10QSB/A 1 v048714_10qsba.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM 10-QSB |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2005 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF 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 (I.R.S. Employer incorporation or organization) Identification No.) 1 Gorham Island, Suite 303 Westport, Connecticut 06880 (Address of principal executive offices) (Zip code) 203-222-7315 (Registrant's telephone number including area code) --------------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Common Stock, Par Value $.001 Per Share --------------------------- Check whether the issuer (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 such filing requirements for the past 90 days. Yes |X| No |_| APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes |X| No |_| APPLICABLE ONLY TO CORPORATE ISSUERS As of February 13, 2006, the number of Common shares outstanding was 27,486,413 Transitional Small Business Issuer Format (Check one) Yes |_| No |X| THE AMERICAN ENERGY GROUP, LTD. INDEX TO FORM 10-QSB/A PART I-FINANCIAL INFORMATION PAGE Item 1. Financial Statements ............................................ 3 Item 2. Management's Discussion and Analysis or Plan of Operation............................................. 5 Item 3. Controls and Procedures.......................................... 8 PART II-OTHER INFORMATION Item 1. Legal Proceedings................................................ 9 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...... 9 Item 3. Defaults Upon Senior Securities.................................. 9 Item 4. Submission of Matters to a Vote of Security Holders.............. 9 Item 5. Other Information................................................ 9 Item 6. Exhibits ........................................................ 9 -2- PART I-FINANCIAL INFORMATION THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, June 30, 2005 2005 (Unaudited) (Audited) ----------- ----------- ASSETS Current Assets Cash $ 37,001 $ 227 Prepaid expenses 6,397 60,178 ----------- ----------- Total Current Assets 43,398 60,405 ----------- ----------- Property and Equipment Office equipment 3,286 3,286 Accumulated deprecation (575) (246) ----------- ----------- Total Property and Equipment 2,711 3,040 ----------- ----------- Total Assets $ 46,109 $ 63,445 =========== =========== LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities Accounts payable $ 42,034 $ 17,632 Accrued liabilities 57,867 35,209 Convertible debt -- 25,000 Current portion of long term debt 292,000 292,000 ----------- ----------- Total Current Liabilities 391,901 369,841 ----------- ----------- Liabilities Subject to Compromise Pre-petition trade accounts payable 238,588 238,588 Pre-petition accrued liabilities 45,500 45,500 Current portion of capital lease obligations 679 679 ----------- ----------- Total Liabilities Subject to Compromise 284,767 284,767 ----------- ----------- Total Liabilities 676,668 654,608 ----------- ----------- Shareholders' Equity Common stock, par value $.001 Per share, authorized: 80,000,000 shares, issued and outstanding: At June 30, 2005: 27,139,584 shares At December 31, 2005: 27,359,306 shares 27,359 27,140 Common stock subscribed 100 -- Expenses prepaid with common stock (108,526) (31,382) Subscriptions receivable (108,000) -- Capital in excess of par value 2,464,087 1,860,545 Accumulated deficit (2,905,579) (2,447,466) ----------- ----------- Net Shareholders' Equity (630,559) (591,163) ----------- ----------- Total Liabilities and Shareholders' Equity $ 46,109 $ 63,445 =========== =========== -3- THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended ----------------------------- ----------------------------- December 31, December 31, December 31, December 31, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------ ------------ REVENUES $ -- $ -- $ -- $ -- OTHER EXPENSES Legal and professional fees 46,833 281 110,801 41,435 Administrative salaries 93,000 90,000 186,000 180,000 Office overhead expense 5,110 4,929 10,264 17,702 General and administrative expense 30,174 20,531 139,691 33,367 ------------ ------------ ------------ ------------ Total Other Expenses 175,117 115,741 446,756 272,504 ------------ ------------ ------------ ------------ NET OPERATING PROFIT (LOSS) (175,117) (115,741) (446,756) (272,504) ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE) Interest expense (5,286) (1,740) (11,358) (6,015) ------------ ------------ ------------ ------------ Net Other Income (Expenses) (11,358) (5,286) (1,740) (6,015) ------------ ------------ ------------ ------------ NET (LOSS) BEFORE TAX (180,403) (117,481) (458,114) (278,519) Federal Income Tax -- -- -- -- ------------ ------------ ------------ ------------ NET (LOSS) FOR PERIOD $ (180,403) $ (117,481) $ (458,114) $ (278,519) ============ ============ ============ ============ EARNINGS (LOSS) PER SHARE $ (0.01) $ (0.01) $ (0.01) $ (0.01) ============ ============ ============ ============
