-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NVmT1PRHVknZ7Fl8pTFOOy3D+tBNJ+PYNuCyr0t505qEhe4oGbkXEkqx1/twxjyo 9X3lGeYwc6fgvaMrn+CEBw== 0000890566-98-000095.txt : 19980129 0000890566-98-000095.hdr.sgml : 19980129 ACCESSION NUMBER: 0000890566-98-000095 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980128 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ENERGY GROUP LTD CENTRAL INDEX KEY: 0000843212 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MOTOR VEHICLE SUPPLIES & NEW PARTS [5013] IRS NUMBER: 870448843 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-25550-LA FILM NUMBER: 98514696 BUSINESS ADDRESS: STREET 1: P O BOX 489 STREET 2: 1861 BROWN BLVD,STE 655 CITY: SIMONTON STATE: TX ZIP: 77476 BUSINESS PHONE: 2813462652 MAIL ADDRESS: STREET 1: PO BOX 489 CITY: SIMONTON STATE: TX ZIP: 77476 FORMER COMPANY: FORMER CONFORMED NAME: BELIZE AMERICAN CORP INTERNATIONALE DATE OF NAME CHANGE: 19941004 FORMER COMPANY: FORMER CONFORMED NAME: DIM INC DATE OF NAME CHANGE: 19920703 10-Q 1 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 DECEMBER 31, 1997 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _____________ to ___________________ Commission File Number: 0-26402 THE AMERICAN ENERGY GROUP, LTD. (Exact name of registrant as specified in its charter) NEVADA 87-0448843 (state or other jurisdiction of (IRS Employer incorporation or organization) identification Number) P O BOX 489 SIMONTON, TEXAS 77476 (Address of principal executive offices) (Zip code) (281)-346-2652 (Registrant's telephone number, including area code) ________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. |X| Yes |_| No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check-mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. |_| Yes |_| No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. 27,862,741 COMMON SHARES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The Company files herewith the Unaudited Consolidated Financial Statements for the three months ended December 31, 1997 and 1996, presented with the Audited Consolidated Financial Statements for the twelve months (Fiscal Year) ended June 30, 1997. 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. The Company utilizes the full cost method of accounting for its oil and gas properties. Under this method, all costs associated with the acquisition, exploration and development of oil and gas properties are capitalized in a "full cost pool". Cost included in the full cost pool are charged to operations as depreciation, depletion and amortization using the units of production method based on the ratio of current production to estimated proven reserves as defined by regulations promulgated by the U.S. Securities and Exchange Commission. Gain or loss on disposition of oil and gas properties are not recognized unless they would materially alter the relationship between the capitalized costs and the estimated proved reserves. Disposition of properties are reflected in the full cost pool. The full cost method of accounting limits the costs the Company may capitalize by requiring the Company to recognize a valuation allowance to the extent that capitalized cost of its oil and gas properties in its full cost pool, net of accumulated depreciation, depletion and amortization and any related deferred income taxes, exceed the future net revenues of proved oil and gas reserves plus the lower of cost or estimated fair market value of non-evaluated properties, net of federal income tax. PAGE 2 OF 7 In the initial two years in which the Company has held the Jacobabad Concession in the Middle Indus Basin of central Pakistan, it has expended in excess of $2.0 Million in acquisition, geological, seismic, and associated costs. At the time of this filing, the Company is in the planning stages for drilling of the initial exploration well on this Concession. The Company has deposited $1.65 Million in its bank account in Islamabad, Pakistan, as a reserve for estimated site preparation and drilling costs on this initial well which is expected to be commenced by April, 1998. The Company is currently evaluating geological data on the area, logistics, mobilization, and other associated matters to devise a sound plan for success. This is a significant undertaking by the Company. 