Notes to the Unaudited Financial Statements
December 31, 2017
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 includes 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, 2017 Annual Report on Form 10-K. Operating results for the three months and six months ended December 31, 2017 are not necessarily indicative of the results that may be expected for the year ending June 30, 2018.
Note 2 – Basic Loss Per Share of Common Stock
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 10,933,334 shares of common stock have not been included in the fully diluted income per share calculation for the three or six months ended December 31, 2017 or the three and six months ended December 31, 2016, because their inclusion would be anti-dilutive, thereby reducing the net loss per common share.
Note 3 - Common Stock
During December, 2017, the Company issued 142,857 shares of common stock for cash at $0.07 per share for proceeds of $10,000.
Note 4 – Notes Payable – Related Parties
During the six months ended December 31, 2017, the Company borrowed $65,000 from a current shareholder with interest at 5%, payable in full at maturity
During the six months ended December 31, 2017, the Company borrowed an additional $4,000 from an individual investor with interest at 2.5%, payable in full in one year.
During the six months ended December 31, 2017, the Company borrowed an additional $54,389 from an officer at 0%, payable in full in one year.
For the three and six months ended December 31, 2017, the Company incurred interest expense on these notes payable in the amount of $22,445 and $44,176, respectively as compared to $20,357 and $39,041, respectively, for the three and six months ended December 31, 2016.
THE AMERICAN ENERGY GROUP, LTD.
Notes to the Unaudited Financial Statements
December 31, 2017
Note 5 – Warrants
During the six months ended December 31, 2017, no stock warrants were issued.
A summary of the status of the Company’s stock warrants as of December 31, 2017 is presented below:
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Weighted Ave.
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Stock
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Exercise
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Exercise
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Warrants
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Price
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Price
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Outstanding and Exercisable, June 30, 2017
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10,933,334
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$
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0.10-0.20
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$
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0.14
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Granted
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-
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$
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-
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$
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-
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Expired/Canceled
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-
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$
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-
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-
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Exercised
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-
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$
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-
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-
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Outstanding and Exercisable, December 31, 2017
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10,933,334
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$
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0.10-0.20
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$
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0.14
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A summary of outstanding stock warrants at December 31, 2017 follows:
Number of
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Remaining
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Weighted
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Common Stock
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Contracted
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Exercise
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Ave Exer.
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Equivalents
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Expir. Date
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Life (Years)
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Price
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Price
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2,333,334
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February 2020
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2.250
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$
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0.10
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$
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0.10
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1,500,000
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February 2020
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2.250
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$
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0.10
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$
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0.10
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2,600,000
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May 2018
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.500
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$
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0.15
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$
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0.15
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2,000,000
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February 2020
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2.250
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$
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0.20
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$
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0.20
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1,000,000
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February 2020
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2.250
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$
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0.20
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$
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0.20
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500,000
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February 2020
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2.250
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$
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0.10
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$
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0.10
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1,000,000
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February 2020
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2.250
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$
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0.10
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$
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0.10
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Note 6 – Other Contingencies – Litigation
In August, 2014, we initiated separate legal actions in Pakistan for an injunction against Sui Southern Gas Company Limited (“Sui Southern”) and Hycarbex-American Energy, Inc. (“Hycarbex”), respectively, in furtherance of the prior interim orders of the Arbitration Tribunal. The new action filed in the Sindh, Karachi High Court named as defendants Sui Southern, Hycarbex, its parent company, Hycarbex Asia Pte. Ltd. (“Hycarbex Asia”) and two additional pro forma defendants and requests an injunction against Sui Southern against payment to Hycarbex of 18% of the total proceeds of gas sales. The requested injunction was granted to us by the Karachi Court but later vacated as premature as it pertains to the third party gas gatherer. However, we also filed in the Islamabad High Court an action against Hycarbex, Hycarbex Asia and Hydro Tur as defendants and obtained injunctive relief against Hycarbex from interference with the Arbitration Tribunal-ordered notifications to Sui Southern to pay us directly our 18% of production, and injunctive relief requiring Hycarbex to escrow the 18% of production which would have been payable to the Company. On April 15, 2015, the ICC Arbitration Tribunal rendered its Partial Final Award in the pending arbitration proceedings which declared that the November 9, 2003 Stock Purchase Agreement between the Company, Hycarbex and Hydro-Tur, which was amended on February 16, 2004, and December 15, 2009, is void
ab initio
and of no legal effect on account of the fraud and misrepresentations of Hycarbex, Hydro-Tur and Hycarbex-Asia and that the Company is thus the 100% owner of the common stock of Hycarbex relating back to the original Stock Purchase Agreement date of November 9, 2003. In connection with its findings, the ICC Arbitration Tribunal ordered that the register of shareholders for Hycarbex be corrected to reflect the Company as the owner of 100% of the common stock, that Hycarbex and Hycarbex-Asia take any and all steps necessary to effect the rectification of the register of shareholders of Hycarbex to reflect the Company as the owner of 100% of the common stock, and that Hycarbex and Hycarbex-Asia bear all costs of the arbitration proceedings, including the Company’s legal costs, which costs and fees are to be fixed by the ICC Arbitration Tribunal in a subsequent award after submission of the total costs and fees by AEGG. The ICC Arbitration Tribunal dismissed Hydro-Tur’s application for costs. The April 15 Award makes moot certain of the pending actions in Pakistan due to the recovery of ownership of 100% of the stock of Hycarbex.
THE AMERICAN ENERGY GROUP, LTD.
Notes to the Unaudited Financial Statements
December 31, 2017
The Company has affected the shareholder and management registration changes ordered by the ICC and has caused Hycarbex to open a new office in Islamabad, Pakistan for Hycarbex’s future operations. The new management of Hycarbex has also assumed control of Hycarbex’s Pakistan personnel. Finally, the new management of Hycarbex has begun its efforts to assume complete control of the Pakistan-based assets, including review and appraisement of each asset and interfacing with the local oil and gas regulatory authorities with jurisdiction over those assets to assure regulatory compliance. The assumption of complete control of the Hycarbex Pakistan-based assets is expected to take several months and be completed in calendar year 2018.
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 December 31, 2017, the Company’s current liabilities exceeded its current assets and it has recorded negative cash flows from operations. The preceding circumstances combine to raise substantial doubt about the Company’s ability to continue as a going concern. Management has been successful in capital raises in the past to continue operations, but there can be no assurance that success will continue in the future.
Note 8 – Subsequent Events
In accordance with ASC 855-10, management of the Company has reviewed all material events from December 31, 2017 through the date the financial statements were issued. There were no other material events that warrant any additional disclosure.