-4- THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six months Six months Ended ended December 31, December 31, 2005 2004 (Unaudited) (Unaudited) ------------ ------------ Cash Flows from Operating Activities: Net income (loss) $ (458,114) $ (278,519) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Common stock issued for services rendered 125,550 25,000 Common stock issued for accrued expenses -- 11,496 Common stock issued for debt conversion -- -- Depreciation and amortization 329 -- Additional expense for warrants 88,714 -- Changes in operating assets and liabilities: (Increase) decrease in other current assets -- 35,000 (Increase) decrease in prepaid expenses (23,362) -- Increase (decrease) in accounts payable 39,000 (12,500) Increase (decrease) in accrued expenses and other current liabilities 22,657 (9,720) ------------ ------------ Cash Provided by (Used in) Operating Activities (205,226) (229,243) ------------ ------------ Cash Flows from Financing Activities: Proceeds from the issuance of warrants 105,000 -- Cash received on stock subscription 27,000 -- Cash received for stock issued 110,000 -- ------------ ------------ Cash Provided By (Used in) Financing Activities 242,000 -- ------------ ------------ Net Increase (Decrease) in Cash 36,774 (229,243) Cash and Cash Equivalents Beginning of Period 227 257,899 ------------ ------------ Cash and Cash Equivalents End of Period $ 37,001 $ 28,656 ============ ============ Cash Paid For: Interest $ -- $ -- Taxes $ -- $ -- Non-Cash Financing Activities: Common Stock Issued For Prepaid Services $ 106,500 $ -- Common Stock Issued For Accrued Expenses $ 33,648 $ -- -5- Notes to the Consolidated Financial Statements December 31, 2005 GENERAL The American Energy Group, Ltd. and Subsidiaries (the Company) has elected to omit substantially all footnotes to the financial statements for the three months and six months ended December 31, 2005 since there have been no material changes (other than indicated in other footnotes) to the information previously reported by the Company in their Annual Report filed on the Form 10-KSB for the year ended June 30, 2005, as amended. WARRANTS During the quarter ended September 30, 2005, the Company issued 260,000 warrants in exchange for $130,000. The warrants provide that up to 160,000 shares may be purchased at $1.50 per share and up to 100,000 shares may be purchased at $1.75 per share during the three year period ending September 30, 2008. The Company estimates the fair value of each stock award at grant date by using the Black-Scholes option pricing model. The warrants granted during the quarter ended September 30, 2005 were based on the following assumptions. Dividend yield 0 Expected volatility 100% Risk free interest 3.90% Expected lives 3 years As a result of the 260,000 warrants issued during the quarter ended September 30, 2005, the Company incurred $88,714 of expense which is included in general and administrative expenses in the consolidated statement of operations. COMMON STOCK During the quarter ended December 31, 2005, the Company issued 122,222 shares of its common stock for cash contributions in the amount of $110,000, or $0.90 share. In addition, the Company completed a completed a private placement of 100,000 shares at a price of $1.35 per share. As of December 31, 2005, the Company received $27,000 as a result of this placement. The balance of the proceeds related to this placement, or $108,000, has been reported as a reduction from equity as subscriptions receivable as of December 31, 2005. In addition, the Company issued 22,500 shares of its common stock in exchange for debt and issued an additional 75,000 of its common stock in exchange for services which will be provided to the Company over a two year period. RESTATEMENT The financial statements for the quarter ended December 31, 2005 were restated to reflect the changes identified below.. Management and the board of directors concluded these restatements were necessary to reflect the changes described below. -6- At December 31, 2005, $108,526 of the amount included in prepaid expenses as an asset were related to the unamortized value of common stock issued for payment of prepaid services.. This amount hasbeen reclassified from an asset to the stockholders' equity section of the balance sheet. Certain language in the certification statements has been modified to conform to regulations. UNAUDITED INFORMATION The information furnished herein was taken from the books and records of the Company without audit. However, such information reflects all adjustments which are, in the opinion of management, necessary to properly reflect the results of the interim period presented. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year. ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward-Looking Statements This report contains statements about the future, sometimes referred to as "forward-looking" statements. Forward-looking statements are typically identified by the use of the words "believe," "may," "will," "should," "expect," "anticipate," "estimate," "project," "propose," "plan," "intend" and similar words and expressions. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that describe our future strategic plans, goals or objectives are also forward-looking statements. Readers of this report are cautioned that any forward-looking statements, including those regarding the Company or its management's current beliefs, expectations, anticipations, estimations, projections, proposals, plans or intentions, are not guarantees of future performance or results of events and involve risks and uncertainties, such as: . The future results of drilling individual wells and other exploration and development activities; . Future variations in well performance as compared to initial test data; . Future events that may result in the need for additional capital; . Fluctuations in prices for oil and gas; . Future drilling and other exploration schedules and sequences for various wells and other activities; . Uncertainties regarding future political, economic, regulatory, fiscal, taxation and other policies in Pakistan; . Our future ability to raise necessary operating capital. The forward-looking information is based on present circumstances and on our predictions respecting events that have not occurred, which may not occur or which may occur with different consequences from those now assumed or anticipated. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including the risk factors detailed in this report. The forward-looking statements included in this report are made only as of the date of this report. We are not obligated to update such forward-looking statements to reflect subsequent event or circumstances. Overview Prior to the Company's bankruptcy proceedings initiated on June 28, 2002, we were an active oil and gas exploration and development company. The foreclosure of our Fort Bend County, Texas oil and gas leases by the secured creditor in early calendar 2003 resulted in the loss of our only revenue producing asset. We intend to initiate new business activities by prudent management of our Pakistan overriding royalty interest and our Galveston, Texas interests and if we are successful in generating working capital from these investments or from sales of securities, we intend to pursue investment opportunities in the oil and gas business. -7- Drilling of the Haseeb No. 1 Well in Pakistan, as to which our overriding royalty pertains, was successfully completed by Hycarbex-American Energy, Inc. prior to June 30, 2005. All testing to date, including the acidization of the well performed during the quarter ended September 30, 2005, and the subsequent testing during the quarter ended December 31, 2005, indicates that the Haseeb No. 1 well will be a significant commercial gas well and such gas sales are now expected to begin during the quarter ending June 30, 2006. The post-acidization testing performed by Schlumberger Oilfield Services to date originally indicated an increase in the natural gas flow rate calculated at the time of the initial drill stem test from 7.3 MMcf per day to 10 MMcf per day. However, further testing and analysis by Schulmberger indicates that the 10MMcf could be potentially increased to 28MMcf per day if the exising production tubing in the well is replaced with higher diameter production tubing and if the wellhead pressure is maintained at approximately 1,000 pounds per square inch. Hycarbex-American Energy, Inc., the operating entity holding the exploration license, previously announced its plans for both a discovery confirmation well and a new exploratory well scheduled for January, 2006, but which now appears to be more likely during the sixty (60) day period following the filing of this report, due to delays in committee approval of the work program. The committee is chaired by DGPC, the entity which represents the President of the Republic of Pakistan. One of the two proposed wells is expected to test a geologic structure which calendar 2005 seismic operations indicate may be commercially productive. Results of Operations Our operations for the period ending December 31, 2005 reflected a net loss of $180,403 attributable to salaries paid to the directors, legal and professional fees, office overhead, and administrative expense. There were no revenues from operations and our sole business during the quarter consisted of management of our Pakistan and Texas assets. All of our previously owned producing oil and gas leases were foreclosed by the first lien lender in early calendar 2003 while the Company was in bankruptcy. As a result, subsequent to emerging from bankruptcy, the Company had no recurring income stream and was solely dependent upon cash infusion from the sale of securities and loans. The loans and securities sales which have occurred since emerging from bankruptcy, including the $110,000 received during the current quarter which resulted from the private placement of Common Stock, together with $135,000 from a subsequent private placement of Common Stock after the end of the current quarter have been used and will continue to be used to