-----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, KPejfIArzK6dvruNUFprGpgxqfXs3H2TXPN8v/GbMEo8HJUdZnW8/6VkIppx4CKn qXDAUpCmIqvv3y3/2zQmCg== 0000890566-99-001442.txt : 19991117 0000890566-99-001442.hdr.sgml : 19991117 ACCESSION NUMBER: 0000890566-99-001442 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ENERGY GROUP LTD CENTRAL INDEX KEY: 0000843212 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870448843 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26402 FILM NUMBER: 99751850 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 SEPTEMBER 30, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _____________ to ____________ Commission File Number: 0-26402 THE AMERICAN ENERGY GROUP, LTD. (Exact name of registrant as specified in its charter) NEVADA 87-0448843 (state or other jurisdiction of (IRS Employer 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. Yes [X] 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. 33,180,888 COMMON SHARES SEC FORM 10-Q THE AMERICAN ENERGY GROUP, LTD. PAGE 1 OF 8 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The Company has included herewith the unaudited consolidated financial statements for the three months ended September 30, 1999 and 1998, 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 September 30, 1999, 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 calendar year 2000. 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 sufficiently large to complete the development of these properties. The Company utilizes the full cost method of accounting for its oil and gas properties. Under this method, all costs associated with the acquisition, exploration and development of oil and gas properties are capitalized in a "full cost pool". 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. SEC FORM 10-Q THE AMERICAN ENERGY GROUP, LTD. 9/30/99 PAGE 2 OF 8 TEXAS GULF COAST OPERATIONS The Company currently owns and operates a total of 105 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 twelve (12) months ending September 30, 1999, the Company, through its operating subsidiary, The American Energy Operating Corp., drilled eight (8) new developmental wells, two (2) of which are situated in the Boling Dome Field and six (6) of which are situated in the Blue Ridge Field. Seven (7) of the eight (8) new wells are currently in various stages of completion, testing or production and the eighth well is awaiting completion while production storage facilities are put in place. Management believes that seven (7) of the eight (8) wells will be commercially productive wells. In addition to new developmental wells already drilled by the Company and additional wells which management anticipates will be drilled in the future, the Company has continued its ongoing efforts to rework and reactivate certain of the existing wells. During the quarter ended September 30, 1999, an average of twenty-two (22) of the Company's 105 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 were as high as $22.00 per barrel and sales of oil by the Company during the quarter averaged $19.38 per barrel net of severance taxes assessed by the State of Texas. 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 will facilitate the generation of a portion of the operating capital necessary to maintain its ongoing reactivation and development programs. However, 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. 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 $7.9 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 H2S and CO2. 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. SEC FORM 10-Q THE AMERICAN ENERGY GROUP, LTD. 9/30/99 PAGE 3 OF 8 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, the constitution was suspended, and the country was placed under martial law. Charles Valceschini, President of Hycarbex-American Energy, Inc., conducted informal meetings in Islamabad with various officials of the Pakistan Ministry of Petroleum and Natural Resources subsequent to the governmental changes. Based upon these meetings and the continued cooperation demonstrated by the Ministry, the Company plans to commence its next exploration well in calendar 2000 and is currently in logistical and technical planning for the project. Hycarbex owns 95% of the working interest in the Jacobabad concession and the Pakistan Government owns a 5% working interest. The Pakistan Government has the option to increase its holdings to a 25% working interest in the event of commercial discovery of hydrocarbons. The Company has deposited in its Pakistan account as a reserve certain cash funds for application to the future costs incurred in connection with its next exploration well to be drilled in calendar 2000. The funds on deposit are insufficient to cover the anticipated costs of completing the well and must be supplemented by funds from outside loans and/or private sales of securities. Management anticipates that the necessary capital raising transactions will be completed in the fiscal quarter ending December 31, 1999. In the event that such capital raising transactions are not completed within the fiscal quarter, the Company's current proposed exploration schedule will be directly affected and will likely be postponed