SB-2

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

Commission File Number ____________

THE AMERICAN ENERGY GROUP, LTD.

(Exact name of small Business Issuer as specified in its charter)

NEVADA	87-0448843
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)
	1311
	(Primary Standard Industrial Classification Code)
1 Gorham Island Suite 303
Westport, Connecticut	06880
(Address of principal executive offices)	(Zip Code)

(203) 222-7315

Issuer’s telephone number, including area code

120 Post Road West, Suite 202

Westport, Connecticut 06880

Former address of principal executive offices

PIERCE ONTHANK

CHIEF EXECUTIVE OFFICER AND PRESIDENT

THE AMERICAN ENERGY GROUP, LTD.

1 GORHAM ISLAND, SUITE 303

WESTPORT, CONNECTICUT 06880

Copies to:

JAMES M. HUGHES

1777 N.E. LOOP 410, SUITE 1500

SAN ANTONIO, TEXAS 78217

(210) 821-5900

ROBERT D. AXELROD, ESQ.

AXELROD, SMITH & KIRSHBAUM, P.C.

5300 MEMORIAL DRIVE, SUITE 700

HOUSTON, TEXAS 77007

(713) 861-1996

Approximate Date of Commencement of Proposed Sale to the Public: From time to time after the effective date of this registration statement.

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be registered (1)	Proposed maximum offering price per unit	Proposed maximum aggregate offering price	Amount of Registration Fee (2)
Common Stock, $.001 par value (3)	2,323,529	$1.70	$3,950,000	$422.73
Common Stock, $.001 par value/ Underlying Warrants (4)	3,867,326	$1.33	$5,147,454	$550.70
TOTAL	6,190,855	N/A	$9,097,454	$973.43

⁽¹⁾ In accordance with Rule 416 under the Securities Act of 1933, as amended (the “Act”), this registration statement also covers any additional shares of common stock which may become issuable under by reason of any stock dividend, stock split, re-capitalization or any other similar transaction effected without the consideration which results in an increase in the number of registrant’s outstanding shares of common stock.

⁽²⁾ This calculation is made solely for the purposes of determining the registration fee pursuant to the provisions of Rule 457 under the Securities Act of 1933, as amended.

⁽³⁾ Shares of Common Stock issued to selling stockholders.

⁽⁴⁾ Represents shares issuable upon the exercise of warrants with exercise prices ranging from $0.75 to $1.70 and an average weighted exercise price of $1.33 per share.

DELAYING AMENDMENT UNDER RULE 473(A): The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to section 8(a), may determine.

The information in this prospectus is subject to completion or amendment. The securities covered by this prospectus cannot be sold until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that state.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND THE SELLING STOCKHOLDERS ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION, DATED AUGUST 4, 2006

THE AMERICAN ENERGY GROUP, LTD.

6,190,855 SHARES OF COMMON STOCK

This prospectus relates to the offering for resale of up to 2,323,529 shares of our common stock, $0.001 par value (“Common Stock”) currently held by certain selling stockholders and 3,867,326 shares of common stock underlying the warrants currently held by certain selling stockholders. For a list of the selling stockholders, please see "Selling Stockholders." We are not selling any shares of our Common Stock in this offering and therefore will not receive any proceeds from the sale thereof. We may, however, receive proceeds upon the exercise of the warrants held by certain selling stockholders for which we are registering the underlying shares if such warrants are exercised and paid for. We will bear all expenses, other than selling commissions and fees of the selling stockholders, in connection with the registration and sale of the shares being offered by this prospectus.

These shares may be sold by the selling stockholders from time to time in the over-the-counter market or other national securities exchange or automated interdealer quotation system on which our Common Stock is then listed or quoted, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices.

Our Common Stock currently trades in the Over the Counter Bulletin Board under the symbol "AEGG." On June 30, 2006, the last reported sales price of our Common Stock was $1.45 per share.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISKS. PLEASE REFER TO THE "RISK FACTORS" BEGINNING ON PAGE 2.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS ______________ ____, 2006.

TABLE OF CONTENTS

PROSPECTUS SUMMARY	1
RISK FACTORS	2
CAUTIONARY STATEMENT CONCERNING
FORWARD LOOKING STATEMENTS	10
BUSINESS	12
LEGAL PROCEEDINGS	21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION	23
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	27
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE	28
USE OF PROCEEDS	28
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS	29
SECURITY OWNERSHIP OF CERTAIN
BENEFICAL OWNERS AND MANAGEMENT	32
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	33
SELLING STOCKHOLDERS	34
PLAN OF DISTRIBUTION	36
DESCRIPTION OF SECURITIES	38
INTEREST OF NAMED EXPERTS AND COUNSEL	39
EXPERTS	39
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES	39
WHERE YOU CAN FIND MORE INFORMATION	40
FINANCIAL STATEMENTS	F-1

PROSPECTUS SUMMARY

The following summary highlights selected information contained in this prospectus. This summary does not contain all of the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements. You should also review the other available information referred to in the section entitled “”Where you can find more information” on page 40 in this prospectus and any amendment or supplement hereto. Unless otherwise indicated, the terms the “Company,” “we,” “us,” and “our” refer and relate to The American Energy Group, Ltd. and its consolidated subsidiaries.

The Company

The American Energy Group, Ltd. (formerly Belize-American Corp. International) (hereinafter the “Company” or “American Energy”) was organized in the State of Nevada under the name “Dim, Inc.” on July 21, 1987. The Company’s name was changed to “The American Energy Group, Ltd.” in 1994. Until our 2002 bankruptcy filing, we were an independent oil and natural gas company engaged in the exploration, development, acquisition and production of crude oil and natural gas properties in the Texas gulf coast region of the United States and in the Jacobabad area of the Republic of Pakistan.

While the bankruptcy proceedings were pending, our producing oil and gas leases in Fort Bend County, Texas were foreclosed by a secured lender. Our non-producing Galveston County, Texas oil and gas lease rights were not affected by the foreclosure. In November 2003, we sold the capital stock of our then existing subsidiary, Hycarbex-American Energy, Inc. (“Hycarbex”), which held the exploration license in Pakistan, to Hydro Tur (Energy) Ltd., a company organized under the laws of the Republic of Turkey (“Hydro Tur”). We retained an 18% overriding royalty interest in the production which may be derived in the future from drilling operations in the Yasin Concession (as discussed herein). We emerged from bankruptcy in January 2004 with these two assets intact and with our sole business being the maintenance and management of these assets.

In the future, the focus of our activities will continue to be the successful management of our royalty in the Yasin Concession, successful development or possible sale of our Galveston County, Texas assets, and further investment in other oil and gas opportunities in Pakistan, whether in the form of overriding royalties or working interests.

THE OFFERING

Outstanding Common Stock	29,867,705 shares (as of June 30, 2006).
Common Stock Offered	Up to 2,323,529 shares of common stock held by certain selling stockholders and 3,867,326 shares of common stock issuable upon the exercise of warrants, which warrants have an exercise price range of $0.75 to $1.70 per share (with a weighted average price of $1.33).
Offering Price	Determined at the time of sale by the selling stockholders.
Proceeds	We will not receive any proceeds from the sale of the common stock offered by the selling stockholders that may be sold pursuant to this prospectus. We will, however, receive proceeds of approximately $5,147,454 upon the exercise of and payment for the warrants held by certain selling stockholders for which we have registered the underlying shares, if all such warrants are exercised. Proceeds, if any, received from the exercise of warrants will be used for general corporate purposes.
Risk Factors	The securities offered hereby involve a high degree of risk. See “Risk Factors” herein.

Page 1

RISK FACTORS

An investment in our Common Stock involves a high degree of risk. You should carefully consider the risks described below before deciding to purchase shares of our Common Stock. If any of the events, contingencies, circumstances or conditions described in the risks below actually occur, our business, financial condition or results of operations could be seriously harmed. The trading price of our Common Stock could, in turn, decline and you could lose all or part of your investment.

Risks Related to the Company

We may incur operating losses.

We may incur significant operating expenses and make relatively high capital expenditures as we develops our business and expand our sales and marketing capabilities. These operating expenses and capital expenditures initially may outpace revenues and result in significant losses.

Our limited history and prior bankruptcy proceedings make an evaluation of us and our future extremely difficult, and profits are not assured.

In view of our limited history in the oil and gas exploration business, our prior bankruptcy proceedings between June 2002 and January 2004, and the fact that we do not have a current revenue stream from operations, it may be difficult for investors to evaluate our business and prospects. Each investor must consider our business and prospects in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. For our business plan to succeed, we must successfully undertake most of the following activities:

* Find and acquire rights in attractive oil and gas properties including the ability to successfully negotiate with foreign governments to obtain these rights;

* Develop or cause third parties to develop the oil and gas projects to a stage at which oil and gas are being produced in commercially viable quantities;

* Procure purchasers of commercial production of oil and gas;

* Comply with applicable laws and regulations;

* Identify and enter into binding agreements with suitable joint venture partners for future projects;

* Raise a sufficient amount of funds to continue acquisition, exploration and development programs;

* Implement and successfully execute its business strategy;

* Respond to competitive developments and market changes; and

* Attract, retain and motivate qualified personnel.

There can be no assurance that we will be successful in undertaking any or all of such activities. A failure to undertake successfully most, if not all, of the activities described above could materially and adversely affect our business, prospects, financial condition and results of operations. In addition, there can be no assurance that exploration and production activities will produce oil and gas in commercially viable quantities, if any at all. There can be no assurance that sales of oil and gas production will generate significant revenues for a sustained period or that we will be able to achieve or sustain profitability in any future period.

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The pricing of gas inside Pakistan is directly tied to an index with a ceiling price which could limit profitability.

The pricing of gas inside the Republic of Pakistan is directly linked to the international prices for crude oil and furnace oil. Prices are based upon a baseline of 1,000 British Thermal Units (“BTU”). If the gas which is sold has a BTU content which is less than or greater than 1,000 BTUs, the negotiated price is proportionately decreased or increased, respectively. Price ranges relating to the international prices for crude oil and furnace oil are set by the Pakistan Oil and Gas Regulatory Authority which has set a ceiling price of $36 per barrel for purposes of determining the gas prices, even if the international oil prices are trading higher. This ceiling price, if it remains in effect, could limit the profits which may be derived from the production and sale of gas.

We may experience potential fluctuations in results of operations.

Our future revenues may be affected by a variety of factors, many of which are outside our control, including (a) the success of project results; (b) swings in availability of services needed to implement projects and the pricing of such services; (c) a volatile oil and gas pricing market which may make certain projects that we undertake uneconomic; (d) the ability to develop infrastructure to accommodate growth; (e) the ability to attract new independent producers with prospects in a timely and effective manner; and (f) the amount and timing of operating costs and capital expenditures relating to establishing our business operations and infrastructure. As a result of our limited operating history and the emerging nature of our business plan, it is difficult to forecast revenues or earnings accurately, which may fluctuate significantly from quarter to quarter.

The trading price of the common stock entails additional regulatory requirements, which may negatively affect such trading price.

The trading price of our common stock is below $5.00 per share. As a result of this price level, trading in our common stock is subject to the requirements of certain rules promulgated under the Exchange Act. These rules require additional disclosure by broker-dealers in connection with any trades generally involving any non-NASDAQ equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such rules require the delivery, before any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions). For these types of transactions, the broker-dealer must determine the suitability of the penny stock for the purchaser and receive the purchaser's written consent to the transaction before sale. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock. As a consequence, the market liquidity of our common stock could be severely affected or limited by these regulatory requirements.

We incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as well as rules subsequently implemented by the SEC, have imposed various new requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these new rules and regulations are expected to make it more difficult and more expensive to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage.

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In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, commencing in fiscal 2007, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management and the independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. The testing, or the subsequent testing by its independent registered public accounting firm, may reveal deficiencies in internal controls over financial reporting that are deemed to be material weaknesses. Compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. Currently, we do not have an internal audit group, and will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are unable to comply with the requirements of Section 404 in a timely manner, or if the independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of the stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Cumulative voting is not available to stockholders.

Cumulative voting in the election of directors is expressly denied in our Articles of Incorporation. Accordingly, the holder or holders of a majority of the outstanding shares of our common stock may elect all of our Directors. Management's large percentage ownership of the outstanding common stock helps enable them to maintain their positions as such and thus control of our business and affairs.

Management controls a significant percentage of our current outstanding common stock and their interests may conflict with those of our shareholders.

As of June 30, 2006, our directors and executive officers and their respective affiliates collectively and beneficially owned approximately 17.8% of the outstanding common stock, including all warrants exercisable within 60 days. This concentration of their voting interest gives the directors and executive officers substantial influence over any matters which require a shareholder vote, including, without limitation, the election of directors, even if their interests may conflict with those of other shareholders. It could also have the effect of delaying or preventing a change in control of or otherwise discouraging a potential acquirer from attempting to obtain control. This could have a material adverse effect on the market price of the common stock or prevent the shareholders from realizing a premium over the then prevailing market prices for their shares of common stock.

We may have conflicts of interest with key personnel.

Our key personnel may, from time to time, be engaged in activities which could be construed as a conflict of interest. Dr. Iftikhar Zahid, our Director and executive in charge of managing our assets in Pakistan, is a principal officer and a director of Hycarbex, our former subsidiary and the owner/operator of the Yasin Concession. A conflict could arise in the event that we have a future dispute with Hycarbex over royalty interest payment matters. Additionally, our key personnel may own non-Company oil and gas investments, and may sit on the board of directors of other oil and gas companies. It is possible that we may purchase oil and gas services from key personnel in the future.

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We are dependent on key personnel.

Our future success is dependent, in a large part, on retaining the services of Mr. R. Pierce Onthank, Dr. Iftikhar Zahid, and other key management, the loss of any of which could have a material adverse effect on our operations. Mr. Onthank and Dr. Zahid each possess a unique and comprehensive knowledge of our industry. While neither Mr. Onthank nor Dr. Zahid have any present plans to leave or retire in the near future, the loss of either Mr. Onthank or Dr. Zahid could have a negative effect on our operating, marketing and financial performance if we are unable to find an adequate replacement with similar knowledge and experience within our industry. We do not maintain key-man life insurance with respect to any of our management or directors.

The policies toward foreign investment in Pakistan oil and gas exploration could change.

Future governmental enactments or changes to existing policies could impact our ownership or asset value. The royalty interest which we hold in the Yasin Concession, and other interests which we will seek to acquire in other concession opportunities, could be adversely affected by future regulatory and/or policy changes. Since the value of such interests is derived from the actual net proceeds of production, changes to the duration of the exploration license, applicable taxes or tariffs, or commodity purchase prices could significantly affect our interests in the region.

The issuance of additional authorized shares of our common and preferred stock or the exercise of stock options and warrants may dilute our investors and adversely affect the market for our common stock.

We are authorized to issue 80,000,000 shares of our common stock. As of June 30, 2006, there were 29,867,705 shares of common stock issued and outstanding. However, the total number of shares of our common stock issued and outstanding does not include shares reserved in anticipation of the conversion of notes or the exercise of options or warrants. As of June 30, 2006, we had outstanding warrants to purchase approximately 3,867,326 shares of our common stock, the exercise price of which range between $0.75 and $1.70 per share, and we have reserved shares of our common stock for issuance in connection with the potential exercise thereof. To the extent such options or warrants are exercised, the holders of our common stock will experience further dilution. In addition, in the event that any future financing should be in the form of, be convertible into or exchangeable for, equity securities, and upon the exercise of options and warrants, investors may experience additional dilution.

Possible or actual sales of a substantial number of shares of common stock by the selling stockholders in this offering could have a negative impact on the market price of our common stock. No prediction can be made as to the effect, if any, that sales of shares of common stock or the availability of such shares for sale will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of common stock may be sold in the public market would likely have a material adverse effect on prevailing market prices for the common stock and could impair our ability to raise capital through the sale of our equity securities.

The exercise of the outstanding convertible securities will reduce the percentage of common stock held by our stockholders. Further, the terms on which we could obtain additional capital during the life of the convertible securities may be adversely affected, and it should be expected that the holders of the convertible securities would exercise them at a time when we would be able to obtain equity capital on terms more favorable than those provided for by such convertible securities. As a result, any issuance of additional shares of common stock may cause our current stockholders to suffer significant dilution which may adversely affect the market. 

Page 5

In addition to our shares of common stock which may be issued without stockholder approval, we have 20,000,000 shares of authorized preferred stock, the terms of which may be fixed by our Board of Directors. We presently have no issued and outstanding shares of preferred stock and while we have no present plans to issue any shares of preferred stock, our Board of Directors has the authority, without stockholder approval, to create and issue one or more series of such preferred stock and to determine the voting, dividend and other rights of holders of such preferred stock. The issuance of any of such series of preferred stock may have an adverse effect on the holders of common stock.

We are solely dependent upon capital from outside sources.

Due to the present lack of a revenue stream from business operations, we do not currently have the financial resources to develop all of our currently identified projects and to sustain our administrative overhead. Revenues from the successful Haseeb No. 1 Well will not be available until Hycarbex connects to the available pipeline. There is no assurance that capital will be available in the future to us or that capital will be available under terms acceptable to us. Depending upon our needs and the timing of pipeline connection, we may need to raise additional capital, either through the sale of equity securities (which could dilute the existing stockholders' interest) or from borrowings from third parties (which could result in assets being pledged as collateral and which would increase our debt service requirements). Additional capital could be obtained from a combination of funding sources, many of which could have a material adverse effect on our business, results of operations and financial condition.

We, and the operators of projects in which we participate, depend on industry vendors and may not be able to obtain adequate services.

Though our oil and gas operators, we are largely dependent on industry vendors for our success. These contracted services include, but are not limited to, accounting, drilling, completion, workovers and reentries, geological evaluations, engineering, leasehold acquisition (landmen), operations, legal, investor relations/public relations, and prospect generation. We could be harmed if the operators of our projects fail to attract quality industry vendors to participate in the drilling of prospects or if industry vendors do not perform satisfactorily. We have little control over factors that influence the performance of such vendors.

We rely on third parties for production services and processing facilities.

The marketability of the our production depends upon the proximity of our projects’ reserves to, and the capacity of, facilities and third party services, including oil and natural gas gathering systems, pipelines, trucking or terminal facilities, and processing facilities. The unavailability or lack of capacity of such services and facilities could result in the shut-in of producing wells or the delay or discontinuance of development plans for properties. A shut-in or delay or discontinuance could materially adversely affect our financial condition.

Our Directors and Officers have limited liability and have rights to indemnification.

Our Articles of Incorporation and Bylaws provide, as permitted by governing Nevada law, that our directors and officers shall not be personally liable to us or any of our stockholders for monetary damages for breach of fiduciary duty as a director or officer, with certain exceptions. The Articles further provide that we will indemnify our directors and officers against expenses and liabilities they incur to defend, settle, or satisfy any civil litigation or criminal action brought against them on account of their being or having been its directors or officers unless, in such action, they are adjudged to have acted with gross negligence or willful misconduct.

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The inclusion of these provisions in the Articles may have the effect of reducing the likelihood of derivative litigation against directors and officers, and may discourage or deter stockholders or management from bringing a lawsuit against directors and officers for breach of their duty of care, even though such an action, if successful, might otherwise have benefited us and our stockholders.

The Articles provide for the indemnification of our officers and directors, and the advancement to them of expenses in connection with any proceedings and claims. The Articles include related provisions meant to facilitate the indemnitee's receipt of such benefits. These provisions cover, among other things: (i) specification of the method of determining entitlement to indemnification and the selection of independent counsel that will in some cases make such determination, (ii) specification of certain time periods by which certain payments or determinations must be made and actions must be taken, and (iii) the establishment of certain presumptions in favor of an indemnitee.

General Risks of the Oil and Gas Business

Investment in the oil and gas business is risky.

Oil and gas exploration and development is an inherently speculative activity. There is no certain method to determine whether or not a given prospect will produce oil or gas or yield oil or gas in sufficient quantities and quality to result in commercial production. There is always the risk that development of a prospect may result in dry holes or in the discovery of oil or gas that is not commercially feasible to produce. There is no guarantee that a producing asset will continue to produce. Because of the high degree of risk involved, there can be no assurance that we will recover any portion of our investment or that our investment in oil and gas exploration activities will be profitable.

The oil and gas business is subject to drilling and operational hazards.

The oil and gas business involves a variety of operating risks, including:

•blowouts, cratering and explosions;

•mechanical and equipment problems;

•uncontrolled flows of oil and gas or well fluids;

•fires;

•marine hazards with respect to offshore operations;

•formations with abnormal pressures;

•pollution and other environmental risks; and

•natural disasters.

Any of these events could result in loss of human life, significant damage to property, environmental pollution, impairment of operations and substantial losses. Locating pipelines near populated areas, including residential areas, commercial business centers and industrial sites, could increase these risks. In accordance with customary industry practice, our operators will maintain insurance against some, but not all, of these risks and losses. The occurrence of any of these events not fully covered by insurance could have a material adverse effect on our financial position and the results of operations.

We will face fierce competition from other companies in the acquisition of development opportunities.

A large number of companies and individuals engage in drilling for gas and oil, and there is competition for the most desirable prospects. This is likewise the case in Pakistan where foreign investment is accelerating at a tremendous pace. We will encounter intense competition from other companies and other entities in the pursuit of quality prospects for investment. We may be competing with numerous gas and oil companies which may have financial resources significantly greater than ours.

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Oil and gas properties are subject to unanticipated depletion.

The acquisition of oil and gas prospects is almost always based on available geologic and engineering data, the extent and quality of which vary in each case. Successful wells may deplete more rapidly than the available geological and engineering data originally indicated. Unanticipated depletion, if it occurs, would result in a lower return for us or a loss to our shareholders.

Oil and gas prices are volatile.

Our revenues, cash flow, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on the prices that we receive for oil and gas production. Declines in oil and gas prices may materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Lower oil and gas prices also may reduce the amount of oil and gas that we can produce economically. High oil and gas prices could preclude acceptance of our business model. Depressed prices in the future would have a negative effect on our future financial results.

Historically, oil and gas prices and markets have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile. Prices for oil and gas are subject to wide fluctuations in response to relatively minor changes in supply of and demand, market uncertainty and a variety of additional factors that are beyond our control. These factors include:

• the threat of global terrorism;

• regional political instability in areas where the exploratory wells are drilled;

• the available supply of oil;

• the level of consumer product demand;

• weather conditions;

• political conditions and policies in the greater oil producing regions, including the Middle East;

• the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

• the price of foreign imports;

• actions of governmental authorities;

• domestic and foreign governmental regulations;

• the price, availability and acceptance of alternative fuels; and

• overall economic conditions.

These factors and the volatile nature of the energy markets make it impossible to predict with any certainty future oil and gas prices. Our inability to respond appropriately to changes in these factors could negatively affect our profitability.

Terrorist attacks and continued hostilities in the Middle East or other sustained military campaigns may adversely impact the industry and us.

The terrorist attacks that took place in the United States on September 11, 2001, were unprecedented events that have created many economic and political uncertainties, some of which may materially adversely impact us. The long-term impact that terrorist attacks and the threat of terrorist attacks may have on the oil and gas business is not known at this time. Uncertainty surrounding continued hostilities in the Middle East or other sustained military campaigns may adversely impact us in unpredictable ways.

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Political instability both internal and external to Pakistan could adversely affect drilling operations and gas marketing.

Pakistan is geographically positioned in a region which has experienced a great deal of political instability and violence. The current Musharraf regime is viewed as pro-western, but a change in government in Pakistan, such as an Islamic fundamentalist government, could have many wide-ranging adverse effects upon the validity of existing exploration licenses and concession agreements and upon our ability to enforce our contractual agreements. Additionally, with or without such governmental changes, recurring incidents of violence could adversely affect oil and gas exploration and marketing operations which would, in turn, adversely affect our ability to receive royalty payments derived from those operations. Examples of regional conflicts, incidents and political unrest inside Pakistan’s borders include the following:

• the Kashmir region bordering India, Pakistan, Afghanistan and China, has been a continuing source of tension and armed conflict between India and Pakistan since 1947;

• In October 1999, the current Musharraf regime assumed power in a military coup. Since that time, there have been several attempts on President Musharraf’s life;

• Balochistan Province tribesmen have attacked the Sui gas fields in Balochistan in Southwest Pakistan generally as a protest for more jobs and higher royalty payments; and

• Pakistan has experienced violence along its Afghanistan border as well as incidents of internal urban violence from fundamentalist militant Islamic groups who oppose President Musharraf’s close ties with the United States.

Continued incidents of political unrest and violence in the future could interrupt drilling operations and gas marketing of our projects.

Our domestic assets are subject to domestic governmental regulations and hazards related to environmental issues.

Gas and oil operations in the United States are subject to extensive government regulation and to interruption or termination by governmental authorities on account of ecological and other considerations. The Environmental Protection Agency of the United States and the various state departments of environmental affairs closely regulate gas and oil production effects on air, water and surface resources. Furthermore, proposals concerning regulation and taxation of the gas and oil industry are constantly before Congress. It is impossible to predict future proposals that might be enacted into law and the effect they might have on our assets and/or operations. Thus, restrictions on gas and oil activities, such as production restrictions, price controls, tax increases and pollution and environmental controls may have a material adverse effect on us.

Hazards in the drilling and/or the operation of gas and oil properties, such as accidental leakage or spillage, are sometimes encountered. Such hazards may cause substantial liabilities to third parties or governmental entities, the payment of which could reduce distributions or result in the loss of Company leases. Although it is anticipated that insurance will be obtained by third-party operators for our benefit, we may be subject to liability for pollution and other damages due to environmental events which cannot be insured against due to prohibitive premium costs, or for other reasons. Environmental regulatory matters also could increase substantially the cost of doing business, may cause delays in producing oil and gas or require the modification of operations in certain areas.

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Our operations are subject to numerous stringent and complex laws and regulations at the federal, state and local levels governing the discharge of materials into the environment or otherwise relating to environmental protection. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements, and the imposition of injunctions to force future compliance.

The Oil Pollution Act of 1990 (“OPA 90”) and its implementing regulations impose a variety of requirements related to the prevention of oil spills, and liability for damages resulting from such spills in United States waters. OPA 90 imposes strict joint and several liability on responsible parties for oil removal costs and a variety of public and private damages, including natural resource damages. While liability limits apply in some circumstances, a party cannot take advantage of liability limits if the spill was caused by gross negligence or willful misconduct or resulted from violation of a federal safety, construction or operation regulation. If a party fails to report a spill or to cooperate fully in a cleanup, liability limits likewise do not apply. Even if applicable, the liability limits for offshore facilities require the responsible party to pay all removal costs, plus up to $75 million in other damages. For onshore facilities, the total liability limit is $350 million. OPA 90 also requires a responsible party at an offshore facility to submit proof of its financial ability to cover environmental cleanup and restoration costs that could be incurred in connection with an oil spill.

The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), also known as the “Superfund” law, and analogous state laws impose strict, joint and several liability on certain classes of persons that are considered to have contributed to the release of a “hazardous substance” into the environment. These parties include the owner or operator of the site where the release occurred, and those that disposed or arranged for the disposal of hazardous substances found at the site. Responsible parties under CERCLA may be subject to joint and several liability for remediation costs at the site, and may also be liable for natural resource damages. Additionally, it is not uncommon for neighboring landowners and other third parties to file tort claims for personal injury and property damage allegedly caused by hazardous substances released into the environment.

State statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. In addition, there are state statutes, rules and regulations governing conservation matters, including the unitization or pooling of oil and gas properties, establishment of maximum rates of production from oil and gas wells and the spacing, plugging and abandonment of such wells. Such statutes and regulations may limit the rate at which oil and gas could otherwise be produced from our properties and may restrict the number of wells that may be drilled on a particular lease or in a particular field.

CAUTIONARY STATEMENT CONCERNING

FORWARD-LOOKING STATEMENTS

This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "should," "likely" or similar expressions, indicates a forward-looking statement.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict. Stockholders are cautioned not to put undue reliance on any forward-looking statements, which speak only to the date made. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, or performance and underlying assumptions and other statements, which are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demands and acceptance, changes in technology, economic conditions, the impact of competition and pricing, and government regulation and approvals. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Some of the key factors which could cause actual results to vary from those we expect include changes in natural gas and oil prices, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as our ability to access them, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business.

Our expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, including without limitation, our examination of historical operating trends, data contained in our records and other data available from third parties. There can be no assurance, however, that our expectations, beliefs or projections will result, be achieved, or be accomplished. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no duty to update these forward-looking statements.

For a discussion of some additional factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under "Risk Factors" beginning on page 2. The identification in this document of factors that may affect future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this prospectus are based on information available to us on the date of the prospectus. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this prospectus.

You may rely only on the information contained in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of common stock means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy these securities in any circumstances under which the offer or solicitation is unlawful.

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THE BUSINESS

The American Energy Group, Ltd. (formerly Belize-American Corp. International) (hereinafter the “Company” or “American Energy”) was organized in the State of Nevada under the name “Dim, Inc.” on July 21, 1987, as a wholly owned subsidiary of Dimension Industries, Inc. a Utah Corporation (hereinafter “Dimension”). At the time of organization, the Company issued the shares of voting common stock to Dimension, which was the sole stockholder. On April 28, 1989, the Company’s Form S-18 filed with the Securities and Exchange Commission was declared effective. Dimension distributed all of the shares it held plus warrants to the stockholders of Dimension as a dividend. From 1987 to 1990, the Company was inactive. In October 1990, the shareholders approved a one for ten (1:10) reverse split of the voting Common Stock. In June 1991, the Company obtained an Oil Prospecting License from the government of Belize. On June 19, 1991, the Company held a special meeting of shareholders, at which resolutions were approved to change the name of the Company to “Belize-American Corp. International”, forward split the voting Common Stock ten for one (10:1) and a vote to ratify the Oil Prospecting License.

During 1991, the Company attempted various means to attract sufficient capital investment to develop the oil prospect in Belize, but was not successful, and the Belize license expired. On September 22, 1994, the Company entered into an agreement with Simmons Oil Company, Inc., a Texas corporation, providing for the acquisition of Simmons and two subsidiaries of Simmons, Simmons Drilling Company and Sequoia Operating Company which owned certain Texas oil and gas leases. The agreement was effective September 30, 1994, and the Company’s name was changed to “The American Energy Group, Ltd.”