finance salaries, legal expenses and nominal administrative overhead until the revenues from gas sales from the successful Haseeb No. 1 Well begin. These gas sales are now expected to begin during the final fiscal quarter ending June 30, 2006. Our prior operating company, The American Energy Operating Corp. ("AEOC") did not participate in our 2002 bankruptcy proceedings and, therefore, its accounts payable and accrued liabilities were carried on our books post-bankruptcy, despite the total inactivation of the subsidiary. On April 14, 2005, Chapter 7 bankruptcy proceedings were initiated for The American Energy Operating Corp. in the Southern District of Texas with the intended purpose of liquidating this inactive subsidiary and eliminating these liabilities from the books of the Company. These bankruptcy proceedings are still pending. Liquidity and Capital Resources Since emerging from bankruptcy, we have been funded through the private sale of convertible debt, convertible equity and Common Stock totaling $575,000 pursuant to Second Amended Plan of Reorganization, all of which has been converted to Common stock. During the fiscal year ending June 30, 2005, we obtained a loan facility from a private party for $300,000 for near term operating capital, the terms of which are accrual of interest at Wall Street Prime plus one percent, no prepayment penalty, and a maturity of one year, with the right to extend the maturity for an additional year by the payment of an extension fee of $20,000. Out of this facility, we have been advanced $292,000 which has been used for general corporate purposes. We likewise obtained from a private party during the quarter ended June 30, 2005, a separate $25,000 loan due and payable December 31, 2005, and which was to accrue interest at JPMorgan Chase Bank Prime plus three percent. During the quarter ended September 30, 2005, this $25,000 loan was converted into 50,000 warrants with a three year term and an exercise price of $1.75. -8- During the quarter ended September 30, we raised an additional $105,000 through the placement with private parties of 210,000 warrants to purchase our Common Stock. The warrants have a three year term and provide for the purchase of the stock during the term, if exercised, at a price of $1.50 per share as to 160,000 warrants, and a price of $1.75 per share as to 50,000 warrants. During the quarter ending December 31, 2005, we sold 122,222 Common shares at $0.90 per share, or a total of $110,000. Immediately following the quarter, we sold 100,000 Common shares at $1.35 per share, or a total of $135,000. We anticipate that the capital obtained from these private loan and sale transactions will provide sufficient working capital through early calendar 2006. If the gas sales from Haseeb No. 1 begin in 2006 as expected, we expect to rely upon actual production revenues for future working capital needs. However, there can be no assurance that the gas sales will begin at the time anticipated and we may require additional operating capital to meet future needs. Business Strategy and Prospects We believe that there have been positive developments resulting from the bankruptcy proceedings. We have eliminated the Company's debt burden, diminished its labor force and significantly reduced all facets of general and administrative overhead. The cancellation and reissuance of new securities have reduced the outstanding shares from over sixty six million shares to just over twenty-seven million shares, a number which both permits the issuance of additional securities in the future as needed to obtain strategic assets or funding from investors, and which provides an opportunity for enhanced shareholder value if the current assets become cash generating assets, as anticipated. Our registration of 2,000,000 Common shares on Form S-8 during the quarter ended June 30, 2005 will likewise provide a means of compensating key consultants in the coming months. We will continue to manage our Pakistan royalty and our Galveston County, Texas oil and gas leases discussed below. While we await production revenues from the sale of gas from the Haseeb No. 1 well in Pakistan, we expect to negotiate the initiation of a deep test on our Galveston County assets. Contemporaneously with these activities, we expect to pursue a lawsuit to obtain accounting of potential unpaid revenues from the middle zones in the Galveston County assets which may now be payable to American Energy as a result of the 15% reversionary interest owned by American Energy in those middle zones. Pakistan Overriding Royalty The Company, through its Hycarbex subsidiary (before the sale of that subsidiary) expended in excess of $10,000,000 on drilling and seismic on the Jacobabad and Yasin concessions in the Republic of Pakistan comprised of over 2,200 square kilometers. The structure, to date, has no Proved Reserves as that term and the calculation for discounted future net cash flows for reporting purposes is mandated by the Financial Accounting Standards Board in Statement of Financial Accounting