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 December 31, 1997, 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 December 31, 1997, the Company incurred a net operating profit of $10,614, with oil & gas sales of $210,385 as compared to a net operating loss of $47,834 on oil &gas sales of $48,384 in the prior fiscal year's Quarter ended December 31, 1996. This reflects in excess of a four fold increase in oil & gas sales in the comparison with the prior year's Quarter ending December 31st. This Quarter's revenues, as another comparison, is seventy four (74%) percent of the total oil sales reported for the prior Year Ended June 30, 1997, which were $283,485. The Company's ongoing drilling and recompletion activities which have resulted in productive wells are attributed to the relative increase from the prior year's Quarter and total year's oil sales. The Company, with the inclusion of other income, including interest, writedown on other investments, and debt forgiveness, reported net income of $73,055 in the Quarter ended December 31, 1997 versus.a loss of $74,934 in the prior fiscal year's Quarter ended December 31, 1996. PAGE 3 OF 7 As of December 31, 1997, the Company was significantly engaged in its principal business activity of drilling and producing wells. The Company had previously financed field maintenance operations through loans and private investment capital infusions, 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. Revenues from current drilling and completion operations and the infusion of private investment capital have increased these revenues, but the projects have yet to be fully developed and are still far from completion. LEGAL EXPENDITURES AND LITIGATION During the six months ended December 31, 1997, the Company paid retainers in excess of $75,000 related to litigation instituted by the Company on July 30, 1997 against certain parties. These retainers are currently reflected on the balance sheet of the Company. In the opinion of management, these retainers are expected to be recovered upon final resolution of this litigation. Partial settlements have been reached with the majority of the defendants and additional settlements are anticipated. TOTAL ASSETS / SHAREHOLDER'S EQUITY Total Assets of the Company increased to $18,985,838, reflecting an increase of $5,893,468, or forty five (45%) percent in six months from the fiscal year ended June 30, 1997, at which time totaled $13,092,370. Net Shareholders Equity increased to $17,441,570 as of December 31, 1997, from $10,457,095 as of June 30, 1997. This reflects an increase of $3,772,728, or twenty seven (27%) percent in the Quarter and an increase of $6,984,475, or sixty seven (67%) percent in the first six months of the fiscal year. This is attributed to a combination of the completion of equity financing and the exercise of certain of the Company's warrants. Net Shareholder Equity Per Share, on a fully diluted basis, has increased from $0.414 per share at June 30, 1997, to $0.474 per share at September 30, 1997, to $0.569 per share as of December 31, 1997 representing an increase of $0.095 per share, or twenty (20%) percent increase in the current Quarter and an increase of thirty seven (37%) percent in the six months ending December 31, 1997. This is also attributed to the completion of the equity financing and Warrants exercise. PAGE 4 OF 7 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On July 30,1997, the Company filed a lawsuit in U.S. District Court for the Southern District of Texas, charging that specific individuals and companies had conspired to manipulate stock of the Company believed to have been fraudulently obtained prior to the formation of The American Energy Group, Ltd. in 1994. On November 7, 1997, the Company announced a partial settlement of the lawsuit filed by the Company on July 30, 1997, and the withdrawal of the countersuit by one of the defendants against the Company's directors. The aggregate financial benefit of the partial settlement to the Company will be detailed in the Company's future filings with the Securities and Exchange Commission. The Company, its directors, and the settling defendants have mutually dismissed all pending actions and cross-actions against one another. The partial settlement does not affect the Company's claims against certain remaining defendants, and the Company intends to continue the pursuit of those claims. ITEM 2. CHANGES IN SECURITIES A summary of the significant adjustments to the outstanding securities of the Company in the Quarter ending December 31, 1997, is provided below: COMMON STOCK The net amount of 3,990,386 shares of Common Stock were issued during the Quarter, thereby increasing the total number of outstanding Common Stock to 27,862,741 shares in the following manner: a. 2,110,000 shares of Common Stock of the Company were