10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2012

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _______________

Commission file number:  0-26402

THE AMERICAN ENERGY GROUP, LTD.

 (Exact name of Registrant as specified in its charter)

Nevada	87-0448843
(State or other jurisdiction of  incorporation or organization)	(I.R.S. Employer Identification No.)
1 Gorham Island Suite 303 Westport, Connecticut	06880
(Address of principal executive offices)	(Zip code)

203-222-7315

(Registrant’s telephone number including area code)

___________________________

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to section 12(g) of the Act:

Common Stock, Par Value $.001 Per Share

___________________________

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes x  No o

APPLICABLE ONLY TO CORPORATE ISSUERS

As of May 21, 2012, the number of Common shares outstanding was 38,732,761

Transitional Small Business Issuer Format (Check one) Yes o  No x

THE AMERICAN ENERGY GROUP, LTD.

INDEX TO FORM 10-Q

PART I-FINANCIAL INFORMATION		PAGE
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition And Results of Operations		8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		12
Items 4 and 4T.	Controls and Procedures		12
PART II-OTHER INFORMATION
Item 1.	Legal Proceedings		13
Item 1A	Risk Factors		14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		14
Item 3.	Defaults Upon Senior Securities		14
Item 4.	Submission of Matters to a Vote of Security Holders		14
Item 5.	Other Information		14
Item 6.	Exhibits		15

2

PART I-FINANCIAL INFORMATION

THE AMERICAN ENERGY GROUP, LTD.

Balance Sheets

Assets
	March 31, 2012			June 30, 2011
	(Unaudited)
Current Assets
Cash		11,493			246,061
Oil and gas sales receivable		514,840			-
Prepaid expenses		14,525			47,955
Total Current Assets		540,858			294,016
Property and Equipment
Office equipment		30,417			29,265
Leasehold improvements		26,458			26,458
Accumulated depreciation		(36,435	)		(32,544	)
Net Property and Equipment		20,440			23,179
Other Assets
Investment in oil and gas working interest – related party		1,583,914			1,583,914
Security deposit		26,209			26,209
Total Other Assets		1,610,123			1,610,123
Total Assets	$	2,171,421			1,927,318
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable		61,580			64,336
Security deposits		13,200			13,200
Note payable		-			19,811
Accrued liabilities		130,317			889,840
Total Current Liabilities		205,097			987,187
Total Liabilities		205,097			987,187
Stockholders’ Equity
Common stock, par value $0.001 per share;
authorized 80,000,000 shares; 37,982,761 and
34,385,333 shares issued and outstanding, respectively		37,982			34,353
Capital in excess of par value		12,082,836			10,948,465
Accumulated deficit		(10,154,494	)		(10,042,687	)
Total Stockholders’ Equity		1,966,324			940,131
Total Liabilities and Stockholders’ Equity	$	2,171,421		$	1,927,318

See accompanying unaudited notes to the financial statements.

3

THE AMERICAN ENERGY GROUP, LTD.

Statements of Operations

For the Three Months and Nine Months Ended March 31, 2012 and 2011

Unaudited

	Three Months Ended						Nine Months Ended
	March 31,			March 31,			March 31,			March 31,
	2012			2011			2012			2011
Revenue	$	242,028		$	0		$	545,230		$	0
Cost of Goods Sold		0			0			0			0
Gross Profit		242,028			0			545,230			0
Expenses
Administrative salaries		108,201			118,600			301,791			344,500
Legal and professional		67,232			31,713			164,082			93,357
General and administrative		47,303			48,174			145,526			118,020
Office overhead expenses		13,253			38,358			36,303			104,550
Depreciation		1,297			1,763			3,891			4,921
Total Expenses		237,286			238,608			651,593			665,348
Net Operating Income (Loss)		4,742			(238,608	)		(106,363	)		(665,348	)
Other Income and (Expense)
Interest expense		(1,751	)		(4,545	)		(5,444	)		(12,071	)
Total Other Income (Expense)		(1,751	)		(4,545	)		(5,444	)		(12,071	)
Net Income (Loss) Before Tax		2,991			(243,153	)		(111,807	)		(667,419	)
Income Tax		0			0			0			0
Net Income (Loss)	$	2,991		$	(243,153	)	$	(111,807	)	$	(667,419	)
Earnings (Loss) per Share
Basic	$	0.00		$	(0.01	)	$	0.00		$	(0.02	)
Fully Diluted	$	0.00		$	(N/A	)	$	(N/A	)	$	(N/A	)
Weighted Average Number
Of Shares Outstanding
Basic		37,469,960			34,213,826			35,638,468			33,213,826
Fully Diluted		39,829,960			36,573,826			37,998,468			35,573,826

See accompanying unaudited notes to the financial statements.

4

THE AMERICAN ENERGY GROUP, LTD.