until these transactions or substituted capital transactions are consummated. RESULTS OF OPERATIONS In the quarter ended September 30, 1999, the Company incurred a net operating profit of $155,808, with oil and gas sales of $315,712 as compared to a net operating profit of $6,967 on oil and gas sales of $52,751 in the prior fiscal year's quarter ended September 30, 1998. This reflects an increase in revenues of approximately five hundred percent (500 %) in comparison with the prior year's quarter ending September 30, 1998. The Company experienced an increase of $148,841 in net operating profits as compared to the prior year's quarter ended September 30, 1998. The increases noted resulted from the increases in barrels of oil sold from the Company's Texas properties at prices which were on the average, sixty-three percent (63%) higher than obtained in the quarter ending September 30, 1998. The average price per barrel of oil sold by the Company in the quarter ending September 30, 1998, was $11.89, as compared to $19.38 per barrel in the current quarter ending September 30, 1999. During the quarter ending September 30, 1999, the Company sold 22,410 barrels of oil, equivalent to 244 gross barrels per day for the 92 day period. The barrels which were allocated net to the Company's interest were 16,298 barrels. The remainder of 6,112 barrels are attributed to landowner royalties. The 16,298 net barrels used in computing the Company's revenues generated $315,712 and reflect an average of 177 net barrels of oil per day. The revenues of $315,712 are especially significant when compared to oil and gas revenues for the fiscal year ended June 30, 1999, which were $417,136. The subject quarter reflects revenues equal to seventy six (76%) percent of the prior year's entire revenues, and is a record quarter for revenues for the Company. SEC FORM 10-Q THE AMERICAN ENERGY GROUP, LTD. 9/30/99 PAGE 4 OF 8 Sales of oil by the Company did not mirror the actual production of oil, as some of the oil produced during the quarter was stored and unsold at the end of the quarter. These unsold barrels are not reflected in gross sales, revenues, or balance sheet computations in the accompanying financial statements. At the beginning of the quarter ended September 30, 1999, unsold oil on hand in production tanks was 2,638 barrels. At the end of the quarter ended September 30, 1999, the unsold oil on hand totaled 3,677 barrels, reflecting an increase of 994 barrels in stored oil inventory. Daily production for the period is approximately 255 gross barrels per day and 185 net barrels per day if the increase in stored but unsold inventory is added to the barrels actually sold. Factors which affect sales range from ability to obtain transportation for oil stored in production facilities (i.e., weather conditions, truck availability, etc.) to the salability of the stored products at the time of the desired sale (i.e., the need for separation of water prior to sale, etc.) The Company, with the inclusion of other income, foreign and domestic administrative expenses, and including interest, reported net profit of $20,607 in the quarter ended September 30, 1999 versus a net loss of $124,885 in the prior fiscal year's quarter ended September 30, 1998. NONRECURRING EVENTS AFFECTING CAPITAL RESOURCES During the quarter ended September 30, 1999, the Company raised $1,500,000.00 in working capital (approximately $1,170,000 net of commissions and expenses) through two (2) nonrecurring transactions. The Company raised $1,100,000.00 (before commissions and expenses) through a loan from a private individual maturing March 17, 2002, secured by a lien on the Company's Texas properties, and convertible, at the option of the lender, into shares of the Company's common stock. The Company also raised $400,000.00 (before commissions and expenses) from the private sale of 400,000 shares of senior convertible preferred stock. The net proceeds from these transactions were predominantly applied to the Company's future Pakistan operations through a deposit as a reserve into the Company's account in Pakistan. The Company intends to pursue additional capital raising transactions through loans and/or the private sale of securities in order to meet its anticipated near term working capital needs, both for its domestic reactivation and development programs and its projected activities in Pakistan. Since the Company's current revenue stream from the sale of oil from its Texas properties is insufficient to meet its anticipated working capital needs for these activities, the success of such capital raising efforts is critical. Should the Company's efforts in raising working capital through outside sources prove unsuccessful, the Company's proposed domestic and international activities would be directly and adversely affected. TOTAL ASSETS / SHAREHOLDER'S EQUITY In the quarter ended September 30, 1999, Total Assets of the Company increased to $24,144,598, or three percent (3%) for the three months beginning from the fiscal year ended June 30, 1999, which at that time totaled $23,456,438. Net Shareholders Equity increased to $21,481,116 as of September 30, 1999, from $21,362,502 as of June 30, 1998. This increase is attributed to the sale of common stock combined with net profits in the quarter ended September 30, 1999. SEC FORM 10-Q THE AMERICAN ENERGY GROUP, LTD. 9/30/99 PAGE 5 OF 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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. At this time, it is not anticipated that litigation costs incurred by the Company will adversely affect ongoing Company operations. 