issued in conjunction with the exercise of Warrants held by shareholders at an exercise price of $1.50 per share. b. 2,159,085 shares of Common Stock of the Company were issued through the conversion of 431,817 shares of outstanding Convertible Preferred Stock at the election of the Preferred shareholders. c. 150,000 shares were issued in conjunction with the acquisition of producing oil and gas property d. 10,000 shares were issued for services rendered to the Company. e. 565,833 shares were cancelled during the Quarter. f. 127,134 shares were issued in conjunction with the conversion of debt. PAGE 5 OF 7 CONVERTIBLE PREFERRED STOCK The number of outstanding Convertible Preferred shares was reduced from 994,058 to 562,241 shares by conversion of 431,817 shares of Convertible Preferred into 2,159,085 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 2,811,205 shares of Common Stock. FULLY DILUTED COMMON STOCK The Common Stock, in the eventuality of 100% conversion of the outstanding Convertible Preferred shares would total 30,673,946 shares. This figure is commonly referred to as the "fully diluted" Common Stock. WARRANTS In the Quarter ending December 31, 1997, the Company issued to each of the three Directors of the Company an additional 150,000 Warrants at an exercise price of $2.31. This represents a total of 450,000 additional Warrants issued. These Warrants are valid for a period of seven years, and are exercisable at the option of the holder into Common Stock of the Company. In the Quarter ending December 31, 1997, a total of 2,110,000 Warrants were exercised at an exercise price of $1.50 per share. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITIES HOLDERS Not Applicable ITEM 5. OTHER INFORMATION Not Applicable PAGE 6 OF 7 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (249.308 OF THIS CHAPTER) (a) EXHIBITS The Consolidated Financial Statements dated December 31, 1997 and 1996, (unaudited) and June 30, 1997 (Audited) are appended hereto and expressly made a part hereof as Exhibit A. (b) REPORTS ON FORM 8-K A Form 8-K , as filed by the Company on December 16, 1997, is appended hereto and expressly made a part hereof as Exhibit B. SIGNATURES THE AMERICAN ENERGY GROUP, LTD. 1/27/98 B/J/S Bradley J. Simmons, President 1/27/98 D/L/C David L. Cox, Secretary PAGE 7 OF 7 EXHIBIT A TO FORM 10-Q FOR PERIOD ENDED DECEMBER 31, 1997 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 (UNAUDITED) AND JUNE 30, 1997 (AUDITED) THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 JUNE 30, 1997 (UNAUDITED) (AUDITED) ------------ ------------ ASSETS CURRENT ASSETS CASH ............................. $ 5,184,082 $ 3,132,294 RECEIVABLES ...................... 88,892 70,989 RECEIVABLES - RELATED PARTY ...... 0 9,702 OTHER CURRENT ASSETS ............. 113,991 63,984 ------------ ------------ TOTAL CURRENT ASSETS ............. 5,386,965 3,276,969 ------------ ------------ OIL & GAS PROPERTIES USING FULL COST ACCOUNTING PROPERTIES BEING AMORTIZED ....... 8,203,915 5,618,847 PROPERTIES NOT SUBJECT TO AMORTIZATION ................ 5,145,208 3,990,489 ACCUMULATED AMORTIZATION ......... (73,363) (33,000) ------------ ------------ NET OIL AND GAS PROPERTIES ..... 13,275,760 9,576,336 ------------ ------------ PROPERTY AND EQUIPMENT DRILLING AND RELATED EQUIPMENT ... 246,494 246,494 VEHICLES ......................... 126,146 126,146 OFFICE EQUIPMENT ................. 25,845 23,021 LESS: ACCUMULATED DEPRECIATION ... (174,222) (159,446) ------------ ------------ NET PROPERTY AND EQUIPMENT ....... 224,263 236,215 ------------ ------------ OTHER ASSETS DEPOSITS AND OTHER ASSETS ........ 98,850 2,850 ------------ ------------ TOTAL OTHER ASSETS ............... 98,850 2,850 ------------ ------------ TOTAL ASSETS .......................... $ 18,985,838 $ 13,092,370 ============ ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS 2 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 JUNE 30, 1997 (UNAUDITED) (AUDITED) ------------ ------------ LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES ACCOUNTS PAYABLE .................... 544,048 545,987 ACCRUED LIABILITIES ................. 15,167 296,970 LEASE OBLIGATIONS-CURRENT ........... 4,825 4,565 NOTES PAYABLE-CURRENT ............... 372,549 1,123,899 ------------ ------------ TOTAL CURRENT LIABILITIES ........... 936,589 1,971,421 ------------ ------------ LONG TERM LIABILITIES NOTES PAYABLE AND LONG TERM DEBT .... 596,741 649,737 CAPITAL LEASE OBLIGATIONS ........... 10,938 14,117 ------------ ------------ TOTAL LONG TERM LIABILITIES ......... 