Statements of Cash Flows

For the Nine Months Ended March 31, 2012 and 2011

(Unaudited)

	2012			2011
Cash Flows From Operating Activities
Net loss	$	(111,807	)	$	(677,419	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation		3,891			4,921
Common stock issued for debt and services		40,000			32,500
Changes in operating assets and liabilities:
(Increase) decrease in oil and gas sales receivable		(514,840	)		-
(Increase) decrease in prepaid expenses		33,430			-
Increase (decrease) in accounts payable		(2,756	)		12,209
Increase (decrease) in accrued expenses and other current liabilities		43,666			179,500
Net Cash (Used In) Operating Activities		(508,416	)		(448,289	)
Cash Flows From Investing Activities
Funds (reserved for) / released from acquisitions		-			392,500
Expenditures for office equipment		(1,152	)		(1,844	)
Net Cash Provided By (Used In) Investing Activities		(1,152	)		390,656
Cash Flows From Financing Activities
Proceeds from the issuance of common stock		275,000			500,000
Net Cash Provided By Financing Activities		275,000			500,000
Net Increase (Decrease) in Cash		(234,568	)		442,367
Cash and Cash Equivalents, Beginning of Period		246,061			25,585
Cash and Cash Equivalents, End of Period		11,493			467,952
Cash Paid For:
Interest		5,444			12,071
Taxes		-			-
Non-Cash Financing Activities:
Common stock issued for payment of debt		823,000			32,500
Common stock issued for services rendered	$	40,000			-

See accompanying unaudited notes to the financial statements.

5

THE AMERICAN ENERGY GROUP, LTD.

Notes to the Financial Statements

March 31, 2012

Note 1 - General

The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements include normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's audited financial statements and notes thereto included in its June 30, 2011 Annual Report on Form 10-K. Operating results for the three months and nine months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending June 30, 2012.

Note 2 – Basic Loss Per Share of Common Stock

	Three Months Ended					Nine Months Ended
	March 31,		March 31,			March 31,			March 31,
	2012		2011			2012			2011
Income (Loss) (numerator)	$	2,991	$	(243,153	)	$	(111,807	)	$	(667,419	)
Basic - Shares (denominator)		37,469,960		34,213,826			35,638,468			33,213,826
Fully Diluted Shares (denominator)		39,829,960		36,573,826			37,998,468			35,573,826
Basic Income (Loss) Per Share	$	0.00	$	(0.01	)	$	(0.00	)	$	(0.02	)
Fully Diluted Income (Loss) Per Share	$	0.00		N/A			N/A			N/A

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 financial statements.  Stock warrants convertible into 2,360,000 shares of common stock are not included in the basic calculation because their inclusion would be antidilutive, thereby reducing the net loss per common share.

Note 3 – Revenue Recognition

Revenue from oil and gas royalties consists solely of override royalty interests and is recognized after production has occurred on the oil and gas concession in which the Company has an interest. Royalty income is reported on a net revenue basis.

Note 4 - Common Stock

During November, 2011, the Company issued 1,500,000 shares of common stock for cash at $0.10 per share.

During December, 2011, the Company issued 1,088,193 shares of common stock for accrued compensation due to a former Director valued at $810,000.

During February, 2012, the Company issued 666,667 shares of common stock for cash at $0.15 per share.  

During March, 2012, the Company issued 125,000 shares of common stock for $0.20 per share.

During March, 2012, the Company issued 217,568 shares for services and payables valued at $53,000.

6

THE AMERICAN ENERGY GROUP, LTD.

Notes to the Financial Statements

March 31, 2012

Note 5 – Investment in Oil and Gas Working Interest – Related Party

During the quarter ended December 31, 2009, the Company executed an agreement to acquire from Hycarbex – American Energy, Inc. (Hycarbex), a related party, a two and one half percent (2-1/2%) working interest in each of the 2,258 square kilometer Sanjawi Block No. 3068-2, Zone II, Baluchistan Province, Pakistan, and 1,229 square kilometer Zamzama North Block No. 2667-8, Zone III, Sindh Province, Pakistan. In exchange for the working interest, the Company issued (1) 2,000,000 shares of common stock to Hycarbex, (2) 100,000 warrants with a three year duration to purchase an additional 100,000 shares at $1.75 per share and (3) $100,000 in cash.

The Company has the option to convert the two and one half percent working interests described above to a one and one half percent gross royalty working interest at any time.

Note 6 – Subsequent Events

In accordance with ASC 855-10, management of the Company has reviewed all material events from March 31, 2012 through the date the financial statements were issued. Subsequent to March 31, 2012, the Company issued 750,000 shares of common stock for cash for $0.20 per share. There were no other material events that warrant any additional disclosure .

Note 7 – Going Concern

The Company’s financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments related to the recoverability of assets or classification of liabilities that might be necessary should the Company be unable to continue as a going concern. At March 31, 2012, while the Company’s current assets exceeded its current liabilities, it has recorded negative cash flows from operations and net losses in this period and prior fiscal periods. The preceding circumstances combine to raise substantial doubt about the Company’s ability to continue as a going concern. The Company received its initial two royalty payments from the operator of the Pakistan petroleum concession in the fall of 2011 and then the operator suspended payments due to its financial difficulties, at which time the operator advised the Company that future revenue payments would be accrued until the financial difficulties were resolved.  In response to the revenue payment suspension, the Company initiated legal proceedings in the High Court of Islamabad, Pakistan against the operator and others to enforce its right to receive monthly production payments from the operator.  The Company subsequently sold 3,041,667 Common shares to private investors for an aggregate $425,000 in order to meet near term operating capital requirements and expects to make future sales if necessary in the event that the pending litigation does not result in a prompt resumption of the revenue payments.  However, there can be no assurance that the litigation will be successful in causing the resumption of revenue payments and, there can be no assurance that management’s efforts to raise operating capital through the sale of securities will be successful, should such sales be necessary.

