS
On October 12, 1999, Pakistani military troops seized control of state run
television and radio stations and major airports throughout the country
following what certain media reports described as a surprise dismissal of the
Army Chief of Staff, General Pervaiz Musharraf. Subsequently, the Government was
dismissed, and the constitution was suspended. Subsequent to these governmental
changes, the Minister and the Secretary of the Ministry of Petroleum and Natural
Resources were replaced. It is uncertain whether these changes or any future
changes within the Ministry or other governmental posts will have a material
affect, adverse or otherwise, upon the Company's holdings and proposed
operations in Pakistan. Given the recent political events and the instabilities
inherent in the current political climate, there can be no assurance that
additional political and economic changes will not take place which materially
adversely affect, or alternatively, jeopardize the continuation of the Company's
holdings and proposed operations in Pakistan.
The Company's wholly owned subsidiary, Hycarbex-American Energy, Inc. has been
granted an extension until June 1, 2000 for the drilling of a substitute well on
its Pakistan Concession. The requirement for a substitute well was brought about
when the Company plugged and abandoned its David #1A well in the Spring of 1999
after encountering carbon dioxide and dangerous levels of hydrogen sulfide gas.
The extension is conditioned upon the Company's compliance with all other
requirements of the exploration license, including the requirement that a
minimum of $1,100,000 be
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maintained on deposit in its Pakistan operating account toward the anticipated
costs associated with the drilling of the substitute well, as well as an
additional $1,100,000 for the anticipated costs of the next exploration well
required by the exploration license. Hycarbex has not complied with these
deposit requirements because of a lack of funds, and efforts to raise the
entirety of the funds to date through loans, equity placements or other means
have been unsuccessful. An additional $500,000 was deposited in Pakistan
subsequent to the end of the quarter. These funds were received upon the
execution of the agreement to sell the Texas oil and gas leases for four million
dollars. Should such transaction be consummated, the balance of the funds would
be paid in cash to the Company and would be applied to discharge the existing
liens against these assets, operating expenses and the Pakistan deposit and
drilling requirements. Under the applicable local rules pertaining to petroleum
concessions, the Government of Pakistan can revoke the exploration license for
any material breach which is not cured within sixty days of written notice of
noncompliance. Hycarbex has not received a notice of default as of the date of
this report. Since the Company does not have the present ability to satisfy the
deposit requirement, a notice of default from the Pakistan Government could only
be cured by successfully raising the necessary funds from the closing of the
sale of the Texas oil and gas leases, a sale of securities, a joint venture
arrangement, or outside sources within the sixty day period. A failure to make
the required deposits after a default notice from the Pakistan Government could
result in a forfeiture of the exploration license and a loss of the concession.
The exploration license could also be revoked if Hycarbex is unable to comply
with the June 1, 2000 drilling deadline for the replacement well. Upon any
revocation of the license, Hycarbex could remain liable to the Pakistan
Government for liquidated damages equal to the required deposit amounts.
The Company's deficient cash position is critical given the current deposit
requirements in Pakistan and given future development requirements under certain
of its Texas oil and gas leases if those leases are not sold in the near future
as anticipated. Management intends to continue to explore and pursue all
available sources of working capital through potential loans, sales of
securities, sales of assets, joint venture affiliations, and other transactions
in order to meet its anticipated near term needs. In conjunction with these
efforts, the Company has retained an investment banking firm to assist in these
efforts. There can be no assurance that these efforts will prove successful. In
the event that capital raising efforts by the Company are unsuccessful, the
likely effects would be the forfeiture of the Pakistan concession and, if the
Texas oil and gas leases are not sold, a slowdown or postponement of scheduled
reactivation and development activities on those Texas properties.