607,679 663,854 ------------ ------------ TOTAL LIABILITIES ................... 1,544,268 2,635,275 ------------ ------------ SHAREHOLDERS EQUITY CONVERTIBLE PREFERRED STOCK PAR VALUE $.001 PER SHARE AUTHORIZED 20,000,000 SHARES ISSUED AND OUTSTANDING: AT JUNE 30, 1997: 1,075,558 SHARES AT DEC. 31, 1997: 562,241 SHARES .... 562 1,076 COMMON STOCK, PAR VALUE $.001 PER SHARE, AUTHORIZED 80,000,000 SHARES, ISSUED AND OUTSTANDING AT JUNE 30, 1997: 22,509,293 SHARES AT DEC. 31, 1997: 27,862,741 SHARES . 27,862 22,509 PAID IN EXCESS OF PAR VALUE ......... 18,403,562 13,893,728 STOCK SUBSCRIPTIONS RECEIVABLE ...... 0 (2,385,000) ACCUMULATED DEFICIT ................. (990,416) (1,075,218) ------------ ------------ NET SHAREHOLDERS EQUITY .................. 17,441,570 10,457,095 ------------ ------------ TOTAL LIABILITIES & SHAREHOLDERS EQUITY ................................... $ 18,985,838 $ 13,092,370 ============ ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS 3 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended December 31 December 31 1997 1996 1997 1996 --------- -------- --------- --------- REVENUES OIL & GAS SALES .............................. $ 210,385 $ 48,384 $ 383,752 $ 51,054 --------- -------- --------- --------- EXPENSES LEASE OPERATING COSTS ........................ 66,159 14,864 108,642 20,417 LEGAL AND PROFESSIONAL FEES .................. 55,694 39,790 105,323 62,778 ADMINISTRATIVE SALARIES ...................... 22,050 16,210 65,616 50,969 OFFICE OVERHEAD EXPENSE ...................... 7,380 5,661 18,960 11,853 FRANCHISE TAXES .............................. 16,041 0 16,041 0 TRAVEL COSTS ................................. 0 2,252 0 2,613 DEPRECIATION ................................. 1,104 541 2,208 1,082 GENERAL ADMINISTRATIVE EXPENSE ............... 31,343 16,900 66,572 39,522 --------- -------- --------- --------- TOTAL EXPENSE ................................ 199,771 96,218 383,362 189,234 --------- -------- --------- --------- NET OPERATING PROFIT (LOSS) ..................... 10,614 (47,834) 390 (138,180) --------- -------- --------- --------- OTHER INCOME (EXPENSE) INTEREST INCOME .............................. 13,732 1,650 36,325 2,527 INTEREST EXPENSE ............................. (625) (28,750) (1,247) (43,097) UNREALIZED LOSS ON INVESTMENT ................ (37,947) 0 (37,947) 0 DEBT FORGIVENESS ............................. 87,281 0 87,281 0 --------- -------- --------- --------- NET OTHER INCOME (EXPENSE) ................... 62,441 (27,100) 84,412 (40,570) --------- -------- --------- --------- NET INCOME (LOSS) BEFORE TAX .................... 73,055 (74,934) 84,802 (178,750) FEDERAL INCOME TAX ........................... 0 0 0 0 NET INCOME (LOSS) FOR PERIOD .................... $ 73,055 ($74,934) $ 84,802 ($178,750) ========= ======== ========= ========= EARNINGS (LOSS) PER SHARE ....................... $ 0.003 ($ 0.009) $ 0.003 ($ 0.024) ========= ======== ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS 4 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months Six months ended ended December 31 December 31 1997 1996 ----------- ----------- Cash Flows from Operating Activities: Net income (loss) ................................. $ 84,802 ($ 178,750) Adjustments to Reconcile Net Loss to Cash Provided by (Used in) Operating Activities: Depreciation and amortization ..................... 55,139 26,773 Less amount capitalized to oil & gas properties ... (13,672) (25,692) (Increase) decrease in receivables ................ (8,201) (35,721) (Increase) decrease in deposits and other assets .. (96,000) (14,683) (Increase) decrease in other current assets ....... (50,007) 1,820 Increase (decrease) in accounts payable ........... (1,939) 44,307 Increase (decrease) in accrued liabilities and other current liabilities ....................... (281,803) 100,264 ----------- ----------- Cash Provided by (Used in) Operating Activities (311,681) (81,682) ----------- ----------- Cash Flows from Investing Activities: Expenditures for oil and gas properties ........... (3,894,253) (1,390,586) Expenditures for other property and equipment ..... (2,824) (744) ----------- ----------- Cash Provided By (Used in) Investing Activities (3,897,077) (1,391,330) ----------- ----------- Cash Flows from Financing Activities: Proceeds from notes payable and long-term liabilities ........................... -- 114,550 Proceeds from the issuance of common stock ........ 6,365,000 1,375,000 Proceeds from the issuance of convertible voting preferred stock .......................... -- -- Payments on notes payable and long-term liabilities (104,454) (377,200) ----------- ----------- Cash Provided By (Used in) Financing Activities 6,260,546 1,112,350 ----------- ----------- Net Increase (Decrease) in Cash ..................... 2,051,788 (360,662) Cash and Cash Equivalents Beginning of Period ....... 3,132,294 424,698 ----------- ----------- Cash and Cash Equivalents end of Period ............. $ 5,184,082 $ 64,036 =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS 5 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD JUNE 30, 1996 THROUGH DECEMBER 31, 1997