7

ITEM 2- MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains statements about the future, sometimes referred to as “forward-looking” statements.  Forward-looking statements are typically identified by the use of the words “believe,” “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “project,” “propose,” “plan,” “intend” and similar words and expressions.  We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act.  Statements that describe our future strategic plans, goals or objectives are also forward-looking statements.

Readers of this report are cautioned that any forward-looking statements, including those regarding the Company or its management’s current beliefs, expectations, anticipations, estimations, projections, proposals, plans or intentions, are not guarantees of future performance or results of events and involve risks and uncertainties, such as:

.  The future results of drilling individual wells and other exploration and development activities;

.  Future variations in well performance as compared to initial test data;

.  Future events that may result in the need for additional capital;

.  Fluctuations in prices for oil and gas;

.  Future drilling and other exploration schedules and sequences for various wells and other activities;

.  Uncertainties regarding future political, economic, regulatory, fiscal, taxation and other policies in Pakistan;

.  Our future ability to raise necessary operating capital.

The forward-looking information is based on present circumstances and on our predictions respecting events that have not occurred, which may not occur or which may occur with different consequences from those now assumed or anticipated.  Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including the risk factors detailed in this report.  The forward-looking statements included in this report are made only as of the date of this report.  We are not obligated to update such forward-looking statements to reflect subsequent event or circumstances.

Overview

In November, 2003, we sold our Hycarbex-American Energy, Inc. (“Hycarbex”) subsidiary, which was the owner and operator of the Yasin 2768-7 Petroleum Concession Block in the Republic of Pakistan, to a foreign corporation.  We retained in the sale an interest in all production from the Yasin Block equal to 18% of gross revenues.  Drilling of the first well in Pakistan as to which our interest pertains, named the Haseeb No. 1 Well, was successfully completed by Hycarbex-American Energy, Inc. (“Hycarbex”), in the fourth quarter of the fiscal year ended June 30, 2005.  A state-of-the-art, third party owned, surface facility for the well was constructed for Hycarbex after well completion.  During September 2010, Hycarbex connected the well to the Sui Southern Gas Company pine line, and commenced gas sales under an Extended Well Test but the production quickly ceased due to mechanical difficulties encountered in the commissioning of the surface facility owned by the third party. Additional gas volumes were sold in April, 2011. The production re-commenced into the pipe line in July, 2011, at the initial rate of 3.5 million cubic feet of gas per day (MMCFD).  Hycarbex previously advised that this rate is expected to be gradually increased to 15 MMCFD during the Extended Well Test.  Such production can likewise experience temporary interruptions to permit testing, calibration and other activities common with an Extended Well Test.

8

In the fall of 2011, we received the initial two production revenue payments for Yasin production, but in November, 2011, Hycarbex, the operator of the Yasin concession, voluntarily suspended the monthly revenue payments due to Hycarbex’s financial difficulties and advised that it would continue to accrue the revenues due to the Company until it resolved its financial difficulties.  Although the daily production rate has increased to over 8 million cubic feet per day under the Extended Well Test, the accrued production revenues due to the Company from August 2011 through the date of this report have not been distributed to the Company.   In December, 2011, we initiated legal proceedings against Hycarbex and others in the High Court of Islamabad, Pakistan to enforce the revenue payment obligations and to impose injunctions to preserve the status quo.  We were successful in obtaining the injunctions against Hycarbex and in March, 2012, in obtaining a final order from the Islamabad High Court which directs the litigants to proceed to final arbitration with the International Chamber of Commerce (ICC) International Court of Arbitration in London, UK.  We filed our arbitration claims in April, 2012.  In our arbitration claim, we are seeking an order which voids, ab initio, based upon our allegations of fraud and misrepresentation, the original 2003 Stock Purchase Agreement under which Hydro Tur, Ltd. acquired the stock of Hycarbex (and thus the underlying Yasin concession owned by Hycarbex) and in conjunction therewith, seeks recovery of the Hycarbex stock sold in 2003.  If we are successful in obtaining this remedy from the arbitrators, American Energy will then own the working interest now held by Hycarbex.  We have requested the alternative remedy of a declaration that American Energy is the owner of a 25% carried working interest, to which is attributed 18% of gross production free of costs and taxes, and an order recovering accrued, unpaid production.   In February, March and April, 2012, we sold shares of Common Stock to certain private investors to provide working capital to the Company and anticipate making future sales as needed for near term working capital requirements while the litigation and arbitration are pending.  Additional sales of securities are expected to be made to support future working capital requirements.