Overview—Post-Bankruptcy

Until our 2002 bankruptcy filing, we were an independent oil and natural gas company engaged in the exploration, development, acquisition and production of crude oil and natural gas properties in the Texas gulf coast region of the United States and in the Jacobabad area of the Republic of Pakistan. We emerged from bankruptcy in January 2004 with two assets, an 18% gross overriding royalty in the Yasin Concession in Pakistan, and a working interest in an oil and gas lease in Galveston County, Texas. While the bankruptcy proceedings were pending, our producing oil and gas leases in Fort Bend County, Texas were foreclosed by a secured lender. Our non-producing Galveston County, Texas oil and gas lease rights were not affected by the foreclosure. In November 2003, we sold the capital stock of our then existing subsidiary, Hycarbex, which held the exploration license in Pakistan, to Hydro Tur (Energy) Ltd., a company organized under the laws of the Republic of Turkey (“Hydro Tur”). We retained an 18.0% overriding royalty interest in the production which may be derived in the future from drilling operations in the Yasin Concession. We emerged from bankruptcy in January 2004 with these two assets intact and with our sole business being the maintenance and management of these assets.

Acquisition of the Original Pakistan Concession and the 18% Royalty Interest in the Yasin Concession

In April 1995, Hycarbex, our wholly owned subsidiary at the time, acquired an exploration license for the Jacobabad (2768-4) Block in the Sindh Province of the Middle Indus Basin of Pakistan, approximately 230 miles northeast of the port city of Karachi. At that time, our assets and the assets of our subsidiaries included both North American and Pakistan development properties. Original exploration efforts on the Jacobabad Block indicated the presence of commercially viable natural gas in the area, but a commercial well was not achieved. On August 11, 2001, Hycarbex was awarded a new exploration license on the Yasin (2768-7) Block. Hycarbex was, at that time, required to relinquish some of its Jacobabad Concession acreage (the “Concession”). Due to management’s belief that the acreage held great potential based upon geologic analysis and gas shows which appeared in the drilling of the Jacobabad wells, Hycarbex negotiated a simultaneous surrender of some of the Jacobabad acreage while retaining the desired acreage as part of the new Yasin Concession. As indicated below, in the latter stages of our bankruptcy proceedings, we sold all of the stock of our Hycarbex subsidiary to Hydro Tur and received an 18% gross royalty in the future production of the Yasin Concession.

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Galveston County, Texas Assets

In June 1997, we purchased the interests of Luck Petroleum Corporation (“Luck”) in two oil and gas leases in Galveston County, Texas. The leases are situated in an area of the Texas Gulf Coast 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 assigned these mid-range zones to Smith Energy, reserving for itself an “after-payout” 15% back-in working interest. Luck also limited the depths assigned to Smith Energy, thereby resulting in depths generally greater than 10,000 feet being entirely reserved to Luck, except for a small overriding royalty in the deep zones which was also conveyed to Smith Energy. We succeeded to the interests of Luck free of liens and encumbrances as a result of the 1997 purchase. With regard to the mid-range zones, once “payout” has occurred, as defined in the 1986 conveyance by Luck to Smith Energy, we are entitled to receive 15% of the monthly working interest production from the existing Smith Energy wells on the leases. The leases also include deep zones under the leases which were acquired from Luck in which we own 100% of the working interest. Based upon research by management, these zones have development potential.

We previously notified Smith Energy of our claim that the 15% interest in the mid-range zones had matured and filed a bankruptcy proceeding against Smith Energy to obtain an accounting. Smith Energy contested this assertion resulting in a dispute over relative rights of the parties. We dismissed the suit in the bankruptcy court with the intention of pursuing civil litigation against Smith Energy in the Texas state court system. However, on April 14, 2006, we entered into a Compromise Settlement Agreement with Smith Energy and Howard A. Smith, fully resolving the dispute without the need for further litigation. Under the settlement terms, we have agreed to relinquish our 15% back in interest in the mid-range zones in exchange for Smith Energy’s overriding royalties in the deep zones, access to Smith Energy’s existing high quality 3D seismic data covering the leases, and a stipulation by Smith Energy that we can operate all wells drilled by us or our agents in the deep zones and, where needed, utilize existing Smith Energy roads, water injection wells, and other facilities.

Our management is exploring the various opportunities to realize value from these deep rights, including potential farmout or sale. The best course for these assets has not been determined, but the leases are held in force by third party production and, therefore, do not require development of these rights by a certain date. Management believes that continued research, including seismic analysis, and negotiations toward development of these assets with investment capital or a strategic partner will maximize the value of these leases in a manner which best suits our goals and cash flow positions.

Bankruptcy Proceedings and Sale of Hycarbex Subsidiary

On June 28, 2002, involuntary bankruptcy proceedings were initiated against us in the Southern District of Texas, which were converted to Chapter 11 debtor-in-possession proceedings in December 2002. In the first quarter of 2003, our primary secured lender obtained the approval of the Bankruptcy Court to foreclose all of the Texas-based oil and gas leases except the leases in Galveston County, Texas. At the time, the status of the exploration license for the Yasin Concession was also under close governmental scrutiny due to the financial and continuous drilling requirements imposed under the terms of the license by the Pakistan Government. In November 2003, after management concluded negotiations with several interested prospective purchasers, we reached an agreement with Hydro Tur to sell to Hydro Tur all of our interest in our then-existing subsidiary, Hycarbex, with the approval of the Bankruptcy Court. Hydro Tur was selected as the purchaser due to its strong financial background, its commitment to implement a multiple well development of the Yasin Concession and its willingness to assign to us an 18% gross royalty on oil and gas production from all acreage in the concession for as long as the concession exists.

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Pursuant to our Second Amended Plan of Reorganization which was approved by the Bankruptcy Court on September 3, 2003, all outstanding shares of common and preferred stock were cancelled and the issuance of new shares of common stock to the bankruptcy creditors was authorized by the Court. We emerged from bankruptcy in January 2004 with new management, virtually debt-free, and with our outstanding common stock reduced to almost one third of pre-bankruptcy level. We emerged from bankruptcy as a restructured company, focused upon acquiring and developing new oil and gas-based projects through prudent management of our two assets, the 18% royalty interest in the Yasin Concession in Pakistan and our working interests in our oil and gas leases in Galveston County, Texas.

American Energy Operating Corp.

Our 2002 bankruptcy proceedings did not include our inactive subsidiary, American Energy Operating Corp. (“AEOC”), our operating subsidiary which became inactive after certain producing oil and gas leases in Fort Bend County, Texas were foreclosed by the first lien creditor in early 2003. However, at the time of the initiation of our bankruptcy proceedings, AEOC carried on its books in excess of $250,000 in operating liabilities related to its operations on these oil and gas leases in Fort Bend County, Texas. In 2003, AEOC received notice from the enforcement division of the Railroad Commission of Texas (“Railroad Commission”) that three (3) abandoned wells in the North Dayton Field previously operated by AEOC several years prior to 2003 were required to be plugged in accordance with Railroad Commission procedures and rules. We were not made a party to the proceedings by the Railroad Commission to enforce the plugging obligations. At that time, the plugging costs were estimated at less than $50,000 based upon estimates made by the Railroad Commission. These uncertain plugging costs, including potential daily penalties for non-compliance by AEOC, together with the high liabilities previously carried on our books related to AEOC’s prior operations, formed the basis for us to cause 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 did not involve the Company. In January 2006, the Railroad Commission of Texas plugged the three wells with State of Texas funds and thereafter demanded from AEOC reimbursement of the costs from AEOC based upon federal bankruptcy statutory exclusions to discharge in bankruptcy related to environmental matters. In July, 2006, these bankruptcy proceedings were closed by the acting Trustee. The closure of the proceedings did not eliminate the plugging responsibility assigned by the State of Texas to AEOC due to these statutory exclusions. In order to resolve the liability of AEOC and to avoid potential claims against the former officers of AEOC, on July 28, 2006, we agreed to a settlement with the Railroad Commission under which $57,701.21 will be paid by us to the Railroad Commission of Texas in equal installments over eighteen months beginning August 28, 2006. (See also, “Legal Proceedings” herein).

Pakistan Activities and Additional Opportunities

Pakistan has a very large sedimentary area of 827,268 square kilometers (319,325 square miles). Most of this area remains virgin and unexplored as current cumulative drilling efforts total one exploratory well for every 1,370 square kilometers (529 square miles). According to the Ministry of Petroleum and Natural Resources (“MPNR”), cumulative drilling within Pakistan has resulted in a very encouraging success ratio of 1:3.5 based upon 177 commercial discoveries out of 620 wells drilled. The MPNR estimates Pakistan’s current potential at 27 billion barrels of oil and 282 trillion cubic feet of gas. Since approximately 884 million barrels of oil and 52 trillion cubic feet of gas have been allocated to new discoveries, there are many undeveloped regions holding these estimated but untapped reserves. The Pakistani government’s current liberal policies toward foreign investment and development of these resources have fostered a great deal of activity and opportunities for us to acquire exploration rights in these undeveloped areas.

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Relevant Features of Pakistan Oil and Gas Laws

In Pakistan, exploration licenses are awarded directly by the office of the President. Under the current rules, the term of each concession is twenty five (25) years with the opportunity for a five (year) extension. The rules are silent as to extensions beyond 30 years, but recent aggressive efforts by the government to privatize the oil and gas industry have resulted in requests from potential private bidders to clarify the possibility of additional extensions if wells continue to produce. At the time of a concession award, the recipient is awarded a 95% working interest and the remaining 5% is awarded to the government-owned Government Holdings (Private) Limited (“GHPL”). A twelve and one half percent (12.5%) royalty is also retained by the government of Pakistan. The 5% working interest held by GHPL is a “carried interest” and thus does not share in the costs of drilling and completion of the wells. Production profits and gains (as determined by a 1979 Income Tax Ordinance) are subject to a forty percent (40%) income tax. The working interest owners (other than GHPL) are also required to pay the President a production bonus should the production achieve certain milestones. A bonus of $500,000 is the first threshold at commencement of Commercial Production, then $1,000,000 upon achieving 30 million barrels of oil equivalent (“BPOE”), then $1,500,000 upon achieving 60 million BPOE, then $3,000,000 upon achieving 80 million BPOE and finally $5,000,000 upon achieving 100 million BPOE. Under the concession agreement, the production bonuses are required to be expended upon infrastructure in the area. The term “Commercial Production” is defined as production of petroleum from a Commercial Discovery which ensures at least the recovery of all expenses attributable to the discovery within a reasonable time and the earning of a reasonable profit. The term Commercial Discovery refers to a discovery well which is declared by the operator, then verified by an appraisal well, with the concurrence of the Operating Committee and the government, and which would justify economic development. If the operator believes that an appraisal well is not justified, then the working interest owners have the right to seek Commercial Discovery status on a one-well basis. At such time as the operator achieves a Commercial Discovery, GHPL has the right to increase its 5% working interest up to a maximum of 25% in the discovery area by reimbursing to the operator out of GHPL’s share of production 5% of the costs of drilling and completion. Thereafter, GHPL must pay its proportionate share of all development costs. In the last several years, the government of Pakistan has not exercised its rights to increase its working interest when Commercial Discoveries occurred, but the option to do so is nevertheless included within each concession agreement.

The concession agreements contain acreage relinquishment provisions which require relinquishment of 20% of the undeveloped acreage at the end of the initial term of the license and an additional 30% of the undeveloped acreage at the end of the second renewal period. The area surrounding producing wells may be retained, as determined by the government at the time of relinquishment. However, there is no relinquishment requirement if upon the Commercial Discovery, the operator applies for and is granted a “Lease”. Such an application for Lease must be accompanied by a development plan disclosing how the operator intends to develop the acreage, equip the wells, and transport the resulting production. The Lease has a duration equivalent to the duration of the license.

Under the current rules, working interests can be transferred with the approval of the Government. For example, in January 2005, Hycarbex transferred a ten percent (10%) working interest to Techno Petroleum (Private) Limited. There is, however, no existing registry for a non-cost bearing royalty carved from the working interest and transferred to a private party. Contracts which create such interests are legal and enforceable in Pakistan, just as in United States’ venues, under the Pakistan law titled: Specific Relief Act of 1887. Like royalties in the United States, the royalty assigned to us is free of the costs of development and exploration and thus does not have the financial exposure associated with a working interest. However, title to the royalty interest is not registered similar to an interest in real estate as it would be in the United States. An overriding royalty interest in Pakistan is dependent upon the viability of the concession to continue in force. Therefore, forfeiture or surrender of the concession will result in elimination of the overriding royalty.

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The Concession Agreement for our interest in the Yasin Concession provides that all disputes between working interest owners or, alternatively, working interest owners and the President of Pakistan, regarding licenses and leases shall be settled by arbitration and submitted to the International Center for Settlement of Investment Disputes.

Gas Pricing in Pakistan

The Oil and Gas Regulatory Authority (“OGRA”) is the agency with jurisdiction over wellhead and consumer gas pricing. According to the OGRA, the pricing is directly linked to the international prices for crude oil and furnace oil. Prices are based upon a baseline of 1,000 British Thermal Units (“BTU”). If the gas which is sold has a BTU content which is less than or greater than 1,000 BTUs, the negotiated price is proportionately decreased or increased, respectively. Currently, there is a ceiling price of $36 per barrel (and $2.65 per MBTU) for purposes of determining the gas prices, even if the international oil prices are higher per barrel, as they are currently. However, we believe the government is rapidly moving toward international pricing which would take the prices to much higher levels in conformity with regional prices for gas and which recognizes the very high oil prices at present. Contracts for the sale of gas are available with either long term fixed rates or variable rates, as negotiated. The gas prices for each producing concession are published by the OGRA.

Early Drilling Efforts on Concession Acreage

In the 1950’s, Burmah Oil Company (predecessor to Pakistan Petroleum Ltd. (“PPL”)) drilled two wells on concession acreage to just over 5,800 feet, each of which indicated gas and oil. In the 1970’s, Amoco Oil drilled a 15,000 feet well which also demonstrated gas and oil. The seismic database acquired in 1995 with the original Jacobabad Concession was extremely limited, consisting of only a few old Amoco vibroseis lines. In 1997, Hycarbex shot 262 km of new 2-D date and acquired the P9222 2-D line running north-south, just outside the eastern boundary of the concession and this data was processed. The remaining Amoco vibroseis data and all the remaining ODGC 2-D lines (approximately 600 km) were not processed when acquired. Hycarbex originally drilled four exploratory wells on the Jacobabad concession. The first well was drilled in 1998 to a depth sufficient to test the primary producing zone in the region. This well found natural gas in several zones and a drill stem test confirmed the presence of high-quality gas before operations were suspended. At the time, equipment available on the well site was inadequate to deal with downhole problems. We believe that this well could be redrilled. The second well, drilled in a different portion of the concession, encountered mechanical problems and did not reach sufficient depth to test any targeted formations. The third well encountered large quantities of hydrogen sulfide and carbon dioxide, which appeared to be confined to a relatively small area around the wellbore. In July 2000, approximately 40km of new seismic was shot and processed, but the acreage comprising the concession was so vast that early drillsite selection still involved some degree of speculation. In 2001, Hycarbex drilled its fourth well which likewise indicated natural gas in the Sui Main and upper Chiltan formations, but did not result in a commercial completion.

The Haseeb No. 1 Well

The Haseeb No. 1 Well was drilled on the Yasin Concession by the Polish Oil and Gas Company for Hycarbex during March and April 2005 to a total depth of 4,945 feet (1,507 meters). The well is located approximately 9 miles from the Hassan No. 1 well drilled by PPL and 5.6 miles from the City of Shikapur in the Sindh Province. Open hole logs performed on the well demonstrated gas shows from 3,543 feet to 3,688 feet and a net pay thickness of 82 feet. The drill stem test conducted over a short duration on a one-half inch choke indicated a production rate form the Sui Main Limestone equivalent to approximately 7.3 MM cubic feet of 805 BTU gas per day. The gas was tested for carbon dioxide and water content and was found to have low levels of each, indicating a likelihood that processing will not be required prior to pipeline transmission.

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In the fall of 2005, Hycarbex completed the acidization of the Haseeb No. 1. Post-treatment testing by Schlumberger Oilfield Services indicated an increase in the natural gas flow rate originally calculated at the time of the drill stem test at 7.3 million cubic feet per day. Schlumberger further concluded that the 10 million cubic feet rate could be potentially increased to as high as 25-28 million cubic feet per day if the existing production tubing is replaced with higher diameter production tubing and if the wellhead pressure is maintained at approximately 1,000 psi.

The Yasin Concession has ready access to pipeline infrastructure. The 12-inch Quetta gas line runs NW-SE through the concession and connects to the 20-inch Sui-Karachi gas line. The Karachi-Muzaffargarh oil line also runs through the southern portion of the concession. Therefore, the capital costs and time delays inherent in connecting to gas pipelines are not likely to affect the Yasin Concession. We expect to connect the Haseeb No. 1 Well to the pipeline not later than December 2006. The gas sales price for the Haseeb No. 1 gas is expected to be not less than $2.50 per MBTU and could be as high as $4.00 per MBTU.

Hycarbex and its development partner, Techno Petroleum (Pvt) Limited

Hycarbex (our former subsidiary) is the operator of the Yasin Concession and has been active in Pakistan since 1995. Hycarbex has expended over $20,000,000 in Pakistan in the drilling of five (5) exploration wells, and in generating 700 kilometers (435 miles) of high resolution 2D seismic data. Hycarbex employs 12 experienced technical, financial and energy professionals as its professional operations team. In January, 2005, Techno Petroleum (Pvt) Limited (“Techno”) acquired ten percent (10%) of the Yasin Concession from Hycarbex with the approvalof the Pakistan government.Techno is headquartered in Islamabad Pakistan and is a subsidiary of Techno Engineering Services (Private) Limited (“Techno Engineering”) a large engineering and construction concern. Techno Engineering recently constructed a 500 mile, 26 inch diameter, white oil pipeline from Karachi to Mahmood Kot in cooperation with China Petroleum Engineering & Construction Corporation at an approximate cost of $400,000,000. In addition to its engineering and infrastructure expertise, Techno Engineering is also an additional source of competitive, high quality drilling equipment which is anticipated to benefit the joint operation on the Yasin Block. Techno Engineering is also financially capable, if necessary and if willing, to assist the venture with financial guarantees to the Pakistan government to secure future drilling rights on the Yasin Block and in other productive regions.

The efforts by Hycarbex to substantially expand the seismic database in 2004 and 2005 resulted in several miles of additional seismic being shot on the concession. Currently, Hycarbex has captured approximately 700 kilometers (435 miles) of high resolution 2D seismic raw data. This seismic raw data has been processed with the old seismic data using current techniques and has been analyzed by highly experienced geophysicists. The results have not only verified geologic structures with closure and high likelihood of gas productivity, but have also delineated drillsite locations which are likely to enhance drilling success. The technical staff at Hycarbex has identified at least ten (10) areas to date which are recommended for drilling.

The Al-Ali No. 1 Well

Hycarbex commenced the Al-Ali No. 1 Well on the Yasin Concession on or about April 30, 2006. The well is being drilled by Oil & Gas Exploration Company Krakow Limited Poland, which also drilled the Haseeb No. 1 Well. The target Sui Main Limestone is expected to be encountered at 3,789 feet (1,155 kilometers) and the total depth is expected to be 5,577 feet (1,700 kilometers). The drillsite was selected using seismic data obtained by Hycarbex in the latter part of 2005 showing a 4-way closure for the target structure. Should this well be successful, Hycarbex anticipates gas production rather than oil and will connect to the same gas sales pipeline as the Haseeb No. 1 Well.

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Other Factors Affecting Pakistan Exploration Opportunities

With regard to Pakistan in-country opportunities, experts view Pakistan as a country with realistic potential for the discovery of large oil and gas reserves. Previously perceived as containing far less oil and gas potential than the Arabian Peninsula countries, Pakistan has never received the extensive exploration efforts required to fully explore the vast and numerous structures warranting such attention. However, in recent years, a significant number of well known international oil and gas operators have moved into Pakistan, and their efforts have met with a high degree of success. These operators include BP Amoco and Premier from the United Kingdom, BHP from Australia, China Oil from China, OMV from Austria, Petronas from Malasia, MOL from Hungary and Shell Oil from the Netherlands. A number of new commercial discoveries have been announced in recent years. There is also geological data which suggests nearly identical structures with those of the Arabian Peninsula. Of the comparatively few (620) exploratory wells drilled, an above-average number have succeeded (177), [i.e. a ratio of 1:3.5] and this degree of success supports the position that Pakistan is a good location in which to focus exploration efforts.

The MPNR openly states in its website that the agency felt an urgent need to move toward a more liberalized and deregulated framework, with the government limiting its role to policy formulation and implementation. In its website under the section “Strategy to Achieve Mission”, the Ministry states that its strategies will include deregulation, liberalization and privatization of oil, gas and mineral sectors.

Exploration and production opportunities in Pakistan are attractive for a number of additional reasons. One such reason is high demand relative to the available supply. Domestic demand for natural gas greatly exceeds supply in Pakistan, and is expected to continue to do so for the foreseeable future. Pakistan is undergoing rapid economic growth with per capita energy consumption of 30,000,000 BTU, as compared with United States’ per capita use of 400,000,000 BTU. This supply will need to increase at a minimum rate of 8% per annum. Energy represents 33% of Pakistani imports and the country currently imports approximately 86% of the oil it consumes, all at a staggering cost of $10-15 million dollars per day. Current projections indicate a critical energy shortage by 2010.

In 2001, the Pakistan government launched a new Petroleum Exploration and Production Policy which offers efficient procedures complimented by a liberal policy framework for obtaining and developing concessions. The concessions are awarded by an open and fair bidding process which does not exempt the state-owned oil companies. Operators conduct regular meetings with ministry officials but the regulatory involvement is relaxed and on a par with international standards. The licenses are granted directly by the President of Pakistan through his oil ministry officials. Foreign investors are permitted unrestricted expatriation of funds, including profits. The sales markets are unregulated and producers may sell to state marketing organizations or third parties. Current efforts are underway to get the market prices on a par with international prices. Energy Information Administration (EIA) reports, and Pakistani sources confirm, that future commercial discoveries will have a ready market at favorable pricing. Imports of goods, including vehicles and equipment is also simplistic, with no tariffs.

Pakistan sits in a strategic location geographically. The Republic of China has been aggressive in identifying potential sources of energy, including Pakistan, to fuel its exploding industrial economy. Several extremely large pipeline projects are in the planning stages. The World Bank compares Pakistan’s economic energy intensity per GDP to its neighbors, China and India and rates Pakistan as the third fastest growing economy. Natural resources often provide a developing country with a significant portion of its hard currency reserves and therefore contribute to economic development in a material fashion. Pakistan’s government has demonstrated a strong commitment to economic development and is working cooperatively with the oil and gas industry to further this agenda. These cooperative efforts will accelerate foreign investment in Pakistan, accelerate the development of additional oil and gas reserves, and reduce Pakistan’s dependency upon imported sources of energy. Private investment is highly regarded as evidenced by the current efforts of Pakistan Petroleum Limited (PPL), which is state owned, to sell 51 percent of the company and to transfer management control to a strategic investor. (See discussion below regarding proposed changes to exploration rules to lengthen the terms of exploration licenses).

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While the region has shown political instability and violence, including inside Pakistan’s borders, the Government of Pakistan has proven to be an invaluable ally on the war against global terrorism. U.S. President George W. Bush has repeatedly lauded President Musharraf’s leadership in these difficult times. The Bush administration is highly committed to furthering foreign investment in Pakistan. The United States-Pakistan Trade and Investment Framework Agreement signed in June 2003 has been highly successful, resulting in Pakistan imports from the United States totaling $843 Million for 2003, and Pakistan exports to the United States totaling $2.5 Billion for 2003. A Bilateral Investment Treaty has been under negotiations with the most recent strategic meetings held in January 2006.

In addition to the above factors, to date, our relationships with Pakistan have been extremely favorable which may provide other in-country investment opportunities for us.

Summary of Forward Business Plan

The focus of our activities will continue to be the successful management of our royalty interest in the Yasin Concession, successful development or possible sale of our Galveston County, Texas assets, and further investment in other oil and gas opportunities in Pakistan, whether in the form of overriding royalties or working interests.

Sources of Financing Employed by Company to Date

To date, we have financed our activities through loans, convertible debt and the issuance of common stock. As of June 30, 2006, all of the debt has been paid in full or converted to common stock or warrants to purchase common stock. In each case, the funds derived from the financing were utilized for general corporate purposes. The financings are summarized as follows:

1. Pursuant to the Second Amended Plan of Reorganization, we privately sold convertible debt securities totaling $575,000 during the pendency of the bankruptcy proceedings and during the early part of calendar 2004, all of which has been converted to common stock.

2. In January 2005, we obtained a loan facility from a private party for $200,000 for near term operating capital, the terms of which were 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. This loan was amended to increase the available principal and a total of $292,000 principal was advanced under the loan during the early part of calendar 2005. The maturity was extended and the extension fee was paid in 10,582 shares of restricted stock. As of June 30, 2006, this loan was paid in full.

3. In mid 2005, we obtained a $50,000 loan from a private party providing for Chase Bank Prime plus three percent and a maturity date of December 31, 2005. In September, 2005, this loan was restructured and converted to a warrant purchase under which an additional $50,000 was advanced to us. The resulting $100,000 total funds were applied as the purchase funds for 200,000 warrants, one half of which have an exercise price of $1.75 and one half of which have an exercise price of $1.50. Simultaneously with this restructure, we sold to another third party 60,000 warrants for $30,000 with an exercise price of $1.50.

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4. In October, 2005, we sold 122,222 restricted shares of common stock for $110,000 to a private party.

5. In February, 2006, we sold 100,000 restricted shares of common stock to four individuals for the total sum of $135,000.

6. In June, 2006, we completed the sale of 2,323,529 shares of restricted common stock and 1,161,766 warrants to a group of institutional investors for the aggregate sum of $3.95 million. The purchase price for the common stock was $1.70 per share. The warrants issued to the investors have a five-year term and provide for an exercise price of $1.70 per share. The warrants may be redeemed at our option if the closing bid price for our common stock equals or exceeds $2.50 per share for twenty consecutive trading days after registration of the underlying common stock for resale. We paid total commissions to the placement agent equal to $237,000 plus 445,560 warrants to purchase common stock which have the same exercise and redemption terms as those warrants issued to the institutional investors. We intend to use the offering proceeds to acquire additional royalty interests in a new oil and gas concession within Pakistan and for general corporate purposes.

EMPLOYEES

As of June 30, 2006, we did not have any full-time employees. We employ a part-time administrative assistant in the corporate office and pay a monthly salary to Pierce Onthank and Iftikhar Zahid, our two senior management officers.

RESEARCH AND DEVELOPMENT EXPENDITURES

During fiscal 2005, we did not have any expenses for research and development costs.

GOVERNMENTAL REGULATIONS AND THE COST OF COMPLIANCE

We are an independent crude oil and natural gas exploration and development company.  Federal, state and local laws and regulations have been enacted regulating the industry which create liability for certain environmental contamination.  Environmental laws regulate, among other things, the transportation, storage, and handling of oil and gas products. Governmental regulations govern matters such as the protection of fresh water sources, both surface and subsurface, remediation of soil and water contamination resulting from business operations or accidents, disposal of residual chemical wastes, operating procedures, waste water discharges, air emissions, fire protection, worker and community right-to-know and emergency response plans.  Moreover, so-called "toxic tort" litigation has increased markedly in recent years as persons allegedly injured by chemical contamination seek recovery for personal injuries or property damage.  These legal developments present a risk of liability should we be deemed to be responsible for contamination or pollution caused or increased by any activities we undertake, or for an accident which occurs in the course of such activities.  There can be no assurance that our policy of establishing and implementing proper procedures for complying with environmental regulations will be effective at preventing us from incurring a substantial environmental liability.  If we were to incur a substantial uninsured liability for environmental damage, our financial condition could be materially adversely affected.

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We presently have the ability to deliver remediation and recycling services through our vendors that meet applicable federal and state standards for the delivery of our services, and for the level of contaminant removal.  The government can, however, impose new standards.  If new regulations were to be imposed, we may not be able to comply in either the delivery of our services, or in the level of contaminant removal from the waste stream. 

Permits are generally required by federal and state environmental agencies for the operation of our activities. The costs of acquiring the operating permits have been borne by us. Most of these permits must be renewed periodically and the governmental authorities involved have the power, under various circumstances, to revoke, modify, or deny issuance or renewal of these permits.

DESCRIPTION OF PROPERTY

Our principal executive offices are located at 1 Gorham Island, Suite 303, Westport, Connecticut. The office space contains approximately 3,574 square feet and is leased under a 5-year lease commencing April 1, 2006, at a rate of $11,913.33 per month for the initial year, $12,211.17 per month for the second year, $12,509.00 per month for the third year, $12,806.83 per month for the fourth year, and $13,104.67 per month for the final year. The lease contains a 5-year option period with base rental ranging from $13,402.50 in the first year of the option period to $14,593.83 in the final option year. We believe this space is adequate for our needs.

LEGAL PROCEEDINGS

On January 12, 2006, a lawsuit was filed in the 281^st Judicial District Court of Harris County, Texas against the Company, the Company’s subsidiary, The American Energy Operating Corp., Hycarbex-American Energy, Inc., Pierce Onthank, individually, Iftikhar Zahid, individually, and Georg Friedher Von Canal, individually, 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. The Plaintiffs are Moin Hussain, who originally incorporated Hycarbex, Inc. in 1985, and Saleem Khan, and Khan & Piracha, who are 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, Inc., The American Energy Group, Ltd. acquired all of the outstanding common stock of Hycarbex, Inc. and changed the name of the company to Hycarbex-American Energy, Inc. (“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 allegedly promised by Hycarbex that they would receive twenty percent (20%) working interest in the Yasin Concession. The Plaintiffs specifically allege that Defendants, through Hycarbex, entered into a written agreement whereby Hycarbex agreed to hold their respective portions of the concession in trust for Khan and Piracha. The Plaintiffs allege that the several Defendants have failed to honor the alleged commitments without identifying the specific party responsible for the alleged obligation. As of June 30, 2006, Mr. Zahid and Mr. Von Canal have not been personally served and have not otherwise made an appearance in the lawsuit. Furthermore, American Energy Operating Corp. was dismissed from the suit by the Plaintiffs very soon after the filing. The Company, Hycarbex, American Energy Operating Corp. and Pierce Onthank have answered the lawsuit denying all liability. The Company, Hycarbex, and Pierce Onthank have likewise filed a counterclaim against Saleem Khan, and Khan & Piracha alleging a breach of fiduciary duty and coercion on their part in relation to their attempts to obtain a 20% working interest in the concession while serving as legal counsel to Hycarbex. We intend to vigorously defend the allegations of the Plaintiffs and to prosecute the counterclaim.