Convertible Voting Capital in Common Stock Preferred Stock Excess of Accumulated Shares Amount Shares Amount Par Value Deficit ----------- -------- ---------- ------- ------------ ----------- Balance, June 30, 1996 ........... 12,584,627 $ 12,584 1,075,558 $ 1,076 $ 4,734,829 ($ 918,555) ----------- -------- ---------- ------- ------------ ----------- Common stock issued for cash contributions at $.95 per share 7,274,666 7,275 -- -- 6,922,635 -- Common stock subscriptions at $.90 per share ............. 2,650,000 2,650 -- -- 2,382,350 -- Offering costs related to sales of common stock ................... -- -- -- -- (146,086) Net (loss ) for the year ended June 30, 1997 ............ -- -- -- -- -- (156,663) ----------- -------- ---------- ------- ------------ ----------- Balance, June 30, 1997 ........... 22,509,293 22,509 1,075,558 1,076 13,893,728 (1,075,218) ----------- -------- ---------- ------- ------------ ----------- Common stock issued for cash contributions at $1.00 per share 550,000 550 -- -- 549,450 -- Common stock issued upon completion of private placement 405,562 Conversion of preferred shares ... 407,500 813 (81,500) (82) 264,269 Net income for the quarter ended September 30, 1997 ....... -- -- -- -- -- 11,747 ----------- -------- ---------- ------- ------------ ----------- Balance, September 30, 1997 ...... 23,872,355 $ 23,872 994,058 $ 994 $ 14,707,447 ($1,063,471 =========== ======== ========== ======= ============ =========== Conversion of preferred shares ... 2,159,085 2,159 (431,817) (432) 1,727 Common stock issued for Warrant exercise at $1.50 per share .... 2,110,000 2,110 -- -- 3,162,890 -- Common stock issued in acquisition of oil property ...... 150,000 150 -- -- 224,850 -- Common stock issued for services rendered to the Company .......... 10,000 10 -- -- 14,990 -- Common stock cancelled ........... (565,833) (566) -- -- 566 -- Common stock isued in conjunction with debt conversion ............. 127,134 127 -- -- 292,280 -- Net income for the quarter ended December 31, 1997 .......... -- -- -- -- -- 73,055 ----------- -------- ---------- ------- ------------ ----------- Balance, December 31, 1997 ....... 27,862,741 $ 27,862 562,241 $ 562 $ 18,404,760 ($ 990,416) =========== ======== ========== ======= ============ ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS 6 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND JUNE 30, 1997 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. ORGANIZATION The American Energy Group, Ltd. (the Company) was incorporated in the state of Nevada on July 21, 1987 as Dimension Industries, Inc. Since incorporation, the Company has had several name changes including DIM, Inc. and Belize-American Corp. Internationale with the name change to The American Energy Group, Ltd. effective November 18, 1994. Effective September 30, 1994, the Company entered into an agreement to acquire all of the issued and outstanding common stock of Simmons Oil Company, Inc. (Simmons), a Texas Corporation, in exchange for the issuance of certain convertible voting preferred stock (see Note 6). The acquisition included wholly owned subsidiaries of Simmons, Sequoia Operating Company, Inc. and Simmons Drilling Company, Inc. The acquisition was recorded at the net book value of Simmons of $1,044,149 which approximates fair value. During the year ended June 30, 1995, the Company incorporated additional subsidiaries including American Energy-Deckers Prairie, Inc., The American Energy Operating Corp., Tomball American Energy, Inc., Cypress-American Energy, Inc., Dayton North Field-American Energy, Inc. and Nash Dome Field-American Energy, Inc. In addition, in May 1995, the Company acquired all of the issued and outstanding common stock of Hycarbex, Inc. (Hycarbex), a Texas corporation, in exchange for common stock of the Company (see Note 7), a 1% overriding royalty on the Pakistan Project and a future $200,000 production payment if certain conditions are met. In April 1995, the name of that Company was changed