During the Quarter ended March 31, 2000, the Company announced its intention to
sell its Texas oil and gas leases in order to focus the Company's activities and
resources toward the development of its Pakistan concession and immediately
engaged in active negotiations with interested parties. The timing of the
decision permits the Company to take advantage of opportunities for a more
favorable sale created by recent increases in market prices for oil. Such a sale
is expected to provide funds to the Company which will be used to meet the
current deposit requirements in Pakistan. Subsequent to the end of the quarter,
the Company entered into an agreement with Northern Lights Energy, Ltd. to sell
its Texas oil and gas leases for four million dollars after considering the
relative terms of a number of verbal and written offers from the interested
parties. There can be no assurance that such a sale, if consummated, would
generate sufficient cash
Page 7 of 11
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resources to meet all of the near term capital requirements in Pakistan and it
is likely that such cash resources will have to be supplemented by capital from
the sale of the Company's securities, loans or other sources. Sale of the Texas
leases would also eliminate the Company's ongoing revenue stream which would
create the need for a reserve from the sale proceeds or the need for capital
from other sources in order to meet near term administrative and operating
expenses. The Company does not currently have a line of credit or other credit
facility which can meet these needs and there can be no assurance that efforts
to sell its securities or raise capital by other means will be successful. The
likely result of the failure to sell the Texas oil and gas properties or to
raise sufficient capital within the current fiscal quarter to meet the deposit
and drilling requirements in Pakistan would be a loss of the concession due to
nonperformance.
The book value of the Company's Total Assets is currently at $24,729,130, based
upon the full cost method of accounting for the Company's oil and gas properties
whereby all costs associated with the acquisition, exploration and development
of the properties are capitalized in a "full cost pool". (See "GENERAL
INFORMATION" above). The portion of these Total Assets attributed to the Texas
oil and gas leases is $15,643,873 and the sum of $8,428,554 has been capitalized
in connection with the Pakistan concession. The book value of an oil and gas
property which is calculated using the full cost method of accounting does not
necessarily approximate the fair market value of the particular property. The
fair market value approach is generally determined by the price a willing
purchaser will pay for the property. Many factors can affect the market value,
including the recoupment period for the investment based upon the particular
property's income generating potential over a finite period. Book value, on the
other hand, will generally incorporate as a part of the calculation the
long-term income based upon development of the proven reserves.
The Company has entered into an agreement to sell its oil and gas properties for
four million dollars after consideration of a number of competing verbal and
written offers. If the sale is consummated, the Company will realize a loss
against book value equal to $11,643,873 based upon the difference between the
$15,643,873 in book value attributed to these assets and the $4,000,000 sale
price.
The Company incurred certain long term convertible debt in the amount of
$1,500,000 in the quarter ended September 30, 1999, which debt is convertible at
the option of the holder at the rate of one Common share for each one dollar of
principal converted. A contractual provision within the lending documents
required the Company to initiate a registration with the Securities & Exchange
Commission of the underlying Common shares by December 16, 1999. The Company has
not complied with this registration requirement, triggering a financial penalty
of $45,000 per month beginning January 20, 2000, and continuing until such time
that the registration is accomplished. The company has elected to pay the
penalty sum in common stock as permitted in the lending documents and will
continue to incur this monthly penalty until the registration is completed.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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On July 30,1997, the Company filed a lawsuit in U.S. District Court in Houston,
Texas, charging that specific individuals and companies had conspired to
manipulate stock of the Company which was believed to have been fraudulently
obtained prior to the acquisition by The American Energy Group, Ltd. in 1994.
The case is styled The American Energy Group. Ltd. v. Douglas E, Brown, et. al.,
C.A. No. H97-2450, in the United States District Court, Southern District of
Texas, Houston, Division. The Company subsequently reached a settlement with all
except three of the defendants. The litigation proceeded against three
defendants after the settlement, representing in excess of 400,000 shares of
common stock which the Company believes to have been fraudulently obtained. In
the quarter ended March 31, 2000, the Company obtained a judgment against one of
the three defendants and favorable settlements with the other two remaining
defendants which collectively result in a rescission of a majority of the
disputed shares. The Company is in the process of dismissing this litigation
based upon such results.
In the quarter ending June 30, 1999, 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, 2000, is provided below:
COMMON STOCK
A net increase of 1,614,673 shares of Common Stock occurred during the quarter,
thereby increasing the total number of shares of outstanding Common Stock to
34,928,895 shares in the following manner:
A total of 214,673 shares were issued to a prior investor in conjunction with
the Company's deficiency with regard to the registration of the investor's
common stock. (SEE EVENTS AFFECTING CAPITAL RESOURCES AND MATERIAL ASSETS)
During the quarter ended March 31, 2000, the entire 400,000-share class of Block
F Convertible Preferred Stock was converted into 1,400,000 shares of Common
Stock. Due to the price decline in the average closing price of the shares and
due to certain conversion adjustment provisions, the shares were converted at
better than the anticipated one-for-one basis as described in previous filings.