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During the period ended June 30, 2004, The American Energy Operating Corp. (“AEOC”), our operating subsidiary which has been inactive since the producing Fort Bend County, Texas oil and gas leases were foreclosed in 2003, received notice from the enforcement division of the Railroad Commission of Texas, the agency responsible for regulating oil and gas activities in the State of Texas, that three (3) abandoned wells in the North Dayton Field previously operated by AEOC many years ago were required to be plugged in accordance with Commission procedures and rules. At that time, the plugging costs were estimated at less than $50,000 based upon estimates made by the Railroad Commission. At the time of the initiation of our bankruptcy proceedings in 2002, AEOC carried on its books in excess of $250,000 in operating liabilities related to its operations on these South Texas oil and gas leases. These uncertain plugging costs, including potential daily penalties for non-compliance by AEOC, together with the high liabilities previously carried on our books related to AEOC’s prior operations, formed the basis for us to cause 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 did not involve us. In January 2006, the Railroad Commission of Texas plugged the three wells with State of Texas funds and thereafter demanded from AEOC reimbursement of the costs from AEOC based upon federal bankruptcy statutory exclusions to discharge in bankruptcy related to environmental matters. In July 2006, the AEOC acting Trustee fully administered and closed the bankruptcy case. The closure of the proceedings did not eliminate the plugging responsibility assigned by the State of Texas to AEOC due to these statutory exclusions. In order to resolve the liability of AEOC and to avoid potential claims against the former officers of AEOC, on July 28, 2006, we agreed to a settlement with the Railroad Commission under which $57,701.21 will be paid by us to the Railroad Commission of Texas in equal installments over eighteen months beginning August 28, 2006.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AND PLAN OF OPERATIONS

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.

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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 our 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 asset 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.

Drilling of the first well in Pakistan as to which our overriding royalty pertains, named the Haseeb No. 1 Well, was successfully completed in the fourth quarter of the current fiscal year. All testing to date indicates that the Haseeb No. 1 well will be a significant commercial gas well and such gas sales are expected to begin during the quarter ending March 31, 2006. Additional wells are currently planned by Hycarbex, the operating entity holding the exploration license.

Comparison of Fiscal Year Ended June 30, 2005 to June 30, 2004

Results of Operations

Our operations for the period ending June 30, 2005 reflected a net loss of $694,264 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 fiscal year 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. As a result, subsequent to emerging from bankruptcy, we had no recurring income stream and were solely dependent upon cash infusion from the sale of securities and loans. The loans and securities sales which occurred during the fiscal year and subsequent to the end of the fiscal year 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 expected to begin during late 2006.

Our prior operating company, The American Energy Operating Corp. did not participate in the bankruptcy proceedings and its accounts payable and accrued liabilities were carried on our books post-bankruptcy, despite the 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 our books.

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Comparison of Nine Month Period Ended March 31, 2006 to March 31, 2005

Results of Operations

Our operations for the period ending March 31, 2006 reflected a net loss of $338,903 as compared with $180,403 for the prior quarter. The net loss is attributable to salaries paid to the directors, legal and professional fees, office overhead, and administrative expense. The greater net loss for the current quarter as compared to the prior quarter can be attributed to additional legal and professional fees which were incurred during the quarter, including a legal retainer paid by us for representation in a new lawsuit which was filed against us during the quarter. There were no revenues from operations and our sole business during the quarter consisted of management of our Pakistan and Texas assets. As previously reported, all of our previously owned producing oil and gas leases in Fort Bend County, Texas were foreclosed by the first lien lender in early calendar 2003 while we were in bankruptcy. As a result, subsequent to emerging from bankruptcy, we had no recurring income stream and were solely dependent upon cash infusion from the sale of securities and loans. During the current quarter, we completed the sale of 100,000 shares of our common stock for $135,000, while subsequent to the end of the quarter we sold 1,705,882 common shares for the sum of $2.9 Million as part of a $3.95 Million private offering to institutional investors. The proceeds of these sales will continue to be used to finance salaries, legal expenses and nominal administrative overhead until the revenues from gas sales from the Haseeb No. 1 Well begin. These gas sales are expected to begin in late 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 our books.

Liquidity and Capital Resources

Since emerging from bankruptcy, we have been funded through the private sale of convertible debt securities 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. The loan agreement originally provided for a $200,000 loan, but was amended twice to increase the available principal under the loan to $300,000.00, of which $292,000.00 is currently outstanding. We likewise obtained from a private party 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. This $25,000 loan was converted to 50,000 warrants at an exercise price of $1.75 after the end of the fiscal year.

Subsequent to the end of the fiscal year, we raised $130,000.00 (including the $25,000 loan referenced in the preceding paragraph) through the placement with private parties of 260,000 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 100,000 warrants. Also subsequent to the end of the fiscal year we obtained a commitment from an existing shareholder to purchase 122,222 Common shares at $0.90 per share, or a total of $110,000.00. We anticipate that the capital obtained from these transactions will provide sufficient working capital through early calendar 2006. If the gas sales from the Haseeb No. 1 Well begin in late 2006 as expected, we may be able 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.

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In April 2005, we registered 2,000,000 shares of our common stock on a Form S-8 Registration Statement for issuance to key consultants. We anticipate that some critical services rendered by third party consultants during the 2006 fiscal year will be paid with common stock instead of cash assets.

Business Strategy and Prospects

We believe that there have been positive developments resulting from the bankruptcy proceedings. We have eliminated our debt burden, diminished our 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-nine 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 provided a means of compensating key consultants.

On April 20, 2006, we executed a Compromise Settlement Agreement with Smith Energy 1986A Partnership (“Smith Energy”) and Howard A. Smith pertaining to our Galveston County, Texas oil and gas leases, removing the remaining obstacle to our exploration plans for the properties. The two-year old dispute between American Energy and Smith Energy was based upon American Energy’s claims that it was entitled to a 15% back in working interest in certain mid-depth producing zones under the Galveston County, Texas leases as a result of the satisfaction of the payout threshold criteria described in a 1986 assignment under which Smith Energy acquired its working interest and rights to operate the properties. Smith Energy had contested American Energy’s payout contentions. Under the terms of the Compromise Settlement Agreement, American Energy Group acquired all of Smith Energy’s 3% overriding royalty interest in the deep zones greater than 10,000 feet as well as the right to review valuable 3D seismic data covering the leases. American Energy also acquired from Smith Energy affirmation of American Energy’s right to operate the oil and gas leases as to wells drilled to depths greater than 10,000 feet. The Agreement also affords American Energy access under mutually agreed terms to existing Smith Energy facilities in connection with American Energy’s future operations, such as roads and salt water disposal facilities. American Energy Group relinquished to Smith Energy Group under the agreement its claims to the 15% back-in interest in the zones above 10,000 feet. This settlement facilitates our planned exploration of the deeper zones under the oil and gas leases.

We will continue to manage our Pakistan royalty and our Galveston County, Texas oil and gas leases. While we await production revenues from the sale of gas from the Haseeb No. 1 well in Pakistan and the results of the Al Ali No. 1 Well commenced in Pakistan shortly after the end of the current quarter, we expect to negotiate the purchase of one or more additional royalty interests on one or more additional oil and gas concessions in Pakistan using the proceeds of the recently consummated $2.9M institutional private offering. We also expect to analyze the recently acquired Smith Energy seismic data and to begin negotiations for a deep test well on the Galveston County oil and gas leases.

Pakistan Overriding Royalty Interest

We, through our former subsidiary, Hycarbex, 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 drilled in the fourth quarter of 2005 based upon all available test results. We further announced subsequent to the end of our fiscal year 2005 the completion of 110 kilometers of additional seismic research by Hycarbex which provided valuable data for selection of the second well on the concession (the Al-Ali) which was drilled during May 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. We expect to use these anticipated revenues for further investment in other revenue generating assets or business activities. The financial risks inherent in oil and gas drilling in Pakistan will no longer be borne by us because an overriding royalty interest is not subject to such costs.

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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. Based upon our research, we believe that the deeper zones also have development potential. We are exploring the various opportunities to realize value from these deep rights, including potential sale. We have not yet determined the best course for these assets. 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 conduct future 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 fiscal year ended June 30, 2005, or during the nine month period ended March 31, 2006.

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MARKET FOR COMMON EQUITY

AND RELATED STOCKHOLDER MATTERS

Market Information.

Our Common stock is traded on the over-the-counter bulletin board under the symbol AEGG. The quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions. The trading market began during the quarter ending December 31, 2004, and the low and high prices for that quarter were $0.20 and $1.01, respectively.

The following chart sets forth the high and low bid prices for each quarter for the last two fiscal years and the nine-month interim period for the quarter ending March 31, 2006. Such prices represent quotations between dealers, without dealer markup, markdown or commissions, and may not represent actual transactions.

Quarter	High	Low
December 31, 2004	$0.55	$0.20
March 31, 2005	$1.50	$0.75
June 30, 2005	$3.03	$0.50
September 30, 2005	$1.82	$1.15
December 31, 2005	$1.90	$1.01
March 31, 2006	$1.98	$1.30
June 30, 2006	$2.00	$1.45

As of June 30, 2006, the closing price for shares of our common stock in the over-the-counter market, as reported by the OTC Bulletin Board, was $1.45.

No prediction can be made as to the effect, if any, that future sales of shares of our common stock or the availability of our common stock for future sale will have on the market price of our common stock prevailing from time-to-time. The additional registration of our common stock and the sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock.

Record Holders.

As of June 30, 2006, we had approximately 56 registered holders of our common stock (excluding holders in “street name”). As of June 30, 2006, there were 29,867,705 shares of common stock issued and outstanding.

Dividends

There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

1. We would not be able to pay our debts as they become due in the usual course of business; or

2. Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.

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We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future. Our current policy is to retain any earnings in order to finance the expansion of our operations. Our Board of Directors will determine future declaration and payment of dividends, if any, in light of the then-current conditions they deem relevant and in accordance with the Nevada Revised Statutes.

Equity Compensation Plan Information As of June 30, 2005
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	-0-	-0-	-0-
Equity compensation plans not approved by security holders	2,000,000	$1.00	-0-
Total	2,000,000	N/A	-0-

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

We have had no changes in or disagreements with accountants on accounting and financial disclosure.

USE OF PROCEEDS

We are not selling any shares of our Common Stock and therefore, there will be no proceeds to us from the sale of shares of Common Stock. However, we may receive up to approximately $5,147,454 upon the exercise and payment for the outstanding warrants held by certain selling stockholders for which we have registered the underlying shares of common stock. We intend to use any proceeds from the exercise of warrants for working capital purposes.

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DIRECTORS, EXECUTIVE OFFICERS,

PROMOTERS AND CONTROL PERSONS

MANAGEMENT OF THE COMPANY

The following table sets forth our directors and executive officers:

Name	Age	Position
R. Pierce Onthank	46	Director, President, CEO, CFO and Secretary-Treasurer
Iftikhar Ahmed Zahid	47	Director
Karl Welser	52	Director

R. Pierce Onthank, age 46, serves as President, CEO, Secretary-Treasurer. Mr. Onthank has also served as our Director since 2003. Mr. Onthank received a BA in economics from Denison University in 1983. He served as the investment broker for the Company from 1998 until 2001. In addition to serving American Energy Group Ltd. as one of its prior investment bankers, Mr. Onthank has specialized in oil and gas investments for his previous clients. With over 20 years of experience in the securities business, Mr. Onthank has held senior positions in investment banking firms and has managed high yield net worth and institutional portfolios. Mr. Onthank began his career in the Merrill Lynch training program and subsequently was employed by Bear Stearns in 1985 where he became a limited partner in 1987. In 1988, he became a Senior Vice President at Drexel Burnham Lambert, where his primary responsibilities were to manage the private client group, which was involved in both public and private investments for individual and institutional accounts. Mr. Onthank served as a Senior Vice President at Paine Webber from 1990 to 1993. From 1993 to 1995, he was employed by Smith Barney Shearson where he managed the investments of institutional and individual clients. Before becoming a director and an executive officer of The American Energy Group Ltd., he co-founded Crary Onthank & O’Neill, an investment banking company, in 1998.

Dr. Iftikhar Zahid, age 47, has served as our Director since 2002. Dr. Zahid was educated at Murray College in Sailkot, Pakistan where he received a Degree in Science in 1976. Dr. Zahid received his degree in medicine from the Dow Medical College at Karachi University in 1979. In 1981, he joined the police services of Pakistan. In 1988, he resigned from governmental services as a Superintendent of Police. Between 1988 and 1996, Dr. Zahid served as an advisor and consultant to several multi-national organizations doing business in Pakistan. In 1996, Dr. Zahid became Resident Director/Country Manager of the Pakistan Office of Hycarbex, our then-existing subsidiary. In June 2001, he was promoted to Vice-President and Resident Director of Hycarbex and, in 2002, he joined the Company as a Director. Since our sale of Hycarbex in November 2003, Dr. Zahid has been managing our 18% royalty interest in the Yasin Block Concession. In April 2004, Dr. Zahid was appointed President of Hycarbex and in November 2005, Dr. Zahid was appointed as a director of Hycarbex.

Karl Welser, age 52, has been our Director since May 2005. Mr. Welser has been actively involved in private real estate and finance ventures for family interests since 1999. After graduating from the Dr. Raeber/ZH &KV/ZH business school in Zurich in 1972, Mr. Welser joined Bank J. Vontobel which specialized in private financial management. From 1977-1980, Mr. Welser attended the Zurich Management School where he obtained his Economist KSZH degree. From 1980 through 1998, while employed at Zürcher Kantonalbank, Bankinstitut and UBS in Zurich, Switzerland, respectively, Mr. Welser’s primary activities included analysis of the securities markets.

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BOARD OF DIRECTORS

We held three meetings of the Board of Directors during the fiscal year ended June 30, 2006, and the Board of Directors took action by unanimous written consent 18 times during that period. Mr. Onthank and Dr. Zahid are our only Directors who are also our officers and operations executives.

We do not have any standing committees of the Board of Directors, which we believe is adequate based on the size of our business. The Board of Directors has not adopted a formal policy with regard to the process to be used for identifying and evaluating nominees for director. The consideration of candidates nominated by directors is at the Board’s discretion. We believe this practice is adequate based on the size of our business and current Board member qualifications.

We do not currently have a process for security holders to send communications to the Board of Directors. However, we welcome comments and questions from our shareholders. Shareholders can direct communications to our Chief Executive Officer, Pierce Onthank, at our executive offices, 1 Gorham Island, Suite 303, Westport, Connecticut 06880. While we appreciate all comments from shareholders, we may not be able to individually respond to all communications. We attempt to address shareholder questions and concerns in our press releases and documents filed with the SEC so that all shareholders have access to information about the Company at the same time. Mr. Onthank collects and evaluates all shareholder communications. If the communication is directed to the Board of Directors generally or to a specific director, Mr. Onthank will disseminate the communications to the appropriate party at the next scheduled Board of Directors meeting. If the communication requires a more urgent response, Mr. Onthank will direct that communication to the appropriate executive officer. All communications addressed to our directors and executive officers will be reviewed by those parties unless the communication is clearly frivolous.

Compensation of Directors

Our Directors are reimbursed for reasonable out-of-pocket expenses in connection with their services as members of the Board including attendance at Board of Director meetings, and may be granted options to purchase shares of our common stock at the discretion of our Board of Directors. Directors are not otherwise provided any remuneration for their services as our Directors.

Summary Compensation Table

The following table reflects all forms of compensation for the fiscal years ended June 30, 2003, 2004 and 2005 for services provided by our executive officers and directors.

Page 30

SUMMARY COMPENSATION TABLE
			ANNUAL COMPENSATION			LONG TERM COMPENSATION
Name	Title	Year	Salary	Bonus	Other Annual Comp-ensation	Awards		Payouts	All Other Comp-ensation
						Restricted Stock Awarded	Options/ SARs Warrants (#)	LTIP payouts ($)
R.Pierce Onthank(1)	President, CEO and Sec. Treas.	2005 2004 2003	$192,000 $ 68,000 -0-	-0- -0- -0-	-0- -0- -0-	-0- 1,500,000 -0-	1,000,000 -0- -0-	-0- -0- -0-	-0- -0- -0-
Dr. Iftikhar A. Zahid(1)	(2)	2005 2004 2003	$180,000 $ 65,000 -0-	-0- -0- -0-	-0- -0- -0-	-0- 1,500,000 -0-	1,000,000 -0- -0-	-0- -0- -0-	-0- -0- -0-

Notes to Summary Compensation Table:

(1) Between July 1, 2003 and January 31, 2004, neither Mr. Onthank nor Dr. Zahid received any cash compensation. Beginning February 1, 2004, each was paid $10,000 per month. Beginning April 1, 2004, Mr. Onthank’s cash salary was increased to $16,000 per month and Dr. Zahid’s cash salary was increased to $15,000 per month.

(2) Dr. Zahid manages our assets in Pakistan. He holds no formal officer title with us.

Stock Option/SAR and Warrant Grants

The following grants constitute the only warrants granted to executive officers or directors during the fiscal year ended June 30, 2005. There are currently no outstanding stock options or SAR’s.

Option/SAR/Warrant Grants in Last Fiscal Year

(Individual Grants)

Name	Number of Securities Underlying Warrants/Options/ SARS Granted (#)	Percent of Total Options/SARs/ Warrants Granted to Employees in Fiscal Year (%)	Exercise of Base Price ($/Sh)	Expiration Date
Pierce Onthank	1,000,000	50%	$0.75 (500,000); $1.00 (250,000); $1.50 (250,000)	04/12/10
Iftikhar A. Zahid	1,000,000	50%	$0.75 (500,000); $1.00 (250,000); $1.50 (250,000)	04/12/10

Page 31

Aggregated Option/SAR/Warrant Exercises In

Last Fiscal Year and FY-End Option/SAR Values

Name	Shares Acquired on Exercise (#)	Value Realized ($)	Number of Unexercised Underlying Options/SARs/ Warrants at FY end (#); Exercisable/ Unexercisable	Value of Unexercised In-The-Money Options/SARs/ Warrants at FY end ($); Exercisable/ Unexercisable
Pierce Onthank	-0-	-0-	1,000,000/0	$510,000/0
Iftikhar Zahid	-0-	-0-	1,000,000/0	$510,000/0

There were no stock options, SAR’s or warrants exercised by any of our named executive officers during our most recent fiscal year ended June 30, 2005.

Long-Term Incentive Plans

We currently have no Long-Term Incentive Plans.

Employment contracts and change-in-control arrangements

There are no employment contracts or change-in-control agreements between us and our executive officers or directors.

CODE OF ETHICS

In September 2004, we adopted a Code of Ethics that is applicable to all directors, officer and employees. A copy of the Code of Ethics may be obtained without charge by writing to: The American Energy Group, Ltd., 1 Gorham Island Suite 303,Westport, Connecticut 06880.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock file with the Securities and Exchange Commission various reports as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on information provided to management, we believe that our officers and directors have complied with all filing requirements under Section 16(a) of the Securities Exchange Act of 1934, except for the filing of the Form 5 for each such officer and director which was filed late.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT

The following table sets forth certain information at June 30, 2006, with respect to the beneficial ownership of shares of common stock by (i) each person known to us who owns beneficially more than 5% of the outstanding shares of common stock, (ii) each of our Directors, (iii) each of our Executive Officers and (iv) all of our Executive Officers and Directors as a group. Unless otherwise indicated, each stockholder has sole voting and investment power with respect to the shares shown. As of June 30, 2006, we had 29,867,705 shares of common stock issued and outstanding.

Page 32

Name and address of beneficial owner	Title of Class of Stock	Number of Shares of Common Stock	Percentage of Common Stock (1)
R. Pierce Onthank 1 Gorham Island Suite 303 Westport, Connecticut 06680	Common stock	2,500,000 (2)	8.0% (2)
Dr. Iftikhar A. Zahid 1 Gorham Island Suite 303 Westport, Connecticut 06680	Common stock	2,780,000 (2)	9.0%(2)
Karl Welser 1 Gorham Island Suite 303 Westport, Connecticut 06680	Common stock	259,000	0.86%
All Officers and Directors as a group (total of three)	Common stock	5,539,000 (3)	17.86%

⁽¹⁾ Under Rule 13d-3 promulgated under the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on June 30, 2006. As of June 30, 2006 there were 29,867,705 shares of our common stock issued and outstanding.

⁽²⁾ Includes 1,000,000 shares issuable upon the exercise of warrants to purchase shares of common stock.

⁽³⁾ Includes 1,000,000 shares issuable upon the exercise of warrants to purchase shares of common stock.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

None of the following persons has any direct or indirect material interest in any transaction to which we were or are a party during the past two years, or in any proposed transaction to which we propose to be a party:

(A) any of our directors or executive officers;

(B) any nominee for election as one of our directors;

(C) any person who is known by us to beneficially own, directly or indirectly, shares carrying more than 5% of the voting rights attached to our common stock; or

(D) any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons named in paragraph (A), (B) or (C) above.

Page 33

SELLING STOCKHOLDERS

The following is a list of the selling stockholders who own or who have a right to acquire the shares of Common Stock covered by this prospectus. Up to 2,323,529 Shares are currently held by selling stockholders. Up to 3,867,326 Shares are issuable upon the exercise of warrants held by certain of the selling stockholders. As set forth below and elsewhere in this prospectus, some of these selling stockholders hold, or within the past three years have held, a position, office or other material relationship with us or our predecessors or affiliates.

Beneficial ownership is determined in accordance with Rule 13d-3 promulgated by the Securities and Exchange Commission, and generally includes voting or investment power with respect to securities. In computing the number of shares beneficially owned by the holder and the percentage ownership of the holder, shares of common stock issuable upon conversion of the note and upon exercise of the warrant held by the holder that are currently convertible or are exercisable or convertible or exercisable within 60 days after the date of the table are deemed outstanding.

The percent of beneficial ownership for the selling stockholders is based on 29,867,705 shares of common stock outstanding as of June 30, 2006. Shares of common stock subject to warrants, options and other convertible securities that are currently exercisable or exercisable within 60 days of June 30, 2006, are considered outstanding and beneficially owned by a selling stockholders who holds those warrants, options or other convertible securities for the purpose of computing the percentage ownership of that selling stockholders but are not treated as outstanding for the purpose of computing the percentage ownership of any other stockholder.

The shares of common stock being offered under this prospectus may be offered for sale from time to time during the period the registration statement of which this prospectus is a part remains effective, by or for the account of the selling stockholders. After the date of effectiveness of the registration statement of which this prospectus is a part, the selling stockholder may have sold or transferred, in transactions covered by this prospectus or in transactions exempt from the registration requirements of the Securities Act, some or all of its common stock. Information about the selling stockholders may change over time. Any changed information will be set forth in an amendment to the registration statement or supplement to this prospectus, to the extent required by law.

The following table sets forth information concerning the selling stockholders, including the number of shares currently held and the number of shares offered by each selling security holder, to our knowledge as of June 30, 2006.

		Before the Offering		After the Offering
Name of Selling Stockholder	Position, Office or Other Material Relationship	Total Number of Shares of common stock Beneficially Owned Prior to the Offering (1)	Number of Shares to be Offered for the Account of the Selling Stockholder (2)	Number of Shares to be Owned after this Offering (3)	Percentage to be Beneficially Owned after this Offering (4)
Common Stock
Cumberland Partners (5)	None	496,740	496,740	-0-	-0-
Cumber International S.A. (5)	None	140,360	140,360	-0-	-0-
Long View Partners B, L.P. (5)	None	116,790	116,790	-0-	-0-
Cumberland Benchmarked Partners, L.P. (5)	None	336,690	336,690	-0-	-0-
HRF HE Platinum Master Trust (5)	None	35,110	35,110	-0-	-0-
Cumberland Long Partners, L.P. (5)	None	1,300	1,300	-0-	-0-
Summer Street Cumberland Investors, LLC (5)	None	49,480	49,480	-0-	-0-
Spectra Capital Management (6)	None	247,794	235,294	12,500	<1%
Arclight Capital, LLC (7)	None	176,471	176,471	-0-	-0-
Redwood Partners II, LLC (8)	None	238,165	117,647	120,518
GLG North American Opportunity Fund (9)	None	617,647	617,647	-0-	-0-
		TOTAL	2,323,529

Page 34

Common Stock underlying Warrants
Cumberland Partners (5)	None	248,370	248,370	-0-	-0-
Cumber International S.A. (5)	None	70,180	70,180	-0-	-0-
Long View Partners B, L.P. (5)	None	58,395	58,395	-0-	-0-
Cumberland Benchmarked Partners, L.P. (5)	None	168,345	168,345	-0-	-0-
HRF HE Platinum Master Trust (5)	None	17,555	17,555	-0-	-0-
Cumberland Long Partners, L.P. (5)	None	650	650	-0-	-0-
Summer Street Cumberland Investors, LLC (5)	None	24,740	24,740	-0-	-0-
Spectra Capital Management (6)	None	117,647	117,647	-0-	-0-
Arclight Capital, LLC (7)	None	88,236	88,236	-0-	-0-
Redwood Partners II, LLC (8)	None	58,824	58,824	-0-	-0-
GLG North American Opportunity Fund (9)	None	308,824	308,824	-0-	-0-
Dahlman, Rose & Co., LLC (10)	Placement Agent	445,560	445,560	-0-	-0-
Pierce Onthank	Director, CEO, President	2,500,000(11)	1,000,000	1,500,000	8.0%
Iftikhar Zahid	Director	2,780,000(12)	1,000,000	1,780,000	9.0%
John S. Gebhardt	None	299,200 (13)	150,000	149,200	<1%
Maximilian A. Gebhardt	None	99,000 (14)	50,000	49,000	<1%
Calvert D. Crary	None	102,000(15)	60,000	42,000	<1%
		TOTAL	3,867,326

Page 35

(1)	Includes shares of common stock for which the selling security holder has the right to acquire beneficial ownership within 60 days.
(2)	This table assumes that each selling security holder will sell all shares offered for sale by it under this registration statement. Security holders are not required to sell their shares.
(3)	Assumes that all shares of Common Stock registered for resale by this prospectus have been sold.
(4)	Based on 29,867,705 shares of Common stock issued and outstanding as of June 30, 2006.
(5)	The Manager of Cumberland Associates LLC (Investment Manager for the selling stockholder) holds the investment decision and voting power for this non-natural entity. These persons are: Bruce G. Wilcox, Andrew M. Wallach and Gary G. Tynes. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes.
(6)	The Managers of Spectra Capital Management (Andrew Burton and Greg Porges) hold the investment decision and voting power for this non-natural entity. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes.
(7)	The Manager of Arclight Capital, LLC (Andrew Burton) holds the investment decision and voting power for this non-natural entity. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes.
(8)	The Manager of Redwood Partners II, LLC (Michael Schwartz) holds the investment decision and voting power for this non-natural entity. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes.
(9)	The Managing Directors of GLG Partners, LP (Investment Manager for the selling stockholder) hold the investment decision and voting power for this non-natural entity. These persons are: Noam Gottesman, Pierre Lagrange and Emmanuel Roman. GLG Partners, LP is approximately 20% owned by Lehman Brothers International. Lehman Brothers International has no investment decision or voting power on behalf of the selling stockholder. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes.
(10)	The Managing Director of Dahlman, Rose & Co., LLC, Mr. David Frischkorn, holds the investment decision and voting power for this non-natural entity. The shares were acquired by the selling stockholder as payment for services as Placement Agent in the normal course of business for investment purposes.
(11)	Includes 1,500,000 shares of common stock and 1,000,000 warrants to purchase common stock held by the selling stockholder.
(12)	Includes 1,780,000 shares of common stock and 2,000,000 warrants to purchase common stock held by the selling stockholder.
(13)	Includes 149,200 shares of common stock and 150,000 warrants to purchase common stock held by the selling stockholder.
(14)	Includes 49,000 shares of common stock and 50,000 warrants to purchase common stock held by the selling stockholder.
(15)	Includes 42,000 shares of common stock and 60,000 warrants to purchase common stock held by the selling stockholder.

PLAN OF DISTRIBUTION

Shares owned by the selling stockholders, or by their partners, pledgees, donees (including charitable organizations), transferees or other successors in interest, may from time to time be offered for sale either directly by such individual, or through underwriters, dealers or agents or on any exchange on which the shares may from time to time be traded, in the over-the-counter market, or in independently negotiated transactions or otherwise. The methods by which the shares may be sold include:

· a block trade (which may involve crosses) in which the broker or dealer so engaged will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

· purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this prospectus;

· exchange distributions and/or secondary distributions;

· sales in the over-the-counter market;

· underwritten transactions;

· ordinary brokerage transactions and transactions in which the broker solicits purchasers; and

· privately negotiated transactions.

Page 36

Such transactions may be effected by the selling stockholders at market prices prevailing at the time of sale or at negotiated prices. The selling stockholders may effect such transactions by selling the common stock to underwriters or to or through broker-dealers, and such underwriters or broker-dealers may receive compensations in the form of discounts or commissions from the selling stockholders and may receive commissions from the purchasers of the common stock for whom they may act as agent. The selling stockholders may agree to indemnify any underwriter, broker-dealer or agent that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act. We have agreed to register the shares for sale under the Securities Act and to indemnify the selling stockholders, certain representatives of the selling stockholders and each person who participates as an underwriter in the offering of the shares against certain civil liabilities, including certain liabilities under the Securities Act. We are required to pay certain fees and expenses incurred by us incident to the registration of the shares.

Because selling stockholders may be deemed to be statutory “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. The selling stockholders are subject to the applicable provisions of the Exchange Act, and the rules and regulations thereunder which may restrict certain activities of, and limit the timing of purchases and sales of securities by, selling stockholders and other persons participating in a distribution of securities. The selling stockholders may also sell shares under Rule 144 of the Securities Act, if available, rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the shares by the selling stockholders.

In connection with sales of the common stock under this prospectus, the selling stockholders, upon effectiveness of the Form SB-2 Registration Statement, may enter into hedging transactions with broker-dealers, who may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders also may sell shares of common stock short and deliver them to close out the short positions, or loan or pledge the shares of common stock to broker-dealers that in turn may sell them.

The selling stockholders and any underwriters, dealers or agents that participate in distribution of the shares may be deemed to be underwriters, and any profit on sale of the shares by them and any discounts, commissions or concessions received by any underwriter, dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

We agreed to keep this prospectus effective until the earlier of (i) June 6, 2008, or (ii) the time that all of the shares have been sold pursuant to the prospectus or Rule 144 under the Securities Act or any other rule of similar effect.

There can be no assurances that the selling stockholders will sell any or all of the shares offered under this prospectus.