Results of Operations

Our operations for the three and nine months ended March 31, 2012 reflected net operating income of $4,742 and a net operating loss of $(106,363), respectively, as compared to net operating losses of $(238,608) and $(665,348) for the three and nine months ended March 31, 2011, respectively.   The net income for the quarter ended March 31, 2012 is  predominantly a direct result of oil and gas revenue earned during the current quarter in the amount of $242,028.   Prior to September, 2011, we had no recurring income stream and relied upon the proceeds of securities sales and loans.   In the fall of 2011, Hycarbex, the operator of the Yasin concession, commenced revenue payments to the Company but then abruptly suspended the monthly revenue payments due to Hycarbex’s financial difficulties after only two  revenue payments totaling $30,425.11 covering Hycarbex’s April 2011 and July 2011 production.  Hycarbex advised us in its notice of suspension that it would continue to accrue the revenues due to the Company until it resolved its financial difficulties.  As a result, the accrued production revenues due to the Company from August through the date of this report have not been distributed to the Company.

Hycarbex performed scheduled maintenance on the surface gas treatment facility and replaced the amine fluid in September, 2011, which enabled production to increase from 3.6 million cubic feet per day to 7.6 million cubic feet per day in October.  Unofficial verbal reports have indicated to Company management that production has temporarily climbed as high as 9.2 million cubic feet per day, but the written reports from Hycarbex to the Pakistan Oil Ministry in February indicate a daily production rate of 8.3 million cubic feet per day.  Furthermore, the production rate volumes actually reported by Hycarbex to the Pakistan Oil Ministry indicate that the average daily production for October, 2011 was 7.4 million cubic feet per day, for November, 2011, was 8.4 million cubic feet per day, and for December, 2011, was 8.3 million cubic feet per day.  Thus, we have based our production and revenue accrual estimates and assumptions near that daily figure due to Hycarbex’s failure, despite repeated requests, to provide us with updated, accurate production and sale information.   Given the early information received from Hycarbex as to the BTU content of the gas sold, management believes that the appropriate estimated gas price applicable to these estimated sale volumes is $1.80 per million cubic feet of gas sold.  Using this price and using the actual production reported by Hycarbex to the Pakistan Oil Ministry for February, 2012 of 8.3 million cubic feet of gas per day would result in an estimated accrual to the Company for the quarter of $242,028.  Actual monthly accruals for the period could be higher or lower depending upon the actual BTU content, the actual price received and the actual sale volumes for the entire quarter.

In December, 2011, we initiated legal proceedings against Hycarbex and others in the High Court of Islamabad, Pakistan to enforce the revenue payment obligations.  Management is optimistic that such proceedings will be successful in causing the resumption of payments to the Company.   In order to provide necessary working capital for the Company while these revenue payments are being wrongfully withheld, we sold to private investors 666,667 shares of Common Stock in February, 2012, for $100,000.  The funds will be utilized for general and administrative expenses incurred by the Company, including the non-recurring legal costs associated with the pending litigation in Pakistan.  We will make additional sales of securities in the future to fund the Company’s working capital needs as they arise in the event that the pending litigation in Pakistan does not result in a near term resumption of monthly revenue payments from Hycarbex.   Despite management’s expectations, there can be no assurance of litigation success in the short term or upon final resolution on the merits, and there can be no assurance of management’s ability to consummate securities sales to meet working capital requirements. (See Note 7 – Going Concern footnote to Financial Statements above).

9

Liquidity and Capital Resources

Prior to the connection of the Haseeb No. 1 to the gas marketing pipe line, we funded our operations through private loans, all of which have been repaid, and through the private sale of securities.  The re-connection to the marketing pipe line and resulting gas sales under the Extended Well Test were expected to provide future cash flow sufficient to meet the Company’s ongoing expenses because the level of production was sufficiently high to cause production revenues to exceed the Company’s monthly operating capital requirements.  The suspension of revenue payments by Hycarbex due to its financial difficulties after just two (2) monthly revenue payments caused management to develop a different short term approach to funding its operations.  In order to provide necessary working capital for the Company while these revenue payments are being wrongfully withheld, we sold to private investors 1,500,000 shares of Common  Stock in November, 2011, for $150,000, 666,667 shares of Common Stock in February, 2012, for $100,000, 125,000 shares of Common Stock in March for $25,000, 125,000 shares of Common Stock in April for $25,000 and 625,000 shares of Common Stock in April for $125,000..  The funds will be utilized for general and administrative expenses incurred by the Company, including the non-recurring legal costs associated with the pending Pakistan litigation and arbitration in London.  Management is optimistic that such proceedings will be successful in causing the recovery of the entire Yasin concession from Hycarbex by the voiding of the 2003 Stock Purchase Agreement, or alternatively, causing the resumption of payments to the Company.   However, we will make additional sales of securities in the future to fund the Company’s working capital needs as they arise in the event that the pending litigation in Pakistan does not result in a near term resumption of monthly revenue payments from Hycarbex.   Despite management’s expectations, there can be no assurance of litigation success in the short term or upon final resolution on the merits, and there can be no assurance of management’s ability to consummate securities sales to meet working capital requirements. (See Note 7 – Going Concern footnote to Financial Statements above).