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 September 30, 1999, is provided below: COMMON STOCK A net increase of 302,500 shares of Common Stock occurred during the quarter, thereby increasing the total number of shares of outstanding Common Stock to 33,180,388 shares in the following manner: During the quarter ended September 30,1999, two holders of the Company's convertible preferred stock exercised their conversion rights whereby 60,500 shares of convertible preferred stock were converted into common stock of the Company at a conversion ratio of five shares of common stock in exchange for each one share of convertible preferred stock. A total of 302,500 shares of common stock were issued. The Company did not receive any proceeds in the conversion. The Company believes that each of the persons had knowledge and experience in financial and business matters which allowed them to evaluate the merits and risk of the purchase of these securities of the Company, and that each person was knowledgeable about the Company's operations and financial condition. These transactions were effected by the Company in reliance upon exemptions from registration under the Securities Act of 1933 as amended (the "Act") as provided in Section 4(2) thereof. Each certificate issued for unregistered securities contained a legend stating that the securities have not been registered under the Act and setting forth the restrictions on the transferability and the sale of the securities. SEC FORM 10-Q THE AMERICAN ENERGY GROUP, LTD. 9/30/99 PAGE 6 OF 8 CONVERTIBLE PREFERRED STOCK During the quarter ended September 30,1999, the Company issued 400,000 shares of Block F Convertible Preferred Stock, for which the Company received $400,000. Each share is convertible into one share of common stock of the Company. The Company believes that the purchaser had knowledge and experience in financial and business matters which allowed him to evaluate the merits and risk of the purchase of these securities of the Company, and that he was knowledgeable about the Company's operations and financial condition. These transactions were effected by the Company in reliance upon exemptions from registration under the Securities Act of 1933 as amended (the "Act") as provided in Section 4(2) thereof. Each certificate issued for unregistered securities contained a legend stating that the securities have not been registered under the Act and setting forth the restrictions on the transferability and the sale of the securities. At the time of issuance of the Block F Convertible Preferred Stock, the Company also had outstanding other convertible preferred shares designated as Blocks A through E. In the quarter ended September 30, 1999, the number of outstanding Convertible Preferred shares (Blocks A through E) was reduced from 101,996 shares to 41,500 shares by conversion of 60,496 shares into 302,500 shares of Common Stock on the basis of five Common shares for each one convertible preferred share (see Common Stock). The remaining Block A through E Convertible Preferred shares, if converted, would require issuance of an additional 207,500 shares of Common Stock. All Convertible Preferred shares, if converted to common stock, would require the issuance of 607,500 shares of common stock. WARRANTS As of the fiscal year ended June 30, 1999, outstanding warrants totaled 16,030,000. Total outstanding warrants as of September 30,1999 had deceased by 5,030,000 warrants to 11,000,000, ranging in exercise price from $1.25 to $5.31 per share and in term from one year to seven years. In the quarter ended September 30, 1999, no warrants were exercised, a total of 6,680,000 warrants expired unexercised, and a total of 1,650,000 warrants were issued to various parties involved with the Company as described below: In the quarter ended September 30, 1999, a total of 1,500,000 warrants were issued to an individual in conjunction with the sale of Convertible preferred shares. These Warrants are exercisable on the basis of one share of Common Stock for each Warrant, at exercise prices of $1.00 per share for a sixty day period beginning September 17, 1999. In the event that these warrants are exercised in the prescribed time period, then this individual is to receive an additional 1,500,000 warrants identical to those described above for another sixty day period. The Company believes that the person had knowledge and experience in financial and business matters which allowed them to evaluate the merits and risk of the receipt of these securities of the Company. In such capacity they were knowledgeable about the Company's operations and financial condition. These transactions were effected by the Company in reliance upon exemptions from registration under the Securities Act of 1933 as amended (the "Act") as provided in Section 