Page 37

DESCRIPTION OF SECURITIES

General

The following description of our capital stock is subject to and qualified in its entirety by our certificate of incorporation and bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and by the applicable provisions of Nevada law. Our authorized capital stock consists of 80,000,000 shares of common stock, par value $.001 per share, and 20,000,000 shares of preferred stock, par value $1.00 per share.

Common Stock

As of June 30, 2006, there were 29,867,705 shares of common stock outstanding. The rights of all holders of the common stock are identical in all respects. The holders of the common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. The current policy of the Board of Directors, however, is to retain earnings, if any, for reinvestment in drilling ventures to maximize development of reserves.

Upon liquidation, dissolution or winding up of the Company, the holders of the common stock are entitled to share ratably in all aspects of the Company that are legally available for distribution, after payment of or provision for all debts and liabilities and after preferences are afforded to the holders of the preferred shares.

The holders of the common stock do not have preemptive subscription, redemption or conversion rights under our Articles of Incorporation. Cumulative voting in the election of Directors is not permitted. The outstanding shares of common stock are validly issued, fully paid and nonassessable. The rights, preferences and privileges of holders of common stock will be subject to, and may be adversely affected by, the rights of holders of shares of any series of preferred stock that are presently outstanding or that may be designated and issued by us in the future.

Preferred Stock

Our Articles of Incorporation authorize the issuance of up to 20,000,000 shares of preferred stock with such rights, designations and preferences as are determined by our Board of Directors. As of June 30, 2006, there were no shares of preferred stock outstanding.

Schedule of Warrants

As of June 30, 2006, we had the following warrants to purchase shares of our common stock were outstanding:

Strike Price	Number of Warrants	Expiration Date
$ 0.75	1,000,000	04/12/2010
$ 1.00	500,000	04/12/2010
$ 1.50	660,000	04/12/2010 (500,000)
$ 1.75	100,000	09/12/2008 (60,000) 09/30/2008 (100,000)
$ 1.70	1,161,766	5/3/2011
$ 1.70	445,560	5/3/2011
TOTAL	3,867,326

Page 38

Anti-Takeover Provisions

Certain anti-takeover provisions in our Certificate of Incorporation may make a change in control of the Company more difficult, even if a change in control would be beneficial to our stockholders. In particular, our board of directors is authorized to issue a total of up to 20,000,000 shares of preferred stock with rights and privileges that might be senior to our common stock, without the consent of the holders of our Common Stock, and has the authority to determine the price, rights, preferences, privileges and restrictions of the preferred stock. Although the ability to issue preferred stock may provide us with flexibility in connection with possible acquisitions and other corporate purposes, this issuance may make it more difficult for a third party to acquire a majority of our outstanding voting stock.

Transfer Agent

The transfer agent for our Common Stock is Computershare Trust Co., Inc., 350 Indiana, Suite 850, Golden, Colorado 80401. Their telephone numbers is 303-262-0600.

INTEREST OF NAMED EXPERTS AND COUNSEL

Jim Hughes, who has prepared this Registration Statement and Opinion regarding the authorization, issuance and fully-paid and non-assessable status of the securities covered by this Registration Statement, has represented us in the past on certain legal matters. Mr. Hughes presently owns 478,604 shares of our common stock. Otherwise, his entire relationship with us has been as legal counsel, and there are no arrangements or understandings which would in any way cause him to be deemed an affiliate of the Registrant or a person associated with an affiliate of the Registrant.

EXPERTS

The financial statements of The American Energy Group, ltd. at June 30, 2005 and 2004, included in and made a part of this document have been audited by Chisolm, Bierwolf & Nilson, independent auditors, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

COMMISSION POSITION ON

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our certificate of incorporation provides that we shall indemnify our directors and officers and that none of our directors will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:

• for any breach of the director's duty of loyalty to the Company or its stockholders;

• for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of the law;

• under Nevada General Corporation Law for the unlawful payment of dividends; or

• for any transaction from which the director derives an improper personal benefit.

These provisions require us to indemnify its directors and officers unless restricted by Nevada law and eliminate our rights and those of its stockholders to recover monetary damages from a director for breach of his fiduciary duty of care as a director except in the situations described above. The limitations summarized above, however, do not affect our ability or that of its stockholders to seek non-monetary remedies, such as an injunction or rescission, against a director for breach of his fiduciary duty.

Page 39

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form SB-2 under the Securities Act, and the rules and regulations promulgated thereunder, with respect to the common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits thereto. Statements contained in this prospectus as to the contents of any contract or other document that is filed as an exhibit to the registration statement are not necessarily complete and each such statement is qualified in all respects by reference to the full text of such contract or document. For further information with respect to us and the common stock, reference is hereby made to the registration statement and the exhibits thereto, which may be inspected and copied at the principal office of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may be obtained at prescribed rates from the Commission's Public Reference Section at such addresses. Also, the SEC maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. Additional information can also be obtained through our website at www.aegg.net. We also make available free of charge our annual, quarterly and current reports, proxy statements and other information upon request. To request such materials, please contact Mr. Pierce Onthank, 1 Gorham Island Suite 303, Westport, CT 06880.

We are in compliance with the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, file periodic reports, proxy and information statements and other information with the SEC. Such periodic reports, proxy and information statements and other information will be available for inspection and copying at the principal office, public reference facilities and Web site of the SEC referred to above.

Page 40

                        THE AMERICAN ENERGY GROUP, LTD.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2005 AND 2004








                                 C O N T E N T S



Independent Auditors' Reports............................................   F-3

Consolidated Balance Sheets..............................................   F-4

Consolidated Statements of Operations....................................   F-5

Consolidated Statements of Stockholders' Equity..........................   F-6

Consolidated Statements of Cash Flows....................................   F-8

Notes to the Consolidated Financial Statements...........................   F-10



                                      F-2




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

To the Board of Directors and Shareholders of
The American Energy Group, Ltd. and Subsidiaries
Westport, CT.

We have audited the  accompanying  consolidated  balance  sheets of The American
Energy Group, Ltd. and Subsidiaries as of June 30, 2005 and 2004 and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the year ended June 30, 2005, and for the periods  January 30, 2004 through June
30, 2004 and July 1, 2003 through January 29, 2004. These consolidated financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
consolidated financial statements are free of material misstatement. The Company
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audit included  consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of The
American Energy Group,  Ltd. and  Subsidiaries as of June 30, 2005, 2004 and the
consolidated results of their operations and their cash flows for the year ended
June 30, 2005 and for the periods  January  30, 2004  through  June 30, 2004 and
July 1, 2003  through  January 29, 2004,  in  conformity  accounting  principles
generally accepted in the United States of America.

As  discussed in Note 9 to the  consolidated  financial  statements,  there were
errors in the presentation of the reporting periods in the financial  statements
and the reclassification of prepaid expenses.



Chisholm, Bierwolf & Nilson, LLC
Bountiful, Utah
October 13, 2005, except for notes 1, 2 ,7 ,8 & 9 dated July 5, 2006


                                      F-3


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                                     Assets
                                     ------
                                                                        June 30,
                                                               --------------------------
                                                                   2005           2004
                                                               -----------    -----------
Current Assets
   Cash (Note 1)                                               $       227    $   257,899
   Prepaid expenses                                                 60,178         35,000
                                                               -----------    -----------

     Total Current Assets                                           60,405        292,899
                                                               -----------    -----------

Property and Equipment
   Office equipment
                                                                     3,286             --
   Accumulated depreciation                                           (246)            --
                                                               -----------    -----------

     Net Property and Equipment                                      3,040             --
                                                               -----------    -----------

        Total Assets                                           $    63,445    $   292,899
                                                               ===========    ===========

                      Liabilities and Stockholders' Equity
                      ------------------------------------

Current Liabilities
   Accounts payable                                            $    17,632    $    12,500
   Accrued liabilities                                              35,209         24,239
   Convertible Debt                                                 25,000
   Current portion of long term debt                               292,000             --
                                                               -----------    -----------

       Total Current Liabilities                                   369,841         36,739
                                                               -----------    -----------

Liabilities Subject to Compromise
   Prepetition trade accounts payable                          $   238,588    $   238,588
   Prepetition accrued liabilities                                  45,500         45,500
   Current portion of capital lease obligations (Note 5)               679            679
                                                               -----------    -----------

       Total Liabilities Subject to Compromise                     284,767        284,767
                                                               -----------    -----------

Long-Term Liabilities
   Convertible debt (Note 4)                                            --        375,000
                                                               -----------    -----------
     Total Long-Term Liabilities                                        --        375,000
                                                               -----------    -----------

     Total Liabilities                                             654,608        696,506
                                                               -----------    -----------

Stockholders' Equity (Notes 6,7 and 8)
   Common stock; par value $0.001 per share;
      authorized 80,000,000 shares; 24,698,518 and
      27,139,584 shares issued and outstanding, respectively        27,140         24,699
   Capital in excess of par value                                1,860,545      1,312,490
   Expenses prepaid with common stock                              (31,382)
   Accumulated deficit                                          (2,447,466)    (1,740,796)
                                                               -----------    -----------

     Total Stockholders' Equity                                   (591,163)      (403,607)
                                                               -----------    -----------

     Total Liabilities and Stockholders' Equity                $    63,445    $   292,899
                                                               ===========    ===========


                                      F-4


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      Consolidated Statements of Operations

                                                    SUCCESSOR           SUCCESSOR            PREDECESSOR
                                                     ENTITY              ENTITY                ENTITY
                                               For the Year Ended     For the Period       For the Period
                                                     June 30,       January 30,2004 to    July 1, 2003 to
                                                      2005            June 30, 2004      January 29, 2004
                                                   ------------        ------------        ------------
Revenue
   Oil and gas sales                               $         --        $         --        $         --
                                                   ------------        ------------        ------------

     Total Revenue                                           --                  --                  --

Expenses
   Legal and professional                               180,550                  --                  --
   Depreciation and amortization expense                    246                  --                  --

   Other general and administrative                     513,468             259,228              14,095
                                                   ------------        ------------        ------------

     Total Expenses                                     694,264             259,228              14,095
                                                   ------------        ------------        ------------

       Net Operating Loss                              (694,264)           (259,228)            (14,095)

Other Income (Expenses)
   Loss on sale of investment in subsidiary                  --                  --            (621,234)
   Interest expense                                     (12,406)             (5,480)                 --
                                                   ------------        ------------        ------------

     Total Other Income (Expenses)                      (12,406)             (5,480)           (621,234)
                                                   ------------        ------------        ------------

     Income (loss) before Reorganization Items
     and Income Taxes
                                                       (706,670)           (264,708)           (635,329)

Reorganization (Expenses)
   Legal fees                                                --                  --             (28,352)
                                                   ------------        ------------        ------------

     Total Reorganization (Expenses)                         --                  --             (28,352)
                                                   ------------        ------------        ------------

       Net Loss                                    $   (706,670)       $   (264,708)       $   (663,681)
                                                   ============        ============        ============

       Basic Loss per Common Share                 $      (0.03)       $      (0.01)       $      (0.01)
                                                   ============        ============        ============

       Weighted Average Number of
       Shares Outstanding                            25,319,754          23,528,518          66,318,037
                                                   ============        ============        ============


                                      F-5


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
                        For the Year Ended June 30, 2005
              And for the Period January 30, 2004 to June 30, 2004
               And for the Period July 1, 2003 to January 29, 2004

                                                                                Convertible Voting
                                                 Common Stock                     Preferred Stock
                                       -----------------------------     -----------------------------
                                          Shares           Amount           Shares           Amount
                                       ------------     ------------     ------------     ------------
Balance, June 30, 2003                   66,318,037     $     66,318           41,499     $         42

January 2004, reorganization
adjustment                              (66,318,037)         (66,318)         (41,499)             (42)

Net (loss) for the period ended
January 29, 2004                                 --               --               --               --
                                       ------------     ------------     ------------     ------------

Balance, January 29, 2004                        --               --               --               --
                                       ------------     ------------     ------------     ------------

January 2004, new shares issued
pursuant to bankruptcy settlement        18,898,518           18,899               --               --

February 2004, shares issued for
royalty interest at par value             1,500,000            1,500               --               --

February 2004, shares issued for
services at $0.03 per share               3,000,000            3,000               --               --

June 2004, shares issued for
convertible debt at $0.15 per share       1,300,000            1,300               --               --

Net (loss) for the period ended
June 30, 2004                                    --               --               --               --
                                       ------------     ------------     ------------     ------------

Balance, June 30, 2004                   24,698,518           24,699               --               --
                                       ------------     ------------     ------------     ------------

July 2004, new shares issued
for services at $0.10 per share             250,000              250               --               --

December 2004, new shares issued
for services at $0.32 per share              76,520               77               --               --

                                        Capital In
                                        Excess of       Accumulated
                                        Par Value          Deficit         Totals
                                       ------------     ------------     ------------
Balance, June 30, 2003                 $ 37,763,777     $(43,206,577)    $ (5,376,440)

January 2004, reorganization
adjustment                              (36,728,088)      42,394,170        5,599,722

Net (loss) for the period ended
January 29, 2004                                 --         (663,681)        (663,681)
                                       ------------     ------------     ------------

Balance, January 29, 2004                 1,035,689       (1,476,088)        (440,399)
                                       ------------     ------------     ------------

January 2004, new shares issued
pursuant to bankruptcy settlement           (18,899)              --               --

February 2004, shares issued for
royalty interest at par value                    --               --            1,500

February 2004, shares issued for
services at $0.03 per share                  97,000               --          100,000

June 2004, shares issued for
convertible debt at $0.15 per share         198,700               --          200,000

Net (loss) for the period ended
June 30, 2004                                    --         (264,708)        (264,708)
                                       ------------     ------------     ------------

Balance, June 30, 2004                    1,312,490       (1,740,796)        (403,607)
                                       ------------     ------------     ------------

July 2004, new shares issued
for services at $0.10 per share              24,750               --           25,000

December 2004, new shares issued
for services at $0.32 per share              24,923               --           25,000


                                      F-6


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
                        For the Year Ended June 30, 2005
              And for the Period January 30, 2004 to June 30, 2004
               And for the Period July 1, 2003 to January 29, 2004

                                                                          Convertible Voting
                                               Common Stock                 Preferred Stock
                                       --------------------------    --------------------------
                                          Shares          Amount        Shares        Amount
                                       -----------    -----------    -----------    -----------
December 2004, shares issued for
convertible debt at $0.20 per share      1,932,482          1,932             --             --


March 2005, new shares issued
for services at $1.25 per share             26,000             26             --             --

March 2005, new shares issued
pursuant to bankruptcy settlement           35,760             36             --             --


June 2005, new shares issued
for services at $0.33, $1.05,
$1.12, $2.08 & $1.80 per share             120,304            120             --             --


Expenses prepaid with
  Common stock                                  --             --             --             --

Net (loss) for the year ended
June 30, 2005                                   --             --             --             --
                                       -----------    -----------    -----------    -----------

Balance, June 30, 2005                  27,139,584    $    27,140             --             --
                                       ===========    ===========    ===========    ===========


                                       Capital In
                                        Excess of      Accumulated
                                        Par Value        Deficit          Totals
                                       -----------     -----------     -----------
December 2004, shares issued for
convertible debt at $0.20 per share        384,564              --         386,496


March 2005, new shares issued
for services at $1.25 per share             32,474              --          32,500

March 2005, new shares issued
pursuant to bankruptcy settlement              (36)             --              --


June 2005, new shares issued
for services at $0.33, $1.05,
$1.12, $2.08 & $1.80 per share              81,380              --          81,500


Expenses prepaid with
  Common stock                                  --              --         (31,382)

Net (loss) for the year ended
June 30, 2005                                   --        (706,670)       (706,670)
                                       -----------     -----------     -----------

Balance, June 30, 2005                 $ 1,860,545     $(2,447,466)    $  (591,163)
                                       ===========     ===========     ===========


                                      F-7


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

                                                             SUCCESSOR           SUCCESSOR           PREDECESSOR
                                                              ENTITY               ENTITY              ENTITY
                                                        For the Year Ended     For the Period      For the Period
                                                               June 30,      January 30, 2004 to   July 1, 2003 to
                                                                 2005           June 30, 2004     January 29, 2004
                                                              -----------        -----------        -----------
Cash Flows from Operating Activities
   Net loss                                                   $  (706,670)       $  (264,708)       $  (663,681)
   Adjustments to reconcile net loss to net cash
    provided (used) by operating activities:
     Depreciation and amortization                                    246                 --                 --
     Common stock issued for services rendered                    114,940            100,000                 --
     (Gain) loss on investment                                         --                 --            621,234
   Changes in operating assets and liabilities:
     (Increase) decrease in prepaid expenses                      (20,000)           (35,000)                --

     Increase (decrease) in accounts payable                       17,632             12,500             (1,763)
     Increase (decrease) in accrued liabilities and
      other current liabilities                                    22,466              2,254            (90,272)
                                                              -----------        -----------        -----------

       Net Cash Provided (Used) by Operating Activities          (571,386)          (184,954)          (134,482)
                                                              -----------        -----------        -----------

Cash Flows from Investing Activities
   Cash disposed of in sale of subsidiary                              --                 --         (1,121,881)

   Expenditures for other property and equipment                   (3,286)                --                 --
                                                              -----------        -----------        -----------

       Net Cash Provided (Used) by Investing Activities            (3,286)                --         (1,121,881)
                                                              -----------        -----------        -----------

Cash Flows from Financing Activities
   Proceeds from convertible debt                                 317,000            425,000            150,000

   Payments on notes payable and long-term liabilities                 --                 --                 --
                                                              -----------        -----------        -----------

       Net Cash Provided by Financing Activities                  317,000            425,000            150,000
                                                              -----------        -----------        -----------

       Net Increase (Decrease) in Cash                           (257,672)           240,046         (1,106,363)

       Cash and Cash Equivalents at Beginning of Year             257,899             17,853          1,124,216
                                                              -----------        -----------        -----------

       Cash and Cash Equivalents at End of Year               $       227        $   257,899        $    17,853
                                                              ===========        ===========        ===========


                                      F-8


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Continued)


                                                          SUCCESSOR            SUCCESSOR         PREDECESSOR
                                                           ENTITY               ENTITY              ENTITY
                                                      For the Year Ended    For the Period      For the Period
                                                           June 30,       January 30,2004 to    July 1, 2003 to
                                                            2005            June 30, 2004      January 29, 2004
                                                          --------           ------------      ----------------
Cash Paid for:
   Interest                                               $       --         $        --          $         --
   Income taxes                                           $       --         $        --          $         --

Non-Cash Financing Activities:

   Common stock issued in satisfaction of accounts
     payable                                              $   12,500         $        --          $         --
   Common stock issued for services rendered              $  114,940         $   100,000          $         --
   Common stock issued for prepaid services               $   36,560         $        --          $         --
   Common stock issued for royalty interest               $       --         $     1,500          $         --
   Common stock issued for accrued  interest on debt      $   11,496         $     1,500          $         --
   Common stock issued for convertible debt               $  375,000         $   200,000          $         --


                                      F-9


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2005 and 2004

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.

      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 120,000 shares of common
      stock of the Company, a 1% overriding royalty on the Pakistan Project (see
      Note 2) and a future $200,000 production payment if certain conditions are
      met. The  acquisition was accounted for as a  pooling-of-interests  on the
      date of the  acquisition.  The fair value of the  assets  and  liabilities
      assumed  approximated  the fair  value of the  120,000  shares  issued  of
      $60,000 as of the date of the acquisition.  Accordingly, book value of the
      assets and  liabilities  assumed was $60,000.  In April 1995,  the name of
      that company was changed to  Hycarbex-American  Energy,  Inc. The American
      Energy   Group,   Ltd.,   The  American   Energy   Operating   Corp.   and
      Hycarbex-American  Energy,  Inc., were the only operating  entities during
      the years ended June 30, 2005 and for the periods January 30, 2004 to June
      30,  2004 and July 1,  2003 to  January  29,  2004.  The  Company  and its
      subsidiaries were principally in the business of acquisition, exploration,
      development and production of oil and gas properties.

      On June 28,  2002,  the  Company  was placed  into  involuntary  Chapter 7
      bankruptcy by three  creditors,  including Georg von Canal, an officer and
      director  who  was  then  involved  in  litigation  with  the  Company  to
      invalidate  an attempt to remove him from his  management  positions.  The
      bankruptcy filing followed an unsuccessful effort by management to resolve
      both the litigation and the need for a substantial cash infusion through a
      stock sale to a  German-based  investor  which  would have  simultaneously
      resulted in a restructure  of  management.  Shortly after this  bankruptcy
      filing,  the secured  creditor  holding a first lien on the Company's only
      producing oil and gas leases in Fort Bend County, Texas, sought permission
      from the  bankruptcy  court to  foreclose  on those  assets.  The  Company
      responded by converting the Chapter 7 bankruptcy  proceedings to a Chapter
      11 reorganization  proceeding.  The company obtained approval of a plan or
      reorganization   in  September   2002,   but  the  secured   creditor  was
      nevertheless  permitted to foreclose upon the Fort Bend County oil and gas
      leases.  Subsequent to the approval of the  foreclosure of the oil and gas
      producing  properties,  the Company  abandoned  the  remaining oil and gas
      properties  except for one lease in  southeast  Texas.  For the year ended
      June  30,  2003,  the  Company  recognized  a loss of  $13,040,120  on the
      foreclosure  and abandonment of the oil and gas properties and the sale of
      the fixed assets.

      On  October  26,  2003,  the  Company  sold its  wholly-owned  subsidiary,
      Hycarbex-American  Energy, Inc., for an 18% overriding royalty interest in
      the  Exploration  License No.  2768-7 dated August 11, 2001,  of the Yasin
      Exploration Block.

      On January 29, 2004, the Company was released from bankruptcy. Pursuant to
      the plan, all of the existing 66,318,037 shares of common stock and 41,499
      shares of preferred  stock were cancelled.  The Company issued  18,898,518
      new shares of common stock to  creditors.  Also,  the Company  adopted the
      provisions for fresh-start reporting. Accordingly, the accumulated deficit
      accumulated  through January 29, 2004 has been eliminated.  The Company is
      considered  to have a  fresh-start  due to the  cancellation  of the prior
      shareholders'  common stock and the subsequent issuance of common stock to
      creditors, the new shareholders.

      On April  14,  2005,  the  Company's  wholly  owned  inactive  subsidiary,
      American  Energy  Operating  Corp (AEOC) filed for a voluntary  bankruptcy
      liquidation.  AEOC does not have any assets but does have  liabilities  in
      the amount of $284,767  which are segregated on the  consolidated  balance
      sheets as prepetition liabilities subject to compromise.


                                      F-10


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2005 and 2004

Note 1 - Organization and Summary of Significant Accounting Policies (continued)

      b. Going Concern

      The  accompanying  consolidated  financial  statements  have been prepared
      assuming the Company will continue as a going concern. These factors raise
      substantial  doubt  about  the  Company's  ability  to  continue  as going
      concerns. The Company has no operations and is dependent upon financing to
      continue its operations.  It is  management's  plan to manage and maintain
      its two core assets and to develop these assets where possible to generate
      cash for further investment and growth. In the case of the southeast Texas
      oil and gas lease, generation of cash will likely require an outright sale
      or a partial sale with a retained  interest in production,  as the company
      does not have sufficient cash assets to conduct drilling operations or the
      bonding  capacity to obtain operating  authority under Texas  regulations.
      With regard to the Pakistan royalty, the company does not have development
      rights or  obligations  and is dependent  upon the success of the drilling
      program  implemented by Hydro Tur (Energy) Ltd. During the year ended June
      30, 2005, Hydro Tur (Energy) Ltd.  announced the successful  completion of
      its  initial  well,  the  Haseeb  No.  1,  which is  anticipated  to begin
      generating  cash flows in the first  quarter of calender  2006.  Hydro Tur
      (Energy) Ltd. has also  expressed  their  commitment  to accelerate  their
      development  activities  in  Pakistan  as a result of the  success  of the
      Haseeb No.1 well. If either  activity is  successful  in  generating  cash
      assets,  management plans to seek out investment  opportunities compatible
      with its focus upon oil and gas properties.

      The recovery of assets and continuation of future operations are dependent
      upon the Company's  ability to obtain additional debt or equity financing,
      and their ability to generate  revenues  sufficient  to continue  pursuing
      their  business  purpose.  These  financial  statements do not include any
      adjustments  that might  result from the  outcome of these  uncertainties.
      Subsequent  to the date of these  financial  statements  the  Company  has
      raised $240,000 from private parties and an existing  shareholder  through
      the  issuance of warrants to purchase  common stock and through the direct
      issuance of common shares.

      c. Accounting Methods

      The Company's  consolidated  financial  statements  are prepared using the
      accrual method of accounting. The Company has elected a June 30 year-end.

      d. Oil and Gas Properties

      The full cost  method was used by the Company  prior to emerging  from the
      bankruptcy.  As of June 30,  2005 and 2004,  the  Company did not have any
      costs capitalized as oil and gas properties.

      e. 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. Cash Equivalents

      The Company  considers  all highly liquid  investments  with a maturity of
      three months or less when purchased to be cash equivalents.

      g. 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 year ended June 30, 2005, and for the periods  January 30, 2004 to
      June 30, 2004 and July 1, 2003 to January 29, 2004, the Companies incurred
      total depreciation of $246, $0 and $0, respectively.


                                      F-11


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2005 and 2004

Note 1 - Organization and Summary of Significant Accounting Policies (continued)


      h. Basic Loss Per Share of Common Stock

                                  For the Year       For the Period       For the Period
                                 Ended June 30,     January 30, 2004     July 1, 2003 to
                                     2005           to June 30, 2004    January 29, 2004
                                 --------------     ----------------    ----------------
      Loss (numerator)           $    ( 706,670)     $      (264,708)    $     (663,681)

      Shares (denominator)           25,319,754          23,528,518          66,318,037
                                 --------------      --------------      --------------

      Per share amount           $        (0.03)     $        (0.01)     $        (0.01)
                                 ==============      ==============      ===============


      The basic loss per share of common stock is based on the weighted  average
      number  of  shares  issued  and  outstanding  during  the  period  of  the
      consolidated  financial  statements.  Stock warrants and preferred  shares
      prior to  conversion  are not  included in the basic  calculation  because
      their inclusion would be  antidilutive,  thereby reducing the net loss per
      common share.

      i. Use of Estimates

      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure  of  contingent  assets  and  liabilities  at the  date  of the
      financial  statements  and the  reported  amounts of revenues and expenses
      during the  reporting  period.  Actual  results  could  differ  from those
      estimates.

      j. Long Lived Assets

      All long lived assets are evaluated for  impairment  per SFAS 144 whenever
      events or changes in circumstances  indicate that the carrying value of an
      asset may not be recoverable.  Any impairment in value is recognized as an
      expense in the period when the impairment occurs.

      In addition,  pursuant to the full cost method used in accounting  for oil
      and gas properties, the capitalized oil and gas property costs are subject
      to the full cost ceiling test to determine if the value of proved reserves
      and other  mineral  assets in the  respective  cost center are adequate to
      recover  the  unamortized  costs in the full  cost  pool.  If the  Company
      determines  that the capitalized  costs exceed the full cost ceiling,  the
      excess is charged to expense and separately  disclosed  during the year in
      which the excess occurs.

      k. Equity Securities

      Equity  securities issued for services rendered have been accounted for at
      the fair market value of the securities on the date of issuance.

      l. Income Taxes

      At June 30, 2005,  the Company had net  operating  loss  carryforwards  of
      approximately $43,103,661 that may be offset against future taxable income
      from the year 2005 through  2024.  No tax benefit has been reported in the
      June 30, 2005  consolidated  financial  statements since the potential tax
      benefit is offset by a valuation allowance of the same amount.


                                      F-12


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2005 and 2004

Note 1 - Organization and Summary of Significant Accounting Policies (continued)

      The  income  tax  benefit  differs  from the  amount  computed  at federal
      statutory rates of approximately 38% as follows:


                                                     For the Year       For the Period       For the Period
                                                    Ended June 30,     January 30, 2004     July 1, 2003 to
                                                         2005          to June 30, 2004    January 29, 2004
                                                    --------------     ----------------    ----------------
      Income tax benefit at statutory rate          $      268,535      $      100,589      $      252,199
      Change in valuation allowance                       (268,535)           (100,589)           (252,199)
                                                    --------------      --------------      --------------
                                                    $           --      $           --      $           --
                                                    ==============      ==============      ==============

      Deferred tax assets are comprised of the following:

                                                     For the Year       For the Period       For the Period
                                                    Ended June 30,     January 30, 2004     July 1, 2003 to
                                                         2005          to June 30, 2004    January 29, 2004
                                                    --------------     ----------------    ----------------
      Income tax benefit at statutory rate          $   16,379,391      $   16,110,856      $   16,010,267
      Valuation allowance                              (16,379,391)        (16,110,856)        (16,010,267)
                                                    --------------      --------------      --------------
                                                    $           --      $           --       $          --
                                                    ==============      ==============      ==============

Note 2 - Oil and Gas Properties

      As described in Note 1, as of June 30, 2005, the Company has one remaining
      lease for oil and gas properties located in Southeast Texas.

Note 3 - Notes payable and long-term debt

                                                                           2005             2004
                                                                     --------------   --------------
      Promissory note due to an individual,  interest at prime
      plus 1.0% per annum,  principal and interest due January
      18, 2006 with a one year  maturity  extension  available
      for a fee of  $20,000,  secured  by  1/2  of the  future
      production,  if  any  received  by  the  company  on its
      retained onverriding royalty interest in its Republic of
      Pakistan  Yasin block and its  retained  interest in its
      Maco-Stewart,  Gillock  Field  Oil  and  Gas  leases  in
      Galveston County.

                                                                     $      292,000   $            0
                                                                     --------------   --------------

                   Total Notes Payable and Long-Term Debt                        --               --

                   Less Current Portion                                     292,000               --
                                                                     --------------   --------------
                   Long-Term Debt                                    $            0   $            0
                                                                     ==============   ==============


                                      F-13


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2005 and 2004

Note 4 - Convertible debt

                                                                           2005             2004
                                                                     --------------   --------------
      Convertible   promissory   notes  due  to   individuals,
      interest  at prime plus 1.0% per annum,  principals  due
      from  December 31, 2005  through June 2006,  convertible
      into shares of common stock at $0.20 per share,  secured
      by 1/2 of the note future production, if any received by
      the company on its retained onverriding royalty interest
      in its Republic of Pakistan Yasin block and its retained
      interest in its Maco-Stewart,  Gillock Field Oil and Gas
      leases in Galveston County.