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CONVERTIBLE PREFERRED STOCK
In the quarter ended March 31, 2000, the number of outstanding Convertible
Preferred shares (Blocks A through E) totaled 41,500 shares which, pursuant to
their terms, are convertible on the basis of five Common shares for each one
Convertible Preferred share. The respective conversion dates for each of the
Block A through E Convertible Preferred shares have expired. These shares, which
are no longer convertible, may be redeemed by the Company, at its election, for
$0.50 per share.
All of the 400,000 outstanding Block F Convertible Preferred shares issued
during the Quarter ended September 30, 1999, were converted in the Quarter
ending March 31, 2000, into 1,400,000 shares of Common Stock.
WARRANTS
Outstanding warrants or options as of December 31,1999 totaled 11,100,000,
ranging in exercise price from $1.00 to $5.31 per share and in term from one
year to seven years. The net increase by 325,000 warrants to 11,425,000 warrants
outstanding during the quarter ended March 31, 2000 is as a result of (i) no
warrants being exercised, (ii) no warrants expiring unexercised and (iii) a
total of 325,000 warrants being issued to five individuals described below:
A total of 250,000 warrants were issued to new directors. Two new Directors were
appointed during the quarter ending March 31, 2000. Each director received
125,000 warrants with an exercise term of seven years, one with an exercise
price of $0.75 per share and one with an exercise price of $0.50 per share. The
exercise price was determined by using the closing price on the date upon which
each individual joined the Board.
Three individuals serve the Company in the capacity of the Disclosure Committee
of the Company. Each of these individuals received 25,000 warrants, exercisable
at $0.75 per share, with a term of seven years.
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
In the quarter ended March 31, 2000, Gerald N. Agranoff resigned as an officer
and director of the
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Company. The Board vacancy was filled on February 9, 2000 by the appointment of
Georg von Canal for the unexpired portion of Mr. Agranoff's term.
On March 21, 2000, Don Henrich resigned as a director and was replaced with the
appointment by the Board of Charles Valceschini. Mr. Valceschini has been
serving in the capacity of President of Hycarbex-American Energy, Inc.
Subsequent to the quarter ended March 31, 2000, Bradley J. Simmons resigned as
an officer and director of the Company. Charles Valceschini was appointed to
fill Mr. Simmons positions as President of the Company and various subsidiaries,
including the above referenced Hycarbex subsidiary. No appointment has been made
to fill this vacancy on the Board. In addition, subsequent to the quarter ended
March 31, 2000, Mr. Gilbert Torner resigned as a director of the Company. No
appointment has been made to fill this vacancy on the Board.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (249.308 OF THIS CHAPTER)
(A) EXHIBITS
The Consolidated Financial Statements dated March 31,
2000 and 1999 (unaudited), and June 30, 1999 (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.
5/05/2000 C/V
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Charles Valceschini, President
5/05/2000 L/F/G
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Linda F. Gann, Secretary
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EXHIBIT A
TO FORM 10-Q FOR PERIOD ENDED MARCH 31, 2000
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999 (UNAUDITED)
AND JUNE 30, 1999 (AUDITED)
F-1
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 JUNE 30, 1999
(UNAUDITED) (AUDITED)
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ASSETS
Current Assets
Cash ......................... $ 454,390 $ 1,196,566
Receivables .................. 186,570 73,166
Receivables - related party .. 0 1,626
Investments .................. 180 420
Other current assets ......... 10,463 13,602
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Total Current Assets ......... 651,603 1,285,380
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OIL AND GAS PROPERTIES USING
FULL COST ACCOUNTING
Properties being amortized ... 16,089,871 14,388,253
Properties not subject
to amortization ............ 8,428,554 7,913,414
Accumulated amortization ..... (675,980) (437,450)
------------ ------------
Net Oil and Gas Properties ... 23,842,445 21,864,217
------------ ------------
PROPERTY AND EQUIPMENT
Drilling and related equipment 384,817 384,679
Vehicles ..................... 139,801 155,811
Office equipment ............. 48,933 48,933
Less: Accumulated depreciation (343,569) (287,682)
------------ ------------
Net Property and Equipment ... 229,982 301,741
------------ ------------
OTHER ASSETS
Deposits and other assets .... 5,100 5,100
------------ ------------
Total Other Assets ........... 5,100 5,100
------------ ------------