Standards No. 69, titled "Disclosures About Oil and Natural Gas Producing Activities". While we did not obtain a commercial discovery well in any of our previous Pakistan drilling efforts, we have announced the success of the Haseeb No. 1 well and the completion of 110 kilometers of additional seismic research by Hycarbex-American Energy, Inc. We have likewise announced that Hycarbex-American Energy, Inc. intends to drill two wells early in calendar 2006. We strongly believe that the concession acreage contains oil and gas producing physical structures which are worthy of further exploration. If successfully developed, our reserved 18% overriding royalty interest will likely be a good source of cash revenues because the royalty, by its nature, entitles us to share in gross, rather than net, production. These revenues are expected to be used by the Company for further investment in other revenue generating assets or business activities. While continuous production and favorable hydrocarbon prices are necessary for the overriding royalty interest to demonstrate real value, we are optimistic that the recent successful drilling of the Haseeb No. 1 Well, the proximity of a pipeline for gas sales and the additional seismic and technical data collected will enhance the chances of continued success on the concession despite the customary risks inherent with oil and gas drilling in general. Galveston County, Texas Leases In 1997, we purchased the interests of Luck Petroleum Corporation from its bankruptcy trustee in two oil and gas leases in Galveston County, Texas. The leases are situated in an area which is productive in multiple zones or horizons and the leases themselves have produced commercial quantities of oil and gas from both shallow and mid-range zones. In 1986, Luck Petroleum Corporation assigned these mid-range zones to Smith Energy, reserving for itself an "after-payout" 15% back-in working interest. Luck Petroleum Corporation also limited the depths assigned to Smith Energy, thereby resulting in depths generally greater than 10,000 feet being reserved to Luck Petroleum Corporation. We succeeded to the interests of Luck Petroleum Corporation as a result of the 1997 purchase from the bankruptcy trustee. With regard to the mid-range zones, our research to date has given rise to the belief that "payout" has occurred, as defined in the 1986 conveyance by Luck Petroleum Corporation to Smith Energy. If we are correct, then we are entitled to receive 15% of the monthly working interest production from the existing Smith Energy wells on the leases. Smith Energy has disputed our contentions and thus such rights, if any, are likely only to be established in litigation or a negotiated settlement. Settlement discussions have occurred between the two companies. -9- Based upon our research, we believe that the deeper zones also have development potential. Our deep rights are currently vested and are unaffected by the dispute with Smith Energy as to the mid-range zones. We are exploring the various opportunities to realize value from these deep rights. This will likely be accomplished through a straight assignment of the leases to a third party exploration company with a retained interest in production, if any, by American Energy, or alternatively, through the raising of drilling capital with private investors. In the latter scenario, we are likely to utilize a third party drilling and operating company to perform the drilling in order to minimize the environmental and other risks associated with deep drilling. These leases are held in force by third party production and, therefore, the leases do not require development of these rights by a certain date. We believe that we will be able to continue our research and negotiations toward a development path which best suits our goals and our cash flow position. Off Balance Sheet Arrangements We had no off balance sheet arrangements during the quarter ended December 31, 2005. ITEM 3- CONTROLS AND PROCEDURES In conjunction with this Report on Form 10-QSB/A and the certification of the disclosures herein, and as required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act"), the Company's principal executive officer and principal financial officer, Pierce Onthank, evaluated the effectiveness of the Company's disclosure controls and proceedings. This review, which occurred as of December 31, 2005, found the disclosure controls and procedures to be effective. There have been no changes in the Company's internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 which occurred during the fiscal quarter ended December 31, 2005, that have materially affected or are reasonably likely to materially affect these internal controls over financial reporting. -10- PART II-OTHER INFORMATION ITEM 1-LEGAL PROCEEDINGS During the period ended June 30, 2004, The American Energy Operating Corp. ("AEOC"), the inactive former operating subsidiary of the Company, which has been inactive since the producing Texas oil and gas leases were foreclosed in 2003, received notice from