                                                                     $       25,000   $      375,000
                                                                     --------------   --------------
                   Total Convertible Debt                                         0          375,000

                   Less Current Portion                                      25,000               --
                                                                     --------------   --------------
                   Long-Term Debt                                     $           0   $      375,000
                                                                     ==============   ==============

Note 5 - Capital Lease Obligations

      The Company entered into a lease agreement  during the year ended June 30,
      2001  relating  to  office  equipment  which has been  accounted  for as a
      capital  lease.  The lease has a term of 36  months  with a total  monthly
      lease payment of $122.



      The following are the scheduled annual payments on the capital lease:

         Year Ending June 30,2005                                    $          709
                                                                     --------------
         Total minimum lease commitments                                        709
         Less: amount representing interest                                     (30)
                                                                     --------------
         Total capital lease obligations                                        679
         Less: current portion                                                 (679)
                                                                     --------------
         Total Long-Term Capital Lease Obligations                   $           --
                                                                     ==============

Note 6 - Convertible Voting Preferred Stock

      On September 22, 1994, the board of directors of the Company  approved the
      issuance of  2,074,521  shares of the  authorized  preferred  stock of the
      Company,  to be issued in a series, to be known as the "Convertible Voting
      Preferred  Stock,   $.025   Non-Cumulative   Dividend".   A  corresponding
      certificate  of  issuance  was filed with the State of Nevada.  Holders of
      these shares are  entitled to a  noncumulative,  preferential  dividend of
      $.025  per share  per  annum,  when  declared  by the board of  directors,
      payable  from the surplus,  net profits or assets of the  Company.  At any
      time after  September 30, 1999,  the board of directors of the Company may
      elect to redeem this  Convertible  Voting  Preferred Stock at a redemption
      price of $0.50 per share. Each share of this Convertible  Voting Preferred
      Stock shall be  convertible  into five  shares of the common  stock of the
      Company.


                                      F-14


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2005 and 2004


Note 6 - Convertible Voting Preferred Stock (continued)

      Under the conversion  privileges of these shares,  the holder may elect to
      convert 20% of the Convertible  Voting  Preferred Stock prior to September
      30, 1995 and an additional 20% every year  thereafter  until September 30,
      1999.  The  right to  convert  shall  terminate  if not  exercised  before
      September  30, 1999.  At June 30, 2002,  the  remaining  41,499  preferred
      shares  are no longer  convertible.  The  Company  has the right to redeem
      these shares for $0.50 per share.  Each share of this  Convertible  Voting
      Preferred  Stock  shall  be  entitled  to  one  shareholder   vote.  These
      2,074,521,  shares were issued  pursuant to the acquisition by the Company
      of  Simmons  Oil  Company,  Inc.  and  its  subsidiaries.   One  share  of
      Convertible  Voting  Preferred  Stock was issued for every four  shares of
      common stock of Simmons Oil Company, Inc.

      As  described  in Note 1,  pursuant  to the  bankruptcy  proceedings,  the
      preferred stock was canceled.

Note 7 - Common Stock

      During  January  2004,  as  described  in Note 1,  the  Company  cancelled
      66,318,037  shares of  existing  common  stock and issued  18,898,518  new
      shares of common stock to creditors.

      During February 2004, the Company issued  1,500,000 shares of common stock
      at par value for an 18%  overriding  royalty  interest in the  Exploration
      License No. 2768-7 dated August 11, 2001 of the Yasin Exploration Block.

      During February 2004, the Company issued  3,000,000 shares of common stock
      for services valued at $100,000.

      During June 2004, the Company issued  1,300,000 shares of common stock for
      convertible debt of $200,000.

      During July 2004,  the Company  issued  250,000 shares of common stock for
      services valued at $25,000.

      During December 2004, the Company issued 76,520 shares of common stock for
      services valued at $25,000.

      During December 2004, the Company issued  1,932,482 shares of common stock
      for convertible debt of $375,000 and related accrued interest of $11,496.

      During March 2005,  the Company  issued  26,000 shares of common stock for
      services valued at $32,500.

      During March 2005,  the Company  issued  35,760  shares of common stock to
      creditors pursuant to the prior year's bankruptcy settlement.

      During May 2005,  the Company  issued  17,620  shares of common  stock for
      services valued at $18,500.

      During June 2005,  the Company  issued  102,684 shares of common stock for
      services valued at $63,000


                                      F-15


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2005 and 2004

Note 8 - Common Stock Warrants

      The Company applies  Accounting  Principles Board ("APB") 25,  "Accounting
      for Stock Issued to Employees," and related  interpretations in accounting
      for all stock option plans. Under APB 25,  compensation cost is recognized
      for  stock   options  and   warrants   granted  to   employees   when  the
      option/warrant  price is less  than  the  market  price of the  underlying
      common stock on the date of grant.

      FASB Statement 123,  "Accounting for Stock-Based  Compensation" ("SFAS No.
      123") requires the Company to provide proforma  information  regarding net
      income and net income per share as if compensation costs for the Company's
      stock  option  plans  and  other  stock  awards  had  been  determined  in
      accordance  with the fair value based method  prescribed  in SFAS No. 123.
      The Company estimates the fair value of each stock award at the grant date
      by using the Black-Scholes  option pricing model. The warrants granted for
      the year ended June 30, 2005 were based on the following assumptions:

            Dividend yield                0
            Expected Volatility         100%
            Risk free interest            4%
            Expected lives           5 years

      A summary of the status of the  Company's  stock  warrants  as of June 30,
      2005 and changes during the periods  January 30, 2004 to June 30, 2004 and
      July 1, 2003 to January 29, 2004.

                                                           Weighted      Weighted
                                                            Average       Average
                                               Stock       Exercise      Grant Date
                                              Warrants       Price       Fair Value
                                            ----------       --------    --------
            Outstanding, June 30, 2003       3,351,929       $   1.37    $   0.17
                  Granted                           --             --          --

                  Expired/Canceled          (3,351,929)         (1.37)      (0.17)
                  Exercised                         --             --          --
                                            ----------       --------    --------
            Outstanding, June 30, 2004              --             --          --
                                            ----------       --------    --------

               Granted                       1,000,000       $   0.75    $   0.50
                  Expired/Canceled                  --             --          --
                  Exercised                         --             --          --
                                            ----------       --------    --------
            Outstanding, June 30, 2005       1,000,000       $   0.75    $   0.50
                                            ----------       --------    --------


      As described in Note 1, all of the  outstanding  warrants  issued prior to
      the year ended June 30, 2004 were  cancelled  pursuant  to the  bankruptcy
      settlement.

      For  purposes of proforma  disclosures,  the  estimated  fair value of the
      warrants are included in expense over the vesting  period or expected life
      of the warrant.

                                                            Jan 30, 2004 to    July 1, 2003 to
                                            June 30, 2005    June 30, 2004      Jan 29, 2004
                                            -------------    -------------     ---------------
  Net loss as reported                      $  (706,670)      $  (264,708)  $      (663,681)

   Adjustment calculated in
      accordance with SFAS 123                 (500,000)               --                --
                                            -----------       -----------    --------------

  Proforma Net Loss                         $(1,206,670)      $  (264,708)  $      (663,681)
                                            -----------       -----------   ---------------

Net loss per common share as reported       $     (0.03)      $     (0.04)   $        (0.22)

    Proforma net loss per common share      $     (0.05)      $     (0.04)   $        (0.22)
                                            -----------       -----------    --------------


                                      F-16


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2005 and 2004

Note 9 - Restatement


      The financial  statements  for the years ended June 30, 2005 and 2004 were
restated to reflect the issues  identified  below.  Management  and the board of
directors concluded these restatements were necessary to reflect these changes.

      On January 29, 2004,  the Company  emerged from Chapter 11 bankruptcy  and
adopted the provisions for fresh start  reporting.  The  consolidated  financial
statements  of  operations,  cash flows and equity have been restated to present
the results for the reporting period prior to emerging from bankruptcy and after
emerging from bankruptcy.

      At June 30,  2005 and 2004,  $31,382  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 has been reclassified from
an asset to the stockholders' equity section of the balance sheet.


                                      F-17


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                                   (Unaudited)
                             June 30, 2005 and 2004

S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES


          (1)   Capitalized Costs Relating to Oil and Gas Producing Activities


                                                                             June 30,
                                                                   --------------------------
                                                                      2005            2004
                                                                   ----------      ----------
          Proved oil and gas producing properties and related
            lease and well equipment                               $       --      $       --
          Accumulated depreciation and depletion                           --              --
                                                                   ----------      ----------

          Net Capitalized Costs                                    $       --      $       --
                                                                   ==========      ==========


          (2)   Costs Incurred in Oil and Gas Property Acquisition,
                Exploration, and Development Activities


                                                                      For the Years Ended
                                                                             June 30,
                                                                   --------------------------
                                                                        2005          2004
                                                                   ----------      ----------
          Acquisition of Properties
               Proved                                              $        -       $       -
               Unproved                                                     -               -
          Exploration Costs                                                 -               -
          Development Costs                                                 -               -

          The  Company  does  not have any  investments  accounted  for by the
          equity method.

          (3)   Results of Operations for Producing Activities


                                                                      For the Years Ended
                                                                             June 30,
                                                                   --------------------------
                                                                      2005            2004
                                                                   ----------      ----------
          Sales                                                    $        -       $       -
          Production costs                                                  -               -
          Depreciation and depletion                                        -               -
                                                                   ----------      ----------

          Results of operations for producing activities
           (excluding corporate overhead and interest costs)       $        -      $        -
                                                                   ==========      ==========


                                      F-18


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                                   (Unaudited)
                             June 30, 2005 and 2004

S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (Continued)

       (4)   Reserve Quantity Information

                                                             Oil         Gas
                                                             BBL         MCF
                                                          ---------   ---------
          Proved developed and undeveloped reserves:

          Balance, June 30, 2004                                 --           --
            10% of reserves sold during year                     --           --
            Change in estimates                                  --           --
            Production                                           --           --
                                                          ---------   ----------
          Balance, June 30, 2005                                 --           --
                                                          =========   ==========

          Proved developed reserves:
                                                             Oil         Gas
                                                             BBL         MCF
                                                          ---------   ---------

            Beginning of the year ended June 30, 2004            --           --
            End of the year ended June 30, 2005                  --           --

      During the year ended June 30,  2005,  the  Company  did not have  reserve
      studies and  estimates  prepared on the one remaining oil and gas property
      located in Southeast Texas. Therefore,  the balance of the proved reserves
      and underdeveloped reserves should be $0.

      (5)   Standardized Measure of Discounted Future Net Cash Flows Relating to
            Proved Oil and Gas Reserves

      The standardized  measure of discounted  future net cash flows is computed
      by applying  year-end prices of oil and gas (with  consideration  of price
      changes only to the extent  provided by contractual  arrangements)  to the
      estimated future production of proved oil and gas reserves, less estimated
      future expenditures (based on year-end costs) to be incurred in developing
      and  producing  the proved  reserves,  less  estimated  future  income tax
      expenses (based on year-end  statutory tax rates,  with  consideration  of
      future tax rates  already  legislated)  to be  incurred on pretax net cash
      flows less tax basis of the properties and available credits, and assuming
      continuation of existing  economic  conditions.  The estimated  future net
      cash  flows  are  then  discounted  using a rate of 10  percent  a year to
      reflect the estimated timing of the future cash flows.


                                      F-19


                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                                   (Unaudited)
                             June 30, 2005 and 2004

S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (Continued)

      (5)   Standardized Measure of Discounted Future Net Cash Flows Relating to
            Proved Oil and Gas Reserves (Continued)

                                At June 30, 2005


                                                                      The American
                                                                      Energy Group
                                                                        Ltd. and
                                                                      Subsidiaries
                                                                     -------------
      Future cash inflows                                            $          --
      Future production and development costs                                   --
                                                                     -------------
      Future net inflows before income taxes                                    --
      Future income tax expense                                                 --
                                                                     -------------
      Future net cash flows                                                     --
      10% interest held by related company                                      --
      10% annual discount for estimated timing of cash flows                    --
                                                                     -------------

      Standardized measure of discounted future net cash flows       $          --
                                                                     =============

      The above schedules relating to proved oil and gas reserves,  standardized
      measure  of   discounted   future  net  cash  flows  and  changes  in  the
      standardized  measure  of  discounted  future  net cash  flows  have their
      foundation  in  engineering  estimates  of future  net  revenues  that are
      derived from proved  reserves and with the  assumption of current  pricing
      and  current  costs  of  production  for oil and gas  produces  in  future
      periods.

      Subsequent  development  and  production  of the  Company's  reserves will
      necessitate  revising  the present  estimates.  In  addition,  information
      provided in the above schedules does not provide definitive information as
      the  results  of any  particular  year  but,  rather,  helps  explain  and
      demonstrate  the impact of major  factors  affecting the Company's oil and
      gas producing activities.  Therefore, the Company suggests that all of the
      aforementioned factors concerning assumptions and concepts should be taken
      into consideration when reviewing and analyzing this information.

      Since the Company did not complete a reserve  study at June 30, 2005,  the
      standardized measure of discounted future net cash flows is $0.


                                      F-20

                        The American Energy Group, Ltd.
                                and Subsidiaries
                             Consolidated Financial
                Statements for the Period Ending March 31, 2006


Consolidated Balance Sheets                                            Page F-22

Consolidated Statements of Operations                                  Page F-23

Consolidated Statements of Cash Flows                                  Page F-24

Notes to the Consolidated Statements                                   Page F-25


                                      F-21

  THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS


                                                          MARCH 31, 2006    JUNE 30, 2005
                                                           (UNAUDITED)        (AUDITED)
                                                           -----------       -----------
ASSETS
CURRENT ASSETS
        Cash                                               $    38,149       $       227

        Prepaid expenses                                        16,000            60,178
                                                           -----------       -----------
        Total Current Assets
                                                                54,149            60,405
                                                           -----------       -----------

PROPERTY AND EQUIPMENT

        Office equipment                                         3,286             3,286

        Accumulated deprecation                                   (739)             (246)
                                                           -----------       -----------
        Total Property and Equipment
                                                                 2,547             3,040
                                                           -----------       -----------
TOTAL ASSETS
                                                           $    56,696       $    63,445
                                                           ===========       ===========

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES

                                                           $    37,034       $    17,632
        Accounts payable

        Accrued liabilities                                    106,931            35,209

        Convertible debt                                            --            25,000

        Current portion of long term debt                      292,000           292,000
                                                           -----------       -----------
        Total Current Liabilities
                                                               435,965           369,841
                                                           -----------       -----------

LIABILITIES SUBJECT TO COMPROMISE

        Prepetition trade accounts payable                     238,588           238,588

        Prepetition 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                                      720,732           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 March 31, 2006:  27,521,413 shares                   27,521            27,140

        Expenses prepaid with common stock                     (31,382)               --
        Capital in excess of par value                       2,552,925         1,860,545

        Accumulated deficit                                 (3,244,482)       (2,447,466)
                                                           -----------       -----------
        Net Shareholders' Equity                              (664,036)         (591,163)
                                                           -----------       -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $    56,696       $    63,445
                                                           ===========       ===========

                                      F-22


  THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
                                   OPERATIONS


                                               THREE MONTHS ENDED                 NINE MONTHS ENDED
                                          ---------------------------         ---------------------------
                                           MAR. 31,          MAR. 31,          MAR. 31,          MAR. 31,
                                             2006              2005              2006              2005
                                         (UNAUDITED)       (UNAUDITED)       (UNAUDITED)        (UNAUDITED)
                                          ---------         ---------         ---------         ---------
REVENUES                                  $      --         $      --         $      --         $      --

OTHER EXPENSES

Legal and professional fees                 202,683            18,812           313,484            60,247

Administrative salaries                      93,000            92,760           279,000           272,760

Depreciation expense                            164                82               492                82

Office overhead expense                       5,058             5,011            14,994            22,713

General and administrative expense           31,934            14,476           171,625            47,843
                                          ---------         ---------         ---------         ---------
   Total Other Expenses                     332,839           131,141           779,595           403,645
                                          ---------         ---------         ---------         ---------

NET OPERATING PROFIT (LOSS)                (332,839)         (131,141)         (779,595)         (403,645)
                                          ---------         ---------         ---------         ---------

OTHER INCOME (EXPENSE)

Interest expense                             (6,064)           (1,441)          (17,422)           (7,456)
                                          ---------         ---------         ---------         ---------
   Net Other Income (Expenses)               (6,064)            1,441)          (17,422)           (7,456)
                                          ---------         ---------         ---------         ---------

NET INCOME (LOSS) BEFORE TAX               (338,903)         (132,582)         (797,017)         (411,101)

Federal Income Tax                               --                --                --                --
                                          ---------         ---------         ---------         ---------

NET INCOME (LOSS) FOR PERIOD              $(338,903)        $(132,582)        $(797,017)        $(411,101)
                                          =========         =========         =========         =========

EARNINGS (LOSS) PER SHARE                 $   (0.01)        $   (0.01)        $   (0.03)        $   (0.01)
                                          =========         =========         =========         =========



                                      F-23


         THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED
                            STATEMENTS OF CASH FLOWS


                                                     Nine months       Nine months
                                                        ended             ended
                                                      March 31,         March 31,
                                                        2006              2005
                                                     (Unaudited)       (Unaudited)
                                                     ---------         ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                    $(797,017)        $(411,101)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
  Common stock issued for services rendered            214,450            30,788

  Common stock issued for accrued expenses                  --            11,496

  Common stock issued for prepaid services                  --            26,712
  Depreciation and amortization                            492                82

  Additional expense for warrants                       88,714                --
Changes in operating assets and liabilities:

  (Increase) decrease in other current assets               --           (56,712)
  (Increase) decrease in prepaid expenses               75,560                --
  Increase (decrease) in accounts payable               19,402           (12,500)
  Increase (decrease) in accrued expenses and
    other current liabilities                           86,321           (15,080)
                                                     ---------         ---------

     Cash Provided by (Used in) Operating
Activities                                            (312,078)         (426,315)
                                                     ---------         ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash payments for the purchase of equipment               --            (3,286)
                                                     ---------         ---------

     Cash (Used in) Investing Activities                    --            (3,286)
                                                     ---------         ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from the issuance of warrants               105,000                --

  Proceeds from notes payable                               --           220,000
  Cash received for stock issued                       245,000                --
                                                     ---------         ---------

     Cash Provided By (Used in) Financing
Activities                                             350,000           220,000
                                                     ---------         ---------

NET INCREASE (DECREASE) IN CASH                         37,922          (209,601)

CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD              227           257,899
                                                     ---------         ---------

CASH AND CASH EQUIVALENTS END OF PERIOD                 38,149         $  48,298
                                                     =========         =========

CASH PAID FOR:

    Interest                                         $      --         $      --

    Taxes                                            $      --         $      --

NON-CASH FINANCING ACTIVITIES
    Common Stock Issued for Accrued
Expenses                                             $  14,597         $      --


                                      F-24


                 Notes to the Consolidated Financial Statements
                                 March 31, 2006

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 nine  months  ended  March 31, 2006 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.

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 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 during the
quarter ended December 31, 2005 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 four month period.

During the quarter ended March 31, 2006, the Company issued 62,107 shares of its
common stock in exchange for legal and professional services provided to the
Company.

SUBSEQUENT EVENTS
- -----------------

Subsequent to the quarter ended March 31, 2006, the Company consummated the sale
of  $2,900,000  of its common stock to  institutional  investors in a $3,950,000
private offering. These shares were sold at $1.70 per share resulting in a total
issuance of 1,705,882 shares.

RESTATEMENT
- -----------

The financial  statements  for the quarter ended March 31, 2006 were restated to
reflect the issues  identified  below..  Management  and the board of  directors
concluded these restatements were necessary to reflect these changes.

At June 30, 2005, $31,382 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  has  been  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.


                                      F-25

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Our officers and directors are indemnified as provided by the Nevada Revised Statutes (the "NRS") and our Bylaws. Unless specifically limited by a corporation's articles of incorporation, the NRS automatically provides directors with immunity from monetary liabilities.

The Articles of Incorporation provide that we will indemnify our officers, directors, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against all expenses, liability and loss (including attorney's fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by that person as a result of that connection to us. This right of indemnification under the Articles is a contract right which may be enforced in any manner by such person and extends for such persons benefit to all actions undertaken on our behalf.

Our Bylaws provide that we will indemnify our directors and officers; provided, however, that we may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that we shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the Company, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under Nevada law or (iv) such indemnification is required to be made pursuant to the Bylaws.

Our Bylaws provide that we will advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the Company, or is or was serving at our request as a director or executive officer of another Company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under our Bylaws or otherwise.

Item 25. Other Expenses of Issuance and Distribution.

The following table sets forth estimated expenses expected to be incurred in connection with the issuance and distribution of the securities being registered. All such expenses will be paid by us.

Securities and Exchange Commission Registration Fee	$	973.43
Printing and Engraving Expenses	$	(*)
Accounting Fees and Expenses	$	(*)
Legal Fees and Expenses	$	(*)
Blue Sky Qualification Fees and Expenses	$	(*)
Miscellaneous	$	(*)
TOTAL	$

(*) To be updated by amendment.

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Item 26. Recent Sales of Unregistered Securities.

Set forth below is information regarding the issuance and sales of our securities without registration during the last three years. Except as otherwise noted, all sales below were made in reliance on Section 4(2) of the Securities Act of 1933, as amended (the "Act") and no such sales involved the use of an underwriter and no commissions were paid in connection with the sale of any securities. No advertising or general solicitation was employed in offering the securities. In each instance, the offerings and sales were made to a limited number of persons, who were either (i) accredited investors, (ii) business associates of the Company (iii) employees of the Company, or (iv) executive officers or directors of the Company. In addition, the transfer of such securities was restricted by the Company in accordance with the requirements of the Act. Furthermore, all of the above-referenced persons were provided with access to our filings with the Securities and Exchange Commission.

1. In June, 2006, we completed the sale of 2,323,529 shares of restricted common stock and 1,161,766 warrants to a group of institutional investors for the aggregate sum of $3.95 million. The purchase price for the common stock was $1.70 per share. The warrants issued to the investors have a five-year term and provide for an exercise price of $1.70 per share. The warrants may be redeemed at our option if the closing bid price for our common stock equals or exceeds $2.50 per share for twenty consecutive trading days after registration of the underlying common stock for resale. We paid total commissions to the placement agent equal to $237,000 plus 445,560 warrants to purchase common stock which have the same exercise and redemption terms as those warrants issued to the institutional investors.

2. During the quarter ended March 31, 2006, we completed the private sale of 100,000 shares of our restricted common stock resulting in gross proceeds of $135,000, which was be used for general corporate purposes.

3. During the quarter ended June 30, 2005, we issued 250,000 shares of restricted common stock to Brian Perry for website consulting services performed during 2004 and 2005. At the time of his consulting agreement, the stock had no trading value.

4. In April 2005, each of Pierce Onthank and Iftikhar Zahid were issued 1,000,000 warrants to purchase shares of common stock. The warrants are exercisable during the five year period ending April 12, 2010 and contain cashless exercise provisions. One half of the warrants were exercisable upon issuance on April 12, 2005, at an exercise price of $0.75. On October 13, 2005, 250,000 warrants became exercisable at $1.00 per share, and on January 12, 2006, 250,000 warrants became exercisable at $1.50 per share.

5. During the quarter ending March 31, 2005, we issued 35,760 shares of restricted common stock to B.W. Fishing Tools, Inc. ("BWFT"), an original creditor in our prior bankruptcy proceedings. In those proceedings, each creditor was issued stock for its debt on a three shares for one dollar of debt basis pursuant to the Second Amended Plan of Reorganization. In the case of BWFT, its stock issuance was inadvertently omitted and the issuance of the 35,760 shares corrects the omission.

6. In May 2005, we obtained a $25,000 loan from a private party which was due and payable December 31, 2005. In August 2005, this loan was converted into 50,000 warrants at an exercise price of $1.75.

7. In January 2005, we obtained a loan facility from a private party for $300,000 with 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. The extension fee was paid in April 2006 by the issuance of 10,582 shares of our restricted common stock. As of June 30, 2006, this loan was paid in full.

8. Pursuant to the Second Amended Plan of Reorganization, during early 2004, we privately sold convertible debt securities totaling $575,000, all of which has been converted to common stock.

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Item 27. Exhibits.

The following is a list of exhibits filed as part of this registration statement. Where so indicated by footnote, exhibits which were previously filed are incorporated herein by reference. Any statement contained in an Incorporated Document shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed Incorporated Document modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.

Exhibit
Number	Description
3.1	Articles of Incorporation of The American Energy Group, Ltd. (including all amendments)
3.2	Bylaws of The American Energy Group, Ltd.
4.1	Securities Purchase Agreement (Form Of)
4.2	Registration Rights Agreement (Form Of)
4.3	Warrant Agreement (Form Of)
5.1	Legal Opinion of James Hughes *
10.1	Stock Purchase Agreement between The American Energy Group, Ltd., Hycarbex American Energy, Inc. and Hydro Tur Ltd. dated November 9, 2003
10.2	Amendment to Stock Purchase Agreement between The American Energy Group, Ltd., Hycarbex American Energy, Inc. and Hydro Tur (Energy) Ltd. dated February 16, 2004
10.3	License and Concession Agreement for Yasin Concession
10.4	Compromise Settlement Agreement between Smith Energy 1986A Partnership, Howard A. Smith and The American Energy Group, Ltd. dated April 17, 2006
10.5	Cross-Assignment and Stipulation of Interest dated April 17, 2006
10.6	Assignment of Limited Partnership Interest dated April 17, 2006
21.1	List of Subsidiaries
23.1	Consent of Chisolm, Bierwolf & Nilson, Independent Auditors
99.1	Bankruptcy Plan
99.2	Lease Agreement

Footnotes to Exhibits:

* To be filed by Amendment.

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Item 28. Undertakings.

(1)The Company hereby undertakes:

(a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration:

(1) To include any prospectus required by Section 10(a)(3) of the Securities Act;

(2) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and

(3) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;

(b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) To remove from registration by means of post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(2)The Company hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Company's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.

(3)Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by the director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of the counsel the matter has been settled by controlling precedent, submit to the appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 3rd day of August, 2006.

THE AMERICAN ENERGY GROUP, LTD.

By /s/ Pierce Onthank

Pierce Onthank

President, Chief Executive Officer and

Chief Financial Officer

POWER OF ATTORNEY

The American Energy Group, Ltd. and each of the undersigned do hereby appoint Pierce Onthank its or his true and lawful attorney to execute on behalf of The American Energy Group, Ltd. and the undersigned any and all amendments to this Registration Statement on Form SB-2 and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission; each of such persons shall have the power to act hereunder with or without the other.

In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates stated.

Signature	Title	Date
By /s/ Pierce Onthank	Director, President, Chief Executive Officer,	August 3, 2006
Pierce Onthank	Chief Financial Officer, and Principal
	Accounting Officer
By /s/ Dr. Iftihhar Zahid	Director	August 3, 2006
Dr. Iftihhar Zahid
By /s/ Karl Welser	Director	August 3, 2006
Karl Welser

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EX-3.1

EX-3.2

EX-4.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of May 4, 2006, by and among THE AMERICAN ENERGY GROUP, LTD., a Nevadacorporation with its principal offices at 120 Post Road West, Suite 202, Westport, Connecticut 06880 (the “Company”), and the investors listed on the Schedule of Investors attached hereto as Exhibit A(individually, an “Investor” and, collectively, the “Investors”).

RECITALS

A.The Company and each Investor is executing and delivering this Agreement in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act.

B.Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares of the Common Stock, par value $.001 per share, of the Company (the “Common Stock”), set forth opposite such Investor’s name under the heading “Common Shares” in Exhibit A (which aggregate amount for all Investors together shall be 2,323,530 shares of Common Stock) and (ii) a Warrant (as defined below) entitling such Investor to subscribe for and purchase such number of Warrant Shares (as defined below) set forth opposite such Investor’s name under the heading “Warrant Shares” in Exhibit A. The Common Shares (as defined below) and the Warrant Shares issued under this Agreement shall collectively be referred to herein as the “Shares.” The Shares and the Warrants shall collectively be referred to herein as the “Securities.”

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows:

ARTICLE I

DEFINITIONS

1.1Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.

“Agent” has the meaning set forth in Section 3.1(l).

“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

“Closing Date” means the date and time of the Closing and shall be 10:00 a.m., Eastern Daylight Time, on May ___, 2006 (or such other date and time as is mutually agreed to by the Company and each Investor).

“Closing Price” means, for any date, the closing price per share of the Common Stock for such date (or the nearest preceding date) on the primary Eligible Market or exchange or quotation system on which the Common Stock is then listed or quoted.

“Common Stock” has the meaning set forth in the Recitals to this Agreement.

“Common Shares” means an aggregate of 2,323,530 shares of Common Stock, which are being issued and sold by the Company to the Investors at the Closing, together with any securities issued or issuable upon any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof.

“Company”has the meaning set forthin the introductory paragraph of this Agreement.

“Company Counsel” means James M. Hughes, Attorney at Law or such other counsel designated by Company.

“Disclosure Materials” has the meaning set forth in Section 3.1(g).

“Effective Date” means the date that the Registration Statement is first declared effective by the SEC.

“Effectiveness Period” has the meaning set forth in Section 6.1(b).

“8-K Filing” has the meaning set forth in Section 4.5.

“Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the Nasdaq Capital Market.

“Environmental Laws” has the meaning set forth in Section 3.1(aa).

“Event Payments” has the meaning set forth in Section 6.1(d).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Investors” means the Agent and its Affiliates.

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“Filing Date” means the date that is 60 days after the Closing Date.

“GAAP” has the meaning set forth in Section 3.1(g).

“Hazardous Materials” has the meaning set forth in Section 3.1(aa).

“Indemnified Party” has the meaning set forth in Section 6.4(c).

“Indemnifying Party” has the meaning set forth in Section 6.4(c).

“Intellectual Property Rights” has the meaning set forth in Section 3.1(s).

“Investor” has the meaning set forth in the introductory paragraph of this Agreement.

“Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction.

“Losses” means any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, and reasonable attorneys’ fees.

“Material Adverse Effect” has the meaning set forth in Section 3.1(b).

“Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company or joint stock company.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, or a partial proceeding, such as a deposition), whether commenced or threatened in writing.

“Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430B promulgated by the SEC pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means the Common Shares and the Warrant Shares.

“Registration Statement” means each registration statement required to be filed under Article VI, including (in each case) the Prospectus, amendments and supplements to such registration statement or the Prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference in such registration statement or the Prospectus.

“Regulation D” has the meaning set forth in the Recitals to this Agreement.

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“Rule 144,” “Rule 415” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

“SEC” has the meaning set forth in the Recitals to this Agreement.