Business Strategy and Prospects

In July, 2011, the Haseeb #1 Well began producing into the Sui Southern Gas Company line under the Extended Well Test Gas Sales and Purchase Agreement covering the sale of gas from the Haseeb Gas Field on Yasin Block (2768-7) signed by the parties in December, 2009.  While the Company received only the initial two production payments from Hycarbex before the wrongful suspension and accrual of payments, Management is optimistic that pending arbitration proceedings will be successful in causing the recovery of the entire Yasin concession from Hycarbex by the voiding of the 2003 Stock Purchase Agreement, or alternatively, causing the resumption of payments to the Company.     We are further optimistic that the Company will continue to be successful in making sales of securities to private investors to fund the Company’s working capital requirements.  We further expect that the monthly production currently being accrued by Hycarbex to the Company’s interest will increase as the sale volume under the Extended Well Test is gradually increased to the target daily production level of 15 million cubic feet per day.   Our business strategy is to use these sales of securities to meet our administrative expenditure requirements and legal expenses until the monthly payments derived from production are resumed.    Further, since the accrual rate exceeds the Company’s actual and historical monthly cash requirements for operations, management expects to seek similar non-cost bearing production  purchase opportunities in Pakistan and other petroleum producing regions.

The Yasin Block, to date, has no reported 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”.  However, based upon test results upon the Haseeb No. 1 and other data collected by Hycarbex from its drilling and seismic activities, we strongly believe that the Yasin Block acreage contains oil and gas producing physical structures which are worthy of further exploration.  If successfully developed, our reserved 18% production interest will likely be a good source of cash revenues because our cost-free interest 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.

10

On October 29, 2009, the Company executed an agreement to acquire from Hycarbex a two and one half percent (2-1/2%) working interest in each of the 2,258 square kilometer Sanjawi Block No. 3068-2, Zone II, Baluchistan Province, Pakistan, and 1,229 square kilometer Zamzama North Block No. 2667-8, Zone III, Sindh Province, Pakistan, concessions, each of which is operated by Heritage Oil and Gas Limited. Heritage is an affiliate of Heritage Oil, PLC, an independent oil and gas company which focuses its oil and gas operations in Africa, the Middle East, and Russia. Heritage’s shares trade on the London Stock Exchange under the symbol HOIL with a secondary listing on the Toronto Stock Exchange under the symbol HOC. Heritage owns a 54% interest in the Zamzama North Block and a 48% interest in the Sanjawi Block.  Other working interest participants in the two Blocks are Sprint Energy (Private) Limited, an affiliate of Pakistan-based JS Group, and Tracker Energy (Private) Limited, an affiliate of Pakistan-based TPL Holdings, Ltd.  Under the terms of the agreement with Hycarbex, the American Energy Group, Ltd’s 2-1/2% working interests are “carried” by Hycarbes for the initial two (2) wells on the Sanjawi Block and the initial three (3) wells on the Zamzama North Block. The term “carried” means that the costs associated with work programs, seismic, road preparation, drillsite preparation, rig and equipment mobilization, drilling, reworking, testing, logging completion and governmental fees (except taxes and production) shall be borne by Hycarbex. Infrastructure costs such as pipelines and surface facilities constructed after the first discovery well on each Block are not carried. After the initial carried wells have been drilled, American Energy Group, Ltd. shall bear its proportionate share of drilling and exploration costs. The agreement provides and option to American Energy group, Ltd. to convert its working interest in any well at any time to a 1.5% gross royalty interest free of any exploration costs or operating costs.

According to information set forth on Heritage’s website [www.heritageoilplc.com], the Sanjawi Block is considered a very viable prospect due to the recent oil discovery to the West, a number of gas fields to the Southeast and the presence of oil seeps. The Sanjawi Block is dominated by a series of broad East-West trending surface features including the Dabbar and Warkan Shah anticlines. These are large structures, with the Dabbar anticline being some 300 square kilometers in area.  The Zamzama North Block is immediately to the North of the Zamzama Gas Field, a major Upper Cretaceous gas accumulation.  Heritage has acquired approximately 750 kilometers of fair to good quality, 2D seismic and has mapped a number of structural leads. According to Heritage, further seismic is being acquired and a new well on the Zamzama North Block is planned in the near future.   If such development activities occur and are successful, then our Zamzama North interest would also be a source of revenue in the future.

Off Balance Sheet Arrangements

We had no off balance sheet arrangements during the three months ended March 31, 2012.

11

ITEM 3-QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is not a party to nor does it engage in any activities associated with derivative financial instruments, other financial instruments and/or derivative commodity instruments.

ITEMS 4 AND 4T - CONTROLS AND PROCEDURES

In conjunction with this Report on Form 10-Q and the certification of the disclosures herein, and as required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s principal executive officer and principal financial officer, Pierce Onthank, evaluated the effectiveness of the Company’s disclosure controls and procedures and the Company’s internal control over financial reporting as of March 31, 2012. The assessment was conducted in accordance with the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.   Based on this assessment, the Company’s management concluded that there was no material weakness in the Company’s internal control over financial reporting, and concluded that the Company’s disclosure controls and procedures and the Company’s financial control over financial reporting are effective as of March 31, 2012.  The Company is extremely small and had just begun receiving revenues from gas royalties when the revenue payments were wrongfully and abruptly suspended by Hycarbex due to its financial difficulties. The Company responded by initiating litigation in the High Court of Islamabad, Pakistan to enforce the required revenue payments.   Management believes that the internal control over financial reporting should be improved through an increase in staff size, segregation of financial duties and responsibilities and appointment of an audit committee by the Board of Directors and intends to make such improvements when the pending litigation is resolved and the revenue stream is resumed.