to Hycarbex-American Energy, Inc. All of these companies are collectively referred to as "the Companies". The Company and its subsidiaries are principally in the business of acquisition, exploration and development of oil and gas properties with the ultimate goal of production and operation of those properties and the contracting of those services to other unrelated businesses. b. DEVELOPMENT STAGE AND CONTINUED EXISTENCE During the year ended June 30, 1997, 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 December 31, 1997 7 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND JUNE 30, 1997 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, 1997 was $31,028 . No interest was capitalized in the quarter ended December 31, 1997. In addition, depreciation capitalized during the year ended June 30, 1997 totaled $51,303. Depreciation capitalized during the quarter ended December 31, 1997 totaled $6,284. 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, 1997, 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 $33,000 has been recognized in the accompanying consolidated financial statements for the year ended June 30, 1997 and $20,181 for the quarter ended December 31, 1997 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, therefore, had no effect on the consolidated financial statements through April 6, 1995. 8 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND JUNE 30, 1997 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 December 31; 1997, the Companies incurred total depreciation expense of $7,388 of which $6,284 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 December 31, 1997, the Companies held three certificates of deposit totaling $300,000 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 mature every 30 days. These certificates of deposit are unencumbered at December 31, 1997. In prior periods, certificates of deposit of corresponding amounts had been pledged as collateral on notes payable. . 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 9 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND JUNE 30, 1997 leases on which existing wells had been shut-in and abandoned and had additional sites available 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 director of the Companies. This note payable bears interest at a rate of 11% and matured January 19, 1996. In addition, the Companies have assigned to this individual a 1% overriding royalty in all oil and gas properties of the Companies. This obligation was paid off during the year ended June 30, 1997. NOTE 4 - NOTES PAYABLE AND LONG-TERM DEBT The following is a summary of notes payable and long-term debt as of June 30, 1997 and December 31, 1997: December 31 June 30 1997 1997 ----------- ----------- 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 ................................. $ 855,706 $ 915,000 Notes payable bearing no interest; due in monthly installments of $64,834; secured by joint venture interests in certain oil and gas properties ............. --0-- 389,000 8.5% note payable to a financial institution due in monthly installments of $950 for 36 months; secured by two vehicles ....................... 23,984 28,520 10% notes payable, due on demand, unsecured .... --0-- 190,000 7% notes payable, due September 15, 1995, secured by working interest in oil and gas properties ................................ 242,859 443,250 Total notes payable and long-term debt ......... $ 1,122,549 $ 1,965,770 ----------- ----------- Less: Unamortized discount ..................... (153,259) (192,134) ----------- ----------- Net notes payable and long-term debt ........... 969,290 1,773,636 Less: Current portion of notes payable and long-term debt ............................ (372,549) (1,123,899) ----------- ----------- Long-Term Liabilities .......................... $ 596,741 $ 649,737 =========== =========== 10 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND JUNE 30, 1997 NOTE 5 - CAPITAL LEASE OBLIGATIONS The Company entered into certain lease agreements during the year ended June 30, 1997 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 $643.The following are the scheduled annual payments on these capital leases: Year ending June 30, 1997 1998 $4,232 1999 $7,711 2000 $6,815 2001 $2,741 2002 $1,387 ------- $22,886 Total minimum lease commitments $ 22,886 Less: Executory costs (such as taxes and insurance) included in capital lease payments (2,108) --------- Net minimum lease payments 20,778 Less: Amount representing interest ( 5,015) --------- Total Capital Lease Obligations 15,763 Current