“SEC Reports” has the meaning set forth in Section 3.1(g).

“Securities” has the meaning set forth in the Recitals to this Agreement.

“Shares”has the meaning set forth in the Recitals to this Agreement.

“Securities Act” has the meaning set forth in the Recitals to this Agreement.

“Short Sales” has the meaning set forth in Section 3.2(i).

“Subsidiary” means any Affiliate of the Company that, directly or indirectly through one or more intermediaries, is controlled by the Company.

“Trading Day” means (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the Nasdaq National Market (or any successor thereto) or (c) if trading ceases to occur on the Nasdaq National Market (or any successor thereto), any Business Day.

“Trading Market” means the Nasdaq National Market or any other Eligible Market, or any national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted.

“Transaction Documents” means this Agreement, including the schedules and exhibits attached hereto, and the Warrants.

“Transfer Agent” means Computershare Trust Co., Inc., 350 Indiana, Suite 800, Golden, Colorado 80401, or any successor transfer agent for the Company.

“Transfer Agent Instructions” means, with respect to the Company, the Irrevocable Transfer Agent Instructions, in the form of Exhibit D, executed by the Company and delivered to and acknowledged in writing by the Transfer Agent.

“Warrant” means the warrants to purchase the Warrant Shares in the form and substance attached hereto as Exhibit E issued to the Investors pursuant to the terms hereof.

“Warrant Shares” means shares of the Common Stock issuable upon exercise of or otherwise pursuant to the Warrants, together with securities issued or issuable upon any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof.

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ARTICLE II

PURCHASE AND SALE

2.1Closing.

Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, (a) such number of Common Shares set forth opposite such Investor’s name on Exhibit A under the heading “Common Shares” and (b) a Warrant entitling such Investor to subscribe for and purchase such number of Warrant Shares set forth opposite such Investor’s name on Exhibit A under the heading“Warrant Shares.” The date and time of the Closing and shall be 10:00 a.m., New York City Time, on the Closing Date. The Closing shall take place at the offices of Company Counsel.

2.2Closing Deliveries.

(a)At the Closing, the Company shall deliver or cause to be delivered to each Investor the following:

(i) either (x) one or more stock certificates, free and clear of all restrictive and other legends (except as expressly provided in Section 4.1(b)), evidencing such number of Common Shares set forth opposite such Investor’s name on Exhibit A under the heading “Common Shares,” registered in the name of such Investor or (y) a letter of instruction to the Company’s Transfer Agent instructing the Transfer Agent to issue to each investor such number of Common Shares set forth opposite such investor’s name on Exhibit A under the heading “Common Shares”;

(ii)a duly executed Warrant entitling such Investor to subscribe for and purchase such number of Warrant Shares set forth opposite such Investor’s name on Exhibit A under the heading “Warrant Shares”;

(iii)a legal opinion of Company Counsel as to the matters set forth in Exhibit C, executed by such counsel and delivered to the Investors and the Agent; and

(iv)duly executed Transfer Agent Instructions acknowledged by the Transfer Agent.

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(b)At the Closing, each Investor shall deliver or cause to be delivered to the Company the purchase price set forth opposite such Investor’s name on Exhibit A under the heading “Purchase Price” in United States dollars and in immediately available funds, by wire transfer to an account designated in writing to such Investor by the Company for such purpose.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties of the Company.  The Company hereby represents and warrants to the Investors as follows:

(a)Subsidiaries. The Company has no Subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien and all the issued and outstanding shares of capital stock or comparable equity interests of each Subsidiary are validly issued and are fully paid, nonassessable and free of preemptive and similar rights.

(b)Organization and Qualification. Each of the Company and the Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite legal authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (i) have or result in a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries, taken as a whole on a consolidated basis, or (ii) materially and adversely impair the Company’s ability to perform its obligations under any of the Transaction Documents (either of clause (i) or (ii), a “Material Adverse Effect”).

(c)Authorization; Enforcement. The Company has the requisite corporate authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents to which it is a party by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. Each of the Transaction Documents to which it is a party has been, or upon delivery will be, duly executed by the Company and is, or when delivered in accordance with the terms hereof will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally and (ii) the effect of rules of law governing the availability of specific performance and other equitable remedies.

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(d)No Conflicts. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party and the consummation by the Company of the transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound, or affected, except to the extent that such conflict, default, termination, amendment, acceleration or cancellation right would not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject, including all applicable Trading Markets), or by which any property or asset of the Company or a Subsidiary is bound or affected, except to the extent that such violation would not reasonably be expected to have a Material Adverse Effect.

(e)The Shares. The Common Shares are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable. Upon exercise of the Warrants in accordance with the terms thereof and the payment therefor, the Warrant Shares will be validly issued, fully paid and nonassessable. The issuance and delivery of the Common Shares and the Warrants are free and clear of all Liens and will not be subject to preemptive or similar rights of stockholders. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable upon exercise of the Warrants.

(f)Capitalization. The aggregate number of shares and type of all authorized, issued and outstanding classes of capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) as of the date of this Agreement is set forth in Schedule 3.1(f). All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with all applicable securities laws. Except as disclosed in Schedule 3.1(f), the Company has not issued any other options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except as set forth on Schedule 3.1(f), and except for customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issuance and sale of the Common Shares and the Warrants will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than pursuant to the terms of the Transaction Documents) and will not result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities. To the knowledge of the Company, except as specifically disclosed in the SEC Reports or in Schedule 3.1(f), no Person or group of related persons beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of in excess of 5% of the outstanding Common Stock, ignoring for such purposes any limitation on the number of shares of Common Stock that may be owned at any single time.

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(g)Confidential Offering Memorandum. All statements made by the Company in the Confidential Offering Memorandum distributed to Holders in connection with the sale of the Securities are accurate and complete. The Confidential Offering Memorandum does not omit to state a material fact required to be stated or that is necessary to make a statement not misleading.

(h)SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof (the foregoing materials being collectively referred to herein as the “SEC Reports” and, together with this Agreement and the Schedules to this Agreement, the “Disclosure Materials”), on a timely basis or has received a valid extension of such time of filing for any of the SEC Reports and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations promulgated by the SEC thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or specifically identified in the SEC Reports, to the extent such agreements are required to be included or identified pursuant to the rules and regulations of the SEC.

(i)Material Adverse Change. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development in the business, financial condition or results of operations of the Company and its subsidiaries taken as a whole that, individually or in the aggregate, has had or that could result in a Material Adverse Effect, (ii) neither the Company nor any Subsidiary has incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) the Company has not altered its method of accounting or changed its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders, in their capacities as such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (except for repurchases by the Company of shares of capital stock held by employees, officers, directors or consultants pursuant to an option of the Company to repurchase such shares upon the termination of employment or services) and (v) the Company has not issued any equity securities to any officer, director or Affiliate.

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(j)Absence of Litigation. Except as disclosed in the SEC Reports or in Schedule 3.1(i), there is no action, suit, claim or proceeding, or, to the Company’s knowledge, inquiry or investigation, before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of the Subsidiaries that could, individually or in the aggregate, challenge the Company’s rights in connection with its 18% royalty asset in Yasin Block (2768-7) in the Republic of Pakistan or its working interests and overriding royalty interests in oil and gas leases in Galveston County, Texas or have a Material Adverse Effect.

(k)Enforceability. The Company’s rights in its 18% royalty asset in Yasin Block (2768-7) in the Republic of Pakistan and its working interests and overriding royalty interests in oil and gas leases in Galveston County, Texas are legal, valid, binding and enforceable under applicable federal, state and foreign laws and no claims exist against such rights by any third party or governmental entity.

(l)Compliance. Neither the Company nor any Subsidiary, except in each case as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, except to the extent that any such default or violation would not reasonably be expected to have a Material Adverse Effect.

(m)Title to Assets. Except as specifically disclosed in the SEC Reports, the Company and the Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property that are material to the business of the Company and the Subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, claims and defects that would have a Material Adverse Effect.

(n)No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf (other than the Agent), has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Shares or the Warrants. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commission (other than for persons engaged by any Investor or its investment advisor) relating to or arising out of the issuance of the Common Shares and the Warrants pursuant to this Agreement. The Company shall pay, and hold each Investor harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim for fees arising out of the issuance of the Common Shares and the Warrants pursuant to this Agreement. The Company acknowledges that it has engaged Dahlman, Rose & Co., LLC Inc. as its exclusive placement agent (the “Agent”) in connection with the sale of the Common Shares and the Warrants. In consideration of the Agent’s services rendered to the Company as its exclusive placement agent in connection with the sale of the Common Shares and Warrants, the Company will pay the Agent a fee equal to 6% of the gross proceeds received by the Company from Investors at the time of Closing, and will reimburse the Agent for its reasonable out-of-pocket expenses incurred from time to time in connection therewith. The Company shall also issue to the Placement Agent 0.12 Warrants for each Dollar ($1.00) of proceeds to the Company, net of commissions.

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(o)Private Placement. Neither the Company nor any of its Affiliates nor any Person acting on the Company’s behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D in connection with the offer and sale by the Company of the Securities as contemplated hereby. The Company is not required to be registered as, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company is not required to be registered as, a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980.

(p)Listing and Maintenance Requirements. The Company has not, in the 12 months preceding the date hereof, received notice (written or oral) from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is in compliance in all material respects with all such listing and maintenance requirements.

(q)Registration Rights. Except as set forth in Schedule 3.1(o), no Person has any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the SEC under the Securities Act because of the filing or effectiveness of the Registration Statement or otherwise in connection with the issuance of the Securities other than pursuant to this Agreement.

(r)Application of Takeover Protections. Except as described in Schedule 3.1(p), there is no control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to any of the Investors as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Securities and the Investors’ ownership of the Securities.

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(s)Disclosure. The Company confirms that neither it nor any of its officers, directors or Affiliates, has provided any of the Investors (other than Excluded Investors) or their agents or counsel with any information that constitutes or might constitute material, nonpublic information (other than the existence and terms of the issuance of Securities, as contemplated by this Agreement). The Company confirms that neither it nor any officers, directors or Affiliates, has provided any of the Investors (other than Excluded Investors or other Investors who have executed a Non-Disclosure Agreement with the Agent) or their agents or counsel with any information that constitutes or might constitute material, nonpublic information (other than the existence and terms of the issuance of Securities, as contemplated by this Agreement). The Company understands and confirms that each of the Investors will rely on the foregoing representations in effecting transactions in securities of the Company (other than Excluded Investors). All disclosure provided by the Company to the Investors regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on the behalf of the Company are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. To the Company’s knowledge, no event or circumstance has occurred or information exists with respect to the Company or any of the Subsidiaries or its or their business, properties, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. The Company acknowledges and agrees that no Investor (other than Excluded Investors) makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in the Transaction Documents.

(t)Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the assumption that the transactions contemplated by this Agreement are consummated in all material respects in conformity with the Transaction Documents, the Company acknowledges and agrees that each of the Investors (other than Excluded Investors) is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that no Investor (other than Excluded Investors) is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Investor (other than Excluded Investors) or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investors’ purchase of the Securities. The Company further represents to each Investor that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives and upon the representations, warranties and covenants of the Investors made in this Agreement.

(u)Patents and Trademarks. To its knowledge, the Company and the Subsidiaries own, or possess adequate rights or licenses to use, all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (the “Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted. The Company does not have any knowledge of any infringement by the Company or the Subsidiaries of the Intellectual Property Rights of others, except for such as would as would not reasonably be expected to have a Material Adverse Effect. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company being threatened, against the Company or the Subsidiaries regarding the Intellectual Property Rights, which could reasonably be expected to have a Material Adverse Effect.

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(v)Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses and location in which the Company and the Subsidiaries are engaged.

(w)Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such certificates, authorizations and permits does not, individually or in the aggregate, have or result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any written notice of proceedings relating to the revocation or modification of any certificates, authorizations and permits, except where such revocation or modification would not, singularly or in the aggregate, have a Material Adverse Effect.

(x)Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers, directors or employees of the Company is presently a party to any transaction that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC under the Securities Act.

(y)Internal Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(z)Sarbanes-Oxley Act. The Company is in compliance with applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by the SEC thereunder, except where such noncompliance would not have, individually or in the aggregate, a Material Adverse Effect.

(aa)Foreign Corrupt Practices. Neither the Company nor any of the Subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any of the Subsidiaries has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

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(bb)Employee Relations. No labor disturbance by the employees of the Company or any of the Subsidiaries exists or, to the best of the Company’s knowledge, is imminent that might be expected to have a Material Adverse Effect. The Company is not aware that any key employee or significant group of employees of the Company or any subsidiary plans to terminate employment with the Company or any such subsidiary.

(cc)Environmental Laws. The Company and the Subsidiaries (i) are in compliance with any and all Environmental Laws (as hereinafter defined), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

(dd)Tax Status.The Company and the Subsidiaries each (i) has filed all necessary federal, state and foreign income and franchise tax returns which are due, (ii) has paid all federal state, local and foreign taxes due and payable for which it is liable and (iii) does not have any tax deficiency or claims outstanding or assessed or, to the best of the Company’s knowledge, proposed against it that would have a Material Adverse Effect.

3.2Representations and Warranties of the Investors.  Each Investor hereby, as to itself only and for no other Investor, represents and warrants to the Company as follows:

(a)Organization; Authority. Such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Investor of the Securities hereunder has been duly authorized by all necessary action on the part of such Investor. This Agreement has been duly executed and delivered by such Investor and constitutes the valid and binding obligation of such Investor, enforceable against it in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally and (ii) the effect of rules of law governing the availability of specific performance and other equitable remedies.

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(b)No Public Sale or Distribution; Investment Intent. Such Investor recognizes that the Securities have not been registered under the Securities Act or any state securities laws. Such Investor is acquiring the Securities in the ordinary course of business for its own account as principal and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws, and such Investor does not have a present arrangement to effect any distribution of the Securities to or through any person or entity; provided, however, that by making the representations herein, such Investor does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. Such Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Securities except in compliance with the Securities Act and the rules and regulations promulgated thereunder.

(c)Investor Status. At the time such Investor was offered the Securities, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.

(d)Experience of Such Investor. Such Investor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Investor understands that it must bear the economic risk of this investment in the Securities indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment.

(e)Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information (other than material non-public information) about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents.

(f)Company’s Option to Redeem Warrant. Such Investor understands that, if the Company’s stock price has a closing bid price above $2.50 per share, subject to adjustment as set forth in the Warrant, for twenty (20) consecutive Trading Days, the Company may, after providing the Investor thirty (30) day’s written notice, redeem the outstanding Warrants, in whole and not in part. Upon receipt of such a redemption notice, Investor must exercise the Warrant and pay the Exercise Price for the Warrant within the 30-day notice period in order to avoid the cancellation of the Warrants by the Company. A copy of the Warrant Certificate is attached hereto as Exhibit E.

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(g)No Governmental Review. Such Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

(h)No Conflicts. The execution, delivery and performance by such Investor of this Agreement and the consummation by such Investor of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of such Investor, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Investor is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Investor, except in the case of clauses (ii) and (iii) above, for such that are not material and do not otherwise affect the ability of such Investor to consummate the transactions contemplated hereby.

(i)Illegal Transactions. Neither such Investor, directly or indirectly, nor any Person acting on behalf of or pursuant to any understanding with such Investor, has engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales (as defined below) involving any of the Company’s securities) since the time that such Investor was first contacted by the Company, the Agent or any other Person regarding an investment in the Company. Such Investor covenants that neither it nor any Person acting on behalf or pursuant to any understanding with such Investor will engage, directly or indirectly, in any transactions in the Company’s securities, including Short Sales, prior to the time that the transactions contemplated by this Agreement are publicly disclosed. Such Investor further covenants that from and after the date of such disclosure, and for so long as such Investor owns any Securities purchased hereunder, neither it nor any Person acting on behalf of or pursuant to any understanding with such Investor willengage in any Short Sales at a time when it has no equivalent offsetting long position in shares of Common Stock and otherwise covenants to conduct all its trading in the Company’s securities in compliance with applicable securities laws. For purposes of determining whether or not such Investor has such an equivalent offsetting long position, shares of Common Stock that such Investor would otherwise be entitled to receive upon conversion or exercise of the Company’s convertible securities (including the Warrant held by such Investor) will be included as if held long by such Investor (regardless of any limitation upon such conversion or exercise). For purposes hereof, “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated by the SEC under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis) and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers.

(j)No Legal, Tax or Investment Advice. Such Investor under-stands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Investor in connection with the purchase of the Securities constitutes legal, tax or investment advice. Such Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in con-nection with its purchase of the Securities. Such Investor understands that the Agent has acted solely as the agent of the Company in this placement of the Common Shares and the Warrants and that the Agent makes no representation or warranty with regard to the merits of this transaction or as to the accuracy of any information such Investor may have received in connection therewith. Such Investor acknowledges that it has not relied on any information or advice furnished by or on behalf of the Agent.

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(k)Confidentiality.  SuchInvestor will hold in confidence all information concerning this Agreement and the placement of the Common Shares and the Warrants hereunder until the earlier of such time as (a) the Company has made a public announcement concerning the Agreement and the placement of the Common Shares and the Warrants hereunder and (b) this Agreement is terminated.

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

4.1Transfer Restrictions.

(a)Each Investor covenants that the Securities will only be disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in compliance with any applicable state securities laws, including, in the case of any transfer of Securities by such Investor pursuant to the Registration Statement, that such Investor will deliver a current prospectus (unless such a prospectus is deemed to have been delivered pursuant to Rule 172 under the Securities Act) and, in the case of any such transfer pursuant to Rule 144, that such Investor will comply with the requirements of Rule 144. In connection with any transfer of Securities (other than any such transfer (i) pursuant to an effective registration statement, (ii) pursuant to Rule 144(k) or (iii) to the Company), the Company shall require the transferor to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act or is exempt from such registration. Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books of the Company and with the Transfer Agent, without any such legal opinion, except to the extent that the Transfer Agent requests such legal opinion, any transfer of Securities by an Investor to an Affiliate of such Investor, provided that the transferee certifies to the Company that it is an “accredited investor” as defined in Rule 501(a) under the Securities Act and provided that such Affiliate does not request any removal of any existing legends on any certificate evidencing the Securities.

(b)The Investors agree to the imprinting, so long as is required by this Section 4.1(b), of the following legend on any certificate evidencing Securities:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.

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Certificates evidencing Securities shall not be required to contain such legend or any other legend (i) after the Securities have been sold pursuant to a Registration Statement that is effective under the Securities Act covering the resale of such Securities, (ii) following any sale of such Securities pursuant to Rule 144 if the holder provides the Company with a legal opinion providing reasonable assurances that the Securities can be sold under Rule 144, (iii) if the holder provides the Company with a certificate providing reasonable assurances that the Securities are eligible for sale under Rule 144(k) or (iv) if the holder provides the Company with a legal opinion providing reasonable assurances that such legend is not required under applicable requirements of the Securities Act (including controlling judicial interpretations and pronouncements issued by the Staff of the SEC). The Company shall cause its counsel to issue the confirmation included in the Transfer Agent Instructions to the Transfer Agent on the Effective Date. Following the Effective Date or at such earlier time as a legend is no longer required for certain Securities, the Company will, no later than three Trading Days following the delivery by an Investor to the Company or the Transfer Agent of a certificate bearing restrictive legend representing such Securities and an opinion of counsel to the extent required by Section 4.1(a), deliver or cause to be delivered to such Investor a certificate representing such Securities that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.1(b).

4.2Furnishing of Information. As long as any Investor owns Securities, the Company covenants to use its commercially reasonable efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. The Company further covenants that it will take such further action as any holder of Securities may reasonably request to satisfy the provisions of this Section 4.2. As long as any Investor owns Securities, such Investor covenants and agrees (a) to provide the Company with such information regarding such Investor’s ownership of its Securities and the plan of distribution thereof as shall be reasonably required for the timely preparation and filing of the Registration statement and (b) that, notwithstanding anything herein to the contrary, the Company shall not be required to register any of such Investor’s Securities under the Registration Statement if such information, to the extent not provided at the Closing, is not provided to the Company within 15 days of the Closing Date.

4.3Integration. The Company shall not, and shall use its commercially reasonably efforts to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Investors or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market.

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4.4Reservation of Securities. The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations to issue such Shares under the Transaction Documents. In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations to issue such Shares under the Transaction Documents, the Company shall promptly take such actions as may be required to increase the number of authorized shares.

4.5Securities Laws Disclosure; Publicity. The Company shall, on or before 8:30 a.m., New York time, on the first Trading Day following execution of this Agreement, issue a press release acceptable to the Investors disclosing all material terms of the transactions contemplated hereby. On the Closing Date, the Company shall file a Current Report on Form 8-K with the SEC (the “8-K Filing”) describing the terms of the transactions contemplated by the Transaction Documents and including as exhibits to such Current Report on Form 8-K this Agreement, in the form required by the Exchange Act. Thereafter, the Company shall timely file any filings and notices required by the SEC or applicable law with respect to the transactions contemplated hereby and provide copies thereof to the Investors promptly after filing. The Company shall not publicly disclose the name of any Investor or include the name of any Investor in any press release without the prior written consent of such Investor, unless otherwise required by law. The Company shall not, and shall cause each of the Subsidiaries and its and each of their respective officers, directors, employees and agents not to, provide any Investor with any material nonpublic information regarding the Company or any of the Subsidiaries from and after the issuance of the above referenced press release without the express written consent of such Investor.

           4.6     Use of Proceeds.The Company intends to use the net proceeds from the sale of the Common Shares and the Warrants and the exercise of the Warrants for the acquisition of additional oil and gas interests (overriding royalties and working interests, as available) in Pakistan and to fund its working capital needs. The acquisitions may be directly from the Pakistan government through existing bidding processes or through private negotiation with current license holders. The proceeds will also be used for general corporate purposes.

ARTICLE V

CONDITIONS

5.1Conditions Precedent to the Obligations of the Investors. The obligation of each Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such Investor, at or before the Closing, of each of the following conditions:

(a)Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of the Closing Date and so certified; and

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(b)Performance. The Company and each other Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing Date and so certified.

(c)Deliveries. The Company shall have fulfilled its obligations under Section 2.2 of this Agreement and delivered to the Investors a certificate in form and substance satisfactory to Investors executed by an authorized executive officer of the Company confirming that the conditions in Section 5.1(a),(b) and (c) have been satisfied.

5.2Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell the Securities at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:

(a)Representations and Warranties. The representations and warranties of the Investors contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of the Closing Date; and

(b)Performance. The Investors shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Investors at or prior to the Closing Date, including, without limitation, completing and delivering to the Company the Instruction Sheet for Investors attached hereto as Exhibit B.

(c)Deliveries. The Investors shall have delivered to the Company: (i) the Purchase Price by wire transfer of immediately available funds to a bank account designated by the Company; (ii) a completed Stock Certificate Questionnaire as set forth in Exhibit B-1; (iii) a completed Registration Statement Questionnaire as set forth in Exhibit B-2; and (iv) a completed Certificate for Corporate, Partnership, Limited Liability Company, Trust, Foundation and Joint Investors, as set forth in Exhibit B-3, as applicable.

ARTICLE VI

MISCELLANEOUS

6.1Termination. This Agreement may be terminated by the Company or any Investor, by written notice to the other parties, if the Closing has not been consummated by the third Business Day following the date of this Agreement; provided, however, that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

6.2Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of their applicable Securities.

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6.3Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing Date, and without further consideration, the Company will execute and deliver to the Investors such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.

6.4Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section 6.4prior to 6:30 p.m. (Eastern Standard Time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section 6.4 on a day that is not a Trading Day or later than 6:30 p.m. (Eastern Standard Time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service and (d) upon actual receipt by the party to whom such notice is required to be given. The addresses and facsimile numbers for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person.

6.5Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and each of the Investors or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

6.6Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

6.7Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign its rights under this Agreement to any Person to whom such Investor assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Investors,” and that such assignment complies with the transfer restrictions set forth in Article IV hereof. Notwithstanding anything to the contrary herein, Securities may be assigned to any Person in connection with a bona fide margin account or other loan or financing arrangement secured by such Securities.

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6.8No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

6.9Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF NEVADA SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS SITTING IN THE CITY OF HOUSTON, COUNTY OF HARRIS, FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

6.10Survival. The representations and warranties, agreements and covenants contained herein shall survive the Closing.

6.11Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

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6.12Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

6.13Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor exercises a right, election, demand or option owed to such Investor by the Company under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then, prior to the performance by the Company of the Company’s related obligation, such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to such Investor, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

6.14Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities and any bond that may be required for such indemnity.

6.15Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation (other than in connection with any action for temporary restraining order) the defense that a remedy at law would be adequate.

6.16Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable in shares of common stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of common stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in any Transaction Document to a number of shares or a price per share shall be amended to appropriately account for such event.

6.17Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to this Agreement has been made by such Investor independently of any other Investor and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or any Subsidiary that may have been made or given by any other Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or employees shall have any liability to any other Investor (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no other Investor will be acting as agent of such Investor in connection with monitoring its investment hereunder. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.

[SIGNATURE PAGES TO FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

THE AMERICAN ENERGY GROUP, LTD.
By:
Name:	Pierce Onthank
Title:	President and CEO
Address  for Notice:
120 Post Road West, Suite 202
Westport, Connecticut 06880
Facsimile: 203-226-6222
Telephone: 203-222-7315

23

Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor hereby joins in and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of May 3, 2006 (the “Purchase Agreement”) between The American Energy Group, Ltd. and each of such Investors (as defined therein), as to the number of shares of Common Stock and the number of their Warrant Shares set forth on Exhibit A hereto and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.

Name of Investor:
By:
	Name:
	Title:

Address:_____________________________
________________________________

________________________________ 

Telephone No.: _____________________________

Facsimile No.: ______________________________

Number of Securities: ________________________

Aggregate Purchase Price: $____________________

Agreed to and accepted this

___ day of May, 2006

THE AMERICAN ENERGY GROUP, LTD.

By: _______________________________

     Name: Pierce Onthank

       Title: President and CEO

Exhibits:

A	Schedule of Investors
B	Instruction Sheet for Investors
C	Opinion of Company Counsel
D	Transfer Agent Instructions
E	Form of Warrant

Schedules:

3.1(a)	Subsidiaries
3.1(f)	Capitalization
3.1(h)	Material Changes
3.1(i)	Litigation
3.1(o)	Additional Securities with Piggy-Back Registration Rights

Exhibit A

Schedule of Investors

Investor	Mailing Address	Common Shares	Warrant Shares	Purchase Price
TOTAL

Exhibit B

INSTRUCTION SHEET FOR INVESTOR

(to be read in conjunction with the entire Securities Purchase Agreement)

A.     Complete the following items in the Securities Purchase Agreement:

1.     Complete and execute the Investor Signature Page. The Agreement must be executed by an individual authorized to bind the Investor.

2.     Exhibit B-1 - Stock Certificate Questionnaire:

Provide the information requested by the Stock Certificate Questionnaire;

3.     Exhibit B-2 - Registration Statement Questionnaire:

Provide the information requested by the Registration Statement Questionnaire.

4.     Exhibit B-3 - Investor Certificate:

Provide the information requested by the Certificate for Corporate, Partnership, Trust, Foundation and Joint Investors (B-3).

5.     Return, via facsimile, the signed Securities Purchase Agreement, including the properly completed Exhibits B-1 through B-3, to:

THE AMERICAN ENERGY GROUP, LTD.

120 Post Road West, Suite 202

Westport, Connecticut 06880

Facsimile: 203-226-6222

Telephone: 203-222-7315

Attn: President

with copies to:

[_______]

Facsimile:

Telephone:

Attn:

and:

[_______]

Facsimile:

Telephone:

Attn:

6. After completing instruction number 5 above, deliver the original signed Securities Purchase Agreement including the properly completed Exhibits  B-1 through B-3 to:

THE AMERICAN ENERGY GROUP, LTD.

120 Post Road West, Suite 202

Westport, Connecticut 06880

Facsimile: 203-226-6222

Telephone: 203-222-7315

Attn: President

with copies to:

[_______]

Facsimile:

Telephone:

Attn:

and:

[_______]

Facsimile:

Telephone:

Attn:

2

B. Instructions regarding the transfer of funds for the purchase of Securities are:

Account Name: The American Energy Group, Ltd.

Bank: Bank of America, Westport, CT 06880

ABA: 026009593

Account Number: 0094973-98245

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Exhibit B-1

THE AMERICAN ENERGY GROUP, LTD.

STOCK CERTIFICATE QUESTIONNAIRE

	Please provide us with the following information:
1.	The exact name that the Securities are to be registered in (this is the name that will appear on the stock certificate(s)). You may use a nominee name if appropriate:	_________________________
2.	The relationship between the Investor of the Securities and the Registered Holder listed in response to item 1 above:	_________________________
3.	The mailing address, telephone and telecopy number of the Registered Holder listed in response to item 1 above:	_________________________
		_________________________
		_________________________
		_________________________
		_________________________
4.	The Tax Identification Number of the Registered Holder listed in response to item 1 above:	_________________________

Exhibit B-2

THE AMERICAN ENERGY GROUP, LTD.

REGISTRATION STATEMENT QUESTIONNAIRE

In connection with the Registration Statement, please provide us with the following information regarding the Investor.

1.Please state your organization’s name exactly as it should appear in the Registration Statement:

______________________________________________________________________

Except as set forth below, your organization does not hold any equity securities of the Company on behalf of another person or entity.

State any exceptions here:

______________________________________________________________________

2. Address of your organization:

______________________________________________________

______________________________________________________

Telephone: ___________________________

Fax: ________________________________

Contact Person: _______________________

3. Have you or your organization had any position, office or other material relationship within the past three years with the Company or its affiliates? (Include any relationships involving you or your affiliates, officers, directors, or principal equity holders (5% or more) that has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.)

Yes _____ No _____

If yes, please indicate the nature of any such relationship below:

4. Are you the beneficial owner of any other securities of the Company? (Include any equity securities that you beneficially own or have a right to acquire within 60 days after the date hereof, and as to which you have sole voting power, shared voting power, sole investment power or shared investment power.)

Yes _____ No _____

If yes, please describe the nature and amount of such ownership as of a recent date.

______________________________________________________________________

______________________________________________________________________

5. If you are an entity, does any natural person have voting or investment power over the shares held by you?

_______ Yes_______ No

If so, please state the person’s or persons’ names(s):

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

6. Except as set forth below, you wish that all the shares of the Company’s common stock beneficially owned by you or that you have the right to acquire from the Company in connection with the Securities Purchase Agreement be offered for your account in the Registration Statement.

State any exceptions here:

______________________________________________________________________

______________________________________________________________________

7. Have you made or are you aware of any arrangements relating to the distribution of the shares of the Company pursuant to the Registration Statement?