TOTAL ASSETS .......................... $ 24,729,130 $ 23,456,438
============ ============
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, 2000 JUNE 30, 1999
(UNAUDITED) (AUDITED)
-------------- -------------
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable .................... $ 1,158,613.00 $1,299,152.00
Accrued liabilities ................. 280,778 250,233
Lease obligations - current ......... 3,020 4,078
Notes payable - current ............. 313,941 324,347
------------ ------------
Total Current Liabilities ........... 1,756,352 1,877,810
------------ ------------
LONG-TERM LIABILITIES
Capital lease obligations ........... 4,988 8,725
Notes payable and long-term debt .... 1,100,000 207,401
------------ ------------
Total Long-Term Liabilities ......... 1,104,988 216,126
------------ ------------
Total Liabilities ................... 2,861,340 2,093,936
------------ ------------
SHAREHOLDERS' EQUITY
Convertible preferred stock
par value $.001 per share
authorized 20,000,000 shares
issued and outstanding
At June 30, 1999: 101,996 shares
At March 31, 2000: 41,500 shares ... 42 102
Common stock, par value $.001
per share, authorized: 80,000,000
shares, issued and outstanding:
At June 30, 1999: 32,878,388 shares
At March 31, 2000: 34,928,895 shares 34,929 32,878
Paid in excess of par value ......... 23,775,381 23,687,080
Accumulated deficit ................. (1,942,562) (2,357,558)
------------ ------------
Net Shareholders' Equity ............ 21,867,790 21,362,502
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ..................................... $ 24,729,130 $ 23,456,438
============ ============
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,
2000 1999 2000 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Oil and gas sales .................. $ 507,965 $ 85,614 $ 1,300,440 $ 245,909
Lease operating and production costs 163,085 84,343 504,193 213,448
----------- ----------- ----------- -----------
Gross Profit .................... 344,880 1,271 796,247 32,461
----------- ----------- ----------- -----------
OTHER EXPENSES
Legal and professional fees ........ 42,120 83,360 165,073 344,998
Administrative salaries ............ 20,425 27,900 61,825 71,425
Office overhead expense ............ 10,063 13,807 33,890 47,802
Franchise taxes .................... 17,000 18,750 35,000 26,250
Depreciation ....................... 3,381 4,127 12,111 12,381
General and administrative expense . 33,836 36,008 74,413 95,044
----------- ----------- ----------- -----------
Total Other Expenses ............ 126,825 183,952 382,312 597,900
----------- ----------- ----------- -----------
NET OPERATING PROFIT (LOSS) ................. 218,055 (182,681) 413,935 (565,439)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income .................... 225 0 8,301 21,172
Loss on investments ................ 0 0 0 (3,373)
Loss on asset sales ................ 0 0 (4,416) (3,293)
Interest expense ................... (1,962) (1,187) (2,824) 0
----------- ----------- ----------- -----------
Net Other Income (Expenses) ..... (1,737) (1,187) 1,061 14,506
----------- ----------- ----------- -----------
NET INCOME (LOSS) BEFORE TAX ................ 216,318 (183,868) 414,996 (550,933)
Federal Income Tax ................. 0 0 0 0
----------- ----------- ----------- -----------
NET INCOME (LOSS) FOR PERIOD ................ $ 216,318 ($ 183,868) $ 414,996 ($ 550,933)
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE ................... $ 0.006 ($ 0.006) $ 0.012 ($ 0.018)
=========== =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN 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
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................. $ 198,678 ($ 550,933)
Adjustments to Reconcile Net Loss to Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization ..................... 185,436 158,931
Less amount capitalized to oil & gas properties ... (21,371) (39,165)
(Increase) decrease in receivables ................ (89,135) (31,357)
(Increase) decrease in deposits and other assets .. 240 (191,897)
(Increase) decrease in other current assets ....... (5,599) 2,960
(Increase) decrease in restricted cash ............ 0 (863,727)
Increase (decrease) in accounts payable ........... (253,344) (1,841,450)
Increase (decrease) in accrued liabilities and
other current liabilities ....................... 40,186 (19,093)
----------- -----------
Cash Provided by (Used in) Operating Activities 55,091 (3,375,731)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for oil and gas properties ........... (1,743,600) (2,043,761)
Proceeds from the sale of equipment ............... 10,000 --
Expenditures for other property and equipment ..... (6,089) (68,032)
----------- -----------
Cash Provided By (Used in) Investing Activities (1,739,689) (2,111,793)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and
long-term liabilities ........................... 1,100,000 --