Portion (4,825) --------- Long Term Portion $ 10,938 ========= NOTE 6 - CONVERTIBLE VOTING PREFERRED STOCK During the quarter ended December 31, 1997, a total of 431,817 shares of the Company's Convertible Preferred shares were converted into 2,159,085 shares of Common Stock. NOTE 7- COMMON STOCK During the quarter ended December 31, 1997, a net total of 3,990,386 shares of Common Stock of the Company were issued through a combination of equity sale through Warrant exercise, conversion of Convertible Preferred shares, debt conversion, stock cancellation, and acquisition of oil & gas properties. (See Consolidated statement of Stockholders Equity) 11 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND JUNE 30, 1997 NOTE 8- COMMON STOCK WARRANTS Subsequent to the Quarter ended September 30, 1997, and concurrent with the settlement and dismissal of litigation as described herein, the Company issued to each of the three Directors of the Company an additional 150,000 Warrants at an exercise price of $2.31. This represents a total of 450,000 additional Warrants issued. These Warrants are valid for a period of seven years, and, unless subsequently registered, are exercisable into Rule 144 Common Stock of the Company. As of the filing of this report, none of the outstanding Warrants have been exercised. A total of 2,110,000 shares of Common Stock of the Company were issued in conjunction with the exercise of Warrants held by shareholders at an exercise price of $1.50 per share. NOTE 9 - INCOME TAXES Through December 31, 1997, the Companies have sustained net operating loss carryforward totaling approximately $990,000 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 As discussed in Note 5, the Companies defaulted on the payment of the Drilling Investor Notes due and payable September 15, 1995 related to the acquisition of oil and gas leases in Harris County, Texas. Although these notes are secured by a financial guarantee bond, there is no assurance that the bond can be enforced. The Companies have begun to settle these obligations, along with the related accrued interest. The ultimate effect on the Companies and outcome of the satisfaction of this obligation cannot be determined. The Company leases office space in Simonton, Texas from the President and director of the Company at a monthly cost of $500 plus utilities. This is a month to month lease and can be terminated by either party with 30 days notice. 12 EXHIBIT B TO FORM 10-Q FOR PERIOD ENDED DECEMBER 31, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) DECEMBER 16, 1997 THE AMERICAN ENERGY GROUP, LTD. (Exact name of registrant as specified in its charter) NEVADA 0-26402 87-0448843 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) P.O. BOX 489, SIMONTON, TEXAS 77476 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (281) 346-2652 ____________________________________________________________ (Former name or former address, if changed since last report.) FORM 8-K THE AMERICAN ENERGY GROUP, LTD. ITEM 1. CHANGES IN CONTROL OF REGISTRANT. Not Applicable. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS Not Applicable. ITEM 3. BANKRUPTCY OR RECEIVERSHIP. Not applicable ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT: Not Applicable. ITEM 5. OTHER EVENTS. A total of 2,110,000 Warrants have been exercised at an exercise price of $1.50 per share, generating $3,165,000 in additional investment into the Company. These Warrants were held by various overseas shareholders in conjunction with the Company's sale of Common stock to such persons as reported in previous filings with the Securities and Exchange Commission. The Common Stock has been issued pursuant to Regulation S restrictions upon ownership and transefability. The funds will be primarily allocated to further development of the Company's domestic and Pakistan oil and gas projects. ITEM 6. RESIGNATIONS OF REGISTRANTS DIRECTORS. Not Applicable. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. Not Applicable The American Energy Group, Ltd. Form 8-K Page 2 ITEM 8. CHANGE IN FISCAL YEAR. Not Applicable. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE AMERICAN ENERGY GROUP, LTD. (Registrant) Date: DECEMBER 16, 1997 BY: B/J/S Bradley J. Simmons, President The American Energy Group, Ltd. Form 8-K Page 3 EX-27 2
5 6-MOS JUN-30-1998 DEC-31-1997 5,184,082 10,000 88,892 0 0 5,386,965 13,747,608 247,585 18,985,838 936,589 0 0 562 27,862 17,413,146 18,985,838 383,752 507,358 108,642 383,362 37,947 0 1,247 84,802 0 84,802 0 0 0 84,802 .003 .003
-----END PRIVACY-ENHANCED MESSAGE-----