Yes _____ No _____

If yes, please describe the nature and amount of such arrangements.

2

NASD Questions

1. Are you (i) a “member”¹ of the National Association of Securities Dealers, Inc. (the “NASD”), (ii) an “affiliate”² of a member of the NASD, (iii) a “person associated with a member” or an “associated person of a member”³ of the NASD or (iv) an immediate family member⁴ of any of the foregoing persons? If yes, please identify the member and describe such relationship (whether direct or indirect), and please respond to Question Number 2 below; if no, please proceed directly to Question Number 3.

2. If you answered “yes” to Question Number 1, please furnish any information as to whether any such member intends to participate in any capacity in the private placement, including the details of such participation:

___________________

¹NASD defines a “member” as any broker or dealer admitted to membership in the NASD, or any officer or partner or branch manager of such a member, or any person occupying a similar status or performing a similar function for such a member.

²The term “affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is in common control with, the person specified. Persons who have acted or are acting on behalf of or for the benefit of a person include, but are not necessarily limited to, directors, officers, employees, agents, consultants and sales representatives. The following should apply for purposes of the foregoing:

(i) a person should be presumed to control a Member if the person beneficially owns 10% or more the outstanding voting securities of a Member which is a corporation, or beneficially owns a partnership interest in 10% or more of the distributable profits or losses of a Member which is a partnership;

(ii) a Member should be presumed to control a person if the Member and Persons Associated With a Member beneficially own 10% or more of the outstanding voting securities of a person which is a corporation, or beneficially own a partnership interest in 10% or more of the distributable profits or losses of a person which is a partnership;

(iii) a person should be presumed to be under common control with a Member if:

(1) the same person controls both the Member and another person by beneficially owning 10% or more of the outstanding voting securities of a Member or person which is a corporation, or by beneficially owning a partnership interest in 10% or more of the distributable profits or losses of a Member or person which is a partnership; or

(2) a person having the power to direct or cause the direction of the management or policies of the Member or such person also has the power to direct or cause the direction of the management or policies of the other entity in question.

³ The NASD defines a “person associated with a member” or an “associated person of a member” as being every sole proprietor, partner, equity owner, officer, director or branch manager of any member, or any natural person occupying a similar status or performing similar functions, or any natural person engaged in the investment banking or securities business who directly or indirectly controls or is controlled by such member (for example, any employee), whether or not any such person is registered or exempt from registration with the NASD.

⁴ Immediate family includes parents, mother-in-law, father-in-law, husband or wife, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, and children, or any other person who is supported, directly or indirectly, to a material extent, by a person associated with a member of the NASD or any other broker/dealer.

3

Description:

______________________________________________________________________

______________________________________________________________________

3. Are you or have you been an “underwriter or related person”⁵ or a person associated with an underwriter or related person, including, without limitation, with respect to the proposed public offering? If yes, please identify the underwriter or related person and describe such relationship (whether direct or indirect).

Yes _____ No _____

Description:

______________________________________________________________________

______________________________________________________________________

4. If known, please describe in detail any underwriting compensations, arrangements or dealings entered into during the previous twelve months, or proposed to be consummated in the next twelve months, between (i) any underwriter or related person, member of the NASD, affiliate of a member of the NASD, person associated with a member or associated person of a member of the NASD or any immediate family member thereof, on the one hand, and (ii) the Company, or any director, officer or stockholder thereof, on the other hand, which provides for the receipt of any item of value and/or the transfer of any warrants, options or other securities from the Company to any such person (other than the information relating to the arrangements with any investment firm or underwriting organization which may participate in the proposed public offering).

Description:

______________________________________________________________________

______________________________________________________________________

5. Have you purchased the securities in the ordinary course of business?

Yes _____ No _____

___________________

⁵ The term “underwriter or related person” includes underwriters, underwriters’ counsel, financial consultants and advisors, finders, members of the selling or distribution group, and any and all other persons associated with or related to any of such persons, including members of the immediate family of such persons.

4

ACKNOWLEDGEMENT

The undersigned hereby agrees to notify the Company promptly of any changes in the foregoing information which should be made as a result of any developments, including the passage of time. The undersigned also agrees to provide the Company and the Company’s counsel any and all such further information regarding the undersigned promptly upon request in connection with the preparation, filing, amending, and supplementing of the Registration Statement (or any prospectus contained therein). The undersigned hereby consents to the use of all such information in the Registration Statement.

The undersigned understands and acknowledges that the Company will rely on the information set forth herein for purposes of the preparation and filing of the Registration Statement.

The undersigned understands that the undersigned may be subject to serious civil and criminal liabilities if the Registration Statement, when it becomes effective, either contains an untrue statement of a material fact or omits to state a material fact required to be stated in the Registration Statement or necessary to make the statements in the Registration Statement not misleading. The undersigned represents and warrants that all information it provides to the Company and its counsel is currently accurate and complete and will be accurate and complete at the time the Registration Statement becomes effective and at all times subsequent thereto and agrees to notify the Company immediately of any misstatement of a material fact in the Registration Statement or the omission of any material fact necessary to make the statements contained therein not misleading.

Dated: __________

______________________________

Name

______________________________

Signature

______________________________

Name and Title of Signatory

5

Exhibit B-3

THE AMERICAN ENERGY GROUP, LTD.

CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY COMPANY,

TRUST, FOUNDATION AND JOINT INVESTORS

If the investor is a corporation, partnership, limited liability company, trust, pension plan, foundation, joint Investor (other than a married couple) or other entity, an authorized officer, partner, or trustee must complete, date and sign this Certificate.

CERTIFICATE

The undersigned certifies that the representations and responses below are true and accurate:

(a)The investor has been duly formed and is validly existing and has full power and authority to invest in the Company. The person signing on behalf of the undersigned has the authority to execute and deliver the Securities Purchase Agreement on behalf of the Investor and to take other actions with respect thereto.

(b)Indicate the form of entity of the undersigned:

____Limited Partnership

____General Partnership

____Limited Liability Company

____Corporation

____Revocable Trust (identify each grantor and indicate under what circumstances the trust is revocable by the grantor):______________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________ 

(Continue on a separate piece of paper, if necessary.)

____Other type of Trust (indicate type of trust and, for trusts other than pension trusts, name the grantors and beneficiaries):

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________ 

(Continue on a separate piece of paper, if necessary.)

____Other form of organization (indicate form of organization (__________________________________________).

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(c)Indicate the approximate date the undersigned entity was formed: _______________.

(d)In order for the Company to offer and sell the Securities in conformance with state and federal securities laws, the following information must be obtained regarding your investor status. Please initial each category applicable to you as an investor in the Company.

___1.a bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;

___2.a broker or dealer registered pursuant to Section 15 of the Exchange Act;

___3.an insurance company as defined in Section 2(13) of the Securities Act;

___4.an investment company registered under the Investment Company Act of 1940, as amended, or a business development company as defined in Section  2(a)(48) of such Act;

___5.a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;

___6.a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;

___7.an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

___8.a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;

___9.an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;

___10.a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule  506(b)(2)(ii) under the Exchange Act;

___11.an entity in which all of the equity owners qualify under any of the above subparagraphs. If the undersigned belongs to this investor category only, list the equity owners of the undersigned, and the investor category which each such equity owner satisfies: _______________________________________________________________________________

                                 _______________________________________________________________________________

                                 _______________________________________________________________________________

                                                (Continue on a separate piece of paper, if necessary.)

7

Please set forth in the space provided below the (i) states, if any, in the U.S. in which you maintained your principal office during the past two years and the dates during which you maintained your office in each state, (ii) state(s), if any, in which you are incorporated or otherwise organized and (iii) state(s), if any, in which you pay income taxes.

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

Dated:________________________________________ , 2006

_______________________________________

Name of investor

_______________________________________

Signature and title of authorized officer, partner or trustee

8

Exhibit C

OPINION OF COMPANY COUNSEL

1.The Company isduly incorporated, validly existing and in good standing underthe Nevada Revised Statutes and has thecorporatepower to own and lease the properties it purports to own and lease, to conduct the business in which it is engagedand to execute and deliver, and to perform its obligations under,this Agreement, includingto issue and deliver the Common Shares and the Warrants hereunder.

2.This Agreement has been duly authorized, executed and delivered by the Company.

3.The Common Shares have been duly authorized and, upon issuance and delivery thereof and payment therefor pursuant to this Agreement, will be validly issued, fully paid and non-assessable. The Warrants have been duly authorized, executed and delivered by the Company and constitute legal, valid and binding obligations of the Company. The Warrant Shares have been duly authorized, and if issued upon the exercise of the Warrants in accordance with the terms of the Warrants, and after payment therefore, the Warrant Shares would be validly issued, outstanding, fully paid and nonassessable.

4.The issuance of the Common Shares will not be subject to any preemptive or similar rights of any security holder of the Company under the Nevada Revised Statutes or the Articles of Incorporation of the Company or any contract known to counsel to which the Company is a party or to which its assets are bound.

5.Neither the execution and delivery of, nor the performance of the Company’s obligations under, this Agreement, including the issuance and delivery of the Common Shares, Warrants and the Warrant Shares upon exercise of the Warrants,by the Companywill violate or conflict with, result in a breach of, or constitute a default under, (a)the Articles of Incorporation or the By-Lawsof the Company or (b) any federal law of the United States of America orthe Nevada Revised Statutes applicable to the Company that in our experience is generally applicable to transactions of the type contemplated by this Agreement or any contract known to counsel.

6.Except for compliance with the securities or blue sky laws ofthe State of Nevada,as to which we express no opinion, and registration of the Shares under the Securities Act, no approval, authorization or other action by any governmental authority of the United States of America or filing with any such authority (other than any filing solely for information purposes or to obtain action that is not the subject of governmental discretion) that has not been obtained or accomplished is required by the Company for the valid execution and delivery of, or the performance of its obligations under, this Agreement, by the Company, including the issuance and delivery of the Common Shares and the Warrants by the Company thereunder.

7.Based in part on the representations and warranties, covenants and other agreements of the of the Investors set forth in Article IV of this Agreement, the offer and sale of the Common Shares and the Warrants pursuant to the terms of this Agreement are exempt from the regitration requirements of the Securities Act.

8. There is no action, suit claim or proceeding pending, or threatened against the Company or its subsidiaries which, if determined adversely against the Company or its subsidiaries could have a Material Adverse Effect (as defined in the Securities Purchase Agreement) on the business, property, assets, rights or condition (financial or otherwise) of the Company.

9. The Company’s working interests and overriding royalty interests in oil and gas leases in Galveston County, Texas are legal, valid, binding and enforceable under applicable federal and state laws and no claims exist against such rights by any third party or governmental entity.

10. To the knowledge of counsel, the Confidential Offering Memorandum, when distributed to Investors, did not contain an untrue statement of material fact or fail to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

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Exhibit D

TRANSFER AGENT INSTRUCTIONS

_____________________, 2006

Computershare Trust Co., Inc.

Attn:  Nicole Hunt

350 Indiana, Suite. 850

Golden, CO  80401

Ladies and Gentlemen:

Reference is made to that certain Securities Purchase Agreement, dated as of May____, 2006, (the “Agreement”), by and among The American Energy Group, Ltd., a Nevadacorporation (the “Company”), and the investors named on Exhibit A attached thereto (collectively, the “Holders”), pursuant to which the Company is issuing shares of its Common Stock, par value $[__] per share (the “Common Stock”), and warrants to purchase shares of Common Stock (the “Warrants”) to the Holders.

This letter shall serve as our irrevocable authorization and direction to you (provided that you are the transfer agent of the Company at such time) to issue certificates representing (a) the shares of the Common Stock issued pursuant to the Agreement (the “Common Shares”) upon transfer or resale thereof in accordance with the terms thereof and (b) the shares of the Common Stock issued upon the exercise of the Warrants (the “Warrant Shares”) to or upon the order of a Holder from time to time upon delivery to you of a properly completed and duly executed Notice of Exercise, in the form attached to the Warrants, which has been acknowledged by the Company as indicated by the signature of a duly authorized officer of the Company thereon.

You acknowledge and agree that so long as you have previously received (a) written confirmation from the Company’s legal counsel that either (i) a registration statement covering the resale of the Common Shares and the Warrant Shares has been declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) sales of the Common Shares or the Warrant Shares may be made in conformity with Rule 144 under the Securities Act (“Rule 144”), (b) if applicable, a copy of such registration statement and (c) notice from legal counsel to the Company or any Holder that a transfer of Common Shares or the Warrant Shares has been effected either pursuant to such registration statement (and a prospectus delivered to the transferee, unless such a prospectus is deemed to have been delivered pursuant to Rule 172 under the Securities Act) or pursuant to Rule 144, then, unless otherwise required by law, within three (3) business days of your receipt of the notice referred to in clause (c) above, you shall issue the certificates representing the Common Shares or the Warrant Shares, as the case may be, so sold to the transferees registered in the names of such transferees, and such certificates shall not bear any legend restricting transfer of the Common Shares or the Warrant Shares, as the case may be, thereby and should not be subject to any stop-transfer restriction.

A form of written confirmation (to be used in connection with any sale) from the Company’s legal counsel that a registration statement covering resales of the Common Shares and the Warrant Shares has been declared effective by the SEC under the Securities Act is attached hereto as Annex I.

Please be advised that the Holders are relying upon this letter as an inducement to enter into the Agreement and, accordingly, each Holder is a third-party beneficiary to these instructions.

Please execute this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions.

Very truly yours,
THE AMERICAN ENERGY GROUP, LTD.
By:
	Name:
	Title:

THE FOREGOING INSTRUCTIONS ARE

ACKNOWLEDGED AND AGREED TO

this ___ day of _________, 2006

COMPUTERSHARE TRUST CO., INC.

By: __________________________________

Name: ___________________________

Title: ____________________________

Enclosures

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Annex I

FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

[_____], 2006

Computershare Trust Co., Inc.

Attn:  Nicole Hunt

350 Indiana, Suite. 850

Golden, CO  80401

Ladies and Gentlemen:

Reference is made to that certain Securities Purchase Agreement, dated as of May____, 2006 (the “Agreement”), by and among The American Energy Group, Ltd., a Nevadacorporation (the “Company”), and the investors named on Exhibit A attached thereto (collectively, the “Holders”), pursuant to which the Company is issuing shares of its Common Stock, par value $[__] per share (the “Common Stock”), and warrants to purchase shares of the Common Stock (the “Warrants”) to the Holders.

Pursuant to the Agreement, the Company has agreed, among other things, to register the resale of the Registrable Securities (as defined in the Agreement), including the shares of Common Stock issuable upon exercise of the Warrants under the Securities Act of 1933, as amended (the “Securities Act”). In connection with such agreement, on [_____], 2006, the Company filed a Registration Statement on Form _____ (File No. 333-[_____]) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities, which names each of the Holders (or transferees thereof) as a selling stockholder thereunder.

In connection with the foregoing, I advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [_____] on [_____], 2006, and I have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the Securities Act pursuant to the Registration Statement.

Very truly yours,

[Legal Counsel]

By:_____________________

cc: [List Names of Holders]

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Exhibit E

SCHEDULE 3.1(a)

[Subsidiaries]

The Company has the following Subsidiaries (with its percentage ownership of equity interests specified):

The American Energy Operating Corp., a Texas corporation - $100%

SCHEDULE 3.1(f)

[Capitalization]

The Company’s authorized capital stock consists of 80,000,000 shares of common stock, par value $.001 per share, and 20,000,000 shares of preferred stock, par value $.001 per share. The transfer agent and registrar for the Company’s Common Stock is Computershare Trust Co., Inc., 350 Indiana, Suite 850, Golden, Colorado 80401.

As of April 28, 2006 there were 27,535,876 shares of common stock outstanding. At the closing of the Offering, there will be 29,859,406 shares of common stock outstanding assuming all of the Shares offered hereby are sold (and including all shares issued pursuant to prior private placements but excluding in-the-money warrants). There are no outstanding shares of Preferred Stock. The rights of all holders of the common stock are identical in all respects. The holders of the common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. Upon liquidation, dissolution or winding up of the Company, the holders of the common stock are entitled to share ratably in all aspects of the Company that are legally available for distribution, after payment of or provision for all debts and liabilities and after preferences are afforded to the holders of the preferred shares. The Preferred shares have preference over the Common Stock in the event of liquidation of the Company.

As of April 28, 2006, the following warrants to purchase shares of the Company’s common stock were outstanding:

Strike Price	Number of Warrants	Expiration Date
$ 0.75	1,000,000	04/12/2010
$ 1.00	500,000	04/12/2010
$ 1.50	660,000	04/12/2010 (500,000)
$ 1.75	100,000	09/12/2008 (60,000) 09/30/2008 (100,000)

TOTAL           2,260,000

After the Offering, there will be 3,867,325 Warrants issued and outstanding.

SCHEDULE 3.1(h)

[Material Changes]

None.

SCHEDULE 3.1(i)

[Litigation]

The Company, together with its subsidiary, The American Energy Operating Corp., were joined as defendants in a new lawsuit initiated on January 12, 2006, in the 281^st 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. The other named defendants are Hycarbex-American Energy, Inc., Pierce Onthank and Iftikhar Zahid. 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 Company 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 Company has filed its response to the pleadings and intends to defend the allegations. It is the Company’s position that it has no liability to the named plaintiffs and that the dispute, if any, should lie entirely between the plaintiffs and Hycarbex. The outcome of the lawsuit is not expected to have an adverse effect upon the Company because Hycarbex has provided a written affirmation to the Company that the Company will continue to hold its 18% royalty in the Yasin Block despite the outcome of the lawsuit.

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SCHEDULE 3.1(o)

[Others with Piggy Back Registration Rights]

Calvert D. Crary - 60,000 Warrants

John S. Gebhardt - 100,000 Warrants

Maximillian Gebhardt - 100,000 Warrants

Pierce Onthank, Director - 1,000,000 Warrants

Iftikhar Zahid, Director - 1,000,000 Warrants

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EX-4.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the "Agreement") is made by and between the undersigned (the "Shareholder") and The American Energy Group, Ltd., a Nevada corporation (the "Company").

W I T N E S S E T H:

WHEREAS, the Shareholder has purchased __________ shares (the "Shares") of common stock of the Company, par value $.001 per share (the “Common Stock”) and ___________ warrants to purchase Common Stock (the “Warrants”) in the Offering of Shares of Common Stock and Warrants (the “Offering”) made by the Company as described in the Confidential Private Offering Memorandum dated May 3, 2006 (the “Memorandum”) as evidenced by that certain Securities Purchase Agreement executed and submitted to the Company by Shareholder dated May 3, 2006 (the “Purchase Agreement”);

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

The Company covenants and agrees as follows:

1. Definitions.   For purposes of this Agreement:

(a)   The term "Holder" means any person owning or having the right to acquire Shares or the Registrable Securities, including Shareholder or any transferees of Shareholder.

(b)The term “1933 Act” means the Securities Act of 1933, as amended.

(c)The term “1934 Act” means the Securities Exchange Act of 1934, as amended.

(d)The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the 1933 Act, and such registration statement or document becoming effective.

(e)The term "Registrable Securities" means (i) the Shares, (ii) the Warrants(iii) the shares of Common Stock underlying the Warrants, all issued by the Company pursuant to the Offering, or in exchange for or in replacement of the Shares, but excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which his rights are not assigned; provided, however, that any such securities shall cease to be Registrable Securities when one or more registration statements with respect to the sale of such securities shall have become effective under the 1933 Act and all such securities shall have been disposed of in accordance with the plan of distribution set forth therein.

(f)The number of shares of "Registrable Securities Then Outstanding" shall be equal to the sum of the number of shares of Common Stock outstanding and the number of shares of Common Stock underlying the outstanding Warrants which are Registrable Securities.

(g)The term "Registration Expenses" means all registration, qualification, listing and filing fees, printing expenses, escrow fees and blue sky fees, fees and disbursements of counsel for the Company and of the Company's independent certified public accountants, in each case incident to or required by the registration under this Agreement, and any other fees and expenses of the registration under this Agreement which are not Selling Expenses.

(h)The term "Selling Expenses" means all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Holders and all fees and disbursements of counsel for any Holder.

(i)All other capitalized terms used in this Section that are not defined herein shall have the meaning otherwise given in the Memorandum.

2.Registration Obligation.Within sixty (60) days after the Closing Date of the Offering (as defined in the Memorandum), the Company agrees to file a registration statement (the “Registration Statement”) pursuant to the 1933 Act to register the resale of the Registrable Securities with the Securities and Exchange Commission (the “Commission”). The Company shall promptly give written notice to all holders of record of the Shares and the Warrants which were purchased or issued in connection with the Offering. The Company will use reasonable efforts to cause the Registration Statement to become effective. The Company shall use its commercially reasonable efforts to cause the Registration Statement to be declared effective as promptly as possible after the filing thereof, but not later than one hundred twenty (120) days after the Closing Date. Should the Company fail to file the registration statement within sixty (60) days after the Closing Date, then upon such occurrence, and on every monthly anniversary thereof until the filing of the Registration Statement by the Company, the Company shall pay to the Holder an amount in cash as liquidated damages and not as a penalty, equal to 1.0% of the number of Shares then owned by Holder acquired in the Offering. Any payments made pursuant to the terms hereof shall apply on a prorated basis for any portion of a month prior to the filing of the Registration Statement by the Company. In the event the Company fails to make the payments pursuant to the terms hereof in a timely manner, such payments shall bear interest at a rate of 1% per month (prorated for partial months) until paid in full. The Company will give each Holder written notice of such registration and include in such registration (and any related qualification under blue sky or other state securities laws) all of the Registrable Securities. The Company shall not be obligated to effect more than one registration on behalf of the Shareholders and purchasers in the Offering.

3.Expenses of Registration. All Registration Expenses incurred in connection with a registration pursuant to this Agreement shall be borne by the Company. All Selling Expenses relating to the Registrable Securities registered on behalf of the Holders shall be borne by the Holders of such Registrable Securities prorata based upon the total number of Registrable Securities included in the registration or, if such Selling Expenses are specifically allocable to Registrable Securities held by specific Holders, by such Holders to the extent related to the sale of such Registrable Securities.

4.Registration Procedures.

(a)In connection with the registration of Registrable Securities required pursuant to this Agreement, the Company shall as expeditiously as is reasonable:

(i) prepare and file with the SEC on any appropriate form a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become and remain effective for the period described in paragraph (ii) below;

(ii)prepare and file with the SEC such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities and other securities covered by such registration statement the earliest of (w) when the Registrable Securities have been sold pursuant to Rule 144 promulgated under the 1933 Act (or any successor provision) ("Rule 144") or such registration statement, (x) when the Registrable Securities have been otherwise transferred and a new certificate for the Registrable Securities not bearing a legend restricting further transfer shall have been delivered by the Company, (y) when all of the Holder’s and its Affiliates’ remaining Registrable Securities can be sold in a single transaction in compliance with Rule 144, or (z) when the Registrable Securities have ceased to be outstanding;

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(iii)furnish to each seller of such Registrable Securities such number of conformed copies of such registration statement and of each such amendment and supplement thereto (at least one of which shall include all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the 1933 Act, such documents incorporated by reference in such registration statement or prospectus, and such other documents, as such seller may reasonably request in order to facilitate the sale or disposition of such Registrable Securities;

(iv)use its reasonable best efforts to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions as each seller shall reasonably request, and do any and all other acts and things as may be reasonably necessary to consummate the disposition in such jurisdictions of the Registrable Securities covered by such registration statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, or to subject itself to taxation in respect of doing business in any such jurisdiction, or to consent to general service of process in any such jurisdiction;

(v)immediately notify each seller of Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the 1933 Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing or if it is necessary, in the opinion of counsel to the Company, to amend or supplement such prospectus to comply with law, and at the request of any such seller prepare and furnish to any such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and shall otherwise comply in all material respects with law and so that such prospectus, as amended or supplemented, will comply with law;

(vi)otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, beginning with the first month of the first fiscal quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act;

(vii)use its reasonable best efforts to list such securities on each securities exchange or over-the-counter market on which shares of Common Stock are then listed, if such securities are not already so listed and if such listing is then permitted under the rules of such exchange and, if shares of Common Stock are not then listed on a securities exchange or over- the-counter market, to use its reasonable best efforts to cause such securities to be listed on such securities exchange or over-the-counter market as such seller shall reasonably request;

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(viii)provide a transfer agent and registrar for such Registrable Securities not later than the effective date of such registration statement; and

(b)The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may from time to time reasonably request and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement.

(c) Notwithstanding the registration rights granted to the Shareholder under this Agreement, in the event the Company files a registration statement for an underwritten public offering of Common Stock (a "Company Offering") within three years of the termination of the Offering and while the Registration Statement covering the Registrable Securities is effective, then upon the request of the Company's underwriter in such Company Offering, the Shareholder agrees to enter into an agreement pursuant to which the Shareholder will be prohibited from transferring the Registrable Securities for such period of time, not to exceed 60 days after completion of the Company Offering, as the Company's underwriter may request. The Company may enter stop transfer orders with its transfer agent in order to effect this prohibition.

5.Obligations of Shareholder.

(a)The Shareholder agrees that it will offer and sell Shares in compliance with all applicable state and federal securities laws. Specifically, without limitation, the Shareholder agrees as follows:

(i)The Shareholder agrees not to use any prospectus (as that term is defined under the 1933 Act) for the purpose of offering or selling the Shares to the public except for the Prospectus, as the same may be supplemented and amended from time to time.

(ii)Neither the Shareholder nor any affiliate of the Shareholder shall engage in any practice which would violate Rule 10b-6 promulgated under the 1934 Act ("Exchange Act").

(iii)Neither the Shareholder nor any Affiliate of the Shareholder shall solicit purchases of Common Stock to facilitate the distribution of Shares in violation of Rule 10b-2 promulgated under the 1934 Act.

(iv)Neither the Shareholder nor any Affiliate of the Shareholder shall effect any stabilizing transactions to facilitate the offer and sale of Shares to the public in violation of Rule 10b-7 promulgated under the 1934 Act.

(b)The Shareholder agrees to promptly notify the Company as and when any Shares are sold and when the Shareholder elects to terminate all further offers and sales of Shares pursuant to the Registration Statement. The Shareholder acknowledges that any Shares which have not been sold within two years after the termination of the Offering or any earlier termination of the distribution of the Shares will be removed from registration by means of a post-effective amendment to the Registration Statement.

(c)It shall be a condition precedent to the obligations of the Company to take any action with respect to registering the Shares that the Shareholder furnish the Company in writing such information regarding the Shareholder, the Shares and other securities of the Company held by the Shareholder, and the distribution of such Shares as the Company may from time to time reasonably request in writing. If the Shareholder refuses to provide the Company with any of such information on the grounds that it is not necessary to include such information in the Registration Statement, the Company may exclude the Shareholder's Shares from the Registration Statement if the Company provides the Shareholder with an opinion of counsel to the effect that such information must be included in the Registration Statement and the Shareholder thereafter continues to withhold such information.

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6.Restrictions on Transfer. The Shareholder agrees that it will not sell, exchange, pledge or otherwise transfer any Shares except in transactions (i) made pursuant to the Registration Statement, or (ii) which are exempt from all registration requirements of the 1933 Act (or conducted pursuant to Rule 144 thereunder) and all applicable state securities laws, and for which the Company is provided with an opinion of counsel to the Shareholder and other evidence as may be reasonably satisfactory to the Company to the effect that such transfer will not be in violation of the 1933 Act and all applicable state securities laws.

7.Indemnification.

(a)The Company will indemnify each Holder or transferee with respect to which registration has been effected pursuant to this Agreement, each of its officers and directors, if any, and each underwriter for such Holder or transferee, if any, and each person who controls the Holder or any such underwriter within the meaning of Section 15 of the 1933 Act, against any and all losses, claims, damages, liabilities or expenses (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading, or any violation by the Company of the 1933 Act or any rule or regulation promulgated under the 1933 Act applicable to the Company in connection with any such registration, and the Company will reimburse each such Holder, each such underwriter and each person who controls any such underwriter, for any legal and other expenses reasonably incurred, as such expenses are incurred, in connection with investigating, preparing or defending any such claims, loss, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder or underwriter and stated to be specifically for use therein.

(b)Each Holder or transferee will, if Registrable Securities held by such Holder or transferee are included in the securities as to which such registration is being effected, indemnify the Company, each of its directors and officers, each underwriter for such Holder, if any, of the Company’s securities covered by such a registration statement, each Person who controls the Company or such underwriter within the meaning of Section 15 of the 1933 Act and each other such Holder against any and all losses, claims, damages, liabilities and expenses (or actions in respect thereof), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or prospectus, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein, in the light of the circumstances under which they were made, not misleading, and will reimburse the Company, such Holders, underwriters or control persons for any legal or any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement or prospectus in reliance upon and in conformity with written information furnished to the Company by such Holder. Notwithstanding the foregoing, the liability of each Holder under this Section shall be limited to an amount equal to the aggregate proceeds received by such Holder from the sale of Registrable Securities hereunder, unless such liability arises out of or is based on willful conduct by such Holder.

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(c)Each party entitled to indemnification under this Section 7 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claims or any litigation resulting therefrom; provided, however, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (which approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such Indemnified Party’s expense; provided, however, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense for matters as to which there is, in the opinion of counsel to the Indemnifying Party, a conflict of interest or separate and different defenses. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and the litigation resulting therefrom.

8.   Contribution.

(a) If the indemnification provided for herein is unavailable to the Indemnified Parties in respect of any losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to therein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other in connection with the statement or omission which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue statement (or alleged untrue statement), of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or the Indemnified Party and the parties’relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim.

(b) Notwithstanding anything to the contrary contained herein, the obligation of each Holder to contribute pursuant to this Section 8 is several and not joint and no selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling Holder were offered to the public exceeds the amount of any damages which such selling Holder has otherwise been required to pay by reason of such untrue statement (or alleged untrue statement) or omission (or alleged omission).

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(c) No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

9.Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration as the result of any controversy that might arise with respect to the interpretation or implementation of the terms of this Agreement.

10.Notices. All notices required or permitted herein must be in writing and shall be deemed to have been duly given the first business day following the date of service if served personally, on the first business day following the date of actual receipt if delivered by telecopier, telex or other similar communication to the party or parties to whom notice is to be given, or on the third business day after mailing if mailed to the party or parties to whom notice is to be given by registered or certified mail, return receipt requested, postage prepaid, to the Shareholder at the address set forth in the Purchase Agreement, and to the Company at the address set forth below, or to such other addresses as either party hereto may designate to the other by notice from time to time for this purpose.