the enforcement division of the Railroad Commission of Texas that three (3) abandoned wells in the North Dayton Field previously operated by AEOC many years ago are required to be plugged in accordance with Commission procedures and rules. The Company is not a party to these proceedings. The plugging costs are estimated at less than $50,000 based upon estimates made by the Railroad Commission, but could be potentially higher depending upon subsurface conditions. These uncertain plugging costs, together with the high liabilities previously carried on the Company's books related to AEOC's prior operations, formed the basis for AEOC to file for a voluntary Chapter 7 bankruptcy liquidation on April 14, 2005 in the Southern District of Texas, Houston Division in Cause No. 05-35757. These proceedings do not involve the Company. AEOC's bankruptcy is pending, but an ultimate discharge of AEOC may not eliminate the plugging responsibility assigned by the State of Texas to AEOC based upon federal bankruptcy statutory exclusions related to environmental matters. If not eliminated by the ultimate discharge, the State of Texas could, in its discretion, seek enforcement of the plugging responsibilities against AEOC. The Company's subsidiary, The American Energy Operating Corp., was served with a new lawsuit initiated on January 12, 2006, in the 281st Judicial District Court of Harris County, Texas. The suit is titled: M.S. Moin Hussain, Saleem Z. Khan and Khan & Piracha vs. The American Energy Group, Ltd., The American Energy Operating Corp., Hycarbex-American Energy, Inc. f/k/a Hycarbex, Inc., Pierce Onthank, Iftikhar Ahmed Zahid and Georg Friedher Von Canal. While the Company is one of the named Defendants, it has not yet been served as of the date of this report. The Plaintiffs are Moin Hussain, who originally incorporated Hycarbex, Inc. ("Hycarbex") in 1985, and Saleem Khan and Khan & Piracha, Pakistan-based attorneys. According to the Plaintiffs' pleadings, the Plaintiffs allege that in 1995, shortly after the petroleum exploration license covering the Jacobabad Block 2768-4 was awarded to Hycarbex, The American Energy Group, Ltd. acquired all of the outstanding stock of Hycarbex. The Plaintiffs further state in their pleadings that consideration for the sale of the stock included a 1% overriding royalty assigned to Hussain, and that Hussain subsequently assigned two tenths of one percent of same to Saleem Khan. Plaintiffs further assert that in connection with the subsequent acquisition by Hycarbex of the Yasin block in 2001, Khan & Piracha assisted in the acquisition and were promised by Hycarbex, according to Plaintiffs, twenty percent of the Yasin concession. The Plaintiffs allege that the several Defendants have failed to honor the alleged commitments without identifying the specific party responsible for the alleged obligation. The American Energy Group, Ltd. intends to defend the allegations when it is joined in the lawsuit and to assert that it has no liability to Plaintiffs in the dispute between Plaintiffs and Hycarbex. Furthermore, the results of such litigation will not affect the Company's 18% royalty interest in the Yasin Block based upon representations by Hycarbex to The American Energy Group, Ltd. reaffirming the 18% royalty in the Yasin Block despite these claims. ITEM 2-UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the quarter ended December 31, 2005, we completed the private sale of 122,222 shares of Common Stock resulting in gross proceeds of $110,000, which will be used for general corporate purposes. In another private sale transaction which transpired after the quarter ending December 31, 2005, the Company sold 100,000 shares of its Common Stock for gross proceeds of $135,000, or $1.35 per share, which will likewise be used for general corporate purposes. In each of these transactions, the securities were offered and sold by the Company to accredited investors in reliance upon Section 506 of Regulation D of the Securities Act of 1933, as amended. To date, the Company has not paid dividends on its shares and we do not anticipate paying dividends. ITEM 3-DEFAULTS UPON SENIOR SECURITIES There has been no default upon senior securities during the quarter ended September 30, 2005. ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS There has been no submission of any matters to a vote of security holders during the quarter ended December 31, 2005. -11- ITEM 5-OTHER INFORMATION None. ITEM 6-EXHIBITS The following documents are filed as Exhibits to this report: Exhibit 31.1 - Certification by R. Pierce Onthank, President, Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a); Exhibit 32.1 - Certification by R. Pierce Onthank, President, Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Section 1350(a) and (b). SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE AMERICAN ENERGY GROUP, LTD. (REGISTRANT) By:/s/ R. Pierce Onthank --------------------- R. Pierce Onthank, President, Secretary, Chief Executive Officer and Chief Financial Officer DATED: August 3, 2006 -12-