There have been no  changes in the Company’s internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 which occurred during the fiscal quarter ended March 31, 2012, that have materially affected or are reasonably likely to materially affect  the internal control over financial reporting.  This report does not include an attestation report of the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission because the attestation rules are not yet applicable to the Company.

12

PART II-OTHER INFORMATION

ITEM 1-LEGAL PROCEEDINGS

In December, 2011, we initiated civil legal proceedings against Hycarbex and others in the High Court of Islamabad, Pakistan.   Our pleadings with respect to the 2.5% carried working interest positions in the Sanjawi and Zamzama North concessions sought a registration of those interests with the Government of Pakistan and  simultaneously sought the imposition of an injunction preventing the transfer of the working interest in those concessions until the registration can be effected, thereby protecting our interests.  Our pleadings with respect to the Yasin concession and the right to receive 18% of the gross production revenues, our pleadings sought a referral to arbitration based upon ownership of, in effect, a 25% carried working interest to which is attributed 18% of gross production revenues and the right to receive pertinent records and data, the appointment of a receiver to both protect and cause disbursement of the 18% of gross revenues since the inception of production in April, 2011, and the imposition of an injunction against the transfer of the working interest in the Yasin concession.The Courtimmediatelyissued two injunction orders preserving the status quo as to the Company’s interests in each of the Yasin, Sanjawi and Zamzama North petroleum concessions.

On March 27, 2012, the Islamabad High Court issued its final order (later clarified as to certain arbitration procedures by a clarification Order dated April 4, 2012).   The Court directed the parties to proceed to arbitration in London, UK under the ICC Rules of Arbitration and further reaffirmed the continuation of the pending temporary injunctions against Hycarbex’s potential transfer of interests in the concessions prior to final resolution in the arbitration forum.  Our application for the appointment of a receiver was neither granted or denied, but was instead deferred by the Court to the arbitration forum.  Hycarbex appealed the March 27, 2012 Order asserting that litigation should not have been initiated by American Energy without first going to arbitration, asserting that our claims to 18% of gross production revenues were premature (despite already having made some payments toward that production interest) because a “commercial discovery” had not yet been declared, and asserting that the injunctions had the effect of enjoining all of the working interest, not just a portion.  Management believes that the assertions by Hycarbex in its appeal are entirely without merit.  American Energy countered with an appeal that the Court should reconsider the application for a receiver due to an existing arbitration rule which would prevent the arbitration forum from granting interim relief of that type, irrespective of the merits of such an application.  These appeals are expected to be heard in June, 2012.

On April 10, 2012, pursuant to the terms of the March 27, 2012, Islamabad High Court Order, we filed our claim with the International Chamber of Commerce (“ICC”) International Court of Arbitration.  In this claim, we are seeking an order which voids, ab initio, the original 2003 Stock Purchase Agreement under which Hycarbex’s parent company acquired the stock of Hycarbex (and thus the underlying Yasin concession owned by Hycarbex) and in conjunction therewith, seeks the recovery of any financial dividends or advances which may have been made by Hycarbex to its shareholders.   Alternatively, our arbitration claim requests the declaration of a 25% carried working interest (and the in-country registration of same) to which is attributed 18% of gross production free of taxes and costs, plus the recovery from the respondents of all accrued, unpaid production revenues.    The request in our arbitration claim for a voiding of the original Stock Purchase Agreement is based upon our assertions in the claim that Hydro Tur, Ltd., the original purchaser of the Hycarbex stock under the 2003 Stock Purchase Agreement, fraudulently misrepresented to American Energy that “no current or past shareholders, officers and/or directors of [American Energy] or Hycarbex have any interest, direct or indirect, in the ownership of [Hydro Tur, Ltd.].”   If we are successful in obtaining this remedy from the arbitrators, American Energy will recover the Hycarbex stock sold to Hydro Tur, Ltd. in 2003 and thus effectively recover all of the Yasin working interest owned by Hycarbex. The respondents have not yet filed their response to the arbitration claim, which is due to proceed further in June, 2012.

13

ITEM 1A-RISK FACTORS

Not applicable.

ITEM 2-UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In February, 2012, we sold 666,667 shares of Common Stock to a private investor for $100,000.  In March, we sold 125,000 shares of Common Stock to that investor for $25,000.   The funds raised were applied to salaries, office rent, legal and accounting expenses and other general and administrative expenses incurred, including the costs associated with our pending litigation with Hycarbex.  Subsequent to the end of the quarter, in April, 2012, we sold another 750,000 shares of Common Stock to private investors for $150,000.  These funds also will be utilized for general, administrative and litigation expenses which are expected to be incurred.

ITEM 3-DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the quarter ended March 31, 2012.

ITEM 5-OTHER INFORMATION

None.

14

ITEM 6-EXHIBITS

The following documents are filed as Exhibits to this report:

Exhibit 31.1 – Certification by R. Pierce Onthank, President, Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a);

Exhibit 32.1 – Certification by R. Pierce Onthank, President, Chief Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Section 1350(a) and (b).