If to Company:The American Energy Group, Ltd.

                                                   Attn: President

                                                   120 Post Road West, Suite 202

                                                   Westport, Connecticut 06880

If to Shareholder:_____________________________

_____________________________

_____________________________

11.Entire Agreement. This Agreement contains and constitutes the entire agreement between and among the parties with respect to the matters set forth herein and supersedes all prior agreements and understandings between the parties hereto relating to the subject matter hereof. There are no agreements, understandings, restrictions, warranties or representations among the parties relating to the subject matter hereof other than those set forth or referred to herein. This instrument is not intended to have any legal effect whatsoever, or to be a legally binding agreement or any evidence thereof, until it has been signed by all parties hereto.

12.Binding Effect. This Agreement shall be binding on and enforceable by the Shareholder and by the Company and its successors. No transferee of Shares shall acquire any rights under this Agreement except with the written consent of the Company, which may be withheld for any reason. In the event the Company is a party to a merger or consolidation in a transaction in which the Shares are converted into equity securities of another entity, then the Company shall cause such other entity to assume the Company's obligations under this Agreement such that this Agreement shall apply to the equity securities received by the Shareholder in exchange for the Shares, unless such equity securities are, upon receipt and without further action by the Shareholder, readily salable without registration under the Securities Act.

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13.Construction. This Agreement shall be construed, enforced and governed in accordance with the laws of the State of Nevada. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter gender thereof or to the plurals of each, as the identity of the person or persons or the context may require. The descriptive headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision contained herein.

14.Invalidity. If any provision contained in this Agreement shall for any reason be held to be invalid, illegal, void or unenforceable in any respect, such provisions shall be deemed modified so as to constitute a provision conforming as nearly as possible to such invalid, illegal, void or unenforceable provisions while still remaining valid and enforceable, and the remaining terms or provisions contained herein shall not be affected thereby.

15.Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement.

16.Amendments and Waivers. Any term or provision of the registration rights stated in this Agreement may be amended and the observance of any term of such rights may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of at least sixty-seven percent (67%) of the Registrable Securities Then Outstanding. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of the Shares and any Registrable Securities Then Outstanding, each future holder of Shares and such Registrable Securities, and the Company.

17.Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada, without regard to principles of conflict of laws. In any action between or among any of the parties, whether arising out of this Agreement or otherwise, each of the parties irrevocably consents to the exclusive jurisdiction and venue of the federal and state courts located in Washoe County, Nevada.

[SIGNATURES APPEAR ON THE NEXT PAGE.]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates shown below.

SHAREHOLDER:________________________________________________

_______________________________________________

Date

COMPANY:THE AMERICAN ENERGY GROUP, LTD.

By:__________________________________________

Pierce Onthank, President and CEO

Date:May 3, 2006

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EX-4.3

[FORM OF]

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT.

WARRANT TO PURCHASE

COMMON STOCK OF

THE AMERICAN ENERGY GROUP, LTD.

Date of Issuance: May 3, 2006 Warrant No. ______

This certifies that, for value received, THE AMERICAN ENERGY GROUP, LTD., a Nevada corporation (the “Company”), grants ____________________________ or registered assigns (the “Registered Holder”), the right to subscribe for and purchase from the Company, at the Exercise Price (as defined herein), from and after 9:00 a.m. Eastern time on the Exercise Commencement Date (hereinafter defined) and to and including 5:00 p.m., Eastern time on the Expiration Date (hereinafter defined), __________________________________ (_______) shares, as such number of shares may be adjusted from time to time as described herein (the “Warrant Shares”), of the Company’s common stock, par value $.001 per share (the “Common Stock”), subject to the provisions and upon the terms and conditions herein set forth. The “Exercise Price” per share of Common Stock shall be ONE DOLLAR SEVENTY CENTS ($1.70) per share.

Section 1. Registration. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Records”), in the name of the Registered Holder. The Company may deem and treat the Registered Holder as the absolute owner of this Warrant for the purpose of any exercise hereof or any distribution to the Registered Holder, and for all other purposes, and the Company shall not be affected by any notice to the contrary.

Section 2. Registration of Transfers and Exchanges.

(a)Subject to Section 11 hereof, the Company shall register the transfer of this Warrant, in whole or in part, upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the Form of Assignment attached hereto completed and duly endorsed by the Registered Holder, to the Company at the office specified in or pursuant to Section 3(b). Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Common Stock purchase rights so transferred shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Common Stock purchase rights not so transferred, if any, shall be issued to the Registered Holder.

(b)This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the office of the Company specified in or pursuant to Section 3(b) hereof, for new Warrants, in substantially the form of this Warrant evidencing, in the aggregate, the right to purchase the number of Warrant Shares which may then be purchased hereunder, each of such new Warrants to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Registered Holder at the time of such surrender.

Section 3. Duration and Exercise of this Warrant.

(a)This Warrant shall be exercisable by the Registered Holder as to any or all of the Warrant Shares at any time and from time to time during the period commencing on the Exercise Commencement Date and ending on the Expiration Date. For purposes hereof, the Exercise Commencement Date shall be the date of issuance specified on the first page hereof. For purposes hereof, the Expiration Date shall be May 3, 2011. At 5:00 p.m., Eastern time, on the Expiration Date, this Warrant, to the extent not previously exercised, shall become void and of no further force or effect.

(b)Subject to Sections 4, and 11(a) hereof, upon exercise or surrender of this Warrant, with the Form of Election to Purchase attached hereto completed and duly endorsed by the Registered Holder, to the Company and delivered to the Company’s designated brokerage firm for warrant exercise and processing as described in the Warrant Exercise Policy on file at the Company offices at 120 Post Road West, Suite 202, Westport, Connecticut 06880, Attention: President, or at such other address as the Company may specify in writing to the Registered Holder, and upon payment of the Exercise Price multiplied by the number of Warrant Shares then to be issued upon exercise of this Warrant in lawful money of the United States of America, all as specified by the Registered Holder in the Form of Election to Purchase, the Company shall promptly issue and cause to be delivered to or upon the written order of the Registered Holder, and in such name or names as the Registered Holder may designate, a certificate for the Warrant Shares to be issued upon such exercise. Any person so designated in the Form of Election to Purchase, duly endorsed by the Registered Holder, as the person to be named on the certificates for the Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares, evidenced by such certificates, as of the Date of Exercise (as hereinafter defined) of such Warrant.

(c)The Registered Holder may pay the applicable Exercise Price pursuant to Section 3(b), at the option of the Registered Holder, by cashier’s or certified bank check payable to the Company or by wire transfer of immediately available funds to the account which shall be indicated in writing by the Company to the Registered Holder in an amount equal to the product of the Exercise Price multiplied by the number of Warrant Shares being purchased upon such exercise (the “Aggregate Exercise Price”).

(d)The “Date of Exercise” of any Warrant means the date on which the Company shall have received (i) this Warrant, with the Form of Election to Purchase attached hereto appropriately completed and duly endorsed, and (ii) payment of the Aggregate Exercise Price as provided herein.

(e)This Warrant shall be exercisable either as an entirety or, from time to time, for part only of the number of Warrant Shares which are issuable hereunder. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the certificates for the Warrant Shares issued pursuant to such exercise, deliver to the Registered Holder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which Warrant shall be substantially in the form of this Warrant.

(f)The Company may, by written notice to the Holder of the Warrant, appoint a transfer agent for the purpose of issuing Common Stock (or other securities) on the exercise of this Warrant, exchanging this Warrant, and replacing this Warrant, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

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Section 4. Payment of Taxes and Expenses.

(a) The Company will pay all expenses and taxes (other than any federal or state income tax or similar obligations of the Registered Holder) and other governmental charges attributable to the preparation, execution, issuance and delivery of this Warrant, any new Warrant and the Warrant Shares; provided, however, that the Company shall not be required to pay any tax in respect of the transfer of this Warrant or the Warrant Shares, or the issuance or delivery of certificates for Warrant Shares upon the exercise of this Warrant, to a person or entity other than a Registered Holder or an Affiliate (as hereinafter defined) of such Registered Holder.

(b)An “Affiliate” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity.

Section 5. Mutilated or Missing Warrant Certificate. If this Warrant shall be mutilated, lost, stolen or destroyed, upon request by the Registered Holder, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, of like tenor, but, in the case of loss, theft or destruction, only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, indemnity also reasonably satisfactory to it.

Section 6. Reservation, Listing and Issuance of Warrant Shares.

(a)The Company will at all times have authorized, and reserve and keep available, free from preemptive rights, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon the exercise of the rights represented by this Warrant, the number of Warrant Shares deliverable upon exercise of this Warrant. The Company will, at its expense, cause such shares to be included in or listed on (subject to issuance or notice of issuance of Warrant Shares) all markets or stock exchanges in or on which the Common Stock is included or listed not later than the date on which the Common Stock is first included or listed on any such market or exchange and will thereafter maintain such inclusion or listing of all shares of Common Stock from time to time issuable upon exercise of this Warrant.

(b)Before taking any action which could cause an adjustment pursuant to Section 7 hereof reducing the Exercise Price below the par value of the Warrant Shares, the Company will take any corporate action which may be necessary in order that the Company may validly and legally issue at the Exercise Price, as so adjusted, Warrant Shares that are fully paid and non-assessable.

(c)The Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized, fully paid and nonassessable, and (ii) free from all taxes with respect to the issuance thereof and from all liens, charges and security interests.

Section 7. Adjustment of Number of Warrant Shares. The number of Warrant Shares to be purchased upon exercise hereof is subject to change or adjustment from time to time as hereinafter provided:

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(a)Stock Dividends; Subdivisions and Combinations of Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 7(A). The number of shares of Common Stock that the Holder of this Warrant shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 7(a)) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 7(a)) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise.

(b)Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. In the event that the Company (i) consolidates with or merges into any other corporation and is not the continuing or surviving corporation of such consolidation of merger, or (ii) consolidates with or merges any other corporation into the Company and the Company is the continuing or surviving corporation but, in connection with such consolidation or merger, the Common Stock is changed into or exchanged for stock or other securities of any other corporation or cash or any other assets, or (iii) transfers all or substantially all of its properties and assets to any other corporation, or (iv) effects a capital reorganization or reclassification of the capital stock of the Company in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash and/or assets with respect to or in exchange for Common Stock, then, and in each such case, proper provision shall be made so that, upon the basis and upon the terms and in the manner provided in this subsection (f), the Registered Holder, upon the exercise of this Warrant at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive (at the aggregate Exercise Price in effect for all shares of Common Stock issuable upon such exercise immediately prior to such consummation as adjusted to the time of such transaction), in lieu of shares of Common Stock issuable upon such exercise prior to such consummation, the stock and other securities, cash and/or assets to which such holder would have been entitled upon such consummation if the Registered Holder had so exercised this Warrant immediately prior thereto (subject to adjustments subsequent to such corporate action as nearly equivalent as possible to the adjustments provided for in this Section).

(c)Share Issuance at Less Than Exercise Price. In the event that the Company shall issue any Common Stock or any security, debt instrument, warrant, right or option to purchase Common Stock prior to the complete exercise of this Warrant for a consideration less than the Exercise Price, as may be adjusted from time to time pursuant to Sections 7(a), 7(b) or 7(c) hereof, then and thereafter successively upon each such issue, the Exercise Price shall be reduced to such other lower issue price. For purposes of this adjustment, the issuance of any security or debt instrument of the Company carrying the right to convert such security or debt instrument into Common Stock or of any warrant, right or option to purchase Common Stock shall result in an adjustment to the Exercise Price upon the issuance of the above-described security, debt instrument, warrant, right, or option. This Section 7(c) shall not apply to issuances to employees, directors or consultants under a stock incentive or bonus plan whether or not such plan is covered by an effective registration statement on Form S-8.

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(d)Notice of Adjustment. Upon any adjustment of the Exercise Price, then and in each case the Company shall promptly deliver a notice to the Registered Holder and either (i) a certificate of the chief financial officer of the Company or (ii) upon the request of the Registered Holder, the opinion of a firm of independent certified public accountants (which may be the regular auditors of the Company) of recognized national standing selected by the Board of Directors, which notice or opinion shall state the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

(e)Other Notices. In case at any time:

(i)the Company shall declare any cash dividend on its Common Stock;

(ii)the Company shall pay any dividend payable in stock upon its Common Stock or make any distribution (other than regular cash dividends) to the holders of its Common Stock;

(iii)the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights;

(iv)the Company shall authorize the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of earnings or earned surplus or dividends payable in Common Stock);

(v)there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation (other than a subsidiary of the Company in which the Company is the surviving or continuing corporation and no change occurs in the Company’s Common Stock), or sale of all or substantially all of its assets to another corporation;

(vi) there shall be a voluntary or involuntary dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, or winding up of the Company;

5

then, in any one or more of said cases the Company shall give written notice, addressed to the Registered Holder at the address of such Registered Holder as shown on the books of the Company, of (1) the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights, or (2) the date (or, if not then known, a reasonable approximation thereof by the Company) on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, winding up or other action, as the case may be, shall take place. Such notice shall also specify (or, if not then known, reasonably approximate) the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, winding up, or other action, as the case may be. Such written notice shall be given at least thirty (30) days prior to the action in question and not less than thirty (30) days prior to the record date or the date on which the Company’s transfer books are closed in respect thereto. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the 1933 Act, or to a favorable vote of stockholders, if either is required.

Section8.Certain Dividends and Distributions. In the event that the Company shall at any time prior to the exercise of this Warrant declare a dividend or otherwise distribute to its stockholders any monies, assets, property, rights, evidences of indebtedness, securities (other than shares of Common Stock), whether issued by the Company or by another person or entity, or any other thing of value, the Registered Holder shall thereafter be entitled, in addition to the shares of Common Stock receivable upon the exercise of the Warrant, to receive, upon the exercise of the Warrant, the same monies, property, assets, rights, evidences of indebtedness, securities or any other thing of value that the Registered Holder would have been entitled to receive at the time of such dividend or distribution had the Registered Holder been an owner of record of the shares of Common Stock into which the Warrant is then being exercised as of the record date or other date of determination for such dividend or distribution and an appropriate provision (which provision may include without limitation, the establishment of an escrow agreement in favor of the Registered Holder in which the portion of the dividend or distribution attributable to such warrants is held) shall be made a part of any such dividend or distribution. Notwithstanding any provision herein to the contrary, no adjustment under this Section 8 shall be made with respect to any cash dividend or distribution payable solely out of current or retained earnings of the Company.

Section 9. No Rights or Liabilities as a Stockholder. The Registered Holder shall not be entitled to vote or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or subscription rights or otherwise, until the Date of Exercise shall have occurred. No provision of this Warrant, in the absence of affirmative action by the Registered Holder hereof to purchase shares of Common Stock, and no mere enumeration herein of the rights and privileges of the Registered Holder, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

Section 10. Fractional Warrant Shares. The Company shall not be required to issue fractions of Warrant Shares upon exercise of the Warrant or to distribute certificates which evidence fractional Warrant Shares. If any fraction of a Warrant Share would, except for the provisions of this Section 10, be issuable on the exercise of any Warrant (or specified portion thereof), the Company shall pay to the Registered Holder an amount in cash equal to the Market Price as of the Exercise Date, multiplied by such fraction.

Section 11. Transfer Restrictions; Registration of the Warrant and Warrant Shares.

(a)Neither the Warrant nor the Warrant Shares have been registered under the 1933 Act. The Registered Holder, by acceptance hereof, represents that it is acquiring this Warrant to be issued to it for its own account and not with a view to the distribution thereof, and agrees not to sell, transfer, pledge or hypothecate this Warrant, any purchase rights evidenced hereby or any Warrant Shares unless a registration statement is effective for this Warrant or the Warrant Shares under the 1933 Act or in the opinion of such Registered Holder’s counsel reasonably satisfactory to the Company, a copy of which opinion shall be delivered to the Company, such transaction is exempt from the registration requirements of the 1933 Act.

(b)Subject to the provisions of the following paragraph of this Section 11, each Certificate for Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:

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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT.

(c)The restrictions and requirements set forth in the foregoing paragraph shall apply with respect to Warrant Shares unless and until such Warrant Shares are sold or otherwise transferred pursuant to an effective registration statement under the 1933 Act or are otherwise no longer subject to the restrictions of the 1933 Act, at which time the Company agrees to promptly cause such restrictive legends to be removed and stop transfer restrictions applicable to such Warrant Shares to be rescinded.

(d)The Company will use its best efforts to comply with the reporting requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act") (whether or not it shall be required to do so pursuant to such Sections) and will use its best efforts to comply with all other public information reporting requirements of the Securities and Exchange Commission (including, without limitation, Securities and Exchange Commission (“SEC”) Rule 144 promulgated under the 1933 Act) from time to time in effect and relating to the availability of an exemption from the 1933 Act for sale of restricted securities. The Company also will cooperate with the Registered Holder and with each holder of any Warrant Shares in supplying such information as may be necessary for any such holders to complete and file any information reporting forms presently or hereafter required by the SEC as a condition to the availability of an exemption from the 1933 Act for the sale of restricted securities.

Section 12.Company Redemption Rights. In the event that the Company’s stock price has a closing bid price at or above $2.50 per share, subject to adjustment as set forth in the Warrant, for twenty (20) consecutive Trading Days, the Company may, after providing the Holder thirty (30) written notice (the “Redemption Notice”), redeem the outstanding Warrants unless the Holder, upon receipt of the Redemption Notice, exercises his/her/its Warrant rights and pays in full the Exercise Price, as adjusted in Section 7 hereof, if applicable. If the Holder fails to timely pay the amount set forth in the Redemption Notice, the Company’s sole remedy shall be to cancel a corresponding amount of this Warrant. Unless otherwise agreed to by the Holder of this Warrant, a Redemption Notice must be given to all Warrant holders who receive Warrants similar to this Warrant (in terms of Exercise Price and other principal terms) issued on or about the same Date of Issuance as this Warrant, in proportion to the amounts of Common Stock which may be purchased by the respective holders in accordance with the respective Warrants held by each.

Section 13.Notices. All notices, requests, demands and other communications relating to this Warrant shall be in writing and shall be deemed to have been duly given if delivered personally or sent by United States certified or registered first-class mail, postage prepaid, return receipt requested, to the parties hereto at the following addresses or at such other address as any party hereto shall hereafter specify by notice to the other party hereto:

(a)If to the Registered Holder of this Warrant or the holder of the Warrant Shares, addressed to the address of such Registered Holder or holder as set forth on books of the Company, or otherwise furnished by the Registered Holder or holder to the Company.

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(b)If to the Company, addressed to:

The American Energy Group, Ltd.

120 Post Road West, Suite 202

Westport, Connecticut 06880

Attn: President

Section 14.Binding Effect. This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns, and the holder or holders from time to time of this Warrant and the Warrant Shares.

Section 15.Survival of Rights and Duties. This Warrant shall terminate and be of no further force and effect on the earlier of (i) 5:00 p.m., Eastern time, on the Expiration Date and (ii) the date on which this Warrant and all purchase rights evidenced hereby have been exercised, except that the provisions of Sections 4, 6(c) 11 and 12 hereof shall continue in full force and effect after such termination date.

Section 16.Governing Law. This Warrant shall be construed in accordance with and governed by the laws of the State of Nevada.

Section 17.Section Headings. The Section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed under its corporate seal by its officers thereunto duly authorized as of the date hereof.

SIGNATURES APPEAR ON FOLLOWING PAGE

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THE AMERICAN ENERGY GROUP, LTD.
By:
	Pierce Onthank, President and CEO

9

FORM OF ELECTION TO PURCHASE

(To Be Executed Upon Exercise of this Warrant)

To The American Energy Group, Ltd.:

The undersigned, the record holder of this Warrant (Warrant No. _____), hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase ___________ of the Warrant Shares and herewith tenders payment for such Warrant Shares to the order of The American Energy Group, Ltd. of $_________ representing the full purchase price for such shares at the price per share provided for in such Warrant and the delivery of any applicable taxes payable by the undersigned pursuant to such Warrant.

The undersigned requests that certificates for such shares be issued in the name of:

(Please print name and address) Social Security or Tax Identification No.

In the event that not all of the purchase rights represented by the Warrant are exercised, a new Warrant, substantially identical to the attached Warrant, representing the rights formerly represented by the attached Warrant which have not been exercised, shall be issued in the name of and delivered to:

(Please print name and address) Social Security or Tax Identification No.

Dated: ________________	Name of Holder (Print):
	By:
	(Name):
(Please print name and address)	(Title):

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers to each assignee set forth below all of the rights of the undersigned under the attached Warrant (Warrant No. _____) with respect to the number of shares of Common Stock covered thereby set forth opposite the name of such assignee unto:

Name of Assignee	Address	Number of Shares of
		Common Stock

If the total of said purchase rights represented by the Warrant shall not be assigned, the undersigned requests that a new Warrant Certificate evidencing the purchase rights not so assigned be issued in the name of and delivered to the undersigned.

Dated: ________________	Name of Holder (Print):
	By:
	(Name):
(Please print name and address)	(Title):

EX-10.4

EX-10.5

CROSS - ASSIGNMENT AND

STIPULATION OF INTEREST

STATE OF TEXAS	§
	§
COUNTY OF GALVESTON	§

THIS CROSS - ASSIGNMENT and STIPULATION OF INTEREST (“Assignment”) is between SMITH ENERGY 1986A PARTNERSHIP, a New York limited partnership (“Smith Energy”), HOWARD A. SMITH (“Smith”) and THE AMERICAN ENERGY GROUP, LTD., a Nevada corporation (“AEG”).

WHEREAS, Smith Energy, Smith and AEG each own interests in certain oil and gas leases and lands located in Galveston County, Texas, which leases and lands are described more particularly on Exhibit “A” attached hereto and incorporated by reference herein (the “Leases”);

WHEREAS, disputes have arisen between AEG, on the one hand, and Smith Energy and Smith on the other hand, concerning the extent of the interests owned by each in the Leases and the rights of each with respect to the interests owned; and

WHEREAS, AEG, Smith Energy and Smith have resolved their differences and desire to stipulate to the interests owned by each in the Leases.

Now, therefore, in consideration of the premises and to effect the settlement of the disputes between AEG, Smith Energy and Smith, it is hereby covenanted, granted, concluded and agreed by and between the parties, and each of them covenants, grants, concludes and agrees, for itself and its successors and assigns, that a stipulation of interest and cross - conveyance of the Leases be made as follows, viz:

1.Smith Energy shall from henceforth have, hold, possess and enjoy, in severalty, by itself and to itself and its successors and assigns, free from any and all claims of AEG the following rights, title and interest:

i)All interests owned or claimed by AEG including and above the depth of ten thousand feet (10,000’) in the Leases;

ii)All interests owned or claimed by AEG in and to the interest reserved to Luck Petroleum Corporation as a 15% back in reversionary interest at 125% recoupment of Smith Energy 1986A Partnership and O & G’s investment costs, as specified in paragraph 8 of that certain Partial Assignment of Oil and Gas Leases dated May 12, 1986, between Luck Petroleum Corporation, Smith Energy, Smith Energy Co., Inc., Smith and O & G Carriers, Inc., recorded under Film Code number ###-##-####, of the Official Public Records of Galveston County, Texas, as same was conveyed to AEG pursuant to that certain Assignment of Oil and Gas Leases dated June 13, 1997, from Pamela Gale Johnson, Chapter 7 Trustee for the Estate of Luck Petroleum Corporation under Case Number 93-48561-H3-7, reference to which is made for all purposes.

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Page 1

AEG hereby grants, conveys, releases, and confirms unto Smith Energy the above described property, to have and to hold in severalty, with all and singular the hereditaments and appurtenances thereto unto Smith Energy, its successors and assigns, forever. And for the same consideration, AEG hereby binds itself, its successors and assigns, respectively, to warrant and forever defend all and singular the said premises against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under AEG, but not otherwise.

2.AEG shall from henceforth have, hold, possess and enjoy, in severalty, by itself and to itself and its successors and assigns, free from any and all claims of Smith Energy the following rights, title and interest:

i)All interests and rights owned or claimed by Smith Energy and Smith below the depth of ten thousand feet (10,000’) in the Leases;

ii)All interests and rights owned or claimed by Smith Energy and Smith in and to a three percent (3%) overriding royalty interest in the Maco Stewart A Lease designated on Exhibit “A” as the “Maco Stewart ‘A’ Lease as specified in that certain Partial Assignment of Oil and Gas Leases dated May 12, 1986, between Luck Petroleum Corporation, Smith Energy, Smith Energy Co., Inc., Smith and O & G Carriers, Inc., recorded under Film Code number 004-56-0395, of the Official Public Records of Galveston County, Texas, reference to which is made for all purposes, including any interests in said overriding royalty which Smith Energy or Smith may have acquired from O & G Carriers, Inc. by subsequent instrument.

Smith Energy hereby grants, conveys, releases, and confirms unto AEG the above described property, to have and to hold in severalty, with all and singular the hereditaments and appurtenances thereto unto AEG, its successors and assigns, forever. And for the same consideration, Smith Energy hereby binds itself, its successors and assigns, respectively, to warrant and forever defend all and singular the said premises against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Smith Energy but not otherwise.

This Assignment shall be effective at _________ o’clock, ___. m. C.S.T. on April ___, 2006.

Smith Energy, Smith and AEG agree to execute, to acknowledge and to deliver to the other any additional instruments, notices, division orders, transfer orders and other documents and to do any other acts and things which may be necessary to more fully and effectively assign and convey to the other the Leases intended to be assigned hereby.

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IN WITNESS WHEREOF, Smith Energy, Smith and AEG have executed this Assignment on the date of the acknowledgment annexed hereto, but this Assignment shall be effective as of the Effective Date hereinabove recited.

THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK.

SIGNATURES APPEAR ON THE FOLLOWING PAGE.

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SMITH ENERGY 1986A PARTNERSHIP
acting by and through its general partner,
By:
	Howard A. Smith, General Partner
	Smith Energy 1986A Partnership
	HOWARD A. SMITH

THE AMERICAN ENERGY GROUP, LTD.
By:
	Pierce Onthank, President and CEO

STATE OF NEW YORK	§
	§
COUNTY OF _______	§

Before me the undersigned authority on this ____ day of ________, 2006, personally appeared Howard A. Smith, individually and as general partner of Smith Energy 1986A Partnership, a New York limited partnership, and acknowledged to me that he executed the same in his individual capacity and in the capacity therein stated on behalf of such partnership for the purposes and consideration therein expressed.

Notary Public in and for the State Of New York

STATE OF NEW YORK	§
	§
COUNTY OF _______	§

Before me the undersigned authority on this ____ day of ________, 2006, personally appeared Pierce Onthank, as President and CEO of The American Energy Group, Ltd., a Nevada corporation, and acknowledged to me that he executed the same in the capacity therein stated on behalf of such partnership for the purposes and consideration therein expressed.

Notary Public in and for the State Of Connecticut

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EXHIBIT “A”

Maco Stewart A Lease:

Oil and Gas Lease dated April 30, 1935, between MACO STEWART, as Lessor and COAST PETROLEUM CORPORATION, as Lessee, covering 393 acres, more or less, recorded in Volume 516, Page 313, Oil and Gas Records, Galveston County, Texas.

Maco Stewart B Lease:

Oil, Gas and Mining Lease dated May 4, 1949, between MACO STEWART and LOUISE BISBEY STEWART, as Lessors, and JOHN W. MECOM, as Lessee, covering 1,400 acres, more or less, recorded in Volume 779, Page 573, Oil and Gas Records, Galveston County, Texas, insofar and only insofar as said lease is described as containing 280 acres in that certain Partial Release, dated January 28, 1985, between ATLANTIC RICHFIELD COMPANY, as Lessee, and VIRGINIA B. BALL, MACO STEWART III, WELLS STEWART and ROBERT GEORGE GISBEY, Trustee, as Lessors, recorded in Film Code ###-##-####, Deed Records, Galveston County, Texas, and also in that unrecorded Partial Release of January 28, 1985, between ATLANTIC RICHFIELD COMPANY, as Lessee, and VIRGINIA B. BALL, MACO STEWART II, WELLS STEWART and ROBERT GEORGE BISBEY, Trustee, as Lessors.

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EX-10.6

ASSIGNMENT OF LIMITED PARTNERSHIP INTEREST

THE AMERICAN ENERGY GROUP, LTD., a Nevada corporation (hereinafter called “Assignor”), for TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration in hand paid by SMITH ENERGY 1986A PARTNERSHIP (hereinafter called "Assignee"), does hereby GRANT, ASSIGN, SELL, TRANSFER, CONVEY and SET OVER unto the Assignee all of Assignor’s limited partnership interest in and to SMITH ENERGY 1986A PARTNERSHIP (“Partnership Interest”).

The interest herein assigned to Assignee is the identical 4.3011% interest described in that certain Assignment of Oil and Gas Leases dated June 13, 1997, from Pamela Gale Johnson, Chapter 7 Trustee for the Estate of Luck Petroleum Corporation pursuant to Order of the United States Bankruptcy Court for the Southern District of Texas, Houston Division, in Case Number 93-48561-H3-7. This Assignment is made without warranties, expressed or implied.

TO HAVE AND TO HOLD the Partnership Interest, together with all and singular the rights, privileges and appurtenances appertaining thereto or in anywise belonging to the said Assignee, its successors and assigns forever.

WITNESS OUR HANDS, this____ day of April, 2006, to be effective as of April____, 2006

ASSIGNOR:
THE AMERICAN ENERGY GROUP, LTD.
By
	Pierce Onthank, President and CEO

Assignment of Limited Partnership Interest

Page 1

ASSIGNEE:
SMITH ENERGY 1986A PARTNERSHIP.
	By Howard A. Smith, General Partner Smith Energy 1986A Partnership

Assignment of Limited Partnership Interest

Page 2

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

The following are the subsidiaries of The American Energy Group, Ltd.:

Name	State of Organization
The American Energy Operating Corp.	Texas

EX-23.1

Exhibit 23.1

REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM'S CONSENT

We consent to the inclusion in this Registration Statement on Form SB-2, of our report dated October 30, 2005, as amended for Notes 1, 2 ,7 ,8 & 9 on July 5, 2006, with respect to our audit of the consolidated balance sheets of The American Energy Group, Ltd. as of June 30, 2005 and 2004, and related consolidated statements of operations and accumulated deficit, changes in shareholders' equity, and cash flows for the years then ended, as amended, which report appears in the Prospectus, and is part of this Registration Statement. We also consent to the reference to our firm under the heading "Experts" in such Prospectus.

/s/ Chisholm, Bierwolf & Nilson

Bountiful, Utah

August 3, 2006

EX-99.2