Proceeds from the issuance of common stock ........ 100,000 3,455,000
Expenditures for offering costs ................... (327,673) --
Proceeds from the issuance of convertible
voting preferred stock .......................... 400,000 --
Payments on notes payable and long-term liabilities (204,113) (81,797)
----------- -----------
Cash Provided By (Used in) Financing Activities 1,068,214 3,373,203
----------- -----------
NET INCREASE (DECREASE) IN CASH ..................... (616,384) (2,114,321)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD ....... 1,196,566 3,214,205
----------- -----------
CASH AND CASH EQUIVALENTS END OF PERIOD ............. $ 580,182 $ 1,099,884
=========== ===========
</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, 1999 THROUGH MARCH 31, 2000
<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, 1999 ......... 32,878,388 $ 32,878 101,996 $ 102 $ 23,687,080 ($ 2,357,558)
============ ============ ============ ============ ============ ============
Convertible preferred stock issed
for cash @ $1.00 per share .... -- -- 400,000 400 399,600 --
Common stock issued upon
conversion of preferred shares 302,500 302 (60,496) (60) (241) --
Offering costs related to the
issuance of common stock ...... -- -- -- -- (301,994) --
Net income for the quarter
ended September 30, 1999 ...... -- -- -- -- -- 20,607
------------ ------------ ------------ ------------ ------------ ------------
Balance, September 30, 1999 ..... 33,180,888 $ 33,180 441,500 $ 442 $ 23,784,445 ($ 2,336,951)
============ ============ ============ ============ ============ ============
Common stock issued for cash
at $0.75 per share ............ 133,334 134 -- -- 99,866 --
Offering costs related to the
issuance of common stock ...... -- -- -- -- (25,677) --
Net income for the quarter
ended December 31, 1999 ....... -- -- -- -- -- 178,071
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 ...... 33,314,222 $ 33,314 441,500 $ 442 $ 23,858,634 ($ 2,158,880)
============ ============ ============ ============ ============ ============
Offering costs related to the
issuance of common stock ...... -- -- -- -- (82,038) --
Common stock issued upon
conversion of preferred shares 1,400,000 1,400 (400,000) (400) (1,000) --
Common stock issued related
to private placement provisions 214,673 215 -- -- (215) --
Net income for the quarter
ended March 31, 2000 .......... -- -- -- -- -- 216,318
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 2000 ........ 34,928,895 $ 34,929 41,500 $ 42 $ 23,775,381 ($ 1,942,562)
============ ============ ============ ============ ============ ============
</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, 2000 AND JUNE 30, 1999
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
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.
F-7
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND JUNE 30, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 1999 was $52,842 . No interest was capitalized during the three & nine
months ended March 31, 2000. In addition, depreciation capitalized during the
year ended June 30, 1999 totaled $51,339. Depreciation capitalized during the
quarters ended March 31, 2000, December 31, 1999, and September 30, 1999 was
$26,153, $15,649 and $5,772, respectively. 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, 1999, 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 $133,523 has been recognized in the
accompanying consolidated financial statements for the year ended June 30, 1999
and for the quarters ended March 31, December 31, 1999 and September 30, 1999,
was $83,195, $88,759 and $66,756, respectively, on proved and impaired or
abandoned 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 to the date of acquisition,
September 30, 1994, do not include the financial position, 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.
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.
F-8
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND JUNE 30, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 three and nine
months ended March 31, 2000, the Companies incurred total depreciation expense
of $67,682 of which $26,203 and $47,574, respectively, 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.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
F-9
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND JUNE 30, 1999
NOTE 3 - NOTES PAYABLE AND LONG-TERM DEBT
The following is a summary of notes payable and long-term debt as of June 30,
1999 and March 31, 2000:
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
2000 1999
----------- -----------
<S> <C> <C>
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 ........................................ $ 270,667 $ 539,404
Note payable to individual secured by certain oil and 1,100,000 -0-
gas properties of the Company, payable March 17, 2002,
bearing no interest, payable at face value of note
of $1,500,000 at time of payment .....................