101.INS **	XBRL Instance Document
101.SCH **	XBRL Taxonomy Extension Schema Document
101.CAL **	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF **	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB **	XBRL Taxonomy Extension Label Linkbase Document
101.PRE **	XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

15

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	THE AMERICAN ENERGY GROUP, LTD.
DATED:  May 21, 2012	By:	/s/ R. Pierce Onthank
		R. Pierce Onthank,
		President, Chief Executive
		Officer, Principal Financial Officer and Director

16

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, R. PIERCE ONTHANK, President, chief executive officer and chief financial and accounting officer of The American Energy Group, Ltd., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 of The American Energy Group, Ltd..

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am the registrant’s sole certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure the material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting, and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.  I am the registrant’s sole certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATED: May 21, 2012	/s/
	Printed Name: R. PIERCE ONTHANK
	President, Chief Executive Officer and
	Principal Financial Officer

EX-32.1

EXHIBIT 32.1

THE AMERICAN ENERGY GROUP, LTD.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION

906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q of The American Energy Group, Ltd. (the “Company”) for the period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Pierce Onthank, President and chief executive and chief financial and accounting officer of the Company, certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and

2.   The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

DATED: May 21, 2012	By:	/s/
		R. Pierce Onthank
		President, Chief Executive Officer and
		Principal Financial Officer

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Common Stock

9 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 4 - Common Stock

During November, 2011, the Company issued 1,500,000 shares of common stock for cash at $0.10 per share.

During December, 2011, the Company issued 1,088,193 shares of common stock for accrued compensation due to a former Director valued at $810,000.

During February, 2012, the Company issued 666,667 shares of common stock for cash at $0.15 per share.

During March, 2012, the Company issued 125,000 shares of common stock for $0.20 per share.

During March, 2012, the Company issued 217,568 shares for services and payables valued at $53,000.

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Revenue Recognition

9 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 3 - Revenue Recognition

Revenue from oil and gas royalties consists solely of override royalty interests and is recognized after production has occurred on the oil and gas concession in which the Company has an interest. Royalty income is reported on a net revenue basis.

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Balance Sheets (USD $)	Mar. 31, 2012	Jun. 30, 2011
Assets
Cash	$ 11,493	$ 246,061
Oil and gas sales receivable	514,840
Prepaid expenses	14,525	47,955
Total Current Assets	540,858	294,016
Office equipment	30,417	29,265
Leasehold improvements	26,458	26,458
Accumulated depreciation	(36,435)	(32,544)
Net Property and Equipment	20,440	23,179
Investment in oil and gas working interest - related party	1,583,914	1,583,914
Security deposit	26,209	26,209
Total Other Assets	1,610,123	1,610,123
Total Assets	2,171,421	1,927,318
Liabilities and Stockholders' Equity
Accounts payable	61,580	64,336
Security deposits	13,200	13,200
Note payable		19,811
Accrued liabilities	130,317	889,840
Total Current Liabilities	205,097	987,187
Total Liabilities	205,097	987,187
Stockholders' Equity
Common stock, par value $0.001 per share; authorized 80,000,000 shares; 37,982,761 and 34,385,333 shares issued and outstanding, respectively	37,982	34,353
Capital in excess of par value	12,082,836	10,948,465
Accumulated deficit	(10,154,494)	(10,042,687)
Total Stockholders' Equity	1,966,324	940,131
Total Liabilities and Stockholders' Equity	$ 2,171,421	$ 1,927,318

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General

9 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 1 - General

The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements include normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's audited financial statements and notes thereto included in its June 30, 2011 Annual Report on Form 10-K. Operating results for the three months and nine months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending June 30, 2012.

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Basic Loss Per Share of Common Stock

9 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 2 - Basic Loss Per Share of Common Stock

	Three Months Ended					Nine Months Ended
	March 31,		March 31,			March 31,			March 31,
	2012		2011			2012			2011
Income (Loss) (numerator)	$	2,991	$	(243,153	)	$	(111,807	)	$	(667,419	)
Basic - Shares (denominator)		37,469,960		34,213,826			35,638,468			33,213,826
Fully Diluted Shares (denominator)		39,829,960		36,573,826			37,998,468			35,573,826
Basic Income (Loss) Per Share	$	0.00	$	(0.01	)	$	(0.00	)	$	(0.02	)
Fully Diluted Income (Loss) Per Share	$	0.00		N/A			N/A			N/A

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 financial statements. Stock warrants convertible into 2,360,000 shares of common stock are not included in the basic calculation because their inclusion would be antidilutive, thereby reducing the net loss per common share.