4(2) thereof. Each certificate issued for unregistered securities contained a legend stating that the securities have not been registered under the Act and setting forth the restrictions on the transferability and the sale of the securities. SEC FORM 10-Q THE AMERICAN ENERGY GROUP, LTD. 9/30/99 PAGE 7 OF 8 During the fiscal year, the Company engaged certain technical and financial consultants in various contracts. In conjunction with retaining their services in the quarter ended September 30, 1999, the Company issued 150,000 warrants with an exercise price of $1.00 per share and an expiration date of September 17, 2004. The Company believes that each of the transacting persons had knowledge and experience in financial and business matters which allowed them to evaluate the merits and risk of the receipt of these securities of the Company. In such capacity they were knowledgeable about the Company's operations and financial condition. These transactions were effected by the Company in reliance upon exemptions from registration under the Securities Act of 1933 as amended (the "Act") as provided in Section 4(2) thereof. Each certificate issued for unregistered securities contained a legend stating that the securities have not been registered under the Act and setting forth the restrictions on the transferability and the sale of the securities. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITIES HOLDERS Not Applicable ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (249.308 OF THIS CHAPTER) (A) EXHIBITS The Consolidated Financial Statements dated September 30, 1999 and 1998 (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. 11/12/99 /s/ B/J/S Bradley J. Simmons, President 11/12/99 /s/ L/F/G Linda F. Gann, Secretary SEC FORM 10-Q THE AMERICAN ENERGY GROUP, LTD. 9/30/99 PAGE 8 OF 8 EXHIBIT A TO FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1999 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES FINANCIAL STATEMENTS SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) AND JUNE 30, 1999 (AUDITED) F-1 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1999 JUNE 30, 1999 (UNAUDITED) (AUDITED) ------------------ -------------- ASSETS Current Assets Cash .................................. $ 1,178,618 $ 1,196,566 Receivables ........................... 114,611 73,166 Receivables - related party ........... 2,147 1,626 Investments ........................... 420 420 Other current assets .................. 22,505 13,602 ------------ ------------ Total Current Assets .................. 1,318,301 1,285,380 ------------ ------------ Oil and gas Properties Using Full Cost Accounting Properties being amortized ............ 15,089,015 14,388,253 Properties not subject to amortization ..................... 7,964,838 7,913,414 Accumulated amortization .............. (504,206) (437,450) ------------ ------------ Net Oil and Gas Properties ............ 22,549,647 21,864,217 ------------ ------------ Property and Equipment Drilling and related equipment ........ 389,851 384,679 Vehicles .............................. 129,601 155,811 Office equipment ...................... 48,933 48,933 Less: Accumulated depreciation ........ (296,835) (287,682) ------------ ------------ Net Property and Equipment ............ 271,550 301,741 ------------ ------------ Other Assets Deposits and other current assets ..... 5,100 5,100 ------------ ------------ Total Other Assets .................... 5,100 5,100 ------------ ------------ TOTAL ASSETS ............................... $ 24,144,598 $ 23,456,438 ============ ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS F-2 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 JUNE 30, 1999 (Unaudited) (Audited) ------------------- ---------------- LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities Accounts payable .......................................... 920,679 1,299,152 Accrued liabilities ....................................... 235,665 250,233 Lease obligations - current ............................... 4,180 4,078 Notes payable - current ................................... 288,117 324,347 ------------ ------------ Total Current Liabilities ................................. 1,448,641 1,877,810 ------------ ------------ Long-Term Liabilities Notes payable and long-term debt .......................... 1,208,355 207,401 Capital lease obligations ................................. 6,486 8,725 ------------ ------------ Total Long-Term Liabilities ............................... 1,214,841 216,126 ------------ ------------ Total Liabilities ......................................... 2,663,482 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 September 30, 1999: 441,500 shares ..................... 442 102 Common stock, par value $.001 per share, authorized: 80,000,000 shares, issued and outstanding: At June 30, 1999: 32,878,388 shares At September 30, 1999: 33,180,888 shares .................. 33,180 32,878 Paid in excess of par value ............................... 23,784,445 23,687,080 Accumulated deficit ....................................... (2,336,951) (2,357,558) ------------ ------------ Net Shareholders' Equity .................................. 21,481,116 21,362,502 ------------ ------------ Total Liabilities and Shareholders' Equity ..................... $ 24,144,598 $ 23,456,438 ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS F-3
THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 (UNAUDITED) (UNAUDITED) --------------------- -------------------- REVENUES Oil and gas sales .................................. $ 315,712 $ 52,571 Lease operating and production costs ............... 159,904 45,604 --------- --------- Gross Profit .................................... 155,808 6,967 --------- --------- OTHER EXPENSES Legal and professional fees ........................ 80,641 70,307 Administrative salaries ............................ 17,250 18,025 Office overhead expense ............................ 13,233 20,982 Depreciation ....................................... 3,381 4,127 General and administrative expense ................. 20,753 27,401 --------- --------- Total Other Expenses ............................ 135,258 140,842 --------- --------- NET OPERATING PROFIT (LOSS) .............................. 20,550 (133,875) --------- --------- OTHER INCOME (EXPENSE) Interest income .................................... 4,683 15,036 Loss on investments ................................ 0 (2,300) Loss on asset sales ................................ (4,416) (2,300) Interest expense ................................... (210) (1,446) --------- --------- Net Other Income (Expenses) ..................... 57 8,990 --------- --------- NET INCOME (LOSS) BEFORE TAX ............................. 20,607 (124,885) Federal Income Tax ................................. 0 0 --------- --------- NET INCOME (LOSS) FOR PERIOD ............................. $ 20,607 ($124,885) ========= ========= EARNINGS (LOSS) PER SHARE ................................ $ 0.001 ($ 0.004) ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS F-4 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS THREE MONTHS ENDED ENDED SEPTEMBER 30 SEPTEMBER 30 1999 1998 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .................................................... $ 20,607 ($ 122,585) Adjustments to Reconcile Net Loss to Cash Provided by (Used in) Operating Activities: Depreciation and amortization ........................................ 85,079 38,984 Less amount capitalized to oil & gas properties ...................... (5,772) (11,857) (Increase) decrease in receivables ................................... (41,445) (22,420) (Increase) decrease in deposits and other assets ..................... (521) (99,942) (Increase) decrease in other current assets .......................... (8,903) (1,676) Increase (decrease) in accounts payable .............................. (378,473) (1,429,160) Increase (decrease) in accrued liabilities and other current liabilities .......................................... 14,568 17,793 ----------- ----------- Cash Provided by (Used in) Operating Activities ................... (314,860) (1,630,863) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for oil and gas properties .............................. (887,172) (158,450) Proceeds from the sale of equipment .................................. 10,000 -- Expenditures for other property and equipment ........................ (2,715) (35,659) ----------- ----------- Cash Provided By (Used in) Investing Activities ................... (879,887) (194,109) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable and long-term liabilities .............................................. 1,100,000 -- Proceeds from the issuance of common stock ........................... -- 1,905,000 Expenditures for offering costs ...................................... (301,994) -- Proceeds from the issuance of convertible voting preferred stock ............................................. 400,000 -- Payments on notes payable and long-term liabilities .................. (21,207) (30,966) ----------- ----------- Cash Provided By (Used in) Financing Activities ................... 1,176,799 1,874,034 ----------- ----------- NET INCREASE (DECREASE) IN CASH ........................................ (17,948) 49,062 CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD .......................... 1,196,566 3,214,205 ----------- ----------- CASH AND CASH EQUIVALENTS END OF PERIOD ................................ $ 1,178,618 $ 3,263,267 =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS F-5 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD JUNE 30, 1999 THROUGH SEPTEMBER 30, 1999
CONVERTIBLE VOTING CAPITAL IN COMMON STOCK PREFERRED STOCK EXCESS OF ACCUMULATED SHARES AMOUNT SHARES AMOUNT PAR VALUE DEFICIT ------------ ------------ ------------ ------------ ------------ ------------ Balance, June 30, 1998 .............. 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 comon 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) ============ ============ ============ ============ ============ ============