Note payable to corporate officer, unsecured,
payable on demand .................................... 30,000 -0-
8.5% note payable to a financial institution due in
monthly installments of $950 for 36 months; secured
by two vehicles ...................................... -0- 9,069
7% notes payable, due September 15, 1995,
secured by working interest in oil and gas properties 38,117 38,117
----------- -----------
Total notes payable and long-term debt ............... $ 1,438,784 $ 586,590
----------- -----------
Less: Unamortized discount ........................... (24,843) (54,842)
----------- -----------
Net notes payable and long-term debt ................. $ 1,413,941 $ 531,748
Less: Current portion of notes payable
and long-term debt ................................... (313,941) (324,347)
----------- -----------
Long-Term Liabilities ................................ $ 1,100,000 $ 207,401
=========== ===========
</TABLE>
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 32 to 60 months with total monthly lease
payments of $662.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, 2000 AND JUNE 30, 1999
NOTE 5 - CAPITAL LEASE OBLIGATIONS ( CONTINUED)
Year ending June 30
2000 $ 1,236
2001 $ 3,355
2002 $ 3,355
2003 $ 2,278
2004 $ 0
-------------
$ 10,224
Total minimum lease commitments ................... $ 10,224
Less: Executory costs (such as taxes and insurance)
included in capital lease payments .......... (460)
--------
Net minimum lease payments ........................ 9,764
Less: Amount representing interest ................ (1,756)
--------
Total Capital Lease Obligations ................... 8,008
Current Portion ................................... (3,020)
--------
Long Term Portion ................................. $ 4,988
========
NOTE 6 - CONVERTIBLE VOTING PREFERRED STOCK
During the quarter ended March 31, 2000, all of the outstanding 400,000 shares
of Block F Convertible Preferred stock were converted into 1,400,000 shares of
common stock. There was an adjustment to the original conversion ratio of one
share of Common for one share of Convertible Preferred due to the decline in the
average closing price over the period in which the shares were to be converted,
triggering an increase in the conversion ratio to 3.5 Common shares to one share
of Convertible Preferred.
The number of outstanding Convertible Preferred (Block A-E) shares totaled
41,500 shares. The conversion deadline for all of these Block A-E Convertible
Preferred shares has passed making them no longer convertible. The Company has
the right to redeem these shares for $0.50 per share.
NOTE 7- COMMON STOCK
During the quarter ended March 31, 2000, a net increase of 214,673 shares of
Common Stock of the Company was incurred through adjustment to previous private
sale of common stock. (See Consolidated Statement of Stockholders Equity). This
addition brings total outstanding Common Stock to 34,928,895 shares.
F-11
<PAGE>
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND JUNE 30, 1999
NOTE 8- COMMON STOCK WARRANTS
As of the quarter ended December 31, 1999, outstanding warrants totaled
11,100,000. Total outstanding warrants as of March 31,2000 had increased by
325,000 warrants to 11,425,000, ranging in exercise price from $1.00 to $5.31
per share and in term from one year to seven years.
NOTE 9 - INCOME TAXES
Through March 31, 2000, the Companies have sustained a net operating loss
carryforward totaling approximately $1,942,562 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. In the event
of a sale of the Texas based assets, this obligation is expected to be assumed
by the Purchaser.
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
settled the matter, and the lawsuit has been dismissed.
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. Terms have not been disclosed, and the viability and
continued pursuit of the transaction is under review by the Board of Directors.
In the fiscal year ended June 30, 1999, the Company 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 planned drillsite on the
concession, scheduled for drilling, subject to the ability to obtain additional
financing, in mid 2000.
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM AMERICAN ENERGY GROUP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 454,390
<SECURITIES> 180
<RECEIVABLES> 186,570
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 651,603
<PP&E> 24,415,996
<DEPRECIATION> 343,569
<TOTAL-ASSETS> 24,729,130
<CURRENT-LIABILITIES> 1,756,352
<BONDS> 0
0
42
<COMMON> 34,929
<OTHER-SE> 21,832,819
<TOTAL-LIABILITY-AND-EQUITY> 24,729,130
<SALES> 507,965
<TOTAL-REVENUES> 508,190
<CGS> 163,085
<TOTAL-COSTS> 289,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,962
<INCOME-PRETAX> 216,318
<INCOME-TAX> 0
<INCOME-CONTINUING> 216,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 216,318
<EPS-BASIC> .006
<EPS-DILUTED> .006
</TABLE>