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Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2012	Jun. 30, 2011
Stockholders' Equity
Common Stock Par Value	$ 0.001	$ 0.001
Common Stock Shares Authorized	80,000,000	80,000,000
Common Stock Shares Issued	37,982,761	34,385,333
Common Stock Shares Outstanding	37,982,761	34,385,333

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Document and Entity Information	9 Months Ended
	Mar. 31, 2012	May 21, 2012
Document And Entity Information
Entity Registrant Name	AMERICAN ENERGY GROUP LTD
Entity Central Index Key	0000843212
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		38,732,761
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2012

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Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012	Mar. 31, 2011
Income Statement [Abstract]
Revenue	$ 0	$ 242,028	$ 545,230	$ 0
Cost of Goods Sold	0	0	0	0
Gross Profit	0	242,028	545,230	0
Expenses
Administrative salaries	118,600	108,201	301,791	344,500
Legal and professional	31,713	67,232	164,082	93,357
General and administrative	48,174	47,303	145,526	118,020
Office overhead expenses	38,358	13,253	36,303	104,550
Depreciation	1,763	1,297	3,891	4,921
Total Expenses	238,608	237,286	651,593	665,348
Net Operating Income (Loss)	(238,608)	4,742	(106,363)	(665,348)
Other Income and (Expense)
Interest expense	(4,545)	(1,751)	(5,444)	(12,071)
Total Other Income and (Expense)	(4,545)	(1,751)	(5,444)	(12,071)
Net (Loss) Before Tax	(243,153)	2,991	(111,807)	(667,419)
Income Tax	0	0	0	0
Net Income (Loss)	$ (243,153)	$ 2,991	$ (111,807)	$ (667,419)
Earnings (Loss) per Share Basic	$ (0.01)	$ 0	$ 0	$ (0.02)
Earnings (Loss) per Share Fully Diluted		$ 0
Weighted Average Number of Shares Outstanding Basic	34,213,826	37,469,960	35,638,468	33,213,826
Weighted Average Number of Shares Outstanding Fully Diluted	36,573,826	39,829,960	37,998,468	35,573,826

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Going Concern

9 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 7 - Going Concern

The Company’s financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments related to the recoverability of assets or classification of liabilities that might be necessary should the Company be unable to continue as a going concern. At March 31, 2012, while the Company’s current assets exceeded its current liabilities, it has recorded negative cash flows from operations and net losses in this period and prior fiscal periods. The preceding circumstances combine to raise substantial doubt about the Company’s ability to continue as a going concern. The Company received its initial two royalty payments from the operator of the Pakistan petroleum concession in the fall of 2011 and then the operator suspended payments due to its financial difficulties, at which time the operator advised the Company that future revenue payments would be accrued until the financial difficulties were resolved. In response to the revenue payment suspension, the Company initiated legal proceedings in the High Court of Islamabad, Pakistan against the operator and others to enforce its right to receive monthly production payments from the operator. The Company subsequently sold 3,041,667 Common shares to private investors for an aggregate $425,000 in order to meet near term operating capital requirements and expects to make future sales if necessary in the event that the pending litigation does not result in a prompt resumption of the revenue payments. However, there can be no assurance that the litigation will be successful in causing the resumption of revenue payments and, there can be no assurance that management’s efforts to raise operating capital through the sale of securities will be successful, should such sales be necessary.

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Subsequent Events

9 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 6 - Subsequent Events

In accordance with ASC 855-10, management of the Company has reviewed all material events from March 31, 2012 through the date the financial statements were issued. Subsequent to March 31, 2012, the Company issued 750,000 shares of common stock for cash for $0.20 per share. There were no other material events that warrant any additional disclosure .

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Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash Flows From Operating Activities
Net loss	$ (111,807)	$ (667,419)
Depreciation	3,891	4,921
Common stock issued current debt and services	40,000	32,500
Changes in operating assets and liabilities:
(Increase) decrease in oil and gas sales receivable	(514,840)
(Increase) decrease in prepaid expenses	33,430
Increase (decrease) in accounts payable	(2,756)	12,209
Increase (decrease) in accrued expenses and other current liabilities	43,666	179,500
Net Cash (Used In) Operating Activities	(508,416)	(448,289)
Cash Flows From Investing Activities
Funds (reserved for) / released from acquisitions		392,500
Expenditures for office equipment	(1,152)	(1,844)
Net Cash Provided By Investing Activities	(1,152)	390,656
Cash Flows From Financing Activities
Proceeds from the issuance of common stock	275,000	500,000
Net Cash Provided By (Used In) Financing Activities	275,000	500,000
Net (Decrease) in Cash	(234,568)	442,367
Cash and Cash Equivalents, Beginning of Period	246,061	25,585
Cash and Cash Equivalents, End of Period	11,493	467,952
Cash Paid For:
Interest	5,444	12,071
Taxes
Non-Cash Financing Activities:
Common stock issued for payment of debt	823,000	32,500
Common stock issued for services rendered	$ 40,000

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Investment in Oil and Gas Working Interest - Related Party

9 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 5 - Investment in Oil and Gas Working Interest - Related Party

During the quarter ended December 31, 2009, the Company executed an agreement to acquire from Hycarbex – American Energy, Inc. (Hycarbex), a related party, a two and one half percent (2-1/2%) working interest in each of the 2,258 square kilometer Sanjawi Block No. 3068-2, Zone II, Baluchistan Province, Pakistan, and 1,229 square kilometer Zamzama North Block No. 2667-8, Zone III, Sindh Province, Pakistan. In exchange for the working interest, the Company issued (1) 2,000,000 shares of common stock to Hycarbex, (2) 100,000 warrants with a three year duration to purchase an additional 100,000 shares at $1.75 per share and (3) $100,000 in cash.

The Company has the option to convert the two and one half percent working interests described above to a one and one half percent gross royalty working interest at any time.