THE ACCOMPANYING NOTE ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. F-6 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 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 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. F-7 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 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 in the quarter ended September 30, 1999. In addition, depreciation capitalized during the year ended June 30, 1999 totaled $51,339. Depreciation capitalized during the quarter ended September 30, 1999, totaled $5,772. 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 $66,756 for the quarter ended September 30, 1999 on proved and impaired or abandoned oil and gas properties. The acquisition of Simmons Oil Company, Inc. and it's subsidiaries has been accounted for using the purchase method. Accordingly, the accompanying consolidated financial statements for the period up until the date of acquisition, September 30, 1994, do not include the financial position, the results of operations or cash flows of the Simmons companies for those periods. The acquisition of Hycarbex, Inc. has been accounted for using the pooling-of-interests method. Hycarbex had no assets or liabilities or results of operations through the date of the acquisition and, 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 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 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 quarter ended September 30, 1999, the Companies incurred total depreciation expense of $18,323 of which $5,772 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 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 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 September 30, 1999:
SEPTEMBER 30 JUNE 30 1999 1999 ---------------- -------------- 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 .............................................. $ 403,199 $ 539,404 Note payable to individual secured by certain oil and gas properties of the Company, payable March 17, 2003, bearing no interest, payable at face value of note of $1,500,000 at time of payment .............................. $ 1,100,000 $ -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 ..................... $ 1,541,316 $ 586,590 ----------- ----------- Less: Unamortized discount ................................. (44,844) (54,842) ----------- ----------- Net notes payable and long-term debt ....................... $ 1,496,472 $ 531,748 Less: Current portion of notes payable and long-term debt ......................................... (288,117) (324,347) ----------- ----------- Long-Term Liabilities ...................................... 1,208,355 $ 207,401 =========== ===========
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 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 AND JUNE 30, 1999 NOTE 5 - CAPITAL LEASE OBLIGATIONS ( CONTINUED) Year ending June 30 2000 $ 4,042 2001 $ 3,355 2002 $ 3,355 2003 $ 2,278 2004 $ -0- -------- $ 13,030 Total minimum lease commitments $ 13,030 Less: Executory costs (such as taxes and insurance) included in capital lease payments ( 552) ---------- Net minimum lease payments 12,478 Less: Amount representing interest (1,812) ---------- Total Capital Lease Obligations 10,666 Current Portion (4,180) ---------- Long Term Portion $ 6,486 ========== NOTE 6 - CONVERTIBLE VOTING PREFERRED STOCK During the quarter ended September 30,1999, the Company's issued 400,000 shares of Block F convertible preferred stock, for which the Company received $400,000. Each share is convertible into one share of common stock of the Company. The number of outstanding Convertible Preferred (Block A-E) shares was reduced from 101,996 shares to 41,500 shares by conversion of 60,496 shares of Convertible Preferred into 302,500 shares of Common Stock on a "five Common for each one Convertible Preferred" basis. All remaining Convertible Preferred shares in all classes, if converted, would require issuance of an additional 607,500 shares of Common Stock NOTE 7- COMMON STOCK During the quarter ended September 30, 1999, a net increase of 302,500 shares of Common Stock of the Company was incurred through conversion of Convertible Preferred shares. (See Consolidated Statement of Stockholders Equity). This addition brings total outstanding Common Stock to 33,180,888 shares. F-11 THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 AND JUNE 30, 1999 NOTE 8- COMMON STOCK WARRANTS As of the fiscal year ended June 30, 1999, outstanding warrants totaled 16,030,000. Total outstanding warrants as of September 30,1999 had deceased by 5,030,000 warrants to 11,000,000, ranging in exercise price from $1.25 to $5.31 per share and in term from one year to seven years. In the quarter ended September 30, 1999, no warrants were exercised, a total of 6,680,000 warrants expired unexercised, and a total of 1,650,000 warrants were issued to various parties involved with investment into the Company or consulting to the Company. NOTE 9 - INCOME TAXES Through September 30, 1999, the Companies have sustained net operating loss carryforward totaling approximately $2,336,951 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. 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 in early 2000. F-12 EX-27 2
5 3-MOS JUN-30-1999 SEP-30-1999 1,178,618 420 105,207 0 0 1,318,301 23,118,032 296,835 24,144,598 1,448,641 0 0 442 33,180 21,447,494 24,144,598 315,712 320,395 159,904 295,162 4,416 0 210 20,607 0 20,607 0 0 0 20,607 .001 .001
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